Kenya Power and Ministry of Energy Might Have Colluded In Sh18.5b Heist That Taxpayers Paid​ LTWP.

Auditor General Nancy Gathungu in the audit report tabled to Parliament on August 5, said the Ministry of Energy and Kenya Power should be held responsible for the Ksh.18.5 billion bill arising from the Lake Turkana wind farm project.

The two parties did not ensure a competitive process in picking a contractor for the construction of a transmission line connecting the project with the national grid.

The Ministry of Energy granted the Lake Turkana Wind Power (LTWP) Limited, a private entity, the exclusive rights to survey the project area and wind resources and to further invite tenders on behalf of Kenya Power. The action has been established to be contravention of the now repealed Public Procurement and Disposal Act of 2005 with the Energy Ministry further failing to justify the criteria for direct procurement.

Conflict of Interest 

The Auditor General report flagged conflict of interest given the contracted M/s Isolux Ingenieria SA is affiliated to LTWP who is the proprietor of the wind power farm located in Loiyangalani and holds a private power purchase agreement (PPA) to sell generated electricity to Kenya Power over a 20-year period.

The terms of the PPA require Kenya Power to pay for power from the plant irrespective of whether the output makes its way to the national grid. Under the PPA, LTWP was to finance, design, procure, construct, install, test, commission, operate, maintain and sell net electricity output exclusively to KPLC.

KPLC on the other hand was required to evacuate all net electric power from LTWP plant once commissioned for a period of 20 years. The new transmission line connecting the plant to the grid was completed in September 24,2018, 21 months after the completion of the wind farm resulting in the accrued Ksh.18.5 billion bill in deemed generated energy (DGE) payments to LTWP.

The huge payout arose from a 381-day delay in completion of the 428km high-voltage power line from Marsabit to Suswa sub-station in Narok, the main interchange for power from different sources.

LTWP commissioned its 310 megawatts power plant on January 27, 2017 but the government, which built the evacuation line did not complete the works until September 24, 2019.

“Due to delays in completing the transmission line, energy charge was not evacuated from LTWP plant resulting in accrued penalties to the government referred to as deemed generated electricity (DGE) claims amounting to Sh18,499,082,672 (euros 167,261,145) for the period January 27, 2017 to September 10, 2019,” Nancy Gathungu said in a special audit of LTWP.

Already, the government has paid Sh10.3 billion to owners of LTWP leaving a balance of Sh9.8 billion (euros 81,577,128). “The balance (Sh9.8 billion) is to be recovered by LTWP Ltd through a tariff increase by Kenya Power and Lighting Company (KPLC) of Euros 0.00845/Kwh for the period June 1, 2018 to May 31, 2024 (DEG recovery period) and likely to be borne by the consumers,” Ms Gathungu said.

The Auditor General queried the legitimacy of the charges given LTWP direct involvement in the procurement of the transmission line’s contractor.

“M/s Isolux Ingenieria SA and the consultant KEMA, both who has been procured by LTWP Ltd were the key players in determining the success of the transmission line, yet LTWP Ltd was the eventual beneficiary of the delays in the completion of the project by way of the transmission line (TI) interruption DGE payments,” read part of the special audit.

At the same time, the report stated the payments commenced without any independent review of confirm the readiness of power generation by LTWP.

Previously, the World Bank warned of the project’s risks as it pulled out of a proposed financing deal noting the ‘take or pay’ obligation exposed Kenya Power to unacceptable high financial risk while the time proposed to put up the transmission line was inadequate. After signing a Ksh.16.9 billion contract to develop the T-line in December 30, 2011, M/s Isolux Ingenieria filed for bankruptcy on 14 July 2017 in Spain, three months after failing to meet the December 30, 2016 deadline to deliver the project.

Despite state of Isolux Ingenieria, Ministry of Energy continued involvement of the contractor in the project amidst its financial capacity constraints.

“There was no evidence that an independent financial and technical due diligence on the contractor before the signing of the contractor had been done.”

The Kenya Electricity Transmission Company ( KETRACO ) stepped in to salvage the project by kicking out the contractor and picking a consortium of the Nari Group Corporation and Power-China Guizhou Engineering who completed the line on September 10, 2018.

LTWP is owned by seven shareholders namely:

•Aldwych Turkana Limited (owned by Anergi, an African Power Company established through the joint venture between Africa Finance Consortium and Harith General Partners of South Africa);

•KP&P Africa B.V.;

•The Danish Climate Fund through Investment Fund for Developing Countries (IFU);

•KLP Norfund Investments of Norway;

•Vestas;

•Finnfund- the Finnish Fund for Industrial Cooperation Ltd; and

•Sandpiper.

LTWP is financed by a consortium of senior and subordinated lenders specifically:

•European Investment Bank;

•African Development Bank;

•The Trade and Development Banks (TDB), formerly the PTA Bank

•East African Development Bank (EADB);

PROPARCO;

•Netherlands Development Finance Company (FMO);

•Deutsche Investitions- und Entwicklungsgesellschaft (DEG);

•Eksport Kredit Fonden of Denmark (EKF);

•Standard Bank of South Africa;

•Nedbank of South Africa; and

•EU Africa Infrastructure Fund (EU-AITF).

Kenya Power currently on the brink of collapse with board wars , financial losses, blacklisted by their Donors.