Obsolete electricity infrastructure to blame for high power bills, Lake Turkana Wind Power tells Senate

Officials from the Lake Turkana Wind Power Limited (LTWPL) project have now blamed the obsolete electricity infrastructure for the high power bills saying almost a third of the power produced is lost in the transmission cycle.

Further, in what paints government officials in the energy sector on the limelight for the apparent deliberate negligence, the team said their advice was ignored after detecting the problem in 2015.

Specifically, officials implicated are drawn from the Kenya Transmission Company (Ketraco) and the Kenya Power and Lighting Company PLC (Kenya Power).

Appearing before the Senate Energy Committee chaired by Nyeri Senator Wahome Wamatinga, the firms’ Executive Director Rizwan Fazal defended the organisation against any wrongdoing saying they have instead saved consumers a whopping Sh45billion since September 2018.

LTWPL provides energy to country’s national grid – approximately 17 per cent of the country’s installed capacity, to be bought at a fixed price by Kenya Power over a period of 20 years in accordance with the Power Purchase Agreement (PPA) controversially signed between them and the utility firm, Kenya Power.

“We would like to inform Kenyans that 26 per cent of power produced in the country is lost in the transmission cycle since we have old electricity infrastructure which needed to be upgraded, we foresaw this problem as early as 2015 but our advice was dismissed by the relevant authorities.” Fazal noted.

He also they are not to blame for the current high power bills that have soared the high cost of living.

At least five key personalities previously under the Ministry of Energy and two parastatals domiciled the energy sector have been profiled as persons of interests in connection to the ongoing investigations over the signing and execution of the skewed multibillion LTWPL project reported to have cost the taxpayer a Sh18.5 billion loss believed to have been a well-orchestrated heist.

The probe has been narrowed down to the former Ministry of Energy Principal Secretary who doubles as the outgoing Transport Principal Secretary Engineer Joseph Njoroge, immediate former Ketraco Managing Director and current Kakamega governor Fernandes Barasa, Barasa’s predecessor at Ketraco Eng. Joel Kiilu, former and current Ketraco board members and top managers Kenya Power (KP) officials and their counterparts from the Energy and Petroleum Regulatory Authority (EPRA).

All the institutions played a role in the tendering and execution of the power project that was meant to lower the cost of electricity but was turned into a cash cow to siphon taxpayers’ money.

Njoroge, Kiilu and Barasa are among scores of high profile persons who have so far been questioned and recorded statement with the anti-graft body, the Ethics and Anti-Corruption Commission (Eacc).

Njoroge, who served as the managing director at Kenya Power from 2007 and 2012 before he was elevated to the position of PS in the Energy and Petroleum ministry by retired President Uhuru Kenyatta has already appeared before Eacc sleuths at Integrity Center where he was grilled for hours on what he knows about the project whose delay in the execution cost Sh18billion penalties in the form of Deemed Generated Energy between January 2017 and September 2018.

The long-serving PS was transferred last year from the energy docket where he has served for about eight years and made PS Transport and acting PS in the Ministry of Water, Irrigation and Sanitation.

The probe was occasioned by a National Assembly’s Public Investments Committee (PIC) report which highlighted irregularities that led to the “avoidable loss” have also seen several current and former board and management officials Ketraco, Kenya Power and EPRA which were key in the project record statements and will either be witnesses or suspects.

Fazal said the company had spent Sh2billion when starting the project which was a great risk considering very few investors were ready to support them in a venture whose prospects they were not sure of and that they should be supported instead of being vilified.

He was responding queries why they are seeking about Sh20 billion as compensation to Deemed Generated Energy (DGE) after the government failed to live to its end of the agreement and have a transmission line ready in early 2017.

The Committee further wanted to know why the firm was insisting on getting paid for the penalties which has been cited as one of the reasons for the high cost of electricity in the country which has contributed to the high cost of living in the country.

“We have an obligation as the elected representatives of the people to ensure that the cost of electricity which plays a major role in the economy comes down since it had contributed to other many services being expensive, that is why we are probing all players in the sector to establish where the problem is.” Committee chairman Wamatinga said.

Narok Senator Ledama ole Kina called for a forensic audit on the engagements between Kenya Power and Lighting Company and Lake Turkana Wind Power Limited to establish if there was corruption since there is no reason why the Independent Power Producers could be allowed to sell power at an exorbitant price without some entities benefitting.

Ledama said Kenyans want to know why the company should be paid almost Sh20 billion for services not rendered since they were penalties.

The senator said it should be probed whether some government officials might have deliberately sabotaged the provision of supply lines so as to pave way for the exorbitant claims by the private company with citizens bearing the burden of paying.

“We are disappointed to say what is being demanded by Lake Turkana Wind Power which is said to be a breach of contract could have been used to carry out several development projects that could turn around the lives of Kenyans for the better, we are out to establish if there is anyone who failed in their role leading to this,” he said.

His sentiments were echoed by Tana River Senator Danson Mungatana who sought to know whether the management of the Independent Power Producer could consider writing off some of the monies its claiming from the government as a sign of goodwill.

Mungatana said this would be possible since the firm did not lose directly but was only seeking compensation for the delay and it stood to lose nothing by giving in to save Kenyans who are suffering.

Mungatana said the Energy CS needs to appear before the committee and explain in detail what may have caused the delay of the supply line from Marsabit County where the company is situated and Suswa in Narok County for redistribution to the rest of grid bearing in mind the agreement in place which was now causing a headache to Kenyans.

His Nairobi Senator Edwin Sifuna said as elected leaders they were under pressure from the electorate to explain why the cost of electricity had skyrocketed in the past few months and that they will not allow a few individuals to benefit at the expense of millions of Kenyans who were suffering.

Sifuna said the management of the company should name individuals it alleged curtailed them when they tried to offer solutions early enough to avoid the situation where Kenyans are supposed to pay almost Sh20 billion for what appears to be deliberate mistakes.

But Fazal said 13 international organisations took the risk and supported the project that is now picking up and that at one point they gave a proposal to take over the construction of the transmission line and they were informed that it was not their responsibility hence they cannot be blamed for seeking penalties.

He said during the signing of the Power Purchase Agreement (PPA) between Kenya Power and Lake Turkana Wind Power Limited it was agreed that there will be a penalty should the state not have a line between Marsabit where the plant is located and Suswa for redistribution to the rest of the grid.

Barasa has been on the radar of the Ethics and Anti-Corruption Commission (Eacc) Barasa over the manner in which Ketraco handled wayleaves acquisition and provision of access to Isolux, one of the companies awarded the contract.

Under the contract under investigation, Ketraco was expected to grant access along the entire 428 kilometre stretch to M/S Isolux within 210 days from March 13, 2015. On June 2, 2016, Ketraco committed to the African Development Bank to have the compensation of Persons Affected by the Projects completed by the end of that month.

Minutes of the Wayleave Coordination Progress meetings of June 8, June 20, July 14 and October 13, 2017 and February 14, 2018m show that the wayleave acquisition process was still incomplete, contrary to Ketraco’s earlier commitment.

Eacc is also investigating directors of two foreign companies contracted for the project, M/S Isolux of Spain and NARI Group Corporation & PowerChina Guizhou Engineering Co. Ltd.

EACC is investigating circumstances under which the project, where the government initially engaged Lake Turkana Wind Power Ltd and The Consortium of NARI Group Corporation & PowerChina Guizhou Engineering Co. Ltd to alleviate energy costs in the country, ended up incurring additional, avoidable financial penalties.

Despite NARI Group Corporation & PowerChina Guizhou Engineering Co. Ltd emerging as the most responsive out of the five bidders, it was recommended that the award process be undertaken through a specially permitted procurement procedure that was approved by Dr Kamau Thugge, then PS at the National Treasury.

The firm, according to a report by Parliament, was contracted on January 30, 2018, and completed the transmission line on September 10, the same year, earning Sh9.5 billion, and leaving a balance of Sh1.75 billion which is still pending, “plus any accrued penalties” amounting to approximately Sh1.1 billion as at the time of the inquiry.

Our sources disclosed that is being treated as a suspect and more individuals from the energy sector believed to have played a role have also been summoned and will soon start having their day with the detectives.

Investigations into the scandal followed a report by PIC and Auditor-General pointing at the possible theft of the billions of shillings through deliberate “omissions and commissions” which delayed completion of the transmission line.

At the heart of the investigations by Eacc is the circumstances under which a project, where the government initially engaged Lake Turkana Wind Power Ltd (LTWP Ltd) and The Consortium of NARI Group Corporation & Power China Guizhou Engineering Co. Ltd to alleviate energy costs in the country, ended up incurring an additional and avoidable financial burden following a failure to secure wayleaves and signing addenda to the Transmission Interconnector (TI) contract that led to delay in the completion of the line exposing taxpayers to the delay payments and higher energy bills

Documents from Kenyan Power indicate that LTWP and KPLC entered into a Power Purchase Agreement (PPA) on 29 January 2010 when the utility firm was still under Njoroge.

The parties subsequently amended and restated the PPA on September 29, 2011, 14 September; 2012 and May 13, 2013, and through a variation agreement dated July 31, 2014, they amended the PPA (dated 13 May; 2013) to address definition of Long Stop Effective date and provide for Conditions Precedent.

Further, a second variation agreement dated September 19, 2017 amended the PPA to address the Transmission Interconnector Delay for the period May 15, 2017 to May, 2018.

Njoroge was among the several senior government officials who appeared before the parliamentary committee, then chaired by Mombasa governor Abdulswamad Shariff, and which also recommended that the then accounting officers at the Ministry of Energy and Ketraco be held accountable for not conducting an independent legal risk assessment prior to execution of contracts for a capital project of this magnitude.

Other PSs who testified are outgoing Treasury’s Dr. Julius Muia, who took over from Kamau Thugge.

Thugge has been cited in the report as having approved a specially permitted procurement procedure that awarded the multi-billion tender to NARI Group Corporation & PowerChina Guizhou Engineering Co. Ltd despite having emerged as the most responsive out of the five bidders.

Major General retired Gordon Kihalangwa, who was transferred to the Energy Ministry from Public Works docket in September 2021 appeared on December 9, 2021 and March 24, 2022.

Barasa’s successor at Ketraco Anthony Warnukota, Daniel Bargoria (Director general EPRA) and Kenya Power boss Rosemary Oduor appeared before the committee on the 3rd and 16th of February last year.

When he appeared before PIC, Njoroge told the watchdog committee that the terms of the PPAs for the project were based on international best practices of such project financed investments and that it was approved by KPLC’s Board, the Energy Regulatory Commission (ERC) now EPRÂ, and subjected to legal opinion and clearance by the Attorney General on several occasions.

The twenty-six months’ line conduction period included in the PPA, he said, was negotiated based on the eighteen months that LTWP had put in the tender as one of the conditions for bidders for the line construction to be pre-qualified.

“Therefore, the wind power plant and the line had to be completed at the same time to avoid having costly idle power generation capacity. In addition, there was the need to keep the validity of the tender prices of various components of the Wind fan contract and subcontracts,” Njoroge is quoted having told the committee, adding that before a decision was made to develop the resource, an assessment was done to determine commercial viability of the project.

Deemed Energy Generated (DEG) is what cost taxpayer Sh18billion and Njoroge said it arises where the power plant is available to generate but unable to deliver to the off taker’s system electrical energy in the following power system interruption, stoppage or curtailment of the plant arising out of a specific dispatch instruction, a breach by the buyer of its obligations under the PPA’, or unavailability of the grid other than during maintenance.

Additionally, Baringo North Member of Parliament Joseph Makilap has filed a petition in the National Assembly seeking to have the controversial deal probed specifically regarding payments made in 2017 before KPLC was linked to LTWP.

He also said that the Kenya Power board chairperson Vivienne Yeda is the Director General of the East African Development Bank (EADB) which is a co-financier of LTWP and thus raising possible direct conflict of interest.

“Is it not a conflict of interest that Yeda, the EADP Director General, the bank which financed the project doubles up as the chairperson of Kenya Power? In whose interest was the chair appointed at Kenya Power to represent?” he questioned.

Makilap questioned whether there was a link to the unutilised billions of shillings paid to Kenya Power and the high utility bills.

However, Yeda, through her spokesman Charles Gacheru denied that there was any conflict of interest.

“Lake Turkana Wind Power Was started in 2006 and was ready to generate power in 2017 and Yeda was appointed Kenya Power chair in 2020, 14 years after the project started,” Gacheru stated.

“The power purchase agreement was signed in 2013 and payments among others, approved in 2017 before Yeda became chair,” he added.

LTWP has emerged as the second largest supplier for the last four years since it started electricity production.

The petition is expected to be tabled before the House Business Committee as soon as Parliament sessions resume.