Kenyan taxpayers are set to pay owners of Lake Turkana Wind Power a lump sum of Sh5.7 billion in penalties for failing to connect power to the national grid in breach of contractual terms.
The money has been allocated in the supplementary budget.
The contract with the wind firm provided that the government would incur penalties for failing to take up power from the Lake Turkana wind project which was completed in January.
Treasury Secretary Henry Rotich yesterday told a special committee of MPs scrutinising the Supplementary Budget that the payments are in line with an agreement signed between the government and Spanish firm Isolux Ingeneria SA, which went under after its parent company in Spain filed for bankruptcy.
“These are deem generated payments that should have started on January 26, 2017, to August this year. Under an agreement which we gave letter of support, we said once the project is complete we have to evacuate power. These are take-off pay. As we speak, the project (Lake Turkana) borrowed money from financers and has to repay the loan by selling power to Kenya power,” Mr Rotich told MPs.
The government had earlier indicated that the penalty payment would be staggered over six years, recoverable on power consumer’s bills.
Mr Rotich said the government had to provide repayment of debt as captured by a letter of support guaranteed by African Development Bank (AfDB) under partial lease guarantee due to lack of a line to evacuate power from the Turkana wind energy project that was completed in January.
Mr Rotich said the transmission line is currently 60 per cent complete. The Kenya Electricity Transmission Company (Ketraco) terminated a contract it awarded the Spanish firm that won the contract for the Sh15.7 billion Turkana-Suswa power.
Ketraco terminated Isolux’s contract in August after its parent company filed for bankruptcy in Spain.
Yesterday, Mr Rotich told the Ad hoc committee on the Supplementary Budget that the Energy ministry and the Treasury have opened discussions with the government of Spain with a view to getting another Spanish contractor to complete the project as per the contract agreement.
Treasury principal secretary Kamau Thugge said the country would have paid in excess of Sh8 billion had the wind power owners billed it from January when the energy was ready.
“The deemed generated payments should have started in January to August. If we don’t complete the power line by next April, for each month, there will be a cost of Sh1 billion for non-evacuation,’’ he said.
“We would have paid Sh8 billion but because of a compromised position, we came to an agreement that we pay Sh5.7 billion rather than the higher figure,” he said.
Mr Rotich asked the committee to interrogate the ministry of Energy saying it is better placed to respond to questions over the project.
“The biggest challenge the company has is paying for loans that started kicking in from July. They were able to waive charges from January,” Mr Rotich said.
Eldama Ravine MP Moses Lesonet said the Treasury should have explored the option of loading Sh2 to Sh3 per electricity bill to recover the Sh5.7 billion.