The Loiyangalani wind project that became a living nightmare
- Oct 3, 2021 11:47 pm GMT
It started like all the good plans do: a dream. The plan? To transform Kenya's energy economy, make its power generation environmentally sustainable and position Kenya as a continental leader in wind energy. Sounds cool, right? Wrong.
The whole enterprise, from conception to execution, was crafted from the start to rob taxpayers of billions of shillings through phony contracts with the country's power distributor.
This is the short but sad story of the
What's more, the company also makes Value Added Tax (VAT) claims of Sh2.7 billion. And the government pays on its behalf. A new company is contracted to finish the job, but it demands, and gets, an additional Sh3.1 billion. Then there are other accrued penalties of Sh1.7 billion slapped on the taxpayer by the new contractor, earning interest for every day not paid. In total, about Sh37 billion goes down the drain.
The icing on the cake? The company has committed no crime. No one is held accountable as Kenyans start paying for these mistakes, a decade later, through additional tariffs loaded on their monthly power bills.
The dream carrier was the
This was way before 2004, way before Kenya became a global powerhouse in geothermal generation. At that time, getting 300MW of wind power from the Loiyangalani desert was a dream come true.
But first, the wind company, whose board has been chaired by former Vision 2030 director-general Mugo Kibati, a man who had made his name marketing Kenya's 30-year growth plan, needed land. Nowhere else showed more promise for the project than Loiyangalani in Marsabit County.
In 2005 the firm easily secured a 99-year lease for 40,000 acres, or about 160 square kilometers, in the desert from the Kenyan government, with effect from 2005. Shortly afterwards, the wind company contracted DEWI, an international wind energy consulting firm, to carry out wind tests on the land. The company submitted the test results and proposal to the
With the tests complete, the company came to the government with a final proposal to construct a wind power plant and sell the energy generated to
In the letter dated
According to the power purchase agreement,
'The special audit, therefore, notes with concern that a Power Purchase Agreement was executed between
The audit also notes that the PPA was guided by the Feed-in-Tariff policy which allowed power producers to sell electricity to Kenya Power at a predetermined tariff for a given period. The firm was, therefore, to produce 300MW and sell at a rate of Sh7.65 per kilowatt (Kwh). The price was lower than the EPRA-recommended Sh11.
At the time of executing the power purchase agreement, the managing director of Kenya Power was Mr
Also on the driving seat was Mr
At the time, the project location in Loiyangalani was not serviced by any transmission line network. That was when the problems began and a good dream turned into a nightmare that has refused to go away as taxpayers face hefty penalties for power that was never generated or consumed.
In order to supply the power to the national grid for uptake by Kenya Power as was envisaged in the power purchase agreement, there was a need for developing a transmission line from Loiyangalani to Suswa, where the wind farm was to connect to the national grid. The Energy ministry was to construct a 400 kilovolts (KV) sub-station near Loiyangalani and a 428-kilometre transmission line from Loiyangalani to Suswa to realise the project.
But before the transmission scandal started, the Energy ministry broke other laws. The special audit found that it granted the private company the exclusive rights to survey the project area and wind resources and further invite tenders on behalf of Kenya Power, which the Auditor-General has now found illegal.
'The special audit confirmed that the process was contrary to Section 3(2) of the Public Procurement and Disposal (Public-Private Partnerships) Regulations, 2009 as there was no competitive bidding for this potential Public-Private Partnerships arrangement, and neither was there any justification for such an exception,' she notes.
But as the ink dried on the contract, the wind power company went on with its business. It had broken no laws. Thus, it would be involved in the financing, designing, procuring, constructing, installing, testing, commissioning, operating and maintening of the plant. It completed the power generation plant on
'In addition, they were involved in part of the procurement process (invitation to tender), supposedly on behalf of Kenya Power for Lot 3: 400kv transmission line from Loiyangalani to Suswa, which was a red flag and potential conflict of interest,' the special audit reveals.
Ironically, the company is the one that procured South African firm
Payments also began without any independent review to confirm the readiness of power generation by
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