Charles Keter in Trouble For a Sh18.4 Billion Power Fine Levied Against Taxpayers

On September 14, 2016, Kenya Electricity Transmission Company (Ketraco) issued a warning to then-Energy Cabinet Secretary Charles Keter to avoid penalties for idle power generated by Lake Turkana Wind Power (LTWP).

In a letter, Ketraco stated that a Spanish company, Isolux Ingenieria SA, was breaching most of their contractual obligations and that there were clear indications that the transmission line would not be completed in time to tap into the power generated by LTWP.

Taxpayers were later slapped with Sh18.4 Billion fines for idle power between 2017 and September 2018. Sh10 Billion was to be paid through taxes and Sh9.8 billion was charged on consumers through a tariff review between June 2018 and May 2024.

Documents indicate that Mr. Kenneth Sigilai, who was the Ketraco CEO, wrote to Mr. Keter, who recently resigned from the Cabinet as head of Devolution, that Isolux could not complete the line on time; hence the country risked being penalized by LTWP for Deemed Generated Energy (GEE).

“I wish to bring to your attention the risk that Loiyangalani-Suswa transmission line being undertaken by Isolux Ingenieria SA of Spain may not be completed as scheduled, attracting penalties from the partial risk guarantee given in the government letter of support to the developers of Lake Turkana Wind Power Plant,” reads the letter.

Mr. Sigilai wanted the CS to negotiate with LTWP to extend the deadline to give Ketraco time to look for another contractor to complete the line to avoid penalties.

“We, therefore, request an additional 12 months to source a replacement contractor to complete the project,” the letter further read.

However, no document before the National Assembly Public Investments (PIC), which is investigating the saga, indicates that Mr. Keter responded to Ketraco’s letter, a move that would have saved taxpayers the Sh10 Billion they are currently paying.

Due to this, Mr. Keter has been summoned by the committee, at a date yet to be confirmed, to answer questions regarding the project. PIC chairman Abdulswamad Nassir (Mvita) said Mr. Keter and former Ketraco CEO Fernandes Barasa will have to explain their role in the saga.

In the letter, Mr. Sigilai told Mr. Keter the transmission line was behind schedule in terms of procuring and importing necessary materials for its completion.

As early as February 2017, Ketraco noted poor performance in civil works and towers erection, with Isolux mainly blaming way leave challenges. However, Ketraco says that even after addressing the challenges, Isolux had not made any progress 45 days later.

On July 18, 2017, Isolux filed an insolvency petition in Madrid, and on August 14, Ketraco terminated the contract of Isolux, guided by the Attorney General.

M/s Isolux Ingenieria SA challenged the termination in the High Court, but the case was dismissed in favor of Ketraco. The company pocketed Sh83.54 million for the work and due to the delayed project completion; the government was slapped with a Sh18.4 Billion bill by LTWP.

LTWP completed the 310 MW power plant in January 2017 but could not start producing power because of the delayed transmission line. Chinese firm — Nari Group Corporation — was brought on board and completed the line on September 10, 2018. Lake Turkana gave the government a four-month waiver and started charging for the deemed generated energy in May 2017.

MPs have all reasons to believe the selection of M/s Isolux Ingenieria SA was deliberate, as LTWP knew it would fail so they charge the government billions for idle power.

A special audit of the LTWP project conducted by Deputy Auditor General Fredrick Odhiambo revealed that while the firm would charge KPLC for an incomplete transmission line, the government could not charge the company for delayed projects.

The auditor noted that payments for the idle power began without an independent review and the LTWP billed the government without installing a meter to measure the power produced, and without a system to confirm the quantity of power generated.