Kenya Insights

Tag: KPLC

  • How IPPs Power Firms Rob Kenyans Blind In Fuel Tender Scam

    How IPPs Power Firms Rob Kenyans Blind In Fuel Tender Scam

    Electricity consumers have over the years been overbilled owing to malpractices in the procurement of heavy fuel oil that thermal power producers use to generate electricity.

    A forensic audit on the procurement of heavy fuel oil (HFO) by the thermal Independent Power Producers (IPPs) by the Auditor General shows that consumers paid billions of shillings over and above what they should have paid in compensating the power producers for what they used in acquiring the fuel.

    The money that thermal IPPs spend on fuel is usually passed to consumers and is captured in the power bill as the Fuel Cost Charge (FCC). The charge has been blamed as among the factors that have sustained high power prices in the country.

    The audit, covering the period between 2018 and 2021, unearthed instances where IPPs overlooked fuel suppliers with low bids and instead award contracts to those with higher bids, sometimes more than double what had been the lowest bid.

    The higher costs were borne by consumers. They would also claim to have used higher amounts of fuel when billing Kenya Power while the actual consumption was lower.

    Auditor General Nancy Gathungu now wants the IPPs penalised and also made to return the money that is deemed to have been surcharged on consumers irregularly.

    At the same time, she has recommended action to be taken against Kenya Power staff mandated with overseeing HFO purchases among IPPs for failing to protect consumers.

    Kenya Power, the report noted, has a responsibility of scrutinising the procurement of HFO by IPPs but failed to fulfil this mandate.

    “The instances of irregularities warrant severe assessment of gross misconduct and action to be taken on the responsible parties,” said the Auditor General in the report that was recently presented to Parliament.

    The forensic audit was triggered by the recommendations of the Presidential Task Force on the Review of Power Purchase Agreements (PPAs).

    The John Ngumi-chaired task force had raised alarm after review of the costs incurred by different thermal IPPs when buying HFO.

    It noted a huge variance in the different players paid for the same commodity and purchased under near-similar conditions.

    For instance, over 2019, the task force found out that one IPP would buy a tonne of HFO at $526 (Sh73,640 at current exchange rates) on average while another would buy the same at $1,037 (Sh145,180).

    The task force recommended a forensic audit of HFO procurement by the IPPs over the five years to 2021 as well as closer supervision by Kenya Power of the power producers in their fuel procurement processes.

    Fuel is among the major cost areas for Kenya Power, which paid Sh28 billion in the year to June 2022 to the different power producers operating thermal plants.

    Among the areas of concern that the Auditor General identified following the forensic audit were instances where IPPs are claimed to have bought overpriced HFO.

    According to the audit, three IPPs awarded separate tenders to Gulf Energy between 2013 and 2019 in which the firm had allegedly overpriced the HFO it sold to the power producers.

    The result is that the electricity generators spent a combined Sh1.3 billion more than they would have spent had the IPPs worked with fuel suppliers that had offered the lowest bids. The cost was passed on to electricity consumers.

    “Irregularities noted include the following… procurement award of the HFO supply tenders to Gulf Energy who were not the lowest bidders and without any justification led to losses that would have been avoided,” said the report.

    Gulf Power, according to the report, incurred a loss of $2.93 million (Sh410 million at current exchange rates), Thika Power ($4.44 million – Sh616 million) and Triumph Power ($1.8 million – Sh252 million).

    The report also noted that there was a conflict of interest in Gulf Power – the IPP – buying HFO from Gulf Energy – the oil marketing company – with Gulf Energy owning 80 per cent of Gulf Power when some of the tenders were awarded.

    The Auditor General noted instances where Gulf Energy would be contracted to supply the fuel – not just to Gulf Power but also to other IPPs – even where there were other oil marketers that had bid at lower prices.

    “In the case of the 2019 Thika Power Tender, Total and RH Devani were the lowest bidders but were disqualified. The tender evaluation report stated that the Gulf Energy bid was the lowest bidder, despite evidence to the contrary,” said the Auditor General.

    “Gulf Power, Triumph Power and Thika Power should be held responsible for the losses occasioned through the procurement of more expensive HFO despite the availability of cheaper qualified fuel suppliers. Such actions should include recovery measures,”

    “Action should be taken against KPLC staff tasked with oversight of the procurement process for failure to protect interests of electricity consumers in the irregular award of HFO supply tenders to Gulf Energy.”

    The Auditor General also took issue with a claim for compensation of more than Sh1 billion by two oil marketers that were left holding huge stocks of HFO following a 2015 review of regulations.

    In an April 2016 gazette notice, the Energy and Petroleum Regulatory Authority (then operating as the Energy Regulatory Commission) dropped requirements for IPPs to hold minimum HFO security stocks. This was supposed to ensure security of energy supply in the country.

    KenGen had in 2015 commissioned a 280 megawatt (MW) geothermal plant that reduced dispatch from thermal power plants to 12 per cent from an earlier 33 per cent.

    Hold huge stocks

    This meant that IPPs no longer needed to hold huge stocks of HFO. According to the Auditor General, since the IPPs no longer had to tie this working capital, freeing up of the money that had been tied to the stocks benefited the companies but this was not passed on to consumers.

    Instead, consumers had to pay fuel suppliers that were now stuck with huge stocks of HFO.

    “Following the low dispatch in 2015 and 2016, Gulf Energy and Vivo Kenya who were the fuel suppliers for Kengen Kipevu III, Iberafrica, Gulf Power, Triumph Power, Thika Power and Tsavo Power wrote to ERC (which has since rebranded to Epra) claiming compensation of $9.75 million equivalent to Sh1.01 billion at an exchange rate of Sh103.67, citing additional financing costs,” noted the audit report.

    “After deliberations, ERC approved the request and the amount was recovered from electricity consumers effective July 1, 2017. There was no justification for the payment.”

    “There was also no basis for the fuel compensation since the Fuel Service Agreements were signed between the fuel suppliers and the IPPs and neither the government nor KPLC had guaranteed fuel uptake from the suppliers. All fuel orders from the IPPs were to be based on non-binding monthly estimates depending on the project energy dispatch levels.”

     

     

  • How REREC Executives Masterminded Sh800M Theft And The Coverup

    How REREC Executives Masterminded Sh800M Theft And The Coverup

    A case that has been catching dust in different investigative agencies has been awaken by the Auditor General’s report of 2020/21 bringing to life how the executives of Rural Electrification and Renewable Energy Corporation’s (REREC’s) were engaged in a procurement scam that saw the agency pay rogue contractors Sh800M for supplying substandard electricity poles.

    The scandal was first brought to light in 2019 but ever since, cat and mouse games have ensued and no action has ever been taken against those involved in what is believed to be an insider fraud scheme.

    When procurement irregularities were cited, the Rural Electrification and Renewable Energy Corporation (Rerec) rushed to return 51,238 substandard wooden poles to the suppliers for re-treatment and they were speedily used in electricity projects.

    The suppliers then pocketed Sh800 million, and those investigated and found guilty received a slap on the wrist.

    This was revealed by the Competition Authority of Kenya (CAK), which said that of the 18 companies Rerec awarded the tenders in 2019, five that were investigated were controlled by the same directors and submitted similar bids, raising the cost of the supplied products.

    “The authority conducted investigations to determine if the players in the supply of electric poles could have been engaging in bid rigging practices prohibited under Section 21 of the Act,” the CAK report says.

    “The authority secured and analysed tender documents from Rerec and made a finding that the firms had indeed engaged in collusive tendering. Specifically, the companies presented tender documents bearing identical price schedules and similar prices.

    CAK also cited “cross directorship and information sharing as evidenced by their identical cover pages, handwriting and similar addresses”.

    CAK initiated investigations of collusive tendering irregularities by participating firms in the tenders for Rural Electrification and Renewable Energy Corporation, with regard to procurement of concrete and treated-wooden electricity poles.

    Contained in Auditor-General Nancy Gathungu’s report for the authority in 2020/21, the CAK report also reveals that the five companies that were fully investigated – Mashebrum Ltd, Sonara Ventures Ltd, Sums Decorators, Top Range Ventures Ltd and Tradewinds International Ltd – were found guilty.

    The firms reached a settlement deal and were fined Sh1,305,355. CAK added that investigations on a sixth company – Naweza Investment Ltd – were still going on.

    The Competition Authority of Kenya (CAK) fined, Masherbrum Contractors- Kes203,812, Trade Winds International Kes204,896 and Sums Decorators Limited Kes143,427.

    The companies opted to pay a fine rather than go through the investigations.

    CAK started investigating following a complaint from Inter Tropical Timber Ltd (ITTL) in September 2019, with the company accusing Rerec of tender irregularities.

    ITTL told CAK that Rerec had been unlawfully terminating contracts and awarding tenders automatically to some companies and that there were cases of cross directorship in different companies participating in the same tender.

    Background of the fraud

    The exact amount is uncertain but estimates put it at Sh1B lost in the substandard poles scandal.

    The looting involved a cartel of top managers at the state corporation in collaboration with a long list of companies that supplied the substandard electricity poles.

    Emerging details show that the authorization of the payments was cleared by the REREC Chief Executive Officer (CEO) Peter Mbugua who ordered the chief finance manager accounting Davis Cheruiyot who was at the time on leave to come back on duty to execute the payment transitions.

    They also show that the poles were supplied by a horst of companies to its depots in various parts of the country where inspections were conducted by the REREC team led by Mr Philemon Langat and witnessed by at least six witnesses from the corporation.

    The inspection and testing of the poles failed to meet the REREC standard requirements. The inspections were conducted in April of 2019 and the payments effected at the end of the same year.

    According to documents in possession of Kenya Insights, the team conducting the testing the poles that declared them as having failed the standard requirements apart from Mr Langat included Lawrence Makau, John Kamanga, Eng. C.  Koech, Lawrence Makona, Eng. Benson Oungo, Judy Kiragu, Geoffrey Jiago and Sera Momanyi.

    The others included Lawrence Makokha, Eng. Colletta Koech, Nelson Odongo, Ali Fadhil, and Eng. Benson Ougo among others.

    One of the documents from the inspection.

    The document headed the Rural Electrification Authority Test Results for Poles (10M) dated March 29th, 2019 in part reads: “The poles that failed the tests conducted were witnessed by the General Manager Power Distribution and Regional Coordination Eng. Esther Ruto, the Chief Finance Manager Accounting Davis Cheruiyot, Manager Strategy and Planning Francis Mutua among others.”

    The documents show that the testing was done in Kisumu’s Awasi area, Mariakani in Mombasa, Makuyu in Central Kenya among others as part of the government’s ongoing going Rural Electrification Programme initiated by the President Uhuru Kenyatta administration.

    In challenging the award of the tender to the firms, aggrieved Intertropical Timber Ltd’s director Geoffrey Kariuki pointed out the corruption and impunity at the agency while pointing fingers at the REREC CEO Peter Mbugua and its Chairman Simon Gicharu for loss of pubic funds, procurement of substandard goods and serious conflict of interest and theft of exhibit at REREC stores among other.

    Kariuki filed a petition Petition No 165 of 2019 to highlight the scandal this was after writing numerous letters to the investigative agencies; DCI, EACC and ODPP.

    Letter to the DCI.
    EACC acknowledging the scandal.

    Inter Tropical wrote to Kenya Bureau of Standard (Kebs) complaining that the life-span of power poles had suddenly dropped from 30-40 years to less than 5 years. The complaint caught the eye of Energy Principal Secretary Joseph Njoroge and the CS who ordered a probe to ascertain the claims.

    A few days earlier, energy CS Mr Keter had, in a handwritten note asked REA to “confirm and urgently get me a quick response and if true those involved must face the law.”

    A report by REA(now REREC) for the CS on the claims and dated March 5, lifted the lid on the operations of REA with regard to acceptance or rejection of poles on the basis of treatment. For instance, of all the 7,649 ten metre poles received in Mariakani’s REA stores since July 1, 2018, none had been rejected.

    “Poles that do not meet the minimum requirements are rejected and set aside for the affected suppliers to collect within fifteen days. The suppliers whose poles fail the inspection are immediately notified of the inspection outcome,” Mbugua said in the report sent to CS, PS and the complainant.

    But Inter Tropical claimed REA stores were infiltrated by quacks cum inspectors not accredited and who care less about specifications, safety and standards. REA gave in to the idea of external quality inspection by Kebs or “any other authorised body to conduct tests” on the poles in their stores. It is this acceptance of external inspection that has landed the matter to court whose hearing has been fixed for June 19. The first inspection done only at Makuyu store and to the exclusion of Kebs and Kenya Power was rejected by the petition as biased.

    What started as a mere complaint from one supplier – Inter Tropical Timber Ltd- to Energy Cabinet Secretary Charles Keter, morphed into a court order by Justice J A Makau stopping Rural Electrification Authority (REA) from interfering with the 51,238 substandard poles.

    Letter to DCI.

    The law firm of Kinyua Njagi & Company Advocates wrote to DCI alerting them of the preservation orders granted by the courts and seeking an update on an earlier complaint in March on the same matter.

    The firm also accused the management of coverup by resupplying the same substandard poles hence destroying the evidence. REREC was accused of ignoring court orders that stopped usage of the substandard poles.

    The company accused Rerec in court of having colluded with the suppliers to supply substandard products and defrauding the public. The particular tender was No. REA/2017–2018/NT/021.

    The companies were Wood Treatment Technologies, Silver Wood Treatment Plant, Trucks City, Samfort, Tropical Sawmills Ltd, Abao International Ltd, Lakewood Treatment Ltd, Timber Treatment International, Global Wood Treatment Ltd, Saga E.A. Ltd, Wood World International Ltd, Electrogas Engineering & Construction Ltd, Meru Wood Industries, Janwill Enterprises Ltd, Marula Power Poles Plant Ltd, Line Enterprises Ltd, Tri-tip and Poles & Posts.

    Disputes over the tenders ensued in court in 2019, with several court orders issued and some blocking Rerec from releasing the substandard poles, while another allowed it to return them to suppliers for retreatments.

    In May this year, the High Court sounded doom for the Sh1 billion project that was to benefit thousands of rural households when it upheld Rerec’s argument that the court had no jurisdiction to decide on the matter.

    “I find the proper forum where Petitioners should have proceeded to ventilate any alleged contravention of the provisions of the Act arising from the procurement process, award and performance of contracts thereto vests with the Authority and or the Review Board, as the Petitioners may elect but not before this Honourable Court, as at the time of filing the Petition,” Justice James Makau ruled on May 27.

    Despite being named in the scandal, the firms continue to do business and awarded tenders by the parastatal.

    Procurement scandals

    It is not the first time Rerec’s procurement processes have come under scrutiny since 2018/19. The Auditor-General also questioned the authority’s decision to buy transformers for Sh54 million from a Tanzanian firm through direct procurement.

    The Auditor-General said the procurement was not “an emergency in nature but arose from inadequate planning on the part of management”.

    CS Mwangi Kiunjuri was also linked to the supply of substandard transformers at REA/KPLC in 2015-16 and investigations led by DCI, EACC didn’t help much and the matter was buried.

    Bamboo electric poles

    Another scandal appears to be looming according to the alarm raised by insider source speaking to Kenya Insights, REREC is involved in a speculative procurement as below quoted on secretive tender whose bidding is now closed: “Supply of 10m composite poles –open to local manufacturers only. Within Seven (7) Months after Contract signing,” said the tender document.

    Apparently this tender is tailor-made for a company that is non-existent on the ground called KKN. Huge connection to KEMSA. A cabinet paper was passed by PS Energy to approve the use of composite and KPLC, as well as Rural Electrification and Renewable Energy Corporation (Rerec), were forced to procure 60,000 poles at 60,000 but with bulk order to be reduced to Sh55,000 per pole. This is thrice the price of concrete poles.

    Kenya Power & Lighting Company Plc (KPLC) MD refused to procure initially  and thus tender was channelled through Rerec, by CEO and Chairman both from Mount Kenya.

    Specifications and of the eco pole.

    Technology has not been proven anywhere and is 3 times the price of concrete poles.

    The tender document specifications are as Ecopoles brochure, and the standard is for poles being dropped from a forklift at 3 metres high, which is a farce considering that there is no such test in the world. The product doesn’t conform to any International Standard for Composites and has never been used anywhere in the world, though it is marketed as Norwegian and United Nations (UN) etc.

    There are local manufacturers who have set up a plant for real composite products but they have been sidelined by the tender document which has covered sizes, strengths and designs of Ecopole.

    Ecopole is a rudimentary technology never proven anywhere with false claims of UN goals etc and no certification of such approvals. Furthermore, it states that it is fully recyclable but it is foam filled which isn’t recyclable anywhere in the world. Basically, a waterpipe stuffed with bamboo twigs and filled with foam.

    Tender document.

    The rush to have 15,000 in 7 months since announcement rose curiosity on the urgency since REREC doesn’t hold the capacity to install that huge number of poles in a short time. Perhaps someone in a rush to get a cut off of the tender?

    Conclusion

    Based on the investigation and current available
    evidence, there’s reasonable cause to believe a crime was committed by REREC management. There exists demonstrable grounds for believing that a grave social evil is being allowed to flourish
    unchecked at REREC.

    If the culprits are not prosecuted at this point in time there is likelihood of failer in Public and private justice in future. The Investigative agencies/Public prosecutors seized of the complaints has declined to intitute criminal
    proceedings against REREC management.

    The refusal by state agencies to prosecute is without reasonable cause and no good reason as to why the prosecution should not be undertaken.
    In the current circumstances, prosecution of REREC management by the OPP is highly unlikely to be exercised.

    Based on the forgoing; There should be a leave of court to institute private criminal prosecution against REREC management and
    board of directors if the public is to get accountability and lost money.

    CEO Peter Mbugua and chairman Simon Gicharu.

    It has been noted in other government institutions where officers engage in large scale corruption and pocketing millions in bribery as tender kickbacks.

    Picking the case of Sh800M substandard poles, a multiagency probe more so in the procurement department of REREC would give a money trail and point at suspects who’re likely benefiting from kickbacks. A lifestyle audit would come out with shocking details. Our inside source insists’l it would be shocking’.

    At the end of the day, REREC is answerable to Kenyans and donors who pump billions to various projects in the counter. The back stops with CEO Mbugua and Chairman Gicharu, you can revert to a corner, converse in local dialect and come up with answers to the endless questions.

    [Part 1 ends]

  • Senior KPLC Officials Suspended In Cleanup Exercise

    Senior KPLC Officials Suspended In Cleanup Exercise

    Kenya Power has suspended top leadership of the Supply Chain Division comprising 59 members with immediate effect.

    In a statement released on Thursday, the decision will pave way for forensic audit as recommended by the Presidential Taskforce on the Review of Power Purchase Agreements report presented to President Uhuru Kenyatta on September 29, 2021.

    “In the interim, the Company has appointed a team in an acting capacity to ensure business continuity,” the firm said in a statement.

    The Taskforce which was constituted in March 29, 2021 President Kenyatta was mandated to address the high cost of electricity for both individual consumers and enterprises.

    The nine point recommendations included a forensic audit on the procurement and system losses arising from the use of Heavy Fuel Oils (HFOs).

    “The goal of the forensic audit, which will be done on the procurement systems, stock and staff, is to enhance the robustness of the Company’s supply chain processes so as to anchor them on the principles of value for money, professionalism and accountability,” said KPLC.

    Upon implementation of the report, consumer tariffs is expected to drop from an average of Kshs. 24 per kilowatt hour to Kshs. 16 per kilowatt hour which is about two thirds of the current tariff by December 25, 2021.

    Among the recommendations that were made by the Taskforce was a review of Power Purchase Agreements (PPAs) in order to lower the cost of purchasing power from Independent Power Producers (IPPs) with the aim of securing the sector’s sustainability.

    Sources indicate that some rogue employees at the company have been collaborating with shadow entities to undercut the firm and unsuspecting consumers by generating and selling pre-paid tokens contrary to KPLC policies.

    The scam involves enticing consumers with cheap fraudulent pre-paid tokens offered online which disappear upon payment.

    The tokens fraud is said to be aided through social media platforms and websites such as alphamikofficial.com where consumers are required to key in personal details including metre numbers.

    The audit comes as Kenya Power bounced back to profitability after years of  heavy losses, reporting a full year net profit of Kshs. 1.5 billion driven by increased electricity sales and lower operational expenses.

  • Fleecing KPLC: US Authorities Alarmed Over Extraordinary Profits Made By Ormat From Struggling KPLC

    Fleecing KPLC: US Authorities Alarmed Over Extraordinary Profits Made By Ormat From Struggling KPLC

    American Independent Power Producer (IPP) Ormat Power is on the spotlight in the US for booking outsized gains from Kenya, just days after the President appointed a taskforce to investigate power producers.

    The company’s filings to the Securities Exchange Commission of the United States of America says a huge percentage of income comes from Kenya Power. The utility firm has been struggling to pay Ormat and as of July 2021, it owed the independent producer Sh4.3 billion.

    “A substantial portion of international revenues came from Kenya and, to a lesser extent, from Honduras, Guadeloupe and Guatemala and other countries. Our operations in Kenya contributed disproportionately to gross profit and net income,” the energy firm said in SEC filings.

    Profitable firms

    The company earns twice more than Kengen per megawatt hour. The taskforce investigating power prices advised that all IPPs should slash their tariffs to match state owned Kengen. Kengen is one of the most profitable firms in the region.

    An analysis by the Wall Street Journal owned newsletter Daily Grant says, “ultra premium represents the secret sauce of that windfall. Zachary Truesdell the former MD at Matador Global Management estimated to Grant last year that Ormat earned $94 per megawatt/hour of power provided to Kenya Power, more that double the $45 paid to Kengen.”

    In the SEC filings, the company acknowledges receiving a letter from Kenya’s Parliament to explain the nature of its dealings with Kenya Power, but says it was not about negotiating tariffs.

    “In July 2021, Ormat received a letter from the Kenya National Assembly with a request to respond to various questions and to provide materials regarding our Olkaria complex operations and its PPA. Ormat is engaged in conversations with the Kenya National Assembly to respond to their requests,” said Ormat to the US regulator and investors.

    This web of activities and pricings are an eye opener into how private and foreign players could be charing consumers of their hard earned money through ultrahigh power tariffs.

    The company’s revenue from Kenya has improved from 15 per cent of total revenue last year to 17.5 per cent of the total revenue in 2021. “As of June 30, 2021, the amount overdue from KPLC in Kenya was $43.5 million of which $13.2 million was paid during July 2021. These amounts represent an average of 77.2 days overdue,” the SEC files say.

    Ormat said it believes it will be able to collect all unpaid revenue in Kenya. This belief, it says, is supported by the fact that in addition to KPLC’s obligations under its power purchase agreement, the company holds a support letter from the Government of Kenya that covers certain cases of KPLC non-payment. This includes cases such as where caused by government actions/political events.

    Fixed payments Additionally, the company continued to experience certain curtailments in the first and second quarters of 2021 by KPLC in the Olkaria complex. The impact of the curtailments is limited given that the structure of the PPA secures the vast majority of the Company’s revenues with fixed capacity payments unrelated to the electricity actually generated.

    Due to the high amounts paid to IPPS and high system loses, Kenya is grappling with sky-high electricity prices that continue to keep the cost of living high, while pushing investors out of business which in turn keeps unemployment high.

    In an interesting twist in the sector however, Kenya Power announced last week that it has bounced back to profitability, with Sh1.5 billion in net earnings for the year ended June 30, 2021 compared to a Sh939 million loss last year.

    A detailed analysis from the grants is as below;

    Clean energy is a relative term. Let’s review the peculiar case of Ormat Technologies, Inc. (ORA on the NYSE), the 56-year old, Nevada-based firm that manufactures and installs small geothermal power plants.

    As geothermal energy is both far greener than conventional fossil fuels and represents a reliable, baseload power source (unlike intermittent wind and solar energy), the company is a darling of the prospering environmental, social and governance-focused investment movement.

    Ormat is ranked in the 77th percentile of CHub’s ESG ratings aggregate of 25,208 companies compiled by 787 data sources, topping the average rating of its alternative energy peers, while
    Morningstar bestows a “low” ESG risk rating on the company. ORA is likewise the apple of Wall Street’s eye, trading at 50 times consensus estimates of 2021 earnings per share and six times expected full-year revenues.

    Shares are, however, up just 5% including dividends since Grant’s Interest Rate Observer had its bearish say back on March 6, 2020. Over that time, the S&P 500 has returned 56%.

    The starring role of Kenyan operations in the Ormat story presents a major potential vulnerability. Namely, Kenya delivered 16.4% of revenues through the first six months of 2021, up from 15.7% in the year ago period, and “contributed disproportionately to gross profit and net income,” notes Ormat’s most recent
    form 10-0 filed in early August.

    Ultra-premium pricing may represent the secret sauce for that windfall. Zachary Truesdell, then managing-partner at Matador Global Management, estimated to Grant’s last year that Ormat was earning around $94 per megawatt hour (MWh)
    of power provided to local customer Kenya Power & Lighting Co. (KPLC), morethan double the $45 MWh rate for state-owned geothermal competitor Kenya Electricity Generating Co.

    That disparity has drawn some unwanted attention. This spring, Kenyan President Uhuru Kenyatta convened a task force to scrutinize all power purchaseagreements involving Kenya Power, following the revelation that independent
    power producers (IP’s) were enjoying rates far above those charged by the KenyaElectricity Generating Co. Upon the completion of that review last month, Kenyatta ordered the halt of all power purchase agreements still under negotiation and established a team of auditors to supervise KPLC, while replacing the country’s energy minister. Energy costs in the country will drop by as much as 33% thanks to those enhanced controls, Kenyatta’s office asserts.

    In its 10-Q filing, Ormat acknowledges receiving a letter from the Kenya National Assembly in July requesting information and materials related to its business practices there. For its part, Ormat tells Almost Daily Grant’s that it has not been approached by the Kenyan government regarding a renegotiation of its rates, and that its prices are
    “significantly’ ” lower than those charged by other firms in Kenya.

    Operational risks extend beyond the durability of that lucrative Kenya-based revenue stream. As that 2020 Grant’s analysis pointed out, chairman Isaac Angel served as CEO of Lipman Electronics Engineering Ltd. prior to its 2006 acquisition by Verifone Holdings, Inc. for $793 million in cash and stock. Thanks in part to financial irregularities at Lipman, Verifone was subsequently forced to
    fork over $95 million in a class action lawsuit, a setback which led to the resignation of Verifone’s CFO.

    Then, too, current Ormat CEO Doron Blachar previously served as chief financial officer at Israeli construction firm Shikun & Binui, a company that is now under formal police investigation for bribery. That inquiry is reportedly focused on Kenya and Guatemala, two of Ormat’s most important markets.

    A March 1 analysis by Hindenburg Research alleges that the company routed energy assets through Guatemala via an undisclosed related party, which in turn transferred energy rights to the two senior government officials who approved
    Ormat’s deal to operate in the country. While the company website boasts that its geothermal plants are “powered by nature,” Ormat’s “lucrative international contracts appear to be powered by a slew of payments to senior government
    officials,” Hindenburg writes.

    In March, the company condemned Hindenburg’s report as “inaccurate and filled with innuendo in an attempt to mislead investors about Ormat.” Apart from those allegations, a report last year from local news service NewsZetu asserted that Kenya Power is “broke,” and “technically insolvent,
    .” as net profits collapsed by 92% over the 12 months through June 30, 2019 compared to the
    prior year period. The slow-paying KPLC owed Ormat about $30 million as of the end of July, the 10-Qnotes. That’s equivalent to 37% of 2021 consensus net income.

    Billow Kerrow the former Senator of Mandera has termed it as a “Shame and fleecing Kenyans.”

    In a previous article we did on Kenya Insights and in which we largely relied on the Hindenburg damning report, Ormat came at us with legal demands claiming the publication had some errors, they however didn’t dismiss the entire content.

    In the Hindenburg Report titled ‘Ormat: Dirty Dealings in ‘Clean’ Energy’ it made damning  allegations on the firm’s operations in Kenya saying that;

    • Ormat’s operations in Kenya contribute “disproportionately” to the company’s bottom line, generating an estimated ~41% of the company’s FY 2020 net income. Its customer is the Kenya state power company.
    • A politically-connected businessman admitted to us that he “opened the doors” for Ormat in Kenya and got the go-ahead for the project after an in-person meeting with the Kenya Power boss (who was later charged with corruption) and former President Daniel Arap Moi, widely regarded as one of Kenya’s most corrupt leaders.
    • We present documents showing that Ormat paid contractors in Kenya tied to corrupt government officials, including one run by the son of the former President Daniel Arap Moi along with others run by his documented front-men.
    • The head of the Kenyan state-backed utility who oversaw the original contract with Ormat, as well as the energy minister at the time, were later found to have demanded millions of dollars in bribes to allow international power companies to do business in Kenya.
    • Two former CEOs of Ormat’s Kenyan customer (the state-backed utility) were subsequently arrested in 2018 and more than a dozen top managers were arrested or accused of crimes relating to corruption.
    • The same state utility customer, responsible for driving Ormat’s “disproportionate” financial success in the country, is reportedly “broke” and “technically insolvent”, posing another threat to Ormat’s most lucrative market.

    In sharp reaction, Ormat denied the accusations in a letter to Kenya Insights, “unsupported contentions about third parties such as the “Mugwe firm” and its portfolio, former and current Kenyan presidents and their purported associates, and KPLC managers. These statements are a blatant attempt to sully Ormats reputation through “innuendo” and misleading reporting.”

    Ormart dismissed the allegations against them in the report terming it as a mere “opinion paper” that intends to influence and manipulate the price of a listed stock.

    In their letter, Ormat demanded we publish the following, “Ormat’s Olkaria facility in Kenya is the first and only privately funded and developed geothermal project in Kenya. The project was developed consistently with best market practices at the invitation of the Kenyan government. This project has been widely applauded as a successful
    major Kenyan achievement that has resulted in competitively priced renewable energy. The Company is committed to operate with full transparency with all governmental agencies and
    conducts business with integrity and according to the highest ethical standards in all regions in which it operates    .”

    Kenya Insights complied with the demands and gave the firm a right of reply to the report and allegations. In a letter to Ormat, we asked pertinent questions;

    Letter to Ormat

    For clarifications so that we don’t have to clash again, the editorial will need answers to some questions that perhaps laid ground for the previous ‘misunderstanding’ so kindly pass over the following questions to your client as we have assigned another writer to follow up on this story that we shall publish as a retraction for the previous. Note that our concern is OrPower is at the center of investigations by the parliament and in the good of public, a whole story need to be told not just a PR article:

     

    1. Block & Leviton LLP, a US national securities litigation firm, in March announced that it is investigating Ormat Technologies, for potential violations of the federal securities laws. What’s the reaction to this?

     

    2. Hindenburg Research said Ormat paid contractors in Kenya tied to corrupt government officials. The report widely accuses the management of links to corruption and bribery not only in Kenya but other countries as Honduras. We’d like to get the overall view of the company on this particular report and more specifically to the Kenyan context.

     

    3. OrPower has been accused of exploiting Kenyans with exorbitant prices. For instance, it’s alleged that KPLC buys Sh23 per kilowatt hour yet it can buy the same at Sh0.50 from KenGen. Infact, some are saying that it’s a possibility that cartels in the sector are purchasing power from KenGen at Sh0.50 and offloading to Kenya Power at Sh23. Is this a fact? If so what’s the justification for the high price and direct answer to those claiming it’s exploitation given that Ormat is the second largest producer after KenGen.

     

    4. Recent losses at Kenya Power and expensive electricity bills to consumers have shifted focus to lucrative deals signed between Kenya Power and IPPs. Do you think as a producer this is where the back lay?

     

    5. We’re requesting for the details of operations at Olkaria and agreements or any other relevant document you can avail to us as a matter of openness and integrity.

     

    6. Is it true that the US department of justice is investigating unfair pricing between Kenya Power and Ormat Technologies which was allegedly forwarded by OECD?

    Worthy to note that, we sent the letter on 29th September and a month later and as of the time of publication, we haven’t gotten a reply from Ormat and we can’t tell why they decided not to reply.

    While Ormat distance themselves from bribery allegations, in Kenya some state officials are bragging of having given them a life kick. Disgraced former Geothermal Development Company (GDC) CEO Dr Silas Masinde Simiyu who was also accused of abuse of office and failing to ensure proper management of public funds and fired, has been bragging to anybody who cares to listen that he was behind the successful tendering of Orpower 22 Limited, Sosian Menengai Geothermal Power Limited and Quantum East Africa Power Limited for the Menengai Geothermal Project.

    The Kenya Power and Lighting Company PLC (Kenya Power) recently announced a profit before tax of Kshs.8.2 billion for the period ending 30th June 2021, representing a 216% YoY growth compared to a loss before tax of Kshs.7.04 billion. The strong performance was mainly driven by growth in sales and revenue, as well as a double digit reduction in costs and expenses.

    In the immediate to medium terms, Kenya Power is undertaking deep seated reforms aimed at driving down the cost of power to the end consumer in order to spur social and economic growth, make the business more efficient and agile, and the energy sector more sustainable.

    “The Board recognised that a continued unbalanced approach towards power purchase agreements posed a systemic risk to the sector and the economyas a whole while exposing consumers to high electricity bills. In mitigation, it undertook a collective stakeholder approach to resolve these issues which resulted in the report of the Presidential Taskforce on the Review of Power Purchase Agreements which has made far reaching recommendations which we have started implementing,” noted the Chairman of the Board of Directors, Vivienne Yeda.

    The task force unearthed how Kenya was getting ripped off by IPPs.

    Electricity consumers in Kenya have been paying heavily for the weakening shilling, the latest review of Power Purchase Agreements (PPAs) shows.

    The report by a presidential task force to look into power deals between Kenya Power and Independent Power Producers (IPPs)  shows the country is paying Sh31 more per dollar for a deal entered when the US currency was trading at Sh72 in 2001.

    ”Most of the PPAs executed between the off-taker and IPPs in the country are denominated in foreign currency,” the detailed report reads in part.

    According to the task force set up by President Uhuru Kenyatta, the government bears the responsibility to make dollars or euros available, while the off-taker covers any exchange rate fluctuation risks as well as inflation, by passing the additional cost to the consumer.

    For instance, Tsavo Power signed a dollar-denominated power agreement with Kenya Power in 2001. The currency was trading at Sh72. Today, the dollar is trading at a high of Sh111, Sh29 more.

    The deal between the two companies, however, expired last month.

    Rabai Power on other hand is now earning at least Sh22.40 more per dollar for the deal signed in May 2010 when the US dollar was trading at 107.63.

    The contract which expires in May 2030 means the power producer is likely to reap more as the shilling slides further against the US dollar. The shilling was trading at Sh111 on Monday.

    Ormat is also under the same exchange program.

    Kenya Power is currently forced to shoulder an extra Sh7.60 per dollar to repay the power producer. This is likely to increase as the shilling further drops against the greenback.

    According to the report which is now under implementation stage, the life of a PPA averages 20 years and the exchange rates between the Kenya shilling and the US dollar/Euro is bound to change significantly over the twenty (20) years.

    The task force has recommended renegotiation of some of the power deals, suspension of expensive ones, and termination of ongoing negotiations.

    The report calls for a need to develop locally denominated PPAs to promote use and adoption in local power contracts.

    ”The Taskforce recommends that all future PPAs should be denominated in Kenya Shillings. Stability of local currency will enhance bankability of projects,” the report reads.

    It adds that a monetary policy implementing agency will be required to ensure stable macroeconomic stability to avoid fluctuations in the local currency and erosion of the real value of money.

    ODM leader Raila Odinga has called on the government to review contracts between Kenya Power and independent power producers (IPPs).

    Speaking in Naivasha yesterday after a meeting with local leaders, Raila said the only solution in addressing the high cost of electricity in the country lies in reviewing all power contracts between the utility company and the independent producers.

    The former premier accused the independent power suppliers and unnamed individuals of fleecing the country through expensive deals signed in unclear circumstances.

    Part of the recommendations in the John Ngumi led report by the, Presidential task-force on Power Purchase Agreements is that power purchase agreements with especially both diesel and renewable energy producers is that their tariffs should match Kengen tariffs.

    Matching Kengen tariffs means that most of them will slash their tariffs by half. However Kengen is one of the most profitable companies in Kenya and in the region, meaning the proposal is not that bad.

  • State Takes Over Operations Of KPLC Orders Forensic Audit

    State Takes Over Operations Of KPLC Orders Forensic Audit

    The Government has directed Kenya Power to immediately suspend ongoing and pending negotiations with independent power producers.

    Interior CS Dr. Fred Matiang’i said the Company should also prioritize a review of existing agreements in a drive to lower cost of electricity in the country.

    Matiang’i, said the decision was in line with the recommendations of the Presidential Task Force on the Review of PPAs entered into by KPLC following widespread concerns of high electricity bills.

    “We are all concerned about the cost of power. Our bills are too high, and we have taken tough decisions to deal with challenges in this sector with the focus being the bringing down of the cost of power,” he said.

    The CS was speaking after a meeting the KPLC Board, the company’s senior management team, and officials from the Ministry of Energy.

    He revealed that the Government has declared KPLC a “Special Project” and an inter-ministerial team has been set up to audit and oversight the power-distributor urgently.

    “We are going to do a forensic audit of some of our systems and procedures at KPLC. We are working jointly at an inter-ministerial level to reduce the system losses including the theft of power. We will address all challenges that result in passing unnecessary costs to consumers.” He said,

    The multi-agency team comprising of the DCI, Financial Reporting Center (FRC), Assets Recovery Authority and other investigative agencies will be assembled to investigate alarming system losses within KPLC, procurement practices, insider trading, conflict of interests and suspect transactions involving KPLC staff and others.

    “For a while, KPLC has been running at a loss, with all indicators pointing to ineffective Power Purchase Agreements (PPAs) that have left the company heavily indebted while ironically paying for excesses energy it does not need in take-or-pay arrangements blamed on poor negotiations and vested interests,” He said.

    Matiang’i said besides high fixed capacity charges amounting to Kshs 47 billion, the PPAs are bound by Commercial Operation Dates (CODs) that are not aligned with the company’s power demand. This has often resulted in excess power generation even when the demand is low.

    In the 2019/2020 Financial year, KPLC posted a loss before tax of Kshs 7 billion. Its negative working capital position for the fourth consecutive year has also raised substantial doubt about its ability to sustain operations.

    The system losses stood at 23.47 percent, exceeding the 19.99 percent limit approved by the Energy and Petroleum Authority (EPRA). This is attributed to lack of internal control measures put in place to mitigate losses including governance.

    The company’s obligations to pay for goods and services that were acquired from suppliers were also not met with a long outstanding balance of Kshs 1.3 billion resulting to discontentment of financiers and suppliers.

    The CS SAID the company did not submit to the Unclaimed Financial Assets Authority Kshs 1.2 billion of deposit refunds to consumers, unidentified receipts, unpaid customer electricity deposits, unpaid wayleaves compensation, and unclaimed dividends and stale cheques as required by the Unclaimed Financial Assets Act 2011.

    Dr. Matiang’i exuded confidence that the proposed changes will yield the much-desired results and assured Kenyans that the unit cost of electricity billed to clients will soon go down.

    He was accompanied by Principal Secretaries, Gordon Kihalangwa and Julius Muya, KPLC Board Chair Vivian Yeda, and Ag. KPLC Managing Director Rosemary Oduor

  • Kenya Power Has Paid Sh90bn To Private Electricity Producer Since 2010

    Kenya Power Has Paid Sh90bn To Private Electricity Producer Since 2010

    NAIROBI, Kenya, Sep 15 – The government has paid Sh90 billion to electricity generator Rabai Power since singing a Power Purchase Agreement (PPA) with Kenya Power, the sole electricity distributor, in 2010.

    While appearing before the National Assembly Committee on Energy, Rabai Power Finance Manager Zablon Okwoku revealed that the company charges Sh8 per kilowatt as a variable charge excluding fuel and other related costs.

    The meeting was convened by lawmakers who expressed concern over the amount charged by Rabai Power saying Kenya Electricity Generating Company (KenGen) which produces about 75 pe rcent of electricity consumed in the country, is much cheaper.

    “Energy charge is 0.0063 Euros per kilowatts hour, excess starts are 394 Euros per start, and the fuel charge varies from time to time between Sh8-12 per kilowatt hour,” Okwoku said.

    He was hard pressed by members of the committee led by Garissa Township MP Aden Duale to explain why the company received Sh2.6 billion capacity charge from Kenya Power in the 2019/2020 financial year.

    “You are paid 2.6 billion shillings even in the previous years. Why were you paid that money? You are paid that money and what Kenya Power does is that it transfers that payment it has given you to the ordinary Kenyan’s bill. This is why electricity bills are very high in this country,” Duale stated.

    His sentiments were echoed by Gem MP Elisha Odhiambo who termed the 20-year deal between Kenya Power and Rabai as “total theft.”

    “Why would you keep fuel and wait to give back fuel when you are closing the plant? It looks like there is an insider business in this company. Capacity charge is hot air because they are paid for supplying nothing,” Odhiambo retorted.

    In his defense, Okwoku said capacity charge is a fixed charge that is provided for in the PPA framework.

    In the Power Purchase Agreement, Rabai Power is expected to supply electricity to the Kenya Power for 20 years ending in 2030 then give its thermal plant back to the country’s electricity distributor.

    Okwoku added that the agreement is an investment that is expected to make profit through interest

    “It is just like a loan. If you take a loan, you must pay it back, in installments, principle plus interests. Then after 20 years, Kenya Power will repossesses the plant,” he said.

    Duale however interjected arguing Rabai Management was taking the arrangement as a favour yet the government provided the land where the plant sits on and pays for fuel security storage.

    Rabai is ranked as one of the most expensive suppliers of electricity to Kenya Power, a situation which has been linked to skyrocketing electricity bills in the country.

    With the hiked fuel prices in the September-October review, electricity bills are set to soar signaling tough economic times in the country.

    The Energy and Petroleum Regulatory Authority Tuesday hiked pump prices by Sh9.5 average.

    EPRA announced the pump prices for super petrol, diesel and kerosene would increase by Sh7.58, Sh7.94, and Sh12.97 per litre respectively in Nairobi.

    In Nairobi, super Petrol, diesel, and kerosene will sell at Sh134.7 Sh115.6, and Sh110.8 respectively.

    After a long back and forth debate between the MPs and Okwoku, the committee resolved to request for Rabai’s financial audit and invite Kenya Power officials to explain why it committed to such an expensive agreement with a company whose shareholders are majorly foreigners.

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

    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.

  • Court To Rule On Gichuru, Okemo Britain Extradition

    Court To Rule On Gichuru, Okemo Britain Extradition

    The Supreme Court has set date for the hearing of a petition seeking clarification of whether former Cabinet minister Chris Okemo and former Kenya Power boss Samuel Gichuru can be extradited to Jersey Island to face theft and money laundering charges.

    The judges are expected to determine who between the Attorney-General and the Director of Public Prosecutions (DPP) has the legal authority to commence extradition proceedings in court.

    The DPP moved to the Supreme Court after the Court of Appeal quashed the extradition of Mr Okemo and Mr Gichuru in March 2018 saying the process had been wrongly initiated by the prosecutions boss.

    In the appeal, the DPP wants the appellate court’s decision set aside.

    The Supreme Court will hear the suit on October 5, 2021.

    The Royal Court of Jersey said the Gichuru-Okemo secret accounts received bribes in hard currency estimated at Sh997 million, but only half of the entire loot was found and seized.

    Mr Gichuru and Mr Okemo had reportedly subtly wired large sums from the Jersey account to themselves in the years to 2002. The authorities were only able to recover foreign currency amounting to Sh526 million and Sh444 million was to be wired back to Kenya after deducting court expenses.

    Mr Okemo served in President Moi’s government as the Minister for Energy between 1999 and 2001 while Mr Gichuru was the managing director of Kenya Power & Lighting Company between November 1984 and February 2013.

    A court in Jersey issued a warrant for the arrest of Mr Gichuru and Mr Okemo on April 20, 2011, but the two have challenged the move through multiple legal suits in Kenyan courts.

    The DPP wanted the two sent to Jersey to face corruption and money laundering charges.

    Mr Gichuru and Mr Okemo face a jail term of up to 14 years each if they are extradited to Jersey and found guilty of the racketeering charges preferred against them.

    Interestingly, Kenyan authorities have never opened criminal proceedings against the duo, whose bribery scheme cost taxpayers billions of shillings and hurt the development of power plants — ushering in power blackouts and expensive electricity.

    The asset seizure proceedings and judgment offer a detailed breakdown of the goings-on in the secret account and a rare glimpse of the extent to which Mr Gichuru and Mr Okemo benefited from the bribery scheme.

    The scheme was executed through Windward Trading Ltd — the entity through which Mr Gichuru received hefty kickbacks to award suppliers lucrative tenders during his two-decade tenure at the helm of Kenya Power that ended in 2003.

    Mr Gichuru in August 1986 set up Windward Trading in Jersey as the entity which would receive bribes disguised as ‘commissions’ or ‘consultancy fees’ from firms which won Kenya Power tenders.

    Walbrook Trustees (Jersey) Ltd were the administrators and face of the company and would wire kickbacks received to Mr Gichuru and Mr Okemo.

    However, in May 2002, Walbrook filed a suspicious transaction report with Jersey authorities and refused to make any further payments to Mr Gichuru from these accounts, leading to a freeze on the accounts.

    The scheme was brought into sharper focus by Mr Gichuru’s messy divorce case where his wife lifted the lid on his secret offshore accounts, prompting Jersey authorities to further investigate the matter.

    Windward on February 24, 2016 pleaded guilty to one count of possessing proceeds of crime and three counts of acquiring profits from criminal conduct.

  • How Apopo’s tender wars earned Kenya Power a blacklist slot

    How Apopo’s tender wars earned Kenya Power a blacklist slot

    It has emerged that the scandalous acting chairperson of Kenya Power Board, Vivienne Yeda Apopo  and the former chairman of Kenya Pipeline John Ngumi are the architects behind the wrangles that have rocked the loss making Kenya Power.

    Apopo who has a history of championing controversies is now colluding with Ngumi, the man who chairs President Uhuru Kenyatta’s panel to review Kenya Power purchase agreements to dictate tender winners by kicking out managers viewed as ‘obstacles’.

    She has roped in Ngumi who is using his powerful position to change the management structure of Kenya Power board by planting his spanner boys like Sachen Gudka who was brought in to ensure that Asians in their looting ring win lucrative tenders.

    Gudka was planted like Apopo or Elizabeth Rogo who joined to broker deals for international crooks, a role that earned her a slot in the larger and powerful cartel that includes Caroline Kittony who is a cousin to Baringo senator Gideon Moi.

    The four board members have stumped excess authority over top managers at Kenya Power including the ouster of CEO Bernard Ngugi, a move that has was initially tried through the courts but he survived after a petition to remove him was dismissed.

    John Ngumi [p/courtesy]
    Ngugi became a good target because he was engaged in procurement malpractice. His three year term should end in October 2022 but his replacement has been found in Rosemary Oduor who is now serving in an acting capacity. Oduor is a close ally of Apopo and Ngumi’s cartel through which she lobbied for the position. She was also used to sponsor the case that saw Ngugi kicked out on grounds of corruption.

    Ngugi was among the last managers who were still surviving at Kenya Power after ten other managers including Ken Tarus and former CEO Ben Chumo were kicked out in July 2018 after they abused office and cut deals with a dubious private firm which supplied faulty transformers.

    But it is Apopo’s tender wars with Ngugi that have pushed the donor community to issue threats to withdraw funding for the struggling Kenya Power. She is completely blind to the blows  the agency suffered when France chose to withdraw funding after a section of the management was accused of interfering with the tenders at the parastatal.

    The wars intensified after power transmission line contractors association took Kenya Power to the public procurement administrative review board to block a flouted tender. The body was pushing for a review against the accounting officer, Kenya Power in tender no KP1/6E.1/PT/1/21/ A89.

    The power transmission line contractors association were challenging the supply and extension of low voltage lines last mile connectivity at the average cost of Sh20 million. Tender documents show that (LOT-A) involved supply and extension of LV single phase lines and service cables in Migori, Bomet, Nyamira, Homa Bay, Kisii and Kericho counties calculated at Sh9.2milllion or USD 83,500,000.

    And the supply and extension of LV single phase lines and service cables in Kisumu, Siaya, Vihiga, Busia, Bungoma and Kakamega counties was listed under LOT B at a cost of Sh7.4 million or USD 67,100 but only Sh3,3 million was earmarked for Lot C similar program in Embu, Murang’a, Meru and Tharaka Nithi counties.

    The power transmission line contractors association demanded for an order annulling the tender document and the entire procurement process just after the closure of the tender. The body also wanted Kenya Power to withdraw the tender notice and re-advertise it through a fresh notice without the supply and extension works.

    But Kenya Power’s response proved futile after they filed a memorandum of response on July 5 2021 to object the demands by power transmission line contractors.

  • Graphic: Video Of Man Electrocuted While Vandalizing KPLC Cables

    Graphic: Video Of Man Electrocuted While Vandalizing KPLC Cables

    Earlier today a middle-aged man was electrocuted to death while on a suicidal mission to vandalize high voltage KPLC cables in Athi River.

    According to oreliminary report from the Police, the victim was in a company of other five accomplices who targeted new HT cables under installation along Mombasa road.

    Kenya Power officers have been installing new cables to pave way for Mombasa dual carriage highway construction.

    KPLC says the cables had been connected to live wire as a security to the many other vandalism cases that have been reported before. The dude was unlucky while his accomplices managed to escape unhurt.
    Kenya Power Region Coordinator Cyrus Njenga confirmed the incident and condemned the incident stating that it has become a ritual for natives to vandalize cables costing the company millions in the loss.
    According to Njenga, increased cases of vandalism have halted the modification of electrical cables from one side of Mombasa road to pave way for dual carriage construction.
    This incident comes after KPLC lost cables worth Sh10 million shillings in similar incidents in Athi River last week. The deceased body was taken to the Machakos Level Five Mortuary.
    Here is the video recorded live courtesy of a Kenyan On Twitter.

  • DCI Launches Investigations Into Postpaid Billing Fraud At KPLC

    DCI Launches Investigations Into Postpaid Billing Fraud At KPLC

    DCI sleuths have officially started investigations into an alleged postpaid billing fraud at Kenya Power.

    On 27th of June, DCI had summoned 200 Kenya Power staff and customers summoned to record their statements at its headquarters.

    According to DCI director George Kinoti, millions of monies were lost through a collusion between the staff, brokers and over 5,000 customers.

    Those directors at KPLC and private companies implicated will report to the DCI headquarters on diverse dates in July for further questioning.

    A source at DCI headquarters told this site that Tens of the suspects have already recorded their statements with DCI detectives.

    Fraud cases have hit most of state-owned parastatal.

    This is not the first time senior managers at KPLC are being arrested and questioned.

    July last year, KPLC managing board was arrested over the procurement of defective transformers and the irregularities in pre-qualifying 525 companies.

    18 Kenya Power staffs were dismissed after an audit report revealed that 350 out 500 contractors did not meet the set criteria.

    Government auditors recommended investigation of 19 Kenya Power employees that had shortlisted companies registered by their cronies and relatives.

    Kenya Power has been at the center of corruption for ages, last year, KPLC spent 15 times more to buy power from Independent Power Producers (IPPs) compared to Kengen.

    Kenya Power’s electricity purchase costs summary for 2018 seen by this site records that KPLC spent a total of Sh64.8 billion to buy 10.7 billion kilowatts of power from 19 producers up from Sh60.4 billion in 2017.

    Kengen was the biggest beneficiary of which they sold 7.9 billion kilowatts at Sh37.02 billion.

    Our checks reveals that Kenya Power bought a kilowatt of power from Triumph Power Generating Company at a cost of Sh69.26 compared to Sh4.63 from Kengen.

    Other IPPs including Gulf Power Limited sold a kilowatt at sh26.34, Iberafrica Power at 16.96, Power Tecnology Solution at sh14.70 and Tsavo Power sold a kilowatt at Sh11.77.

    Also Orpower 4 Inc, a subsidiary of Israel owned, OrmatTechnology, a firm listed on New York Securities Exchange sold 1.18 billion kilowatts to Kenya Power which earned them Sh11.4 billion.

    This means Orpower 4 inc sold a kilowatt at Sh9.68, more than double that of Kengen.

    Ethiopia sold 18.3 million kilowatts to Kenya at Sh27 per unit and Uganda 1.26 billion kilowatts at Sh6.54 per unit.

    This is, amongst other irregularities that the DCI are investigating, is what saw KPLC Managing Director Ken Tarus suspended.

    Our investigators checks reveals a list of the most notorious companies on the DCI’s radar;

    Moi University Campus (North Rift), Safaricom Investments Co-op Society Ltd, Nairobi Womens Hospital, Uchumi Supermarkets (North Rift), Holy Cross Fathers (Nairobi North) and Dandora Catholic.

    Detectives will also question the involvement of Sasini Coffee House Limited, Turbo Highway Eldoret, Eldoret Polytechnic, Franscisca Sisters of Anna (Western Kenya) and Seventh Day Adventist Church, South Nyanza on the billing fraud.

    Here is the full list of those summoned by the DCI