Alarm as Ketraco foots Sh4 billion for hot air

MPs have cleared Kenya Electricity Transmission Company to pay a Spanish firm Sh4.5 billion for a botched power line that was never completed.

The Public Accounts Committee of the National Assembly has asked the Energy Principal Secretary and the National Treasury to urgently source the cash and pay Instalaciones Inabensa.

The firm successfully sued Ketraco on charges of wrongfully terminating its contract in April 2016.

PAC has however not recommended that Ketraco bosses should be held responsible for the mess.

The Spanish firm won its case at every legal level–from tribunal to Supreme Court–leaving Ketraco with no further avenues for appeal.

The ill-fated project was meant to build a critical power line connecting Kenya to Uganda, Rwanda, Burundi and DR Congo under the Nile Equatorial Lakes Programme.

The transmission line would have improved electricity supply to multiple towns including Rumuruti, Kabarnet, Narok and Kitui.

 The project collapsed when the contractor was declared bankrupt in Spain and failed to mobilise the required resources.

What followed was an eight-year legal battle that has now ended in a costly defeat for taxpayers.

Auditor General Nancy Gathungu sounded an alarm over the potential loss, stating she could not confirm if taxpayers received any value for the Sh4.5 billion.

Concerns mounted as the project loan continued accruing interest while the incomplete power line sat unused.

"The contractor has closed the project site and barred access until payment is made," said Energy PS Alex Wachira.

He said Ketraco is seeking alternative financing to settle the award and complete the project by 2025-26.

The payout adds to billions of shillings in court awards arising from negligence by public officers that are bleeding taxpayers.

In what exposes the shocking scale of the payouts, Treasury reports showed that bills in respect of court awards–deemed avoidable, stood at more than Sh220 billion in December last year.

The pending payout has doubled from Sh95 billion that was reported in the fiscal year to June 30, 2023 and nearly tripled since 2021 when they stood at Sh69 billion.

The revelations highlight a worsening trend where taxpayers bear the brunt of government negligence in contract management and legal disputes.

The massive settlements stem from wrongful contract terminations, procurement disputes and labour cases across nearly all government sectors.

Agriculture ministries and agencies top the list of offenders with Sh74 billion in pending court awards, including Sh57 billion owed by the Agriculture Ministry alone.

The outstanding balances include some Sh13 billion in land-related cases and Sh4 billion in disputes involving the Livestock Department. 

Shockingly, only Sh595 million of this has been paid despite court orders.

Other departments drowning in legal bills include Environment (Sh43 billion), Health (Sh40 billion), Governance and Justice (Sh17 billion), Education (Sh7 billion), and Public Administration (Sh8 billion).

In one of the most expensive blunders, taxpayers lost Sh700 million when the government unlawfully cancelled a JKIA expansion contract after already spending Sh70 million on a launch ceremony.

The contractor for the second runway and terminal project successfully sued for compensation, with the payout finalised late last year.

Apart from the energy sector, the transport sector emerges as particularly prone to costly mistakes.

Kenya Airports Authority paid Sh390 million over a demolition dispute at JKIA, while the highways agency lost Sh800 million to an Israeli contractor in the Kisumu-Mamboleo road project.

The health sector's debts tell a story of decades-long negligence where two medical suppliers–Equip Agencies and United Medical Supplies–are still waiting for payments of Sh15.2 billion and Sh17 billion from cases decided in 1999 and 1995 respectively.

ODM at one point was awarded Sh4 billion after the parties’ registrar retained some of its share of state proceeds.

President William Ruto has repeatedly warned government agencies against the costly litigation culture, lamenting how taxpayers ultimately fund both the lawsuits and settlements.

"Any government agency that decides to take its counterpart to court will pay using their own money," he declared last year.  The directive has been widely ignored.

PAC, after a review of the Ketraco matter, says the agency has no way out of the debacle.

“They should pursue alternative financing arrangements to settle the awards and complete the project within the financial year 2025-26,” the committee said in a report.

 At the hearings, Ketraco reported to MPs that it had engaged the National Treasury to seek alternative financing for the completion of the project.

“This will allow for the completion of the project hence realisation of investment,” Wachira said.

Treasury has reportedly advised Ketraco to seek alternative funding to settle the arbitration award to the contractor.

Almost 10 years since the project’s termination, no new contractor has been sourced, triggering concerns of further loss of equipment.