NAIROBI, Kenya, Oct 26 – A controversial pilot Wellhead steam generating project could be cancelled after the Kenya Electricity Generating Company (KenGen), said it had experienced technical problems for the second time.
However, KenGen Managing Director Eddy Njoroge told the Parliamentary Committee on Energy on Wednesday that the company would not rush to cancel a tender awarded to the Green Energy Group (GEG) from Norway.
“There is only one component which has failed and its parts had to be replaced. If we cancel before we ascertain the unit can work, we go to tender and we can’t find anyone else who can supply the unit, what next?” Njoroge posed.
Two weeks ago, KenGen was put on the spot with allegations that the tendering process and subsequent award of the bid to the Norwegian firm was flawed.
Njoroge has however continued to deny the claims that were published by the Nairobi Law Monthly magazine.
“The story is fabricated; I have stated that in my personal statement. To make matters worse, the same cover was advertised in the media and it has been put on a billboard, therefore I have taken action. I have instructed my lawyers to sue the publication,” he stated.
Energy Minister Kiraitu Murungi, who had accompanied the CEO, told the committee that he had instructed the national electricity provider to accelerate the program to finding a solution of rationing during the drought.
The publication had alleged that the KenGen boss had been involved in a shoddy deal for the supply of a Wellhead Project that was tendered for in 2009.
A Wellhead is a source of geothermal energy which when fitted with an efficient reservoir-sensitive and portable unit, can produce up to 5 Megawatts of electricity a month, adding to the country’s national grid.
GEG emerged as the most qualified bidder having quoted Sh9.7 billion and following both technical and financial evaluation.
“The article we are referring to states that KenGen paid Sh8 billion. The truth of the matter is KenGen has not made any payments and no firm decision to award them the contract, until such time the first unit runs successfully. If it doesn’t; that’s the end of the story and we get our refund,” said chairman of the board Titus Mbathi.
The embattled MD maintains the project was undertaken after direct procurement which is in line with the law and the company is not at a financial risk.
“There was urgency for electricity because 2009 we had a serious drought and we had been looking for new technology in-house. So when GEG came in and gave a presentation to show they could do it, we jumped and covered ourselves in terms of the risks,” Njoroge said.
In the agreement, KenGen would only pay 50 percent of the total price (Sh437 million) with Sh106 million being payable against receipt from Green Energy AS of Norway (GEG) bank, Sh265 million payable against shipping documents and the remainder of Sh66 million payable after completion of the first acceptance test.
In return, KenGen would pay the remaining 50 percent after presentation of the Second Engineers Acceptance certificate certifying the plant had successfully passed the 18 month pilot run.
Other conditions included provisions that if GEG failed to deliver a successful unit during the test period, they (GEG) would not be entitled to the balance of the contract price but they would have to replace the equipment at no cost to KenGen. No further payment would be made unless the plant is successful and within the time specified or at a reasonable time.
Njoroge said these conditions have been adhered to with GEG having to replace the equipment which was found to be at fault after the first test was unsuccessful.
Njoroge further adds that the payment made so far has been in accordance with the contract.