KETRACO denied funds for Sh17.4 billion power project over Sh9.2 billion debt
The Treasury has insisted that KETRACO must first settle a Sh9.2 billion arbitral award owed to a Spanish contractor before any funds can be allocated.
At least 1.5 million Kenyans who were to be connected to electricity will have to wait longer after the Kenya Electricity Transmission Company (KETRACO) was denied funding by the National Treasury to complete a Sh17.4 billion cross-border power project stalled since 2016.
The Treasury has insisted that KETRACO must first settle a Sh9.2 billion arbitral award owed to a Spanish contractor before any funds can be allocated.
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The dispute arises from the termination of a contract with Spanish firm Inabensa in April 2016 for the construction of a 132-kilometre 400 kV double-circuit transmission line from Lessos, Kenya, to Tororo, Uganda. The project was expected to connect 1.5 million Kenyans to electricity.
KETRACO cancelled the deal, citing non-performance, but Inabensa successfully challenged the move in court, initially securing a Sh4.5 billion award in July 2020. The compensation has since risen to Sh9.2 billion.
Auditor General Nancy Gathungu said in her latest report that KETRACO had requested Treasury support to complete the stalled project.
“Management has engaged the National Treasury through the Ministry of Energy to finance completion of the project. This will allow for completion of the project, hence realisation of value for money from the project,” Gathungu said.
She added that Treasury responded through a formal letter.
“However, in the response, there is a letter from the Principal Secretary, National Treasury to the accounting officer dated 14 March, 2024 indicating that upon advice from the Attorney General, the State Department was to work out a feasible phased-out payment plan for the arbitral award and prioritise funding for the same and any other relevant project completion costs within the financial year 2024/2025 and the Medium-Term Budget,” the Auditor General said.
According to the report, KETRACO cannot proceed with the project until it settles the arbitral award in full. The agency has previously lost cases before both a tribunal and the High Court, which upheld the contractor’s award. The matter is now pending before the Court of Appeal.
By the time KETRACO terminated the contract in 2016, 61 per cent of the works had been completed, leaving projects worth approximately Sh6.8 billion unfinished.
“As previously reported, Note 26 to the financial statements reflects trade and other payables balance of Sh28,888,291,000. Included in the balance is an arbitrational award of Sh9,204,024,000 issued in favour of a contractor engaged by Management to undertake construction of a transmission line. The award, if unsettled, may further adversely affect the liquidity of the Company and is likely to negatively impact service delivery,” the Auditor General warned.
The African Development Bank, which had been financing the project, withdrew its support after the contract termination, pulling out before releasing the full funding.
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