The advance payment made to the contractor of the Arror and Kimwarer dams was done within the law, Treasury CS Henry Rotich has said.
In a statement on Thursday, Rotich said media reports over the alleged misappropriation of Sh28 billion is misleading and damaging to government's image.
"We would like to stress that all projects whether domestic or externally funded are implemented in strict adherence to the law and in accordance with the commercial and financing agreements," he said.
"In this particular case, if there were any breaches, the ongoing investigations will capture that," he added.
Rotich said according to the Public Procurement and Disposal Act 2015, the contractor of the projects; Service Assicurativi Del Comercio Estero (SACE) of Italy was entitled to 15 per cent advance payment.
He said under the Facility Agreement and the Commercial contract signed between the Kerio Valley Development Authority and SACE, Treasury approved payment of Sh4.3 billion for Arror dam as advance payment.
The payments, he said, were made on December 22, 2017.
The total cost of the project was capped at Sh28.5 billion.
Rotich said Kimwarer dam would cost Sh23.1 billion and that Sh3.5 billion was paid as advance payment.
He said the advance payment is meant to facilitate the contractor to move to the site and start a project implementation.
The CS clarified that the funds were part of the loan facility advanced by SACE and not from the exchequer.
"As indicated above, advance payment is mandatory for the utilization of the facility and had to be paid in time to avoid cancellation of the facility."
Rotich said the advance payment will be consequently recovered from the contractor once work commences through an insurance or bank guarantee.
"If the contractor is unable to deliver the service to the government, or runs bankrupt, the guarantee will be recalled. This ensures that the government borrowed funds are always safeguarded," Rotich said.
Other than the advance payments, Rotich confirmed that the contractor was paid Sh11.1 billion as insurance to guard against any financial risks.
Of this, Sh6.1 billion was for Arror dam while Sh5bn was for Kimwarer dam projects respectively.
Further, Sh545.9 million was paid to the arrangers of the loan facility from SACE while Sh359.5 million was paid out as a commitment fee for the lender to ring-fence the loan.
Rotich said Sh3.5 million was also paid out as an agency fee.
"All the above costs and expenses including advanced payments were provided for in the Arror/Kimwarer financing facility agreement," Rotich said.
Already, the DCI has summoned 107 companies (including 27 directors) to record statements overpayments they received concerning the two projects in Elgeyo Marakwet county.
On Thursday, Senator Kipchumba Murkomen said the DCI had scandalised the projects and weaponised the alleged loss of funds to wage 2022 political wars.
He said the DCI should have first sought expert advice before commencing investigations.