- Gathungu says Energy ministry and Kenya Power they should be held accountable for the anomalies unearthed during the review.
- Says there was no fairness, transparency, equity and cost-effectiveness in the tender award.
Image: FILE
Energy ministry and Kenya Power officials could be subject of investigations by the EACC and DCI over irregularities in the execution of the Lake Turkana Wind Power Project.
Auditor General Nancy Gathungu has invited the investigative agencies to conduct a further probe into the missteps that may have cost taxpayers an additional Sh3 billion on the project.
In a bold special audit report, Gathungu has put the Energy ministry and Kenya Power on the spot, saying they should be held accountable for the anomalies unearthed during the review.
“Further investigation should be carried out to determine any anomaly by individuals involved in the entire process of the project and action taken on those found culpable,” Gathungu said in a report tabled in Parliament recently.
The auditor says the ministry and Kenya Power failed to ensure a competitive process was followed in identifying the contractor—Isolux Ingenieria.
As a result, the ministry ended up with a broke contractor, which exposed it to the additional Sh3.2 billion expended on the project.
Gathungu said the termination of the contract with the Spanish firm was the cause of the additional cost, to the loss of the taxpayer.
“The ministry and KPLC should be held accountable for not ensuring a competitive process was followed in identification and implementation of the project,” Gathungu said.
She said in the wake of the prevailing circumstances, there was no fairness, transparency, equity and cost-effectiveness.
The auditor has further accused the entities of failing to conduct an independent legal risk assessment prior to the execution of the “capital project of such a magnitude”.
“These infractions exposed the government, taxpayers, and other partners to value for money and litigation risks for delayed payments to contractors,” the report reads.
Ministry of Energy granted a private investor exclusive rights to survey the project area covering 40,000 acres, generate wind power and sell the same to KPLC.
“The special audit noted that the ministry did not conduct competitive bidding in the identification of the private investor contrary to the law,” Gathungu said.
The special audit established that KPLC had not opened an escrow account at the time of the completion of the special audit.
It was further revealed that the company was not collecting the security support surcharge or remitting the same to LWTP.
“KPLC was therefore in breach of this obligation as evidenced by the various monthly invoices sent to LWTP by KPLC to the tune of Sh4.7 billion.
Gathungu noted with concerns irregular VAT claims by LWTP yet the tax components of the project were settled by the government as part of its contribution.
“Taxes due on those aspects of the project that were not covered by the law were paid by the government as a contribution towards the project, premised that this contribution was to be factored in the determination of a lower tariff,” the report reads.
LTWP completed the power plant in Loiyangalani, Marsabit county in 2017 but the line evacuating power was not completed by Ketraco until September 2018.
The delays followed the contracting of a broke Spanish firm, Isolux Ingenieria, resulting in Ketraco terminating the contract.
The Power Purchase Agreement provided that Kenya constructs a new substation near Loiyangalani where the wind warm was to interconnect to the national grid.
“There was no evidence that an independent financial and technical due diligence was conducted on Isolux Ingenieria SA before signing the contract,” Gathungu said.
The additional cost of constructing the line by 17 per cent was a result of the termination of the contract agreement between the Italian firm and Ketraco.
Other anomalies were that LTWP Ltd invited tenders on behalf of KPLC - deemed a conflict as the firm was to contract to finance, design, procure, construct, install, test, commission, operate, and maintain the plant.
The audit revealed that the Attorney General questioned the continued engagement with the Spanish firm despite public knowledge that they had financial challenges.
The project was completed by a consortium of Nari Group Corporation and Powerchina Guizhou Engineering Co Ltd in less than eight months on September 10, 2018.
The firms are still owed Sh1.8 billion less accrued penalties, which Gathungu said should be settled to avoid incurring more liabilities from delayed payments.
-Edited by SKanyara