Economy

Adviser to settle row between State and Chinese over cancelled Sh55bn JKIA deal

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Transport secretary James Macharia. PHOTO | FILE

An independent adviser is being sought to settle a row between the government and a Chinese firm whose Sh55 billion contract to build an airport terminal was cancelled, raising fears that the botched deal could cost taxpayers hundreds of millions of shillings in compensation.

Transport secretary James Macharia said the adviser will determine who between the government and China National Aero-Technology International Engineering Corporation (Catic) owes the other.

Reports indicate that the Chinese firm was demanding Sh4 billion in addition to another Sh4 billion it had received for work done since 2014 and further compensation for loss of business and anticipated profits.

The government demanded a refund of the Sh4 billion it had paid Catic, arguing that the work done by the firm was not worth the amount paid.

The hardening of positions between the two has stalled talks, prompting the hiring of advisers whose identity was not disclosed.

The Kenya Airports Authority (KAA) in March scrapped plans for a new terminal building at the Jomo Kenyatta International Airport in Nairobi due to financial pressures and excess capacity caused by recent upgrades of existing facilities.

READ: Kenya demands back Sh4bn from China contractor after JKIA deal is cancelled

President Uhuru Kenyatta launched the construction of the terminal in December 2013.

Catic was selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year.

“KAA engaged advisors to amicably meet the contractor and tell the value of work done and then a decision can be reached on whether it is KAA to pay or the contractor to refund some of the money,” said Mr Macharia.

“KAA had paid Sh4 billion to the contractor and when I visited the site nothing much had been done apart from digging up a huge hole and some equipment, so to me the work done was not worth Sh4 billion.”

The contractor had already mobilised 90 per cent of the equipment required for execution of the work. Thirty per cent of designs had been submitted at the time the decision was made to discontinue the project.

Financial documents indicate that the project was to be financed 85 per cent by a consortium of local and foreign banks, including the African Development Bank (AfDB), with 15 per cent financing from the Kenyan government.

The project was dogged by a series of controversies, including a battle over the award of the tender which at one point implicated former KAA managers in corrupt deals before the Ethics and Anti-Corruption Commission (EACC) cleared them.