Mr Albert Mugo, the KenGen chief executive. PHOTO | FILE
What you need to know:
Construction firm H Young obtained a court order barring KenGen from disbursing payments to Hyundai, claiming that the Seoul-based company plans to evade paying it for works done on the Ol Karia I and IV plants.
H Young says Hyundai has refused to disclose payment details for its Sh650 million claim for the subcontract works.
The Kenya Electricity Generating Company (KenGen) has been stopped from paying Hyundai Engineering Company for works done on two geothermal energy plants following claims that the South Korean firm plans to dodge a Sh650 million debt to a local sub-contractor.
Construction firm H Young obtained a court order barring KenGen from disbursing payments to Hyundai, claiming that the Seoul-based company plans to evade paying it for works done on the Ol Karia I and IV plants.
KenGen hired Hyundai for civil and electrical engineering works on the two plants, and the South Korean firm subcontracted H Young to execute part of the project.
H Young now says Hyundai has refused to disclose payment details for its Sh650 million claim for the subcontract works. It adds that Hyundai has already redeployed its foreign staffers to Seoul as it shuts down its Kenya operations.
“H Young has reliably learnt that KenGen has finalised the processing and payment of the claims submitted by Hyundai. Hyundai has no fixed assets in Kenya and will abscond the jurisdiction of this court upon payment of the claims from KenGen. Despite numerous efforts to obtain information in respect to the settlement from KenGen, it has refused to make a disclosure,” H Young says.
Hyundai is yet to file a response to the suit, but has hired Oraro & Company Advocates to defend it.
KenGen, through law firm Robson Harris & Company, has asked the High Court to strike it out of the suit and to lift the order barring it from paying Hyundai.
The state-owned firm says it has no contract with H Young hence should not be dragged into the dispute. KenGen adds that the order may see Hyundai slap it with penalties for delayed payment.
“KenGen has been wrongly enjoined in the suit as the matters in dispute can be effectively settled without KenGen’s participation. The order restraining KenGen from making payments due to Hyundai exposes it to penalties for delayed payments as stipulated in the contract between KenGen and Hyundai,” the state-owned firm holds.
Justice Fred Ochieng will hear the parties today (Wednesday) and give further directions on how to proceed with the case afterwards.
H Young says Hyundai has left only one foreign employee in Kenya identified as Mr Hwang, whom it says has been tasked with overseeing full payment from KenGen before he too leaves for the company’s headquarters in Seoul.
Delayed payments by the government pushed H Young’s interest financing costs to over Sh600 million as at 2014.
As such South African Global Credit Rating agency, (GCR), gave the company a rating of BB+(KE) in the long term with a positive outlook.
The company had revenues of Sh6.65 billion ($70 million) last year and was awarded new contracts valued at Sh11.4 billion ($120 million).
H Young operating profit dropped to Sh612 million from Sh709 million a year earlier attributable to increase in staff and financing costs. The company hired Olkaria Geothermal project staff narrowing its operating margin to 10.3 per cent from 12 per cent.
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