Economy

Dandora power plant stalls in Kidero row with German firm

kidero

Nairobi governor Evans Kidero. PHOTO | FILE

A multi-billion shilling garbage-powered electricity plant billed by Governor Evans Kidero as the magic bullet for Nairobi’s refuse problem hangs in the balance after City Hall disagreed sharply with the German company behind the project.

The firm, Sustainable Energy Management UG (SEM), claims City Hall is in breach of a contract for the proposed setting up of a 70 megawatts (MW) electricity generation plant jointly with the County Government at Nairobi’s Dandora.

The German firm now plans to seek compensation of up to Sh600 million from the county government over the stalled Sh40 billion ($400 million) project. The firm’s managing director, Frank Masuhr, says the county government had failed to honour its part of a memorandum of understanding signed with Mr Kidero.

The waste-powered plant had been billed as the county’s flagship project that would sustainably solve Nairobi’s garbage problem.

Power generated from the project would have been injected into the national electricity grid.
The plant was to be constructed on a Build, Operate and Transfer (BOT) model to help Nairobi County solve the perennial menace of waste, but also directly help employ more than 200 people.
But the Berlin-based firm says failure to honour conditions set out in the contract by the county government for the project to kick off had stalled plans to set it up.
“The outcome of the Roundtable Meeting held on May 3rd 2016 was disillusioning for SEM since (City Hall) withdrew the availability of 2,000 daily tons (of solid waste) and - even more disappointing- the dedication of the seven million Euro per year to co-finance the JV operation,” says the German firm in a protest letter sent to Mr Kidero.

The governor and other county officials did not respond to several requests for comments on the claims.

Cleaning up of Nairobi’s streets and residential estates was a key promise of Mr Kidero’s campaign for governor. 

According to the German firm, the two parties signed an MoU in 2013 to develop the Waste to Power Plant with clear responsibilities and deliverables for each party.

In the MoU seen by the Business Daily, Nairobi County would provide 15 hectares of land for the power plant, guarantee a daily solid waste supply of 2,000 tonnes of waste to generate the required electricity and pay the plant operator a subsidy of Sh700 million (7 million euros) annually to run the solid waste sorting process since no fees for waste collection were to be charged to the public.

However, Mr Masuhr in a letter to the Nairobi county government dated July 22 alleges City Hall has gone back on most of the promises it signed with the company.

“Taking all the above mentioned into account, SEM cannot accept to be excluded from the project. SEM have taken all pre-investment burdens in good faith and confidence in the spirit of our co-operation,” says the German.

READ: City Hall, firm in Sh28bn power deal

Mr Masuhr argues that Nairobi County has gone quiet on the investor and hence stalled the project.

“We have tried by ourselves and even sought the assistance of the German Embassy in Nairobi to set up meeting with the county government to take the project forward, but have so far received no responses,” says Mr Masuhr.

He says the Nairobi County’s silence could push the investor to seek judicial redress, embroiling the two parties in a legal battle that “may taint Kenya’s image as a destination” that attracts foreign direct investment and is easy to do business in.

“We are frustrated at the Nairobi County government’s inaction to take the project forward even after going ahead to spend Sh600 million (6 million euros) on all the pre-engineering activities including project development, basic design and feasibility studies. We have also secured insurance, financing, legal, environmental and socio-economic assessment reports for the project,” said Mr Masuhr.

He says that the Waste to Power project concept had been approved by the central government through Ministry of Energy and Petroleum and the county government as well as Kenya Power

“The project concept also received strong support from President Uhuru Kenyatta, the Embassy of Germany in Kenya and the German Chamber of Industry and Commerce in Kenya,” he added.

The simmering row has roped in the umbrella German business lobby in Kenya.

The Delegation of German Industry and Commerce in Kenya country director, Maren Diale-Schellschmidt, has complained bitterly over handling of the matter in communication seen by the Business Daily.

She raises queries about the governor’s commitment to protecting investment while referencing to a news item that quoted the governor blaming the German investor for the stalled project, and further quoted Mr Kidero saying he was reportedly looking for an alternative investor.