Economy

Boardroom war rocks Geothermal Development Company

gdc

Mr Simon Gicharu, the GDC board chairman (left) and Dr Silas Simiyu, the managing director of GDC. Photo/FILE

A vicious boardroom war is simmering at Geothermal Development Company (GDC) following sharp differences between the agency’s management and the new chairman Simon Gicharu.

The GDC’s boardroom insiders say the differences are linked to the company’s handling of project loans and procurement tenders that Mr Gicharu insists are suspect.

Internal communication memo seen by the Business Daily shows that Mr Gicharu and the GDC managing director Silas Simiyu have differed over a number of issues at the parastatal created as a special purpose vehicle to fast track the development of geothermal power sources.

A damning report produced ahead of a botched full board meeting that was scheduled for March 6 shows that Mr Gicharu had ordered for an audit of the GDC’s procurement deals as well as a review of ongoing drilling programmes in Nakuru’s Menengai area.

Mr Gicharu accuses the GDC management of securing project loans without the board’s approval.

“I am concerned because the board has not been involved in policy management of GDC and that all these projects GDC has been undertaking are planned and executed solely by the CEO,” he says, adding that GDC has so far signed big loans with development partners without the knowledge of the board, the Treasury and the Attorney-General.

Mr Gicharu also accuses the GDC management of inflating the amount of power it has struck in Menengai area.

He claims that an independent audit by an Italian firm, ELC Electroconsult has revealed that the GDC has so far only struck 21MW of power at the Menengai site contrary to claims by its management that it has realised 70MW.

“The amount of steam that the independent feasibility study commissioned by GDC established fundamentally differs with the amount of steam that the chief executive has stated and therefore the company is not giving the government of Kenya and development partners value for the money they have invested in the venture.

“Worst of all, by contracting generators to invest in power plants for 20 years knowing very well that GDC cannot produce 90MW of power, the government is staring at expensive and avoidable legal suits,” Mr Gicharu says in the letter that recommends suspension of the CEO to allow for investigations.

A source at the GDC said the chairman had escalated his demand for accountability in a memo dated March 5 in which he informed board members of the cancellation of the Thursday meeting.

In his memo, Mr Gicharu said he had decided to call off the meeting to allow for a formal handover by his predecessor Paul Gondi and get a full briefing from the various departmental committee chairmen on the company’s operations.

READ: Geothermal power investors get AU backing for exploration costs

Dr Simiyu, however, denied the allegations, insisting that the GDC’s financial dealings and operations were “above board”.

“All loans targeted at financing GDC programmes are handled by the Treasury which has a representative on the GDC board. So claims that the CEO is unilaterally negotiating and securing loans on behalf GDC are fictitious,” he said.

The Africa Development Bank (AfDB) is the key financier of the 400MW Menengai Phase I that is scheduled for commissioning by 2016.

“The Menengai project is a government venture and any loans meant for it are signed by the Treasury on behalf of the government as the custodian of public assets,” Dr Simiyu said.

The project will cost an estimated $847 million (Sh70.3 billion), according to projections by the GDC. Some 120 wells are marked for drilling at the site near Nakuru town.

Private investors will be sourced to build and operate four power plants at the site each with an output of 100 megawatts. Dr Simiyu also denied claims that the company’s Menegai project was performing below par.

“We need to understand the difference between exploration and production wells. What is cited in the preliminary report of ELC Electroconsult is based on exploration wells and that will differ greatly when actual production commences,” Dr Simiyu said.

The feud has left a cloud of uncertainty hanging over the GDC amid concerns that it could delay the geothermal development programmes and continue subjecting consumers to a longer period of expensive thermal power.