KenGen boss put on the spot over Sh52bn contract award

The battle for the Sh52 billion geothermal wellheads leasing contract Tuesday took a new turn after Parliament opened its investigations into the matter with the questioning of Kenya Electricity Generating Company (KenGen) managers.

Rentco East Africa won the tender one month after it was disqualified from participating in another contract for presenting forged documents and irregular financial statements.

KenGen chief executive Albert Mugo and his head of supplies were unable to explain to the National Assembly’s Public Investments Committee (PIC) how Rentco won the contract after it was denied another on June 12, 2015.

KenGen awarded the wellheads power generating unit to Rentco on July 16.

Philip Yego, who heads KenGen’s supply chain unit, said the company’s tender committee had processed two parallel tenders and communicated to Rentco East Africa the decision to block it from participating in the first tender.

He was, however, unable to explain why he communicated to Rentco that it had won another contract a month after informing the firm that the documents it had presented in the first tender were fraudulent. 

Documents before the House showed that KenGen’s tender committee had found Rentco to have presented a false certificate of incorporation to win the wellheads tender. Leasing of the wellheads power generating unit was awarded on a build, operate and maintain basis.

The matter has since become the subject of a legal suit pitting Rentco and an associate of TransCentury, a Kenyan investment firm.

Mr Mugo pleaded with the committee for more time to investigate award of the 15-year contract. “We request for more time to put together information on this matter. We need to go through the files and compile a report for this House,” he told the committee chaired by Eldas MP Adan Keynan.

Rentco East Africa had bid for two contracts, one for leasing wellheads to generate power and another to rehabilitate the wellheads.

The committee said it had information that Rentco did not meet the requirements for the tender as stipulated in the request for proposals.

“We have information that Rentco East Africa’s audited financial statements for 2011/12, 2012/13 and 2013/14 showed the company was not in existence for the three years,” Aldai MP Cornelly Serem said.

READ: Russian firm sues KenGen in Sh14.4bn tender dispute

The firm’s books of accounts show that it was incorporated on June 6, 2012 and therefore it had provided forged financial statements to meet requirements of the tender.

“It is alleged that the certificate of incorporation was forged to read January 5, 2007 but the exact date of incorporation was June 6, 2012,” Mr Serem said.

Mr Mugo was asked to explain how the decision to tender for the lease of wellheads generating unit was arrived at and the rationale used by the power generating company to opt for tendering of the lease under the Public Procurement and Disposal Act as opposed to the Public Private Partnership given the lease period of 15 years.

The MPs further sought to know why KenGen extended the deadline for expression of interest from April 20 to May 20, 2015.

“It is alleged that the evaluation criteria was changed from what was put in the request for proposals and we would like to know if the instructions provided to the bidders in the request for proposals were clear,” Mr Keynan said.

The committee also wanted to know why two of the seven firms shortlisted did not submit their bids.

KenGen also came under criticism for not awarding the tender to the lowest financial bidder as stipulated in the request for proposals and for changing the criteria in favour of the highest revenue bidder.

The change has since become the bone of contention among the unsuccessful bidders. 

The Public Procurement and Oversight Board in its review of the tendering process found that the cost difference arising from the proposed output in megawatts would amount to loss of colossal amounts of public money and would go against public interest as outlined under Article 227 of the Constitution.

The MPs sought to know whether KenGen had had any prior dealings with Rentco East Africa, Lan Tech and Toshiba Limited besides the Sh52 billion tender.

Mr Mugo was asked to explain why KenGen awarded Rentco the tender when it needed higher revenue from the project.

“One of the bidders-OJS Power Machiens Limited, TransCentrury Limited and Civicon Limited as a consortium had bid documents with high revenue but miscalculations were done to favour Rentco,” the PIC said in a brief to MPs.

Mr Mugo said KenGen signed a lease agreement with Rentco outlining how the Power Purchase Agreement would be executed.

“We guaranteed what was to be produced and both parties signed the power purchase agreement,” he said.

Mr Keynan asked KenGen to table minutes of the tender committee as proof that the tender was awarded transparently.

The MPs accused KenGen of conspiring to award tenders and cited the tender for movement of oil rigs as an example. KenGen was given two weeks to respond to the issues raised.