Economy

Kirubi, Ahmednasir in dog fight for coal power tender

Kirubi Ahmednasir

The drama unfolded as Energy ministry officials briefed the bidders on the process of picking the firm that is expected to build Kenya’s inaugural Sh174 billion coal plant. PHOTO | FILE | NATION MEDIA GROUP

The fight over a multi-billion-shilling government tender to build a coal-fired power plant in Lamu yesterday took an ugly turn after a bare-knuckle war of words broke out between billionaire businessman Chris Kirubi and two Nairobi lawyers representing rival bidders.  

The drama unfolded as Energy ministry officials briefed the bidders on the process of picking the firm that is expected to build Kenya’s inaugural Sh174 billion coal plant as part of the Lamu Port South Sudan and Ethiopia Transport corridor (Lapsset) project. The plant is expected to contribute 960 megawatts (MW) of power to the national grid.

The chairman of the tender evaluation committee Simon Ngure ignited the spat as he took the bidders through the process indicating that a consortium led by Centum Investment — a public listed company that Mr Kirubi chairs — and Gulf Energy had clinched the deal.

The briefing revealed that the Centum/Gulf Energy consortium had performed better than the two other bidders led by Shanghai Electric Power Company and HCIG Energy. Nairobi lawyers Ahmednasir Abdullahi and Fred Ngatia represented the Shanghai consortium.

Mr Ngure had presented tender evaluation results showing that the Centum-led consortium had presented the most favourable Specific Fuel Consumption (SFC) — a key determinant of the final Power Purchase Agreement because it defines the plant’s fuel efficiency which is critical in setting the cost of utility for consumers. Mr Ngure said the evaluation committee had awarded the Centum-led team an SFC of 0.42 kilogramme per Kilowatt Hour (KWh) against 0.43 for Shanghai and HCIG groups.

The war of words between Mr Abdullahi and Mr Kirubi began after Mr Ngure announced that the tender committee had not concluded the overall cost analysis of the financial bids presented by the two rival consortiums because they used a coal standard that was not in the tender document.

The two consortiums were found to have used the international coal standard of 29,000 kilojoules per kg (Kj/kg instead of the South African benchmark of 21,000 kj/kg specified in the tender document. Mr Abdullahi fired the first salvo when he accused the tender committee of making deliberate effort to award the contract to the Centum-led consortium.

“When you look at the evaluation process there is constant excuse-making for the Gulf Energy consortium,” Mr Abdullahi, who is representing the Shanghai group said, drawing applause from a section of the audience.

Mr Ngatia, also representing Shanghai, waded into the controversy, accusing the committee of siding with the Centum-led group and asked for fairness. “Each bid evaluation should be purely on merit and not reverse psychology... once you tell a bidder you passed the technical stage that is the end,” he said.

“You risk running into litigation because you will be telling Kenyans to pay Sh19 billion more by awarding the tender as it is currently,” Mr Ngatia claimed, drawing the ire of Mr Kirubi who fired back accusing the two lawyers of misleading the public.

“Kenya is ours and not for big people and global players who can pay big fees for big lawyers,” he said in defence of the Centum bid before asking the two lawyers to “go and live in China if they have ceased to be Kenyans”.

The remark appeared to have hit a raw nerve in the two lawyers who stormed out of the meeting promising to challenge award of the tender in court. “The meeting has degenerated into absurdities we can’t stand and we have opted to leave,” Mr Abdulahi said as he left the venue.

A visibly upset Energy secretary Davis Chirchir, who sat through the exchange, took to the podium and reprimanded Mr Kirubi for the broadside against the two lawyers. “I would like Mr Kirubi to be polite to other investors and use kind and polite language,” the minister said as he stood to restore calm in the meeting.

He said the ministry would review the grievances raised by the rival bidders before forwarding the evaluation report to the Treasury’s Public Private Partnership (PPP) unit and the Public Procurement Oversight Authority(PPOA) for approval.

“If the numbers used in the evaluation are wrong we are ready to have them challenged and we shall ensure they add up so that we don’t make mistakes that will affect other projects in future,” Mr Chirchir said.

The minister asked the evaluation team to stick to the rules but cautioned losing bidders against rushing to court. “Let us not punish Kenyans by delaying cheap power to the grid... if we must seek redress let us stick to the facts,” he said.

Centum later sent a press statement indicating that they had been awarded the multi-billion-shilling tender.

“Following a rigorous tender review process led by an independent technical evaluation committee, a consortium led by Kenyan companies — Gulf Energy Limited (“Gulf”) and Centum Investment Company Limited (“Centum”) — has emerged as the winning bidder of the government’s tender for the development of a 1,000MW coal-fired power plant to be located in Lamu County,” Centum said in the statement, adding that it had beaten a field of strong 26 contenders from India, Japan, the USA and Europe to the contract.

Centum, which is a home-grown investment firm, said it planned to finance the project through $500 million equity and $1.5 billion debt. “The project will cost approximately $2.0 billion (Sh174 billion), of which approximately $500 million (Sh44 billion) will be funded by equity and the balance of approximately $1.5 billion (Sh130 billion) will be funded through debt,” the statement said. 

The Lamu coal plant is among the numerous projects that the Jubilee government is executing under an ambitious scheme to generate 5,000MW of power in 40 months starting September 1, 2013 under the PPP arrangement.

The plant will initially use imported coal and later source raw materials from Kitui’s Mui Coal Basin. Power generated from the coal plant will be sold to Kenya Power under the long-term Power Purchase Agreement (PPA) framework.

There is, however, concern that the country may find itself with more power than it needs if the Lamu port and accompanying infrastructure does not take off or its execution trails the construction of the power plant.

With a capacity of 1,664MW against a maximum recorded demand of about 1,410MW, Kenya is under pressure to boost power generation to keep pace with the projected annual growth in demand of five per cent.

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