Economy

AG Githu fights wind power firm’s claim for compensation

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Attorney- General Githu Muigai. PHOTO | FILE

A Virgin Islands-registered firm that was to construct a Sh15 billion wind power farm in Kinangop has sued the Kenyan government for compensation over the project’s failure, putting at stake billions of shillings in public funds.

Kinangop Wind Park Limited is looking to cash in on an indemnity that the Ministry of Energy had promised it as insurance in the event that the project failed to take off for political reasons.

The company has commenced arbitration proceedings against the Government of Kenya at the International Chamber of Commerce, seeking payment for losses suffered in the venture.

“In the said case, Kinangop Wind Park has sought compensation in the form of the transfer amount to be paid by the government as stipulated in the letter of support dated July 23, 2013,” Energy PS Joseph Njoroge said in court papers filed by Attorney-General Githu Muigai.

The wind power company stopped work on the 60 megawatt (MW) plant in February after months of delay and frustration by locals who refused to cede land for the project.

Kinangop Wind Park also claimed that it had incurred $66 million (Sh6.6 billion) loss from the delays.

Details of the company’s claim against Kenya before the International Chamber of Commerce have emerged in a suit Prof Muigai has filed in the Kenyan High Court, seeking to stop the Norwegian firm from selling equipment that was to be used in the multi-billion shilling Kinangop plant.

READ: Firm pulls the plug on Sh15bn Kinangop wind farm project

Kinangop Wind Park Limited is a consortium of Norwegian private equity firm Norfund, South African asset manager Old Mutual and Sydney-based fund Macquarie.

Judge Lucy Njuguna of the High Court’s Civil Division has stopped KWP from selling the equipment, pending the hearing of the Attorney-General’s suit.

Justice Njuguna also ordered that the suit be transferred to the Commercial Division and be mentioned on July 19.

Under the terms of the indemnity, the government was to compensate KWP for losses suffered if construction of the planned 60MW plant collapsed owing to any event resulting directly from political events.

Mr Njoroge holds that the government still intends to pursue the project and allowing Kinangop Wind Park Limited to sell the equipment would seal its fate.

“If the said assets are sold before determination of the International Chamber of Commerce case, the Government of Kenya stands to face double loss in the event that the outcome of the arbitration will not be in favour of Kinangop Wind Park Limited,” he adds. 

Kinangop Wind Park Limited claims in the arbitration case that the protests by locals and multitude of court cases filed by land owners against the project venue count as a political event.

But Mr Njoroge has told the International Chamber of Commerce that there was no political event as the land dispute is a private conflict between KWP and Kinangop residents.

The Energy PS further faults KWP for not conducting proper environmental impact assessments (EIAs) as required by law before commencing the Sh15 billion project.

“One of the defences raised by the Attorney-General in the arbitration case is that there was no occurrence of a political event to warrant the transfer and that the dispute before the ICC has arisen from a private dispute between the community and KWP relating to land compensation, social and environmental protection that had not been addressed by KWP prior to commencement of the project,” Mr Njoroge adds.

Standard Bank of South Africa — which lent the consortium $55 million (Sh5.5 billion) — is seeking to join the suit.

The South African lender placed Kinangop Wind Park Limited under receivership for failing to repay the loan and has since appointed PricewaterhouseCoopers as receiver managers.

PwC has been enjoined in Prof Muigai’s suit, but is yet to respond. The consultancy has however hired Iseme Kamau & Maema Advocates to represent it in the suit. PwC in April advertised the sale of 38 wind turbines that were to be used in the project alongside other equipment.

Standard Bank executive vice president Marlene Pillay maintains that the equipment PwC seeks to auction had been offered by Kinangop Wind Park Limited as security for the loan it now wants to recover.

“As a result of KWP’s default in repaying the debt owed to Standard Bank of South Africa, PwC were appointed as receivers of KWP. In putting up KWP’s assets for sale, PwC is acting in accordance with the security given to Standard Bank of South Africa to secure the debt,” Ms Pillay says.