Billionaire businessman Chris Kirubi and his firm, Centum Investment, on Tuesday got the green light to sign a $1.8 billion (Sh164 billion) contract with the government to construct a 960 megawatt coal power plant in Lamu.
This followed the dismissal of a petition filed by one of the losing bidders in the tendering process.
The Public Private Partnership Unit’s (PPPU) petition committee threw out an appeal filed by Hebei Construction Investment Group and Liketh Investments consortium (HCIG-Liketh), maintaining that there was no foul play in the tender evaluation process.
HCIG-Liketh had in its petition questioned why Gulf Energy was allowed to join the Centum consortium despite being knocked out of the preliminary evaluation stages, contrary to procurement laws.
The consortium had also claimed it was unfairly evaluated and wanted a review of the process.
The PPPU committee, however, ruled that there is no provision in the Public Private Partnership Act that bars a bidder from replacing a member of its consortium.
“A bidder may replace a consortium member at a later stage of evaluation and this allowed the reconstitution. In view of this, the committee
finds that the reconstituted consortium was not a stranger in the tendering process,” committee chairman Kihara Muruthi said.
Centum had initially partnered with Sepco and Thermax, but the consortium was knocked out. The company opted to reconstitute its membership after being re-admitted so as to submit a stronger bid.
The ruling comes as a relief for Centum – which had already started laying ground for the construction of Kenya’s first coal power plant – both in its internal corporate structure and in its operations at the Nairobi bourse in a bid to fundraise for the multi-billion shilling project.
Centum is in the process of hiring a chief financial officer to head the project development team that will be tasked with completing the project.
The firm advertised the position in October last year. The company will also get close to Sh5 billion from the sale of its stake in UAP Holdings in the Nairobi Securities Exchange.
The firm also recently secured a Sh14 billion real estate deal whose profits are expected to help fund the Lamu power plant project.
Its rival, HCIG-Liketh, had also begun preparations for the project as it put in a bid to exploit coal deposits in Kitui’s Mui Basin. The firm’s bid was in November last year pre-qualified and it expected to use the Mui coal to power the Lamu plant.
Centum’s award of the tender in September last year sparked the legal battle as HCIG-Liketh moved to the High Court to challenge the PPPU’s decision.
Lady Justice Mumbi Ngugi issued restraining orders stopping the government from offering Centum a contract until the petition committee, to which she referred the case, delivered a ruling.
At the committee’s hearing, Energy and Petroleum permanent secretary Joseph Njoroge revealed that procurement rules had been bent to accord as many bidders as possible a chance to be heard.
He claimed that HCIG-Liketh was among seven bidders who had been initially knocked out of preliminary evaluation but was readmitted.
But HCIG-Liketh told the petition committee that its bid was tossed aside by the evaluation committee because of a typographical error in its computations for the energy output and cost expected out of the 960 megawatt plant.
But the committee held that HCIG-Liketh shot itself in the foot by failing to rectify the error on two different occasions despite being afforded the opportunity to do so during evaluation.
“During evaluation, a discrepancy on HCIG-Liketh’s fuel charge rate was noted which needed clarification three times. The petitioner hasn’t explained why he tendered evidence on two occasions to support erroneous computations.”
HCIG-Liketh later attempted to correct the error which it termed “an obvious mistake to be corrected by the evaluation committee”.
Centum, in its bid documents, said construction of the Lamu plant would take 36 months, double the time HCIG-Liketh had stated. The investment firm will also run the plant for 25 years to allow it recover the funds put into construction.
Taxpayers will have to part with Sh46.6 billion annually for 25 years after the power plant is completed. The money will cater for the purchase of coal and its conversion to electricity at the plant.
Following the ruling, HCIG-Liketh said it would file a notice of appeal against the decision in the High Court on Wednesday.
Centum, on the other hand, expressed its pleasure at the decision and reiterated it is capable of completing the project. Questions had initially been raised on whether the firm would afford the construction costs.
“As a consortium, we will now work hard to recover the time lost since the award of the tender to Centum-Gulf Energy in September 2014 and look forward to delivering affordable and cheaper power to Kenyans,” Centum CEO James Mworia said.