Ketraco’s Sh10bn pay to collapsed Spanish firm stopped

The order adds fresh twists to the decade-long legal and financial dispute that has seen a Spanish firm affiliated with Inabensa Enerji AŞ freeze Ketraco’s billions of shillings in 17 bank accounts in NCBA, Standard Chartered Kenya, Co-operative Bank of Kenya, Citibank NA Kenya, and KCB Bank Kenya.

The freeze has heightened the risk of nationwide power blackouts because the utility does not have access to cash for repairs and maintenance.

Read: Christmas blackout threat as Ketraco accounts stay frozen

The judge on Monday ruled that the blockade of payment to the Spanish firms was necessary to safeguard public funds while constitutional issues are resolved.

In a conservatory order issued on Monday, the court barred Ketraco, the Energy Ministry, the National Treasury, and the Attorney General from “authorising, approving, processing, facilitating, or effecting any release, transfer, remittance, or disbursement” of funds to Inabensa Enerji A.Ş, a foreign firm.

The court also directed the State agencies to compile and preserve all records related to the contested payments, including approvals, correspondence, and payment instruments, warning that non-compliance would result in penalties.

The suit follows a petition from Lalashe Consulting, a public interest organisation, which accuses Ketraco and senior government officials of attempting to pay billions for undelivered projects.

Central to the dispute are two engineering, procurement, and construction contracts awarded in April 2013 for the 400kV Lessos–Tororo transmission line and the extension of the Lessos substation.

The projects were valued at over €24.5 million (Sh3.6 billion) and Sh893 million, totalling more than Sh4.5 billion.

The claim for the botched contract has grown to Sh10 billion.

They were meant to facilitate electricity trade between Kenya and neighbouring countries but were terminated in 2016 due to non-performance, including failure to mobilise and execute the work.

However, Lalashe alleges that billions are being pushed for payment despite the contractor’s failure to deliver, comparing the situation to the Anglo-Leasing scandal, where multibillion shilling contracts awarded to fictitious companies were not honoured.

“No transmission line was completed… and not a single transmission tower was erected,” Lalashe argues in its petition.“The project existed largely on paper, yet the financial exposure confronting the public purse runs into billions of shillings,” it adds.

Despite termination for material non-performance, the contractor later filed substantial monetary claims against Ketraco, raising concerns over what Lalashe calls the “monetisation of failure” at taxpayers’ expense.

“Once public funds are released to a bankrupt foreign entity, the loss becomes irreversible, rendering any subsequent judgment academic,” said Lalashe.

Granting interim protection, the court emphasised its constitutional duty to safeguard public funds. The conservatory orders aim to maintain the status quo until the petition is heard on its merits.

Lalashe further alleges that Instalaciones Inabensa became insolvent shortly after contract termination, making fund recovery “speculative, illusory, and practically impossible.”

Court documents reveal that on July 28, 2023, Instalaciones Inabensa S.A. transferred its rights to another Spanish firm, C.A. Infraestructuras T & I SLU, which has been pursuing payment in the decade-long dispute.

The Spanish firm Instalaciones Inabensa sued Ketraco following the termination of two contracts for the construction of a power line and a substation in 2016.

Ketraco awarded the Spanish firm contracts for engineering, procurement, and construction (EPC) in 2013, but terminated the deal on April 25, 2016, prompting the matter to be referred to arbitration, where the tribunal found Ketraco in breach of contract.
In July 2019, the tribunal awarded Inabensa €37,365,691 (Sh5.6 billion) plus interest and costs.

Not satisfied, Ketraco unsuccessfully challenged the award at the High Court, the Court of Appeal, and the Supreme Court.

The legal battle compounds legal and operational challenges at Ketraco, a fully state-owned entity tasked with managing Kenya’s high-voltage transmission grid.

A separate High Court order has frozen 17 of Ketraco’s bank accounts over the Sh10 billion claim C.A. Infraestructuras, leaving the utility unable to service loans, pay salaries, maintain infrastructure, or procure grid stability inputs.

Ketraco warns that the freeze risks widespread blackouts, stating that “any electricity outage could cripple Kenya’s industrial sector and essential services like healthcare.”

The utility is appealing the garnishee order, arguing that enforcement against public funds should not proceed while payee legitimacy and repayment rights remain disputed.

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