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Sh2bn Ketraco and Chinese firm row sent to arbitration
The Chinese firm says the initial contract sum was Sh3.3 billion and that the job was to be implemented within 22 months starting February 14, 2017. The completion date was expected to be December 2018.
The High Court has referred a Sh2.18 billion dispute between a Chinese firm and state-owned Kenya Electricity Transmission Company Ltd (Ketraco) to arbitration.
Justice Peter Mulwa further declined to issue any orders as sought by North China Power Engineering Company Limited, saying it would not be proper to restrain Ketraco from dealing with a “critical transnational infrastructure project which would not only harm public interest but also Kenya’s energy security”.
The Chinese firm sued Ketraco seeking compensation for ‘idle time’ following delayed implementation of the Kenya-Tanzania Power Interconnection project.
‘Idle time’ is an amount paid as compensation for the time a contractor’s employees or machines remain unproductive due to factors that can either be controlled or uncontrolled by the contracting party.
Ketraco said the Chinese firm had sought orders compelling it to deposit $4,912,045 plus another Sh1.54 billion in an interest earning account, a move that was akin to inviting the court to supervise arbitration proceedings.
The contractor had claimed that Ketraco was getting income from the project and if the orders sought were not granted, the corporation was likely to use the money for other purposes and deprive it of its income.
“Upon perusal of the record, I find no evidence that the subject matter of arbitration is under any threat, and there is no demonstrable irreparable injury to be occasioned, or if it were to be suffered that monetary compensation would be inadequate if awarded in arbitration,” said Justice Mulwa in a decision issued on July 16, 2025.
The judge said granting the orders sought by the Chinese firm would effectively determine the dispute, violating the arbitration agreement.
He said arbitration was a time bound dispute resolution mechanism designed to save time.
“To the extent that parties are agreed on the correct forum for this dispute, I exercise my discretion and direct that parties do appoint an arbitrator for the formal commencement of the arbitral proceedings,” said the judge.
Ketraco had opposed the application stating that for claims, the contract provided for an elaborate procedure for submitting a claim for additional costs or extension of time, responses to the claim by the procuring entity and resolution of any emerging dispute to claim.
Ketraco said it wanted the dispute to be arbitrated in Kenya by a single arbitrator appointed by the chairperson of the Chartered Institute of Arbitration of Kenya.
“The defendant will be greatly prejudiced if this present suit is allowed to continue before this honourable court as it would amount to duplicity of suits in different fora that will out-rightly embarrass the judicial system,” said Ketraco through the firm of MMA Advocates LLP.
The energy project, which involved construction of about 510 kilometres of High Voltage Alternating Current (HVAC) transmission line from Kenya to Tanzania, was supposed to start in February 2018 and be complete in December 2018, but was delayed to 2023.
During the period the firm says it incurred financial losses which it wants Ketraco forced to compensate.
The Kenya-Tanzania power interconnection line was energised early last year.
The Chinese firm says the initial contract sum was Sh3.3 billion and that the job was to be implemented within 22 months starting February 14, 2017. The completion date was expected to be December 2018.
However, the project experienced multiple delays, and the contract documents were amended nine times to provide addendums on the completion date. The last addendum is dated July 4, 2023, extending the completion date to December 31, 2023.
Following the extension of the contract duration, the price was varied to $22,428,704 and Sh535,169,929 (cumulatively Sh3.34 billion) to reflect tax adjustments and administrative compliance.
“The company faithfully and successfully completed all its obligations under the contract. However, the delays led to substantial and prolonged expenditure by the company in the form of additional costs, for which Ketraco is liable,” says Peter Wanyama who is representing the Chinese firm in the dispute.
Mr Wanyama said Ketraco has not made any payment and not responded to or acknowledged the company's letters asking for payment.
“The Kenya-Tanzania Power Interconnection Line is live. Ketraco is deriving income from the use of the line. Therefore, it has adequate funds in its bank accounts to settle the claim. If the orders sought are not granted, the Ketraco is likely to use the money for other purposes and deprive the contractor of its income,” he said.
