Energy ministry faces probe over idle Sh79bn steam wellsMonday June 06 2022
Parliament has asked the anti-corruption watchdog to investigate Energy ministry officials who blocked electricity generator KenGen from connecting Sh79.3 billion geothermal wells to the national grid.
This is after it emerged that KenGen incurred billions of shillings in the drilling of wells for geothermal power but which have remained unutilised for the past seven years.
“The committee recommends that the EACC [Ethics and Anti-Corruption Commission] investigates the circumstances under which KenGen was denied approvals to connect ready wells to the national grid,” the National Assembly Public Investments Committee, chaired by Mvita MP Abdulswamad Nassir, said in a report to the House.
The committee wants the EACC to investigate why KenGen has not connected the wells to the national grid as the government pays for the loans of $382.5 million and interest.
The government, the committee observed, is purchasing power from independent power producers when its own wells remained idle.
“Though management indicated that it had requested the Cabinet Secretary for Energy for authority to utilise the wells even after the matter was raised in KenGen’s annual general meeting (AGM) of January 6, 2022, such approval has not been granted to date. It was not clear why the Cabinet Secretary had inordinately failed to grant the requested approval,” the committee said.
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The report says the wells were drilled between 2011 and 2015 and have never been connected to any plant for the generation of power.
PIC says the geothermal wells were financed by a loan from the Export-Import Bank of China (EXIM).
KenGen had in the meantime continued to pay the principal sum and interest while no corresponding revenue had been realised to date.
The parliamentary committee says in its 24th report on the examination of financial statements for State corporations that the KenGen management did not provide the details of when the wells are likely to be utilised in the generation of power.
Auditor-General Nancy Gathungu (left) had flagged the matter, saying there was no value for money obtained on the investment of Sh79,324,783,562 in the drilling of the wells.
During the scrutiny of KenGen’s financial statements, Rebecca Miano, the managing director, told MPs that the government initiated a plan to identify new generation and supply sources to ensure that the national electric power supply exceeds 5000MW in 40 months.
“KenGen’s contribution was 844MW (Geothermal 700MW, Wind 120MW and Hydro 24MW),” she said.
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Ms Miano said the government in 2012 secured funding which was on-lent to KenGen from EXIM Bank of China amounting to $382.5 million.
She said the funds were intended to drill 80 wells but realised 89 wells due to cost savings.
The 89 wells with estimated steam of 447 MW were anchored on the project pipeline as per the Least Cost Power Development Plan (LCPDP).
She said of the 89 wells available, KenGen has already connected 31 to Olkaria V, which was commissioned in 2019.
“It was expected that 16 wells would be connected to Olkaria I Unit 6 by end of 2022. The balance, including internally funded wells, remains allocated to our project pipeline comprising Olkaria VI (34 wells), Modular Power Plant (10 wells), Wellhead Leasing (16 wells) and Olkaria VII (9 wells),” Ms Miano told the committee.
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“These costs were incurred to ensure there was sufficient steam supply to support the geothermal project pipeline. All the wells drilled were allocated to planned power plant projects either as production or reinjection wells.”
She said on commissioning of the project, the cost of wells connected to the same will be recovered.
Ms Miano told lawmakers that all wells would be utilised as either production or reinjection and none will be lost.