State spared Sh31bn penalty after wind energy project fails

Residents of Magumu in Kinangop, Nyandarua
Residents of Magumu in Kinangop, Nyandarua County during protests on the Naivasha-Nairobi highway on Monday February 23, 2015. PHOTO | RAPHAEL NJOROGE | NATION MEDIA GROUP  

The government can breathe a sigh of relief after a British Virgin Islands-registered power company was stopped from demanding Sh31 billion, following unforeseen factors that frustrated implementation of a wind power project in Kinangop, Nyandarua County.

An international arbitral tribunal — the International Court of Arbitration in London has dismissed a claim against the government by Kinangop Wind Park Limited (KWP), bringing to an end a dispute that has been litigated in both Kenyan and foreign courts.

The tribunal has ruled that political interference did not frustrate the project, and as such, the government of Kenya cannot be held liable to compensate KWP.

“It is our finding that there was no political event within the meaning of the Letter of Support, which would have required the government to compensate KWP. Consequently, the claim by KWP is dismissed,” ruled the tribunal.

Implementation of the controversial wind power project started in 2013. As part of the strategy to fully achieving the Kenya Vision 2030, the government has planned to increase the electricity power generation from the 1,664 Megawatts (MW), as of September 2013, by an additional 5,000MW to accommodate the ever-rising demand for both domestic and industrial consumption.


As such, the Kenya Power company Ltd entered into agreements with various investors for engineer-procure-construct (EPC) projects that would generate additional power to be channelled to the main grid.

KWP Ltd and PricewaterhouseCoopers Ltd (PwC), entered into a power purchase agreement on March 26, 2013, with Kenya Power in respect of a 60MW wind farm that the KWP Ltd and PwC Ltd intended to establish in Kinangop.

As a demonstration of goodwill and approval of the project, the government gave PwC Ltd a letter of support dated July 26, 2013, in respect of the implementation in which the government undertook to indemnify the investor in the event of the occurrence of political events.

Some landowners in Kinangop voluntarily leased 1,600 square meters of their respective parcels of land to KWP Leases Ltd, a subsidiary of KWP Ltd, for purposes of construction of the Wind Turbines on their farms, in exchange for lease payments by KWP Ltd, in the implementation of the project.

However, an environmental dispute arose between KWP Ltd and other farmers, whose land parcels surrounded the sites intended for the erection of the masts.

The aggrieved farmers filed a petition at the High Court in Nakuru which delivered a judgment in March 2016, in which Justice Munyao Sila said the variation of the environmental impact assessment (EIA) licences issued, upgrading the project to 60MW and later to 61MW project on new sites situated in 38 plots without requiring a fresh EIA to be provided was contrary to the law.