PS denies rules were bent for Centum in coal plant tender

The Ministry of Energy has denied that it bent tendering rules in favour of one bidder in the multi-billion shilling coal power plant contract.

Energy principal secretary (PS) Joseph Njoroge says in a replying affidavit to one of the losing bidders’ petition that the tender committee decided to re-evaluate the seven bidders who had been knocked out of the race, including Centum, after it found that some documents were not available at the close of the bidding period.

“The Ministerial Tender Committee at its meeting on December 5, 2013 approved the re-evaluation of seven unsuccessful bidders. The re-evaluation committee recognised the unavailability of documents by considering both the hard and soft copies that had been submitted,” Mr Njoroge says.

The PS was responding to claims by a Chinese firm that lost the coal power plant job, HCIG, that the Ministerial Tender Committee relaxed the bidding rules to enable investment firm Centum to bag the Sh174 billion job.

HCIG had claimed in a petition it filed in the High Court that the Energy ministry, the agency that presided over the tendering process, breached procurement rules when it allowed Centum into the bidding race after its initial disqualification.

The Chinese firm reckons that the Centum-Gulf Energy consortium was not among the initial 26 that submitted bids for the project, but somehow emerged in the shortlist of 10 that the ministry later published.

The Ministry of Energy has vigorously denied the alleged bias, saying all bidders benefitted from the revaluation exercise that took place after the initial publication of the list of bidders.

READ: Court stops signing of Sh174bn Centum deal

Mr Njoroge says in a replying affidavit that HCIG, which partnered with Liketh for the tender, also benefited from the relaxed rules, as it had not submitted some documents in hard copy.

“Upon conclusion of re-evaluation, it was established that whereas the expression of interest submitted by HCIG did not contain a hard copy of the power generation licence as required, the scanned documents in the CD submitted contained the said documents,” he added.

Centum had initially partnered with Sepco and Thermax in a consortium that was knocked out at the expression of interest stage of the tendering.
Gulf Energy, which Centum finally partnered with, was initially knocked out after one of the partners in the initial consortium was found to have flouted procurement rules.

Tata Power was kicked out after it was discovered that it had placed a joint bid with Gulf Energy and submitted a separate bid as an independent entity contrary to the Public-Private Partnership Act.

Gulf Energy CEO Francis Njogu has defended his company’s return to the race, insisting that the law allows a bidding consortium to replace members who have stepped down.

“By a letter dated February 25, the Centum-Gulf consortium wrote to the ministry seeking approval to replace Cennergi, which had withdrawn from the joint bid. By its letter dated March 14, the ministry requested the Centum-Gulf consortium to submit bona fides of the replacing members,” said Mr Njogu.

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HCIG last week got reprieve in its quest to reclaim the lucrative tender after Lady Justice Mumbi Ngugi of the Constitutional Court barred the State from signing any contract with any party regarding the coal power plant until the petition committee has determined whether Centum lawfully won the deal.

The Chinese firm contends that it should have been announced the winner of the tender, having submitted a lower financial bid than Centum’s.

Martin Kinoti, an engineer with HCIG, claims in a document filed before the petition committee that his firm offered the lowest cost for plant construction at Sh43 billion per year compared to Centum’s Sh46.6 billion.

“HCIG had the lowest infrastructure cost which was one of the most fundamental parameters to be considered. The petitioner was and still is the most responsive bidder,” Mr Kinoti says.

Centum has dismissed the claim, arguing that HCIG has not provided a basis upon which it reached the figures.

The investment firm has also questioned HCIG’s stated $0.07 (Sh6.4) per kilowatt hour energy charge, arguing that the firm had admitted to being unable to fix a heat rate for the steam in the turbines.

This, Centum argues, makes it difficult to determine their energy cost as the heat rate is part of the formula used to calculate cost.

“HCIG cannot claim its annual energy cost is Sh3.25 billion lower than Centum-Gulf consortium’s because its energy cost could not be determined from its bid as submitted,” Mr Njogu adds.

The High Court’s decision last week is being seen as having given the petition committee the space to determine the dispute.

The winning bidder will run the coal plant for 25 years from the date of commissioning during which it will recover its investment before handing over the facility to the government.

The coal power plant is intended to increase the country’s power generation capacity of 1664 megawatts to at least 5000 megawatts to meet the targets set in the Vision 2030 and to lower the cost of energy in the economy.

Cheaper energy is expected to help Kenya attract more investors in the industrial sector, and to compete with other economies in the region.

Hydro-electric power currently costs Sh27 per kilojoule hour, which the authorities hope to more than half with the introduction of coal power.