In Summary
  • When it was mooted, the power project was to be the first independent large scale wind farm in East Africa and it was to cost $154 million.

  • It was a sweet project and the power generated was to be sold to Kenya Power as per agreement dated March 26, 2013.

  • The British Virgin Island-registered Kinangop Wind Park Limited cited “political events” as the ground and wanted to pin the taxpayer to pay for the damages.

On Monday this week, the government won — for the first time — an international arbitration case in which foreign investors who had abandoned a Sh15 billion wind farm power project wanted Kenyan taxpayers to pay for it.

That must have been a sweet song to former Attorney-General Prof Githu Muigai who had defended the government’s side before he left office. The story of Kinangop wind power scheme is windy — such that many Kenyans have never known why a project that was to generate 60.8 megawatts (MW) was abandoned and its turbines auctioned.

It is also a story of deceit, half-truths, and a case study of bureaucracy, incompetence and unskilfulness.

POLITICAL COMMOTION

When it was mooted, the power project was to be the first independent large scale wind farm in East Africa and it was to cost $154 million. It was a sweet project and the power generated was to be sold to Kenya Power as per agreement dated March 26, 2013.

While walking away, the British Virgin Island-registered Kinangop Wind Park Limited, which was a special purpose vehicle, cited “political events” as the ground and wanted to pin the taxpayer to pay for the damages since the government had issued a “letter of support”.

That meant that it would be compensated against riots and political commotion. When the arbitration case opened in London, Kinangop Wind Park Limited further asked the tribunal to order the government to insure it against any “adverse financial impact” and to “reimburse” all of its fees and expenses connected to the suit.

UNDER RECEIVERSHIP

In a nutshell, the Kenyan taxpayer was being asked to pay for the fiasco — the way we did during the Anglo-Leasing cases where the government lost two litigation cases in London and Geneva without a fight and had to part with billions of shillings.

In one of their claims, the clean energy shareholders said they had incurred a Sh6 billion loss. The consortium had also purchased equipment for the project, including 38 wind turbines. Having taken a Sh5.5 billion loan from South Africa’s Standard Bank to purchase the turbines, the lender placed Kinangop Wind Park under receivership.

But in the Kinangop case, the government stood its ground and said protests by land owners in Nyandarua, while seeking better compensation, could not be used to invoke the “political event” clause. It further argued the parent company, fraudulently received the letter of support after lying it had all the relevant licenses and had secured the relevant land rights and permissions to undertake the project.

RENEW CONTRACT

The story of the project started in 2004 when Ecogen proposed to develop a 30MW wind farm in two phases and with nine turbines each and build a 33KV transmission line to the Suswa substation. In January 2005, it submitted an Environmental Impact Assessment (EIA) report to National Environment Management Authority (Nema) in order to get an EIA license.

It is in this initial report that the first mistake happened. The 2005 report indicated the wind farm would be located in Karati sub-location in Nyandarua “on no more than 2km of land”, while the transmission lines were to pass through Kinungi and then down to Suswa.

The 2005 report said the “project site owner”, a Ms Esther Mburu, had leased her Nene Farm for one year “for testing the wind farm and is willing to lease/renew the contract (but not sell the land). As it would later turn out, Ecogen Wind Farms Limited only had a lease of a small plot where they wanted to put some of the wind turbines.

LAND OWNER

Even though Nema officials were shown the map of the area before issuing the EIA license they failed to notice the wind turbines would run for more than 2km while the portion of the land identified as “Nene Farm” was just 0.6 km. A NEMA official would later testify that had she seen the reference to the 2km, she would have understood that the project would be located outside Nene Farm.

“We did not consider her explanation to be credible,” the arbiters ruled this week.

That notwithstanding, Nema asked Ecogen to enter “proper lease agreement” with “the land owner.” From the onset, it now seems, and by error of omission or commission, it looked like Ecogen was only dealing with a single land owner.

Armed with an EIA licence, Ecogen decided to sell the project to Aeolus Kenya whose founder was Richard Herbert, a third-generation Kenyan-born who had initially managed infrastructure projects in the US, Kenya and South Sudan.

DECEIT PERPETRATED

It was Aeolus Kenya, which decided to upscale the project from the initial 30MW to 60 MW and they brought in a consultant to develop a strategy for its implementation and select the most suitable turbine type.

To coordinate the project, Aeolus also hired Ms Jenny Fletcher who was to coordinate the acquisition of all EIA licenses. Ms Fletcher would feature a lot in the arbitration with the office of the Attorney General arguing Ms Fletcher was dishonest in her dealings with Nema. But the arbiters would later say they found her oral testimony to be honest and credible. In order to upscale the project, Aeolus decided to carry out another Environmental Impact Assesment and Ms Fletcher wrote to Nema informing them on the change in ownership, new transmission line and increased size of the project.

While this 2008 report was being prepared, Aeolus created Kinangop Wind Park Limited, and it was through this special purpose vehicle that the report was sent to Nema in March 2009.

But when this new report was taken to Nema, they said they did not need it — and the government insisted this was due to “deceit perpetrated on Nema” because it still identified the Nene Farm as the site of the project.

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