Inside Politics

Kenyans to pay billions to compensate five IPPs

Wednesday, October 20th, 2021 00:00 |
National Treasury. Photo/File

Taxpayers could be forced to pay billions of shillings to compensate five Independent Power Producers (IPPs) whose contracts lack exit clauses. 

Solicitor-General Kennedy Ogeto says  National Treasury did not seek the Attorney General’s advice while issuing letters of support (LOS) to the IPPs which resulted in lopsided agreements between the IPPs and Kenya Power and Lighting Company (KP). 

The IPPs in question include Rabai Power Ltd, Thika Power Ltd, Triumph Power Ltd and Muhoroni Power Generating Plant, whose contracts according to Ogeto, can only be terminated in case of a breach in their contracts with KP.

“The negotiations of the terms of the letters of support has been done without the involvement of the Attorney General,” Ogeto told the National Assembly’s Departmental Committee on Energy investigating the variance in the cost of purchasing power by KP, KenGen and IPPs.

Letters of Support is an instrument of comfort negotiated by the National Treasury, though the legal opinion of the AG is not necessary, a clause Ogeto said needed to be deleted.

Cost of electricity

Ogeto was responding to a question by Garissa Township MP Aden Duale on remedies available for the government to terminate PPAs with IPPs. 

The move could turn out to be another pain on taxpayers despite attempts to lower increasing cost of electricity saw President Uhuru Kenyatta appointed committee promising a two-thirds reduction of power tariffs agreements between Kenya Power and Independent Power Producers (IPPs) from Sh24 to Sh16 per Kw/h effective December 1, 2021.

The task force was constituted in March this year, to review power purchase agreements (PPA’s) between state utility distributor KPLC, and IPPs. 

Last week, the Government enjoined diplomats from whose countries IPPs originate in renegotiating existing purchase agreements, freezing new contracts and ordering KP to review existing agreements following widespread concerns of high electricity bills.

Responding to Ogeto’s claim yesterday, Gem MP Elisha Odhiambo said in the event the contracts are terminated, the costs should be amortised before compensation.

Ogeto said PPAs involving KenGen, Kipevu Diesel Power Generating Plant, Kipevu III diesel Generating plant and Iberafrica were normal, with exit clauses.

In the case of KenGen’s contract which involves purchase of power from the two Kipevu thermal plants, the contract can be terminated as long as a 24 months (two years) notice was provided.

In the case of Iberafrica, Ogeto said KP can terminate the PPA by initiating the review process with notice, allowing the parties to agree on how the plants will be retired. 

“If the parties are unable to reach an agreement within the six months of the date of notice, KP may exercise its right to terminate and issue a twelve-month notice of termination,” he said.

IPPs shareholders

During the forum, National Treasury Principal Secretary Julius Muia told the committee neither the Ministry of Energy nor KP had provided them with details on the amount of money paid to the IPPs.

However, contributing on the floor of the house, Duale sensationally claimed the KP has been paying the IPPs promptly, despite owing KenGen Sh23 billion despite the State utility generator supplying the bulk of power (78 per cent) to Kenya Power.

Speaking yesterday, Duale sought to know the list of IPPs shareholders, their physical address including the amount of money paid by the KP to the IPPs.

“Let this parliament be remembered for bringing to book the owners of these companies who stole close to Sh400 billion for not supplying power,” said Duale.

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