Members of Parliament have directed the National Treasury to audit Lake Turkana Wind Power (LTWP) over a contested tax bill tied to the Sh19 billion penalty. The firm was paid by the government after Kenya failed to deliver a transmission line to evacuate power from its plant in Marsabit on time.
Taxing the money earned through the penalty has been contested, with the Kenya Revenue Authority (KRA) arguing that it constitutes a taxable service.
The company, however, noted it was a penalty levied on the government for a breach of contract, which made it tax-exempt.
LTWP and the Energy ministry had an agreement requiring Kenya to construct a transmission line from Loiyangalani in Marsabit to Suswa, enabling the company to deliver its power to the national grid and sell it to Kenya Power.
However, the line was not completed on time, prompting LTWP to demand compensation equivalent to what it would have earned had it been allowed to sell electricity to Kenya Power.
The compensation amounted to €127.2 million (Sh19.1 billion at current exchange rates). The payment was made in two tranches, with the government paying Sh6.9 billion (€46 million) upfront and the balance of Sh12.2 billion (€81.6 million) recovered over six years up to 2024 through a surcharge on electricity tariffs.
“By December 2026, the National Treasury, in consultation with the State Department of Energy and the Kenya Revenue Authority, shall undertake a comprehensive audit and reconciliation of the Value Added Tax self-assessment liabilities relating to the Lake Turkana Wind Power project, including verification of legal status, dispute resolution, and potential fiscal exposure,” the National Assembly’s Budget and Appropriations Committee stated in its report on the 2026/27 budget estimates.
The delivery of the 428-kilometer Loiyangalani–Suswa transmission line was delayed by nearly two years. Thus, while the power plant was completed in January 2017, the power line was only completed in September 2018. The delays were on account of the financial difficulties faced by the contractor, Isolux of Spain, which eventually filed for bankruptcy.
The project was re-awarded to a consortium of Chinese firms, Nari Group and Power China Guizhou Engineering Company, in early 2018.
In the report for the next financial year, the BAC report noted that the Energy sector has experienced a major reduction, with the sector casting doubt on the delivery of key projects.
During the public participation process, Parliament’s Committee on Energy made submissions to BAC. It said that a 63.8 per cent reduction in the allocation to the State Department of Energy’s development budget would compromise the delivery of projects underway. Its budget has been slashed by Sh32.13 billion.
“This represented a 63.8 per cent decrease compared to the approved 2025/26 financial year annual estimates. The cuts have resulted in the underfunding of several key agencies, including Kenya Power, Kengen, and Geothermal Development Company for the next financial year,” said BAC in the report.
“The affected projects include critical initiatives such as the Last Mile Electricity Connectivity project, the Electrification in constituencies project, off grid electrification programmes, the street lighting project and the development of transmission lines, substations and geothermal development projects.”
