The Government is embroiled in a $600 million (Sh62.1 billion) court battle with a US-based firm for cancelling its geothermal exploration and development licence at Suswa geothermal fields.
WalAm Energy Inc has taken Kenya to the International Centre for Settlement of Investment Disputes (ICSID) in London for breach of contract over the 30-year lucrative deal.
WalAm Energy in court papers argues that the Government erroneously pulled the plug on the tender award to explore for geothermal power in the Suswa fields because it allegedly did not have the capacity to carry out the exercise.
The firm, which is being represented by Nairobi-based J Miles and Co Advocates, says it is unfair for the State to have backed off from the deal as it resulted in it incurring losses for which it ought to be compensated.
But Kenya through Attorney General Githu Muigai has contested the claims, saying WalAm Energy pulled the wool over the Government’s eyes to clinch the tender.
Prof Githu in his counter argument has raised questions about the firm’s country of origin, telling the court that it presented itself as a Canadian company before changing to American. He also argues that ICSID does not have powers to hear the case.
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“Kenya’s preliminary objections raise questions about the nationality of WalAm Energy Inc, which had represented itself as a Canadian company for purposes of being granted the licence. The company later changed its position to claim it relied upon its incorporation in the United States of America as the basis for arbitration by ICSID,” says Prof Githu in court papers.
“Canada had not ratified the Convention on the Settlement of Investment disputes between States and nationals of other States, which sets up ICSID by the time the licence was revoked,” adds the AG.
The deal between WalAm Energy and Kenya was signed by Energy Minister f Kiraitu Murungi in 2007 under the Geothermal Resources Act of 1982. According to court documents, the signature gave WalAm Energy exclusive rights to explore, drill, extract, produce and dispose geothermal steam and other geothermal resources in Suswa area for a period of 30 years.
The move to seek private investment for geothermal exploration was mooted after the Government realised it did not have enough capital to execute the undertaking.
The firm also got the Akiira Ranch concession while Africa Geothermal International Ltd was awarded the tender to prospect for resources in the Longonot area.
However, in 2012, the business relationship went sour after the Energy Ministry cancelled WalAm Engergy’s licence and repossessed the Suswa fields on account that the firm never carried out an environmental impact assessment study and an accompanying report on the same.