Trail of false starts that have dogged pioneer Sh200b coal-fired Lamu plant

LAMU PORT-CONSTRUCTION-LAMU; The ongoing super structure on berth number one at the Lamu port in Lamu Count. [Maarufu Mohamed,Standard]
Kenya’s ambitious plan to generate coal-fired power has suffered yet another false start.

This is after an environmental tribunal recently took the project developers and the National Environment Management Authority (Nema) back to the drawing board.

The proposed plant has been characterised by long years of litigation.

The fruition of the idea to have 1,050 megawatts (MW) from a coal-fired power plant now seems to be an elusive dream.

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From the tendering process to the final stage where a plant would have been built, the path has always been rocky. The survival of the project has been solely hinged on the courts and the environmental tribunal’s verdict that could see the cost of the power plant in Lamu reflected on the final cost by Amu Power.

And in a major blow to the Government, particularly the Ministry of Energy that has been pushing for the plant, the tribunal found that the Environmental and Social Impact Assessment (ESIA) for the project was done haphazardly; it did not involve the public. The Energy Ministry has been banking on the coal plant to diversify electricity generation sources in the country.

It said the plant would offer another baseload source (power that is always available), in addition to geothermal.

However, the tribunal led by lawyer Mohammed Balala faulted Nema for glaring blunders and casual conduct in issuing an ESIA license to Amu Power.

“The second respondent (Nema) issued the first respondent (Amu Power) with an operating licence without having adequately involved Lamu residents as required by the law,” the tribunal ruled. It also emerged that Amu never submitted its architectural drawings for assessment and did not indicate how it would ensure that there would be no harm to the environment.

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The firm was also faulted for conducting selective public consultations, in which it declined to divulge critical details about the planned coal plant and gave differing dates for consultations.

“Would the members have supported the project if they knew about its effects on their health, damage of flora and fauna, deaths and even adverse effects on forests? There might be ways to mitigate the same, although the residents ought to have been notified of these before a license was issued,” said the tribunal.

“Nema never supervised Amu to ensure that every regulation was followed. Public participation cannot be a mechanical exercise. It has to be a meaningful engagement.”

It also emerged that the conditions given by Nema to Amu Power appeared misplaced and as if they were not meant for the project. “The EIA Licence conditions appeared to be generic and not targeted at the project before it. For instance, the general conditions 2.10 and 2.11 of the EIA licence conditions appear to be relevant to a fuel depot and storage conditions of fuel rather than a coal plant,” noted the tribunal.

“Conditions for coal storage and ash yard were either too basic or lacking thus suggesting a pedestrian and casual consideration of the environmental impacts identified by the proponent.” The decision by the tribunal is a second major blow to the project that has been cited for failure to consider its grave impact on the environment.

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In May last year, the High Court ordered the Government to pay Sh1.7 billion to 5,000 fishermen for failing to consider the environmental harm caused by the Lapsset project.

The State was also ordered to resubmit the project’s documents for reevaluation by Nema and report on the findings within a year. High Court Judges Pauline Nyamweya, Joel Ngugi, Jaden Thuranira, John Mativo, and Joseph Onguto found the State at fault for not providing evidence on how it was going to deal with disrupted sea life after the dredging of Lamu port.

On June 26, 2017, the environmental tribunal observed that although the court had ordered Nema to reconsider the project’s papers, nothing had been done.

“To date, the strategic assessment study of Lamu has never been done as had been ordered by the High Court. Amu did not also submit the proper location details and designs of the project,” observed the tribunal.

“This lack of specifics of information gave the tribunal as well as the public a hard time to determine its effects on the fragile seashore.” Amu Power Chief Executive Cyrus Kirima said the firm would comply with the orders and undertake another ESIA.

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Prior to the Nema case, Amu, which was formed by a consortium of Gulf Energy, Centum, a group of Chinese firms and America’s GE (a recent entrant), was rocked in a suit on who was best placed to build the power plant.

Hebei Construction Investment Group (HCIG) and Liketh Investment Kenya, through their consortium (HCIG-Liketh), claimed Gulf Energy Consortium won the tender unfairly in the case filed at the High Court.

The company said Gulf Energy Consortium would produce power at a higher cost compared to what it (HCIG-Liketh) had proposed in its bid papers.

In the documents, HCIG-LIKETH argued in court that it would channel power into the national grid at a cost of Sh43.4 billion per year - which is Sh16.4 billion lower than Amu Power’s Sh59.8 billion per year.

The two firms were to charge the taxpayers Sh24 billion and Sh32 billion annually for putting up the infrastructure in the Lamu Power plant in which a consortium composed of Gulf Energy, Sichuan Number Three Electric Power Construction, Suchan Electric Power Design, and Consultancy Company, Centum Investment and CHD Power plant Operation Company being on the higher grid.

“One of the underlying consideration in the entire bidding process was the matter of affordability and that unnecessary burden should never be imposed on the end-user. In line with this, HCIG-LIKETH had the lowest base capacity charge which was one of the fundamental parameters to be considered in the Public-Private Partnership project,” HCIG-LIKETH said in its suit papers filed by J Thongori & Company Advocates.

The initial bidders were 26.

The ministerial tender committee evaluation saw nine firms pass the technical requirement stage. In the initial stage, Centum had initially partnered with Sepco and Thermax, but the consortium was knocked out of the expression of interest stage.

Another partner in the same consortium (Gulf), Tata Power had made two entries in that bid though it went to the next stage to measure who would bid the lowest in terms of cost.

Tata formed the first consortium with Gulf and Centum and later exited the scene. HCIG in its case argues that this would have led to Gulf consortium being disqualified in accordance with PPPA section 46.

It argues that Tata ought to have been out of the power game in the first assessment as it had double-bid and that both Tata and Centum could not have been allowed to merge again and get in the process in another group.

Energy PS Joseph Njoroge, in his affidavit defending Gulf Energy consortium bid win, said the withdrawal of Tata from Gulf, which it did on March 20, 2014, was within the law.

He noted that he had sought legal advice from the then-Attorney General Githu Muigai and Public-Private Partnership Unit on the issue and was advised he was within the legal provisions governing the tendering process.

“The Ministry of Energy and Petroleum wrote to the Gulf-Centum Consortium to submit the bona-fides... of the replacing members so as to determine whether after replacing the departing members the consortium would still remain eligible,” Njoroge said.

The reconstituted Gulf consortium, according to Njoroge was “vigorously” evaluated to become the winner.

Gulf Energy CEO Francis Njogu also defended its return to the race, saying the law allowed a bidding consortium to replace members who step down.

According to HCIG-LIKETH, Gulf ought to have also exited from the bid. But Njoroge in his reply to the claim said the ministry didn’t receive any complaint from the bidder regarding the reconstitution of Gulf Energy.

Mr Njoroge said the tender committee’s decision saw Gulf Consortium bag a Sh200 billion deal to construct the plant

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

The committee’s ruling cleared the cloud that Gulf Energy had been illegally slipped in by the tender committee to clinch the 1,020-megawatt power deal.

The Public-Private Partnership Petition Committee composed of Kihara Muruthi, Paul Karezeki, Charity Muya, and Jackeline Kimeto said there were no rules that would have barred Gulf from changing its partners to make it win the deal.

“The prayer to quash and annul the award of the tender to the fourth respondent is hereby rejected. The request by the petitioner for the re-evaluation of the financial bids is hereby disallowed,” Committee Chairman Kihara Muruthi ruled.

Amu Power has a 25-year Power Purchase Agreement to supply Kenya Power at Sh7.52 per Kilowatt hour. Energy Cabinet Secretary Charles Keter has in the past said the country needs a diversified source of electricity.

Analysts argue that Kenya could have idle energy sources if its consumption fails to grow fast to accommodate the extra power.

This is even after President Kenyatta last week commissioned a transmission line that will evacuate 300MW from a wind plant in Turkana.

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NemaLamuAmu PowerLiketh Investment KenyaHebei Construction Investment GroupGulf Energy Consortium