KenGen defends Sh9.6b deal awarded to Chinese firm

By John Njiraini

KenGen has defended a Sh9.6 billion geothermal wells drilling contract awarded to a Chinese company.

The power generator maintains the deal was above board.

KenGen board and management yesterday came out strongly to defend the contract for drilling six appraisal wells and 15 production wells awarded to Great Wall Drilling Company of China in 2006, following allegations that the contract was shrouded with improprieties.

Contrary to allegations that KenGen arbitrary flouted procurement laws and did not negotiate for value for money in awarding the project, KenGen Managing Director Eddy Njoroge said the company followed laid out procedures.

"The only crime we have committed in the contract is to try to accelerate the development of geothermal in the country," said Njoroge.

In what is definitely a complex transaction, in 2004 KenGen floated tenders for drilling six appraisal geothermal wells in Olkaria that only attracted two responses from interested companies.

This forced the company to re-advertise the tender in 2006, this time attracting the attention of 12 companies that went ahead to purchase the tender documents, although only three submitted bids.

Most competitive

The three companies were Century Resources International of Australia, Great Wall Drilling Company of China and PNOC Energy Development Corporation of the Philippines.

"Great Wall Drilling Company of China emerged as the most competitive of the three firms and won the tender," said KenGen Board Chairman Titus Mbathi.

But according to assertions by the Nairobi Law Monthly publication, the contract originally was for six wells. The deal became murky because KenGen went ahead to award a further 15 wells to Great wall without a competitive tendering process.

The publication also alleges that KenGen increased the price of drilling the wells, while the MD sidestepped the work of a legally recognised and lawfully constituted tender board by constituting another tender committee comprising his "henchmen" that executed the illegal deals.

But yesterday, KenGen defended the deal, saying the decision to award the extra 15 wells to Great Wall without tendering had been explained to interested bidders well in advance in the tender documents.

"KenGen tendered for appraisal wells while informing all bidders of the possibility of contract extension should the appraisal drilling confirm steam availability," said Mbathi.

On the issue of contract pricing, the company said cost of drilling wells was based on unit rates that was impacted on the two years difference between the signing of the original contract in 2006 and the time of the contract extension in 2008.

The company also maintained the tender committee was legally constituted and acted in accordance with the Public Procurement and Disposal Act of 2005.