Kenyans now have many reasons to seriously question the Jubilee Government’s elusive commitment to deliver “affordable, efficient and competitively priced Power to All”.
Sh475 Billion will be the additional cost in electricity bills paid by Kenyans if the Ministry of Energy & Petroleum has its way.
On January 27, 2014, the Ministry launched “Tender No. MOEP/RFP/15/2013-2014 for the Development of a 960 Megawatt Coal Fired Power Plant at Lamu, Lamu County in Kenya by Private Investors.”
The tender was to be awarded to the bidder offering to generate electricity at the lowest cost to Kenyans. However, the Jubilee Government (through the Ministry) appears to have had a change of heart.
But the ambiguous request for proposal (commonly known as RFP) had severe challenges from the word go.
They now want to award this tender to the highest bidder, at a whopping cost of Sh475 billion to Kenyans. If the Ministry is allowed to have its way, Kenyans will continue to continue to shoulder the weight of oppressively high electricity bills at an additional cost of Sh19 billion per year for the next 25 years.
In 2013, President Uhuru Kenyatta and his Deputy Ruto while campaigning for their current positions promised massive reforms and progress in Kenya’s energy sector.
They termed Kenya’s energy challenges, both in terms of cost and insufficiency as “a crisis.” They cited it as a major reason that the nation’s economy is being held back.
Here is a verbatim quote: “Expensive energy raises the cost of doing business and hinders industrial competitiveness. The average cost of power supply in Kenya today stands at US Cents 18 per unit, compared to US Cents 2 in South Africa, and US Cents 3 in Egypt. It is evident that the country needs affordable, efficient and competitively priced energy. “
Both President Uhuru Kenyatta particularly his Deputy President William Ruto have doubled down on this commitment in recent statements and actions.
However, their Ministry of Energy & Petroleum appears to be reading from a very different script.
Ministry of Energy and Petroleum Cabinet Secretary Mr Davis Chirchir and his Principal Secretary Eng. Joseph K. Njoroge were appointed to lead the Jubilee Government’s charge to “deliver affordable, efficient and competitively priced Power to All”.
However, the tender process for the 960 Megawatt coal-fired power plant has been mismanaged from the beginning. From available we have since scrutinized, one bidder submitted two bids.
As per the Request for Proposal rules, both bidders should have been disqualified including the consortium that originally contained Gulf Energy. However, one withdrew, and the other was inexplicably allowed to proceed with their bid. A separate bidder (Centum) failed prequalification.
But this was not the last they were heard of. They re-appeared after prequalification as part of another consortium. Even worse, an additional bidder was added after the close of prequalification. So much for equal treatment and integrity of the process. However, it should be noted that there were bidders without such issues.
As previously stated, Kenya is facing an energy cost and supply crisis – so the process moved on. Three bidders were approved by the Ministry’s technical evaluation committee as being technically responsive to the request for proposal.
However, during the financial evaluation process, the lowest bidder, having been found technically sound, has been disqualified, incredibly on non-material technical grounds. How does a financial evaluation revoke a technical approval on technical grounds? That is the question someone at the National Treasury’s Public Private Partnerships Committee (PPPC) established under Sec. of the Public Private Partnerships Act, 2013.
The favourable treatment given to the highest bidder is even more intriguing given the make-up of the consortium was changed from that pre-qualified to the eventual consortium who submitted a bid.
How does a Ministry without absolutely no experience of coal-fired power generation in country with less than 2,000 MW of total generating capacity question the technical competence of, for example, one of the supposedly disqualified bidders whose own generating capacity as an individual company is over 90,000 MW?
The end result is that the Ministry of Energy & Petroleum now wishes to award the highest bidder, a consortium comprising of the following companies: Gulf Energy, Centum Investment, Sichuan Electric Power Design and Consulting Company Ltd, Sichuan No. 3 Electric Power Construction Company Ltd., and CHD Power Plant Operation Company Ltd.
These are the entities that will pocket the additional Sh475 Billion over the course of 25 years that will be unnecessarily and unfairly charged to Kenya’s electricity consumers. That means asking every Kenyan individually for over Sh10,000 each. To the benefit, of course, of certain few.
Due to the Ministry’s mismanagement and malfeasance, the award of this tender has already been delayed for over three months.
We would have hoped that perhaps when confronted with the implications of what they doing to every Kenyan, someone at the Ministry of Energy & Petroleum found cause for pause. However, while the Ministry delays, Kenyans continue to pay higher electricity bills.
Kenya is now at risk of ever increasing power costs, deterring foreign investment and putting in serious doubt the commitment to create the much-hyped 1 million jobs that may have happened if Kenya became a low-cost investment destination. Even the Jubilee Government’s signature Standard Gauge Railway project is now in jeopardy, as it requires over 1,000 Megawatts for its electric engines to run.
How two relatively small (within the global picture) companies like Gulf Energy and Centum intend to find the required money for this project is equally puzzling. Do they intend to simply flip this on for a quick buck? Gulf Energy has already saddled Kenya with huge costs as part of an oil-importing cartel rolled over from previous regimes.
Their only experience in generation of electricity is an 80MW Heavy Fuel Oil plant that is not yet even operational. These are power plants that supply electricity to the common man at over US$ 30 cents making life unbearable, stifling the economy, reducing growth but of course lining pockets of a few select individuals.
Inflation is at a 25-month high point. The main cause, as per the Kenya National Bureau of Statistics, is a direct result of these types of power plants that suck the life out of Kenyans.
It is not lost on us that the Chairman of Centum has asked all Chinese to go home. China being Kenya’s most significant investment partner, Kenya’s biggest enabler of achieving its infrastructure goals and ultimately the biggest catalyst to Kenya achieving its Vision 2030 goals. Like them or hate them, it is China which has the most experience of developing efficient coal-fired power plants across the whole world. The game plan is very clear.
The best course of action for the Ministry is to award the tender to the bidder with the lowest cost of energy as required by law as this was the point of the entire purpose, and reason for this tender and RFP.
Just as an award to the highest bidder would be disastrous to Kenyans and the economy, a cancellation of the tender would also be damaging. This is because it is highly unlikely that a re-tender after the financial offers of the bidders have already been made public will be competitive.
It would be unlikely to attract the same level of interest. The reputational damage to the country of such a bungled and manipulated tender process has huge implications on the attraction of Foreign Direct Investment and in particular through the much-talked of PPP’s.
Contrary to the various public announcements, the Ministry of Energy & Petroleum only made a recommendation to the National Treasury’s Public Private Partnerships (PPP) Committee which will eventually consider and award the controversial tender. The award is yet to be issued.
It is sad that the PPPC has 5 principal secretaries and Attorney General from the Government side as board members and only 4 independent directors appointed by the National Treasury Cabinet Secretary and whose PS Dr Kamau Thugge chairs the PPPC.
In essence the Government skewed domination of the PPPC means that a recommendation by the Energy Ministry PS to his colleagues at PPPC is most unlikely to be turned down.
Above all, we at Cofek call for an independent investigation of the tendering process by all competent procurement oversight entities as well as by the Ethics & Anti-Corruption Commission.
Kenya should not allow the coal-project PPP to fail along the lines of Rift Valley Railways experiment. The tender process must be halted. Vested political and other interests must be unmasked.
If not, the only hope and option left is the Judiciary and for which Cofek will seek their intervention if His Excellency the President will not smoke out the clear corruption in the PPP tender.