KenGen to pay Sh1.98 billion as debt battle continues

The High Court has ordered power producer KenGen to pay Sh1.98 billion to a company that is seeking billions of shillings from the Geothermal Development Corporation (GDC) over a botched contract.

Justice Alfred Mabeya also lifted an order freezing all KenGen's bank accounts as the dispute between GDC, Lantech Africa Ltd and several banks escalated.

The judge unfroze KenGen's bank accounts at Absa, KCB and NCBA and ordered the plaintiff (Lantech) to pay the lenders Sh50,000 each as costs of the suit.

KenGen had been drawn into the dispute on the basis that it should settle its debt to GDC, which would then be in a position to settle its obligations to Lantech. The power generator went back to court seeking a review of the decision issued on September 20, which ordered the freezing of its bank accounts and any funds used to settle a Sh3.9 billion debt owed to Lantech Africa by GDC.

Lantech had been contracted by GDC for Menengai Geothermal Project and the parties fell out. The dispute was referred to an arbitrator who ruled in favour of Lantech, but the award was never paid.

"The freezing order on the Standard Chartered Bank account alleged to contain Sh3.8 billion is hereby set aside and the bank is directed to immediately pay 50 per cent of the award sum amounting to $13,400,000 to the award holder," the judge ruled.

Justice Mabeya said KenGen would thereafter be free to operate the said account with a view to paying for electricity and other utilities at the end of the month.

Further hearing in the case is scheduled for October 3.

GDC had also applied for the order to be set aside on the grounds that the judge had made the order before hearing them. The company also said the order made KenGen the principal debtor without any security. 

KenGen on its part pointed out that the ruling contradicts another decision issued by the same judge in May, which held that all proceeds of steam charge sales cannot be attached because the account had been assigned to another debt.

“I have been advised by the applicant’s advocate on record which advise I verily believe to be correct that decision by the learned judge dated 20th September 2023 amounts to the judge sitting as an appellate court on his own decision,” KenGen’s legal manager George Ominde said in an affidavit.

Mr Ominde requested for the varying of the order saying KenGen stands to suffer losses as the freeze will paralyse its functions.

The judge made the directives last week after being informed that KenGen owes GDC some money derived from steam sales.

“Accordingly, the court finds that there was an admission on the part of the 4th Garnishee (KenGen) that it holds monies for and on behalf of the judgment-debtor (GDC),” the judge said.

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