How wind power firm overcharged Sh785m

Lake Turkana Wind Power project

Lake Turkana Wind Power project in Loiyangalani, Marsabit County.

Photo credit: Pool

Lake Turkana Wind Power over-quoted penalty fees for the delayed connection of its plant to the national grid, prompting the controversial overpayment of Sh785 million (euros 6.1 million) by the Treasury that then took more than a year to refund.

The power producer says the payment was based on “erroneous estimates” of the average power generated in the months when Kenya delayed construction of the high-voltage line linking to the national grid.

Kenya paid Sh5.7 billion (€45,197,003) in charges for deemed generated electricity (DGE) that LTWP says were based on the erroneous wind generation capacity estimates.

The government paid the DGE after it delayed construction of the line to evacuate power from LTWP to the national grid, delays that hurt the company’s revenues at a time when its loan obligations fell due.

LTWP says the government asked for a review of the charges based on the actual power produced by the plant in 2019, prompting a refund of Sh785 million (€6.1 million).

The revelations add to the controversy over the money whose reimbursement to the National Treasury was delayed for more than a year and half over wrong account details.

“The charges were based on the assumption that we (LTWP) would supply 62 per cent of the installed capacity, but then there was underperformance in 2019 due to bad winds,” the firm says.

“Going by the performance of 2019, the government argued we had been overpaid by 6.1 million euros and sought a refund.”

LTWP commissioned its 310-megawatt power plant on January 27, 2017, but the government, which built the evacuation line, did not complete the works until September 24, 2019, prompting payment for the DGE.

Kenya paid the lump sum amount of Sh5.7 billion and then agreed to pay the remainder in six years to 2024. The power producer says the DGE provided cash to pay loans that funded the plant and fell due at a time when delays from the government saw the firm lose out on revenues.

But the refund has been shrouded in controversy due to delays in wiring the cash to the Treasury more than one and a half years after LTWP notified Kenya Power, the Ministry of Energy and the Treasury of the excess payment.

LTWP at first wired the cash to a government account through the Standard Chartered Bank in Frankfurt, Germany, but the bank rejected the payment.

The power producer said Kenya gave the wrong account details, prompting the bank to reject the payment amid claims that LTWP failed to meet the customer due diligence requirements. Standard Chartered termed the cash transfer suspicious.

LTWP told Parliament that it contacted Kenya Power three times and the CBK twice in December last year in search of the required documentation to support the transfer of the overpayment.

Rejection of the payment came amid increased oversight by German financial regulator BaFin for money laundering breaches, which has seen lenders in the European country slapped with multi billion-shilling fines.

The cash was finally received in March, but National Treasury Principal Secretary Julius Muia told Parliament that it was not clear why Kenya Power and the Ministry of Energy took that long to recover the amount.

LTWP appeared before the Public Investments Committee of the National Assembly in December last year as investigations into the payment gathered pace.

The firm is selling electricity to Kenya Power for €9.2 per kilowatt-hour (Kwh) from the initially agreed €8.4 (Kwh) in a 20-year deal. The increment of €0.00845/Kwh covers the penalty after the government delayed in linking power from LTWP to Kenya Power. The charges will drop to €8.4 (Kwh) upon completion of the DGE in 2024.

The wind power generator has ruled out any reductions in wholesale electricity prices, rejecting a push by the government to bring down tariffs by a further 15 per cent.

The government has been in negotiations with Independent Power Producers (IPPs) to lower wholesale power prices in a bid to lower the cost of electricity to homes and businesses by 15 per cent before next month.

LTWP chief executive officer Phylip Leferink on Tuesday said that lowering its prices will hurt its cash flows and ability to honour its financial obligations, such as loan repayments.


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