Puzzle of dubious firm’s Sh1.8bn World Bank loan

LPG

 An LPG gas refilling area. Cooking gas prices have recently increased.

Photo credit: File | Nation Media Group

 Did a foreign company that had fallen into bad books with the government dupe the World Bank into releasing Sh1.8 billion for a project that did not have proper regulatory approvals?

Mombasa Gas Terminal limited (MGT), whose oil exploration licence was cancelled two years ago by the government for engaging in speculation, secured from IFC, a total debt of Sh1.8 billion ($15 million) for the construction of a Sh2.8 billion ($23 million) Liquefied Petroleum Gas (LPG) storage plant that has now stalled under questionable circumstances. The cash, released in June last year, was meant to fund the first phase of an LPG bulk import and storage terminal at the Mbaraki creek in Ganjoni, Mombasa. MGT was to inject Sh0.9 billion as equity into the project.

The LPG plant was, according to MGT, supposed to have a storage capacity of 22,000 tonnes and a throughput capacity of 400,000 tonnes of LPG per annum. On paper, it looked like a brilliant idea. After all, Kenya imports 90 percent of its LPG needs through one private firm and the rest from the port of Dar es Salaam, a factor that has consistently contributed to high cooking gas prices.

But beneath the surface were queries on how Mombasa Gas Terminal got approvals from the National Environment Management Authority (Nema). The inconsistencies have boiled over and stalled what was a controversial plan from the beginning.

Before the conceptualisation of the LPG plant, MGT’s parent company, Milio International Limited, which is domiciled in Dubai, had just entered the government’s bad books after then-Petroleum Cabinet Secretary John Munyes cancelled its oil exploration licence in Lamu for failing to meet its contractual obligations.

Mining rights

According to Mr Munyes at that time, Milio, which is run by British citizen John Hart, was among six foreign companies that had acquired oil exploration and mining rights in Lamu but were using the licences for speculation and insider trading, instead of doing actual exploration.

Milio had just two years before filed for bankruptcy at a court in Minesotta, USA, seeking legal protection against its creditors. Yet, despite the existence of these red flags, it convinced the World Bank to hand them $15 million for the construction of the plant.

The World Bank’s subsidiary, International Finance Corporation (IFC), made this disclosure on its data portal on June 2 last year.

“The project cost is approximately $23 million financed by a loan of $5.0 million and $10 million in additional debt arranged by IFC. The balance of $8 million is equity contribution from the sponsor,” said the IFC.

MGT even issued a press statement announcing receipt of the cash from the World Bank, indicating that construction of the first phase of the project was going to take just half a year.

“This project will underpin Kenya’s ambitious goal for sustainable economic development. We are aiming to complete construction of phase one and begin operations within six months,” said MGT East African managing director Julius Riungu.

Overgrown bush

It is now over a year since that statement, which was widely covered by the media, yet there is no indication when construction would start. The Nation, on a visit to the site, found an overgrown bush opening up to the ocean at Mbaraki creek. There was no one in sight apart from two stalled yachts that residents said have been there for over a year. The only sign of life at the area was at the Mombasa Yacht Club, almost a kilometre away.

Residents said they had never seen any form of construction on the site. MGT, however, insisted that the project was going on as scheduled. “That project is above board. The only people who have problems with it are our competitors and that is probably why you are chasing this matter,” Mr Riungu told Saturday Nation, promising to provide documentation to show that the project was clean and ongoing.

It is, however, now emerging that the licence issued to the company by Nema had been cancelled on instructions of the National Environment Tribunal (Net) six months before Milio received Sh1.8 billion from the World Bank. This is after it was discovered that Nema had okayed MGT to construct the plant through EIA licence No. NEMA/EIA/PSL/7383 without proof of land where the project was to be set up. The licence was issued on February 19, 2019.

Rule 18 of the Environmental Impact Assessment Regulations says that “an EIA study Report shall provide the location of a project and it is this location that guides the process of public participation and is eventually published on the EIA licence.”

The developer, as per the law, has to furnish Nema with a copy of the title of the site of the project.

However, the report, which was done by Earth View Consultants and handed over to Nema for approval, and which Saturday Nation has obtained, does not contain the LR number of the project site. When accosted by activists about the anomaly, Nema first said the project was supposed to be constructed on LR NO Mombasa/ Block XLVIII, before saying the new site would be on LR NO Mombasa/ Block XLVIII/45 at Mbaraki, in Ganjoni Division.

World Bank

Dissatisfied, the four activists filed a case at Net, which ordered Nema to cancel the licence it issued to MGT. It is unclear if MGT’s parent company, Milio, informed the World Bank that one of the licences it used to apply for financing had been cancelled.

An email to Mr Hart sent by the Nation in April about this matter has yet to get a response. The Nation asked “why construction for the project is yet to start more than a year after it was announced that his company had received Sh1.8 billion from the World Bank”.

The matter has now been picked up by the Directorate of Criminal Investigations (DCI) after one of the petitioners in the case filed at Net suddenly backtracked, claiming his signature had been forged by lawyers who successfully represented him and three others in the case.

“It is imperative and important in the interest of justice that a proper investigation is carried out to prove the authenticity of the signatures and whether the firm of Hashim and Lesaignor Advocates was ever instructed by the plaintiffs in the suit,” Robert Muriuki, who represented MGT, has written to the DCI in support of one of the petitioners.

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