Queries over Sh12bn paid by Ketraco for stalled projects

Fernandes Barasa.

Former Ketraco Managing Director Fernandes Barasa. He is Kakamega County governor.

Photo credit: File | Nation Media Group

 The Kenya Electricity Transmission Company (Ketraco) spent Sh12.7 billion on four projects that had been terminated or had stalled, an Auditor-General’s report has shown.

This is among new details that could shed light on why the firm’s former boss (now Kakamega County Governor) Fernandes Barasa resigned hurriedly hours before a parliamentary committee grilling.

The details from the Auditor-General’s report show that in the financial year 2020/21, the company paid a total of Sh12,691,434,033 on four transmission lines: Lessos-Tororo, Bomet-Sotik, Mwingi-Kitui-Wote-Sultan Hamud, Nanyuki-Nyahururu and Olkaria.

In particular, Ketraco incurred Sh8.7 billion on the Lessos-Tororo Line, which stalled in 2016 after the contract was terminated, and the company has been in a legal battle since.

“Review of the project status report indicated that an amount of Sh3,976,801,443 had been paid to a contactor in respect of Bomet-Sotik, Mwingi-Kitui-Wote-Sultan Hamud, Nanyuki-Nyahururu and Olkaria transmission lines for contracts that have since been terminated, while an amount of Sh8,714,632,590 was incurred on construction of the Lessos-Tororo transmission line which had stalled,” Auditor-General Nancy Gathungu stated.

The report notes under the query “Court Award on Terminated Contract” that an arbitration case between Ketraco and a contractor for the termination of contract for the construction of 132 kilometres of a 400KV double circuit transmission line from Lessos substation in Kenya to Tororo substation in Uganda has remained unresolved since April, 2016.

In July 2019, the report notes, a tribunal awarded the contractor Sh6.7 billion for termination of the contract, a decision that was upheld by the High Court in February 2020.

“Further, it was not possible to confirm whether the project would be completed in the near future, and the additional costs that would be necessary to complete the project, or the losses which the Government of Kenya would suffer in the event that the project is not completed,” the report states.

The circumstances under which Ketraco incurred the Sh8.7 billion despite earlier termination of the contract have not been explained and the Auditor-General said the public may not get value for the billions put into the project.

Under a query titled “Payments made for Terminated and Stalled Projects”, the Auditor-General also said Ketraco’s management failed to explain why the projects were terminated “and measures instituted to recover the payments made to the contractors”.

The company was at the time headed by Mr Barasa as Managing Director, before resigning in February last year, just hours before his date with the National Assembly’s Public Investments Committee to be grilled over usage of funds at the state-owned body.

“In the circumstances, it was not possible to confirm whether value for money was obtained on the expenditure of Sh12,691,434,033 on the four (4) transmission lines,” the Auditor-General stated.

Ms Gathungu further stated that a special audit conducted in April 2021 raised serious procurement issues on execution of the construction of the Loyangalani-Suswa transmission interconnector line, including a case where the company paid a contractor Sh10.8 million, only for the contractor to file for bankruptcy.

 “Management did not undertake both technical and financial due diligence as provided under Section 68(1) of the PPDA Act 2015 leading to irregular payment of Sh10,827,072 to a contractor which subsequently filed a petition for bankruptcy.

“After bankruptcy of the original contractor, management engaged yet another contractor. However, the procurement was not included in the annual procurement plan and valuation of the pending works for the purposes of preparing the bills of quantities was not provided for audit,” the report states.

Value for money

It notes that Ketraco’s management breached the law in various aspects of executing the contract and value for money could not be confirmed.

The report was signed by Ms Gathungu on September 23, 2022. It gave the firm a Qualified Opinion, meaning that although by and large the financial transactions as recorded were deemed to be in agreement with the accounting records, there were cases where the Auditor-General was unsatisfied with the veracity of certain expenditures, which may not be significant.

Ms Gathungu, for instance, queried the spending of Sh701.4 million on the construction of the Loyangalani- Suswa transmission line, which was not supported with a certificate of completion and commissioning.

“In the circumstances, validity of the expenditure of Sh701,416,727 for construction of transmission lines could not be confirmed,” she stated.