Italian firm wants Sh12 billion for zero work on Arror, Kimwarer dams

Kenyan taxpayers could pay up to Sh12.4 billion to an Italian company at the centre of the Arror and Kimwarer mega dams scandal.

CMC Di Ravenna, the Italian construction company that had been contracted by the government to undertake construction of the two water and hydro-electricity dams, did not deliver on the projects following allegations of massive corruption in the tendering process.

They are seeking compensation for irregular cancellation of the contract. The firm has filed an arbitration case at the International Chamber of Commerce.

In the case, the contractor wants the tribunal to rule that the government, through the Kerio Valley Development Authourity (KVDA), cancelled the contract irregulary, abnormally and in an unlawful way.

It wants the government compelled to pay it a sum of $114,177,645 (Sh12,38 billion as per the current forex exchange rate). It also wants KVDA to pay for costs that will be incurred during hearing and determination of the case by the arbitration tribunal.

The company argues that under the contracts and the applicable law, KVDA is liable for the delays caused on the progress and completion of the construction works.

Further, it argues that KVDA is liable for other failures to comply with its contractual obligations.

Multi-purpose dams

As such, it wants the tribunal to declare that KVDA is liable for the costs, losses and damages suffered by the contractor.

The Kenyan government is set to file its response in defence of its decision to cancel the deal. 

In preparing the defence and response, Solicitor General Kennedy Ogeto has asked the Elgeyo Marakwer governor, Alex Tolgos, to furnish him with all necessary documentation.

"In order to enable our urgent preparation of GOK's (Government of Kenya) answer, the county government of Elgeyo Marakwet is required to provide to this office all the necessary documentation and correspondences with regard to the projects," says Mr Ogeto in the letter also copied to Attorney General Paul Kihara Kariuki.

Two senior State counsels, Charles Wamwayi and Sheilla Mammet, have been allocated the role of handling the matter as the focal contact persons in the preparations.

The Italian company was contracted in May 2017 to construct two multi-purpose dams in Kerio Valley at a cost of Sh66 billion (Sh38 billion for Kimwarer and Sh28 billion for Arror). The duration of the construction works was 60 months.

However, in September 2019 President Uhuru Kenyatta ordered cancellation of the Kimwarer project after it was found to be technically, economically and financially not feasible by a technical committee chaired by Principal Secretary for Infrastructure, Prof Paul Maringa.

Overpriced projects

The president appointed the committee to review the project alongside the Arror dam following corruption claims that rocked the two projects.

The technical committee established that no current reliable feasibility study had been conducted on the project. It was also found that only studies on a similar project was conducted 28 years ago, and that it revealed a geological fault across the 800-acre project area.

The team found both projects were overpriced and recommended a cost rationalisation plan.

The President allowed the Arror project to proceed at a cost of Sh15.4 billion instead of the initial quoted cost of Sh28 billion. The technical committee recommended that the height of the dam be reduced from 96 metres to 60 metres, as the latter was found to be unviable.

The president's directive followed allegations of graft, which established that the projects were non-existent on the ground yet billions of shillings had been pumped into them.

This led to the arrest of Treasury cabinet secretary Henry Rotich, his principal secretary Kamau Thugge, Tourism and Wildlife Principal Secretary Dr Susan Koech and a host of other government officials over the graft scandal.

They were charged with multiple counts including conspiracy to commit an economic crime, improperly conferring a benefit, abuse of office, committing an offence of financial misconduct, engaging in a project without prior planning and failing to comply with rules and regulations relating to management of public finances.

Implicated officials

They were all accused of jointly conspiring to defraud the government of $501,829,769 (Sh54.4 billion), by entering into a deal to construct the two dams without approval. They allegedly committed the offence between December 17, 2014 and January 31, 2019

But the Director of Public Prosecutions (DPP) has since withdrawn charges against Mr Thugge and Ms Koech, leaving Mr Rotich as the senior-most former government official in the scandal.

Through senior assistant DPP Alexander Muteti, the ODPP in November said Mr Thugge and Ms Koech will be State witnesses in the trial of the former Treasury Cabinet Secretary, other State officials and directors of the Italian company implicated in the scam.

Mr Rotich is facing charges of entering into a commercial loan facility agreement, disguising it as a government-to-government loan guaranteed by the Italian Government. He has denied the charges.

Other officials implicated in the scam are former KVDA managing director David Kimosop and Treasury officials Kennedy Nyachiro (chief economist), Jackson Kinyanjui (Head of Europe Division) and Titus Muriithi (Director of Resource Mobilisation at the Treasury).

Mr Rotich is accused of procuring loans from BNP Paribas Forties S.A/N.V, Intesa Sanpaolo SPA, Unicredit SPA and Unicredit Bank AG for the development of Kimwarer multi-purpose dam.

Irregular procurement

He is also facing charges of failing to follow procurement procedures and irregular procurement of an insurance policy through single-sourcing.

He is, however, fighting off the case through a petition filed at the High Court seeking to quash the charges preferred against him.

In the case, he says it is unfair and irrational for the DPP to take him to court yet the projects were entered by the KVDA with the approval of the parent ministry.

The KVDA was then under the Ministry of Environment and Natural Resources and Regional Development Authorities headed by Cabinet Secretary Judy Wakhungu.

He says his duty was to ensure that the terms and conditions of the agreements complied with the Treasury requirements.

Mr Rotich also argues that he could not be faulted for allegedly engaging in a project without prior planning because the procuring entity was the KVDA and not the National Treasury.

He further says he did not have the powers to direct a parent ministry or procuring entity on tender matters.

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