Even before dust settles on Kimwarer and Arror dams scandal. it has emerged that Kenyan taxpayers have lost Ksh1.4 billion to a Chinese company.
The Geothermal Development Company (GDC) contracted Hong Kong Offshore Oil Services Limited (HOOSL) from China to drill 15 to 20 geothermal wells in Bogoria-Silali in Baringo in April 2016. In the simmering scandal, HOOSl obtained Ksh1.4 billion as a advance payment before the job started.
However, the bank recalled the advance payment guarantee just after payment had been issued and affirmed by the bank.
In what looks like a movie script, the company tarried in starting the project until the contract expired, as GDC now realises they might have been fooled.
HOOSL requested for an advance payment just two months after the contract was signed, and also requested to be allowed to offer a guarantee from an insurance company rather than a bank.
According to reports by the Standard, the request was rejected by GDC, and instead asked the Chinese company to submit the payment guarantee within 30 days. This was on October 6, 2016, five months after the contract was signed.
“HOOSL responded to this letter on October 8, 2016 by informing GDC that they are working on the issuance of the guarantee with a local bank. Subsequently, on October 20, 2016, HOOSL sought an extension of the timeline for submission of the guarantee by additional 60 days,” says a report prepared for GDC board by George Muya, General Manager, Strategy.
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The extension was accorded, but a few days to its lapse HOOSL sought another extension. GDC granted it as the final extension.
The second and final extension lapsed without the contractor getting a guarantee, hence sought another extension, which the GDC declined.
On June 2, 2017 the contractor submitted the advance payment guarantee of USD 14,629,952 (Ksh1.5 billion) from the bank and which was to expire on December 1, 2018.
The payment was processed through the Ministry of Energy and National Treasury.
“The advance payment was paid out to HOOSL in September 2017 which HOOSL confirmed receipt on September 25, 2017,” adds the report.
At this point, Muya made a contract mistake. In the contract agreement, designated representatives to act on behalf each of the parties to the contract. Muya proceeded to write to HOOSL giving them a notice to mobilise starting of the project.
The designated representative for GDC was Stephen Kangogo. Realising the mistake, HOOSL refused to mobilise on grounds that the notice was not validly issued.
In a bid to get the work done, GDC issued a valid notice on March 20, 2018 through Kangogo.
However, HOOSL wrote back stating that the rigs (machinery for the prject) which it had hoped to mobilise were no longer available. They were now hoping to use substitute rig, which had not been inspected by GDC. They also wanted GDC to hire some components of the alternate rigs for them, which GDC declined.
The notice to mobilise expired on June 23, 2018. Three days later, GDC wrote to the bank which had issued the guarantee seeking payback of the moneys advanced. The refund did not go through.
GDC had to give in to in to the alternate rigs, but HOOSL resorted to frustrations until the guarantee expired.
GDC is now staring at a Ksh1.4 billion loss, with no single drilled geothermal well and no machine on site.
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