Completion of the construction of a total of 660 kilometers of electricity transmission lines in Kenya under three separate agreements by Spanish firms has been delayed after the state-owned Kenya Electricity Transmission Company terminated the contracts. Ketraco is the country's transmission system operator.
Construction of a 132-km electricity line linking the Kenyan and Ugandan electricity grids by financially strapped Abengoa Group's affiliate, Instalaciones Inabensa SA, has been put on hold since 2016, when Ketraco terminated the $39.4-million contract. The Spanish contractor is appealing the decision in Kenya's High Court.
Inabensa wants to block Ketraco from awarding the tender to another contractor or cashing the bank guarantees provided for the African Development Bank-financed project. The 220-kv interconnection links Kenya's Lessos substation and Uganda's Bujagali substation.
Inabensa told Justice Olga Sewe of the High Court sitting in Nairobi that after terminating the contract "Ketraco failed to make payments according to the contracts and also to provide possession of and access of all areas of the sites, which constituted a breach of the contracts."
The suit is still pending. In late March, Fernandes Barasa, Ketraco managing director, told the parliamentary accounts committee the transmission system operator has offered Inabensa nearly $24.7 million to settle the dispute out of court, as advised by the country's office of the Attorney General.
The transmission project is part of a regional electric grid interconnection of 946 km, made up of 220-kv and 400-kv transmission lines, by Burundi, the Democratic Republic of Congo, Kenya, Rwanda and Uganda. Other financiers of the project include Japan, Netherlands, Germany and the European Union.
Inabensa is one of the 12 companies in the Abengoa Group that faced financial difficulties recently as the parent firm moved to divest key investments worldwide. In February the company sold its 56% stake in BDDG, which owns the Accra desalination plant in Ghana, to AquaVenture Holdings.
Kenya's auditor general, Edward Ouko, says the delay in the Abengoa contract and two others because of nonperformance could have implications on project completion timelines and final project costs.
"Some of the contracts (by Ketraco) were terminated during the year under review and procurement of replacement contractors initiated. In the circumstances, the completion of the projects within the approved budgets and timelines could not be confirmed," Ouko said.
Ketraco also alleged nonperformance in terminating the $69-million portion of Nairobi Metropolitan Ring contract in mid-2015. The job had been awarded in 2013 to Spain's Iberdrola Ingenieria y Construccion S.A.U. Iberdola has challenged the termination at the London Court of International Arbitration. A verdict is imminent.
Iberdrola was to build the four 220-kV substations at Athi River, Isinya, Ngong and Komarock. The Spanish contractor was also to renovate the existing Dandora substation and extend it to 220 kV.
By the time Iberdrola's contract was terminated, Ketraco indicated Isinya was 92% complete, Athi River 72.5% and Ngong 64.5%, while substation equipment for Komarock had been procured.
Four other Spanish firms won contracts for supply of equipment for the substation projects: General Electric Spain (control, protection and SCADA System), Kuadrotek (auxiliary services switchboard), Benning (110V, 48V, UPS supply, batteries and battery chargers) and Genesal (diesel generators). Other suppliers were Siemens India (disconnectors), Crompton Greaves of India (circuit breakers, current transformers, surge arresters, voltage transformers and power transformers) and Switzerland's ABB (telecommunications).
Previously, Iberdrola, in partnership with Gamesa, had successfully completed construction of a 13.6-MW wind farm project in Kenya under a project awarded by Kenya Electricity Generating Co. at a cost of $27 million.
However, another $104-million turnkey agreement for the construction of the 61-MW Kinangop wind farm 40 km northwest of Nairobi is in limbo after the developer, Aeolus Kenya, suspended the project over project land issues. Iberdrola's subsidiary Iberdrola Engineering was picked as the preferred bidder for engineering, procurement, construction and commissioning of the project with 38 wind turbines manufactured by General Electric. The developer is owned by the Macquarie and Old Mutual-backed African Infrastructure Investment Fund II and the Norwegian Investment fund for developing countries (Norfund).
Early in 2018, Ketraco replaced another Spanish contractor, Isolux Corsan by Chinese contractors NARI Group Corporation and Power China Guizhou Engineering Co. after signing a $94.85-million deal for the completion of remaining works of the Loyangalani- Suswa power transmission project by Aug. 31 this year.
In February Isolux Corsán, LLC filed a motion in the US Bankruptcy Court seeking approval for the sale of substantially all its assets on February 5, 2018, according to a statement by the troubled contractor. It said it sought to sell substantially all its assets to IBT Group.
The termination of the Isolux contract came after the Spanish contractor wrote to Ketraco and informed the transmission system operators of the commencement of insolvency proceedings of its parent company and several subsidiaries. Ketraco terminated the contract three weeks after receiving the Isolux letter.