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Ketraco Loses Sh4.4billion Arbitration Case Against Spanish Contractor

GBR Team 01/11/2019

Power transmission company Ketraco has lost a US$42million (Sh4.4billion) case against Spanish contractor Inabensa in which it was accused of unfairly cancelling its contract.

The dispute related to a Sh3.6bn contract awarded in 2013 to build the 132 kilometre Lessos-Tororo (Uganda) line which was only 40 percent done before it was terminated in April 2016.

Ketraco cited non-performance.

Inabensa, a subsidiary of Spanish construction group Abengoa, filed a case in the Kenyan High Court barring Ketraco from continuing with the project or accessing the site pending resolution of the dispute.

The Attorney-General’s office then advised that the matter be settled out of court to avoid costly settlement and project delays.

The matter was then referred to arbitration before the Institute of Engineers of Kenya (IEK) where Inabensa won.

“Abengoa informs that on 27 August 2019 it has been notified of the award issued in connection with the arbitration proceedings initiated by its subsidiary Instalaciones Inabensa, S.A. Against Ketraco (Kenya Electricity Transmission Company Limited) in Kenya under the Uncitral regulations.”

The award is final and can only be appealed against in court on stringent grounds.

Ketraco will not only pay close to Sh1bn above the contract price, but it will also have to procure another contractor to finish the project.

Reached for comment, Ketraco Managing Director Fernandes Barasa did not respond.

But appearing before the Public Investments Committee of the National Assembly in March this year, Barasa said Ketraco was seeking to pay Inabensa Euros 22m (Sh2.5bn) for certified completed works.

This figure has now increased by 72 percent to Sh4.4bn. The PIC then, demanded to see the contract with Inabensa citing lack of clarity in the information submitted to it.

Analysis

The Office of the Auditor-General raised a red flag about Ketraco’s stalled projects where similar problems with contractors have arisen.

The OAG put the value of such stuck projects at Sh19 billion raising serious questions as to both the viability of the projects but also the capacity of Ketraco to procure and handle such projects.

Besides Inabensa, the company has been involved in arbitration with Iberdrola also of Spain in the London Court of International Arbitration after terminating its Sh10.5bn Nairobi-ring contract.

At award, the project was to cost Sh4.9bn and was co-funded by the French Agency for Development (AFD) and the government.