A Chinese firm has sued the Kenyan government seeking compensation for ‘idle time’ following the delayed implementation of the Kenya-Tanzania Power Interconnection line project.
‘Idle time’ is an amount paid as compensation for the time a contractor’s employees or machines remain unproductive due to factors that can either be controlled or uncontrolled by the contracting party.
North China Power Engineering Company Limited is claiming payment of Sh1.5 billion from Kenya Electricity Transmission Company (Ketraco) for the losses incurred over six years pertaining to idling of equipment and workforce.
The energy project, which involved the construction of about 510km of High Voltage Alternating Current (HVAC) transmission line from Kenya to Tanzania, was supposed to start in February 2018 and be complete in December 2018, but was delayed to 2023.
During the period the company says it incurred financial losses which it wants Ketraco compelled to compensate.
The Kenya-Tanzania power interconnection line was energised early last year, marking a significant step in regional energy integration and allowing for power trade between the two countries.
In the court papers, the Chinese company says Ketraco has already admitted the claim of Sh1.5 billion but is yet to accept to pay the sums.
The firm says the initial contract sum was Sh3.3 billion and that the job was to be implemented within 22 months commencing February 14, 2017. The completion date was expected to be December 2018.
However, the project experienced multiple delays, and the contract documents were amended nine times to provide addendums on the completion date. The last addendum is dated July 4, 2023, extending the completion date to December 31, 2023.
Consequently, following the extension of the contract duration, the price was varied to $22,428,704 and Sh535,169,929 (cumulatively Sh3.34 billion) to reflect tax adjustments and administrative compliance.
“The company faithfully and successfully completed all its obligations under the contract. However, the delays led to substantial and prolonged expenditure by the company in the form of additional costs, for which Ketraco is liable,” says the company’s lawyer Peter Wanyama.
He explains that the genesis of the additional costs lies in Ketraco’s failure to acquire way leaves in a timely and lawful manner, which paralysed and delayed the implementation of key transmission segments of the project.
The company project manager Guo Feng says the company has since documented and submitted the claimed losses to Ketraco.
The claim is pending determination at the High Court in Milimani Nairobi. Pending determination, the Chinese company wants the court to issue a temporary order directing Ketraco to deposit the said sum into an interest-earning account maintained by advocates representing both parties.
The alleged losses incurred include due to idling equipment of the contractor, idle workforce, insurance premiums, office and store maintenance in Nairobi and Namanga, shifting and stoppages, management overheads, bank guarantees, and tax burdens.
According to the lawyer, all the losses arose directly from the inexcusable delays of the project.
He says Ketraco verified the claim after the company demanded through numerous correspondences.
“To date, Ketraco has not made any payment. Moreover, Ketraco has not responded to or acknowledged the company's letters asking for payment. In addition, Ketraco has not invited the company to a meeting to discuss the issue and offer a payment plan,” he says.
Mr Wanyama argues that Ketraco is already using and deriving income that runs in billions of shillings from the project and has adequate income streams and available cash flow to settle the claim.
“But there is simply sheer refusal to pay,” he says.
“The Kenya-Tanzania Power Interconnection Line is live. Ketraco is deriving income from the use of the line. Therefore, it has adequate funds in its bank accounts to settle the claim. If the orders sought are not granted, the Ketraco is likely to use the money for other purposes and deprive the contractor of its income,” he says.
