NAIROBI, KENYA: Energy and Petroleum Cabinet Secretary Davis Chirchir now says Essar Energy Overseas must incur the costs of its failed investment in a joint venture with the Kenya Government in the Kenya Petroleum Refineries Limited (KPRL).
Energy and Petroleum Cabinet Secretary Davis Chirchir
Essar Energy Overseas Company has invoked a clause in the Shareholding Agreement it signed with the Government, and which gave it a 50 per cent stake in KPRL, and opted to exit the controversial joint venture.
However, Mr Chirchir said while the agreement states that a party opting out would be paid US$ 5 million (about Sh4.3 billion), Essar must take responsibility of its failed investment to ensure the Government is not left with the burden of poor investment decisions made by its partner.
“We are making significant claims as Government because of costs accruing due to technology upgrade that may not have happened,” he added.
Chirchir told Parliament’s Public Investment Committee (PIC) that the lawyers from the two parties are deliberating on the exit strategy after Essar agreed to walk out on the joint venture agreement.
“The deed of termination will bring out the payable costs, but we will be very prudent to ensure the Government is not left bearing the burden of a bad investment initiative undertaken by Essar,” said Chirchir.
PIC members had demanded to know how much taxpayers would pay Essar now that the company, whose ownership is still not clear, has opted to walk out of the venture agreed on in July 2009.
In response, Chirchir said while the agreement says that exiting party is entitled to the US$ 5 million, Essar would have to take responsibility for the negative investment decisions it took and which could be left as a liability of the Government.
“We are asking pertinent questions as to whether we should pay them, without considering the negative decisions they made,” said the cabinet secretary.
Chirchir said while Essar had been taken on board to help in upgrading the facility by employing modern technology, it had failed to invest in this area, with their only undertaking being putting up of a power plant to mitigate huge losses incurred due to frequent power losses.
By MOSES NJAGIH, The Standard