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Citizen Weekly

Sunday, 14 December 2014

BRIBERY CLAIMS IN LOOMING MULTI-BILLION COAL TENDER AWARD

The government’s announcement that the ministry of Energy will announce in March 2015 the firms selected for the concession of the Mui Basin Coal Block A, Zombe-Kabati and Coal Block B Mutitu-Itiku has raised eyebrows.
Bribery claims have emerged with top firms said to be reaching out to top Energy ministry officials to compromise them to have them selected for the mining rights.
Word spreading within the corridors of the ministry now says that top managers of the three firms already pre-qualified for the job have been sending emissaries to the ministry officials where it is claimed huge amounts of money have exchanged hands.
Investigations now reveal that the future of a planned coal mining project worth more than Sh8.5 billion in Kitui county now hangs in the balance following opposition by local leaders and a court suit.
Some leaders from the county now want Mui Basin coal mining project stopped over allegations of impropriety and corruption. The Law Society of Kenya is also said to have joined the war and is threatening to go to court to block the signing of an investment agreement between the government and a Chinese investor.
Emerging details, they said, suggest that Fenxi Industry Mining Group could have been a “proxy”. It is claimed that the said Chinese company, Fenxi Industry Mining Group, did not exist in China or in Kenya.
It is alleged that the company is a briefcase one being pushed by a clique of powerful individuals in politics and business circles angling for the deal at the expense of the project and the people of Kitui county.
Back to the shortlisted companies, it is suspected that managers of Transcentury Investments Ltd, Liketh Investment Kenya Ltd and Northeast Electric Power Engineering Corporation have open the zips of their wallets and could be the company which offers the biggest bribe that is likely to win the tender.
What has made the competition tight and the bribery mark higher is the requirement that the shortlisted companies must show proof of ability to raise investment funds in excess of Sh17.6 billion.
Another requirement is that the prospective investor must demonstrate their technical capability and a history of coal mining projects of similar nature in at least three developing countries.
The eligibility criteria were contained in an advertisement placed by the ministry of Energy in the dailies that invited bids from international companies.
“Those interested will have to prove ability to raise funds in excess of Sh17.6 billion in current exchange rates for the projects and a clear demonstration of effective environmental preservation,” the tender notice read.
According to well-placed sources, the three firms will then be invited to give proposals for exploiting the controversial Mui Coal Mines in Kitui. The Mui Basin Coal block includes two blocks comprising of the Zombe-Kabati block and Mutitu-Itiku block.
The winner among the three will join China’s Fenxi Mining Company that is working coal Blocks C and D.
Reports from the ministry indicate that the Mui Basin has an estimated one billion tonnes of coal, valued at $75 billion, and which can produce 5,000MW of electricity.
The move by the government to concession the coal blocks A and B accelerates Kenya’s vision of being a coal producer, after the mining contract for the first coal blocks C and D were awarded three years ago to Chinese investors Fenxi Mining Company.
The basin has been subdivided into Zombe, Kabati, Itiko, Mutito, Yoonye, Kateiko, Isekele and Karunga sub-basins. The later four basins fall under Block C and D.
The government’s decision to concession blocks A and B will see two mining companies involved in extracting the resource simultaneously.
Blocks C and D were awarded three years ago to Fenxi Mining Company of China.
As the lobbying for the mining job continues with stakes rising higher by day, it has also emerged that a Kenyan tycoon has been spending sleepless nights as he plots on how to harvest the expected windfall in the estimated Sh3.4 trillion worth of coal deposits.
Sources say the billionaire is a major shareholder in a local bank joined the rush through a consortium through a Chinese Mining Company and is dealing through his company known as Great Lakes Corporation.
The billionaire now becomes the second Kenyan to place his bet on Kenya’s newfound mineral treasure after investor Chris Kirubi whose firm Centum Investment Ltd was awarded a tender to build a Sh300 billion coal power generating plant in Lamu county.
But even as wealthy businessmen prepare to pay hefty kickbacks to the ministry officials to be considered for the job, sources now say local residents are up in arms as issues such as displacement, resettlement and compensations have never been resolved.
Pressure is now mounting on local politicians and religious leaders from the affected communities to ensure that before the deal is signed, they must ensure a clause that any foreign company involved in the coal mining and coal power generation should have a local subsidiary owning at least 30pc stake.
It is now emerging that the tycoon who is also in the banking business had struck a deal with Fenxi Company but at the initial stages, it was discovered that the tycoon does not have any business or family in Kitui county and the deal was cancelled. Locals claimed that with no family or business in Kitui, the tycoon may not feel compelled to invest in a manner that will benefit residents. Apart from the tycoon, the other directors of the Great Lakes Company are George Kiriithi as the CEO.
The issue of how the locals will benefit together with the compensation has raised tension within Kitui county and sources now say that Energy cabinet secretary Davis Chirchir is expected to meet Kitui leaders and the Mui Basin Community Liaison Committee to discuss the formation of the land compensation and resettlement committee among other key issues.
Surprisingly, not many Kenyans are aware that Kitui country has huge deposits of coal that can produce thousands of megawatts of power and change the economy forever.
According to official reports, the Mui basin has an estimated one billion tonnes of coal, valued at Sh6.9 trillion, and which can produce 5,000MW of electricity. Coal exploration activities in the county started in 1996 when the ministry subdivided the 500km2 Mui basin into four blocks as designated Block A (Zombe-Kabati, covering 121.5 km2); Block B (Mutitu–Itiko, covering 117.5 km2); Block C (Kateiko–Yoonye, covering 131.5 km2 ; and Block D (Karunga–Isekele, covering an area of 120 km2).
Blocks C and D alone can produce 2,000MW of electricity, according to people familiar with the matter. In February, the national government advertised a power plant to be located in the region, adding fires to the scramble for coal in Kitui, which is expected to climax with real exploitation in the next few years. This will position the county as Kenya’s mining hub.
Kitui has more than its share of minerals, estimated at 14. Huge deposits of various valuable minerals include limestone, iron ore, graphite, gypsum, quartz, granite and copper.  According to geological reports by the commissioner of mines, the wide variety of mineral resources places Kitui in the league of Goma and Kinshasa, the mineral rich regions of DR Congo.
Once the real mining starts, there will be other benefits, including royalty fees, to be shared between the national and county governments and the local community, in a formula to be determined in the proposed mining Bill. But the investors will get 76.4pc of the proceeds to recover their input. The government will acquire 11pc stake in the company.
The ministry of Energy and Petroleum has enhanced public sensitisation on coal in Kitui. The ministry team has been stressing the importance of supporting the project as it is expected to provide Kenya with reliable and cheaper electricity leading to increased investment.
The use of coal for domestic purposes will reduce the country’s over-reliance on wood fuels, which in effect will help in the conservation of our forests,” the ministry says in a communiquĂ© posted on its website.
Coal energy comes with many advantages. Its gestation period is less than five years compared to seven years for geothermal and 20 years for nuclear. There are also minimal risks to the environment from the use of coal since modern mining is undertaken using the clean coal technology, which ensures that sulphur and carbon dioxide are safely secured. Mining and utilisation of coal is expected to create employment while businesses will thrive.
As per the land Act, mineral resources belong to the national government. However, it is proposed that revenue accrued from mining and processing of these minerals should be shared out on an 80-15pc for the national government, the county government and the local community respectively. In addition, the government is out to ensure fair and adequate compensation for those to be resettled by compensating them for the land and any developments on it.
The coal project has been dogged by controversies since the concession was awarded two years ago with numerous court cases filed by the local community demanding to be involved in negotiations.