Department of Energy faces investigation into idle 79 billion shillings steam wells
Parliament has asked the anti-corruption watchdog to investigate Energy Ministry officials who blocked electricity generator KenGen from connecting 79.3 billion shillings geothermal wells to the national grid.
This is after it emerged that KenGen has committed billions of shillings to drilling wells for geothermal energy, but which have lain idle for the past seven years.
“The committee recommends that the EACC [Ethics and Anti-Corruption Commission] investigation into the circumstances under which KenGen was denied approvals to connect ready wells to the national grid,” the National Assembly’s Public Investments Committee, chaired by Mvita MP Abdulswamad Nassir, said in a report to bedroom.
The committee wants the EACC to investigate why KenGen did not connect the wells to the national grid while the government is paying the $382.5 million loans and interest.
The government, the committee observed, is buying power from independent power producers while its own wells have gone unused.
“Although management advised that they had applied to the Cabinet Secretary for Energy for permission to use the wells even after the matter was raised at KenGen’s Annual General Meeting (AGM) on 6 January 2022, such approval has not been granted to date. It was unclear why the Cabinet Secretary had grossly failed to grant the requested approval,” the committee said.
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The report says the wells were drilled between 2011 and 2015 and were never connected to a power plant for power generation.
PIC says the geothermal wells were financed with a loan from the Export-Import Bank of China (EXIM).
Meanwhile, KenGen had continued to pay principal and interest while no corresponding income had been realized to date.
The parliamentary committee says in its 24th report on the review of financial statements of Crown corporations that KenGen management did not provide details on when the wells are likely to be used for electricity generation .
Auditor General Nancy Gathungu (left) flagged the matter, saying there was no value for money obtained on the 79,324,783,562 shillings investment in drilling the wells.
While reviewing KenGen’s financial statements, Rebecca Miano, the chief executive, told MPs the government had launched a plan to identify new sources of generation and supply to ensure the national electricity supply exceeds 5000 MW in 40 months.
“KenGen’s contribution was 844 MW (700 MW geothermal, 120 MW wind and 24 MW hydro),” she said.
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Miano said the government secured funding in 2012 which was on-lent to KenGen by EXIM Bank of China in the amount of $382.5 million.
She said the funds were intended to drill 80 wells but completed 89 wells due to cost savings.
All 89 wells with an estimated steam of 447 MW were anchored on the project pipeline in accordance with the Least Cost Power Development Plan (LCPDP).
She said of the 89 wells available, KenGen has already connected 31 to Olkaria V, which was commissioned in 2019.
“It was planned that 16 wells would be connected to unit 6 of Olkaria I by the end of 2022. The balance, including the internally financed wells, remains allocated to our pipeline of projects including Olkaria VI (34 wells ), Modular Power Plant (10 wells), Wellhead Leasing (16 wells) and Olkaria VII (9 wells),” Ms. Miano told the committee.
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“These costs were incurred to ensure there was sufficient steam supply to support the geothermal project pipeline. All wells drilled were assigned to power plant projects as production or reinjection wells.
She said that when the project is commissioned, the cost of wells connected to the same will be recovered.
Ms Miano told lawmakers that all wells would be used as production or reinjection and none would be lost.