Taxpayers face Sh11bn loss to Itare Dam’s contractor

Taxpayers risk losing Sh11 billion that has already been paid out to secure funding for construction of the stalled multi-billion shilling Itare Dam in Nakuru County, Parliament heard yesterday.

Water Secretary Simon Chelugui told MPs that termination of the contract with Italian firm CMC Di Ravenna, which has been declared bankrupt, will expose the government to loss of Sh11 billion, which was already paid out to it.

He said the ministry had instructed the Italian company to sub-contract the project in order to complete it, but no response has been forthcoming since March.

“We have reached a point of either breaking or moving forward. We have understood better the situation affecting the contractor and the circumstances that may accompany our decision if we are going to terminate or move forward.”

Mr Chelugui told MPs that the ministry has put together a report for tabling before the Cabinet based on the recommendation to sub-contract the project.

“I am asking Kenyans to give us an additional two months to September to prosecute a memo through my colleagues in Cabinet to be able to come up with a solution to determine the way forward,” Mr Chelugui told the National Assembly’s Environment committee.

“After the Cabinet resolution, we can say we are not going to move forward and cut our losses. We have to bite the bullet and move forward,” he told the committee chaired by Maara MP Kareke Mbiuki.

Mr Chelugui said there is an option of getting sub-contractors from the troubled Italian firm to deliver on the dam.

“We have the option of getting sub-contractors to deliver the dam. Our wish is to deliver this project and we hope we will have it completed,” Mr Chelugui said.

The revelations come just days after the arrest and prosecution of Treasury Secretary Henry Rotich and principal secretary Kamau Thugge over controversial payments of Sh19 billion to CMC di Ravenna for construction of non-existent Kimwarer and Arror dams.

The Treasury chiefs who have been prosecuted with 27 other government officers, released the money that included Sh11 billion for insurance, Sh4.4 billion to cater for interest and Sh643 million for compensation of affected land owners.

CMC di Ravenna, which also won the Sh29.5 billion Itare dam project was to finance the Arror and Kimwarer dams project but the Kerio Valley Development Authority (KVDA) and the National Treasury went ahead to spend Sh20.5 billion of taxpayers’ money on the ghost projects.

The contract signed between the KVDA and CMC Di Ravenna was to see the Italian firm dig into its own pockets to complete the projects, set up a power plant, transmission lines and other related infrastructure and recover its money by selling power to the government for an unspecified number of years before handing back the dams to the government.

Instead, the National Treasury shopped for expensive loans in Italy and spent Sh20.5 billion.

On Thursday, Mr Mbiuki put the ministry officials to task to explain why the government has chosen the Engineering, Procurement, Construction and Finance (EPCF) model of contract, which he claimed is being used to siphon billions of shillings from public coffers.

EPCF is a contractual model where the successful bidder mobilises resources through a loan, provides engineering design services, procures all major materials and equipment and serves as the general contractor.