Following the sensational withdrawal of the deal with Indian conglomerate Adani Holdings, the Kenyan government will incur a minor expense as the search for a new private partner begins.
Questions about the financial ramifications of terminating the deal with KETRACO, which was in its advanced stages, surfaced following President William Ruto’s shocking announcement on Thursday that the government would walk away from any deals with Adani.
Treasury Cabinet Secretary John Mbadi sought to clarify particulars of the deal after President Ruto’s State-of-the-Nation address, insisting that the country could not incur any losses thanks to a Privately Initiated Partnership procurement arrangement in place. Mbadi went on to say that since the Indian conglomerates only received a deposit, they would receive a refund.
However, owing to the complex nature of a deal involving a state and a private partner, the government faces a tedious three-step process to terminate it, which will also entail paying for verifiable costs.
“We have agreed to reimburse Adani for any verifiable costs associated with the Environmental Assessment Reports, which we are aware of. John Mativo, Managing Director of KETRACO, stated that the law stipulates a maximum cap and provides a mechanism for disputing non-payment.
In Kenya, the cost of an environmental assessment report (EIA) will vary depending on the project and the expert involved.
Assessment costs are typically 0.1% of the total cost of the project, with a minimum of Ksh10,000 and no upper capping. Given the stated cost of Ksh96 billion for 372 km of transmission lines in the KETRACO-Adani Energy deal, an EIA could potentially incur up to Ksh96 million.
What next? KETRACO will now prepare a detailed report for Adani, outlining the reasons behind their decision to withdraw from the deal. Adani may pursue legal action to demand payment for the costs of the assessments it conducted prior to the start of the project.
However, the Indian company could also write back to confirm a mutual withdrawal from the deal with KETRACO.
Further, the government has grounds to avoid overlooking the EIA costs since it could argue that Adani failed to provide sufficient documents for due diligence before agreeing on a deal.
US authorities accused Adani Group founder Gautam Adani and seven others on Wednesday of paying Ksh34 billion in bribes to Indian officials. allegations that the group denies.
