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State-owned energy firms face Sh9bn payouts for contract breaches
Treasury has repeatedly flagged the majority of the State entities for outrightly defying directives to clear pending bills despite having budgets for the same.
State-owned energy sector firms, including the Kenya Electricity and Transmission Company (Ketraco) and the Nuclear Power and Energy Agency (NuPEA) are facing cumulative payout claims of Sh8.7 billion, while have pile up over the years after they lost contract breach court cases against contractors and individuals.
Disclosures by the Ministry of Energy show that the bill is for court cases that the two entities have lost between July 2019 and June 2025. A total of Sh9.027 billion has been awarded, and only Sh245 million of the amount has been paid to the various claimants.
Instalaciones Inabensa SA was awarded the compensation in a ruling made on July 30, 2019, after Ketraco cancelled a deal given to the Spanish firm to construct a 400 kilovolts (kV) double circuit line from Kenya to Uganda in 2016.
The high number of lawsuits ruled against State entities has been attributed to poor decision-making by the concerned entities, exposing taxpayers to a burden that could be significantly reduced or avoided altogether.
"A high number of litigation against an institution is an indicator of poor governance. Where there are proper governance structures and the law and procedures are followed, litigation incidents are minimised," Public Service Commission says in a separate review of lawsuits against the government.
Ketraco is yet to make any part payment of the money due to the Spanish firm, which has grown from the initial Sh5.58 billion (37.36 million euros) amid budget cuts that have increasingly hurt its ability to settle pending arrears.
Instalaciones Inabensa SA had been awarded a deal to build the line spanning 132 kilometres from Lessos in Western Kenya to Tororo in Uganda. Ketraco cancelled the contract midway, accusing the Spanish firm of non-performance.
The termination triggered the lawsuit as the Spanish firm pushed for compensation for what it described as an unfair cancellation of the contract.
The report by the Ministry of Energy further shows that a total of 23 court cases have been ruled against State firms in the sector between July 2019 and July this year. The lawsuits have been against Ketraco and NuPEA.
Four of these lawsuits worth Sh8.77 billion have been decided in favour of contractors, and the rest have been decided in favor of individuals. Besides Instalaciones Inabensa SA, the other companies that were awarded are Ecobank Kenya and the Congolese firm EGMF.
The Ministry of Energy did not disclose the reasons why the lawsuits, some as low as Sh25,150, have not been paid. It also remains unclear whether Ketraco has appealed against some of the lawsuits, thus triggering compensation delays.
Treasury has repeatedly flagged the majority of the State entities for outrightly defying directives to clear pending bills despite having budgets for the same.
Non-payment of arrears, mainly lawsuits and contractor bills by State firms, continues to be a major headache to the Treasury, with the bills ballooning by the year on account of growing interest.
