Belio Kipsang, the Principal Secretary for Regional and Northern Corridor Development in the State Department of Regional Development revealed that the state was seeking to recover the money which was part of a guarantee for the loan.
The government is demanding Ksh4.1 billion from the insurance firm and Ksh3.6 billion from the bank. The two financial institutions acted as guarantors for the construction of the two dams.
“I can confirm that the Treasury has recalled Ksh4.1 billion guarantee for Arror dam project. I cannot, however, confirm whether the money has hit the Treasury accounts. We will be recalling the insurance guarantee from the bank before it expires in June 2023,” PS Kipsang told Business Daily.
The two institutions will be required to remit the amounts, which are part of a performance bond, after Italian construction company CMC Di Ravenna filed for bankruptcy even after failing to construct the two dams.
“The insurance firm had guaranteed that if there is non-performance on the part of the contractor, they will give us the advance payment,” added the PS.
CMC Di Ravenna-Itinera JV had received an approval to be paid Ksh3.5 billion as advanced payment for Kimwarer Dam on July 2, 2018 and Ksh4.3 billion on September 27, 2018, as an advance payment for Arror Dam.
However, Kenya will be forced to part with billions of shillings despite the stalling of the construction of both dams.
The Italian Construction company filed a case at the arbitration court at the International Chamber of Commerce seeking compensation from the Kenyan government and the Kerio Valley Development Authority (KVDA) over termination of the contract.
CMC Di Ravenna claimed that the contract was canceled irregularly and unlawfully. It further accuses KVDA of not complying to their contractual agreement and for the delays in the execution of the project.
In September 2019, President Uhuru Kenyatta, cancelled the Kimwarer dam project after investigations established that it was technically and financially unfeasible.
He also issued an order for commencement of the Arror dam project at half the costs as the technical committee he appointed to look into the developments found it economically viable.