Italian contractor leaves with Kenya's Sh15 billion deposit

A section of Itare Dam in Kuresoi North. [Kipsang Joseph/Standard]

At least Sh15 billion of public money is at risk of being lost as the Italian contractor at the centre of bribery claims involving Kenyan Cabinet Secretaries appears to have left the sites of three mega projects.

CMC Di Ravenna, which has been declared bankrupt at home in Italy, has abandoned the hydro-power and drinking water projects in Nakuru and Elgeyo Marakwet counties despite receiving a down payment from which it is alleged the kickbacks were paid.

Only the front office staff have been retained at the firm’s Nairobi offices while the three site offices remain ghost towns as the ripples of its financial troubles start to be felt.

An assistant confirmed the closure of the sites and said that senior officials, whom she declined to name, had travelled to Italy, supposedly to address the financial crisis. She said she was not certain when they would be back and we were unable to independently verify their whereabouts.

Only Itare Dam in Kuresoi, Nakuru, has had some work done. Sh4.9 billion has been paid for two other projects that have yet to break ground.

Just this week, the firm was kicked out of two mega projects it had been contracted to undertake last year in the South East Asian nation of Nepal.

With CMC Di Ravenna running into financial headwinds, there are fears that the Kenyan contracts could be re-awarded, and at extra cost.

Among the reasons for termination of the contracts in Nepal, according to Nepalese media, was the inability to raise funds for the development of the drinking water and hydro-power plants respectively.

Tanahu Hydropower Ltd followed Melamchi Water Supply Development Board in disengaging CMC Di Ravenna on Tuesday.

Flagged transactions

Lenders are also reported to have flagged transactions with the contractor.

The development raises serious concerns on the contractor’s ability to execute the three mega dam projects in Kenya with a cumulative worth of Sh91 billion. The other two projects are Arror and Kimwarer dams in Elgeyo Marakwet.

Just like in the local cases, CMC Di Ravenna had sought advance payment to kick-start the projects in Nepal, but the request was turned down since the firm had not given the requisite bank guarantees.

Tanahu Hydropower said on Tuesday it had no option but to terminate the contract awarded to CMC Di Ravenna due to the standoff and start the process of finding a replacement.

A day earlier, Melamchi Water confirmed it had dismissed the contractor from the project the firm had abandoned due to a freeze on its payment guarantee – technically known as a security bond.

In Kenya, the bribery claims relate to advance payments worth Sh4.9 billion made to the firm, yet no work had started at Kimwarer and Arror dams. The firm had also been paid Sh10 billion for Itare Dam, meaning it had pocketed a total of Sh14.9 billion.

Treasury Cabinet Secretary Henry Rotich is among high-ranking Government officials who have been questioned in relation to the Sh65 billion stalled dam projects.

Mr Rotich recorded a statement on Monday at the Directorate of Criminal Investigations over the Arror multi-purpose dam and Kimwarer in Keiyo South constituency. It was, however, not clear if the CS was questioned as a witness or if he is under investigation.

But even before investigations into the bribery claims could be concluded, other concerns are emerging relating to the Sh30 billion Itare Dam.

A whistleblower who declined to be named for fear of retribution said more payments had been made to the Italian contractor than work done.

The source added that CMC Di Ravenna has received over one-third of the funds borrowed from Belgium-based BNP Paribas Fortis for less than 17 per cent works completed.

Foreign-funded

Italy’s Intesa Sanpaolo is the other lender for the project, hence the choice of contractor as is the norm with most foreign-funded infrastructure projects that are structured as an EPC (engineering, procurement and construction) package.

At stake for taxpayers is whether they will get value for money from the debt taken out by the National Treasury three years ago, which was intended to ensure water supply to 800,000 people in Nakuru municipality, Kuresoi, Molo, Njoro and Rongai.

The source said that another Sh500 million was paid for the construction of the road leading to Itare Dam to tarmac standards, but whose construction has yet to begin.