Hong Kong Offshore Oil Services Limited (HOOSL) was contracted by Geothermal Development Company (GDC) to drill 15 to 20 geothermal wells in Bogoria-Silali in Baringo in April 2016.
Three years later in 2019, GDC has nothing to show for the billions sunk in so far except frustrations, to the point of writing panicky letters to the Attorney General and Governor of Central Bank of Kenya as reality dawns that they may have been played.
A report prepared for GDC board by George Muya, General Manager, Strategy peels layers of a possible fraud involving a local bank and in which the Sh1.4 billion advance payment guarantee was recalled just after payment had been issued and the bank affirmed it.
The tell-tale signs were there from the very start. According to the report, just two months after the contract was signed, on June 17, 2016, the contractor wrote to GDC requesting the advance payment but also pleading to be allowed to offer a guarantee from an insurance company rather than a bank.
GDC rejected the request on July 8, 2016 and three months later on October 6, wrote to HOOSL asking them to submit the payment guarantee within 30 days.
“HOOSL responded to this letter on October 8, 2016 by informing GDC that they are working on the issuance of the guarantee with a local bank. Subsequently, on October 20, 2016, HOOSL sought an extension of the timeline for submission of the guarantee by additional 60 days,” the report says.
GDC went on to accept this extension which was to lapse on December 20, 2016.
A few days to the deadline, however, HOOSL wrote again to seek further extension by two months; that is up to February 20, 2017.
The company again agreed but marked it as the final extension.
It had no clue what awaited it.February came and passed, no guarantee. Instead the company sought additional extension but GDC was not going to budge.
A stalemate ensued until June 2, 2017 when, out of scope, the contractor submitted the advance payment guarantee of USD 14,629,952 from the bank and which was to expire on December 1, 2018.
Shortly thereafter, the bank confirmed the guarantee and GDC proceeded to facilitate the processing of payment through the Ministry of Energy and National Treasury.
“The advance payment was paid out to HOOSL in September 2017 which HOOSL confirmed receipt on September 25, 2017,” report says.
With money already with the Chinese, GDC proceeded to issue the contractor with a three month notice to mobilise starting on January 15, 2018.
Mobilise meant transportation of the rigs- the massive machines that do the actual drilling into the earth’s subsurface- from China to Baringo for start of drilling operations.
Instead of going on an overdrive to deliver the machinery, HOOSL simply confirmed receipt of the notice and proposed a meeting with GDC in China to discuss the rig mobilisation and amendment of the contract. Soon thereafter, it pulled a shocker.
“On March 9, 2018, HOOSL rejected the issued notice to mobilise stating that it was not validly issued,” the report says.
Apparently, HOOSL had relied on a slight breach by GDC which required designated representatives to act on behalf each of the parties to the contract.
In the breach, the CEO of GDC had issued notice of mobilisation instead of the appointed representative, Stephen Kangogo.
The company corrected itself and issued a fresh notice through their designated representative on March 20, 2018.
Six days later, HOOSL was up again with another hold-up; they wrote to GDC saying the rigs which it had hoped to mobilise were no longer available.