Kenya has agreed to settle outstanding dues to two Chinese firms whose contract to construct a Sh56 billion second terminal at the Jomo Kenyatta International Airport (JKIA) in Nairobi was cut mid-way.
Transport Cabinet secretary Kipchumba Murkomen said Kenya has struck a deal to settle the outstanding amount owed to the Chinese firms for the contract cancelled in 2016.
“There is good news that we have agreed, and we are moving through the last stages of confirming that agreement to settle the amount owed to the firms for cancelling their tender mid-way,” he told Nation without giving details.
“I can assure you that in two months, a tender for the construction of a new terminal at JKIA will be floated.”
The Chinese firms — Anhui Civil Engineering Group (ACEG) and China Aero Technology Engineering International Corporation (CATIC) had been selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year by the former regime under President Uhuru Kenyatta .
The tender was, however, cancelled in March 2016 after Sh4.2 billion had been paid to the contractor in advance and Sh75 million was spent on a groundbreaking ceremony that Mr Kenyatta attended on May 23, 2014.
This forced the firms, ACEG and CATIC JV, to slap the Kenya Airports Authority (KAA) with a Sh17.6 billion bill for an airport project that never took off.
The firm, which had been paid Sh4.3 billion by the time of the cancellation of the contract, has been demanding another Sh17.6 billion from the KAA, amounting to Sh22 billion.
The government has, since the 2016 cancellation, argued that no work was done at the airport despite CATIC receiving money from the State. The Chinese contractor was said to have dug the project foundation and mobilised 90 percent of the required equipment.
The tender was cancelled after some Sh129.9 million was paid to a consultant, Louise Berger, while PriceWaterHouseCoopers got Sh7 million for its role in securing the financier of the project.
Documents tabled before the parliamentary Public Investments Committee show that CATIC wants the KAA to pay Sh2 billion for the preparation of the bill of quantities, Sh2.4 billion in extra costs and Sh708.2 million being 16 percent value-added tax (VAT).
The Chinese contractor has slapped the KAA with a Sh500 million claim in interest and penalties for delayed payment of VAT charged by the Kenya Revenue Authority.
The KAA said the construction contract excludes 16 percent VAT from the contract price, contrary to the requirement of the request for proposal (RFP).
The airports agency argued that the construction contract referred to two foreign currencies and a foreign-local split contrary to the requirement of the RFP.
The authority also argued that the contractor commenced works under the construction contract before a financing agreement had been secured.
Mr Murkomen insisted there is a need to expand the capacity of JKIA, which receives 7.5 million passengers compared to Ethiopia’s 15 million passengers a year but under a public-private-partnership, a move that will see the current regime reverse the Uhuru’s terminal of JKIA deal.
