Mumias lease deal: AG Kariuki now sides with aggrieved bidders
Mumias Sugar Company.
Plans to revive the troubled Mumias Sugar Company may be thrown into disarray after the Attorney-General appeared to side with aggrieved bidders seeking the revocation of a lease awarded to Uganda-based Sarrai Group.
In his fresh court filings, AG Kihara Kariuki has changed his position on the dispute and now wants to withdraw the grounds of opposition that he had lodged earlier against the petition. Initially, he wanted the court to dismiss the bidders’ petition.
“Pursuant to further deliberations between different government entities, which have an interest in the instant suit, it was resolved that the AG, Cabinet Minister for Agriculture, Livestock and Fisheries (Peter Munya) and the Chief Land Registrar withdraw the grounds of opposition and submissions,” the AG says.
Through principal state counsel Allan Kamau, the AG has asked the court to readmit a replying affidavit sworn by National Treasury Principal Secretary Julius Muia that had been struck out on a technicality.
“The striking out of Mr Muia’s replying affidavit is not only prejudicial to the AG but to the public. It is unfair and contrary to the overriding objective test, which this court should uphold at all times. It is only fair that it be readmitted,” Mr Kamau urges.
In the affidavit, Mr Muia had stated that the leasing of Mumias Sugar should adhere to all regulatory requirements.
Some of the aggrieved bidders, such as West Kenya Sugar Company Ltd, owned by the wealthy Rai family, have claimed that the Mumias Sugar receiver-manager, Mr Ponangipalli Venkata Ramana Rao, flouted procedures in leasing the miller to Sarrai Group.
“It is in the interest of the public and all shareholders that Mumias Sugar Company is revived with the intent of taking it back to the heights it once enjoyed,” Mr Muia said.
He also argues that the lease should be awarded to an entity that has capacity to generate income, pay secured creditors and sustain the operations.
“Any interested party who has the intention of leasing Mumias Sugar Ltd should have the best financial interest of the company and should be able to generate the highest possible rental income to pay the secured creditors, service providers, farmers, workers and sustain the operations of the company,” says Mr Muia.
The National Treasury has 20 per cent shares in the fallen sugar miller, while individuals have 75.43 per cent and institutions 4.57 per cent.
Among the questions surrounding the lease is the decision of the receiver-manager to award the lease to Sarrai, which pledged Sh6 billion, compared with West Kenya’s Sh36 billion.
Another losing bidder, Tumaz & Tumaz Enterprises Ltd, had pledged Sh28 billion to revive the sugar miller.
In its court papers, West Kenya states that Sarrai will not settle the liabilities of Mumias Sugar with their bid amount of Sh6 billion.
Through lawyers Paul Muite and Martin Gitonga, it argues that after 20 years the money released from Sarrai’s monthly lease payments will only equate to about 27 per cent of Mumias Sugar’s liabilities. The asset base of the miller is Sh15 billion.
The lawyers also say West Kenya’s bid will see the company roaring back to business within 18 months as it will pay all its outstanding debts.
They accuse the receiver-manager of insincerity by alleging that Devki Group bid the highest by over Sh60 million yet it withdrew from the bidding process on October 15, 2021.
But KCB Bank and the embattled receiver-manager have defended the decision to deny local firms the lucrative tender of reviving the ailing sugar miller.
In their joint written arguments, the lender and the manager urge the court to dismiss allegations by two aggrieved bidders that the leasing process was irregular and opaque.
On claims by West Kenya that it was the most qualified bidder for placing a bid of Sh36 billion compared with Sarrai Group’s Sh6 billion, the receiver-manager and the bank say price was not the only consideration in evaluating the bids.
The aggrieved bidders and some farmers and other stakeholders have criticised the receiver-manager’s choice of Sarrai on the basis of the amounts of money pledged.
Having considered West Kenya’s bid, Mr Rao said he observed that the company did not demonstrate how it would pay Sh150 million per month (Sh1.8 billion per year).
He disclosed that West Kenya made losses in 2018 and 2019 and a profit of Sh491.2 million in 2020.
This profit was achieved after crushing 1,464,241 tonnes of sugarcane. It would, therefore, require them to crush 5,373,134 tonnes of sugarcane per annum to raise the lease rent of Sh1.8 billion that they offered.
“This is impossible as Mumias Company can only crush 2,920,000 tonnes of cane per year when operating optimally,” Mr Rao says.
Rao and KCB have also asked the court to dismiss a case filed by five farmers and two companies (West Kenya and Mumias Outgrowers Company Ltd) challenging the lease.
“We urge the court to dismiss the plaintiffs’ applications and allow the Sarrai Group Ltd to take steps to revive the Company in accordance with the lease and for the benefit of all stakeholders,” Mr Kiragu submitted.
Justice Mabeya adjourned the case until February 22.
