Canadian Firm to Pay Kenya $5mn After Losing Geothermal Case

Attorney General Hon. Paul Kihara Kariuki

A Canadian-American geothermal firm,WalAm Energy, has lost a long-running dispute case against Kenya’s decision to prematurely terminate its licence for geothermal operations in the East African nation.

For losing the case, the Calgary-based firm has been made to compensate Kenya in excess of $5 million in legal and arbitration expenses.

Overseeing the case was Washington DC-based International Centre for Settlement of Investment Disputes (ICSID) where the Canadian firm had taken Kenya in February 2015, three years after its licence was revoked in 2012. The hearing took place in London in May 2018, pending a ruling that has finally been made two years later.

“Kenya has prevailed in an ICSID international arbitration whose award was issued Friday evening. Kenya prevailed in an over $400 million (Sh40 billion) claim over Suswa geothermal fields and will recover costs of at least Sh535 million ($5 million),” Kenya’s Attorney-General Kihara Kariuki said.

In 2015, the Canadian-American firm sued the Kenyan government following cancellation of its geothermal resources licence it had been granted in September 2007.

The firm contested the move, arguing that Kenya had unlawfully pulled the plug on its permit and that the firm had already incurred expenses in geothermal exploration exploits.

Through the global arbitrator, the geothermal company sought to have the licence reinstated. Further, it sought compensation amounting to $339.6 million and interest payment for expropriation, pushing the compensation burden past $400 million.

In 2007, Kenya awarded the geothermal resources licence to WalAm Energy. This granted the firm exclusive rights to explore, drill for, extract, produce and dispose geothermal steam and other geothermal resources in the Suswa area for a period of 30 years.

However, in October 2012, the Kenyan government revoked the licence after establishing that WalAm had not performed its duties under the licence and did not have capacity to undertake the required exploration and exploitation work.

For losing the case, the renewable energy firm is obligated to pay the government of Kenya $648,857 (Sh70 million) – corresponding to its share of the costs of the arbitration.

Further, the firm is to reimburse 75 percent of the government of Kenya’s legal fees and expenses in the amount of € 3,586,039.28 (Sh441 million) and $252,262 (Sh27.2 million).

Kenya is ranked seventh-largest geothermal electricity producer in the world with an installed capacity of 823 megawatts (MW).

Presently, 85 percent of Kenya’s developed geothermal capacity is owned and operated by government-owned power producer KenGen, with the remaining 15 percent owned by American firm Ormat – an independent power producer (IPP).

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