The High Court has ordered State-owned Kenya Electricity Transmission Company (Ketraco) to pay Sh220 million to a French contractor over the stalled Loiyangalani-Suswa wind power transmission line project.
At the same time, the court rejected the company, Enterprise Generale Malta Forest S.A.S’s claim for Sh500 million compensation in idle time and prolongation costs, ruling that the contractor failed to strictly prove the losses despite citing delays, site disruptions, and non-payment.
The court found that the contractor was entitled to payment for certified works despite failing to fully meet agreed performance targets, marking a significant position in commercial law on partial performance.
The dispute stems from the construction of the 400kV Loiyangalani-Suswa transmission line, a critical project designed to evacuate power from the Lake Turkana Wind Power plant in Marsabit County to the national grid.
Ketraco awarded engineering, procurement, and construction contract to Spain’s Isolux Ingenieria S.A in December 2011, which later, in January 2016, subcontracted part of the foundation works to French contractor, Enterprise Generale Malta Forest S.A.S.
Trouble began when Isolux ran into financial distress, slowing the project and delaying payments to subcontractors.
In January 2017, Ketraco entered a direct payment agreement with the subcontractor and Isolux to accelerate construction by funding additional work teams.
Under the arrangement, Enterprise Generale Malta Forest S.A.S mobilised four additional civil works teams, deployed equipment and personnel on site, and executed foundation works along the transmission line corridor.
It invoiced Ketraco more than Sh321 million. The State agency paid about Sh72.8 million but declined to settle the balance, disputing the performance and certification of invoices.
The contractor sued in 2018, seeking over Sh248 million for certified works and an additional Sh342 million for losses linked to delays, idle time, and disruption.
A second suit filed in 2020 sought an additional Sh179.19 million, pushing the total claim well beyond Sh700 million, with the contractor citing alleged misrepresentation and prolonged site costs after remaining on site awaiting payment.
Ketraco denied liability, arguing it was not a party to the subcontract and that the direct payment agreement did not create a full contractual relationship. It also counterclaimed for Sh74.3 million, alleging the contractor failed to mobilise teams as agreed.
But in the ruling, the court held that the direct payment agreement created a ‘limited and specific contractual relationship’ between Ketraco and the contractor, enforceable within its terms.
‘The defendant cannot therefore run away from the obligations it was bound to perform under the said agreement,’ Justice Njoki Mwangi stated, in a ruling that clarifies how far liability extends in complex infrastructure contracts.
The court found that while the contractor did not fully achieve output targets, evidence showed that part of the work was executed and certified. Payments already made by Ketraco supported that conclusion.
‘The plaintiff’s performance under the Direct Payment Agreement was partial, and that the failure to achieve full performance arose from a combination of factors attributable to both parties, each contributing to the failure to achieve full performance,’ said the court.
Crucially, the court affirmed that certified work must be paid for, even where performance is incomplete, provided contractual conditions are met.
After reviewing invoices and payment records, the court awarded Sh220.7 million tied to certified and comparable invoices, finding them sufficiently proved on a balance of probabilities.
However, the court rejected claims exceeding Sh500 million for idle time, disruption, and prolonged costs, citing the lack of strict proof required for special damages.
‘There is insufficient specific proof quantifying idle time losses,’ the court said, adding that the contractor failed to demonstrate presence on site and actual losses incurred.
The court also dismissed Ketraco’s counterclaim for a refund of mobilisation funds, ruling that partial performance had been established and there was no basis for unjust enrichment.
Further, the court held that the insolvency of Isolux in July 2017 disrupted the project but did not extinguish obligations already accrued under the direct payment agreement.
The court further found that the correspondence cited by the contractor did not amount to enforceable promises capable of creating legitimate expectation.
Ketraco, a State corporation mandated to plan, design, and operate Kenya’s high-voltage electricity transmission network, has overseen key projects linking generation to the national grid.
The Loiyangalani-Suswa line was central to evacuating wind power from northern Kenya, but faced delays linked to financing challenges, land access disputes, and contractor difficulties.