KivuWatt machinery worth Rwf700m stuck in Kenya over dispute

A machine worth Rwf700 million that was in transit to Rwanda from Dubai has been stuck at the port of Mombasa since October 2012 due to a standoff between Kenyan firm Civicon and ContourGlobal, an American firm behind the KivuWatt project in Karongi District. The machine, technically referred to as a ‘separator’, is used to separate water from methane gas. It was one of the four devices acquired by ContourGlobal to set up a methane extraction facility on Lake Kivu. In the process of extracting methane gas from the lake, it comes with water which must be separated from the gas before being returned to the lake. Three of the four separators, each costing up to $1 million, according to a KivuWatt official, were delivered in Karangi before the standoff emerged in 2013. Incorporated in Rwanda as a private company, the KivuWatt project would involve the construction and operation of a facility to extract methane gas from Lake Kivu and generate 100 MW of electricity in two phases. On May 31, 2010, Civicon was awarded a contract by KivuWatt to execute works for the first phase of the project that would generate 25MW which should have been completed by 2012, according to officials at the Ministry of Infrastructure. According to contract details seen by The New Times, Civicon signed up to construct a barge on the lake and install the required methane extraction and production equipment using designs and gear provided by ContourGlobal, the client. A barge is the flat-bottomed boat that’s seen seemingly floating on the Lake on which the heavy methane extraction machinery is mounted. To produce the 100MW, KivuWatt is supposed to have four offshore Gas Extraction Facilities barges (GEF’s), an onshore Power Plant and an onshore Marine Landing Site (MLS) used in the fabrication and launching of the GEFs. The first barge on which the GEFs would be mounted was initially the responsibility of Civicon to construct and the four separators would be mounted atop the barge for the purpose of separating water from methane gas. According to a technician with the project, the four separators work as a single unit and without one of them, the three are useless. Civicon sacked In the first quarter of 2013, ContourGlobal cancelled Civicon’s contract on KivuWatt on allegations of producing sub-standard work and lacking the capacity to undertake the technical work required. The project deadline then had been June 2013. ContourGlobal then hired Koch engineering and construction, a Portuguese privately owned and incorporated firm, according to its official website which started work around May 2013. Sources familiar with the ill-fated project intimate that given the significantly substandard work executed by Civicon, Koch asked to demolish everything the sacked contractor had done which set the project back several steps and shifted its completion deadline to June 2014. “So far the new company (Koch) has shown commitment. Work is ongoing and we are confident, by June 2014, the generation of 25MW will have been realised,” Charles Nyirahuku, the then director of energy development at former EWSA told journalists at the time. The deadline was never met. The New Times understands that because the three separators already in Karongi couldn’t work without the fourth one that’s stuck in Kenya, KivuWatt was forced to order for parts of another separator. The parts arrived aboard a cargo plane which landed in Kampala, Uganda before being delivered by road to Rwanda, sometime last year and assembled by Rwandan engineers. With the assembled fourth separator available, the new sub-contractor can now mount them on the barge in preparation for the sinking of the extraction facility into the water to start extracting methane. The government is upbeat again after KivuWatt officials reported that the sub-contractor will be ready to launch the extraction process by the end of April. Kivuwatt methane gas plant on Lake Kivu in Karongi District. (File) Stuck in Kenyan courts Although the project has managed to replace the fourth separator, the time it took before the replacement has cost the project a lot of time and money with two deadlines missed, one in 2013 and another last year. These delays are attributed to an ongoing legal dispute arising from civil suit number 36 of 2013 filed by Civicon in the Kenya High Court against KivuWatt shortly after the former’s contract was cancelled. Apparently, at the time of Civicon’s contract cancellation, the sub-contractor had the last of the set of four separators needed for the barge under construction on Lake Kivu. There was also a bank guarantee pending payment upon delivery of the equipment. The furious Kenyan firm, upon losing the contract filed for a court injunction to block the recovery of both the machinery and the bank guarantee by KivuWatt which had launched the process to recover its equipment in Civicon’s custody. The injunction application, a copy of which The New Times has seen, had three requests of which the third, related to the machinery in question, stated thus; “The plaintiff also seeks orders restraining the Defendant KivuWatt Ltd as well as its authorised agents, servants, employees, assignees and any other person or person’s claiming through KivuWatt, from seizing, attempting to seize and in any manner from interfering with any equipment, plant, machinery or any other asset in possession of Civicon as well as Civicon’s authorised agents, servants by virtue of the contract or contracts which are the subject matter of this suit.” The other two requests regarded a guarantee amount of $1.2 million held by Citibank that should have been paid to Civicon upon execution of the client’s work, KivuWatt. In the letter, Civicon asked high court to block KivuWatt from trying to regain the said amount from the bank and to also block Citibank from trying to pay out the said amount to any of KivuWatt’s agents. As grounds for the injunction, Civicon argued that having been awarded the contract on May 31, 2010, it proceeded to the site in Rwanda to start executing the works. However, “there were challenges owing to lack of essential process engineering designs coupled with money problems,” states the injunction letter. Because of that, Civicon claimed that it became ‘difficult to execute’ the work but even then, the sub-contractor said it had reportedly “incurred outstanding claims in respect of unpaid invoices and on site assets valued in the sum of $18 million.” “KivuWatt had already acknowledged withholding payment for invoices totaling to $2.3 million issued by Civicon,” Civicon added, and that to avoid settling the said outstanding bills, KivuWatt started ‘manufacturing’ various contractual disputes from time to time during the duration of the contract. “The contract was terminated on March 29, 2013 and ejected Civicon as well as its project staff from the contract site with the assistance of armed personnel from the Rwanda Security Forces,” reads the court application. On April 2013, KivuWatt filed an objection letter against Civicon’s injunction application on the grounds, among others, that the Kenyan high court didn’t have the powers to hear and determine the suit. Governments intervene The project’s progress stalled significantly after the case went to court forcing various departments of the government of Rwanda to engage their Kenyan counterparts in a bid to help the two parties seek an amicable solution. But those negotiations failed largely because Kenyan officials said they didn’t want to be seen to be interfering in due process of a civil case which has since dragged on to-date. KivuWatt officials who spoke off record claim that the firm has spent over $300, 000 as resultant costs from transport between Kigali and Kenya to attend hearings as well as unofficial payments to corrupt officials in the Kenyan system. On Wednesday, March 18, 2015, the Kenya Ports Authority (KPA) held a ‘stakeholders’ interactive forum’ in Kigali which brought the port’s top officials face to face with Rwandan importers who use the Mombasa port. During the meeting, Emmanuel Wenani, the Logistics and Transport Manager of KivuWatt, raised the issue before the port’s top officials. He argued that given Rwanda’s landlockedness, the country is very vulnerable to such trade shenanigans which could in the future fail the implementation of important national projects, such as KivuWatt. Wenani called for countries of the Northern Corridor to reach an agreement that would bar the holding of goods in transit at the port in the event of disputes between trade parties. “Such an agreement should ensure that in case of disputes, the goods in transit should be allowed to reach their last destination where it could be kept under watch as legal procedures are allowed to continue,” he argued. Kenyan port officials present and their counterparts from the government of Rwanda promised to forward the matter to higher authorities.

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KivuWatt machinery worth Rwf700m stuck in Kenya over dispute