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Corporate Fraud News

Stanbic Bank looses Sh1.4 billion to a Chinese Development Company

There is mischief in the manner in which Stanbic bank suffered a Sh1.4 billion loss in a contract involving Geothermal Development Company (GDC) and a Chinese company known as Hong Kong Offshore Oil Services Limited.

The Chinese firm was contracted in November 2014 to drill 15-20 geothermal wells in Bogorua-Silali in Baringo. However, not a single well had been drilled by the time the tender was cancelled this year.

According to the reports, the tender was advertised in 2014 and the Chinese firm handed the award notification on 10 November the same year.

According to a report by GDC General Manager George Muya, the Chinese company wrote to GDC requesting an advance payment for the project just two months after signing the contract. As if that was not enough, the firm further requested to be allowed a guarantee not from a bank but from an insurance company which they were denied and GDC was forced to write to the Chinese firm in October 2016 asking them to submit the payment guarantee within 30 days.

“HOOSL responded to this letter on October 8, 2016, by informing GDC that they are working on the issuance of the guarantee with a local bank,” reads the report.

“On October 20, 2016, HOOSL sought an extension of the timeline for submission of the guarantee by an additional 60 days, the report says.

“The geothermal company accepted the extension which was to lapse in December 2016. However, a few days to the deadline, the Chinese firm asked for another extension by two months, which was accepted.”

Still, when the two months were up in February, the firm had not issued a guarantee. The firm would later submit an advance payment guarantee of Sh1.4 billion from Stanbic bank. The guarantee was to expire in December 2018.

“When Stanbic confirmed the guarantee, the payment process through the Energy and National Treasury began and the Chinese firm confirmed receipt of the money in September 2017. However, by December 2018, their payment guarantees had expired and drilling machines in Baringo had remained unused”, reads the report.

In the report issued on Wednesday last week by GDC CEO Johnson Nchoe, the geothermal company will proceed with its own drilling operations even after the Chinese company had received sh1.5 billion that makes 25% advance of the contract sum.

“We will proceed with our own drilling operations. Already there is one rig at the site and we have completed drilling of the two wells. The recovery of the funds will boost our operations in the region,” the statement by GDC CEO Johnson Nchoe read in part.

He further confirmed that the Geothermal Development Company has recovered Sh1.4 billion awarded to a Chinese contractor for drilling at the Baringo-Silali project. He clarified that Stanbic Bank, the guarantor, was compelled to refund the cash after Hong Kong Offshore Oil Services Limited failed to do the job.

“Stanbic bank had provided the Advance Payment Guarantee for Hong Kong Offshore Oil Services Limited in favour of GDC,” read a statement from GDC.

254News has established that Geothermal Development Company(GDC) CEO Johnson Ole Nchoe and GDC General Manager George Muya are very economical with the truth over millions that were lost to a chinese company for drilling at the Baringo-Silali project.

What has stopped the two from telling Kenyans where the sh100 million has gone to? Why are they silent over the interest gained so far?

Insiders say, former national oil acting CEO Mary Mwangi together with her GDC counterpart Johnson Nchoe are fully aware of what transpired with the said Chinese company. That this might have led to the replacement of Mary Mwangi from acting capacity as George Kubai took over.

“In most cases the offshore Chinese company is locally owned by Kenyans fronted as Chinese.” Said a source.

If you look at how this company operated between 2014 to date, you don’t need a rocket science to tell that it’s a typical Kenyan owned company. It’s these Kenyan owned companies that ask for advanced payment. This is what transpired in the Ksh4.9 billion tender awarded to Seven Seas Technologies to connect all medical facilities above Level 4 hospital across the country with The Kenyatta National Hospital (KNH) “to help track patients seeking specialised treatment.” And not a single medical facility was connected by the time the tender was cancelled by the ministry three years later.

The management at Stanbic Bank, the GDC board and CEO Johnson Nchoe, and former national oil acting CEO Mary Mwangi should come clear on this and tell Kenyans where the sh100 millon and the interest gained from the sh1.5billion went to since the company had not done any drilling two years later. And why did they not recover all the sh1.5bilion and interest?



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