Court stops KenGen tender as funding dispute derails Olkaria VII

A High Court ruling has brought a major government-backed energy project to a standstill after siding with Kenya Electricity Generating Company in a dispute over financing approvals, stopping a consultancy tender tied to the Sh32 billion Olkaria VII geothermal plant.

The decision reinforces the role of external financiers in public projects, after the European Investment Bank declined to clear the process, leaving KenGen unable to proceed.

In the judgment delivered in Nairobi, the court found that the absence of the financier’s approval made it impossible for the procurement process to continue lawfully. It agreed with KenGen that moving ahead without a confirmed funding framework would expose the company to commitments it could not honour.

“The question is whether KenGen could reasonably be expected to move forward with the procurement process, award contracts, or implement those contracts without confirmed and adequate budgetary provision and funding. The answer is a big NO,” the judge ruled.

At the centre of the case is a tender for consultancy services linked to the Olkaria VII geothermal project, an 80.3-megawatt plant planned for the Olkaria geothermal field in Naivasha. The project is part of efforts to increase electricity generation from renewable sources and improve supply stability.

Preparations for the development began in 2022 when feasibility studies were launched to guide its design. Momentum picked up in 2025 after the project secured government approval, with expectations that it would be completed and connected to the national grid by 2027.

KenGen initiated the consultancy procurement in September 2024, stating that funding would come from the European Investment Bank and that the process would follow the lender’s procurement rules. Those rules required clearance from the financier at key stages, including before awarding and signing contracts.

Following the evaluation process, KenGen identified a preferred bidder and sought approval from the bank in January 2026. However, the request was declined, prompting the company to cancel the tender, arguing that it could not proceed without assurance that the financier would support the contract.

The move triggered a challenge at the Public Procurement Administrative Review Board by Sintecnica Engineering S.R.L working jointly with Steam S.R.L, the firm that had been recommended for the award. In February 2026, the board ruled in favour of the bidder, saying KenGen had not provided sufficient grounds to cancel the process and directing the company to continue with the procurement.

KenGen contested that decision in court, maintaining that the board had failed to consider the binding conditions attached to the financing arrangement.

The High Court agreed with KenGen, finding that the review board had misunderstood the legal effect of the financier’s refusal. It held that the “no objection” requirement was not optional but a necessary step before any contract could be awarded or implemented.

“The financier’s ‘no objection’ was a mandatory condition precedent to award and contract execution,” the court ruled.

“It was not open to the Review Board to direct continuation of a procurement process in disregard of an express financing condition,” the court said.

The court also determined that the tribunal had gone beyond its powers by examining and attempting to override the financier’s decision. It noted that matters relating to donor approval fall within the authority of the funding institution and cannot be replaced by decisions of a local review body.

Further, the judgment criticised the board for failing to separate the overall project funding from the specific tender under dispute. While Olkaria VII is supported by multiple funding sources, the consultancy contract in question was directly tied to financing from the European Investment Bank.

As a result, the court concluded that without the bank’s approval, the tender process could not move forward under the law, regardless of the wider financing arrangements for the project.