How KenGen locked out bidder for its carbon credits

A seemingly small addition to a tender document (addendum) became the sticking point that saw the highest-priced bid for the Kenya Electricity Generating Company (KenGen’s) 6.38 million carbon credits kicked out in the preliminary stage.

While KenGen awarded the tender to a firm buying its carbon credits at Sh2.55 billion, a fight at the procurement tribunal shows that it would have made Sh400 million more – about Sh2.9 billion – had it not knocked out one of the bidders that failed to meet a contested requirement at the preliminary stage.

The tender award was, however, cancelled. KenGen has since been directed to redo the tendering process by the Public Procurement Administrative Review Board.  Curiously, the firm that was locked out in the May 2025 tender process had been in a previous deal with KenGen for the purchase of 4.62 million tonnes of CERs, but the deal collapsed. Sintmond Group had, in April last year, signed a Sh4 billion contract with KenGen, which, however, collapsed early this year. This is after Sintmond failed to make the payments for the carbon credits.

Following the collapse of the deal, KenGen relaunched the bid to dispose of carbon credits in May this year and advertised a tender seeking buyers. 

The initial requirements were soon supplemented by several addenda, with a critical one being the addendum number one on May 29 that introduced the Mandatory Requirement 16 (MR16).

MR16 stipulated that bidders must “demonstrate previous successful participation in Emission Reduction trading or transactions of CERs or VERs by submission of client references and or evidence of CERs transfer or Voluntary Cancellation Certificates from successful purchase of CERs.” The interpretation of this mandatory requirement has now become the subject of controversy.  Responding to queries from bidders, KenGen on June 5 further issued a clarification, noting that the prior experience required by MR16 was “critical” to ensure “effective delivery of the assignment”.

Documents submitted to the Public Procurement Administration Review Board (PPARB) strongly suggest a preference for firms acting as brokers or traders with established third-party clientele, rather than companies buying credits for their own internal offset.

KenGen received three bids – one from the joint venture of Munja Trading Ltd in a joint venture with Marwil Energy Holding AS, one from Kyoto Network Ltd and another from Sintmond Group. 

Kyoto Network and Sintmond Group were knocked out in the preliminary evaluation stage, having failed to meet all 16 mandatory requirements, which were necessary to qualify for progression to the financial evaluation stage.

This left the JV of Munja Trading and Marwil Energy as the sole contender when its bid proceeded to the financial evaluation stage. At this stage, KenGen expected to award the tender to the firm that offered to buy its carbon credits at the highest bid, but with Munja Trading-Marwil Energy JV being the only one that survived, it was therefore ranked as the best evaluated bidder. The joint venture had bid to buy the 6.38 million CERs for Sh2.55 billion ($19.64 million). KenGen notified the bidders of the outcome on August 1. The power producer told Sintmond that it was not successful as it failed to demonstrate any transfer of CERs to a client or on behalf of a client as required under MR16.

Documents that the firm had provided showed that the CERs purchased were for voluntary offsetting of its own business activities, which KenGen considered as an internal transaction that did not amount to a client-related transaction as envisaged in the requirement

“The evidence submitted of purchase for voluntary offset of the bidder’s own business activity is largely insider dealing, which does not meet the requirement of a transaction with a client,” said KenGen in a letter on August 1 to Sintmond. Dissatisfied with the outcome, Sintmond Group challenged the tender award on August 6. It filed a request for review at the PPARB.

Financial evaluation

It asked the Board to nullify the award to the  Munja Trading-Marwil Energy JV  and compel KenGen to re-admit Sintmond’s bid, noting that it had met all mandatory requirements and should proceed to the second stage of financial evaluation. 

It is not the first time that KenGen has been trying to sell the carbon credits.

It had, in April last year, gotten into a deal with Sintmond, which has now protested being locked out of the latest tender process, to buy 4.62 million tonnes of CERs for Sh4.14 billion. The deal, however, collapsed early this year after the firm failed to pay for the carbon credits. 

At PPARB, Sintmond Group said it was unfairly disqualified on the grounds that it failed to meet the requirement that required proof of participation in emissions trading through client references or evidence of CER transfers or voluntary cancellation certificates.

It also noted that its bid was considerably higher than that of the winning JV by some Sh400 million.  In submissions through its lawyer George Kamau of Gerivia Advocates LLP, the firm noted that it had met this requirement.

PPARB, in its decision on August 28, nullified the award to the JV and directed KenGen to restart the tender and consider bids from all the bidders.

To prove this, it had included a Carbon Trade Exchange trading statement in its name, showing the purchase of 100 voluntary carbon units, accompanied by relevant transaction details, equivalent to UNFCCC cancellation certificates. 

The lawyer added that KenGen had “applied extraneous, unreasonable criteria in rejecting the applicant’s bid”. He added that if KenGen “intended to exclude bidders purchasing for their own purposes, it should have expressly said so in the tender document”. 

Kamau also noted that Sintmond Group had offered to buy the carbon credits at a high rate compared to the other bidders.

According to his submissions to ARB, “the applicant’s bid was approximately Sh400 million higher than the interested party’s (the JV), and no justification was offered for disregarding this significant saving”. 

Kamau also challenged the responsiveness of the winning bid, noting that it also fell short of Mandatory Requirement 16, yet KenGen found it compliant. He cited the JV’s supporting affidavit that “showed a transaction of 3,000 ERs (Emission Reductions) on a new platform but provided no proof of transfer to a third party”.

KenGen, in its defence through lawyer Marysheila Oduor of Triple OK Law LLP Advocates, argued that the crux of the dispute lay in the meaning of “trading” as defined by the requirement MR16.

KenGen asserted that it was seeking a firm with proven experience in trading, which, according to the criteria and clarification, entailed buying and selling on behalf of a client.

Oduor further noted that in its clarification, KenGen had “expressly underscored the importance of prior participation in trading or transactions for purposes of delivering the assignment”. It also noted that it had been clear “that it sought bidders with proven experience in carbon trading”. 

In scrutinising the documents that were provided by Sintmond, Oduor said, KenGen had found out that invoices and receipts showing the purchase of CERs and VCUs were in the company’s (Sintmond’s) name as opposed to that of a client.

She further argued “that these documents only demonstrated that the applicant (Sintmond) had purchased and retired credits for its own account, without engaging a third party”.

She explained that KenGen had sought a firm with experience in trading, which, according to the criteria set out in the MR16, entailed buying and selling with third-party involvement and that Sintmod’s documents were inadequate as they did not amount to trading in the criteria set out by the Mandatory Requirement 16.

Oduro further asked ARB to “find that the applicant’s (Sintmond’s) bid was not responsive, as it failed to meet MR16 despite quoting a higher price and that the applicant was therefore ineligible”. 

In an affidavit supporting KenGen’s view, Munja Trading-Marwil Energy JV, in an affidavit, noted that Sintmond’s documents demonstrated that the transactions were its own dealings and could not qualify as client transactions.

The JV, through its lawyer Seko, said the real issue was whether KenGen’s interpretation of MR16 was correct or whether Sintmond had provided sufficient evidence of trading with clients as required. 

PPARB, however, rejected the interpretation of MR16 by both KenGen and the JV. It noted that the requirement had room for both firms buying carbon credits on behalf of clients, but also for their own use.

In the requirement, KenGen had used the words “and or”, stating that bidders could submit “client references and or evidence os CER transfer Voluntary Cancellation Certificates from successful purchase of CERs”. 

This, according to the Board, meant that a “bidder could satisfy the requirement by producing evidence under the first part alone, or under the second part alone, or under both”.

“Compliance was therefore not limited to fulfilling both conditions simultaneously; fulfilling one of them was sufficient to meet MR16,” said the Board after perusal of submissions from the different parties.

“Based on the documents submitted, the board finds no doubt that the applicant (Sintmond) satisfied Mandatory Requirement No. 16 with respect to its second part, given that the requirement is interpreted disjunctively.”

PPARB, in its decision on August 28, nullified the award to the JV and directed KenGen to restart the tender and consider bids from all the bidders. 

“The first respondent (KenGen) be and is hereby directed to re-convene the evaluation committee and re-evaluate all tenders at the preliminary evaluation stage afresh,” said PPARB, further directing the power producer to “proceed with and conclude the tender proceedings (for the sale of CERs, including issuance of an award within 21 days from the date hereof.”