Stanbic Bank has lost KSh1.4 billion after a deal between Geothermal Development Company (GDC) and Hong Kong Offshore Oil Services (HOOS) collapsed.
In the deal struck in 2014, the geothermal drilling company had contracted HOOS to drill 15-20 geothermal wells in Bogorua-Silali in Baringo. However, no wells have been drilled by this year.
The deal saw Stanbic Bank step in as the guarantor, offering KSh1.4 billion (25% of the contract sum).
Therefore, Stanbic was forced to refund the cash after HOOS failed to accomplish the task. GDC now says they will drill the wells themselves, with one drilling rig already on site while two wells are complete.
As reported by the GDC indicates that two months after signing the contract in 2016, HOOS wrote to GDC requesting an advance payment. Later in 2017, the firm submitted an advance payment guarantee of KSh1.4 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 HOOS confirmed receipt of the money in September 2017.
However, the guarantee expired in December last year, yet no well had been drilled. This, thus, forced GDC to enforce a refund from Stanbic.