The real fight for Grand Regency

http://www.bdafrica.com/index2.php?option=com_content&task=view&id=7160&pop=1&page=0&Itemid=5822

by Albert Muriuki and Morris Aron
April 23, 2008:

On Nairobi’s Loita Street, the Libyan flag
flies high atop the five-storey Embassy building, perhaps a sign of the
country’s passion to get a foothold in Kenya’s oil and business sector. The
stakes are high.

Across the street is the Grand Regency Hotel, a landmark institution that
symbolises greed, theft and corruption — the hallmark of the Kanu regime.

The Libyans want the hotel as part of their bid to entrench themselves into
Kenya’s business sector and so do the Indians.
Diplomatically, the Libyans have an upper hand — or so they believe.

Last month, when the country was in the thick of a political stalemate,
President Kibaki flew to Kampala meet Libya’s President Muammar Gaddafi who
was commissioning a new mosque.

In diplomacy circles, that was a signal that the Libyans have got to the
heart of Kenya’s presidency.

Libyan oil merchants are in town looking for contracts and seeking to elbow
out other investors in a pull-and-push game that has seen Indians — who were
after the lucrative oil refinery in Mombasa — cry foul.

Eight years after they re-opened an embassy in Nairobi — which was shut in
1987 after the Moi regime accused the embassy officials of espionage — the
Libyan oil merchants want to have a footprint in the region and are keen to
edge out competitors.

Like the emerging story of the Grand Regency Hotel, the entry of Libyans –
and the fight for lucrative tenders and business space — is opening new
battle grounds.

Indian, Chinese and Libyan companies are taking advantage of a political
stand-off between the Kibaki regime and British companies which were
previously the main beneficiaries of such high level transactions.

At the Grand Regency, a group comprising Libyan investors trading as Libyan
Arab African Investment Company is pitted against another one of Indians who
recently bought a vacant plot next to the hotel.

The Indian group boasts of the fifth richest man in the world, Mr Mukesh
Ambani, who early last month partnered with an Arabian real estate firm,
Arrow Webtex, to form Delta Resources Limited and bought a number of plots
close to the hotel.

One of the deals included the purchase of a parking lot next to Grand
Regency at a cost of Sh1.4 billion from the National Social Security Fund
(NSSF) in the country’s biggest property deal so far this year.

Arrow Webtex has also reportedly bought another parking lot between Barclays
Plaza and Nyati House, where it plans to build a number of top-end hotel and
shopping malls, creating a “city within a city” around the hotel complete
with modern shopping centres, casinos and other entertainment services.
The investors also recently bought into Gapco oil and have other interests
in the country.

Once a virgin green zone, the land between Uhuru Highway and Loita Street
has been the bastion of speculators who got the land in the mid years of the
Moi Government and it is there that the Indians and the Libyans will start
their fights.

And a cabal of local interests have joined the fray, questioning the
authenticity of documents regarding the hotel sale.

A document supposedly written by businessman Kamlesh Pattni’s lawyers but
which do not have his signature, states that one of the pre-conditions for
the hand-over of the hotel to CBK is the sale of the property to a
pre-determined investor.
*
[image: Image]President Kibaki on a recent trip to Libya.
*According to the document, the hotel was to be sold jointly by the Central
Bank and Mr Pattni to a buyer free of any encumbrances at market value and
determined by two reputable valuers.

Wetangula, Adan, Makhoha and Company, Mr Pattni’s advocates, through Mr
Ahmed Adan told the Business Daily that the reports were fraudulent and that
the advocate firm had not issued such a document.

“I can confirm to you that we have not written any such a declaration,” said
Mr Adan.

The law firm accused politicians who are against the repossession of the
hotel and “people who are interested in the deal,” as being behind the
document.

“The people behind this are shameless corrupt people with up to 20 cases in
court,” said Mr Adan as he showed the Business Daily what he said was the
declaration signed by Mr Pattni before the handover of the hotel to Central
Bank.

The Attorney General (AG) yesterday distanced himself from the hotel’s
recovery by the Kenya Anti-Corruption Commission (KACC).

So, if the documents were forged, who did it?

At the port of Mombasa, the transaction to buy 50 per cent of shares held by
Shell, Chevron and BP in the Kenya Petroleum Refinery Limited (KPRL), has
not only annoyed the Indians, but has brought to the fore just how Libya has
muscled all its diplomatic, political and economic clout to get the
lucrative deal even after the Indians, through their company, Essar Energy
Overseas Ltd, won the tender in December last year.

The battle lines are slowly getting drawn.

Essar Energy Overseas Limited concluded a transaction of the purchase of 50
per cent shares by Shell, Chevron and BP in KPRL, Mombasa in December 2007.
As per the Shareholders Agreement between the Government and the Industry
shareholders, the Government has the Right of Pre-emption if the industry
shareholders decide to sell their shares.

Accordingly, when the transaction was signed, the Government was approached
by the three oil companies to waive its first right of purchase. This
request has been extended three times, raising concern mainly amongst cadres
of the Energy ministry, Foreign Affairs and Essar.

The last deadline passed on March 19.

The refinery in Changamwe, Mombasa, has a capacity of around 72,000 barrels
per day and is an attractive investment. The intended modernization
programme is to increase current production of liquefied petroleum gas, from
the current 30,000 tonnes to 120,000 tonnes per year.

*[image: Image]*At the centre of the diplomatic row is the Finance ministry
which has apparently been using delaying tactics probably as a way to force
Essar to give up its bid and give Oilibya an easy way in.

The Libyans are slowly mastering their way into Kenya, having entered the
downstream market with a rebranding of the former Mobil petrol stations.

However, during his recent trip to Uganda during the official opening
ceremony of the Gadaffi National Mosque on March 19 in Kampala, Colonel
Muammar Gadaffi held talks with President Kibaki. Whether this involved the
pending business is not clear. The Presidential Press Service did not answer
queries about the issue even after numerous calls and emails.

But the Indians are not taking it lying down, correspondence obtained by the
Business Daily, shows that in a meeting held on March 12 this year, India
raised concerns about the KPLR issue and urged his Kenyan counterpart to
raise the issue with the Finance and Energy ministries.
The Kenyan Ministry of Foreign Affairs, in a letter signed by Ms Mercy
Odongo on behalf of the Permanent Secretary, conveyed the Indians concerns
to the ministries in a letter that clearly emphasised the fears and concerns
of Essar.

“The matter is still being discussed in government. These consultations
could take some while. In that regard and the fact that a number of
ministries and stakeholders are involved, Foreign Affairs may not be in a
position to provide further information at the moment,” Mr Eliphas Barine of
the Foreign Affairs ministry said.

The Indians are said to have pledged to use over $400 million (about Sh22
billion) in both equity and loans to upgrade the refinery, a process that
would eventually dilute the 50 per cent share holding by the Government.

But the hurdle at the KPLR goes beyond the foreign relations and even deeper
into matters of bi-lateral lending between Kenya and its erstwhile Indian
partner.

This is because of Export-Import Bank of India (Exim Bank).

Exim normally finances Indian firms for acquisition of overseas businesses
including leveraged buy-outs and structured financing options. According to
a Ministry of Energy official, Exim bank was to be the main financer for
Essar for the KPLR transaction.

Essar is considering taking legal action to scuttle the process for the
Libyans and might end up in a court out of Kenya where the three KPLR
shareholders can arbitrate a dispute against the Kenyan Government.

This will not be without precedent for the Libyans in Kenya. A Czech firm,
Skoda Export which partnered with Tamoil (the predecessor of Oilibya) for
the Kenya-Uganda oil pipeline sued Oilibya in a London court over
contractual difficulties between them. The London suit was one of the
reasons that led to the stalling of the oil pipeline extension to Uganda.
The suit was however thrown out for lack of jurisdiction in late March this
year.

India and Libya want a foothold on the East African coast as it will be one
of the three entries to extensive offshore oil exploration in Africa with
huge potential. Already, the Southern African and Western African coast have
already been clinched by western countries and China.

*[image: Image]Mr Kamlesh Pattni
*In Nairobi, intense lobbying for the ownership of Grand Regency hotel has
been set off following the decision by Mr Pattni to surrender it to the
Central Bank.

The hotel had been placed under charge in the mid 1990s over $210 million
(Sh14 billion at current exchange rates) that Mr Pattni’s defunct Exchange
Bank had borrowed from the Central Bank and failed to pay.

Mr Pattni said he had surrendered the prestigious hotel under the Economic
Crimes Act of 2003, which allows for pardoning of perpetrators who forfeit
proceeds and assets from stolen public funds to the state.

But that is half the story.

“Investors know that they can make money if they bought the hotel,” one
investor interested in the facility said. But there is more in the Grand
Regency saga.

Recent reports suggesting that the hotel has since been sold to Libyan
investors and denied by the Central Bank are understood to be part of the
shadow boxing tactics among prospective investors. There have since been
questions over the authenticity of the correspondence on which the reports
were based.

Valuers contacted by The Business Daily valued the property at between Sh8
billion to Sh12 billion compared to the Sh1.6 billion mentioned in the
reports. It has since emerged from dealmakers advising various interest
groups on how to approach the transaction that two investment groups,
assisted by some politicians, are seeking to get the better of each other in
the deal.

A third force exists in the form of politicians led by Imenti South MP
Gitobu Imanyara who want the hotel sold to the public. The Law Society of
Kenya has also threatened to seek legal redress if no competitive bidding is
done in line with public procurement rules.

Patronage is seen to be in favour of Libyan investors especially after the
government signed a memorandum of understanding on investment with the
Libyan government.

Legally, CBK being the chargees can single-handedly choose who to sell the
property to through either private treaty or public auction. Grand Regency
was owned by Uhuru Highway Development Company which Mr Pattni acquired from
the family of the late Mohamed Aslam, owners of the collapsed Pan Africa
Bank.

Mr Pattni was the subject of a Commission of Inquiry into the Goldenberg
scandal which started in February 2003 and ended in September 2004 The
commission recommended that he, alongside other culprits, be prosecuted and
made to pay back the stolen money. Under the Economic Crimes Act, however,
those who agree to return the property they are cleared of all the charges.

Under the Anti-Corruption and Economic Crimes Act of 2003, KACC is given the
powers to recover any property that is deemed to have been acquired
illegally. However, this is done after the KACC institutes proceedings at
the High Court and adduce evidence that the person has unexplained assets
which have been obtained through corruption.

*[image: Image]*In the recent recovery of Grand Regency, at least three
court cases which were still on going even as he gave up the property. The
KACC is said to have offered Pattni amnesty in after he surrendered the
property.

Further, the statement by Mr Wako also raises issues on the manner of
cooperation between the AG’s office and KACC, the two are supposed to
compliment each other but seem to be working at a cross purpose without
briefing each other.

“As the legal advisor to the government, the AG’s opinion should have been
sought before awarding amnesty to Pattni,” says Prof Githu Muigai, a leading
lawyer.

But Pattni remains a sideshow in the battle between the Libyans and Indians.

–~–~
Date: Wed, 23 Apr 2008 11:31:54 +0300
From: Robert Alai
Subject: Goldenberg 2 authored by Kimunya and Ringera

– – – – – – – – – – –

Apparently, President Moi refused to authorize the building of the Jamai University within the City Centre, and also the Muammar Gadafi’s investement plan within Nairobi City. President Moi was very keen to allow Gadafi or Libyan getting their hands on into the Kenyan economy. And this is what President Kibaki need to do. He is an economist or do we need Joe Donde to teach somethings.

The fact is that there is unhealthy competition from the Libyan Oil things. It might sound far fetched but some decade ago, Gadafi has been eyeing Kenya as one of the country where he can advance his selfish motives. In Sudan, he has also built the Gadafi centre – a multi billion sort of hotel that only houses hmm dignitaries. Soon, he is building another multi billi dollar thing – he is purchased massive land in Sudan, goodwill from China imposed president El Bashir.

Now where is Mwai and Raila??????

Kombo Elijah

– – –
Date: Wed, 23 Apr 2008 02:48:05 -0700 (PDT)
From: Elijah Kombo
Subject: Re: Goldenberg 2 authored by Kimunya and Ringera

– – – – – – – – – – –

Here we go again……..Elijah with his popular distorted concepts.
Apparently, Indians, Chinese & Armenians can invest in Kenya but Gaddafi
cannot!! What keenness are we talking about in Moi’s era? Mobitelea is
still a mystery, so is Goldenberg and a host of other investments.

Elijah reminds me of the furor raised by American Senators/Congressmen in
opposing Dubai World investment in the US. That was a racist attempt to
block a certain race from investing in the US.

Chinese investments are known to be counter productive particularly in
Africa (Zimbabwe is the latest case of Chinese using their money
oppressing the masses to protect their investments). The Indians with
their money have practically reduced the African worker to a Robot.
Indians demand long working hours, pay less than the market and believe
they own the worker.

Kenya needs investments to spur the economy. While we cannot afford to
choose who do to business with, when we have to choose, the rules must be
the same for all. You cannot play football with 9 players on one side, and
11 on the opposite. That would not be a fair game!!

God Bless Kenya!
Best Regards,
Salem

– – –
Date: Wed, 23 Apr 2008 14:20:57 +0300
From: Salem
Subject: Re: Goldenberg 2 authored by Kimunya and Ringera