Court orders fresh review of KenGen carbon credits tender after Appeal Court ruling

Lede

The Court of Appeal has ordered a fresh review of a Kenya Electricity Generating Company (KenGen) tender for carbon credits, ruling that procurement authorities may not add new evaluation criteria during the due diligence phase. The judgment concerns a competitive procurement for carbon credits, the bidders and the procuring authority. It has drawn judicial, regulatory and media attention because it clarifies limits on how tenders for climate-related assets may be evaluated.

What happened, who was involved, and why this matters

KenGen ran a procurement to buy or contract the sale of carbon credits. A bidder challenged aspects of the evaluation. The Court of Appeal found that introducing additional evaluation criteria after the evaluation stage, during due diligence, was impermissible and ordered the procurement reviewed again. The immediate parties are KenGen, competing bidders and the courts. The case matters because it affects how public entities buy and sell carbon-related products, with implications for procurement predictability, investor confidence in carbon markets and compliance with public procurement law.

Background and timeline

Procurements involving carbon credits have become more common as utilities, governments and private firms try to monetise emission reductions or source offsets. KenGen issued a tender under standard public procurement rules. After evaluation, one or more unsuccessful bidders challenged the process, arguing the procurement had been altered after bid submission and evaluation. The Court of Appeal found that the procuring authority had effectively introduced new criteria during due diligence, a stage meant for verification rather than redefining the basis of award, and ordered a fresh review.

Short factual sequence of events

• KenGen advertises and runs a tender for carbon credits under its procurement rules.
• Bids are submitted and an evaluation process is conducted according to the tender documents.
• During the due diligence stage, procurement evaluators apply additional or changed criteria not present in the original tender documents.
• Affected bidder(s) challenge the decision in court claiming procedural irregularity.
• The Court of Appeal rules that new evaluation criteria cannot be introduced during due diligence and orders a fresh review of the tender.

Stakeholder positions

KenGen, as a state-owned utility, must balance technical, environmental and commercial factors when structuring carbon credit transactions. Bidders and market participants want clear, stable evaluation frameworks so bids are assessed predictably. The judiciary treated the dispute as one of procurement law and fairness: due diligence is for verifying compliance with pre-announced criteria, not for changing the rules. Media and public interest groups have focused on transparency and market confidence in climate-related procurements.

What Is Established

• The Court of Appeal ordered that the KenGen carbon credits procurement be reviewed afresh.
• The court held that procurement entities cannot introduce new evaluation criteria during the due diligence phase.
• The dispute arose from differences between the tender documents and the evaluation actions taken by the procuring authority.
• The judicial ruling applies legal norms around procurement procedure and fairness in public tenders.

What Remains Contested

• Whether the specific additional checks applied during due diligence were substantive new criteria or legitimate clarifications - this is subject to review and legal interpretation.
• The appropriate remedial outcome for the parties - the court ordered a fresh review, but how that will be implemented and affect contracts is unresolved.
• The operational reasons KenGen advanced for its due diligence approach and whether they reflect broader sector practice or a one-off misstep remain matters for institutional response and documentation.
• How this ruling will influence procurement practice for carbon transactions across other public agencies and utilities in the region is open to interpretation and likely to be shaped by subsequent guidance or decisions.

Institutional and Governance Dynamics

The case highlights a governance tension common to public procurement for novel asset classes: institutions must fit existing procurement frameworks to the technical complexities of markets such as carbon credits. Procurement rules aim to secure fairness, predictability and accountability. When a procuring entity seeks extra assurance through enhanced due diligence, it risks turning verification into de facto re-evaluation. Procuring agencies want to protect public value and avoid reputational or financial risk, while bidders seek contractual certainty. Clarifying legal limits on how and when evaluation criteria may be applied is central to keeping both legal compliance and market confidence intact.

Regional context and implications

Across Africa, governments and state-owned enterprises are increasingly dealing with carbon markets, either to sell emission reductions from projects or to buy offsets. This growth exposes procurement systems to technical and commercial questions traditional tender rules did not fully anticipate. The KenGen decision highlights a need for procurement regulations and sector guidance that explicitly address carbon transactions, due diligence boundaries and dispute-avoidance mechanisms. Without clearer frameworks, similar disputes could emerge in other jurisdictions, slowing market development and deterring private capital that needs contractual predictability.

Forward-looking analysis

For procurement practitioners and policymakers the ruling is a prompt to update procurement templates and guidance for climate-related procurements. Practical reforms could include explicit tender clauses describing the scope of due diligence, pre-defined verification checklists and transparent processes for clarifications that do not introduce new award criteria. For KenGen and similar utilities, documenting the rationale for any heightened verification and aligning it with procurement law will reduce legal risk. For bidders and market intermediaries, the decision signals that legal challenge is a viable tool to enforce process discipline, and it may push bidders to seek clearer contractual warranties or procedural safeguards in future offers.

Conclusions

The Court of Appeal’s order for a fresh review does not decide the economic merits of any bid; it restates a procedural principle: procurement must follow the rules published to bidders. As governments and public utilities scale up in carbon markets, matching procurement design to the technical needs of carbon transactions while keeping processes clear will be essential to preserve public trust, attract investment and meet climate goals.