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Taxpayers face Sh23bn bill over Koko Networks death
Sunday, February 01, 2026 - 6 min read
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From left: Koko Networks CEO Greg Murray, Ministry of Energy Principal Secretary Joseph Njoroge and Koko Networks Chief Customer Officer Leila Ibrahim during the launch of a clean bio-ethanol cooking fuel in KOKO Fuel in the Kenyan market on May 28, 2019 at Mama Nyama restaurant in Nairobi.
File | Nation Media Group
By
Dominic Omondi
Kenya has opened a new legal battlefront with the World Bank Group over a multi-billion shilling compensation to troubled clean energy startup Koko Networks that is backed by the multilateral lender.
Koko shut down Kenya operations and is on the brink of bankruptcy after a dispute with the Kenyan government over the sale of carbon credits.
The company failed to receive letters of authorisation from Kenya’s government to sell carbon credits in the compliance markets, denying the firm substantial revenues to keep it afloat.
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An agreement inked with the World Bank’s Multilateral Investment Guarantee Agency (Miga), which offers political insurance, legally binds the country to compensate investors if officials block or interfere with trade.
Koko is expected to file a claim for insurance from Miga alleging breach of contract by the Kenyan government.
Last March, Miga insured Koko’s investment for $179.6 million (Sh23.1 billion), in what was the world’s first carbon-linked political insurance coverage. The policy explicitly covers government breach of contract.
The World Bank unit is expected to push Kenya for compensation.
While underwriting cover for Koko’s projects spanning Kenya and Rwanda, Miga took steps to guard against abuse by requiring host countries to commit to compensating private investors if found guilty of frustrating their trade in carbon credits.
“If the government of [country] fails to comply with its commitments set forth in Section 1 above, it shall compensate the investor for the losses resulting from such non-compliance,” says Miga in a letter of authorisation template introduced in 2024.
“[The scope and amount of such compensation will be determined in a manner that is equitable, transparent and consistent with prevailing industry standards and regulations in consideration of, among others, the prevailing market value of the affected credits [and estimated revenue losses by the investor attributable to the government of [country]’s failure to meet its commitments under this Letter of Authorization.]”
The standoff will deepen concerns about the viability of the cookstove financing model and could damage Kenya’s reputation as a hub for green investment.
Koko has invested $300mn (Sh38.7 billion), with half that sum going on building a network to supply bioethanol to about 1.5 million low-income urban households.
Koko’s investors include the Microsoft Innovation Fund, Mirova and Rand Merchant Bank.
The company sells cooking stoves and fuel at subsidised prices via a distribution partnership with Vivo Energy and recoups losses by selling carbon credits.
The airline industry wants to buy millions of carbon credits, such as those supplied by Koko, under a scheme run by the International Civil Aviation Organization.
Those credits cost about $20, as much as 10 times the price fetched in the largely discredited voluntary carbon markets.
The credits are generated through calculations about how much deforestation — and therefore carbon emissions — are avoided by low-income households switching from cooking with charcoal to using bioethanol made from sugarcane.
In June 2024, the government signed an investment framework agreement with Koko that would allow it to sell credits into compliance markets under Article 6 of the UN Paris Agreement.
The agreement guaranteed Koko’s ownership rights over carbon credits, its ownership rights to freely transfer its carbon credits to its business partners, and the Kenyan government’s commitment not to resell those credits.
However, the Kenyan government is reported not to have issued the necessary letters of authorisation needed to complete the sale of credits.
As of December 2023, Koko reported that it had successfully issued approximately 2,450,000 tons of carbon credits following its operations in Kenya, the proceeds of which were mainly used to subsidise the prices of cookstoves and bioethanol cooking fuel for end-users in the country.
Carbon credits allow companies to emit a specific amount of carbon dioxide or other harmful gases—with one credit equivalent to 1.0 ton of emissions. They are generated through projects such as tree planting or using cleaner cooking fuel.
In November 2024, Miga introduced a letter of authorisation template to be used in contractual agreements between governments and private investors that want to sell credits into the lucrative compliance markets under Article 6 of the UN Paris Agreement.
The second part of the template, under the heading ‘Consideration and Proceeds,’ deals with host government fees for allowing a private company to sell carbon credits abroad.
These include upfront payments made when the project is registered and shared revenue, which the government takes as a fraction of the actual sales.
The government is then required to recognise and back carbon credits once they are officially certified as genuine.
By accepting this certification as final, the state loses the right to dispute the quality of these credits later.
In June 2024, the government signed an investment framework agreement with Koko that would allow it to sell credits into compliance markets under Article 6 of the UN Paris Agreement.
The agreement guaranteed Koko’s ownership rights over carbon credits, the rights to freely transfer its carbon credits to its business partners, and the Kenyan government’s commitment not to resell those credits.
However, the Kenyan government is reported not to have issued the necessary letters of authorisation needed to complete the sale of credits.
Koko’s business model entailed selling cooking stoves and bioethanol to low-income families in Kenya and Rwanda at subsidised prices, then recouping the losses by selling carbon credits in lucrative compliance markets.
The credits are generated through calculations regarding how much deforestation—and therefore carbon emissions—is avoided by low-income households switching from charcoal to bioethanol made from sugarcane. The credits are certified by the verification organisation Gold Standard.
Koko currently sells fuel to an estimated 1.5 million customers across Kenya, most of whom are from low-income households.
However, the price of the fuel and cooking stoves is subsidised, with the company relying on the sale of carbon credits to bridge the gap and fund its operations.
The startup employs at least 650 direct staff and works with thousands of agents who sell and refill fuel at more than 3,000 automated refilling machines countrywide.
The firm’s exit leaves the State vulnerable to a massive breach of contract claim that could force taxpayers to compensate the multilateral financier.
In the past three decades, Miga has guaranteed at least 23 projects based in Kenya, including Grain Bulk Handlers, a grain-handling facility at the port of Mombasa owned by billionaire Mohammed Jaffer.
Others are milling company Kibos Sugar and Allied Industries, Resolution Health East Africa, Globeleq, and AMEA Power.
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