Beirut announces plan to restart electricity sell-off

19 November 2004
Energy Minister Maurice Sehnawi is to unveil in early December the new government's strategy for restructuring the country's ailing electricity sector. The strategy is expected to involve a revised plan for the part-privatisation of state electricity company Electricite du Liban (EdL).

Speaking to parliament in early November, newly-appointed Prime Minister Omar Karami said Sehnawi was reviewing options for the sector. He said the strategy would include the privatisation of the management of EdL.

Sources in Beirut say the energy minister is also considering the option of importing electricity from Syria and Turkey.

The country's electricity sector has been blighted by power outages resulting from a chronic lack of funds due to high fuel prices, failure to collect revenues, and corruption. Poor management at EdL is also blamed for a failure to properly maintain and modernise the country's power infrastructure. The finance ministry has been lending money to the company for the past three years in order to buy fuel oil from the markets. Local economists believe that if all the power plants worked at full capacity, the government could cut its spending on the industry by about 70 per cent.

The privatisation of EdL was a key goal of former prime minister Rafiq Hariri, who aimed to reduce Lebanon's crippling debt pile through an aggressive privatisation programme. Under the electricity privatisation planned for summer 2003, a private company would take a 40 per cent stake in a new operating company. The public/private joint venture would own 100 per cent of the power generation and distribution assets, with the private sector partner taking management control. Under a separate management contract the successful bidder would also have management control over the transmission network, which would remain state-owned.

But Hariri's reforms were stalled by disagreements with President Lahoud, who was opposed to the premier's plans to sell-off the country's assets. The new government is expected to follow an alternative path for reform that many expect will involve long-term leasing rather than the sale of assets, and the outsourcing of key functions such as management and operations.

Sources in Beirut say that another change in direction will see authority for sector restructuring devolved to the relevant ministries. Under Hariri, all privatisations were handled by the Higher Council for Privatisation (HCP), whose director-general Ghazi Youssef resigned in October following the resignation of the Hariri government. The role of the HCP is now under review. BNP Paribas, which had been advising HCP on the EdL sale and had developed the privatisation programme, is expected to remain involved.

However, with parliamentary elections scheduled for May 2005, the top priority for the new government is expected to be popular political rather than financial reforms. These are expected to include increased spending on maintaining the power infrastructure and the reform, or possibly cancellation, of military service.

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