16 June 2007
BEIRUT: The government announced on Friday it would privatize the Beddawi power plant in North Lebanon and hold a tender process to build another facility of the same capacity.
The 450-megawatt Beddawi plant is fired by fuel oil but could be converted to natural gas, a possibility with the signing of an agreement between Lebanon and Egypt in April 24 of this year.
The tender for building the new plant is meant to dovetail with the privatization of Beddawi - if one bidder wins the privatization process and the construction tender, that entity could choose to build the new plant as an addition to the Beddawi site, said Julia Brickell, country director for the International Finance Corporation (IFC), which will advise the government on both transactions.
Ideally, within 12 months the government will open bids on the same day for the privatization and the new plant, Brickell told The Daily Star on Friday.
The government unveiled the plans at the Grand Serail at a signing ceremony with the IFC, the private-sector arm of the World Bank.
Speaking after the signing ceremony, Prime Minister Fouad Siniora praised the agreements, saying they would "push our efforts in adding new [electricity] production capacity."
"These agreements will make new energy possible," he said. "It is important to do this very urgently."
The energy sector has long been an albatross for Lebanon. The state often fails to provide a constant stream of electricity, and many businesses are forced to generate their own power, while the prices charged by the state for electricity are some of the highest in the region.
Despite that, Brickell said the relatively new Beddawi plant would be attractive to potential buyers.
"It's a good target for privatization," she said. "It's still in good shape."
However, she did acknowledge that the energy-sector transactions are certain to attract the attention of politicians, and not just power companies.
"We focus on projects that have a political dimension," said Brickell, adding that electricity in Lebanon "is a highly politicized sector."
Brickell also said that the IFC can provide comfort to investors because of its reputation and its strong relationships with regional governments.
The IFC also announced a $20 million agreement in ADMIC (Advanced Development Management and Investment Corporation), a huge property firm whose tie-ups include the BHV/Monoprix complex in Jnah, City Mall in Dora, and the Movenpick resort in Beirut. The investment includes a $13.5 million loan and a $6.5 million equity investment.
Additionally, the IFC inked deals with the Bank of Beirut and the Arab Countries (BBAC) and Credit Libanais worth $40 million. The IFC will provide $25 million in risk-sharing funds to BBAC, so the bank could deliver more loans, primarily for small- and medium-sized enterprises (SMEs). Credit Libanais, meanwhile, will receive a $15 million credit line.
At January's Paris III donor conference, the IFC pledged to provide up to $275 million to Lebanese private enterprises by the end of June, although Brickell said she expects the actual amount to be higher.
Other government ministers present at the Grand Serail praised the multiple deals.
Finance Minister Jihad Azour said the agreements "confirm that Lebanon continues," despite the current political instability, and he added that the agreements constituted "important symbols that [the international community] believes in Lebanon."
Economy Minister Sami Haddad, who spent more than a decade working for the IFC, underscored the weakness of the country's energy sector.
"The Lebanese economy desperately needs power," Haddad said. "The IFC will make sure the process is fair, transparent and well done."
The positive atmosphere surrounding the ceremony was somewhat tempered, however, by the ongoing deterioration of the security situation.
Azour acknowledged that the problems are "affecting the private sector."
"The instability is limiting the capacity to increase the level of growth," he said. "If we are given breathing space on security, this economy could jumpstart."
The minister also expressed regret about "political events overshadowing what we are doing today."
One official close to Friday's proceedings said on condition of anonymity that if the political situation worsens, international organizations could well close their offices in Lebanon. But Michael Essex, IFC director for the Middle East and North Africa, dismissed ideas that the IFC would abandon Lebanon, saying that Friday's deals signaled that "we're moving full-speed ahead here."
