27 April 2006
BEIRUT: The Lebanese Cabinet on Wednesday debated Minister of Energy Mohammad Fneish's plan to cut the massive losses of the state-owned electricity sector Electricite du Liban (EDL). The strategy proposes an overhaul of EDL's management, auditing and accounting procedures in order to reduce the companies' deficit, which accounts for one-third of the government's public debt according to most estimates.
The ultimate objective is to minimize EDL's losses through billing in order to corporatize Lebanon's electricity sector and to promote a partnership with a reputable international firm to manage the restructuring of Lebanon's production and distribution networks.
The program also aims to increase the supply of natural gas to Lebanon's power plants, and to explore the possibility of constructing new plants and converting existing ones to burn natural gas.
One independent expert close to EDL who preferred to remain anonymous said that the current proposal is "90 percent cut-and-paste from previously drafted plans" but that it embodies the stance of the current Energy Minister, which he called "against complete privatization, and pro-asset management."
"The ministry's reform strategy is focusing on medium and long-term reform, but it has forgotten to address the most urgent need of restoring existing capacity by doing the necessary repairs and a major overhaul of existing units in order to have the needed power for the summer months, which will probably be hot," the source told The Daily Star.
Lebanon's Energy Minister Mohammad Fneish did not respond to various requests from The Daily Star for comment on his strategy.
One new aspect of the ministries' agenda is to install a smart-metering system to reduce the losses borne by EDL due to its inefficient billing procedures, which allow customers to underpay for electricity usage.
The source said that Fneish had received approval from the Cabinet allowing EDL to commission an American consulting firm to conduct a study about "closing the financial gap by installing a new meter-management system."
The study concluded that $150-200 million of private-sector investment is needed to install one million meters of Advanced Meter Management (AMM). The source said that the ministry will issue a tender for an international firm to launch the project based on the results of the feasibility study.
Separating the distribution networks from EDL's transmission and generation systems will cost an estimated $300 million over a period of three years, and upgrading the current generation capacity will require an estimated $1 billion of private-sector investment.
These reforms are projected to inject over $1.5 billion of revenue into Lebanon's flailing electricity sector.
Experts agree that a solution to EDL's travails more urgent than ever due to skyrocketing oil prices and EDL's inability to meet the country's consumption requirements.
Currently EDL's output of around 1,250 megawatts (MW) of energy is not enough to satisfy the estimated peak demand of around 1,800 MW.
The source offered a wry take on the likely outcome of Wednesday's session.
"The ministerial session will most probably be about launching a regulatory and monitoring body, and approving the principle of awarding reputable international firms BOT contracts to manage Lebanon's power generation and distribution. But it will also be about approving new feasibility studies and more candidates to oversee more monitoring bodies," he said.
