BEIRUT - Lebanon has turned to global power plant manufacturers including General Electric to arrange financing to build badly needed electricity capacity, hoping favourable terms can be agreed with help from their governments.

Energy Minister Raymond Ghajar told Reuters on Wednesday that Lebanon had modified its approach to the process since it defaulted on its sovereign debt in March, meaning it was unable to offer the kind of sovereign guarantee sought by investors.

"The default has caused a significant financability problem for infrastructure projects in Lebanon. That is why we are trying to meander around it," he said in an interview.

Beirut has said it plans to sign memorandums of understandings with Siemens AG , General Electric, Mitsubishi and Ansaldo Energia - for negotiations to propose financially viable solutions for building the plants.

"We talked to the four companies ... they all expressed interest of their governments to finance such projects," Ghajar told Reuters. "They are all willing to invest because now companies like these don't have a lot of work around the world."

Fixing the loss-making power sector is seen as critical for the country which is mired in a financial crisis seen as the biggest threat to its stability since the 1975-90 civil war.

Foreign donors see it as a test of Beirut's will to enact long-delayed reforms that may in turn help unlock their aid.

The companies would have conditions attached to their financing, which is expected to come from export credit agencies. "Hopefully we can meet these conditions ... If they cannot be met we are back to square one," Ghajar said.

Lebanon has set a six-month period for the negotiations.

 

EXPENSIVE GENERATORS

The country has failed to provide 24-hour power since the war, leaving households reliant on expensive private generators.

More power cuts of late are linked to the crisis: Ghajar said two fuel shipments sitting off the coast had not been unloaded promptly as JP Morgan, the vendor's correspondent bank, had put a financial hold on Lebanese letters of credit.

The issue had now been resolved.

The electricity company (EDL) has drained up to $2 billion a year from the public purse depending on oil prices.

The government has budgeted $1 billion for EDL this year, which Ghajar said would be enough due to low oil prices.

But next year's amount - $500 million - would not, meaning the government needs to curb losses and improve collection rates on bills. If this was not enough, tariffs would need to be restructured, Ghajar said.

Donors want a regulatory authority established as part of the reforms. The government is working on amendments to a law for establishing it, which parliament must then ratify.

Ghajar also said interest in Lebanon's second offshore oil and gas exploration licensing round, which closes on June 1, had not been very high.

Most firms are not interested in exploration as budgets have been cut due to low oil prices and the new coronavirus, he said.

(Writing by Tom Perry; Editing by Emelia Sithole-Matarise) ((thomas.perry@thomsonreuters.com; Reuters Messaging: thomas.perry.reuters.com@reuters.net))