Lebanon Turns to Global Power Plant Manufacturers to Finance Needed Electricity Capacity
Lebanon has turned to global power plant manufacturers including General Electric (GE.N) to finance building needed electricity capacity.
Energy Minister Raymond Ghajar said 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, Reuters reported.
“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.
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.
Beirut has said it plans to sign memorandums of understandings with Siemens AG (SIEGn.DE), General Electric, Mitsubishi (6503.T) 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.”
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.
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.