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ELECTRICITY

Cabinet validates treasury advances requested by Walid Fayad

The cabinet also agreed to renew an agreement with Iraq and transfer assets from the Nahr al-Bared concession to the state.

Cabinet validates treasury advances requested by Walid Fayad

The cabinet met Wednesday to discuss Lebanon's glaring electricity shortages (Credit: Dalati and Nohra)

The caretaker cabinet of Prime Minister-designate Najib Mikati on Wednesday approved four Treasury advances requested by Electricité du Liban (EDL) to finance fuel purchases and expenses for the maintenance of its power plants.

The requests were submitted to the cabinet earlier this week by caretaker Energy Minister, Walid Fayad, who did not attend the session.

A loyal member of the Aounist camp — that is opposed to cabinet sessions during a presidential vacancy — Fayad suggested that the 24 ministers sign the draft decrees without going through the cabinet, but Mikati dismissed this approach.

However, the advances, which had been defined following discussions last year on the implementation of an amended emergency plan to support the electricity sector, were approved by the cabinet.

Four advances

In a sign of prevailing tensions, L'Orient-Le Jour had to wait for the end of the day — when the cabinet published its decisions — to get a clear picture of what exactly had been approved.

Read more:

EDL tariffs hike depends on the release of a treasury advance

According to L'Orient-Le Jour's correspondent in Baabda, all decisions will have to be signed by Mikati, Fayad and caretaker Finance Minister Youssef Khalil.

In his press briefing, Mikati announced that two of the four advances were approved and that the other two are still pending.

According to the decisions published, the cabinet validated two advances with immediate effect:

- A first advance of $62 million to purchase diesel from two ships that have been anchored off the coast of Lebanon since December and carry a total of 66,000 tons of diesel. This diesel is intended for the Deir Ammar (North Lebanon) and Zahrani (South Lebanon) power plants.

- A second advance of $54 million to finance the maintenance of the country's power plants.

The cabinet also approved two advances subject to posteriori validation by a ministerial committee specially formed for the occasion. They are”

- A third advance of $42 million to purchase fuel from two other ships with more than 60,000 tons of grade A and grade B fuel in their holds. One shipment is bound for the Jiyyeh (Chouf) power plant and the other for the Zouk (Kesrouan) power plant. “The initial precise request was $48 million, but it was adjusted,” Fayad told L'Orient-Le Jour.

- A fourth advance of $142 million for fuel deliveries for a period of a few months.

Twelve of 24 ministers

These amounts, comprising an overall advance of more than $300 million, will be used to finance EDL’s fuel needs between the transitional period when electricity production will increase and when the new electricity tariffs will be applied.

Read more:

Électricité du Liban starts the new year with almost no power

The increase in these tariffs, which have been frozen since 1994, is intended to allow EDL to finance future fuel purchases. The state electricity supplier has hardly produced any power for the past two years, due to a lack of resources amid the economic crisis.

The ministerial committee, whose formation was determined by the cabinet to monitor the implementation of the amended emergency plan for electricity and the means allocated to it, is chaired by the prime minister.

The committee must bring together the deputy prime minister as well as the ministers of energy, finance, public works, defense, interior, justice, culture, tourism, industry, education and transport. EDL's management must send reports on its expenses, bill collection and production progress to this committee, which includes 12 of the 24 cabinet members.

“The committee must not waste time validating the $42 million because every day that passes exposes Lebanon to delay penalties,” said Fayad, referring to a daily cost of $40,000 for these shipments. At a press conference on Monday, he said the blockage of the four ships had so far cost the state about $1 million in penalties.

During his press briefing after the cabinet meeting, Mikati promised he would ask Fayad to handle negotiations with the import company so that Lebanon does not pay penalties for the delay in payment.

“The four ships are chartered by the same company (Vitol Bahrain EC), which offers some room for negotiation. But first we must end the blockage of the ships,” said Fayad.

Iraq and Nahr al-Bared

The other issue concerning electricity was a one-year renewal of the swap agreement with Iraq. Through its state-owned company, SOMO, Iraq committed to delivering 1 million tons of high-sulfur fuel for one year. Lebanon can then exchange the Iraqi fuel for fuel compatible with EDL's grids, as offered by third-party companies selected through a tender.

Deliveries were previously made on a monthly basis, but the last few shipments were delayed for various reasons. Quantities varied according to crude oil prices, which shot up significantly in 2022.

During its meeting, the cabinet approved:

- The closing of the first year of the agreement, which ended in November 2022 and whose total bill for Lebanon was increased by $101 million in addition to the $438 million originally planned. These amounts are kept in a Banque du Liban account and are intended to purchase “services” in Lebanese lira at an exchange rate aligned with the BDL's Sayrafa exchange platform.

- The renewal of the agreement from Dec. 1, 2022, until Nov. 30, 2023, for a quantity of Iraqi fuel still set at 1 million tons.

The last point concerns the hydroelectric concession of Nahr el-Bared (North Lebanon) which was completed in late May and has a production capacity of 15 megawatts.

The cabinet approved the transfer of the equipment of this concession to EDL.

Reporting contributed by Hoda Chedid. This article was originally published in French in L'Orient-Le Jour. Translation by Joelle El Khoury.

The caretaker cabinet of Prime Minister-designate Najib Mikati on Wednesday approved four Treasury advances requested by Electricité du Liban (EDL) to finance fuel purchases and expenses for the maintenance of its power plants.The requests were submitted to the cabinet earlier this week by caretaker Energy Minister, Walid Fayad, who did not attend the session.A loyal member of the Aounist camp...