The Caretaker Minister of Energy and Water, Walid Fayad. Photo Mohammad Yassine
BEIRUT — The latest clash between officials over the fate of Electricite du Liban's (EDL) fuel delivery has come to an end.
During a press conference in Beirut, caretaker Energy Minister Walid Fayad announced the cancellation of the supply contract between the ministry and the Emirati company Coral Energy DMCC, without charges.
This follows calls for offers launched and concluded between June and August.
The first direct consequence is that the Ardmore, the maritime gas carrier chartered by Coral Energy DMCC, which has been stranded off the Lebanese coast for the past 10 days, will not be delivering the 30,000 tons of diesel fuel ordered by EDL destined for the Deir Ammar (North Lebanon) and Zahrani (South Lebanon) power stations.
The next scheduled shipments of around 30,000 tonnes of diesel and 21,000 tonnes of fuel oil for the Jiyeh (Chouf) and Zouk (Keserwan) power stations have also been canceled.
The total bill for all these shipments is around $80 million, including over $30 million for the first of them.
The issue should therefore no longer be discussed at next Wednesday's cabinet meeting, although it was the first item on the agenda.
EDL can still count on fuel delivered under the barter agreement between Lebanon and Iraq since the summer of 2021 to provide a handful of hours of electricity a day to its subscribers, who rely on private generators for power the rest of the time.
Friendly agreement
Lebanon, on the other hand, will not pay any penalties for canceling the contract.
According to the explanations provided by the caretaker minister, "Coral Energy DMCC agreed to waive more than $2.7 million in penalties to which it was entitled on condition that the ministry waive an old late payment penalty claimed by the company".
According to several documents related to the case that L'Orient-Le Jour was able to consult — including a letter dated Aug. 25, 2022, drafted by the ministry and addressed to the company — these arrears owed by the company are linked to a delay in the delivery of a fuel order in May 2022, and amounts to over $1.65 million.
The Minister claims to have succeeded in negotiating this solution, adding that Coral Energy DMCC had also found another buyer for the fuel destined for EDL.
After several days of procrastination, the energy minister finally decided to cancel these orders and the contract concerned, after caretaker Prime Minister Najib Mikati notified him that Banque du Liban (BDL) could not release the necessary funds by converting the Lebanese pounds deposited in EDL's accounts into USD from its reserves.
According to EDL's press office, this conversion was initially to be carried out at a rate of LL85,500 to the US dollar. The money comes from the revenue generated by the bills collected by the public provider, whose rates, which were frozen in 1994, were first increased last autumn.
Mikati's letter
In a separate letter to the press dated Thursday, the caretaker prime minister confirmed this decision after consulting the Finance Ministry and BDL. He also noted that the caretaker minister had acted "irresponsibly" in ordering the fuel without obtaining the authorization of the ministerial committee formed by the Council of Ministers to oversee the implementation of a new strategy it had just validated to turn around EDL's finances while increasing its production.
Specifically, the cabinet had agreed to set aside an amount of $300 million to be spent on several fuel orders, enabling EDL to gradually increase its production and revenues generated by invoices applying the increased tariffs.
The decrees validating all these advances were published in the Official Gazette on Jan. 19. For his part, the caretaker energy minister pointed out that these decrees make no mention of the committee's prior authorization, and that $107 million of the total authorized advances remain outstanding.
For him, this episode further mortgages Lebanon's chances of finding a company willing to sign a long-term supply contract with it, and thus to acquire fuel more cheaply than via spot cargo contracts.
The electricity issue is set against the backdrop of political rivalries between Gebran Bassil's Free Patriotic Movement, Parliament Speaker Nabih Berri's Amal Movement and the caretaker prime minister. Since acting governor Wassim Mansouri took office at the beginning of the month, the BDL has decided to stop financing government expenditures without a legal framework but continues to provide dollars at below-market rates to pay civil servants' salaries.