Electricity

Electricity Sector OverviewThe electricity sector constitutes avery sensitive infrastructuredirectly linked to all daily activitiesof citizens.All indicators of the sector point tothe extent of the numerous andchronicle problems that hinder themajor works, threaten the sector,and inflict heavy damage to thenational economy, making itimpossible to be resolved unlessradical and gradual reform policy,able to boost the sector, is adopted.Finance Ministry sources showedthat amounts that have beentransferred to EDL in 2012 haveexceeded US$ 2300 million, 96.4%of which, to cover for fuelexpenses. It is noteworthy that thefinancial deficit of EDL reached theverge of US$ 1472 million in 2008because of the global increase in oilprices, whereas the deficitsurpassed US$ 1430 million in2009.

Problems and difficulties enduredby the electricity sector have beenextended to incorporate: technical,

administrative as well as financialframeworks and whatever linksthem together. On the technicalside, the production, transmissionand distribution sub-sectors sufferfrom several accumulatingproblems. They start with theunavailability of capacity in energyproduction to supply the demand,they transit through the existence ofdeteriorating equipment andinstallations, the increase intechnical and non-technical losslevels, and furthermore, they do notend with the decrease in collectionlevels and human resourceproblems.

The Current Condition of theSectorEDL’s inability to meet thedemand, which clearly appeared atthe beginning of the last summer,has caused EDL to enter a criticalphase. The imperative issuerequires: the reconsideration of thepriorities in order to prevent furtherdeterioration in the first phase,bridging the deficit in the second,and anchoring the required stability

at the end.Reforming the electricity sector inLebanon has become an importantchallenge for the Lebanesegovernment in the foreseenperspective, particularly afterpledging during Paris III to takenecessary reform measures in orderto be able to transfer the sector froma burden on its treasury andeconomy into an efficient andsustainable sector, with positiverepercussions on the growth of thenational income and consequentlyon the economy.

It has now become clear that thegap between the capacity of supplyand the demand has reached,according to Energy and WaterMinistry sources, approximately1600 megawatts of power (about50% of the demand at peak hours),which is equivalent to 11 hours ofdaily rationing outside the Beirutadministrative and Summervacation regions. Should thissituation prevail, the gap isexpected to increase and reach 1700megawatts by the end of year 2014,which is equivalent to 58% of thedemand, or about 15 hours of dailyrationing.

Currently, the main effective peakcapacity does not exceed 1567megawatts whereas the demand hassurpassed 2600 megawatts in 2013.Power generation in Lebanon ismainly concentrated on thermalenergy production. Hydropowerproduced from plants does notexceed 4.5% from the totalgeneration capacity in the country.

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Power Supply from ExternalSourcesElectric power is drawn from Syriato Lebanon through two mainconnection networks. The firstnetwork links Deir Nbouh plant inthe north with the Tartous plant inSyria through two overhead lines of120 megawatt capacity working on220 kV of electrical pressure. Thesecond network has a capacity of 80megawatts through a singleoverhead line working on 66 KV ofelectrical pressure linking Aanjarsubstation plant with the Dimasplant in Syria. Lebanon has beendrawing electrical power fromSyria for a long time now. In year2000, Lebanon drew a peak 1418million kilowatt-hour of electricalenergy. It stabilized, at a later stage,

at a yearly average ofapproximately 800 millionkilowatt-hours, only 8% of the totalpower production or the equivalentof 90 megawatts of continuouspower capacity throughout the year.

As for the Eight Arab connectionnetwork, and the electric energypurchase agreement from Egypt,the construction works andinstallations of the new Ksara HVsubstation have been completed.Efforts have succeeded inSeptember 2009 to operate the new400KV overhead lines, andterminate the new link with theDimas transmission plant in Syria.

In year 2010, Lebanon benefitedfrom approximately 120 megawatts

of additional electrical capacity onthe grid at an average feed of 21hours per day, but the transfer washalted in year 2011. The new gridconnection capacity can currentlycarry up to 300 megawatts ofpower. Lebanon is currentlyseeking to increase the importcapacity from the countries of theregion to cover for the remaining180 megawatts.

The Main Problems of theSector

1 - The existence of highoperational expenses:• The two combined cycle power

plants in Zahrani and DeirAmmar, as well as the two opencycle power plants in Sour and

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Baalback operate on Gas Oil(Diesel) rather than natural gas.

• The Zouk and Jiyyeh thermalpower plants operate with lowefficiency, which necessitateperiodical overhauling activities.

• The need to operate Sour andBaalback thermal power plantsoutside peak times.

2 - The existence of rationing andthe increase in power failures aredue to following reasons:• Insufficiency of current power

generation to meet all the needs, afact that led to the spread of thelocal private generationphenomenon.

• Low public investments since atleast 12 years (not in therehabilitation and maintenance ofthe plants nor in the constructionof new ones).

• The incompletion of the 220 kVtransmission networks.

• The presence of the “bottle necks”

on distribution networks and theincrease of local breakdowns incrowded areas on peak timesduring summer and winter peaks.

• Loss of flexibility of electricitylinks between the old and the newgrid.

• The absence of the usage ofelectronic accounting programsthat study and organize the energyflow to ensure the supply andreduce the technical losses such asGIS.

• Deficiency in periodicmaintenance operations bytechnical expertise for the mainpower plants, the substations, andthe transmission network.

• High percentage of technicallosses because of theincompletion of the 220kVdistribution grid, which variesfrom one area to another,exceeding in some areas the 15%average, to reach the 20% line inareas like the Bekaa.

• The problems in the distributionnetwork include:

- The existence of old rusty steeldistribution poles.

- The inexistence of standbysystems.

- The inexistence of efficientmonitoring of the meters.

- The inability to prevent theftaggressions.

- The inability to carry out requiredmaintenance preventivemeasures.

- The inability to match the billingpreparation measures.

- Collection and paymentmonitoring.

- The ill issuance and control of billsettlements.

- The loss of network componentsin some regions.

• Significant shortage of requiredequipment tools and machinerynecessary to improve andaccelerate the needed

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interventions mainly due to thegreat financial deficit that EDL isexperiencing.

3 - The decline in financialreturns of EDL are due tofollowing reasons:• The global increase in oil prices

has aggravated EDL’s budget andincreased the debt and caused afinancial shortage, which becamean increasing burden and a sourceof concern for the nationaltreasury.

• The tariff structure hasn’t beenreconsidered since almost 15years now. A transparent policythat decides whether electricenergy is sold as a commodity ordelivered as a service needs to beadopted.

• Continuous aggressions andillegal connections on thenetwork.

• Incomplete bill collections.

4 - The main institutionalproblems in the management ofEDL are as a result of:• An insufficient authority for the

Board of Directors for takingadequate decisions.

• Absence of clear criteria toevaluate the performance of EDL.

• Lack in technical training anddifficulty in recruiting newqualified personell.

• Unavailability of reliable andtransparent reports (statistics,finance, criteria, performance,etc.) represented, the least to say,in the inadequate account auditingsince 2001.

• A huge deficiency in humanresources represented by a presentbody of only 1902 employeeswhen 5027 are needed; a vacancyfor 3125 positions. The currentbody also loses 120 to 150

workers (8%) per annum due toretirement.

The Vision for the FutureIn order to exit at the end and attainan efficient and sustainable sector,future visions to restructure thesector cannot be implementedunless the action plans includereform programs that would workin parallel on the short, medium andlong terms. The reforms mustencompass all the technical,financial and institutional aspectsthat would put in place an end to thefinancial deficit and ensure theauto-financing for futureinvestments, as well as securing thegood service at reasonable prices.Coordination efforts with theMinistry of Energy and Water iscurrently being carried out in orderto form a working paper, based on amedium term strategy, that willinclude working on the technical,economic, financial andinstitutional levels.

II - Main Accomplishments (1992– 2013)Main projects implemented byCDR for EDL during the 1992 –2013 periods can be summarized asfollows:

1 - Generation• Construction of two combined-cycle power plants in Deir Ammarand Zahrani with a capacity of 435

MW for each plant at a cost of US $575 million, achieved in 1999.• Rehabilitation of thermal and

hydraulic plants at a cost of US $109 million, achieved in 1998.

• Construction of two open-cyclepower plants in Sour andBaalback with a capacity of 70MW for each plant at a cost of US$ 61 million, achieved in 1996.

• The initiation of supply of a120MW of electrical power fromEgypt to the new HV transmissionplant in Ksara through the EightArab connection network.

2 - Transmission• The construction of the 220 kV

network which included theinstallation of 339 km of overheadlines. Overhead lines that havebeen completely constructed are:Deir Nbouh to Ksara line, Ksarato Aaramoun line, Aaramoun toZahrani and Sour line, and theBahsas to Bsalim line passingthrough Halat.

• The construction of 220 kVsubstations in downtown Beirut,Aaramoun, Mkalles, El Horsh,Ras Beirut, Halat, Ksara, Bsalim,and Sour between 1999 and 2001.

• The construction of 61 km ofunderground buried cables for the220 kV network in the North andin Beirut in 1999.

• The restructuring of the 150kVand 66 kV transmission networksin 1997.

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• The construction of 400 kVnetwork and substation in Ksaraallowing for the power exchangebetween the countries of theregion.

• Work on completing the 1900meter run of the Mansourieh line,essentially after the conclusion ofthe report that was prepared by theMinister of Health on 5/11/2010,which concluded in theinexistence of any significanthealth risks attributed to theexposures of non-ionizedelectrical and magnetic fields.

3 - Distribution• Rehabilitation of the distribution

networks in 1997 at a cost of US $

112 million.

III - Progress of works in 2013 -contracts awarded before 2013The electrical transmission networkexpansion project: all works relatedto the expansion project of theelectrical transmission networkhave been completed as specifiedabove, except for the worksregarding the installation of cableson poles in Mansourieh – AinSaadé – Ain Najm, due to theobjections expressed by localresidents of the area. Efforts arecurrently being made to resolve theissue. Completion of the works isexpected to be sorted out in 2014, ifall goes well.

National Control and Dispatchcenter: works started during themonth of July 2006. The project isfunded by the Arab Fund forEconomic and Social Developmentand its overall cost is evaluated atapproximately US $ 25 million.The project is expected to becompleted during 2014 knowingthat the proposed amendments havebeen considered.

After repeated halts, due to severalreasons, works of the center werere-launched in year 2010. Phase oneof the project, which comprised63%, was undertaken by CDR. Thespecialists were relocated to thenew center and commenced on theoperation of the advanced controlprograms in 15 major substationsthat linked Mkalless, Ain Mraisseh,Mssaileh, Gharbieh, Onesco, andRas Beirut substations. Theexecuted works are now estimatedat 92%. They include all the worksof the center, the connections withthe major substations and with thepower plants as well as the localtesting and commissioning in all themajor substations. The delays inconnecting the center with the restof the substations go back to theincompletion of the Mansouriehlink which incorporate the fiberoptic lines that run in parallel withthe high tension lines. This in turnhinders the completion of the final

testing and commissioning of someof the microwave lines. In addition,the need for securing some of theleased lines is currently beingcoordinated upon amongst EDLand the local concernedadministrations.

The National Control Centercurrently monitors and controls 56major substations and lies in waitfor 15 others until connectionproblems are resolved.

Rehabilitation and Expansion ofTransmission and DistributionNetworks in the Liberated regions: The works for rehabilitation andexpansion of the high tension 66KVtransmission line and the 20KV/15kV transmission distributionnetwork in the liberated regionswere awarded; however, thecontract wasn’t signed. The fundingfrom the Iranian protocol wascanceled. The total cost of theproject was estimated at about $ 25million (US Dollars). CDR iscurrently seeking to securealternative financing.

The rehabilitation and ExpansionProject of Al-Ayoun and FneidekTransmission and DistributionNetwork in Akkar: The completion of the 66KV line inBeit Mellat, in the area of Al-Ayounand Fneidek in Akkar, has allowed

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the Beit Mellat substation, whichwas completed in February 2011, tobe placed in operation. The 66KVline was completed in year 2012right after the Kuwaiti funds and thebidding process were settled. The5,150,000 euros project wasdesigned to raise the transmissionand distribution power capacity ofthe region from 10 to 40 MW.

The Technical Assistance Projectsfor the Electricity Sector ReformPlan: Right after an international tenderwas conducted during year 2007,three consulting service contractswere awarded that aimed atgranting technical assistance withinthe framework of the electricitysector reform plan as follows:

• Enhance the capacities of theMinistry of Energy and Water toimplement the proposed reformactions in the sector policystatement. The main tasksassigned to the consultant were toassist the Ministry in thepreparation of a national sectorpolicy and fuel oil strategy. Part ofthe tasks was to review theproposals related to the supply ofliquefied natural gas (LNG) to theZahrani plant, and evaluate theproposals aimed at attractingprivate investments and reviewingprevious studies regarding theestablishment of the Electricity

Sector Regulation Authority.Works are expected to becompleted in September 2009.

Having secured the funds from theWorld Bank, CDR, in this respect,and in coordination with theMinistry of Energy and Water,entered into contract in October2011 with Poten & Partners, a well-known consultancy specialized instrategic studies for buildingLiquefied Natural Gas facilities, inan effort to help select the besttechnology and site location for asuggested port aiming at securingthe required Natural Gas quantitiesat the best possible price.

In April 2012, the Consultantcompleted all of the required tasksand submitted all the relevantreports, which contained:1) A summary about existing

worldwide LNG markets.2) Lebanon’s LNG demand up until

year 2030.3) A summary about the main LNG

suppliers.4) A detailed preliminary study for

designing an LNG port aftercarrying out site assessments to 3locations (Deir Ammar powerplant, Zahrani power plant, andthe Setaata area).

5) Three reports related to thePreliminary EnvironmentalImpact Assessments of the 3 sites.

6) One report concerning the

existing legal current conditionsand the legal frames that shouldgovern this sector.

7) The necessary capacity buildingfor the specialists at CDR and atthe Ministry of Water andEnergy.

8) The preparation of the “EOI”(Expression of Interest) Terms ofReference for companiesinterested in bidding to build andoperate a sea port for importingLNG including the purchase andoperation of the Floating StationRegasification unit (FSRU) andthe building of the sea port forreceiving LNG through harboringthe ships for emptying its loads.The goal of this TOR is to preparea short list of qualified companiesfor invitations for bidding.

Through local funding, and incooperation with the Ministry ofEnergy and Water, CDR, enteredinto contract with the sameconsultant in October 2012, toperform the second phase of thesestrategic studies. The consultantcompleted the required tasks inAugust 2013 and submit thefollowing reports: 1) Terms of Reference for the

selection of consultants willingto conduct the EnvironmentalImpact Assessments in supportfor the development of theFloating Station RegasificationUnit to regasify LNG.

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2) Term of Reference for theselection of the developer of theFSRU.

3) Help in selecting 4 companiescapable of importing LNG toLebanon.

4) Help to evaluate companies’ bidsfor the development of theFSRU.

5) A report covering the trainingworks required for the staff ofthe local institutions.

• The improvement of theoperational and financialperformance of EDL, where themain duties of the consultant will bethe preparation of a plan forimproving the efficiency of powergeneration plants and for assistingin the implementation procedures.Reorganizing the supply duties ofEDL, establishing the priorities forreducing technical and non-technical losses, providingassistance to complete currentprojects, organizing an inventory ofassets and survey of auditedfinancial reports and preparing thetender documents for the financialaudit contract covering 2005 and2006 are also included in the tasks.Consultancy services are expectedto be completed in May 2009.

• To provide the necessary supportfor the Higher Council forPrivatization for incorporating EDLin conformity with the ElectricitySector Regulation Law and theMinistry’s plan for restructuring thesector. The tasks are to propose theorganizational structures forcompanies that will emanate fromEDL, including the detaileddescription of the proposedpositions and the procedures to befollowed; along with thepreparation the preliminary workplans for these companies. It is also

required to organize the inventoryof assets and determine the capitallevels and the share structure ofthese companies.

Right at the finish line of the firstphase of the contract, CDR, enteredinto a contract with Booz and Co. toundertake another complementingstudy to the first phase in order toprovide the Higher Council forPrivatization with the required supportin corporatizing EDL. The contractwas signed in cooperation with theMinistry of Energy and Water andunder finance from the World Bank.Booz and Co completed the studies bythe end of May 2012 and submittedthe reports related to the detailedimplementation procedures to executethe plan.

It should be noted that the estimatedtotal cost of the technical assistancecontracts are of approximately US $6.5 million, distributed in thefollowing manner:

US $ 5 million from the WorldBank grant, about US $1 millionfrom the French DevelopmentAgency grant, and US $ 500,000from local funds to cover for thelocal tax expenses.

The designated consultants are tosubmit their reports gradually indue time in accordance with their

terms of references, where therevisions by the concernedinstitutions are expected toconstitute an opportunity for a closecoordination amongst the involvedparties that will facilitate thedecision making process regardingthe electricity sector reforms.

• The Comprehensive Master Planfor the Generation and Transmissionof Power: Electricité de France(EDF), which was placed in chargeof drafting the Master Plan from agrant financed by the Frenchgovernment, has submitted a draftreport regarding power generation.Based on the discussions withconcerned officials over the remarks,EDF issued the second version of thereport in June 2008 withexpectations to issue the finalversion in 2010.

IV - Main Projects UnderPreparation (2014 – 2015)

Generation sector:

- The rehabilitation of Zouk andJiyyeh power plants:

The installed and actual capacitiesof the Zouk and Jiyyeh power plantunits are as follows:

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The total installed capacity of bothZouk and Jiyyeh power plants are938 MW, whereas the averageeffective operational capacity is 564MW. EDL is currently conductingthe rehabilitation feasibility studyfor the 2 plants, in addition todetailed studies and the preparationof the tender documents. The ArabFund for Economic and SocialDevelopment expressed itsreadiness to finance therehabilitation of units 3, 4 and 5 ofthe Jiyyeh power plant (since units1 and 2 which were erected in 1970are expected be replaced) as well asall the four units of the Zouk powerplant in accordance with a 5 to 6year work plan schedule. Oncefulfilled, the rehabilitation isexpected to raise the effectivecapacity of both plants to 800 MW,in addition to the preparation of therequired provisions for thereplacement of units 1 and 2 of the

Jiyyeh power plant. Awarding ofthe rehabilitation project isexpected to start in 2014.

-Construction of NewGeneration Plants: Based on thefirst outcomes of the master planconducted by EDF, variousproposed options to construct newpower plants are overlaid. TheMinistry of Energy and Waterawarded a contract for the erectionof a new power plant in DeirAmmar, and another for theerection of new generation units inZouk and Jieh power plants.

- CDR signed a contract with theconsulting group “MottMacdonald /Pan Arab ConsultingEngineering/ Clyde and Co LLP”to help the Ministry of Energy andWater in preparing requiredfeasibility studies for the addition

of 1500MW of electric powercapacity generation through PublicPrivate Partnership schemes.

- Power transfer from Steamers: thecontract between the Ministry ofEnergy and Water and one of theTurkish companies is expected tocontinue during year 2014. The twosteamers secure close to 270MW ofpower in Zouk and Jieh powerplants.

Transmission sector:

- Construction of substations invarious regions: Amongst the current priorities arethe five substations that have beendetermined to treat the suffocationswitnessed on the transmissionnetworks, mainly at: The SouthernSuburbs (Dahieh), Bahsas (Tripoli),Marina (Dbayeh), and Ashrafieh.

Technical Assistance andSectoral Studies:

- The Master Plan Study forDistribution in Beirut and itsSuburbs:

Following EDL’s request fromCDR to seek funding for the MasterPlan study for the PowerDistribution in the Greater Beirutarea, the French Agency forDevelopment (AFD) has expressedits willingness to finance the studythrough a grant. The consultantEDF, who prepared the Master Planof 1998, is expected to benominated to carry out the works,which are anticipated to be finalizedin 2014.

The Master Plan of the GreaterBeirut area includes: the updatingof the Master Plan of 1998 for thecity of Beirut, the area extendedfrom Mkalles to Aaramoun, inaddition to the Master Plan for thesouthern and northern suburbs.