Lebanon News

Lebanon launches power plant prequalification round

Lebanese Energy Minister Nada Boustani displays a map of offshore oil and gas blocks in the Mediterranean, on June 12, 2019 during an interview to AFP in Beirut. AFP / ANWAR AMRO

BEIRUT: The Energy Ministry Friday launched a prequalification round for companies interested in building two new power plants in Lebanon, a significant step toward achieving a plan to provide residents with 24/7 electricity.

Energy Minister Nada Boustani announced the move on Twitter, calling on companies to submit “classification requests,” or documents showing their technical and financial capabilities to undertake the projects.

“It’s good, common practice to do prequalification in order to asses companies based on past experience, resources and financial capacity,” Jessica Obeid, an independent energy analyst, told The Daily Star.

By soliciting these initial proposals, the government is also looking to gauge market interest in the new plan, said Zaher Fawwaz, regional sales director at PW Power Systems, who has been in contact with the government about the plan. PW Power Systems is owned by Mitsubishi, a company that has expressed interest in the plan.

The proposals will be accepted for the first two of six power plants proposed in an ambitious plan, endorsed by the Cabinet in April, to reform Lebanon’s ailing energy sector. They are set to be built in southern Zahrani and northern Selaata, and will play a large part in making up the country’s nearly 1,500-megawatt electricity deficit.

Lebanon’s peak electricity demand last year sat at almost 3,500 megawatts, while production hovers at about 2,050 MW.

The companies whose proposals are accepted will also have to present short-term solutions to the country’s electricity deficit until the power plants go online, which isn’t slated to happen until 2022.

In addition to Mitsubishi, General Electric and Siemens have also expressed interest in participating in the plan. A source familiar with the electricity plan told The Daily Star that Lebanese officials were looking to these three large companies to eventually submit bids to supply Lebanon with power. Boustani in her tweet did not specify a deadline for the end of the prequalification round. The Daily Star was unable to reach her for comment, and two of the minister’s advisers declined to comment.

During prequalification, it is not the suppliers of power generation technology like Mitsubishi, GE or Siemens that submit documents. Rather, it is the developers that will be directly involved in the plants’ construction.

Fawwaz told The Daily Star that the suppliers were in contact with these companies, but did not formally select which ones they would work with until after they had prequalified.

The power plan’s implementation is an integral part of the government’s drive to reduce its yearly budget deficit. Lebanon has the third-highest deficit-to-GDP ratio in the world, and about 40 percent of this debt stems from government subsidies to the state-run electricity company, Electricite du Liban.

In recent years, EDL’s deficit has ranged from $1.5 billion to $2 billion.

Reforming the power sector was a key condition countries set at last year’s CEDRE conference for Lebanon to unlock some $11 billion in soft loans.

Following the conclusion of prequalification, the Energy Ministry will launch what is known as requests for proposals, or RFPs, when the companies that prequalified can submit formal bids.

This part of the plan may hit stumbling blocks, after the Constitutional Council struck down a law extending to Cabinet and the Energy Ministry the power to oversee the tendering process in the absence of the National Electricity Regulatory Authority, which has never been formed.

Friday’s announcement comes after the Energy Ministry earlier this month began assessing bids put forward for the construction of floating liquefied natural gas terminals, known as FSRUs, that are supposed to provide Lebanon’s power plants with natural gas. LNG is cheaper and less detrimental to the environment than the heavy fuel oil that currently runs Lebanon’s power plants. The plan calls for the new plants to be run on natural gas.

“This is a very important enabler of the power plan. The FSRU tender should be resolved by the time the RFP is in place, because it should be clear to companies how they can fuel the power plants,” Fawwaz said.

“You have to try to lower the variables as much as possible.”

 
A version of this article appeared in the print edition of The Daily Star on July 13, 2019, on page 1.

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