Lights back on in Lebanon after Prime Minister promises payment

Electricity in Lebanon returned on Thursday afternoon following a brief blackout that began the previous evening, caused by the stoppage of the country’s two largest power plants due to a lack of payment.

Primesouth Lebanon, the company operating the Zahrani and Deir Amar power plants on behalf of Electricite du Liban – the country’s state electricity provider – said it would resume operations after a promise from caretaker Prime Minister Najib Mikati that it would receive a monthly amount of $7 million in unpaid dues.

The amount is to be drawn from Lebanon's Special Drawing Rights, a supplemental reserve provided by the International Monetary Fund.

The company cited an accumulated debt of “over $80 million and counting” for the stoppage of electricity generation in the power plants, said a company official, speaking on condition of anonymity.

A statement circulated by Primesouth earlier on Thursday pointed to “serious breaches of contract and our failure to receive the financial dues resulting from it”.

“The main problem since the beginning of the [economic] crisis is that we were spending a lot on suppliers and contractors, in dollars, for maintenance and spare parts,” the official said.

Primesouth haemorrhaged money after Lebanon’s central bank, suffering from a major liquidity crisis, was unable to pay dues owed to the company, the official said.

“Today we got a promise that we would receive regular payment and so we turned our plants back on,” he added.

Power cuts caused by lack of fuel or delayed payments are not uncommon in the country. Electricity has become notoriously scarce in Lebanon since an economic crisis began ravaging the country in 2019.

The crisis has resulted in the collapse of most public subsidies and services.

No payment despite EDL liquidity

Lebanon's electricity sector is in chaos, with state electricity only supplied for less than an hour a day – if at all – before March, when the government approved an emergency plan enacted by caretaker Energy Minister Walid Fayad.

The plan saw increased revenue for EDL through a rise in electricity tariffs, with a $116 million advanced line of credit from the central bank to pay for fuel and power plant maintenance, which would, in theory, be repaid by the revenue from tax increases.

This brought state power up to around four to six hours per day.

But despite the minister’s emergency plan, Primesouth said it had received little but promises.

“We have been receiving promises of weekly and even daily payments, but without any payments despite the continued collection from citizens,” the company statement said.

“No dues have been paid to us since that period, which negatively affected our ability to pay the financial dues owed to us, which made us unable to continue in the performance of our work.”

It remains unclear why the state has not paid Primesouth since March. The Energy Minister told The National that payment delay lay with the central bank, and not with the liquidity of EDL, which has generated money from collected tax revenue.

“There is money in the bank and fuel in the tank,” Mr Fayad said. “There should be no problem paying suppliers for fuel or operations.”

EDL has accumulated the equivalent of about $40 million in Lebanese pounds in its central bank account.

According to Mr Fayad, the amount awaits conversion to dollars to pay suppliers, which the central bank has yet to release.

The problem is that the central bank had “not acted on the orders of the payments”.

“There is no logical reason they don’t convert Lebanese [pounds] into dollars,” Mr Fayad told The National.

He added that he has been trying to contact acting central bank governor Wassim Mansouri since early August but has received no response.

“It’s unfair to hold hostage the money EDL has brought to the bank.”

The National contacted the central bank for comment but received no formal reply. In a comment to local television station LBCI, a central source said it would “not pay a dollar from the reserves to Primesouth or others, and the state must pay from its accounts or from the remaining funds in the SDR”.

The state's lack of liquidity – which in 2019 caused commercial banks to enact unofficial capital controls, trapping people's deposits – makes it difficult for the central bank to use its own reserves, which technically consists of depositors' money.

Mr Fayad waved off the bank's comment.

“This has nothing to do with the SDR. It has nothing to do with the issue. EDL as an institution has plenty of money.”

Blackouts are not new to Lebanon, which has had spotty state electricity since the days of the 1975-1990 civil war.

Until 2019, there were rolling blackouts in state electricity for at least three hours per day, allowing private generators to take control in the interim.

But since the start of the economic crisis, state power cuts became regular, with costly generator subscriptions overwhelmingly replacing state electricity as a primary source of power for residents.

“People are paying for the electricity. There is money in our account. And we need to pay the suppliers,” Mr Fayad said of the challenges facing the state power provider.

“Do we want to have institutions that function or not? Or do we want to let this country become completely dependent on generators?”