The power sector in Lebanon is dominatedby the national electric utility, Electricite du Liban(EdL), which is organized under the Ministry of Energy andWater (MEW). EdL's assets, human resources, andadministrative facilities were severely damaged during theperiod of civil war in Lebanon, and most efforts in thepost-war period have been on the rehabilitation of assets,with a lesser focus on strengthening the company from aninstitutional, administrative, and financial perspective. Asa result, the company is characterized by lack of technicaland managerial capacity, lack of systems to manage andmonitor performance, and a weak financial situation, withclose to US$400 million in deficit every year and a quicklydeteriorating balance sheet (retained losses now exceed US$1billion). At the operational level, losses, primarilynontechnical, are approaching 50 percent and continuedtransmission constraints and unreliable service haveresulted in a surge in self-generation. Attempts toprivatize EdL have failed because of the lack of financialperformance required to attract investors. The government isvery concerned about the fiscal drain EdL poses and isseeking options to improve the company's, and thesector's, performance. As an immediate priority, theGovernment of Lebanon should (a) put measures in place toimprove the financial and operational performance of EdL(through, inter alia, the introduction of an interimManagement Contract); and (b) in parallel, develop along-term strategy for reforming and restructuring thesector with a view of increased level of private sectorparticipation in the financing and operation of the sectorand efficient competition.
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