Privatization of power supply in Lebanon

Abstract

Plagued by corruption, illegal connections, mismanagement, and more than $300 million in annual deficit, Electricite du Liban (EDL), the vertically integrated government owned Power Company, has become a financial burden on the Lebanese public sector. The following paper proposes a strategy for its privatization. We first start by exposing the relevant characteristics of the country, the current socio-economic situation and the factors that have led to the recent calls for privatization. We then focus our discussion on the power sector and on EDL, identifying the problems that have undermined its operations. The second part of the paper tries, based on an overview of three case studies, to define the different market models available and the requirements, strengths and weaknesses of each model. Finally, based on the country's and sector's specificities, we recommend a two-phase privatization strategy that calls for a corporatization and restructuring transitional phase preceding a limited form of wholesale competition.