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Whirlwind energy sector decisions made as Cabinet goes caretaker

Tuesday, May 22, 2018

Energy Minister Cesar Abi Khalil Monday announced that 200 megawatts of additional electricity from Turkish power barge company Karadeniz Holding had been secured, after a Cabinet session that saw several big energy sector decisions made.

During the session, Cabinet agreed to hold a fourth round of tendering for 850MW of emergency power and to alter the contract of a company tasked with building the second Deir Ammar plant, known as Deir Ammar 2, if they withdraw an international arbitration suit.

Cabinet also agreed to extend by three years the current contract with Karadeniz for two power barges it already runs off Lebanon’s coast, at a reduced cost to the Lebanese government, Abi Khalil said in a statement.

Abi Khalil noted that the 200 MW of extra electricity that he claimed to have secured “for free” from Karadeniz would provide roughly two hours of additional power per day, which he said would meet the increased electricity demand over the summer months.

On renewing the emergency power tender, the tender book – which sets out the criteria to qualify for bidding – has been broadened and altered, a statement from President Michel Aoun’s office said.

The previously tight criteria caused the tender process to be invalidated three times in a row due to the repeated qualification of only one company: Karadeniz.

As per the new terms, interested parties will have ten weeks to submit bids, rather than the 21 days originally allowed when the tender process began last spring.

Companies will also be given nine months to implement the project rather than the three to six months stipulated previously, while bids can be both land- and sea-based. The tender conditions on land use had formerly made it difficult for companies with land-based solutions to submit bids.

Land in Deir Ammar in the northern Minyeh-Dinnieh district and Zahrani in southern Tyre will now be allocated for the emergency power plan. Finally, companies will reportedly be allowed use a wider number of fuels and technologies to implement their project.

The previous tender was criticized for preventing the use of natural gas – a cheaper, less polluting and more efficient fuel than the tender book-mandated heavy fuel oil and diesel.

With regards to Deir Ammar 2, Cabinet agreed to alter the current engineering, procurement and construction contract to a build, operate and transfer contract.

In return, the Greek company J&P Avax will withdraw an international arbitration suit against the Lebanese government.

Work on the Deir Ammar 2 plant has been stalled since 2015 due to local disagreement over whether a multimillion-dollar figure should be paid to the company, with the Finance Ministry refusing to make the payment.

The contract will allow J&P Avax to secure its own financing for the project and establish a long term power supply with the Lebanese government, Abi Khalil told The Daily Star previously.

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