This feature was originally published on MIGA’s Website.
Lebanon’s power sector suffers from chronic supply shortages in the face of growing demand and poor infrastructure. Load-shedding in Beirut alone averages six hours a day and non-technical losses cost the state-owned company, Electricité du Liban (EDL), an estimated $300 to $400 million annually. Reforming the sector is a top priority, and in 2010 the Lebanese government endorsed an action plan that included upgrading transmission and distribution networks and installing advanced metering infrastructure. The World Bank has contributed to the framework through grant funding for feasibility studies and technical assistance. This work is complemented by investments from the International Finance Corporation and, more recently, MIGA guarantees.
Four years since the action plan was launched, considerable progress has been made in the rehabilitation of transmission and distribution networks, billing, and collection. A key element of this success was the government’s decision to transfer these services to the private sector. Among the companies carrying out this important work is Butec Utility Services (BUS), which was awarded a contract to design, upgrade, maintain, and operate the electricity distribution network in North Lebanon.
BUS, which is majority-owned by Butec International Cyprus and its affiliates, is working along with several partners experienced in power distribution. Given the fragile environment in Lebanon, the company approached MIGA to help bring down the risk profile of its investment. In December 2013, MIGA issued guarantees of $35.5 million to Butec International and El Sewedy Electrometer Group of Egypt to cover equity and future earnings related to the contract with EDL. MIGA’s cover is against the risks of war and civil disturbance as well as breach of contract.
“We’re grateful for MIGA’s commitment to our investment,” says Mr. Ziad Younes, BUS chairman and Butec General Manager. “For too long, electricity consumers in Lebanon have faced unreliable service with frequent and long power outages. We’re pleased to report that we’ve made significant strides in our work to improve service and reliability.”