Blame it on Bassil

Future Movement MP Ghazi Youssef’s account on why Lebanon still doesn’t have electricity

Greg Demarque | Executive

E   What was minister Bassil’s plan to reach 24 hours of electricity by 2015?

[Bassil decided] that we needed barges imported from Turkey, a new [power plant to generate] 700 megawatts, to rehab Zouk, Jiyeh, Zehrani, Deir Ammar and Baalbek, and the implementation of 1,500 megawatts from [public-private partnerships]. [Bassil] talked to then prime minister Najib Mikati to send [$1.2 billion] as [a project of law] – from the [council of ministers]. Nabih Berri accepted it and when Nabih Berri accepts something it can [move] super fast – it went straight to the parliament. We said we needed the electricity today better than tomorrow – we have no problem with the politics of it – and it’s costing $6 billion of economic loss per year not having 24 hours of electricity.

E   From your perspective what happened next?

We asked [that] the $1.2 billion [be] allocated to the government. Two, [that] the prime minister seek financing for the $1.2 billion instead of paying it from the treasury – we don’t have [the money and] because we know that donors insist on transparent terms of reference, supervise the spending and supervise [project] implementation. Three, appoint a new board of directors for Electricite du Liban. We cannot have Kamal Hayek who has failed, maybe he is not responsible, but there hasn’t been a board since 1998 – and appoint a regulator. The fourth condition is that the minister will have to show [cabinet] the work that has been done, the terms of reference and how he’ll approach the tender. These were the rules and conditions, [Bassil] got the waste basket and threw them in it.

E   He did not comply with any of the parliament’s stipulations?

[Bassil] did not appoint neither the [ERA regulator] nor a board [EdL], and he came up with terms of reference for a tender for Deir Ammar 2 and for reciprocating engines [diesel engines].

E   So the power plant at Deir Ammar was tendered but has not been built. You allege that contract negotiations were mishandled – what happened?

After opening the bids they found that the cheapest was [Abenor-Butec] – a cost per kilowatt hour of 13.6 cents and on natural gas 9.2 cents. After winning the tender [Bassil] said that Abenor’s offer was too expensive. It was $660 million, [producing] 560 megawatts. The cost per megawatt was $1 million – compared to the reciprocating engines at $1.35 million. [Bassil] said he would negotiate with them to knock off $100 million – they said they could not do that.

E   But then the contract was canceled and retendered.

[Bassil] went back and took off work worth $68 million – the line that connects for gas and the chimney that was 120 meters [in height] became 60 meters. Given these new realities only two companies applied. J&P [a Cypriot company] when it had first applied wrote a letter saying it could not do the job within 30 months, but reapplied for the job that now had to be done in 25 months. Sepco [a Chinese company] refused to sign some of the conditions, saying it could not be done. The envelopes were opened and [the contract awarded] to J&P for $548 million. [Bassil] renegotiated with [J&P] and they accepted for $504 million.

E   And there was also the additional ambiguity over who might be responsible to pay the Value Added Tax in the contract?

The contract did not specify who was to pay the Value Added Tax. We’re talking about $50 million. For a company that won the tender valued at $548 million, accepted at $504 million, it means they’d make some profit. [But] if they have to pay the $50 million [in VAT] they would lose. When this contract was reviewed by the Court of Audit they noticed the $50 million [needed to be paid].

Cesar [Abou Khalil, an advisor to the Ministry of Energy] says that the condition wasn’t placed on the company to pay the $50 million because at that time it was not decided whether or not to seek financing from an international donor. Only [donors] are subject to non-payment of VAT – they’re exempt.

E   The current Minister of Energy Arthur Nazarian recently promised an additional three hours of electricity – is that realistic?

At Jiye the production capacity there is around 350 megawatts [but] actual production is 75 megawatts currently. The reason is that these are all Toshiba [engines] that don’t have spare parts – [staff] have cannibalized old engines [to make repairs]. The reciprocating engines that were put in Jiyeh will be operational by November. [In late September current Minister of Energy Arthur Nazarian] said we’[d] have three more extra hours of production because we’ll have two new productions units – he’s talking about the reciprocating engines, in Zouk and in Jiyeh. In Jiyeh it is true, it will start in a month and a half and will [generate] 84 megawatts. In Zouk, the 260 megawatts will not be ready until May 2016.

E   Your criticism then is that the reciprocating engines were high priced backups that would not actually be as beneficial to the current need as investing the money into new generation capacity?

If Gebran [Bassil] wanted to be transparent he would have started with Deir Ammar 2 and by now we would have had 560 megawatts working. That was the priority and not the reciprocating engines. The engines became the priority because it was easier and more expensive and payoffs were paid out.

E   Is there documentation of these commissions and payouts?

I don’t have anything on the commissions that were paid but one can review the cost per megawatt of reciprocating engines and we find a big difference between $1.35 million that was paid and what could be had for $1.1 – $1.2 million. We’re talking about $60 million.

E   This $60 million, are you saying that Gebran Bassil was distributing it to his own interests – what’s the story?

We should, as politicians, all of us, give our financial bank accounts – everybody close to me [whether] first or second degree – [to show] what I’ve made over the last 10 – 15 years. Gebran ought to do the same, [from] 2005 until now. I know people who have paid him.

E   Suppliers or bidders?

Suppliers who have paid. They’re not going to say it publicly but they’ve told me and they’ve told me how they paid. In cash or to a friend of his.

E   What is the total amount of shady money connected to the electricity file?

I believe it is a minimum of $100 million, around $50–60 million in the reciprocating engines and $40 million for [consulting]. We asked Kamal Hayek [chairman of Electricite du Liban] and the minister to see the accounts – how much and where it was paid out of the $1.2 billion. We haven’t received a document as of today and it’s now been over a month.

E   Are you accusing Gebran Bassil mainly of incompetence, wrong prioritizing, or corruption?

All of the above. First his incompetence because the priorities were not set properly. The notion of corruption is there when you pay more than what you have to pay for in the market. Corruption is when you allow firms to apply and win a tender when they are not supposed to be qualified, when you try to validate a company or lie about whether or not they have to pay the VAT, and when you sign a contract and maneuver the terms of payment after the signature to get preferential treatment for whomever won the tender. All of these combined [show] that there is incompetence and corruption.

E   The United Nations defines corruption as the use of public office or power for private gain. Do you think that Bassil achieved private gain from this endeavor?

I don’t have direct proof of it, but my feeling is he must have.

E   You want to be taken to court by that kind of feeling?

If I’m taken to court I will lift my secrecy and let him lift his. And we’ll let the court decide. I believe he must have had some private gain.

E   Who benefited from the $40 million consultancy fees – do you know who are the consultants?

No. [The ministry must] show us the receipts.

E   Since we also exist within the context of a fragmented political environment do you think that political rivalries and power ambitions play into this?

This is a question I have been asked – why this late in the [process] you come in with the questions? Well we’re not late. First, [the Future Movement] came up with a booklet last year on the electricity. It took us two years to prepare it by looking at where the problems are in terms of the whole sector in energy and specifically in electricity. We said where we are not able to move ahead, how much was spent, the costs and the loss to society, and what has to be done. Even at that time we had questions for Gebran, to the current minister, for EdL – what have you done so far with the $1.2 billion.

E   Are the minister’s advisors accountable to any oversight?

They’re not accountable to anybody, only to the minister. [On September 15] we were supposed to have a parliamentary committee meeting – we asked for the Ministers of Finance and Energy to be present because we wanted to see the results and numbers. He sent us Cesar Abu Khalil who is not an official of the government to represent the minister. So Mohammad Qabbani [chairman of the committee] said go home, there won’t be a meeting until the minister comes.

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