Cleaning up

Turning trash into profit

by Matt Nash

If all goes as planned, 2015 will be a big year for new contracts in the waste management sector, which has been dominated by the Averda companies Sukleen and Sukomi since the 1990s. The government is pushing ahead with a national municipal solid waste (MSW) plan that will see the country divided into six service regions while grant money from the European Union will also fund the construction of new sanitary landfills and waste treatment facilities. Combined, there are 21 MSW projects in the pipeline, five of which are currently being tendered, according to officials responsible for implementing them. While these new projects mean business opportunities for both local and international companies, they could also mean the end of uncontrolled dumps, the dangerous “final” resting place of nearly 30 percent of Lebanon’s garbage.

Talking trash

In 2014, Lebanon disposed of an estimated 6,549 tons of MSW, according to an environmental assessment of the Syrian conflict on the country, commissioned by the Ministry of Environment and published in September. While the report noted that 99 percent of the waste is collected, it did not give a complete breakdown of where the waste went. In 2013, statistics compiled by Sweep-Net — an organization focused on waste management in MENA — showed that 8 percent of Lebanon’s MSW was recycled; 15 percent composted; 29 percent thrown into uncontrolled dumps; and 48 percent put into sanitary landfills — which are designed to keep rotting garbage from polluting the soil and groundwater beneath them. The Sweep-Net figures exclude additional MSW resulting from the influx of Syrian refugees, and the accompanying report notes that the recycling figure may be higher because of informal collection of valuable recyclables, which the organization admits cannot be quantified. 

[pullquote]Managing all of this garbage has long been a challenge for the state[/pullquote]

Managing all of this garbage has long been a challenge for the state. According to its website, the engineering consultancy LibanConsult AGM won a contract to help the government plan a national strategy back in 1971. To date, the closest thing to a master plan for MSW that Lebanon has is the 1997 Emergency Plan for the Greater Beirut Area. As its name implies, it was not meant to last forever. Since then, various efforts at creating a national MSW strategy — including an attempt to ratify a unified MSW law — have failed. From a legal perspective, waste collection and disposal are the responsibility of municipalities, although various other legal texts give ministries such as those of the interior, environment and public health a role in MSW management as well (hence the attempt to define responsibilities for waste management in one law). 

The big fish

According to Averda’s website, Sukleen has been sweeping Beirut’s streets and collecting its residents’ trash since 1993. Its sister company, Sukomi, won contracts to treat and landfill that waste in 1998. Treatment consists of composting organic material as well as sorting and reselling recyclable materials. Today, the two companies are the waste managers for Beirut and five other districts (i.e. the province of Mount Lebanon, excluding the Jbeil district). Sukleen and Sukomi’s service area accounts for around 50 percent of the country’s garbage. Given that parent company Averda is privately held, data on the Sukleen and Sukomi’s profits — particularly their margins in Lebanon — are private. Sweep-Net reported in 2013 that Averda is being paid $130 per ton for waste collection and treatment in Lebanon, without citing a source. The 2012 strategic environmental assessment for Lebanon’s nascent oil and gas sector, however, quoted head of the urban environment service at the Environment Ministry Bassam Sabbagh saying Averda is paid $140 per ton. Neither Sabbagh nor Averda’s chief operating officer for the Levant and Africa were available for an interview. However, an Averda spokesperson sent Executive an infographic on Sukleen and Sukomi’s work that said the companies handle 3,000 tons of waste per day, which would make the contracts worth between $142 million and $153 million annually, depending on which price-per-ton is accurate. 

[pullquote]Various efforts at creating a national MSW strategy … have failed[/pullquote]

Smaller pond

In line with the government’s new solid waste management plan, the Council for Development and Reconstruction (CDR) is currently tendering for three newly created service zones that slice up Averda’s current area of operations, explains Bassam Farhat — who handles waste management at CDR. In past plans, Beirut and Mount Lebanon were always kept together as one service zone. Under the new plan, Beirut and its immediate suburbs are one zone; Jbeil, Keserwan and Metn (minus suburbs tacked onto the Beirut zone) are a second; and Chouf, Aley and Baabda (minus suburbs tacked onto the Beirut zone) are a third. Bid documents from companies interested in these zones are due April 14, he says, noting that one company — or consortium, as joint ventures are allowed to bid — cannot have more than two contracts. Averda was not available to comment. Without giving an exact timeline, Farhat explains that the issuance of tenders for the three remaining service zones — the Bekaa (including Baalbek and Hermel); the North (including Akkar) and the South and Nabatiyeh — will happen in the future. 

Farhat repeats during the interview that the plan was the result of a “political decision.” Asked if that meant it was flawed or ignored advice from agencies like CDR and the Ministry of Environment — which developed past draft strategies — he said the cabinet had all of the relevant information needed to make the best decision but “in the end, it was their decision.”

Rules of the game

To win a contract for one of the new service zones, a local company bidding alone has to have experience in both collection and disposal, Farhat explains, reading from the tender document. If companies form a joint venture, there must be three: one foreign, one local and one either foreign or local. For joint ventures, one of the partners must meet the experience requirements. The tender rules also stipulate that bidders must have a minimum annual turnover, depending on where they are bidding (for Beirut: $80 million; for Metn, Keserwan and Jbeil: $65 million; and for Baabda, Aley and Chouf: $50 million). For joint ventures, he notes, each partner must meet 20 percent of the turnover requirement individually and the consortium must meet the full target. 

When it comes to determining how to treat the waste and where to put it afterward, Farhat says the winners have some latitude. The tender document stipulates that a bidder must choose from a preapproved list of potential sites for sanitary landfills, sorting or composting facilities, or waste incineration or waste-to-energy plants — depending on which mix of management methods the bidder chooses. The sites, Farhat says, are mostly old quarries or open dump sites. He notes that if a winning bidder chooses to build a sanitary landfill, it cannot landfill more than 40 percent of the waste it handles in the first three years and in years four through seven, it can only landfill up to 25 percent of the waste. The contracts have a lifespan of seven years, renewable for another three.

EU money

In 2013 and 2014, the European Commission approved a total of €35 million ($39.8 million) funding in support of MSW management in Lebanon. The money is being channeled through the Office of the Minister of State for Administrative Reform. Mohamad Baraki, who is in charge of the projects, explains that the money will be used to build six sanitary landfills and seven sorting, composting or refuse-derived fuel (or waste-to-energy) facilities. It will also be used to upgrade two existing waste treatment facilities and train municipal staff on operations and maintenance of the yet to be built infrastructure. Baraki says tenders for a sanitary landfill in Joub Jannine and an upgrade to existing facilities in Zahle have been launched while tender documents for sanitary landfills in Baalbek and Srar — in the northernmost district of Akkar — are currently being prepared. Documents from the European Commission’s (EC) website outlining the details of the two grants note the projects are specifically aimed at reducing tensions between Syrian refugees and host communities. They are targeting the areas currently underserved by waste management companies — i.e., everywhere outside of Averda’s service area. While the rest of Lebanon has collection services and — to some extent — sorting and composting facilities, there is by no means nationwide coverage, and Zahle is the only other city with an existing sanitary landfill. The EC documents and Baraki say these projects are meant to fully service areas outside of Averda’s area of operations, which raises the question of why there would then need to be government contracts to build more facilities. Both Baraki and Farhat explain that the government was aware of the EU projects when deciding on a final plan and will take them into account when tendering. Asked if there is a risk of doubling infrastructure, Farhat says, “No, there will not be more [waste management capacity] than needed.”

The 800 pound gorilla

The primary sanitary landfill for Beirut and most of Mount Lebanon is located some 20 kilometers from the capital near the village of Naameh. Farhat explains that it was initially intended to close in 2008. Two three-year extensions later, residents living near it were sick of the smell. When it looked certain the contract would be extended once again in 2014, angry residents stopped Sukomi dump trucks from accessing the landfill. Trash bins, and Beirut’s streets, were soon buried in mountains of garbage. Politicians and locals reached an agreement in 2014 to keep the landfill open for another year while the government promised to find a solution and close it for good in January 2015. That, of course, did not happen exactly as envisioned. Prime Minister Tammam Salam’s government, formed in February 2014, appointed a ministerial committee to develop a new national solid waste strategy, but the cabinet did not approve a plan — detailed above — until three days prior to the now extended January 15 deadline for closing Naameh. The plan, however, only called for extending the landfill’s operation for three months, renewable once. Given that CDR will only receive bids for the service areas currently dumping in Naameh one day prior to the first three month deadline, it is unclear how an alternative will be found by July 15. Asked if the tender documents offer any hints, Farhat says, “This is a decision the government has to make. The government decided to close it. It’s the government’s decision.” 

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Matt Nash

Matt was Executive's Economics & Policy Editor and Real Estate Editor from May 2014 to November 2017. He began reporting in Lebanon in April 2007, and his coverage focused on oil and gas, public policy and human rights.

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1 comment

Maria April 7, 2015 - 5:03 PM

How sad :(

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