Total power outage in Lebanon as plants run out of fuel


Aya Iskandarani
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Lebanon’s two biggest power plants have shut down because of oil shortages, plunging the country into a total blackout.

State electricity provider Electricite du Liban issued a statement saying that the power plant in Deir Ammar had shut down due to a complete lack of fuel on Friday, while the one in Zahrani ceased operations on Saturday.

It is the latest consequence of Lebanon’s two-year economic crisis, which has led to shortages of fuel and medicine, imports paid for using scarce foreign currency.

A senior employee at EdL told The National he was “shocked that people are shocked” at the news.

“We had warned about this before, we are out of fuel,” he said.

A fuel oil shipment is expected later on Saturday. It could be used to generate power from next week, the statement said.

For the past few months, Lebanon’s cash-strapped state electricity provider has been providing residents with zero to four hours of power per day.

The outages forced most residents to rely on costly private generators at a time of financial crisis. Hospitals have also complained of repeated power cuts, which have hindered their work and limited access to health care.

Ziad Al Zein, general director of the state-owned Zahrani Oil Facilities, said that high-level negotiations were taking place to provide the plants with fuel usually reserved for the local market.

There are two solutions to the blackout, he said. Electricite du Liban can either choose to wait until the arrival of a shipment of Iraqi oil on October 20 or the state can request that the Zahrani Oil Facilities provide them with their stocks.

“If we do that, how will I be able to feed the market?” he asked.

Every month power plants receive a fixed amount of fuel, rationed to provide the country with a few hours of power every day, he said.

After Lebanon’s contract with offshore Turkish electricity barges ended earlier this month, the country’s power plants have had to compensate for the lost power.

“Quantities that should last 25 days are being consumed in 8-9 days,” Mr Al Zein said.

People shop in a grocery store under a portable electric light during a power cut near Bhamdoun, Lebanon, October 9, 2021. Reuters
People shop in a grocery store under a portable electric light during a power cut near Bhamdoun, Lebanon, October 9, 2021. Reuters

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Updated: October 10, 2021, 7:50 AM