Lebanon faces a severe energy crisis. The needs to finance the development of its energy sector. Although reforms remain key, financing is an obstacle. A mix of public and private investment as well as ODA is planned to raise $5 billion. Innovative financing models can play a key role in this. SWFs, mainly from Arab GCC countries, can become a source of development. Diaspora bonds could form a significant resource for development financing. However, for the potential to be unleashed, an end of the political paralysis is needed. Increased accountability and transparency would increase overall FDI and accelerate processes.

1. INFRASTRUCTURE FINANCING
F I N A N C I N G T H E D E V E L O P M E N T O F L E B A N O N ' S P OW E R S E C TO R

2. CONTENT
1. Lebanon at a glance
2. The Problem/The Facts
3. The Solution
4. Traditional infrastructure financing
5. Innovative infrastructure financing/ SWFs/ Diaspora Bonds
6. Conclusion
7. References
8. About
DEVELOPING LEBANON'S ENERGY SECTOR (2015) 2
“Goal 7: Ensure access to affordable,reliable,sustainable and
modern energy for all.”
- Sustainable Development Goals

3. LEBANON AT A GLANCE
 Income level: Upper middle income
 GNI per capita, 2014: $9,800
 Inflation rate, 2014: 0.7 percent
 GDP growth, 2014: 2 percent
 Development aid, 2015: $539 million
 Public debt, 2014: 143 percent of GDP
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4. THE PROBLEM (1)
 “The Lebanese electricity sector is at the heart of a deep crisis.
 The sector is unable to supply the reliable electricity needed by homes, offices and industry.
 It is a massive drain on government finances, crowding out more valuable expenditures on education,
infrastructure,social protection, and health, and putting macroeconomic stability at risk.”
- TheWorld Bank, 2008
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5. THE PROBLEM (II)
 “(Lebanon) barely generates enough electricity to keep street lamps on
at night. (...)
 In the financial and political hub of Beirut, there are daily three-hour
power outages
 while in some areas of the country mains electricity is available only a
few hours a day. (...)
 Lebanese households spent on average $1,300 on electricity in 2013,two
thirds on generators, in a country where the gross national income per
capita is $9,800,according to the latestWorld Bank estimates.”
- Reuters, 2015
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6. THE FACTS
 Energy is generated by state-owned Electricité du Liban (EdL)
 EdL has a power supply capacity of 2,000 MW
 Peak demand exceeds 3,000 MW
 Electricity tariffs have not been changed since 1996
 EdL accounts for 40 percent of Lebanon's debt
 Lebanon's public debt-to-GDP ratio reached 143 percent in 2014
 Energy is cited by private firms as the 2nd most important obstacle
- TheWorld Bank, 2015
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7. THE SOLUTION
 Overcoming political paralysis
 Tariff reforms
 Corporatization of EdL
 Increased investment in new power plants
- TheWorld Bank, 2015
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8. TRADITIONAL DEVELOPMENT FINANCING
 The Lebanese government has endorsed an action plan to
reform the power sector and commissioned Butec Utility
Services (BUS) to upgrade the power grids in North Lebanon.
 MIGA, part of theWorld Bank Group, is helping bring down
the risk profile of BUS investment, issuing guarantees of $35.5
million.
- TheWorld Bank, 2014
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ButecUtilityServices

9. INNOVATIVE DEVELOPMENT FINANCING (I)
 Innovative development financing is a global trend that builds on
 (1) the realization that doing business and doing good are intertwined
 (II) the private sector can mobilize much of the resources and the know-how needed to finance
large infrastructure projects
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10. INNOVATIVE DEVELOPMENT FINANCING (II)
 In Lebanon, it was planned in 2010 to
 install 4,000 MW for the national grid
 at a cost of $4.87 billion
 with the following financing model:
 Lebanese government $1.55 billion 32 %
 the private sector $2.32 billion 48 %
 Official development assistance (ODA) $1.00 billion 20 %
- Source: Ministry of Energy andWater, 2010
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11. INNOVATIVE DEVELOPMENT FINANCING (III)
 Due to the outbreak of the war in Syria and regional turmoil
 as well as an internal political paralysis and
 a struggling economy,
 the project will take more time if it ever succeeds.
 Two innovative tools can be employed to attract more capital
 (1) Sovereign wealth funds (SWFs)
 (II) Diaspora bonds
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12. SOVEREIGNWEALTH FUNDS (SWFs)
 SWFs from Gulf countries (GCC) are among the largest in the world
 GCC-based SWFs usually seek investments in projects worth $1 billion and more
 $1 billion would already secure 43% of the private sector’s share
 This investment would make it easier for all stakeholders to mobilize the total amount
 The realization of the project would reverse declining FDI in the MENA region
 A key obstacle to mobilizing GCC-based SWFs is their preference for equity
 This could be addressed by the corporatization of the EdL or the liberalization of the energy
sector
 Further readings: European Investment Bank, 2012.
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13. DIASPORA BONDS
 Lebanon has 4 million inhabitants
 The diaspora is estimated to number between 8 and 14 million
 Remittances 2014 are estimated to reach $7.7 billion
 This equals 17% of Lebanon's GDP
 Lebanon is known for its professional banking sector
 The issuance of diaspora bonds could ensure obtaining resources
 The government strategy needs to (1) secure basic needs of its citizens to (II) channel
remittances in investment and (III) use the investment to curb the losses incurred by EdL
 Further readings: al-Monitor, 2014.
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14. CONCLUSION
 Lebanon faces a severe energy crisis
 Lebanon needs to finance the development of its energy sector
 Although reforms remain key, financing is an obstacle
 A mix of public and private investment as well as ODA is planned
 SWFs, mainly from Arab GCC countries, can become a source of development
 Diaspora bonds could form a significant resource for development financing
 However, for the potential to be unleashed, an end of the political paralysis is needed
 Increased accountability and transparency would increase overall FDI and accelerate processes
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15. REFERENCES
 Al-Monitor, 2014. Remittances key for Lebanon’s economy. http://www.al-
monitor.com/pulse/originals/2014/11/lebanon-expatriate-remittances-boost-economy.html
 European Investment Bank, 2012. Mobilizing the potential of GCC SovereignWealth Funds for the Mediterranean Partner
Countries. http://www.eib.org/attachments/country/femip_study_potential_of_gcc_sovereign_wealth_funds_en.pdf
 Ministry of Energy andWater, 2010. Policy Paper for the Electricity Sector.
http://www.energyandwater.gov.lb/pages.asp?Page_ID=59
 Reuters, 2015. No light at end of tunnel for Lebanon's power crisis. http://www.reuters.com/article/lebanon-
electricity-idUSL8N12J1T120151026
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16. REFERENCES
 World Bank, 2008. Lebanon - Electricity Sector Public Expenditure Review. Washington, DC; World Bank.
https://openknowledge.worldbank.org/handle/10986/7990
 World Bank, 2014. World Bank Group Steps up to HelpTransform Lebanon’s Power Sector.
http://www.worldbank.org/en/news/feature/2014/06/11/world-bank-group-steps-up-to-help-transform-lebanon-
power-sector
 World Bank, 2015. Lebanon - Promoting poverty reduction and shared prosperity: A systematic country diagnostic.
Washington, DC; World Bank Group. http://documents.worldbank.org/curated/en/2015/06/24663519/lebanon-
promoting-poverty-reduction-shared-prosperity-systematic-country-diagnostic
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17. ABOUT
 Final Project for the MOOC “Financing for Development”
 Task “to translate course concepts into simple or actionable ideas,
in a style that could be understood by laypeople
in their community of practice or influence.”
 Topic “a proposed financing solution to a development problem
you are aware of in your professional or community context.”
 Target audience Policy makers and general public
 Author Jonas Feller
 Submitted December 2015
 TheWorld Bank @ Coursera https://www.coursera.org/course/fin4devmooc
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18. THANKYOU
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Beirutatnight.Courtesyoftheauthor