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Written in June 2005, this strategy paper argued that Lebanon's water and wastewater sector had been under-exploited despite climatic conditions that were the most favourable in the region. It set four priorities: capturing rainfall and snowmelt, guaranteeing continuous supply to households and industry, exporting surplus water to neighbouring countries, and building dams that also generate hydroelectric power.
Because the government then lacked the means to fund development, the paper recommended long-term concessions rather than outright privatisation or BOT schemes. Under that model, an experienced multinational operator would manage and invest in the utility for an annual fee, ownership would remain with the state, and net profits would accrue to the Treasury. It presented water as the lowest-risk utility sector, given essential demand, limited substitution and regulated monopoly revenues. It added that privatisation should be considered only at the end of the concession, when receipts would be higher and the risk of misallocation lower.
The analysis remains a reference point for later concession and PPP debates in the sector.
Key findings
- The paper estimated that a developed water network combined with hydraulic energy could yield US$2–3 billion a year to the state.
- It recommended concessions of at least 25 years and preferably 40, because network and dam construction could take up to ten years and short BOT terms leave too little time to set prices and amortise assets.
- Revenue risk was to be borne by the concessionaire, with concession documents reviewed by international legal firms and new water sources developed by the operator.
- Non-revenue water, which the paper put at 60% or more in Lebanon at the time, was identified as a priority, alongside volumetric pricing.
- To limit revenue concentration, no single customer should account for more than 5% of revenues, and the top ten should stay below 10–15%.
- Performance-based ratemaking, as used in the UK and Australia, was preferred to cost-plus regulation, under transparent rules changeable only by legislation.
Archive: written in Jun 2005; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.