Jordan’s Nepco: An End To Operating Losses?

31 May 2019 Issue: 62 / 22 By: Waylon Fairbanks

State power provider Nepco has been a key contributor to Jordan’s debt mountain, which has climbed above $40bn. But the firm is now looking to cut subsidies to end its chronic borrowing. Cheap gas imports from Egypt and Israel will make Nepco’s ambitions more attainable, but subsidy cuts are easier said than done.

Jordan’s economy is amongst the shakiest in the Middle East. Since 2010, GDP growth has averaged only 2.5%. Coupled with the high spending needed to maintain the kingdom’s welfare state, debt has ballooned from $18bn (JD 12.7bn) in 2010 to a projected $41.8bn by the end of 2019 (see chart 1) –nearly 100% of GDP (MEES, 1 February).

State-owned National Electricity Power Company (Nepco) has played a key part in swelling Jordan’s debt burden racking up more than $7bn debt on behalf of the state (18% of total debt). The key damage was done in the $100/B-plus oil price years of 2011-14 when Nepco racked up a cumulative $5.4bn in operating losses (see chart 2). Like many Mena countries, Jordan heavily subsidizes electricity consumption. But unlike most of its neighbors, Jordan’s dearth of domestic energy supplies (Jordan imports some 94% of its energy) means that Nepco pays market value for the oil and gas imports it subsidizes. (CONTINUED - 1616 WORDS)