US EXIM Bank greenlights US$509M loan for GtE Project – VP

…final approval to come after 30-day Congressional notification

In a long-awaited move, the United States Export-Import (EXIM) Bank has approved the Guyana Government’s request for a multi-billion-dollar loan to finance its model Gas-to-Energy (GtE) project.
This was revealed by Vice President Dr Bharrat Jagdeo during a press conference on Thursday.

This announcement follows criticism from many and naysayers, who had argued that the US Exim Bank would not approve financing for this particular project.
Back in April 2023, it was announced that Guyana had applied for the loan from the US EXIM Bank to finance the US$761 million GtE Project, which includes construction of an Integrated Natural Gas Liquid (NGL) plant and a 300-megawatt (MW) combined cycle power plant at Wales, West Bank Demerara utilising natural gas from the country’s offshore operations in the Stabroek Block.
According to VP Jagdeo, the Guyana Government was waiting on the US finance institution to make the announcement first.
“The loan has been approved by the Board of EXIM Bank, and it has been sent to the Congress for 30 days’ notification, after which it will be returned to the Board of EXIM Bank for final approval. So, that is where we stand at this point in time,” he indicated.
The US EXIM Bank’s approval comes on the heels of high-level due diligence done by the financial institution. The Guyana Government had stated that no fatal flaws were found during the technical and environmental assessments done by the bank.
Initially, the Government was aiming to borrow approximately US$645 million from the US Bank to fund the GtE initiative. Guyana was expected to put up the other US$100 million as advance payment to support the US$760 million initiative.
However, the Vice President explained on Thursday that the loan approved was not the full amount that Guyana had requested.
“The amount will not be (US$645) million. It would be less than that, and it will only cover exports out of the United States of America; so it would be upwards of US$500 [$509] million…not the full sum [requested],” Jagdeo told reporters at the press conference.
Guyana Times was informed that the full amount was not approved because not all components of the project will be procured from the US. As a result, financing will only cover the components purchased from that country.
While Guyana was awaiting the approval of this loan, Government had gone ahead and injected some US$400 million to commence work on the highly anticipated GtE project. It was noted, too, that Guyana could potentially fund the entire initiative had the loan request not been approved by the US financial institution.
In fact, Jagdeo had previously explained that the loan can fund retroactive expenditure, hence Government could use bridge financing to get the works going. Bridge financing is a short-term financing option in order to fund a project before the financing is expected.
“The loan will also provide retroactive financing. So, if the loan is made available, it will cover financing that Government of Guyana had to make during the period since the project started,” the Vice President added on Thursday.
Meanwhile, Government has set aside a whopping $80 billion in Budget 2024 to advance the GtE initiative and its associated infrastructure, including transmission and distribution upgrades to offtake the power. Only earlier this week was another $25.3 billion approved by the National Assembly to support the ongoing construction works which were started in December 2022 by the contractor – US-based consortium of Lindsayca CH4 Guyana Inc. (LNDCH4), at the Wales site.
During consideration of Financial Paper No. 4 of 2024 on Wednesday, Prime Minister Brigadier (ret’d) Mark Phillips informed the Committee of Supply that G$99 billion has already been expended on the Wales project, with construction progressing smoothly.
He was at the time being questioned by Opposition Member of Parliament David Patterson regarding the financial and operational status of the project, which would not only see reliable power in the country, but also cut the high electricity costs by half.
According to the Prime Minister, 58 per cent of the works on the GtE initiative has been completed. He noted that of the G$159 billion contract sum, the project’s expenditure prior to 2024 was $$55.7 billion, while spending to date is pegged at some $44,678,828,886.
PM Phillips added that while the sum being sought by Government would further accelerate progress on the project, it doesn’t cover the cost for the arbitration case with the GtE contractor, which has so far racked up a bill of more than G$13 million.
“The sum… [of] $13.6 million to date has been paid for the consultants and the lawyers with regard to this activity,” Phillips stated.
LNDCH4 is engaged in a disagreement with the Government over the timelines of the project and associated costs. LNDCH4, which was awarded a US$759 million contract in November 2022 to build the power plant and NGL facility, is making financial claims to the tune of US$50 million over delays from other components of the project, saying that the late handover would affect its delivery, according to contractual timelines.
In light of the delays, the Government has extended the deadline to March 2025 for the delivery of the power plant, but the contractor is not satisfied, and wants more time. Moreover, Government also rejected the financial claim, resulting in the contractor moving to a dispute resolution mechanism that has seen a three-member board being set up to mediate between the two parties. (G8)