US$526M loan not conditional on settlement of claims by GtE contractor

…VP Jagdeo highlights massive savings for Guyanese

Vice President Dr Bharrat Jagdeo has indicated that the approval by the United States EXIM Bank for the US$526 million loan for Guyana’s Gas-to-Energy project was not conditional to the settlement of claims being made by the contractor, Lindsayca CH4 Guyana Inc. (LNDCH4).
He made this declaration during his weekly press conference on Thursday at the People’s Progressive Party (PPP) Freedom House headquarters.
The Guyana Government and the US-based consortium of Lindsayca and CH4 are at loggerheads over a US$50 million claim by the contractor and the timeline for the completion of the project.
LNDCH4 was awarded the US$759 million contract in November 2022 to build the 300-megawatt Combined Cycle Power Plant and a Natural Gas Liquids (NGL) facility at Wales, West Bank Demerara – key components of the Gas-to-Energy project.
However, there was a three-month delay in other components of the project that would affect LNDCH4-Guyana’s delivery of the power plant in accordance with the contractual timelines. While the government has extended the deadline by three months, the contractor is not satisfied and wants more time.
In addition, LNDCH4-Guyana is making financial claims to the tune of US$50 million, stating that the delays would cost the company. The Guyana Government has already rejected this financial claim thus resulting in the contractor activating the dispute resolution mechanism.
A three-member Dispute Avoidance/Adjudication Board (DAAB) that was set up to resolve this issue has already heard oral and written submissions from both sides and could potentially rule by this month, Jagdeo had previously reported. He had noted too that if either or both parties are not satisfied with that decision then the matter would head to full arbitration.
But even as efforts are being taken to resolve this dispute, the Guyana Government has maintained that this issue would not impact the project and that works continue on the ground.
In fact, only last week, the Board of the US EXIM (Export-Import) Bank had announced its final approval of the US$526 million loan for the model GtE project.
During Thursday’s press conference, VP Jagdeo used the opportunity to hit back at critics, particularly from the political opposition, who had previously condemned the feasibility of the project and now after being proven wrong by the US EXIM, which found the project to be feasible enough to finance, have shifted their focus.
“For years, we took a beat that one, it’s not feasible; two, there is environmental impact study; and three, the loan will not happen. All three were proven wrong [with the approval of the loan]… [But] having been proven wrong, they still want to run down the project so they shift now, speaking about the rising cost of the project.”
“I said last week, ‘oh the Exim Bank loan is about 25 per cent of the project, which is [totalling] about US$2 billion… They said Jagdeo now confess that the project has gone from US$2 billion to US$2.1 billion… [They’re] nitpicking again… they had to find something [to criticize],” the Vice President asserted.
He went onto explain that contrary to claims that the loan has high interests and would increase the country’s external debt, it is in fact a very competitive interest rate at just four per cent per annum. He compared this to the 40 per cent borrowing interest rate that the previous Coalition regime had racked up during their term in office from 2015.
“Just imagine, at four per cent if this is burdensome, their track record was a 40 per cent interest rate in the local market. Imagine how much we would’ve had to pay if that was the case. So, it’s a lot of nonsense,” he posited.
In fact, Jagdeo reiterated that the first five years of the loan from the US Exim Bank would not attract any principal payments nor interest. “So, you make no payments on the loan for the first five years… The interest component is capitalized and from 2031, that when you repay the principal and the interest, which would be about US$50 million annually,” he added.
Moreover, Jagdeo pointed to the US Exim Bank statement, which detailed that the Gas-to-Energy project would save Guyana from importing one million barrels of oil per year, replacing it with the natural gas that would be piped from the ExxonMobil-operated Stabroek Block offshore to the Wales site.
According to the Vice President, the treasury would save some US$100 million from not having to purchase bunker C fuel. He added that when the power plant starts to generate electricity and the price is slashed by half, as promised, Guyanese would save some US$250 million annually. Another US$138 million will be saved when government sells Liquefied Petroleum Gas (LPG) or cooking gas, also at half price.
“So, if you add the two… you have savings by the Guyanese public from lowered electricity bill and from lowered cooking gas price of US$388 million per year. And guess what they’re complaining about, that we gotta pay US$55 million interest per year on the loan… In six years, you can pay back for the whole project from the savings alone to the Guyanese public…They talk about everything else but would never tell you about how it will benefit the people of this country,” VP Jagdeo asserted. (G8)