Jagdeo defends 4% interest on US EXIM Bank loan for Gas-to-Energy projectÂ
Jan 03, 2025
âĤsays rate is âvery competitiveâ
Kaieteur News- Vice President Bharrat Jagdeo on Thursday said the interest rate on the US$527 million loan, Guyana secured from the United States Export Import (US EXIM) Bank, is âvery competitiveâ.
The EXIM Bank loan will support the US$759 million cost of the natural gas-fired power plant and natural gas liquids (NGL) plant being constructed by a joint venture, CH4-Lindsayca.
Vice President Bharrat Jagdeo. (Jagdeo defends 4% interest)
Over the 15-year repayment period, Guyana will pay the bank a whopping US$316.2M in interest alone, in keeping with the 4% annual rate as previously revealed by the VP. This means the country will be paying the Bank a total of US$843.2M overall for the amount it borrowed.
During his weekly press conference at Freedom House, Jagdeo defended the interest rate as he compared the terms of the loan to a previous loan agreement signed under the previous administration. He reasoned, âLet me just say to you, 4% interest is a very competitive interest rate. If you look at the 10 years treasury bill in the U.S, its higher than 4%. If you look at when APNU had concluded the 4.7% loan for GuySuCo through Republic Bank, they were paying 4.7% with a sovereign guarantee.â Jagdeo argued that the global interest rate at the time was the lowest, at about 1.6% on treasury bills.
Furthermore, he said, âWhen we took office, interest rates were 40% in the early period, just imagine, at 4% if this is burdensomeâĤimagine how much we would have had to pay if that was the case.â
Additionally, the VP explained that based on the terms of the loan agreement with the US EXIM Bank, Guyana will not be required to make any payments in the first five years, but will only commence paying installments in 2031.
âSo you make no payments on the loan for the first five years. Iâm sure most Guyanese companies would love to have a loan like that, that they have to make no payment on the loan for the first five yearsâĤyou want to use peopleâs money, you donât want to pay any interest? Suddenly, itâs about oh, we have to pay more interest now on this project,â Jagdeo argued.
Guyana will be required to make two annual payments on November 1 and May 1, commencing on May 1, 2031. Back in April 2023 it was revealed that Guyana applied to the Bank for a US$646M loan to support the NGL and power plant.
It is important to note that the Gas-to-Energy (GTE) project also comprises of a 12-inch diameter pipeline being developed by the Stabroek Block operator, ExxonMobil Guyana Limited. Â Exxon previously said the structure is expected to cost US$1B. Guyana is also expected to repay the contractor for the pipeline over a 20-year period.
Project Head, Winston Brassington in February 2023 explained that Guyana will be required to pay back ExxonMobil some US$55 million each year for 20 years to repay the company for its investment in the pipeline.
âThat US$55 million is the amortized cost of US$1 billion for 20 years at a discount rate,â he said.
(Jagdeo defends 4% interest on US EXIM Bank loan for Gas-to-Energy project )
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