US EXIM Bank approves US$527M loan for Gas-to-Energy project

Dec 28, 2024 News

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Kaieteur News- The United States Export Import (US EXIM) Bank has granted final approval for a US$527 million loan to support Guyana’s Gas-to-Energy (GTE) project.

In a statement on December 26, the financial institution said the Board of Directors approved $527 million to the Ministry of Finance of the Cooperative Republic of Guyana to support a gas-to-energy project that will strengthen the country’s energy security by doubling the country’s installed electric capacity.

It explained that financing from the transaction will aid the construction of a natural gas separation plant; a 300 megawatt (MW) combined cycle gas turbine power plant and services related to the gas supply pipeline near Guyana’s capital, Georgetown.

“This project will allow Guyana to transition to more reliable and cleaner energy for consumers and businesses by using natural gas-powered turbines to generate electricity. Without this gas-to-energy project, Guyana will continue to import fuel oil, one of the highest polluting fossil fuels, and be unable to decommission hundreds of less efficient local generators. This project will result in a reduction of more than 460,000 tonnes of carbon dioxide per year, the equivalent of consuming more than one million barrels of oil,” the US EXIM Bank stated.

President and Chair Reta Jo Lewis said, “I am extremely pleased that the Board of Directors approved this strategically important energy project. Not only is EXIM continuing its support of U.S. businesses small and large, but this project will support more than one thousand jobs across the country. I am especially proud to continue to support Bank priorities and charter mandates along with projects that align with the administration’s economic, energy, and national security priorities.”

The financing will support a U.S. joint venture involving Lindsayca, a Texas-based company, and CH4 Systems, a Puerto Rican small business. The joint venture was awarded the contract to construct the NGL and power plant for Guyana.

According to the EXIM Bank, the financing will also support more than one dozen U.S. companies and support an estimated 1,500 jobs across 11 states and territories.

In a separate statement by the Office of the President, it was explained that President Irfaan Ali received a telephone call from the President and Chair of the US EXIM Bank on Thursday informing that the Board has approved the loan for the gas project.

The Board Meeting was held on Thursday, completing the 35-day congressional notice period. “President Ali expressed to the Chair and EXIM Bank as well as all other US Government agencies and authorities involved, including Ambassador Theriot and her team at the US Embassy in Guyana, the Government’s strong appreciation and thanks for the approval granted and for the confidence shown in this GTE project and in Guyana,” the Office of the President said.

Further, the Head of State commended the Guyana team at the Office of the President, Ministry of Finance, Ministry of Natural Resources, and the Guyana Embassy in Washington DC, whose work helped secure this important outcome for our country.

Meanwhile, the American Chamber of Commerce of Guyana (AMCHAM) applauded the loan approval, signaling that the landmark agreement marks the largest-ever infrastructure loan in the Caribbean which signifies a growing confidence in Guyana’s prosperity and deepening the U.S.-Guyana partnership.

It said, “AmCham Guyana commends the Government of Guyana, the U.S. Embassy, and all stakeholders involved in this ground breaking achievement. We look forward to supporting U.S. EXIM’s continued engagement in Guyana and fostering further economic cooperation between our two nations.”

Repayment

On Friday, Vice President Bharrat Jagdeo during his weekly press conference at Freedom House, Georgetown explained that there is a fixed 4% annual interest rate on the loan which would be repaid over a period of 15 years.

He said the country will be required to make two annual payments on November 1 and May 1, commencing on May 1, 2031.

“The interest rate is 4% so if you calculate it over the period, but remember there are moratoriums and all of that so it’s a 4% interest and you can calculate what the repayment would be over a time period. It’s fixed at 4%…principal repayment is 30 semi-annual installments…so its 15 years thereafter,” the VP explained.

Background on loan

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.

On November 28, Vice President Bharrat Jagdeo announced that approval had been granted for the loan.

At that time Jagdeo explained that the loan will be providing retroactive financing, so if it is made available it will be covering financing that the government had to make since the start of the project.

Last month, Prime Minister Mark Phillips indicated that some $99B has been spent to date on the GTE project. His revelation came as Parliament approved an additional $25.3B to further advance the project. As of November, 58% of the work had been completed, according to the Prime Minister.

Just last week Kaieteur News reported that International award-winning lawyer, Melinda Janki, warned the US EXIM Bank that approving Guyana’s application for a loan to support the GTE Project exposes the financial institution to political, financial and litigation risks.

In a submission to the Bank, dated December 6, 2024, Janki lobbied the Board to refuse Guyana’s loan application, pointing out the risks for the Bank as well as potential breaches of fiduciary duties and the resulting harm to the American people and American economy.

Additionally, over 16,000 Americans had also written to Chair of the EXIM Bank in May 2024, demanding the financial institution not to fund the controversial gas project.

According to a letter from 16,452 members of Friends of the Earth United States, a non-governmental organization, the project is both a disaster for Guyana and the climate.

They said, “This project is both a disaster for Guyana and the climate! The U.S. government should not be using taxpayer dollars to subsidize Exxon – a company that has recently reported billions in profits.”

(US EXIM Bank approves US$527M loan for Gas-to-Energy project)

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• Ali, approve, gas, GTE, loan, US-EXIM bank

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