The adjudication board discussions on the US$50 million dispute between government and gas to energy contractor CH4/Lindsayca will not affect this country’s current US$660 million loan application with the US EXIM Bank, Vice President Bharrat Jagdeo last Thursday said.
With US EXIM officials visiting recently and completing the final due diligence process with no adverse findings, according to Jagdeo, the way is now paved for the loan application to go before the board of the bank.
“The evaluation has been completed for the EXIM Bank loan. This is not going to affect the processing of the loan. If we refuse to abide by the terms of the contract, which is providing for independent arbitration or mediation when there is a dispute, that could be considered expropriation if it is a US company. …But we are following the grievance procedure as established in the contract so that will not affect the processing of the loan,” Jagdeo said when asked about the process.
He was quick to point out that it was Lindsayca that “claimed this figure” and that the government’s “international engineers said they are not eligible for a cent”.
“We have offered three months’ extension in time. Their liquidation damage is over US$11 million per month if they don’t complete the project in time so they have to pay back,” he expressed.
Asked about a timeframe for the discussions regarding the disputed sums, Jagdeo said that he did not know but he was sure that whatever it was, it would not affect “the movement of the project. This [project] would be done.”
As it relates to the loan process with EXIM Bank, he said, “When the US makes loans of this nature they have to do their independent checks…they have done all of those …we are expecting that to be processed.”
Two weeks ago, Jagdeo said that the company had moved to a Dispute Adjudication Board as it was locked in a stalemate with the Government of Guyana over the sum of US$50 million the company felt it was owed because the Wales, West Bank Demerara project site was delivered to it three months late.
Disputing a Reuters report which stated that the contractors for the project had taken government to arbitration for US$90 million for cost overruns, Jagdeo said the government was advised, following a review by its supervisory project consultant, Engineers India Limited (EIL), that the claims lacked merit. “It is US$50 million, not US$90 million…,” Jagdeo clarified
This dispute and delays to parts of the project underline the high stakes in play for the government in what will be the largest ever public sector project in the country’s history and one that is coming with the promise of a cut in power rates by 50%.
Although this means that only one aspect of the project will be delayed, and it will not interfere with the overall end of 2025 project schedule, it was the first time the PPP/C government acknowledged that it is at loggerheads with the project site contractor and that an arbitration hearing was pending. This was first reported by Reuters on April 8th.
“Why did this happen? As I said, [the government] was responsible for the site preparation; the road, the materials offloading facility (MOF), and the laydown yard. We were supposed to hand over the site to the contractor by June, [but] we did not hand over the site; that is, Exxon did not hand over the site until September, and it was still incomplete. And they handed over an additional US$14 million, from the US$1 billion that they set aside, to the contractor, to complete the site… Who was the contractor that Exxon had? It was GYSBI [Guyana Shore Base Inc] to prepare this site. So, we had a three months’ delay by GYSBI and Exxon to hand over the site to the contractor,” the Vice President had explained.
“We have now decided that we will give them an extension of three months. That is from the end of 2024, an additional three months. That is why we are arguing the plant must be completed by end of March, 2025 instead of end of March 2024. GAICO was to do the MOF handover by July to Exxon, to the contractor. This was done until September [and] they still had some issues with that. They [CH4/Lindsayca CH4] want a longer period, because the liquidated damages for not completing the project on time for the contractor, if they don’t complete the project on time, it is over US$11 million per month. They have to pay liquidated damages for delays on the project. So they are arguing that they need more time, beyond the three months. We are saying, three months is adequate for you because that is the delay that we’ve had,” he added.
In February of this year, after rebuffing public qualms about the timeline, Project Lead Winston Brassington had announced that the project would be delayed by months but that its completion would still be at the end of next year. The timeline deferral, according to Brassington, was due to a number of factors including supply chain impediments and work delays. He did not cite the arbitration dispute.
