Dear Editor,
IN the August 11, 2024 edition Kaieteur News (KN), a story was carried with the caption “Jagdeo changes tune on interest rates charged on ExxonMobil’s investments”.
If there is one thing that is true is that Vice President Jagdeo has been consistent since 2015 when he assumed the General Secretary (GS) role of his party and former Leader of the Opposition, and now Vice President.
There is a cost of capital, the cost of equity is the return on equity, which is the profit generated (ROE). The cost of the debt financing is the interest expense. The implicit interest rate on the debt financing, which is in the form of a lease instrument works out to 5.18 per cent, below the weighted average cost of capital (WACC) of ExxonMobil’s global WACC.

More importantly, the confirmation that the interest expense is not cost recoverable doesn’t mean that there is no interest on the debt finance. In the haste to distort, the most important point gets lost, i.e., the interest expense is NOT cost recoverable. Thus, in the context in which the question of the interest rate is framed by KN, the fact that the interest expense is confirmed to be, not cost recoverable, renders such line of questioning irrelevant.
Indeed, KN has been asking this question on the interest rate for a long time. But these are some of the most miniscule questions for any media house to dwell on and propagandize for so long.
It should be noted that when KN had initially put the interest rate question to ExxonMobil Guyana (EMGL) directly, EMGL’s Vice President had promptly referred them to an article I had written on the very question of the interest rate, where I had calculated the implicit interest rate. His referral to my article on same suggests that it was correct.

Further, I had made the point that any independent accountant, finance professional or economist can do so, especially since the financial statements for the oil companies are publicly available and accessible.
Therefore, the question of “interest rate” charged should never be a question for the policymakers or the oil companies directly, rather, the independent media should have their own subject matter experts to conduct these types of analysis and inform the general public.
In market economies like ours, there is a role for all and sundry, in the same manner there is a role for the media, often referred to as the “fourth estate”. There is a role too for analysts and independent professionals.

Do you think the Financial Times, The Economist Magazine, Wall Street Journal, and the New York Times ask ExxonMobil’s CEO what is their interest rates or cost of capital? They absolutely don’t, because those questions are for their dedicated, subject matter analysts, who derive the answer from analysing the company’s annual financial reports that are publicly available.
Yours faithfully,
Joel Bhagwandin