It’s about time someone turn the spotlight on GHK Lall, an opinionist on every subject under the sun and on every prominent politician, chiefly the President and the Vice President.
A few months ago, I had the opportunity to share a virtual platform with him on Globespan, where he stated publicly that he worked on Wall Street and that he formerly held the gold standard finance qualification, theChartered Financial Analyst (CFA) designation. He then claimed that he no longer maintains his subscription, and therefore, he cannot use the designation behind his name. I wonder if he relinquished his training as well, assuming there is truth to his claim.
After reading his column in the August 19, 2024, edition of the Kaieteur News, captioned “Exxon’s interest rate, try return on equity capital”, I was forced to conclude that he could never be a CFA trained financial analyst for the following reasons.
In his August 19th column, a supposedly CFA trained analyst quoted a chartered accountant, namely, Mr. Lalbachan Chris Ram’s calculation of ExxonMobil Guyana’s (EMGL) Return on Equity (ROE) of 96%. One would expect that a CFA trained analyst would perform his own analysis and calculations. Unfortunately, Mr. Ram’s calculation of EMGL’s ROE is incorrect, and a CFA trained analyst ought to have picked this up instantly, rather than blindlyquoting another person’s work.
Having examinedthe 2023 financial statements for EMGL, the ROE, which is calculated using the formula (Net Income / Shareholders’ Equity), is actually 28% and not 96%. As of 2023, EMGL’s net income amounted to G$614.6 billion and shareholders’ equity stood at G$2.2 trillion (614.5/2,200 = 28%). He then goes onto state that “Exxon collects back its investment plus a profit on it (ROE/ROIC), and then also shares in what remains as oil profits”. This statement makes absolutely no sense.
That having been established, let’s understand the original contentious issue. The contention was always about what is the interest rate EMGL is charging Guyana. In this regard, I have addressed this specific question in previous writings, where I had calculated the implicit interest rate (5.18%) on the debt financing, which are in the form of long-term leases.
Additionally, according to the EMGL 2023 balance sheet, the debt-to-equity ratio was 24.8%. Now that we have established these various indicators (the ROE, implicit interest rate/cost of debt, and the debt-to-equity ratio), we can calculate the Weighted Average Cost of Capital (WACC). Accordingly, the WACC works out to 23.46%. To be clear, the ROE is the cost of equity capital, which is essentially the net earnings (net profit) generated by the equity capital employed, whereas the cost of debt capital is the interest rate charged.
These issues were clarified by the Vice President, wherein he confirmed that the interest expense is not cost recoverable, according to reports from EMGL. Following this clarification, Kaieteur News, in one of its editorial suggested that EMGL’s parent company couldbe charging an interest rate on the equity capital invested in Guyana.In this respect, one would have expected that a CFA trained analyst who works for Kaieteur News, would have explained to the editor and/or the publisher, that interest rates do not apply to equity capital. If EMGL’s parent company, ExxonMobil wanted to charge an interest on the capital invested into their Guyana subsidiary, then that capital would not have been reported as equity on the balance sheet, it would have been reflected as a non-current liability (long-term debt) on the balance sheet.
Moreover, someone with a CFA trained background would interrogate EMGL’s claim that the interest expense is not cost recoverable. Reason being, there is no explicit interest rate, it is an implicit interest rate, which means that the interest payment is built into the amortized repayment schedule over the life of the asset (FPSO). Thus, the only way to verify whether that claim is correct, is through the cost recovery audit. This is something that a real CFA trained professional would interrogate robustly.
It is worth mentioning that since I publicly questioned the authenticity of GHK’s claim of being a CFA trained analyst, a few persons who know him from decades ago reached out to me saying that he has no such qualification. One particular individual who worked with him in the 1980s before he left Guyana, said that GHK was an accounts clerk at GNIC (formerly GNEC). He also said that since then, GHK never had any professional qualification, neither a university level education. Indeed, GHK’s history is “murky”. It is unclear what was his real profession in the United States.He returned to Guyana to serve the APNU+AFC Government under questionable circumstances; he held the Chairmanship of the Guyana Gold Board, where there were a plethora of irregularities and procurement breaches under his tenure.
He (GHK) has no LinkedIn profile, so his professional credentials, experience and qualifications are nowhere to be found in the public domain, unlike other credible public commentators and analysts whose professional profiles are well within the public domain,easily searchable and verifiable.
These should be the minimum threshold especially for those so-called public commentators/analysts, who are not really analysts in the true sense, but opinionists.
Further, I am told that GHK has been writing opinion pieces for a very long time, since in the 1980s, which is quite revealing. Because in the 1980s, there was no such thing as an independent, private media. This means that he was writing for the State media on behalf of the centrally command, socialist Government at that time.
So, while he would like to present himself as a neutral voice, he is not. He has long been associated or aligned with the PNC/APNU.
Against this background, it is reasonable to concludethat GHK is an opinionist, not an analyst, especially since he has never proven himself to be a CFA trained analyst, although he claims to be one.