Govt declines free green hydrogen equity

Government yesterday said it consciously chose to fund its 24% equity participation in Hyphen Hydrogen Energy’s green hydrogen project – at a minimum cost of N$16 billion – in order to guard itself against escalating costs of equity capital for investors that free equity could bring about.

Hydrogen commissioner and presidential economic advisor James Mnyupe told Namibian Sun late yesterday that carried interest in the project, which many Namibians are demanding, has its own risks.

He said: “If Namibia had demanded a 24% free equity stake, incoming investors would have to generate a 33% higher return to achieve the same outcome, and consequently Namibia’s hydrogen projects would be more expensive and less attractive to investors”.

It was announced yesterday that government concluded agreements for the establishment and management of Namibia’s sovereign wealth fund, ‘SDG Namibia One’; the exercise of government’s option to take up a 24% interest in the first awarded project being developed by Hyphen, and the signature of a memorandum of understanding between a coalition of Namibian and Dutch partners.

Competitive industry

Mnyupe said there is a large amount of competition between countries to grow their own hydrogen industries, with a lot of competing countries offering billions of Euros in subsidies to attract investors.

“SDG Namibia One is a blended finance vehicle that will allow government to crowd in both concessional funding from international donors and commercial capital from domestic and international investors to fund the development of Namibia’s hydrogen industry,” he added.

SDG Namibia One represents an opportunity for Namibians to participate beyond the 24% equity stake held in Hyphen, as it will offer investment products to various local institutional investors, and thus to the general public, he argued.

“Government will continue to ensure that a competitive industry emerges by tendering new hydrogen projects, while strategically participating in these projects if government deems that doing so would increase Namibia’s relative attractiveness.”

Risky

Government is almost guaranteed to pay for its participation in the first two stages of the project – the feasibility and financial close phases.

For the feasibility stage, Namibia would need to avail €95 million (N$1.88 billion) as part of her 24% stake, while the financial close stage would require a staggering N$14 billion from Namibia alone.

Thanks to Namibia’s strategic partnership with the European Union member states, the Dutch government - via its development institution, Invest International - has given a grant of €40 million (about N$850 million) to the Namibian government to seed the SDG Namibian One Fund. It will facilitate the de-risking of new hydrogen projects in Namibia, Mnyupe said.

The overall investment required from all partners as a collective is N$192 billion.

Meanwhile, Institute for Public Policy Research (IPPR) executive director Graham Hopwood has cautioned government on its plan, saying it would be risky for Namibia to make such an investment while little is known about the viability of the Hyphen green hydrogen proposition.

“I don't think government should exercise its option to take up a 24% [stake] until the feasibility stage of the project is completed. That would seem to be too risky,” he said.

“It also depends on where government gets the loans from to pay for the 24% and what conditions apply. If the project does misfire through no fault of the government, we need to be sure that taxpayers do not end up covering the cost.”

Neo-colonial agenda

Economist Omu Kakujaha-Matundu said the project is driven by a neo-colonial agenda.

“It is more about the interest of European nations rather than concerns for Namibian development. The so-called 24% stake touted by government, and which we don't know how it was arrived at, clearly shows that Namibia is negotiating from a weak position,” he said.

“To go around borrowing money to buy your own resources is absurd, to say the least. Namibia should demand those funds from the investors and their governments, as an upfront buy-in or compensation for the use of our resources.”