Decision on 24% green hydrogen equity in November
Funding models for stake studied
Government is still undecided on whether to take up the equity offer, worth a mammoth N$14 billion, but a decision is looming.
Government has set November as the deadline for its decision on whether to take up a 24% equity offer in the green hydrogen project run by Hyphen Hydrogen Energy, worth a staggering N$14.4 billion.
Green hydrogen commissioner James Mnyupe, speaking on The Agenda, said government has no obligation to take up the offer – and if it does, it has several financing options to consider.
In June, Mnyupe told Namibian Sun that government prefers to fund its 24% stake in the project in order to guard itself against escalating costs of equity capital for investors.
Many Namibians have questioned why the country must fund equity in a resource it owns.
But Mnyupe at the time said: “If Namibia had demanded a free 24% 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”.
On The Agenda - which airs this Sunday - Mnyupe said elsewhere in the world, governments are providing financial support for clean energy projects, including green hydrogen.
“The industry in itself is nascent, meaning it’s new and not yet commercially feasible on its own. It needs subsidies and you need to support it a little bit. Elsewhere in the world, governments are pumping resources into these industries.
Equity offer
Mnyupe said bidders for the green hydrogen projects were asked to indicate how much equity they would avail to Namibia – both as free-carry and commercial equity.
“Hyphen’s offer was the highest at 24%. They offered us to buy 24% equity after the financial clause stage. This is the stage at which the commercial viability of the project is assured.”
Mnyupe said prior to the financial close stage, €93 million (about N$1.9 billion at yesterday’s exchange rate) would need to be invested.
He added that Namibia has received a grant of €40 million (over N$800 million) from the European Union, money the country does not have to pay back should the project prove futile.
“Right now, we’ve got a 24% free-carry [until the financial close stage]. Even after the project has been proven to be viable, we have no obligation to buy any equity. It’s an option.
“What we are doing currently is investigating the attractiveness of the project [from the Namibian point of view]. By November this year, we will make a decision on whether to keep all the 24%, which would require us to raise funds, or scale down some of the equity.”
He said various funding models would be considered if government decides to take up the offer.
“We can, for example, sell 14% to raise enough money to pay for our remaining 10% equity.”
The overall investment required from all partners as a collective is N$192 billion.
Too risky
In June, Institute for Public Policy Research (IPPR) executive director Graham Hopwood cautioned government about taking up the 24% equity, saying this should only happen once all facts about the project and its viability are known.
“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
At the time, 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.”
Green hydrogen commissioner James Mnyupe, speaking on The Agenda, said government has no obligation to take up the offer – and if it does, it has several financing options to consider.
In June, Mnyupe told Namibian Sun that government prefers to fund its 24% stake in the project in order to guard itself against escalating costs of equity capital for investors.
Many Namibians have questioned why the country must fund equity in a resource it owns.
But Mnyupe at the time said: “If Namibia had demanded a free 24% 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”.
On The Agenda - which airs this Sunday - Mnyupe said elsewhere in the world, governments are providing financial support for clean energy projects, including green hydrogen.
“The industry in itself is nascent, meaning it’s new and not yet commercially feasible on its own. It needs subsidies and you need to support it a little bit. Elsewhere in the world, governments are pumping resources into these industries.
Equity offer
Mnyupe said bidders for the green hydrogen projects were asked to indicate how much equity they would avail to Namibia – both as free-carry and commercial equity.
“Hyphen’s offer was the highest at 24%. They offered us to buy 24% equity after the financial clause stage. This is the stage at which the commercial viability of the project is assured.”
Mnyupe said prior to the financial close stage, €93 million (about N$1.9 billion at yesterday’s exchange rate) would need to be invested.
He added that Namibia has received a grant of €40 million (over N$800 million) from the European Union, money the country does not have to pay back should the project prove futile.
“Right now, we’ve got a 24% free-carry [until the financial close stage]. Even after the project has been proven to be viable, we have no obligation to buy any equity. It’s an option.
“What we are doing currently is investigating the attractiveness of the project [from the Namibian point of view]. By November this year, we will make a decision on whether to keep all the 24%, which would require us to raise funds, or scale down some of the equity.”
He said various funding models would be considered if government decides to take up the offer.
“We can, for example, sell 14% to raise enough money to pay for our remaining 10% equity.”
The overall investment required from all partners as a collective is N$192 billion.
Too risky
In June, Institute for Public Policy Research (IPPR) executive director Graham Hopwood cautioned government about taking up the 24% equity, saying this should only happen once all facts about the project and its viability are known.
“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
At the time, 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.”
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