The Green Hydrogen Dutch Factor
• By Uaueza Kanguatjivi
PRESIDENTIAL economic advisor James Mnyupe says the Dutch gave €40m (about N$800m) to Namibia as a grant to assist in sourcing imports of green molecules to sell to other European countries like Germany.
The government this week indicated that it would acquire a 24 percent stake in Hyphen Hydrogen, the company it chose as a preferred bidder for the US$10b Green Hydrogen project.
Hyphen has proposed facilitating the scale-up of hydrogen production in the Tsau//Khaeb National Park as part of the Southern Corridor Development Initiative (SCDI).
On Monday this week, President Hage Geingob, who met Danish Prime Pinister Mette Frederiksen and Dutch Prime Minister Mark Rutte in Windhoek, appealed for help raising funds to buy a stake in Hyphen Hydrogen.
The finance ministry announced on Tuesday this week that it would take up the 24 percent offered in the Green Hydrogen project.
Namibia’s Minister of Finance Ipumbu Shiimi said the official notice marks another key progressive milestone in developing a local and transformative synthetic fuels sector.
“The government delivering on the vision of the Harambee Prosperity Plan II and the first hydrogen valley to be developed, the Southern Corridor Development Initiative, recognised the need to strategically mobilise billions of Namibian dollars of funding in a manner that does not place additional fiscal burdens on the country,” the statement said.
On Wednesday, Mnyupe told Confidente that the government would use €23m (N$460m) from the €40m grant the Dutch government gave to buy the 24 percent stake in Hyphen Hydrogen.
“To develop the project from concept to a feasible stage, Hyphen has budgeted to spend €93m (N$1,9b). The government has agreed to fund 24 percent of that, so ±€23m,” Mnyupe said.
He also said there would be €17m (N$340m) left to develop other projects and/or hydrogen-related infrastructure.
Asked what is in it for the Dutch and how they benefit, Mnyupe said, “Dutch have set aside €300m (N$6b) to assist with sourcing imports of green molecules. They are going to sell them to European countries and customers like Germany. So a bit like Shoprite buying from the factory and selling to normal retail customers (they are wholesalers).”
Mnyupe further said if the project is technically, financially, environmentally, and socially feasible, the developers will endeavour to raise €10 billion (from capital providers, including lenders and equity investors).
The intricate math
Mnyupe said the project is expected to cost €93m to bring the project’s first phase to financial investment decision (FID), where the shareholders of Hyphen, including the government, will raise the capital required to implement phase one of the proposed two-phase project.
He said the capital for phase one would include debt provided by third-party lenders and equity raised by the shareholders.
He said the same process would follow for phase two of the project, with the added advantage that the cash flows generated by phase one could fund some of the equity requirements for phase two.
Mnyupe said Namibia has not yet decided to participate in the project’s equity as FID will be made in the future.
When the project gets to FID, the government will decide to either follow its rights and raise funding to pay for its pro rata share of equity at financial close or sell down a stake of equity in the project at a profit to fund a portion of its equity should it not wish to borrow.
“If the project reaches a financial close, the government could sell a portion of its equity stake, which would be worth significantly more than the €23m initially spent on project development,” Mnyupe added.
“Typically, projects of this nature raise at least 70 percent of the required funding from debt providers and the remaining 30 percent from equity providers. In this example, this would translate to €3.5b in debt (€5b x 70%) and €1.5b in equity ((€5 billion x 30%),” Mnyupe added.
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