New green hydrogen fund launched

Tujoromajo Kasuto

The Government has launched SDG Namibia One during the ongoing United Nations Climate Change Conference, COP27, in Sharm el-Sheikh, Egypt, and secured a Grant Facility of EUR 40 million from the Dutch Prime Minister, Mark Rutte as seed capital to establish the facility.

SDG Namibia One aims to develop Namibia’s green hydrogen economy by streamlining access to public, private and philanthropic capital, linking finance to policy decisions, reducing transaction costs and accelerating high-quality project development.

SDG Namibia One is a blended financing platform managed in partnership between Invest International, Climate Fund Managers, and the Environmental Investment Fund of Namibia.

President Hage G. Geingob said these facilities should serve as examples of what is possible when developing and developed nations work together to mobilize fit-for-purpose capital to build assets that not only contribute to combating climate change, but also provide an opportunity to industrialize developing nations.

‘’This morning at the Namibian pavilion, we announced a portfolio of concessionary climate financing from our European brothers and sisters. Grant funding to the tune of US$43 million has been provided by the Dutch Government through their infrastructure funding vehicle Invest International. The European Investment Bank announced a facility of €500 million available to build green hydrogen and renewable energy projects in Namibia,’’ he said.

These commitments, he added, followed a €40 million grant from the German government through their Ministry of Education and Research.

Geingob said Namibia encapsulated all this in a memorandum of understanding that was executed with the European Union, underlying the desire to deepen collaborations on green hydrogen and critical raw minerals.

Green Hydrogen Commissioner and Presidential Economic Advisor James Mnyupe said a funding

agreement for an initial development capital of EUR 40 million was signed between the Namibian

Government and the Dutch Government during the launch, while the strategy is to use the grant to

catalyze additional development capital to the SDG Namibia One.

He said this will subsequently reduce risk on private capital and facilitate further investments at scale to support the development of high-quality green hydrogen assets and associated value chains.

Mnyupe further added that Infrastructure development is faced with challenges such as scale, risk

sharing, speed and competition. SDG Namibia One is therefore a blended finance solution to address such challenges, and as such aims to mobilize up to EUR 1 billion of investment capacity over the next 10 months.

‘’The Namibian Government has analyzed this partnership in detail and concluded that this established offering presents massive opportunities in many aspects as opposed to direct investment in underlying assets. These include enhanced share of net returns on investment as capital is accessed through grants and mixing high concessional with non-concessional one. Such structure amplifies equity return for the Government while achieving a money multiplier effect through long term capital recycling. The platform is therefore designed as a programme, with a multiphase approach that includes a development fund, construction fund and operational fund.

Such design facilitates successful fundraising and investments in untested markets and projects, as well as being able to attract sponsors with limited track record of operating in a market, or innovative schemes with limited proofs of concept. Consequently, it is suited to enhance participation of domestic financing markets and business entrepreneurs,’’ he explained.

In addition to the above, he said one major attribute of this partnership relate to capacity building as the joint venture allows the unique international expertise and investor’s relationship of the Climate Fund Managers to be harnessed while connecting domestic expertise of the Environmental Investment Fund of Namibia and giving them exposure to sophisticated capital raising designs and deal structuring elements.

The Environmental Investment Fund of Namibia will therefore benefit from capacity building by being directly involved at the fund manager level from the outset, including development of fund management, investment fund-raising and capital mobilization abilities.

Moreover, additional skilled bandwidth and bench strength will thereby be created at the Environmental Investment Fund of Namibia and ultimately within the Government of Namibia.

Mnyupe said the green hydrogen development is set to transform the economic structure of Namibia through forex earnings as an equity participant, but most importantly offering new government revenue streams through royalties, taxes, etc.

The industry also offers huge employment opportunities for Namibians, ultimately addressing poverty and other socio-economic challenges.

However, the commissioner notes that, ‘’despite this great opportunity for Namibia, we recognise that the green hydrogen industry is in its infancy, and it is difficult to predict how the market will develop in the long term and that we will face challenges relating to finance, technical capacity, and many others still unforeseen.

However, we will work closely with our international partners to mitigate such risks, hence a lended

finance in the form of SDG Namibia One was launched today with the premise to attract a diverse group of players in our development journey’’.

By Observer