The recently signed pioneering Feasibility and Implementation Agreement (FIA) between the Government of the Republic of Namibia and Hyphen Hydrogen Energy (Hyphen) is set to govern the development, implementation and operation of sub-Saharan Africa’s largest, and its only fully vertically integrated, green hydrogen project.
By extension, it governs the process under which Namibia’s first green hydrogen project will be realised, as a first step in the implementation of Government’s broader green hydrogen strategy.
With limited existing international precedent to draw upon, government and the inter-ministerial Green Hydrogen Council assembled a negotiations team which was supported by international advisors, to develop the FIA. Government and Hyphen believe that the FIA will set a new global benchmark, creating a template for the sustainable and equitable development of other green hydrogen projects.
The transformative impact of this project on Namibia and its economy is considerable. The total project capital investment of US$10 billion (About N$195 billion) is roughly equivalent to the country’s annual GDP. At full scale development, anticipated before the end of the decade, the project will produce 2 million tonnes of green ammonia annually for regional and global markets.
PHASES
The FIA is split in five broad sequential phases. First is the preliminary phase lasting up to six months to allow for all conditions precedent to the FIA to be met and for Government to exercise its option to acquire up to a 24% interest in the project. Second is the feasibility phase which is a two-year feasibility period in which Hyphen is tasked with undertaking the assessment of the feasibility of developing the project.
The third phase is the validation phase in which the Namibian Government has 120 days following Hyphen’s submission of the Feasibility Report to consider and validate (if appropriate) the final project design. The fourth phase is the financing and construction phase where Hyphen will raise finance for the project and construct the project. Lastly, the operational phase. Hyphen will be responsible for the operation and maintenance of the Project, and for its eventual decommissioning at the end of the term.
ENVISAGED OUTCOMES
Under the FIA Hyphen is responsible for the technical, financial, environmental, social and commercial delivery of the project. Government is responsible for providing the land on which the project will be established and developing and implementing the required legal, fiscal and regulatory environment necessary for the establishment and sustainable operation of Namibia’s green hydrogen industry.
At the heart of the FIA is the commitment to the socio-economic development of Namibia, through job creation and local procurement. It is estimated that the project will create up to 15,000 new jobs during the construction phase, 3,000 permanent jobs during its operation, with the target for 90% of these jobs to be filled by Namibians and 20% by youths. The project is further targeting 30% local procurement of goods, services and materials during the construction and operational phases.
The project will generate significant income to the Namibian fiscus through the payment of land rentals, royalties on all project revenues and taxes. GRN also has an opportunity to be a co-investor in the project with the right to take up to a 24% equity interest at cost. Thanks to its partnership with the European Union and the Global Gateway Initiative, Namibia has mobilised donor and concessional funding from Invest International and the European Investment Bank of more than EUR540 million/ NAD 11.167 billion to finance the development of the green hydrogen industry and to fund its equity participation in the project, with additional support expected to be announced post the execution of the FIA.
Government has mobilised more than €40 million to date to de-risk its equity investment in the project, associated infrastructure and future green hydrogen projects, additional support is expected to be announced post the execution of the FIA. Namibia is also working closely with its development partners to establish a dedicated program that will provide the requisite resources to coordinate the implementation of the Hyphen Hydrogen Energy Project and Namibia’s broader green hydrogen strategy. This program illustrates the multinational nature of this industry and the important role Namibia will play in decarbonizing global hard to abate sectors, while industrializing its own economy.
WHAT HAS BEEN SAID
Hage Geingob, President of the Republic of Namibia, said: “The Harambee Prosperity Plan II noted that the Namibian Government would investigate the feasibility of incubating a synthetic fuels industry in Namibia, as a key transforming agent of our economy. On Friday the 26thof May 2023, we earnestly embark on that journey, as we kick start a process that has the potential to transform the lives of many in our country, the region and indeed the world.”
Ursula Von Der Leyen, President of the European Commission, said: “Namibia has the potential to become one of the main renewable energy hubs on the African continent and even world-wide. Today’s agreement is a major step for the production of green hydrogen in the country. I am proud that Global Gateway allows the EU and Namibia to invest in a shared future fighting climate change together, making Namibia energy-independent and creating jobs and prosperity.”
Marco Raffinetti, CEO of Hyphen Hydrogen Energy, said: “We are delighted to have concluded the FIA and look forward to delivering on the next phase of development of this ground-breaking project. On behalf of Hyphen, I would like to thank the Government for its unwavering support and relentless commitment to unlocking Namibia’s green hydrogen potential. We are confident in our ability to work hand in hand with the people of Namibian to drive lasting change through economic development and job creation, whilst paving the way for a greener and brighter future.”
Leave a Reply