Nghiinomenwa-vali Erastus
Counting from June 2023, the Namibian government has six months to weigh its
options, find capital, and decide whether it will take up 24% equity in Hyphen Hydrogen
Energy.
The Cabinet approved a controversial N$192,1 billion deal with Hyphen for its green
hydrogen project last Friday.
The Feasibility and Implementation Agreement (FIA) was signed on 26 May to govern
the process under which Namibia’s first green hydrogen project will be realised, as a
first step in the implementation of the government’s broader green hydrogen strategy.
The FIA is split into five sequential phases, and each phase can only commence if the
previous phase has successfully been completed and approved by the government.
The first phase called the Preliminary Phase covers the period from the date of the FIA
signing until the date on which both the government and Hyphen are satisfied that all
conditions for the FIA to become "effective" are met.
According to the two partners, this phase will last up to six months.
During these six months, the government is now expected to assess if it will become a
partner in the envisaged project and also be entitled to dividends (by acquiring a stake)
and the risk to be undertaken during the projects.
If no share capital is bought, government will only be entitled to royalties, rent for the
land, and other streams of income that are envisaged to accrue to the government in the
construction and when the project becomes operational.
"It is during this preliminary phase that the GRN can choose whether or not to exercise
its option to acquire up to 24% of Hyphen's share capital," the MoU states.
The FIA reveales that the government "has so far mobilised more than €40 million
(N$849 million) to de-risk its equity investment in the project," the updates indicated.
The risk is associated with the infrastructure and future green hydrogen projects.
After six months have lapsed, the project will move into the second phase which is the
feasibility phase.
In this phase, Hyphen is tasked with assessing the technical, financial, environmental,
social, and commercial viability of undertaking the project, including the potential
establishment of common user infrastructure.
The promised socio-economic development targets will also be assessed and agreed
upon to ensure that the project benefits all of Namibia through training, education, job
opportunities and localisation.
The FIA indicated that it is Hyphen's responsibility to fund these feasibility activities
and produce a comprehensive feasibility report setting out his proposed project design
and commercial structure, for the government's consideration.
As for the government in this phase, it will be responsible for providing the land on
which the project will be established, and to develop and implement the required legal,
fiscal, and regulatory environment necessary for the establishment and sustainable
operation of Namibia's green hydrogen industry.
In the third phase, the government is required to consider whether to validate the
project or not against certain pre-agreed conditions as contained in Hyphen's bid per
the Request For Proposal.
Upon project validation by the government, Hyphen will now start raising the necessary
finance for the project to construct the required infrastructure for the project.
The last phase is to commission the project, where Hyphen will be responsible for the
maintenance and operation of the project.
In the commissioning or operation of the project, Hyphen is again expected to comply
with the agreed socio-economic development targets applicable during operation.
This includes paying land rentals and environmental levies to the government
equivalent to N$548,6 million per annum (increasing at 2% per annum); paying
royalties equivalent to 5% of gross revenues.
At the same time pay corporate income tax if they have made a profit and other
Namibian taxes in accordance with the requirements put in place by the government for
the wider green hydrogen industry.
The partnership between the Namibian government and Hyphen represents the first
step in Namibia's journey that intends to unlock the potential of becoming one of the
world's leading green hydrogen production hubs. Email: erastus@thevillager.com.na