New climate funding flowing into Namibia is being used to make green hydrogen and industrialisation projects less risky.
Speaking at a media briefing about green hydrogen funding in Windhoek yesterday, Namibia Energy Transition Fund Managers (Na-H2) chief executive Mercia Geises said many green industrial projects are at an early stage where they need support in licensing, engineering design and financial modelling.
Last week, the SDG Namibia One Fund, managed by Na-H2, announced it had received US$56 million (N$930 million) from the Green Climate Fund (GCF) to support green hydrogen and industrialisation in Namibia. In the same funding package, South Africa will receive US$84 million.
“[When submitting a proposal], you look at the size of the economy, national development goals, the pipeline of available projects, the state of the development and what type of funding they need,” Geises said.
The funding needs for Namibia and South Africa are very different. South Africa has a bigger industrial economy, with deeper capital markets, while Namibia is at the start of its industrialisation, Geises explained.
This means Namibia received an allocation of funds for project preparation, which South Africa did not receive.
“[When we prepare proposals, we ask] what is needed to get the projects to financial close?” Geises said.
In Namibia, with previous funding from Invest International and the European Union, SDG Namibia One has invested in green hydrogen, green iron, green ammonia and fertiliser production.
“A big part of the funding goes towards licensing and permitting workstreams, including generation licences, land leases, water licences and environmental clearances. A second part goes towards developing projects technically,” Geises said. The funding also goes towards financial modelling, so that the projects can be presented as a proper investment case.
She said the fund has, for now, been prioritising projects that already have pilots. The fund wants to turn the successful pilots into commercially viable large-scale projects.
The purpose of funding like the GCF is to derisk the projects. SDG Namibia One will eventually be able to provide both private and public investors – including pension funds – access to a diversified set of green industrial projects in Namibia.
“We use these grants to derisk these projects, so that by the time the Namibian pension funds come in, the risk profile is fair. [We need to provide] some certainty on the construction timeline, risk profile and returns,” Geises said.
PARTNERSHIP
The SDG Namibia One fund is managed by Na-H2, which in turn is owned by the Environmental Investment Fund of Namibia (EIF), Climate Fund Managers and Invest International.
All of these organisations partnered with the Development Bank of South Africa (DBSA) to submit a proposal for funding from the GCF.
“At the time of our submission of the proposal through the DBSA, there were 49 proposals that were competing with us to the board. Only about nine projects [were selected],” EIF chief executive Benedict Libanda said yesterday.
He said the selection of the proposal by Namibia and South Africa is a “vote of confidence” that will attract other investors.
The GCF is one of the most successful climate financing investment firms in the world, according to Libanda. It provides the financing through the Southern African Industrial Decarbonisation Facility, which is intended to decarbonise South Africa’s industry and develop Namibia’s early-stage green industry.
