Green bonds mooted for hydrogen projects

GOVERNMENT is considering green bonds to fund projects using renewable energy to produce hydrogen for export, green hydrogen commissioner, James Mnyupe was quoted saying in an interview at the just concluded World Economic Forum in Davos.

Government has already outlined a significant build of facilities, largely due to ideal conditions for solar- and wind-powered energy needed to produce the fuel. A number of financing options are being considered with output set to begin within four years, Mnyupe further said.

“By the end of the start of next year, Namibia will have more clarity on whether it’s a green bond or a sustainable bond or even a blue bond,” Mnyupe said.

The production of hydrogen is set to grow in a move away from fossil fuels and lowering dependence on Russian energy, with the European Union looking to import 10 million tons a year by 2030.

“Developers will be responsible for raising most of the debt or equity, while the government will have a call option of up to 24% and potentially raise N$7.5 billion for their own equity. Issuing green bonds is one possible option and discussions have also started with lenders including the European Investment Bank and Climate Fund Managers to raise capital for the nation’s stake. We think if we do a good job of developing these projects we can raise quite a reasonable debt for it,” ,” Mnyupe said.

Namibia chose Hyphen Hydrogen Energy in November for a US$9.4 billion project. It will be developed in phases and is expected to produce 300,000 metric tons of green hydrogen a year from five gigawatts of renewable generation capacity and a 3-gigawatt electrolyzer.

Other green hydrogen projects are also planned in the region, with fuel and chemical producer Sasol Ltd. looking to start in South Africa’s Boegoebaai port that initially will cost an estimated US$10 billion. Chief Executive Officer Fleetwood Grobler said last month that the company plans to speed up development to meet demand from Europe.

The Port of Rotterdam is collaborating with state-owned Namport to start preparing facilities to export ammonia, which hydrogen is converted into for transport by vessel, to Europe, according to Mnyupe.

“Lining up off-take agreements for the fuel will also lower costs with a target to have the funding secured by 2024,” he said. 

Green hydrogen currently constitutes just a fraction of total hydrogen production. The technology is still not fully proven on a big scale, making it a rather risky bet.

There are other concerns. The electrolysis process to separate hydrogen molecules from water is expensive. Producing green hydrogen is even more costly when seawater is used, as Namibia plans to, because then the water has to first go through an expensive desalination process. Transporting hydrogen remains challenging.

“We rather take the risks for a better future, risk all that money to help clean up the environment,” Kandjoze said while he was at Davos. “We are a country that suffers excruciating drought one season and flooding the next. We better stomach that risk than simply wait.”

At the Namibia House in Davos, the green hydrogen pitch appeared to have intrigued potential investors. The investment session on the topic in the presence of President Hage Geingob was overbooked.

“We are overwhelmed by the interest that we are experiencing here in Davos from all sort of development agencies, funding agencies, technology partners,” Sven Thieme, executive chairman of O&L, Namibia’s largest privately held group of companies which is also building a green hydrogen plant as a pilot project,  was quoted saying at Davos.

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