Namibia recently signed a Feasibility and Implementation Agreement (FIA) on a landmark green hydrogen energy project. Fedden Mukwata looked at the legal considerations to be undertaken after the conclusion of the agreement.
On 26 May 2023, the government of the Republic of Namibia andHyphen Green Energy (Pty) Ltd signed a “pioneering” agreement that will take them closer to the realisation of ambitious plans to develop the largest green hydrogen project in sub-Saharan Africa, estimated to cost US$10 billion. At full development, the project will produce 350 000 metric tons ofgreen hydrogen a year and will employ an estimated 3 000 people, 90% of whom are expected to be local Namibians.
With deals like this, questions of ownership and value to the people inevitably come to the fore. In this instance, the FIA states that Namibia has the opportunity to be a co-investor in the project, with the right to take up to a 24% equity interest at cost. As a co-investor, the government will be entitled to returns on its investment, which may be used for the benefit of the people.
For now, the government has immediate legal obligations to address as the FIA requires it to ensure that Namibia is equipped with the necessary legal, fiscal and regulatory environment to enable the implementation of the project.
Although the full agreement has not yet been made publicly available for scrutiny, energy lawyers in the know say there is much work to be done to ensure Namibia has the requisite legal framework in place. A well-defined legislative framework is needed to ensure that the project is regulated and that it will be in compliance with the agreement. Failure to comply would be considered a breach of contract which could lead to further legal consequences for the government.
AsRicardo Hausmann, founder and director of Harvard’s Growth Lab, says, “Creating value out of a country’s natural resources requires a legal framework that allocates property rights on the resources needed to make investment feasible and assigns the economic gains fairly, so as to capture value for the nation.”
In this case the legal framework will also have to address other aspects of transparency, continuous stakeholder engagement, land rights and other legal rights which may come into direct conflict with this onshore project.
The Namibian government clearly sees great opportunity for the country in the green hydrogen sphere, and in November 2022 Namibia published the Green
Hydrogen and Derivatives Strategy. The strategy announced the launch of the US$1 billion SDG Namibia One infrastructure fund “to facilitate and accelerate the development of a green hydrogen sector and economy in Namibia”. Namibia’s Energy Policy 2017 and the National Renewable Energy Policy 2017 also promote the efficient use of all forms of energy and the utilisation of clean energy, like green hydrogen, respectively.
However, energy lawyers confirm that Namibia currently has no well-defined legislative framework for hydrogen projects, nor are there any regulations in place to regulate the value chain of the green hydrogen industry. They say it is therefore imperative that Namibia fast track the adoption of a fit-for-purpose regulatory framework and also develop the existing legislative landscape that applies more generally.
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