The main driver of clean energy investment is energy security rather than climate change. This is according to investment specialists, who have reported major increases in clean energy investment around the world.
In fact, globally, energy investment has seen around a 50% increase in clean energy, which equates to US$1.3 trillion and is expected to increase to US$2 trillion by the end of 2022.
As a result of this escalation in investment, the world is going to see more clean energy, more electric cars and more solar, hydrogen and nuclear power slowly but surely replacing fossil fuels.
Despite this increase, the International Energy Agency (IEA) repeated its assertion that clean energy investment would still need to hit over US$4 trillion by 2030 in its Net Zero Emissions by 2050 Scenario. This, the IEA’s report said, highlighted “the need to attract new investors to the energy sector”.
In steps Mergence Unlisted Investment Managers (Namibia) (Mergence Namibia), which was launched in 2014 as a majority Namibian-owned and led investment house, which focuses on unlisted/private markets investments with a competitive advantage in infrastructure investing.
Investments in Fund I were made on behalf of the GIPF through the Mergence Namibia Infrastructure Fund Trust.
Mergence Namibia is in partnership with a South African specialist black-owned boutique asset manager, known as Mergence Investment Managers, who have successfully deployed more than close to R4 billion over ten years into unlisted investments across the Southern African Development Community (SADC).
“Mergence has demonstrated a strong track record of investing in unlisted entities, provided certain investment criteria are met, and we continue to seek local investment opportunities in the Namibian economic and social infrastructure space,” explained Mergence Namibia portfolio manager Hileni Nghinaunye.
She noted that as an unlisted institutional investor, Mergence Namibia, is governed by the mandates given by its clients, which comprise institutional pension funds, government agencies, fund of funds managers and multi-managers within Namibia, with the GIPF as the major client.
“Our Funds focus on mezzanine debt, equity financing of Previously Disadvantaged Namibians (PDN) and private equity investments to support and enhance infrastructure development within Namibia – and the aim is to address and support the outcome objectives of the Harambe Prosperity Plan and the NDP4 in line with Vision 2030. We invest across a wide range of infrastructure sectors, such as renewable energy, land servicing, transport, water, communication, education and health,” Nghinaunye stated.
As a Regulation 29 compliant investment manager Mergence Namibia aims to acquire assets that result in sound financial returns, while supporting the development of social and economic infrastructure growth needs.
According to Nghinaunye, Fund I is now fully deployed.
“We are proud to have invested in three successful renewable energy projects, with institutional partners via Public-Private Partnerships (PPPs) and other arrangements, as well having enabled PDN participation. This shows that the mandate has recorded success in local ownership, job creation, infrastructure development and general economic growth. We are back in the market raising capital and launching Fund ll in the first quarter of 2023,” she stated.
Mergence Namibia’s investment strategy focuses on community upliftment through infrastructure development, through which it empowers small business owners, creates jobs and improves the lives of all Namibians.
Mergence Namibia also owns majority stakes in all its renewable energy investments.
Nghinaunye stated: “Our shareholding in the two Ejuva projects in Gobabis is 66% each and 56% in Momentous Solar One, located 25km outside Keetmanshoop, in areas with favourable solar irradiation.
The Ejuva projects were commissioned in 2017. The purchase of a majority stake in the projects signals a positive trend to localisation of the industry and in line with the Fund’s broader strategy to position itself as a strategic partner, focused on tracking the acute power shortage and other infrastructure in Namibia. As a sign of further localisation, accounting and reporting for Momentous Solar One previously done offshore have been transferred to local service providers”.
When asked how Mergence Namibia expects its investments to impact the country’s energy mix and generation capacity, Nghinaunye pointed out that the country is still spending, approximately N$2.6 billion per year to import energy when it can use its energy producing capacity, such as wind and solar energy to become energy sufficient.
“At the beginning, it was cheap and cost effective to import, compared to the technology required to produce energy at the time. Things are changing now and we need to adjust in line with the changes. Private funding options for renewable energy projects in the past were very limited, unlike now – and the aim is to create a pro-investment platform for energy generation initiatives,” she stated.
Nghinaunye continued that Namibia has the necessary mineral resources or climate to meet its energy requirements; however, in most cases, there is a lack of funding to develop the energy sector.
This is because infrastructure projects are capital intensive and PDN investors need support to participate as equals alongside international investors.
“It is often difficult for PDNs to make their voices heard. It is also challenging for local shareholders to raise finance on competitive terms while obtaining a reasonable return on investment. Mergence in most of its projects has addressed this lack by offering PDN funding – we can and want ideally to facilitate an equity stake for the Fund in addition to funding the PDN partners to make the economics for the PDN participants more attractive,” Nghinaunye stated.
Meanwhile, from a developmental impact point of view, the projects have created temporary and permanent jobs through construction, operations and maintenance.
Nghinaunye noted the estimated average number of jobs created is four permanent jobs, 75 seasonal workers who cut grass every quarter and two to three security employees daily.
This is in addition to local ownership, skills development and stakeholder management.
The Mergence Namibia board is also exploring ideas to support long-term social projects that are strong on community involvement, such as educational and sports activities, which Mergence Namibia plans to implement in the new year.
“In terms of the environmental impact, generating electricity through solar technology is one of the safest forms of replacing the use of fossil fuels, which release various pollutants, harm the environment and cause chronic respiratory disease, and may contribute to extreme weather events. Renewable energy provides significant health and environmental benefits as opposed to coal and natural gas,” Nghinaunye concluded.