Hyphen Hydrogen Energy, originally proposed a standstill on development of other hydrogen projects until the end of a defined feasibility period as well as a ‘most favoured project’ obligation on the part of Namibian government.
Hyphen is the preferred bidder for Namibia’s first large-scale vertically integrated green hydrogen project
These conditions are contained in a draft feasibility and implementation agreement (FIA) being negotiated between Hyphen and government that was leaked last week by AR activist Job Amupanda on his social media platforms.
However, these terms were apparently rejected by government lawyers working on the draft proposal.
“We have proposed in place of a standstill on development of further projects, a clause by which Namibian government confirms to Hyphen the intention of government to award future projects in a manner that aims to achieve an orderly and sustainable development of hydrogen projects in the park. We propose this clause in order to attempt to give some comfort to Hyphen and their future funders in respect of further projects,” reads a memorandum dated 14 October 2022 and directed to government’s negotiating team (GNT), from Clifford Chance of the Hyphen team.
The Hyphen proposal purportedly urged the GNT to review the proposal carefully to ensure the contents correspond to government plans for future green hydrogen developments.
However, director general of the National Planning Commission Obeth Kandjoze stood firm that allegations made by Amupanda with regard to the green hydrogen project, are unfounded, twisted and manipulated to sensationalise a genuinely competent effort by government.
In a statement this week, Kandjoze said negotiations are still ongoing with the German partners.
“Given that negotiations are ongoing, the GNT is not at liberty to comment on the details of any positions that have been established and or are under development,” Kandjoze said.
Housing
Moreover, Hyphen believes government should provide accommodation and related infrastructure for all of its employees and supply chain companies’ employees in and around Lüderitz.
“While Hyphen agrees that it is responsible for such things during the construction period, Hyphen believes that government, in its role as sovereign, should be responsible for them after the commercial operation date as part of the general social and economic development of the area,” the memorandum stated.
Change of law
Meanwhile, industry insiders told New Era the proposed inclusion for a legislative amendment, according to the draft negotiations, is not unusual and is in fact consistent with international practice in relation to energy and infrastructure projects. This is since government is incentivising Hyphen to establish itself in Namibia and expecting the company to make a significant multi-billion euro investment in the country.
In this case, Hyphen pointed out, investors often request and receive an undertaking from the host government for compensation for changes in the law from a baseline date, given that compliance with any change in law imposed will be a requirement of continued operation in good standing.
“Government can always change the law and require Hyphen to comply with that change in law - the issue is: which party shall be responsible as a matter of the contractual terms of the FIA (feasibility and implementation agreement) for the financial consequences, either positive or negative of the change in law,” Hyphen questioned.
The concern from government’s legal team is this is a serious obligation, which could in the future cost money, as the host government would be required to compensate Hyphen for changes in law. The company further explained government would be required either to find a manner in which Hyphen could be exempted from such change in the tax regime or would have to compensate Hyphen for the cost of any legal changes.
The attorney general’s office, however, is concerned that this could potentially be seen as a usurpation by the executive branch of the functions of the legislator, in that it would require the State to pay a foreign investor compensation for decisions made by the Legislature.
Synthetic Fuels Act
Also, the memorandum stated government’s obligation is to propose changes to legislation, noting that the risk of such legislation not being passed remains with government.
“There is a procedure set out by which government will consult with Hyphen and provide it with government proposals for the legislation. Hyphen will then have the ability to comment on that legislation, so government may also consult with other interested stakeholders should GRN wish to do so,” was the reaction from the State.
Government is also concerned that if a Synthetic Fuels Act is finally adopted, that Namibia would have more to lose should the project become unfeasible, thus exposing government to payment of Hyphen’s reimbursable project expenditure.
In August this year, Prime Minister Saara Kuugongelwa-Amadhila stated Namibia is in the process of developing its national green hydrogen strategy.
The strategy is expected to ensure overall direction and cohesion between new policies needed for the industry as well as existing legislative frameworks.