Netherlands and Denmark to Help Create $1 Billion South Africa Hydrogen Fund

(Bloomberg) -- State-backed firms from the Netherlands will help create a $1 billion green hydrogen fund for investment in South African projects as part of Dutch and Danish investments in renewable energy announced at an event in Pretoria attended by the leaders of the three countries. 

While the breakdown of investment in the fund wasn’t given, Boitumelo Mosako, the chief executive officer of the Development Bank of Southern Africa, said in an earlier interview that Denmark would be involved.

The SA-H2 fund, a first for South Africa, will include the participation of the DBSA and the Industrial Development Corp. of South Africa Ltd., which are both state finance institutions. The Netherlands’ Climate Fund Managers BV and Invest International BV will be involved, as will South African insurer, Sanlam Ltd. and other “strategic investors,” the DBSA said in a statement.

South Africa’s abundant wind and solar resources and industrial capacity have positioned it to potentially become a key producer of the green fuel, which is expected to ultimately replace natural gas.

“South Africa is uniquely positioned to become a key player in the global hydrogen market,” while the Netherlands could serve as an import hub, said Dutch Prime Minister Mark Rutte at an event in Pretoria. 

The DBSA said the money will be raised in South Africa or through “other channels.” The SDG Namibia One fund, which also aims to raise $1 billion, is a similar instrument, the lender said.

The planned fund comes as South Africa prepares to implement an $8.5 billion climate finance pact with some of the world’s richest countries as it seeks to transition away from the use of coal.

Denmark and the Netherlands are in talks to join the so-called Just Energy Transition Partnership between South Africa, the UK, US, France, Germany and the European Union, three people familiar with the matter said earlier this month.

The hydrogen fund “is a first and others will follow,” Mosako said, adding that it would be a blended finance facility, intended to catalyze more private-sector investment in the industry.

In addition, a range of partnerships between the three countries were announced including the formation of a 300 million euro ($327 million) water infrastructure fund for South Africa by Invest International. A Dutch venture to form a “climate-smart” agriculture hub at the soon to be idled Grootvlei power plant in South Africa was also announced.

Mette Frederiksen, the prime minister of Denmark, said her country will contribute about 3.2 billion rand ($174 million) to green energy projects in South Africa. 

The event was attended by 130 business leaders from the three countries, including executives from Vestas Wind Systems A/S and Port of Rotterdam. The CEO of South African petrochemicals company, Sasol Ltd., spoke as did the acting CEO of state power utility, Eskom Holdings SOC Ltd.

(Updates with detail from first paragraph, Netherlands prime minister’s comment in fifth)

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