The Development Bank of Namibia (DBN), has made significant contributions to funding power projects in the country which is a perennial importer of energy from other SADC states. The following is a full interview between Southern Times’, Timotheus Shihepo (TS) and Hellen Amupolo, Senior Portfolio Manager (HA) highlighting the bank’s contribution to the vital sector.
TS: DBN has been making significant strides in the energy sector, what motivates DBN to be involved in this sector?
HA: The Bank strives to support the optimum and sustainable usage of Namibia’s natural resources as well as financing investments within infrastructure that supports economic growth. The bank takes cognisance of the fact that Namibia is a country with vast potential for renewable energy sources such as solar and wind, thus for as long as the country imports more than half of its energy (electricity) requirements, this becomes a valuable resource to harness and invest in, not only to assist in securing reliable and stable energy requirements but also because it is a resource that greatly affects the livelihoods of people.
TS: How many energy projects has DBN helped fund over the years and how much has DBN invested in these projects?
HA: The DBN has funded a number of projects within the energy sector and statistics indicate the bank has availed financing of 1.3 billion since 2005 up to the financial year 1026/17. Secondly the bank has financed projects across the entire value chain, i.e. generation, transmission and at distribution level. Financing availed has also been provided to various business enterprises ranging from state-owned entities (including local authorities), private entities (including Independent Power Producers) as well as SME contractors, especially within the rural electrification space. The bank’s current energy portfolio stands at N$600 million as of 31 May 2017, and this is mainly made up of a number of renewable energy projects.
TS: What kind of funding does the bank give to the energy sector?
HA: The bank provides a variety of funding mechanisms or products to the energy sector which normally takes the form of enterprise development funding or contract based funding. The bank currently only considers funding projects which present a projected annual turnover of over N$ 5 million.
This threshold allows the bank to mainly consider financing projects that range between medium and large scale enterprises. The funding availed can range between short, medium and long term funding, where the bank can consider a tenure of up to 15 -20 years mainly for public enterprises and 10 years for private enterprises. Private enterprises may also be eligible for longer tenures subject to merit and board approval.
TS: What requirements should a company need to meet to qualify for funding for an energy project?
HA : There are general and project specific requirements that enterprises need to conform to. General requirements pertain to company and shareholder related information which is mandatory and as required not only by the bank but also in accordance to the “Knowing Your Customer” as part of the Financial Intelligence Act. Project specific requirements relate to mostly technical information that supports the business venture. In most cases (except for contract based financing) there needs to be a comprehensive business plan that articulates the company’s project goals, objectives and strategies of achieving those. The business plan needs to demonstrate a financially viable and sustainable plan.
There needs to be a clear development impact and projects need to be environmentally sound and confirming to the relevant regulations and compliances. In the case of projects embarking in generation activities, there are relevant licenses that need to be obtained (e.g. Generation license, environmental clearance etc) from the relevant authorities and most importantly the applicant needs to ensure that there is reliable offtake for the purchase of electricity and this is normally presented in the form of a Power Purchase/Supply Agreement.
TS: What is DBN’s budget for energy projects?
HA: The bank does not have a specific budget, however funding is guided by single obligor limits that the bank conforms to. The Bank’s Credit & Equity Investment Policy does not allow single sectoral exposure to exceed 30% of total funds committed. This basically means that at any given point in time, sectoral exposure including that of energy needs to be within that scope on the loan book. The current energy sector exposure as at 31 May 2017 stands at 8% and this immediately presents scope for the bank to continue investing in the energy sector, as we know the policy allows up to 30%.
Secondly, the bank can is also guided by exposure limits to single parties or related parties that currently should not exceed N$ 360 million. This means that the DBN can invest N$360 million either in one single project or in related exposures. This is a moving target as it is calculated as a percentage of loans and advances, thus as the bank’s loan book grows, so does that exposure limit the increase. This is, however, considered on an annual or gradual basis.
TS: Is the public aware that the DBN funds energy projects or do you think there is still a need for more outreach?
HA: There is still room for presenting the bank as a potential financer within the energy sector – especially now that the sector is taking momentum due to the fact that Namibia is aggressively striving to secure its own energy supply for stability and security purposes.
There are a number of policies and regulations under reform and renewal that all aim to accelerate the sector growth and to present it as a viable industry to invest in and to make it investor friendly or conducive. We need to reduce our energy import bill from neighbouring countries and along with creating and stimulating this sector locally, comes constant public awareness and outreach from all stakeholders involved including DBN. We also know that electricity’s contribution to GDP has always been below 2% over the past years and it’s about time we improve this statistic. We do expect positive results going forward most especially as a result of the energy and rural electrification projects that have recently been undertaken and added on to the national grid.
TS: What kind of benefits does DBN seek to get from the energy projects, which the bank funded?
HA: The bank sees value in investing in energy projects. They have demonstrated to present solid development impact such as job creation, skills transfer, empowerment, sector stimulation and foreign direct investment. The bank is also proud to reflect that the energy sector presents positive performing ratios in terms of repayments to facilities advanced. This definitely provides comfort in the bank’s credit principles that have been robust to allow a performing portfolio.
TS: Namibia is facing tough economic conditions at the moment, will this affect DBN’s involvement in the energy sector?
HA: The role of DFI’s cannot be understated when it comes to infrastructure development and more so now that we are facing tough times. The government has called on the private and public sector to join hands through smart public private partnerships and any other means befitting to fight the economic plight.
We now need to invest in resources that have meaningful impact and where it matters most. This amplifies the need for DBN to continue playing an active role with its clear mandate to support economic growth by mobilising financial resources in the economy with specific focus to key priority sectors as outlined by government and to continue being a partner in development.
Energy is one such sector that has presented immense opportunities for everyone in the country and it is a sector that has proven to spur economic activity, create employment, improve trade flows and enhance economic competitiveness.
As we are all aware, Namibia faces various socio-economic challenges including power outrages.