September 20, 2017

Driving new captive solar energy power purchase agreement in Namibia

The energy sector in Africa continues to offer exciting opportunities, with specialist South African law firm, Cliffe Dekker Hofmeyr (CDH), and Germany’s SNP Schlawien (SNP) joining forces as legal advisers on the development and construction of a new 5MW captive solar power plant in Namibia.

A captive plant relates to the sale of power from a private generator and is likely to become increasingly popular as businesses expand and require more energy. Real GDP growth in Namibia is estimated by their central bank at 1.0 percent in 2016, down from 5.3 percent in 2015, but is projected to increase to 2.9 percent and 3.8 percent in 2017 and 2018, respectively.

The mandate on the Namibia plant included drafting and negotiating the Power Purchase Agreement that was entered into between SUNEQ Investments Four (Namibia) (Pty) Ltd (the company incorporated by SUNEQ GmbH in Namibia) and Ohorongo Cement Pty Ltd in December 2016 for the sale and purchase of energy output generated by the plant.  Ohorongo Cement Pty Ltd is a daughter company of Schwenk  Zement, Germany.  SunEQ is a sister company of the German Suntrace GmbH, an independent expert for the development of solar projects worldwide.

The two legal firms also advised on the land lease agreement concluded by Ohorongo Cement Pty Ltd and continue to be involved in the global investor process.  The mandate also includes the drafting and negotiation of the O&M Contract and the EPC Contract. The plant will be built by a major listed German plant engineering company.

“The reasons companies are moving to generating captive power are to have more control over the development itself and to ensure that they have enough secure power for their own use – especially if they are high-level industrial users. The supply of power from utilities in many countries is often not adequate or too intermittent to meet industrial demand across many industries like mining, construction and agriculture. This development of a plant like this is important to secure power supply,” says Emma Dempster, a Director in Cliffe Dekker Hofmeyr’s Projects and Infrastructure practice.

Matthias Schwara, an expert on energy projects at SNP, one of the leading commercial law firms in Germany with a special focus on medium-sized businesses, adds: “In CDH we found the ideal partner for this mandate, who is most familiar with the African market.  Due to the joint cooperation we managed to advise our client SUNEQ even in this area with the same devotion and expertise he is used to at home.” The Power Purchase Agreement in Namibia follows a wide range of other energy   and engineering projects SNP has advised on worldwide together with local law firms in the past.

“We see in Sub-Saharan Africa an increasing interest of developers, energy companies and investors for renewable projects, in particular solar, wind and biomass. Accordingly, engineering and services companies are also looking for a market entry”, says Matthias Schwara.

CDH’s Projects and Infrastructure practice is at the forefront of the infrastructure sector in Africa and incorporates market-leading infrastructure and energy practices.  CDH advised on 31 out of the 66 successful projects in respect of the first three rounds of the South African Department of Energy’s Renewable Energy IPP Procurement Programme.

“We are excited to be involved in this deal as we continue to broaden our own practice into Africa. The continued expansion of Africa’s energy sector remains a particularly exciting growth area,” says Dempster.

The growth and expansion of renewable energy in Africa can be expected to continue in the year ahead. “However, doing business in Africa offers unique opportunities and challenges, and with this comes a need to understand the cultural, economic and political nuances that exist across the vast continent. CDH is strongly positioned to serve legal needs in Africa as our Africa lawyers offer sector specific expertise and knowledge of regulatory nuances to provide an integrated service across Africa,” says Jay Govender, the National Practice Head for Projects and Infrastructure at CDH.

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