By Dhiladhila Magazine · Issue 11
A few million euros rarely makes news. Spent at the right moment, it is what decides whether ten billion dollars ever moves.
In a project costed at about US$10 billion, a facility of a few million euros can look like a rounding error. Yet when the Development Bank of Southern Africa agreed on 24 October 2023 to fund the preparation of Hyphen Hydrogen Energy’s Namibian green hydrogen project, that modest commitment did work no headline figure can. The bank put up a project-preparation facility to pay for the engineering, environmental and socio-economic studies that carry a scheme toward a final investment decision.
The facility is worth about €5 million, roughly US$5.4 million, and it is deliberately small against the build it serves. That is the point. Early preparation is the riskiest money in any megaproject, spent long before anyone can be sure the thing is bankable, and it is precisely the money that the largest lenders prefer to see someone else commit first.
The riskiest money in the deal
Preparation capital sits at the front of the queue and the back of the odds. It pays for the studies that might yet conclude a project cannot work, which is why private banks rarely provide it and why a promoter cannot always fund it alone. The money is exposed to the chance that the whole venture never reaches construction, a risk commercial lenders price so highly that the work can stall for want of a few million.
That is the gap a development bank is built to fill. By taking the early risk that others avoid, DBSA turns a promising concession into a proposition a syndicate can later assess, and it does so at the stage where a small sum decides whether a large one ever arrives.
Preparation is the cheapest money in a megaproject and the hardest to raise.
What the facility actually buys
The commitment is tied to concrete workstreams. It part-funds the engineering design, the environmental and social impact assessment and the socio-economic development framework that Hyphen must complete before a final investment decision. These are not soft costs; they are the evidence base on which every later lender, insurer and offtaker will rely.
Each study also narrows uncertainty. A confirmed project footprint, a costed design and a measured environmental baseline convert vague ambition into numbers a financier can underwrite. The facility, in effect, buys the paperwork that makes a US$10 billion figure credible rather than aspirational.
The facility does not build the plant; it builds the case the plant can be financed.
A development bank as first mover
DBSA is a state-owned development finance institution established in 1983, mandated to catalyse infrastructure across South Africa and the wider sub-continent. Its early commitment carries a signal beyond its size: an institution that studies projects for a living has judged this one worth preparing. For commercial lenders weighing an unfamiliar sector, that judgement lowers the perceived risk of following.
Hyphen has read the move the same way. Its chief executive, Marco Raffinetti, said the finalisation of the commitment demonstrated the bank’s belief in the project and expressed hope that both organisations would go on to provide debt funding for the build itself. The preparation facility is thus also an audition for the far larger loans to come.
A development bank that prepares a project is quietly advertising it to everyone who lends next.
From five million to ten billion
The arithmetic of the ladder is stark. A €5 million facility stands in front of a build costed near the size of Namibia’s entire annual output, and it is the rung without which the climb never starts. Preparation money is the gate that the equity, the debt and the guarantees all wait behind, because none of them will move until the studies clear the project for a decision.
The risk is that the gate never opens. Preparation can conclude that a project is too costly, too slow or too exposed, and the money spent proving that earns no plant. For a development financier, that possibility is the job, not the failure: someone has to fund the work that tells the market whether to commit the billions.
The smallest cheque in the deal is the one that decides whether the largest ones are written.
For a lender, a development financier or an equity investor, the DBSA facility marks where the real early decision sits: not in the ten-billion-dollar figure, but in the few million that prove whether it is bankable. The choice it puts to any capital provider is whether to fund the unglamorous preparation that makes a megaproject investable, or to wait for others to carry that risk and pay a higher price to join once they have.
Sources: Hyphen Hydrogen Energy; DBSA and Hyphen partner to fund green hydrogen project (DBSA); Hyphen secures €5 million facility with DBSA (Namibia Economist)
