Fund II is closing on 30 June 2024

  • All money raised in Fund I was fully deployed
  • This is your last chance to get the 125% tax deduction
  • Don’t pay more tax than you have to
  • 14.22% Average annual cash yield and 18% targeted IRR

The first private equity fund that enables taxpayers (individuals, trusts, companies) and pension funds to invest in a portfolio of renewable energy-producing assets, and benefit from the SARS-approved enhanced 125% Section 12BA tax allowance as promulgated into law in December 2023.

Launched by Grovest, the pioneers of Section 12J, and one of the largest small cap fund administrators in South Africa, with R3.5 billion in assets under administration.

Fund II is closing in:

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Section 12B of the Income Tax Act No. 58 of 1962 allows for a tax deduction in respect of certain qualifying assets (owned and brought into use after 1 January 2016) to reduce the taxable income of the taxpayer. These qualifying assets must be used for purposes of trade in the generation of electricity from renewable sources – SARS

For the period 1 March 2023 to 28 February 2025, the Section 12B allowance has been increased from 100% to 125% and no maximum cap on the output of the solar installation.

Your investment

Do you want someone to walk you through how it works?

Debating investing onshore vs offshore investments?

There’s some reluctance to invest long-term in South Africa. We’ve modelled a comparison between the projected returns of Twelve B Green Energy Fund and a corporate US bond over a 10-year period.

Are the results what you would have expected?

Fund Investment Mandate

To own and operate a portfolio of renewable energy-generating assets, that sells the electricity generated to creditworthy counterparties (sectional title complexes, industrial and commercial companies), that are bound by long-term power purchase agreements.

Your tax benefit as an investor
Taxpayers who invest in the Fund are entitled to claim the 125% Section 12BA tax deduction on the full amount invested, as promulgated into law in December 2023. The tax deduction is applicable to each taxpayer, and is to be claimed in his/her personal respective tax return.

Explore

See the bigger picture

Green energy has become an absolute necessity due to the ongoing lack of reliable electricity and energy supply in South Africa

Encounter on-shore investment in a socially-responsible way

Government acknowledges it needs assistance from the private sector to urgently improve the situation

Playing a role in economic growth and job creation

Reducing South Africa’s carbon footprint and contributing to sustainable energy generation

South Africa has the opportunity to become a leader in renewable energy

Twelve B Green Energy Fund II

Notes

Years
Notes Avg 0 1 2 3 4 5 6 7 8 9 10
Investment (1 000 000)
12BA Tax allowance (125%) 1,2 45% 562 500
Risk capital (437 500)
Organisational Expenses 1% (10 000)
Gross Distributions to Partner 134 599 145 156 156 541 168 820 182 063 196 346 211 749 228 362 246 280 265 604
Management fees 2% (20 000) (20 000) (20 000) (20 000) (20 000) (20 000) (20 000) (20 000) (20 000) (20 000)
Sale of future cash flows 3.4 1 132 060
Performance fees paid to Manager 5 0 0 0 (6 773) (32 413) (35 269) (38 350) (41 672) (45 256) (275 533)
Cashflows before Tax (437 500) 104 599 125 156 136 541 142 047 129 651 141 077 153 400 166 690 181 024 1 102 131
Tax Payable by Limited Partner 6,7 45% (47 069) (56 320) (61 443) (63 921) (58 343) (63 484) (69 030) (75 010) (81 461) (460 303)
Cashflows after Tax in hands of Partner (437 500) 57 529 68 836 75 098 78 126 71 308 77 592 84 370 91 679 99 563 641 828
Avg 0 1 2 3 4 5 6 7 8 9 10
Cash Returns
Before Tax
Cash on Cash return (Gross Investment) 8 14,22% - 10,46% 12,52% 13,65% 14,20% 12,97% 14,11% 15,34% 16,67% 18,10% 110,21%
Cash on Cash return (Risk Capital) 8 32.51% - 23,91% 28,61% 31,21% 32,47% 29,63% 32,25% 35,06% 38,10% 41,38% 251,92%
After Tax
Average Annual Yield (Gross Investment) 8 7,82% - 5,75% 6,88% 7,51% 7,81% 7,13% 7,76% 8,44% 9,17% 9,96% 64,18%
Average Annual Yield (Risk Capital) 8 17,88% - 13,15% 15,73% 17,17% 17,86% 16,30% 17,74% 19,28% 20,96% 22,76% 146,70%
IRR on Risk Capital
Before Tax 32,15% (437 500) 104 599 125 156 136 541 142 047 129 651 141 077 153 400 166 690 181 024 1 102 131
After Tax 18,12% (437 500) 57 529 68 836 75 098 78 126 71 308 77 592 84 370 91 679 99 563 641 828
Times money on Risk Capital
Before Tax 5,5
After Tax 3.1
  1. Assumes partner is an individual paying tax at the marginal rate.
  2. Assumes solar kit starts producing energy at the beginning of year 1.
  3. Assumes selling the future cash flows at a discount rate of 13.5%. 
  4. Assumes replacement of battery at end of year 10.
  5. 20% performance fee paid to manager on excess returns above 110% of risk capital.
  6. Assumes distributions in hands of partner are taxed at the marginal rate.
  7. Tax calculation in year 10 includes recoupment and capital gains tax on the sale of solar equipment and future cash flows.
  8. Calculation excludes year 10 (exit) values.

be part of the returns

Installations are contracted to approved third party EPC (Engineering, Procurement and Construction) companies. Operations and maintenance is contracted to approved O&M parties.
Installations incorporate the latest technology in solar panels, inverters, and battery storage, supported by proprietary software to manage and minimise energy utilisation.

Fund term: 10 years

Distribution policy: bi-annually:
March and September

Targeted internal rate of return (IRR):
18% net of fees and taxes on risk capital over the 10-year term.

125% Tax deductible:
For installations that generate electricity for the first time between 1 March 2023 and 28 February 2025, as promulgated into law in December 2023.

The difference

Section 12B

An en commandite partnership structure which is very tax efficient. 

Investments can be deducted from taxable income in the tax year in which the solar equipment starts to produce electricity.

Whilst the term of the Fund is 10 years, there is no minimum prescribed period to hold the asset to benefit from the 12B allowance.

Unlimited investment per annum for Individuals, Trusts, Companies and Pension Funds.

There is no capital gains tax. There may be a partial recoupment of the Section 12B allowance based on the sale value of the solar kit and/or
exiting from the partnership.

Unlimited investment holding in Twelve B Green Energy Fund II.

Moderate risk

Far more tax efficient due to ‘flow through principle’ which facilitates a tax allowance claimed in the tax year in which solar assets come into
operation.

Section 12J

Fixed capital structure. 

Investments can be deducted from taxable income in the tax year in which the investment was made.

Required holding the investment for a minimum of 5 years to get Section 12J benefit

Was limited to R2.5 million per annum for individuals and trusts; and limited to R5 million per annum for companies

Was not tax efficient for companies, resulting in capital gains tax and withholding tax on dividends.

No one investor or related party can own more than 20% of the Fund.

Can be high risk.

Not tax efficient. 

Sign up

We invite savvy investors seeking to gain superior returns at moderate risk, minimise their tax obligation, and contribute to a greener future to join us as we pioneer this asset class.

 

The team

The fund team has diverse experience and expertise in investment banking, corporate governance, and advisory and is backed by the track record and reputation of Grovest.

Malcolm Segal

Jeff Miller

Amaresh Chetty

Nazir Talia

Glenn Gamsy

Get in touch

+27 (0) 11 262 6433

Building 2, Pinmill Office Park
164 Katherine Street
Sandton, 2196

For any Shariah related queries,
please call Nazir Talia on +27 (0) 82 320 6454

Tivon Loubser

Fund Manager

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