Content locked – Please complete the form to gain access.
Significant investment has already been secured from individual and corporate investors looking to claim their SARS-approved 125% Section 12BA tax deduction in this tax year.
Twelve B is the first private equity fund that entitles taxpayers, including individuals, trusts, companies and pension funds, to invest in a portfolio of renewable energy-producing assets and benefit from the Section 12BA tax incentive.
Twelve B Green Energy Fund marks another milestone for Grovest, the pioneers of Section 12J, and the largest small cap fund administrator in South Africa, with over R3.5 billion in assets under administration.
During the extensive pre-launch period, the Twelve B team focused on sourcing viable projects as well as establishing strategic partnerships with EPC (Engineering, Procurement, and Construction) and O+M (Operations and Maintenance) entities. This meticulous preparation ensured that when Fund I opened for investment, they were well-prepared to deploy capital as and when it was raised.
Twelve B Green Energy Fund currently has a pipeline of over R300 million of solar projects at various stages. Jeff Miller, Twelve B’s CEO and Co-Founder anticipates the average investment across the various projects to be between R8 million and R12 million, resulting in a diversified portfolio of around 25 projects in Fund I’s R200 million portfolio.
In April 2023, the Fund’s first two projects were approved by the Investment Committee and construction has since commenced. They are on track to become energy-generating in July of this year. The profits of the partnership which have been generated from the sale of electricity, net of costs, will be distributed to investors bi-annually, and current investors can expect their first income distribution in September this year.
Although the ability of a fund to reach final close may be a key consideration for an investor, fund success is ultimately determined by its ability to deliver consistent and attractive returns (i.e. deploying capital into projects that have the potential to generate cash flows). Therefore, investors should carefully evaluate the capability and project pipeline of the Fund Manager before committing their capital.
Miller emphasises the crucial nature of conducting comprehensive due diligence on all projects to manage risk, evaluate project viability, remain compliant, promote transparency and accountability, as to ensure that the projects are aligned with the Fund’s Investment Mandate.
Furthermore, each project is bound by 20-year Power Purchase Agreements (“PPA’s”) which sets out the amount of electricity to be supplied, the initial pricing and the annual escalations.
The Fund has a strategic alliance with Hooray Power – the pioneers of large battery storage systems in sectional title complexes. The Fund has the right of first refusal on all projects introduced by Hooray Power.
According to Miller, the Fund’s secret sauce and differentiating factor within the market is their relationship with Hooray Power, who sources all projects and handles all EPC and O+M of each approved project. This relationship is unique to the Twelve B Green Energy Fund and to the investment opportunity.
Miller is of the view that deployment and execution of the funds into energy producing assets is key, and has unwavering confidence that Twelve B Green Energy Fund will raise and deploy R200 million before the end of the February 2024 tax year.
The risk profile of the Fund is low to moderate, and there is currently no gearing within the portfolio. That said, the Fund Mandate does allow gearing which may be considered in the future.
Fund I is still open for investment and the positive market response confirms that investors within the current market climate have an appetite for a moderate risk, tax incentivised investment.
Load shedding isn’t fun. We know this. In a great example of never wasting a good crisis, there are investment opportunities in solar as South Africans effectively build a decentralised grid on private balance sheets.
Offering investors an indicative 18% IRR over 10 years through their new Twelve B Energy Fund, Jeff Miller of Grovest joined me to take a look at:
NOTE: This podcast is for information purposes only and is not a recommendation, nor should it be interpreted as financial advice or an endorsement of the Twelve B product by The Finance Ghost. Do your own research and consult with your independent financial advisor before making any investment decisions.
23 March 2023
Minister of Finance Enoch Godongwana has managed to tread the fine line with his 2023 Budget Speech, delivering on a business-friendly Budget that provides relief and paves the way for economic recovery, amid an even more challenging economic and socio-economic environment than previous iterations.
His macro-economic aggregates are very much in line with what other economists expected – weak economic growth, high levels of unemployment and poverty and escalating consumer inflation – which is behind his extension of the Social Relief of Distress (SDR) grant.
Neil Roets, CEO of Debt Rescue agrees.
“In his 2023 Budget Speech the Minister offers hope to the business sector, proposing a budget that prioritizes economic growth – and rightly so. It’s disappointing that there is no emphasis in the Budget on assisting the SME sector, as they are the drivers of economic growth at a time when the country is at a tipping point, spurred on by the energy crisis and continual fiscal challenges.”
“The elephant in the room is the 30.3 million South Africans currently living below the poverty line and battling to put enough food on the table, in the face of a cost-of-living catastrophe the likes of which we have never seen before,” he says.
According to President Cyril Ramaphosa, millions of South Africans cannot provide for themselves and their families. Ramaphosa substantiated this in his State of the Nation Address delivered on Thursday 9 February. “The rising cost of living is deepening poverty and inequality,” he said.
Although the continuation of the R350 per month social relief of distress (SRD) grant will pay nearly half the population – the shocking ratio who live below the poverty line – a stipend to feed their families, it is not a realistic long-term solution.
“Given our current unemployment rate of 32.9 percent – one of the highest in the world – with youth unemployment highest at 63.9%, job creation is crucial,” says Roets. “While it’s encouraging that 1 million job opportunities have been created to date under the presidential youth employment initiative, the fact that job creation was not tabled in this year’s budget as a top priority, is a serious oversight,” says Roets.
We have a critical shortage of qualified artisans in the country. Minister of higher education, science, and innovation, Blade Nzimande, said in November (2022) that South Africa needs at least 60% of school leavers to pursue artisan-type training to meet the country’s demand for scarce skills.
“How is government planning on turning this around?” he asks.
Today Godongwana proposed a total debt-relief arrangement for Eskom of R 254 billion. He said that explicitly taking on this debt, will reduce fiscal risk and enhance long term fiscal sustainability. However, it is consumers who bear the brunt of Eskom’s infrastructure woes, and the relentless increases in electricity tariffs, and government assistance to date has done nothing to ease this pain.
South Africans are still grappling with the National Energy Regulator of South Africa’s announcement of the massive 18.65% increase due to kick in in April this year. This, at a time when Stage Six load-shedding is being implemented across the country – plunging households and businesses into darkness and despair – with Eskom now in talks regarding possible Stage 8 blackouts.
The repercussions of rolling blackouts pose a serious threat to the lives and livelihoods of people – not least of which pertain to food security – at a time when over 80% of families are battling to put enough food on the table, as a result of spiralling living costs.
Roets says he is encouraged by government’s plan of action to reform the electricity sector, and by the President’s assurance during SONA 2023 that ‘National Treasury is considering the feasibility of urgent measures to mitigate the impact of load-shedding on food prices.’
Although the minister’s announcement of the refund on the Road Accident Fund levy for diesel used in the manufacturing process, will be extended to manufacturers of foodstuffs to ease the impact of the electricity crisis on food prices – it is not nearly enough.
Roets concurs, saying that much more is needed to protect the country’s food security and to manage food prices. “It’s deeply concerning that government has not elevated this to the top of the country’s agenda,” he says. Roets warns that the result of unmitigated power outages will be more food shortages and even higher prices. He says load-shedding undoubtedly contributes to rising inflation, by disrupting supply chains, increasing the cost of production and impacting manufacturing costs across industries and that this will be exacerbated by this latest hike in electricity costs.
Roets questions why food prices have not come down in light of the substantial drop in the price of both petrol and diesel in January 2023. In fact, food prices have not been adjusted downwards at all over the past year, despite petrol price cuts in September and October 2022. “I understand that farmers have to hike their prices in the current economic conditions, but the question remains why our big grocery retailers have relentlessly increased their prices, even though global food prices have dropped,” he asks.
“It is unacceptable that the price of staple foods and drinks like potatoes, cooking oil, bread and eggs just keep on climbing, despite the relief at the pumps,” he points out. This is substantiated by the latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) that shows that South Africans are paying more for these basic food items in 2023.
Government incentives like the Twelve B Green Energy Fund, a soon-to-be-launched solar and renewable energy fund, offering investors a 100% tax break using Section 12B of the Income Tax Act, creates investment opportunities that can bolster the economy. President Ramaphosa pointed to tax incentives for the government’s plans to push rooftop solar across the country in his recent SONA.
Roets says he is encouraged by the minister’s proposed plans, which will attract more investment opportunities to the country.
“The announcement of a tax rebate of 25 per cent of the cost of rooftop solar panels for individuals, to encourage people to install renewables, shows that Government is taking action, but I would like to see much more focus on other incentives for consumers,” he says. “We need more initiatives that will offer relief to over-burdened citizens – like the City of Cape Town’s initiative that offers residents and businesses cash to sell their excess power into Cape Town’s grid.” – Roets
The announcement that the health promotion levy will remain stable is good news for the struggling sugar industry, which has lost approximately R1,2 billion per season since 2018 and resulted in close to 10,000 job losses, mostly in rural areas, where poverty levels are the highest.
The proposed increase in the excise duties on alcohol and tobacco of 4.9 per cent, in line with expected inflation, was widely expected, though still a bitter pill to swallow.
“While I understand that government needs to bolster the coffers, in light of the financial doom and gloom that the average South African has to contend with, placing the few affordable pleasures beyond the reach of consumers at this time simply adds to the pain,” – Roets
The FATF Plenary will make its decision later this week on whether or not to put South Africa under increased monitoring, otherwise known as grey listing. If they do, South Africa could be shut out of certain financial markets, which would negatively affect the wider economy and particularly consumer prices. According to the minister, two laws have been enacted to bolster the government’s broader fight against corruption, crime, state capture and the deliberate weakening of the institutions of law and order. Whether this move will be effective in avoiding the greylisting remains to be seen.
South Africans will no doubt breath a collective sigh of relief that there will be no tax increases for individuals this coming fiscal. “This is really the only encouraging announcement for consumers in this year’s budget speech. Notwithstanding, government must act now to protect consumers’ pockets and jobs – before it is too late,” concludes Roets.
The Minister closed off his speech by tipping his hat to the thousands of public servants who work behind the scenes to keep our country going.
View original article here.
South Africa’s finance minister, Enoch Godongwana, announced two tax measures aimed at boosting investment in renewable energy and increasing electricity generation amidst the ongoing power cuts in the country.
In his budget speech, Godongwana said businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables, with no thresholds on the size of the projects that qualify. The incentive will be available for two years to stimulate investment in the short term starting 1 March 2023.
Individuals who install rooftop solar panels will also be eligible for a tax rebate of 25% of the cost of the panels, up to a maximum of R15 000. This incentive will be available for one year starting 1 March 2023. Additionally, the government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis, as part of proposed changes to the Bounce Back Loan Guarantee Scheme.
Godongwana also emphasised the need for a just transition to a low carbon economy, as climate change poses considerable risks and constraints to sustainable economic growth in South Africa.
The Just Energy Transition plan aims to lower emissions of greenhouse gases and harness investments in new energy technologies, electric vehicles, and energy-efficient appliances. It ensures that communities tied to high-emitting energy industries are not left behind and are provided with new skills and economic opportunities.
South Africa has also stressed the importance of developed nations supporting the energy transitions of developing nations, with a larger grant-funding component. Godongwana’s measures aim to incentivise renewable energy investment in the country and address the persistent electricity supply shortage, particularly through small and medium-sized enterprises.
Meanwhile, South African entrepreneurs and businesses have welcomed the announcement by Godongwana to increase the tax incentives for renewable energy investment and rooftop solar.
Jeff Miller, founder of the Twelve B Green Energy Fund, expressed his appreciation for the government’s decision, stating that this will encourage businesses to invest in solar and help alleviate the country’s energy crisis.
Miller further explained that the increase in the Section 12B tax allowance from 100% to 125% will give investors an increased return of up to 18% for a moderate risk investment. He also praised the introduction of tax allowances for homeowners, stating that it allows them to invest up to R60,000 in a solar kit to get a maximum tax benefit of R15 000.
According to Miller, the government’s support for sustainable energy generation will not only address the electricity supply shortage but also bring long-term benefits. The Twelve B Green Energy Fund is the first private equity fund in South Africa to qualify for SARS-approved tax deductions, enabling individuals, trusts, companies, and pension funds to write off 125% of their investment against their taxable income.
“Green energy has become a necessity due to South Africa’s unreliable electricity supply, and the private sector needs to step in to urgently improve the situation with government’s support,” said Miller.
The incentives announced by Godongwana bode well for the country’s acquisition of renewable energy and the growth of the Twelve B Green Energy Fund.
View original article here.
CEO Jeff Miller explains that the fund has no lock-in period or investment maximum, and is available to individuals, trust companies, pension- and provident funds.
Listen to this podcast on iono.fm here.
SIMON BROWN: I’m chatting with Jeff Miller, founder of the Twelve B Green Energy Fund. Jeff, I appreciate the time today. You and I have chatted in the past: we’ve talked 12J [of the Income Tax Act]. Of course that’s been sunsetted by National Treasury. [Section] 12B is the new one. My understanding is that there are a lot of similarities; [one] of the key points perhaps is that the money’s only actually tax deductible when it’s sort of put to good use. But [among] other issues there’s no lock-in period [and] also no limits on the 12B?
JEFF MILLER: …You’re a hundred percent correct. There are no limits. In 12J you had to hold for five years. There were caps at R2.5 million for individuals and trusts, and R5 million for companies. Here it’s unlimited. There’s no lock-in period. And I think, all things being equal, that 12B is superior to 12J.
SIMON BROWN: That’s my sense of it as well. There is a key point here, of course: this is going to be in energy. In your case you’re focusing on green energy. This is not going to be a hotel or anything like that. It’s going to be focused on the energy space.
JEFF MILLER: Yes. So 12B allows you to invest only into energy, and you have to actually produce energy in order to be able to claim that 12B deduction. So we are focusing on solar in the main and where we would take, whether commercial or industrial, big residential complexes off the grid, where we would provide them with the panels, inverters and batteries, and we would put the equipment on their site and we would sell them their electricity.
SIMON BROWN: I’ve got you. So in essence you’re going to use the money in the fund and you come in. So if I’m a corporate, whatever or whoever I might be, you essentially come to me and say, ‘We are going to give you green energy’. Would that be almost at no cost to me except for the monthly bill I pay for the power you produce?
JEFF MILLER: Not only would there be similar costs to [those] currently, but we peg the escalations at CPI plus 1% to 2%. So there are no surprises. Now we’ve got an 18.6% increase [in electricity tariffs coming from Eskom]. Next year we’ve got a 12% increase. So, all being equal, one can peg the escalations and budget accordingly.
SIMON BROWN: I’m imagining your biggest challenge is probably demand. Everybody I know is going off grid. But if you raise, I don’t know, billions and billions, are you going to be able to deploy it in a year or two or potentially longer?
JEFF MILLER: You’re absolutely one hundred percent correct – it’s all about the deployment. So we are doing the capital raises in tranches of R200 million on a first-come-first-served basis.
So the first R200 million we would deploy, and the intention is that we match the capital raise with the deployment in the same year. So in fact investors would be able to claim their 12B deduction for February 2024.
SIMON BROWN: That’s an important point because, if I deposit the money, it’s not when I put the money into the fund that I get the deduction, it’s when the deployment happens that I get that deduction.
JEFF MILLER: Absolutely correct. So you get the 12B deduction when we deploy it, but you do earn the revenue that regenerates on a monthly basis, and we distribute that biannually in August and February each year.
SIMON BROWN: Okay. Biannually, I get that. Obviously green is exciting, everyone’s interested in that in a sense. The key point here perhaps as well is that [there’s] no duration or anything like that. At some point, though, does the fund wrap itself up or does it sort of run in perpetuity, forever?
JEFF MILLER: It’s a 10-year fund, but there are some exit mechanisms should investors wish to exit prior to the 10 years. But we are assuming that at the end of the 10 years we would on-sell the cash flows to another fund, where a money fund would take it over.
SIMON BROWN: Okay. That makes sense. You said there are mechanisms for exit. I imagine it’s not almost like a unit trust where I can cash in at a day’s notice, but if I want to get out I can exit?
JEFF MILLER: There are exit mechanisms, obviously subject to the operational requirements of the fund. But the fund does generate a lot of cash and we’ll do everything in our power to assist early exits.
SIMON BROWN: As you say, it would be hugely cash-generative.
A last question. In terms of when I’m exiting, is that then just taxed as income, because of course I’ve got the deduction from my income tax up-front when I get the cash back, whether it be the dividend flows or the exit at the end. Is that now taxed as income?
JEFF MILLER: The distributions are actually taxed in your individual hands at the end of each year, because you are theoretically receiving a share of the profits of the partnership. And when we sell at the end of 10 years, or if you exit earlier, there is a recoupment of the assets, of the value of the assets at the time. So in terms of the 10 years, we’ve assumed that there would be a recoupment of between 30% and 40% of the asset value.
SIMON BROWN: Okay. I hadn’t thought of that. A last question. This is open to individuals. Are there minimums? You said no maximums; are there minimums for individuals?
JEFF MILLER: Yes, there’s a minimum of R100 000 for investment, but there are no maximums, and it’s available to individuals, trust companies, and even to pension and provident funds.
SIMON BROWN: Okay. Across the spectrum. Jeff Miller, founder of the Twelve B Green Energy fund. Jeff, I appreciate the time.
View original article here.
Finance minister Enoch Godongwana is set to deliver South Africa’s budget speech on Wednesday, 22 February 2023, which should see the announcement of incentives for installing solar panels at homes and businesses.
However, according to a Times Live report, some experts believe tax incentives will be challenging to implement. The focus should instead be on lowering import duties on solar panels, batteries and inverters.
This comes after President Cyril Ramaphosa spoke of a tax incentive for rooftop solar panels to help households and businesses afford solar systems during his 2023 State of the Nation address (Sona).
“We are going to proceed with the rollout of rooftop solar panels,” he said.
“In his budget speech, the minister of finance will outline how households will be assisted and how businesses will be able to benefit from a tax incentive.”
South African Revenue Service (Sars) commissioner Edward Kieswetter said he is engaging with his colleagues to review the additional provisions that can be made to provide “relief and some incentive for people to become more self-sufficient.”
BusinessTech reports that while Sars doesn’t set financial policy, Kieswetter said he was actively engaging with the national government over rebates and incentives for private power producers.
He also cautioned that tax is not always the most effective route.
Grovest CEO Jeff Miller agrees, saying incentives for homeowners will be complex for Sars to implement.
“Reducing tariffs on imported solar components would make them more affordable for the homeowner,” he told Times Live.
Grovest recently launched the Twelve B Green Energy Fund, which intends to deploy R1 billion a year to invest in solar panels, inverters and batteries in residential complexes, commercial buildings and industrial buildings.
On the other hand, Metrowatt CEO Laurent Pieton believes tax incentives for consumers could have a significant impact.
“This has been a proven driver in the uptake of solar around the world,” Times Live quoted him as saying.
Following Ramaphosa’s announcement during Sona 2023, business experts raised concerns over the incentives as little detail has been given on how this will happen, according to a BusinessTech report.
Business Leadership South Africa CEO Busi Mavuso explained that the avenue government takes to implement incentives will be crucial to stimulating off-grid installation and ensuring the promises aren’t just empty gestures.
“A half-hearted approach is not likely to make much of an impact, and there’s a danger that this benefits only high-income earners,” Mavuso said.
She highlighted several approaches that government could take for effective incentives:
South Africans have been subject to daily load-shedding since October 2022, and solar power installations at homes and businesses have accelerated.
As a result, South Africa imported solar panels worth $125 million (about R2.25 billion) in the first five months of 2022, according to the World Economic Forum.
It said this is enough to boost the country’s existing solar capacity by 40%.
Factories, mines, farms, businesses and individuals have been forced to reduce their dependence on Eskom’s network by supplementing their electricity with in-house power generation.
However, the level at which this is happening isn’t yet sufficient to reduce power cuts substantially.
View original article here.
South Africa’s first private equity fund which allows green energy investors to qualify for Sars-approved tax deductions has been launched.
Section 12B of the Income Tax Act No. 58 of 1962 allows for a tax deduction for certain qualifying assets used for electricity generation from renewable sources.
A similar tax incentive, Section 12J, was launched in 2014 and it became the fastest growing alternative asset class in South Africa, with more than R12bn of capital raised across 200+ funds. The Section 12J tax incentive reached its sunset clause in June 2021.
“Green energy has become a necessity due to SA’s unreliable electricity supply and the private sector needs to step in to urgently improve the situation. In addition to the longer-term benefits of sustainable energy generation, the Twelve B Green Energy Fund is an attractive initiative. South African individuals, trusts, companies and pension funds can write off 100% of their investment against their taxable income in the year the assets produce electricity. Effectively, this could provide green energy investors with up to 100% tax relief in that year,” says Jeff Miller, founder of Twelve B Green Energy Fund.
Miller is pioneering the Section 12B initiative, drawing on his experience as pioneer of Section 12J venture capital companies (VCCs) which offered attractive investment propositions and tax deductions.
The Twelve B Green Energy Fund has a mandate to invest in solar panels, inverters and batteries in residential complexes, and commercial and industrial installations.
Twelve B’s portfolio of assets is spread over several solar projects which are at different locations and have different end users. Each project is governed by a long-term power purchase agreement (PPA), which governs for the amount of energy generated at an agreed price over the term of the PPA.
All projects are vetted by an experienced investment committee before they are approved.
The fund is regulated by the FSCA. It is managed and administered by Grovest, the pioneers of Section 12J, which brought the first Section 12J fund to the market in 2014. Today, Grovest is the largest administrator of Section 12J funds, with over R3.5bn in assets under administration.
“The Twelve B Green Energy Fund is targeting an IRR to investors of 14% to 15% net of fees and taxes and has a moderate risk profile. The ability to write off the cost of the investment against taxable income provides downside protection and enhances overall returns for investors,” says Miller.
The Twelve B Green Energy Fund is a tax-efficient partnership structure. Investors receive bi-annual distributions from the profits of the partnership.
While the term of the fund is 10 years, there is no minimum prescribed period to hold the asset to benefit from the Section 12B allowance.
The minimum investment amount is R100,000 and there is no maximum cap on investments into the fund.
Twelve B is a Shariah compliant investment.
A: Investor invests R100,000 in March 2023.
The full amount is invested into the solar kit that starts generating energy in May 2023.
The investor can deduct the full R100,000 from his or her taxable income for the year ended February 2024.
B: Investor invests R100,000 in March 2023.
Only R70,000 is invested into the solar kit that starts generating energy in the year ended February 2024.
The investor can deduct R70,000 from his or her taxable income for the year ended February 2024. The balance of R30,000 can be deducted from taxable income in the following tax year when the balance of the solar kit comes into operation.
“This is a significant milestone. We are proud to launch an industry-first with so many positives – an attractive tax-structured fund, with solid returns and a strong ESG focus, which also allows us to play our part in solving South Africa’s dire energy crisis,” says Miller.
View original article here.
Labour union Solidarity appealed to a court to overturn the state of disaster declared by President Cyril Ramaphosa to deal with the energy crisis.
The union is arguing the electricity crisis does not meet the definition of a disaster in terms of the relevant legislation, existing laws can adequately manage the crisis, the declaration of a state of disaster does not serve a clear purpose and there was improper political interference in declaring the decree, it said in a statement.
“The government itself is the cause of the electricity disaster and it cannot declare itself a disaster, thereby obtaining extraordinary powers to address the disaster,” said the union’s CEO Dirk Hermann
Government will probably take on R140bn of Eskom’s guaranteed debt in the fiscal year through March 2024, followed by an additional R50bn and R30bn respectively in the next two years as the power utility goes on to meet predetermined financial and operational targets, RMB Morgan Stanley analysts led by Andrea Masia said in note published on Tuesday.
The department of mineral resources & energy and energy will issue a request for proposals for 513MW of battery storage by the end of the month, energy minister Gwede Mantashe said in a speech.
It also plans to issue request for proposals for 3,000MW of gas-fuelled generation by the end of the current financial year and up to 5,000MW subject to grid capacity availability for the seventh bid window.
The ongoing energy crisis has caused rolling blackouts, weakened the rand and forced the declaration of a state of disaster.
An alternative asset manager is touting a new fund that it said will help alleviate that crisis and make investors a healthy return.
Grovest’s Twelve B Green Energy Fund will ultimately seek to deploy as much as R1bn annually, CEO Jeff Miller said in an interview, while noting its current pipeline is about a tenth of that. It will use the funds to invest in solar panels, inverters and batteries in residential complexes, commercial buildings and industrial buildings.
Eskom, named as the world’s biggest sulphur dioxide emitter, is seeking approval to release more of the pollutant linked to ailments ranging from asthma to heart attacks.
The move is part of an attempt by the company to reduce the level of temporary blackouts as a result of its inability to meet demand.
Eskom will cut 3,000MW of power from the national grid from 5am to 4pm and 4,000MW from 4pm to 5am until further notice, the utility said on Twitter on Sunday.
Ramaphosa blindsided the ruling ANC by reneging on a party resolution to place the state power utility under the control of the energy ministry and faces criticism for appointing an electricity minister within his office.
He declared a state of disaster last Thursday over the energy crisis hobbling the economy. The measure will enable the government to bypass regulatory hurdles as it seeks to repair broken power plants and procure emergency electricity to end outages that have extended to as long as 12 hours a day since the start of the year.
View original article here.
Listen to the full podcast here.
President Cyril Ramaphosa announced during his State of the Nation Address (Sona) that tax incentives are set to be unveiled for households and businesses tapping into solar energy by installing rooftop panels.
The incentives would aim “to unleash businesses and households to invest in rooftop solar” and will be detailed in in Finance Minister Enoch Godongwana’s Budget Speech on 22 February.
“National Treasury is working on adjustments to the bounce-back loan scheme to help small businesses invest in solar equipment, and to allow banks and development finance institutions to borrow directly from the scheme to facilitate the leasing of solar panels to their customers.” – President Cyril Ramaphosa
On Tuesday, Grovest launched a solar investment fund that offers investors huge tax benefits in terms of Section 12B of the Income Tax Act.
Grovest CEO Jeff Miller explains how the venture capital company’s “Twelve B Green Energy Fund” works.
“12B has been around since 2016, but now we’ve managed to create a structure which is a partnership structure typical of private equity funds, which is a ‘general partner limited’ partner.” – Jeff Miller, CEO – Grovest
“Investors can invest directly into the partnership which owns the solar assets, which then sells the electricity it generates to offtakers. In doing so the investor can not only claim the allowance in the year in which the solar energy starts being produced, but they also get a biannual distribution of the profit that is generated from selling the electricity.” – Jeff Miller, CEO – Grovest
Miller says the Fund is suited for individuals, companies and trusts, as well as provident funds in terms of Regulation 28.
He explains that it will be highly regulated, being registered as a Category 2 financial service provider with the Financial Sector Conduct Authority.
“Where the solar equipment generates less than 1MW you can write it off in less than one year, and where it creates more than 1MW you write it off over three years…” – Jeff Miller, CEO – Grovest
“The Twelve B Green Energy Fund is focusing mainly on below 1MW because its diversification of the solar plants which makes it very much a moderate-risk fund.” – Jeff Miller, CEO – Grovest
View original article here.
A new solar and renewable energy fund is launching in South Africa, offering investors a 100% tax break using Section 12B of the Income Tax Act. However, investors will need a minimum of R100,000 to get through the door.
The fund, called the Twelve B Green Energy Fund, relies on Section 12B of the Income Tax Act, which allows for a tax deduction from qualifying assets which are used for renewable electricity generation.
A similar tax incentive was launched in 2014 – Section 12J – which was the fastest-growing alternative asset class in South Africa. Under the section, over 200 funds raised R12 billion. However, Section 12J was sunset in June 2021.
According to Investec, Section 12J was specifically implemented to draw venture capital to the South African market and boost SMMEs and infrastructure development. However, it ultimately ended up being used as a tax haven for property development and wealthier individuals, missing its goals of boosting smaller businesses and creating an inclusive investment environment.
One of the key hangups for the scheme was the high participation threshold – requiring a minimum investment of R100,000 just to partake, leaving many individuals and smaller funds out in the cold.
While Section 12J was more broadly aimed at venture capital ingestion, Section 12B is specifically aimed at renewable energy generation. When first adopted in 2013, the section offered a longer-term tax break of a three-year (50%, 30%, 20%) accelerated depreciation allowance on renewable energy. This was changed in 2016 to a one-year allowance of 100%.
SARS commissioner Edward Kieswetter recently alluded to discussions between the revenue service and government to review the tax regime around renewables to potentially offer better tax breaks to further incentivise the rollout of solar and other projects.
President Cyril Ramaphosa also pointed to tax incentives for the government’s plans to push rooftop solar across the country. More details on these plans are expected at the 2023 Budget scheduled for 22 February.
Should these plans come to fruition, South Africans can expect more funds and investment opportunities to crop up in the coming months and years.
According to Twelve B founder, Jeff Miller, green energy has become a necessity in South Africa due to the country’s unreliable electricity supply.
“The private sector needs to step in to urgently improve the situation,” he said.
Miller said that through the new Twelve B fund, South African individuals, businesses, trusts and pension funds will be able to write off 100% of their solar infrastructure investment against their taxable income for the year.
The Twelve B Green Energy Fund invests in solar panels, inverters and batteries in residential, commercial and industrial areas across different locations for different end users.
Every project is governed by a power purchase agreement (PPA), which rules over the amount of energy generated at an agreed price during the term of the PPA. All projects are vetted by an investment committee before they are approved, he said.
The fund is managed and administered by Grovest and regulated by the Financial Services Conduct Authority (FSCA). Grovest was one of the largest administrators of Section 12J funds, with R3.5 billion in assets.
“The Twelve B Green Energy Fund is targeting an internal rate of return (IRR) to investors of 14%-15% net of fees and taxes and has a moderate risk profile. The ability to write off the cost of the investment against taxable income provides downside protection and enhances overall returns for investors,” said Miller.
The Twelve B Green Energy Fund has a tax-efficient partnership structure, with investors receiving bi-annual payments from the partnership’s profits.
The term of the fund is ten years, but there is no specified minimum period to hold the asset to benefit from Section 12B allowance, he said.
However, as was the case with Section 12J investments, the Twelve B fund comes with a high entry point. Those who want to invest in the scheme will need a minimum of R100,000 – and there is no maximum cap for investment.
Thus, only investors with large amounts of capital will be able to invest in solar and receive a deduction in their taxable income.
As an example, Miller said that an investor who invests R100,000 in March 2023 – with the full amount being invested in a solar kit that stats generating in May 2023 – will be able to deduct R100,000 from their taxable income in February 2024.
If only R70,000 is invested in a solar kit that starts generating in February 2024, the investor will be able to deduct R70,000 from their taxable income for the year ended in February 2024, with the remaining R30,000 reduced from their taxable income the following tax year.
It should be noted that these are one-off deductions, and cannot be repeated on the same investment.
“We will endeavour to give investors the opportunity to deduct their Section 12B allowance in the year in which they make the investment,” the group said. “As such, we will be raising capital in tranches of R200 million on a first-come, first-serve basis.”
In terms of the investment mandate of the fund, at least 70% of capital contributions will be invested in projects under 1 megawatt. As such, the fund will be investing in a portfolio of renewable energy projects focused on sectional title complexes and select commercial and industrial installations.
“These installations incorporate the latest technology in solar panels, inverters, and battery storage,” it said, “spread across various sectors – multi-family residential, retail, and industrial off-takers. They are also geographically spread across South Africa.”
Currently, the fund has approximately R80 million of potential deals in the pipeline.
On top of the high barrier to entry, investors should be aware of the fees involved, including:
View original article here.
South Africa’s ongoing energy crisis has caused rolling blackouts, weakened the South African rand and forced the declaration of a state of disaster. An alternative asset manager is touting a new fund that it says will help alleviate that crisis and make investors a healthy return.
Grovest’s Twelve B Green Energy Fund will ultimately seek to deploy as much as 1 billion rand ($56 million) annually, Chief Executive Officer Jeff Miller said in an interview, while noting its current pipeline is about a tenth of that. It will use the funds to invest in solar panels, inverters and batteries in residential complexes, commercial buildings and industrial buildings.
The fund will also allow investors to benefit from a tax deduction — as high as 100% — for having qualifying assets used for electricity generation from renewable sources, as stipulated under Section 12B of the Income Tax Act, according to a press release.
“There’s an energy crisis and there’s a tax benefit and there’s attractive cash return after fees and taxes,” Miller said, predicting an investor return of as much as 15% net of taxes and fees. “We are very bullish on it and because it is a moderate risk fund we are very comfortable that we will be able to deliver returns to investors.”
The venture comes as the country suffers through its 13th consecutive month of power cuts, which the South African Reserve Bank estimates is costing the economy as much as 899 million rand ($50 million) per day.
The power cuts, which started in 2008, are needed to protect the grid from collapse when state-owned company Eskom Holdings SOC Ltd.’s aging and poorly maintained and mostly coal-fed plants can’t meet demand. This month, South African President Cyril Ramaphosa declared a state of disaster to enable the government to accelerate its response to an ongoing energy crisis, and said he’ll appoint a minister in his office who will focus on boosting power supply.
Miller says the 12B fund could allow some of the clients to get completely off the grid. Grovest, which manages and administers the vehicle, has 3.5 billion rand in assets under administration.
View original article here.
