Frequently Asked Questions

Section 12B of the South African Income Tax Act entitles taxpayers to claim an accelerated wear and tear
allowance on assets owned and brought into use by the taxpayer for trade in generating various forms of
renewable electricity.

For the period 1 March 2023 to 28 February 2025, as promulgated into law in December 2023, the Section 12B allowance will be increased from 100% to 125% and no maximum cap on the output of the solar installation.

A: Investor invests R100,000.

The full amount is invested into the solar kit that starts generating energy in the relevant tax year.

The investor can deduct 125% i.e. R125,000 from their taxable income in that tax year.

B: Investor invests R100,000.

Only R70,000 is invested into the solar kit that starts generating energy in the relevant tax year.

The investor can deduct R87,500 (70,000 X 125%) from their taxable income for that tax year. 

The balance of R37,500 (30,000 X 125%) can be deducted from taxable income in the following tax year when the balance of the solar kit comes into operation.

PLEASE NOTE: The adjusted tax incentive will only be available for installations that generate electricity for the first time between 1 March 2023 – 28 February 2025.

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

Individuals, trusts, and companies can invest into the Fund. Pension Funds are also permitted to invest in
the Fund as governed by Regulation 28 (as amended) of the Pension Fund Act.

The Twelve B Green Energy Fund is structured as an en commandite partnership. The en commandite
partnership structure is most commonly used by private equity Fund Managers in South Africa.

It comprises two categories of partners:

  • Undisclosed limited liability partners – the investors into Twelve B Green Energy Fund
  • The general partner: Twelve B GP II (Pty) Ltd

The two categories of partners enter into a partnership agreement that co-own the assets in which the Fund
invests.

Investors contribute a fixed sum in exchange for a percentage share in the partnership. The liability of the
investors is limited to their capital contribution into the Fund.

The net income earned by the partnership is distributed to the investors in accordance with the ratio of
ownership as set out in the partnership agreement.

A limited partner (investor) comprises an individual, trust, company, or pension fund who contributes
capital into the partnership. The investor’s liability is limited to the amount of his/her investment into the
Fund.

The general partner is in ultimate control of the Fund. It appoints the Fund Manager to manage the Fund on
a day-to-day basis on its behalf.

The GP’s liability is unlimited in relation to the partnership.

A Deed of Adherence is a supplementary legal document that is used to bind an investor to the partnership
agreement.

A power purchase agreement (PPA) is a long-term electricity supply agreement between the partnership,
being the energy producer and an offtaker.

The PPA sets out the amount of electricity to be supplied, the initial pricing, the annual escalations, and
penalties for non-compliance.

An offtaker is a consumer of the electricity generated by the solar assets deployed at the premises of the
offtaker.

Offtakers may be sectional title complex, industrial or commercial installations.

The Internal Rate of Return (projected IRR): ≈ 18% (net of fees and taxes on risk capital).

Distribution policy
Investors will receive bi-annual distributions from the profits of the sale of the electricity:

  • Distribution: March and September
  • Average annual yield: 14.22% p.a. on your investment amount
  • Average annual yield: 32.51% p.a on risk capital invested

The IRR is a metric used to estimate the return on the investment having taken into account the time value of
money.

  • A dividend is paid by a company as a share of profits to the shareholder as a consequence of him/her
    owning shares in a company.
  • A distribution is a share of the profits paid to a partner as a consequence of him/her being a partner in a
    partnership agreement.
  • Dividends are subject to dividends withholding tax after having paid company tax of 27%.
  • Distributions are paid directly to the partner and are taxed directly in the partner’s hands.

Given that the Twelve B Green Energy Fund is a partnership, investors receive distributions.

The profits of the partnership which have been generated from the sale of electricity, net of costs, are distributed to investors bi-annually in March and September each year.

It is the cumulative annual distributions of the Fund to investors as a percentage of investors’ capital
contribution.

No, funds will be deployed into a diversified portfolio of energy-producing assets.

Once the financial statements of the Fund have been audited by the Fund’s auditors, a detailed tax summary
will be sent to each investor.

This summary will confirm the amount of the Section 12B deduction as well as his/her share of profits that
should be included in your tax return for the tax year ended February each year.

Yes, it may be carried forward to the successive year, and set off future taxable income.

The investment risk profile is moderate.

The funds will be deployed into a portfolio of solar projects in different locations, with different offtakers.
Each project will be bound by a long-term PPA which sets out the amount of electricity to be supplied, the
initial pricing and the annual escalations.

All solar equipment is covered by an all-risks insurance policy for lightning, floods, theft, etc.

Counterparty risk is mitigated as the solar equipment is movable and can be moved to another site if
required.

  • Non-payment by offtakers. However, the portfolio is made up of a number of offtakers, so each offtaker
    will only represent a small portion of the Fund. One can also repurpose the solar kit for another offtaker
    at an alternate site.
  • Helioscope projections are utilised to size solar equipment to ensure that energy production is matched
    to usage.

Yes, it is regulated by the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC).

The Fund is administered by Grovest, the pioneers of Section 12J, who operationalised the first Section 12J
Fund in 2014. The Section 12J market grew to over R12 billion when the sunset clause was reached in June
2021. Today, Grovest is the largest administrator of Section 12J Funds, with over R3.5 billion in assets under
administration.

Yes it is. This amount is determined at the time of exit based on the selling price of the portfolio.

You are deemed to have exited your investment once the portfolio is sold to a third party.

At the end of the 10-year Fund term, the portfolio of energy-generating assets will be sold into the active
institutional market for moderate risk, high-yielding, long-term investment instruments.

To enhance investor returns, the Fund term may be extended for a further two years, at the discretion of the
Fund Manager.

In the unplanned circumstance of exiting early, the investor will need to request this from the Fund
Manager.

Subject to the working capital requirements of the Fund, the Fund Manager may repurchase your
investment at an appropriate discount at the time.

The earlier the exit, the higher the discount will be.

At any point in the 10-year term, an investor may sell their partnership interest to a third party.

If an investor disposes of their investment before the end of the Fund term, or at the end of the Fund term,
the investment will be subject to a portion of the recoupment of the value of the solar assets at the time of
disposal and is to be included in the investor’s tax return in the year in which the investment is sold.

Set-up fee:
A set-up fee of 1% (once off) of capital raised is paid to the Manager.

Management fee:
A management fee of 2% per annum is paid to the Manager on the capital invested. This fee is paid quarterly
in arrears.

Performance fee:
The Manager will earn a performance fee of 20% on all distributions after first returning 110% of risk capital
to investors.

All monies received from Shariah investors will be invested into a Shariah-compliant bank account until
deployed into qualifying assets.

All projects are approved by an experienced Investment Committee before they are implemented. The Investment Committee will select a diversified portfolio of projects to mitigate for concentration risk.

The Investment Committee will consider investments based on the following:

  • The offtaker must be credit-worthy with historic electricity invoices to validate usage.
  • The offtaker must enter into a long term power purchase agreement.

The projects emanate from various sources including engineering, procurement and construction
contractors (EPCs), operations and maintenance contractors (O&M), with whom the Fund has an association,
or perhaps the offtakers themselves.

In the current environment and severe crisis in the availability of electricity in South Africa, it is self-evident
that there will be numerous projects which require Funding.

Projects also emanate from word of mouth, landlords, managing agents, and property developers.

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.

These are spread across various sectors – multi-family residential, retail, and industrial offtakers. They are
also geographically spread across South Africa.

Currently, through their partnership with Hooray Power, Twelve B Fund Managers, have sufficient pipeline to deploy.

The minimum investment is R100,000. There is no maximum investment amount.

Environmental, social, and governance (ESG) investing is a form of socially responsible investing that
prioritises financial returns alongside impact on the environment and the planet.

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

Twelve B Green Energy Fund is an ESG investment committed to sustainability.

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