It’s been just three months since Twelve B Green Energy Fund launched.
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.
Current status of the Fund
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.
- The first project approved is a sectional title complex situated in Dunkeld, Johannesburg. The solar system will have a peak power capacity of 175 kilowatts and the energy storage system will have a capacity of 300 kilowatt-hours.
- The second project is a commercial business in Sandton, and the solar system will have a peak power capacity of 201.7 kilowatts and the energy storage system will have a capacity of 500 kilowatt-hours.
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.
Twelve B Green Energy Fund’s strategic alliance
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.
- Hooray Power’s sophisticated load management software manages power via solar, battery and the grid which provides an always-on power solution for their clients.
- They have a 4-year proven track record and are the longest operator of these actively-managed battery systems in South Africa.
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.
Twelve B Green Energy Fund invites savvy investors wanting to decrease their tax obligation and achieve superior returns, to invest today and add to a greener, more sustainable future for South Africa.