Dear 12J Investors,
It's been a hectic and very busy few months since our previous communication. Please find below a short summary of what’s been happening in the 12J Solar Fund.
TL;DR
- Existing sites: The existing sites are performing well. As expected, there are some operational issues which arose from time to time, but we are managing them. The fund overall is in line to reach its 10%-12% pre-tax, pre-management fees targeted returns for the year.
- Missed Opportunity: Unfortunately, due to Eskom delaying our grid allocation until 2029, we were unable to launch the 10 MW “wheeling” project at the Nicolor gold processing mine in the North West Provence. Although a huge disappointment for the team (which invested a lot of time on this project over the last year), the project not going ahead has no financial impact on investors. We will continue to apply this “at risk” development model and continue to only deploy funds once projects are secured and validated.
- Exciting new pipeline: We are excited to have won the development of 11 smaller sites from ADvTECH, our first listed client. We also anticipate the roll-out of further sites during 2025.
DETAILED FEEDBACK
We present below more detail in respect of our existing sites, the missed opportunity and new pipeline described above
Existing Projects
Overall our existing sites are doing well, with most projects performing in line with expected budgets. This simply means that the fund as a whole is on course to meet its targeted returns initially communicated at the outset to our investors, being a key deliverable for us as fund managers.
A few comments on some of our sites:
LimeRoc Business Park (Pretoria)
Both LimeRoc solar sites continue to perform well and in line with budgets. Unfortunately during May 2024 we had a fire within a mini-sub, which resulted in the site being offline for more than 100 days to enable repairs. Insurance claims were approved and already paid out for property damage and business interruption, and apart from excess insurance payments, investors returns were not affected.
Sunderland Ridge Business Park (Pretoria)
As you may recall we replaced inverters during October 2023 which resulted in significantly improved generation of energy. We are pleased to announce that we maintained the improved generation volumes since the new inverters were installed, already justifying the decision to make the additional capex investment.
As for LimeRoc, in the last reporting period, we had an unrelated incident at the Sunderland Ridge site experiencing electrical issues leading to overheating of cables and related equipment and some minor electrical fires. The solar site was offline for repairs for approximately 30 days. Insurance claims were submitted and already paid out for property damage, and we are in the process of dealing with the business interruption part of the insurance claim. We expect this claim also to be honored with minimal impact on investor returns.
Klinger sites (Wadeville, Honeydew, Sasolburg and Cape Town)
The Klinger sites in Wadeville, Honeydew, and Sasolburg are showing improved performance after a period of reduced energy demand caused by the client’s curtailed operations over the past year. However, the Cape Town site, though the smallest of the portfolio, continues to underperform due to the client’s consistently lower electricity requirements, which are not expected to increase in the foreseeable future.
It is also worth noting that December traditionally sees lower production across all Klinger sites, as the group closes operations for the year-end shutdown.
Over the past 18 months, we have been working to secure the rights to feed surplus solar energy from the Wadeville site into the City of Ekurhuleni’s grid. This would allow us to generate additional revenue, particularly over weekends and during the December shutdown period. Unfortunately, despite ongoing discussions, the City of Ekurhuleni remains unable to facilitate grid feed-in. We will continue fighting this battle over the next few months.
Similarly, we explored grid feed-in options for the Cape Town site. However, the client is not registered under a Time-of-Use tariff, which is a prerequisite for grid feed-in. While we assessed the viability of converting to a Time-of-Use structure, the current financial models indicate that this change would not be commercially beneficial for the client at this stage. As such, we will need to operate within the current limitations.
We were also informed last week that 60 solar panels were stolen from a roof at the Honeydew site. Again, it's covered by insurance, but certainly disruptive in time and effort to deal with assessors, claims and getting the sites operational again.
On a positive note, we successfully renegotiated the PPA rates with Klinger for all the above sites, allowing us to increase billing over the past few months. This adjustment has helped offset the impact of reduced energy demand resulting from the client’s scaled-down operations.
Western Cape Portfolio (Worcestor and Stilbaai)
Our Western Cape Portfolio cromprising Malan Boerdery and Doornekraal in Worcestor and the old age home in Stilbaai are performing well and in line with budgets.
Nicolor (North West Province)
Our returns from the existing Nicolor site are in line with the budgeted returns.
However, we were not able to expand into the follow-up 10 MW “wheelling” project as initially anticipated - refer below for more comments.
Missed Opportunity: "Wheeling" at Nicolor
During our previous communications, we shared our excitement about expanding operations at Nicolor into a 10 MW wheeling site. Despite months of dedicated effort, we regret to report that this opportunity did not materialize.
There are several contributing factors, with the most significant being delays caused by Eskom’s ongoing unbundling into Generation, Transmission, and Distribution divisions. Ultimately, Eskom has now informed us that grid access for this project will not be available before 2029.
This outcome is undoubtedly disappointing for the Futureneers team, as we invested significant time and effort—working hands-on for over a year—to bring this project to life. However, while this represents a missed opportunity to the fund, there are no financial implications for the fund. The Futureneers development model ensures that all project development work is undertaken “at risk” by the team, and funding from the 12J Fund is only deployed once a project is fully secured and validated.
Moreover, the insights and experience gained from attempting to execute this project have been invaluable and will undoubtedly strengthen the team’s capabilities for future opportunities.
New Pipleine: ADvTECH
The setback with the Nicolor wheeling project has certainly delayed our initial project roll-out plans, as we had anticipated construction to take place between October 2024 and February 2025.
The good news, however, is that we have secured 11 new smaller sites for ADvTECH, our first listed client. ADvTECH operates in the education sector, with a strong focus on schools, tertiary education, and resourcing services.
Construction on some of these sites is already underway and is expected to be completed by February 2025. Additionally, we anticipate rolling out further ADvTECH sites during 2025, marking the start of a close working relationship with this prominent client.
While the scale of the ADvTECH contracts does not fully replace the lost 10 MW Nicolor opportunity, securing our first listed client is a significant milestone. It also allows us to fill the project pipeline gap created by the Nicolor delay.
We will keep you updated on the progress of these sites and any further developments as we secure additional projects for 2025.
Final Remarks
As we approach the year-end holiday season and with 2025 just around the corner, we want to extend our heartfelt thanks to our investors for your continued trust and confidence in Futureneers. Your support means a great deal to us, and we remain fully committed to delivering on our targeted returns, despite operating in an increasingly competitive environment with narrowing margins.
On a positive note, the anticipated “higher-than-usual” utility rate increases expected from 1 April may create further opportunities and add momentum to our projects in 2025. Our main challenges for 2025 and beyond remains uncertainty and reliance on Eskom, very few municipalities being bankable and competing with the big guys as wheeling and energy traders will surely start playing a significant part in the wheeling and selling of energy.
Overall, we are optimistic about the year ahead and look forward to continuing this journey with you.
For now, we wish you and your loved ones a joyful holiday season and a successful, prosperous 2025.
Kind regards
Jaco, Deon and the Futureneers Energy Team