Dear 12BA Solar Investors,
It's time for an update on your Section 12BA Solar fund investment. It is our aim to send an email update every 3 to 4 months, but you are welcome to contact any of us at any time should you have any specific questions.
Feedback Philosophy
As this is our first newsletter, I want to introduce Futureneers' open-book feedback philosophy. Our goal is to keep you informed about your investment and the solar project behind it, sharing both the successes and challenges. We will undoubtedly face obstacles, but how we respond to them is what truly matters. Our team is hands-on and actively involved in the ongoing management of each project alongside our partners. Additionally, we will occasionally share our strategic insights and include educational content. We believe that the more our investors understand this industry, the better their future investment decisions will be. Let's get started.
Critical 1st Milestone achieved
As you are aware, to qualify for your Section 12BA tax deduction, the solar plants must be operational and generating energy before the tax year ends. We are proud to confirm a 100% success rate in this regard. Although it was challenging at times, our technical team deserves commendation for their hard work and dedication in achieving this goal. What does this mean for you as an investor? Simply put, you are now significantly "de-risked" and can claim back taxes (or "short-pay" tax for provisional taxpayers) using your 12BA tax allowance. Milestone one achieved. Additionally, your remaining investment, referred to as "Risk Capital" (as low as 20%), will now attract enhanced returns due to this innovative tax-structured investment. Future reports will therefore express returns on Risk Capital in line with the budget presented to you when the original investment was made..
Project Feedback: Western Cape projects
The trading months from March to April have been fruitful, with all our Western Cape projects delivering the expected solar generation and billing in line with our budgets. While most of these projects are smaller installations where actual generation closely matches the budget, we've encountered challenges with rising insurance costs, slightly exceeding our budget. We are negotiating new terms with our brokers to address this crucial expense line item for all our projects
Project Feedback: Nicolor Gold Processing Plant
The Nicolor project is a much larger solar plant with many variables that may impact financial results, such as the client’s energy demands, business cycles, and technical complexities, including electricity supply from multiple Eskom delivery points. The positive news is that the plant is generating to specifications. However, we are currently facing significant challenges in optimizing generation and energy balancing.
Two issues are hindering our operations:
(a) Client’s Unplanned Mill Shutdown: A client’s unplanned mill shutdown, connected to our supply point, is limiting our ability to distribute solar plant energy efficiently. This forces us to limit our solar feed-in generation to a single "usage point," while the client’s consumption is spread across three different connection points.
(b) Technical Issues with Eskom: Specifically, line fault levels are preventing us from closing an internal busbar to distribute energy to multiple connection points at the plant. Additionally, we are experiencing delays in receiving final interconnection approval from Eskom due to staffing shortages on their side. This results in a substantial portion of the solar plant's potential generation not being utilized.
In response to these challenges, we are taking the following actions:
(a) Feeding Surplus Energy Back into the Grid: Following discussions with the technical Eskom team, we have agreed to feed surplus energy back into the grid, creating a "billing credit" for the client. While the application has been submitted and the technical assessment completed, it will take some time for Eskom to process and implement this solution. We anticipate having it in place by the end of July. This will then allow us to sell 100% of our generated energy either for direct use by the client or indirectly through offsetting their Eskom account.
(b) Weekly Meetings with Client's Production Team: To mitigate the impact of sales shortfalls in the interim period, we are meeting with the client’s production team weekly to maximize the use of solar energy.
(c) Provisions in the Power Purchase Agreement (PPA): The PPA includes provisions for a minimum annual offtake, ensuring that we can recover any shortfalls contractually before the end of the year.
We are confident that once the Eskom credit offset is implemented, we will be able to catch up without any financial impact on the first year's results. Rest assured, this matter is demanding our core attention, and we will keep you updated on this issue in the next newsletter.
Click below to view drone footage of the Nicolor 4MW plant recently commissioned by Futureneers Energy.
Tax Pack ready for the July 2024 Tax submission deadline
The 2024 final tax filings (for the tax year ended 28 February 2024) typically open in July. Therefore, in June 2024, we will email everyone a Tax Pack, which will guide you through the process of completing your tax filings. Along with this, we will also distribute the Annual Financial Statements for the 2024 tax year. Investors can either send this pack and the financial statements to their accountants or use them to complete their 2024 tax filings themselves. Our team is also available to assist with any specific questions you may have.
Investor Participant certificates issued
During the last two days of February, we emailed Investment Participation Certificates to each investor. If you have not received yours, please contact us at office@futureneers.co. We remind investors that their 12BA investment is in an En Commandite Partnership, not a company. The Participation Certificate is similar to a share certificate in a company and indicates your effective portion of the net profits of the partnership, as well as your effective percentage rights to the partnership’s assets and liabilities.
As a Limited Partner, each year, your pro rata portion of the partnership balance sheet will be added to your personal balance sheet, and pro-rata income will accrue to you and be taxable in your hands. According to our models, we have planned for these events, and your future cash distributions will include all taxes payable on the pro-rata income. We will elaborate on the first distributions in our next newsletter.
Final Word
And that's it for now. Please drop us an email should you have any specific questions.
Kind regards
The Futureneers Energy Team
(Jaco, Deon and James)