Dear 12BA Investors,
As we move through September 2024, we’re pleased to share a brief update on your 12BA investment with Futureneers.
Overall Performance
Despite encountering some technical challenges at our Nicolor site (details below), the portfolio is performing well and in line with budgets. We remain confident in achieving our targets for the first year, ending on 28 February 2025 (YR1).
SARS Refunds
We’ve also received feedback from several non-provisional tax-registered investors who have already received their tax refunds from SARS. It seems standard for SARS to request certain verification documents during tax return filings. If you need any assistance with this, please don’t hesitate to reach out; we’re here to help.
Provisional Tax Payments Aug '24 and Feb '25 Distributions
As you may recall, your investment was strategically structured to maximize and accelerate your upfront Section 12BA tax benefit through gearing (debt). As discussed, the cash flows in the first few years will primarily service the debt. However, we have also budgeted distributions to ensure our investors are never out of pocket when tax liabilities arise in the partnership. As income grows, we plan to distribute surplus cash as well.
For YR1, our strategy is to eliminate the investors’ tax liabilities from the partnership by acquiring additional assets that qualify for Section 12BA allowances, consistent with our original budget and fund management mandate. This approach means that your provisional tax payments due at the end of August 2024 will effectively be zero. Furthermore, in line with our original forecast and budget, we are targeting a zero net taxable income (or as close as possible) for the tax year ending 28 February 2025.
Now that we have addressed the tax and financial matters, see below high level feedback on the various projects on the portfolio:
Nicolor Solar Plant
In recent months, we’ve faced several technical issues at the Nicolor plant, including client equipment breakdowns and unscheduled maintenance. The primary challenge, however, is an ongoing technical dispute with Eskom regarding the connection of certain lines within the mine's electrical infrastructure and supply points. Additionally, Eskom’s delays in enabling our feedback into the grid, which is critical for fully utilizing our solar generation, have been a significant hurdle. The recent unbundling of Eskom into separate transmission, distribution, and generation entities has introduced further unforeseen and unexplained delays. While this issue has been a source of concern, please be assured that we are actively managing it. We are holding regular meetings with our client’s technical and operational teams and are in constant communication with Eskom to resolve the bottlenecks and budget inquiries.
Should we regain the support from Eskom that we had prior to their unbundling, we are optimistic that this matter could be resolved in a matter of weeks. Until then, the plant will continue to operate below its full capacity for the short term. From discussions with the client we are also confident of various heavy electricity using equipment coming online again in October (after the completion of the unscheduled maintenance) which should have an immediate positive impact on plant utilization.
Loan Collection Update
We’re pleased to report that loan collections are progressing smoothly, with everything operating as expected.
Cost Management and Control:
While we are beginning to see an uptick in insurance costs, overall cost management remains strong. Our consolidated portfolio costs are currently under budget for YR1.
Key Actions for the Next 6 Months
Our primary focus over the next six months will be to resolve the technical issues at the Nicolor plant and to enhance its utilization.
That’s all for now. Please feel free to reach out if you have any questions. We also encourage our investors to contact us if they receive validation requests from SARS regarding their February 2024 tax returns. Our team is well-prepared to address these queries efficiently and effectively.
Warm regards,
Jaco, Deon, James, and the Futureneers Energy Team