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With South Africa contending with frequent power outages and rising energy costs, many estate owners are actively seeking alternative energy solutions to sustain their operations.
Among the available choices, rooftop solar has emerged as the favored option. This preference is unsurprising due to the minimal maintenance requirements of solar technology, its durable components with extended lifespans, and its manageable overall cost.
The primary challenge faced by most estate owners lies in securing the necessary capital for installing a solar solution. Fortunately, through the Government’s recently enhanced Section 12B tax incentive, fund managers are able to offer funding to estate owners at rates that are significantly more competitive than traditional funding options.
Fund managers are able to offer more competitive rates because their investors’ returns are boosted by the large tax incentive.
Jonty Sacks, a partner at Jaltech, stated: “Section 12B fund managers are not subject to banking legislation and can therefore fund an entire project without security, as opposed to traditional institutions that require some equity contribution from the estate owner. In addition, our funding rate is significantly more attractive because our investors enjoy the Section 12B tax benefit.”
It’s not only the terms that are attractive.
Estate owners benefit from accessing Section 12B funding for a number of reasons, namely:
- No security required
- No upfront costs involved with accessing the funding
- Stable and predictable costs over the term
- The estate owner will be able to appoint the EPC/solar installer
- Maintenance and monitoring are the responsibility of the appointed EPC/solar installer
- The funding is structured in a way that it is off the balance sheet for the estate owner
- The funding term can be as long as 20 years, lowering the annual payments
- The funding can be used to refinance existing solar systems to free up capital for their estates
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Jonty Sacks further adds that “it’s not only the estate owners who benefit, but the solar installers which we are working with, as they now also have access to funding that has unlocked a number of projects which simply took too long through the traditional funding channels. This has ultimately resulted in more business for them.”
One of the main benefits of accessing this type of funding is that within a short period of time, the actual cost of the funding is expected to be much lower than purchasing electricity from the utility company, and it’s anticipated that each year the estate owner’s saving will increase as Eskom increases its tariff.
The prospect of Eskom supplying the South African market with reliable electricity within the next two years is remote, and when they eventually achieve this, the cost of the electricity would most likely be significantly higher than the cost of producing energy through solar. Estates should, therefore, be exploring alternative energy solutions as their adoption is inevitable.
