Section 12B
Residential Solar
Investment II
Up to 104% returned within 6 months
Introduction
Through a strategic partnership with Wetility, one of South Africa’s leading residential solar providers, we are offering investors the opportunity to gain exposure to a diversified portfolio of up to 3,700 solar-powered homes.
Investment Focus
The capital raised will be deployed to fund the acquisition of an existing portfolio of residential solar systems.
Backed by strong operational expertise, scale, and robust safeguards, this investment represents the most de-risked Section 12B investment in the market.
Here’s why:
The investment targets a return of up to 104% of investor capital within 6 months.
Investors gain access to a highly diversified portfolio of up to 3,700 residential solar systems.
The structure includes a 17% first-loss protection to further safeguard investor capital.
Investors gain exposure to a portfolio of residential solar systems with a proven track record of performance and payment.
Our Track Record
With one of the sector’s leading in-house technical teams, we have established ourselves as South Africa’s largest Section 12B solar fund manager. Our track record reflects both expertise and scale:
We’ve raised and committed over R1 billion across 250+ solar projects
98% of our solar portfolio has a positive payment track record
Over 600 taxpayers have entrusted their capital with us
We’ve deployed more than 110% of equity raised within the first year
We’ve invested in solar projects, which are projected to generate double-digit IRRs
Residential 12B Investment II Explained
Short Explanatory Video
Residential Solar Investment
Capital Raise & Draw Down Timeline
We are targeting a capital raise of R180 million.
Investment allocations will be made on a first-come, first-served basis, with a full drawdown of committed capital by 20 February 2026.
Investment
Highlights
Key Investment Benefits:
Up to 230% Tax Deduction:
This investment has been structured to maximise tax efficiency by targeting an equity-to-debt ratio of 1:1.30. In practical terms, for every R1 million invested, we aim to raise R1.30 million in debt/partner contribution, effectively increasing the total allowable tax deduction to R2.30 million.
As a result of this structure, investors can claim:
> A 100% tax deduction on capital invested; and
> A 100% tax deduction on the associated debt.
By way of illustration, an investor in the top tax bracket who invests R1 million will be entitled to a total tax deduction of up to R2.30 million (R1 million on the investment + R1.30 million on the debt). This equates to a SARS refund of approximately R1,035,000.
In essence, this investment aims to return the full amount of the initial investment plus R35,000 to the investor within 6 months of investing.
Diversification:
Investors will gain exposure to a highly diversified portfolio of up to 3,700 residential solar systems, spread across multiple geographic regions throughout South Africa. This broad diversification significantly reduces default risk and enhances the stability of returns.
In addition, Wetility is contractually obligated to remove and reinstall equipment from defaulting customers’ homes. This proactive approach helps minimise cash flow disruptions and protects the overall performance of the portfolio.
First Loss Protection:
To align interests and enhance downside protection, Wetility has committed 17% of the total capital/debt required. This contribution will be structured as a first-loss tranche, meaning it will absorb the first 17% of any losses incurred in the investment.
Deployment:
The investment will result in the acquisition of an existing portfolio of residential solar systems with a value of over R400 million.
Contractual Exit:
As part of the investment structure, Wetility is contractually obligated to acquire the solar asset portfolio at the end of year 8 at a predetermined value.
Cash Flows:
Investors are projected to receive an average annual cash yield (excl. the tax benefit) of between 15% to 17% pre-tax and 3% to 4% post-tax for 8 years, in addition to receiving 104% of their capital back within six months.
Key Investment Benefits:
Up to 230% Tax Deduction:
This investment has been structured to maximise tax efficiency by targeting an equity-to-debt ratio of 1:1.30. In practical terms, for every R1 million invested, we aim to raise R1.30 million in debt/partner contribution, effectively increasing the total allowable tax deduction to R2.30 million.
As a result of this structure, investors can claim:
> A 100% tax deduction on capital invested; and
> A 100% tax deduction on the associated debt.
By way of illustration, an investor in the top tax bracket who invests R1 million will be entitled to a total tax deduction of up to R2.30 million (R1 million on the investment + R1.30 million on the debt). This equates to a SARS refund of approximately R1,035,000.
In essence, this investment aims to return the full amount of the initial investment plus R35,000 to the investor within 6 months of investing.
First Loss Protection:
To align interests and enhance downside protection, Wetility has committed 17% of the total capital/debt required. This contribution will be structured as a first-loss tranche, meaning it will absorb the first 17% of any losses incurred in the investment.
Deployment:
The investment will result in the acquisition of an existing portfolio of residential solar systems with a value of over R400 million.
Diversification:
Investors will gain exposure to a highly diversified portfolio of up to 3,700 residential solar systems, spread across multiple geographic regions throughout South Africa. This broad diversification significantly reduces default risk and enhances the stability of returns.
In addition, Wetility is contractually obligated to remove and reinstall equipment from defaulting customers’ homes. This proactive approach helps minimise cash flow disruptions and protects the overall performance of the portfolio.
Contractual Exit:
Cash Flows:
Calculate Your Tax Savings
Not sure whether you qualify for the Section 12B tax deduction, or how much tax you could potentially recover from SARS?
We have a simple online tax calculator designed to give you a clear estimate of the tax benefit you could be eligible for after investing with us.
Return Profile & Cash Inflows:
This investment is designed to deliver consistent annual income over an 8-year period, alongside an initial SARS tax refund in year one.
Below is the projected return and cash flow on the investment in the scenario where both investor capital and debt have been deployed. The figures in *green demonstrate the combined yield (net of fees and taxes) an investor will earn, over the specific period, after having paid income tax and debt repayments.
Investment Performance Summary
| Pre-tax return (incl. tax benefit & net of fees) | R2 365 577 |
| Post-tax return (incl. tax benefit & net of fees) | R1 318 999 |
| Pre-tax IRR (incl. tax benefit & net of fees) | 66% |
| Post-tax IRR (incl. tax benefit & net of fees) | 25% |
| Average annual pre-tax yield (excl. tax benefit & net of fees) | 15% - 17% |
| Average annual post-tax yield (excl. tax benefit & net of fees) | 3% - 4% |
+ Assumptions
- R1 million investment
- The investor is in the highest tax bracket
- The Prime Rate as of 1 January remains unchanged
- The assets are sold at year 8 at 20% of the original purchase price
- Minimum 8-year holding period
- Annual customer cancellation rate: 3%
Key Risks & Mitigating Factors:
| Risk | Description | Mitigation |
|---|---|---|
|
Deployment Risk |
A binding term sheet has been signed with the seller of the solar systems, and the final agreements are expected to be signed during the first week of February 2026. However, as with any transaction, there is a risk that the deal may not proceed as planned, while the legal agreements are being finalised. |
Although the final agreements have not yet been signed, the key terms of the transaction have already been agreed upon, including the purchase price and other principal commercial terms. Investors will only be required to deposit their committed capital should the transaction go ahead.
|
|
Cancellation Risk |
The residential solar customers have committed to three-year contracts, with a portion of these contracts reaching expiry each year over the next few years. As a result, there is a risk that some customers may choose not to renew their contracts after the initial three-year term. |
Wetility is contractually required to relocate solar systems installed at customers’ homes where contracts are not renewed, thereby reducing the time period in which the assets are non-productive. Ongoing Eskom electricity tariff increases continue to improve the relative economics of solar. As a result, homeowners are able to generate increasing annual savings from solar installations, which reduces the incentive to cancel or not renew their contracts. |
|
Credit Risk |
Returns are dependent on the ability of energy consumers to make consistent payments for electricity consumed. |
The residential solar portfolio has an excellent payment history, with defaults remaining in the low single digits. Wetility is contractually obligated to remove and reinstall solar equipment from defaulting customers’ homes. This proactive approach helps minimise cash flow disruptions and protects the overall performance of the portfolio. |
|
Debt Funding Availability |
Jaltech’s debt provider has indicated a willingness to fund the debt component; however, the final agreements have not yet been concluded. |
Jaltech’s debt provider has conducted an in-depth analysis of the portfolio and has indicated a strong willingness to provide the debt facility before the end of February 2026. |
|
Debt Risk |
If the investment has a material number of defaults or cancellations, the debt provider may enforce its rights and repossess the solar equipment. In this scenario, investors could lose their capital and have to repay a portion of their tax benefit. |
We maintain a prudent equity-to-debt ratio to manage this risk and help preserve investor capital. In addition, this risk is mitigated due to the excellent credit quality of the portfolio. |
|
Legislation Risk |
Changes to renewable energy regulations or government-controlled electricity tariffs could affect the long-term viability of residential solar projects. |
Given the significant role that residential solar plays in alleviating pressure on the national grid and reducing load shedding, we believe the likelihood of adverse legislative or regulatory changes impacting the viability of residential solar is low. |
Key Risks & Mitigating Factors:
Deployment Risk
A binding term sheet has been signed with the seller of the solar systems, and the final agreements are expected to be signed during the first week of February 2026.
However, as with any transaction, there is a risk that the deal may not proceed as planned, while the legal agreements are being finalised.
Although the final agreements have not yet been signed, the key terms of the transaction have already been agreed upon, including the purchase price and other principal commercial terms.
Investors will only be required to deposit their committed capital should the transaction go ahead.
Cancellation Risk
The residential solar customers have committed to three-year contracts, with a portion of these contracts reaching expiry each year over the next few years.
As a result, there is a risk that some customers may choose not to renew their contracts after the initial three-year term.
Wetility is contractually required to relocate solar systems installed at customers’ homes where contracts are not renewed, thereby reducing the time period in which the assets are non-productive.
Ongoing Eskom electricity tariff increases continue to improve the relative economics of solar. As a result, homeowners are able to generate increasing annual savings from solar installations, which reduces the incentive to cancel or not renew their contracts.
Credit Risk
Returns are dependent on the ability of energy consumers to make consistent payments for electricity consumed.
The residential solar portfolio has an excellent payment history, with defaults remaining in the low single digits.
Wetility is contractually obligated to remove and reinstall solar equipment from defaulting customers’ homes. This proactive approach helps minimise cash flow disruptions and protects the overall performance of the portfolio.
Debt Funding Availability
Jaltech’s debt provider has indicated a willingness to fund the debt component; however, the final agreements have not yet been concluded.
Jaltech’s debt provider has conducted an in-depth analysis of the portfolio and has indicated a strong willingness to provide the debt facility before the end of February 2026.
Debt Risk
If the investment has a material number of defaults or cancellations, the debt provider may enforce its rights and repossess the solar equipment. In this scenario, investors could lose their capital and have to repay a portion of their tax benefit.
We maintain a prudent equity-to-debt ratio to manage this risk and help preserve investor capital. In addition, this risk is mitigated due to the excellent credit quality of the portfolio.
Legislation Risk
Changes to renewable energy regulations or government-controlled electricity tariffs could affect the long-term viability of residential solar projects.
Given the significant role that residential solar plays in alleviating pressure on the national grid and reducing load shedding, we believe the likelihood of adverse legislative or regulatory changes impacting the viability of residential solar is low.
Fees
Management Fee
2.25% p.a.
Performance Fee
Zero performance fee within the first 3 years. Thereafter, 20% above a hurdle of 12.5% of the investment amount, calculated and charged annually with a high-water mark (with catch-up) – see explanation.
A performance fee of 20% based on the profits from the sale of the solar assets (accounting for depreciation of the assets over the term of the contract with the customer).
Debt Raising Fee
A once-off fee of 3% of the total debt amount, payable upon the successful securing of the debt facility.
All quoted returns are net of fees.
Performance Fee Structure Explained
If an investor invests R100 and the investment generates a return of R14 in year four, a performance fee of 20% would apply to the R1.50 excess (R14 minus R12.50). If the return in year five is R10, no performance fee would be charged.
For a performance fee to be earned in the following year, the return would need to exceed R15, as the prior year’s underperformance would first need to be “caught up.”
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Disclaimer: The contents of this document does not constitute and should not be construed as an offer to subscribe for shares or investment, tax, legal, accounting and/or other advice. For advice on these matters consult your preferred investment, tax, legal, accounting and/or other advisers about any information contained in this document. All mentioned returns in this document are estimates at current tax rates, and past performance is not an indication of future performance. All returns and referencing to investor(s) is with reference to an investor(s) who is in the highest tax bracket.
All reference to investor(s) assumes the investor(s) is a natural person with an income tax rate of 45%.