New funding option for companies moving to solar
26 July 2023
News
With South Africa still in the midst of loadshedding and rising energy prices, many businesses are looking to going solar to alleviate the energy crisis they find themselves in. Rooftop solar has become the popular option as the energy/cost ratio has improved and the panels require little maintenance once installed.
There is, however, one major obstacle that businesses need to overcome, and that is how to fund the initial capital outlay of a solar installation. The recently enhanced Section 12B tax incentive will allow taxpayers (businesses, individuals or trusts) to claim a 125% deduction in the first year for all renewable energy projects, without a threshold on generation capacity. One criterion is that the incentive will only be available for solar investments brought online between 1 March 2023 and 28 February 2025.
Jonty Sacks, partner at alternative investments specialist Jaltech, explains, “Traditional institutions are only able to fund a portion of a project, but since Section 12B fund managers are not subject to banking legislation, we can fund an entire project. The terms we offer are also significantly more attractive.”
Property or business owners benefit from accessing Section 12B funding as no security is required. There are minimal upfront costs and costs are stable and predictable. The funding term can be as long as 15 years, lowering the annual payment and structuring the funding in a way that is off the balance sheet for the property or business owner.
The property owner will be able to appoint the engineering, procurement and construction provider/solar installer that will also be responsible for maintenance and monitoring.
One of the main benefits of accessing this type of funding is that the cost of the funding is expected to be much lower than purchasing electricity from Eskom, and it’s anticipated that each year the business or property owner’s savings will increase as Eskom increases its tariff. The adoption of alternative energy solutions is inevitable.
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