Ghost Stories #11: Investing in 12B Solar with Grovest (with Jeff Miller, CEO Grovest)

Load shedding isn’t fun. We know this. In a great example of never wasting a good crisis, there are investment opportunities in solar as South Africans effectively build a decentralised grid on private balance sheets.

Offering investors an indicative 18% IRR over 10 years through their new Twelve B Energy Fund, Jeff Miller of Grovest joined me to take a look at:

• An overview of alternative investments and how s12J set the scene for this asset class to be offered to retail investors in South Africa
• The danger of assuming that an entire asset class carries a specific risk profile, as the risk ultimately comes from the underlying exposure rather than the type of asset class (e.g. equities / bonds / alternatives)
• The way in which the tax allowances give a kicker to returns without increasing the risk of the underlying exposure
• The background to Grovest and how the business is positioned to take advantage of this environment
• The quality of the investments available to investors if we ignore the tax kicker i.e. the attractiveness of the underlying assets
• The way that Grovest thinks about gearing (the use of debt to boost equity returns) in a structure like this and how investors can think about their own gearing
• The cash-on-cash return vs. the return achieved through an eventual sale of the solar cash flows at the end of 10 years, with examples of existing market transactions for such cash flows
• The project pipeline and the strategy to deploy the full R200 million being raised, with a discussion on the impact of not matching the tax deduction to the cash flows
• The relationship with Hooray Power as the EPC for these solar projects and the way that this addresses a key risk in solar: project execution risk
• The sensitivity of the returns to the terminal value
• Minimum investment size and the important point that there is no cap on the investment
• A discussion on the capital gains tax and recoupment considerations
• The difference between invested capital and risk capital and how this relates to the Grovest fees in this investment
• An overview of the investment committee

For more information, visit twelveb.co.za and reach out to the team with any questions by emailing apply@twelveb.co.za. You can also visit the Grovest website for more information on the broader group.

Twelve B Fund Managers (Pty) Ltd is an approved juristic representative of Black Mountain Investment Management Proprietary Limited, an Authorised Financial Services Provider FSP No 49908.

NOTE: this podcast is for information purposes only and is not a recommendation, nor should it be interpreted as financial advice or an endorsement of the Twelve B product by The Finance Ghost. Do your own research and consult with your independent financial advisor before making any investment decisions.