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With the problems at Eskom, ever resilient South Africans dig deep into the ‘Boer maak ‘n plan’ philosophy and come up with their own solutions. And when it came to investing into another round at 12J company Bright Light Solar, which invests in solar and efficient renewable energy, they were keen to back a company that finds alternatives. CEO Kevin Shames told Biznews Founder Alec Hogg that there might be another round of raising capital next year but it would depend on whether the Government extended the sunset clause for 12J companies. – Linda van Tilburg
Bright Light Solar’s prospectus closed last week, and the company was looking for a minimum of R10m in its latest effort to raise capital for the solar company and they managed to exceed that and raised R82.5m. CEO Kevin Shames said the way that a VCC or a 12J company worked, was that it could not be owner of a 100% of the installation. The R82.5m that the company raised grossed up to R120m over twelve months for the next year, which Shames says was great: “It gives us a fantastic base to go forward.”
He said it was interesting how the dynamics and the make-up of that R82m has changed. Last year Bright Light Solar raised R94m from 96 investors, which amounted to a million rand per investor. “So, in the last year, the capital raised came from some very chunky investors.” There was no cap on the amount that could be invested last year, but National Treasury has changed the amount that an individual can contribute to 12J companies, which is now capped at R2.5m.
This year Bright Light Solar had a number of investors who contributed the R2.5m who said that they would have wanted to invest substantially more, but the company could obviously not facilitate that. Shames said the R82.5m came from 222 investors, double the number of last year. The average per investor was R370,000. “We farmed more democratic in terms of our capital raise. We have certainly broadened the base, which is very exciting as it gives us a great platform going forward and we’ve got the capital we sought to raise. And it gives us a fantastic opportunity to deploy going forward.”
Alec Hogg said from Treasury’s perspective; they started the 12Js to get South Africans to invest, to give them a tax incentive to invest in projects like this and eventually it could help Eskom. “They must be quite pleased about this, but there is still the possibility that the 12J was going to be cancelled in the next year.”
Shames said according to the Income Tax Act there was a sunset clause for 12Js to the end of June 2021 and National Treasury would have to make decisions on what they wanted to do going forward. “There was a reference to 12J companies in the budget notes, but no indication yet of what they are considering. Whether they want to extend it, tweak it, make it applicable to certain industries only or if they want to scrap it all together.”
Alec asked whether the 21% effective return that Bright Light Solar was talking about was secure for those who put in the R82.5m. Shames said it only became secure once they exit in year five. “It’s a process with the 12J deduction upfront. The semi-annual dividends over five years and then the exit in year six. “He said the company was certainly still forecasting that it is fully on track. Now we’ve got to go and deploy in great assets and ensure that we can deliver the return that we promised, and there’s no impact on them about any changes of legislation next year or thereafter.”
Bright Light Solar plans to raise capital again in February 2021 and will have to see “what the conversation is as to whether it is going to be extended” or if there was a sunset clause. Shames said they needed to decide whether they would raise capital in June 2021.
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