Bright Light Solar’s 2021 Prospectus published, ‘fastest fingers first’ for prospective investors

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With the Covid-19 lockdowns knocking economic activity, Bright Light Solar has been unable to deploy its excess capital, so is cutting the 2021 fund raise back to R50m. The 12J tax incentives make this an especially appealing investment opportunity that was very well supported last year by the BizNews community. But with the smaller capital raise, Bright Light CEO Kevin Shames explains in this podcast why it will be first-come-first-allocated when the fund raising opens on February 1. – Alec Hogg

For the full details on this investment opportunity exclusive to the BizNews community, contact Bright Light Solar here.

Kevin Shames on the Bright Light Solar 2021 prospectus:

So Bright Light Solar is a public company. We are governed by the Companies Act. The Companies Act specifies if you are raising money from the public, there are a whole lot of conditions that you have to comply with. Any capital raise from the public has to be in the form of a prospectus. This is a legal document that complies with the Companies Act, to fulfil all of our obligations and to provide all of the information that an investor would need, to make a decision as to whether they would like to invest or not.

On the tax benefit of 12J investments:

Section 12J of the Income Tax Act is a specific section relating to what are called venture capital companies. If you are an approved Section 12J company, an investor gets to deduct 100% of their investment against their taxable income, in the year in which they invest. So, whatever you’re investing, you deduct that against your taxable income. Effectively, Sars are then making a contribution alongside you – because you don’t pay tax on that amount of your investment. What are the conditions associated with that? You have to stay in invested for five years.

The whole idea behind Section 12J was to create employment in South Africa. The idea behind these investments is that they are – the venture capital company, the 12J company – is investing in underlying, small and medium enterprise, with the intention of ultimately creating employment in South Africa.

On how the allocation works:

It’s going to be ‘fastest finger first’. It’s a first come, first serve basis. When we hit R50 million, we are closed. It’s a legal requirement in terms of our prospectus. We cannot raise R1 more than the R50m. We are only offering this to the existing investors and BizNews community members.

On how previous investments have performed:

There are three components to the return. The first one is the Section 12J tax incentive – which we are calculating as if you are a marginal tax payer. In the current tax year, that means you’re earning just under R1.6m. Anything that you invest, you will get back a tax saving of 45% on that. The second part is the dividend return that you get. We pay dividends from year one. So after six months, you’ll get your first dividend. We pay dividends for the six month periods ended August and February every year, and that dividend will grow over time.

So in year one, the dividend is about 4.6%.That is because we are in the process of deploying the money. Once that cash has been deployed, that dividend yield jumps up to 9% in year two, 9.5% in year three and growing thereafter.

On the future of 12J investments:

There is what is called a ‘sunset clause’. That clause says that the current version of section 12J expires at the end of June 2021. In six weeks time, when the minister stands up to deliver his budget, he is expected to give us an indication on what his plans or national treasury’s plans are, in terms of are they looking to extend the current Section 12J? Are there going to be changes? Or is it going to die at the end of June?

Now, most importantly, that only affects investors after June. So, anyone that invests now in February is not subject to any impact of that sunset clause.

For the full details on this investment opportunity exclusive to the BizNews community, contact Bright Light Solar here.

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