Cheaper funding introduced into the solar market
*This content is brought to you by Jaltech
With South Africa grappling with frequent power outages and escalating energy prices, numerous business owners are actively seeking alternative energy solutions to sustain their operations. Among the available choices, rooftop solar has emerged as the favoured option. This preference is unsurprising due to the minimal maintenance requirements of solar technology, its durable components with extended lifespans, and its manageable overall cost.
The primary challenge faced by most business owners lies in securing the necessary capital for installing a solar solution.
Fortunately, through the Government's recently enhanced Section 12B tax incentive, fund managers are able to offer funding to property/business owners at rates which are significantly more competitive than traditional funding options. Fund managers are able to offer more competitive rates because their investors' returns are boosted by the large tax incentive.
Jonty Sacks a partner at Jaltech stated:
"Section 12B fund managers are not subject to banking legislation and can therefore fund an entire project without security as opposed to traditional institutions which require some equity contribution from the property owner. In addition, our funding rate is significantly more attractive because our investors enjoy the Section 12B tax benefit."
It's not only the terms which are attractive. The property/business owners benefit from accessing Section 12B funding for a number of reasons, namely:
- No security required
- There are no upfront costs involved with accessing the funding
- The costs are stable and predictable over the term
- The property owner will be able to appoint the EPC/solar installer
- Maintenance and monitoring are the responsibility of the appointed EPC/solar installer
- The funding is structured in a way that it is off the balance sheet for the property/business owners
- The funding term can be as long as 15 years lowering the annual payments
- The funding can be used to refinance existing solar systems to free up capital for their businesses
Jonty Sacks further adds that "it's not only the property owners who benefit, but the solar installers which we are working with as they now also have access to funding that has unlocked a number of projects which simply took too long through the traditional funding channels. This has ultimately resulted in more business for them."
One of the main benefits of accessing this type of funding is that within a short period of time, the actual cost of the funding is expected to be much lower than purchasing electricity from Eskom, and it's anticipated that each year the business/property owner's saving will increase as Eskom increases its tariff.
The prospect of Eskom supplying the South African market with reliable electricity within the next two years is remote, and when they eventually achieve this, the cost of the electricity would most likely be significantly higher than the cost of producing energy through solar. Businesses should, therefore, be exploring alternative energy solutions as their adoption is inevitable.
If you are a solar EPC/installer or are looking to fund a solar solution for your company, contact Jaltech by emailing Rory Sim at rorys@jaltech.co.za or click here to complete an enquiry form.
*Rory Sim – Head of Solar Origination at Jaltech.