Why blue-chip off-takers matter more than panel counts in Section 12B investing
Section 12B renewable energy investments have become increasingly popular among South African investors seeking tax efficiency and resilient income. As the market has matured, the most important differentiators are no longer headline deductions or installation counts, but the quality of the underlying assets and, crucially, who ultimately pays for the electricity.
At its core, a solar investment is a long-term commercial arrangement. Electricity must be sold consistently and paid for reliably over many years. The strength of the off-taker, the contractual structure and the operational maturity of the assets all play a decisive role in whether projected cashflows are achieved.
A commercial, infrastructure-led approach
Futureneers Energy’s 12B Fund Nine has been structured around an institutional infrastructure mindset. The fund focuses on deployed, revenue-generating commercial solar assets supplying JSE-listed and blue-chip off-takers.
These off-takers operate under long-term power purchase agreements, typically have audited financials, and treat electricity as a core operational input rather than a discretionary expense. This allows revenue to be contractually defined, operationally predictable and aligned with the engineered life of the solar assets.
Assets are commissioned into operation shortly after capital raised, meaning investors are exposed to producing infrastructure rather than development-stage projects. This materially reduces execution risk and accelerates the transition from capital deployment to cash generation.
After-tax outcomes, clearly defined
While Section 12B is often discussed in terms of tax mechanics, investors ultimately care about after-tax cash outcomes. Fund Nine has been designed to prioritise these outcomes explicitly.
For investors at a 45% tax rate, the fund targets the following returns:
102% post-tax upfront return, driven by the Section 12B deduction in the year of investment.
An additional 13% post-tax of the original investment returned in accelerated cash distributions by the end of year 3 (115% after tax returned cumulative).
6% post-tax p.a. average thereafter, resulting in a long-term income stream for the remaining life of the solar assets.
This combination allows investors to recover capital early while retaining exposure to contracted income for the duration of the asset life.
Why duration supports value
In infrastructure investing, duration is often a source of strength rather than a constraint. Solar assets are engineered to operate over long periods, and power purchase agreements are typically written to match that lifespan.
When combined with early capital recovery through tax efficiency and accelerated distributions, a longer asset life enables investors to benefit from stable income long after initial capital exposure has been materially reduced. The emphasis shifts from transactional exits to sustained, predictable cash generation.
Execution and track record
As with any infrastructure strategy, execution is critical. Futureneers Energy has raised more than R890 million across its group, commissioned over R350 million in solar assets in the past 24 months, and secured more than R366 million in Section 12B and 12BA deductions for investors during the last two tax years.
During this period, the group has achieved 100 percent capital-to-asset implementation, ensuring investor capital has consistently been converted into operating assets rather than remaining unutilised.
A more mature view of Section 12B
As the Section 12B market evolves, investors are increasingly looking beyond tax benefits alone. Asset quality, counterparty strength and portfolio-level risk management are becoming the defining factors of sustainable outcomes.
Futureneers Energy 12B Fund Nine reflects this more mature approach, positioning commercial solar infrastructure not merely as a tax solution, but as a long-term, income-producing asset class.
Investors are advised to seek independent tax and financial advice. All forecasts are indicative and subject to risk.