what is section 12B?
During the 2023 Budget Speech, the Minister of Finance expanded the Section 12B tax incentive to enable taxpayers to claim up to a 125% up-front tax deduction for all renewable energy projects with no thresholds on generation capacity. The expanded deduction is only available for projects brought into use for the first time between 1 March 2023 and 28 February 2025.
Previously, the use of Section 12B was limited to corporate and institutional renewables investors. Westbrooke’s REAL Investment strategy changes this paradigm by enabling investors to use this deduction against their taxable income calculations and also enhancing the tax deduction to up to 250%* of the investor’s cash invested.
Westbrooke is South Africa’s leader in tax enhanced investing. Previously South Africa’s largest Section 12J manager, with over R3 billion in assets under management, Westbrooke has successfully returned in excess of R700 million of tax enhanced investment capital to clients (with another R800 million set to be successfully returned to clients in April 2023), at double-digit annualised returns.
The Westbrooke Real | 2024 Vintage is a closed-ended South African solar investment fund which aims to provide investors with a unique investment advantage by offering access to a multi-partner portfolio of solar photo-voltaic (PV) projects underpinned by high-quality end-users and contractual cash flows, enhanced by the Section 12B tax deduction.
A combination of attractive project returns, the investor tax deduction and a conservative level of gearing at the project level (for which investors will be required to provide a limited-recourse guarantee, limited to their pro-rata portion of the gearing) allow Westbrooke Real to target returning all cash invested within two years, materially de-risking the investment.
Thereafter, investors benefit from long-term (10 – 15 year) de-risked cash flows from the solar PV portfolio, with an anticipated IRR of >40% p.a. and an annual yield of an initial 7% p.a. in year 1, growing to above 25% after year 10 (net of investment costs and Westbrooke fees).
Investors are required to download and read the full Westbrooke Real Information Memorandum prior to investing. Please note that the offering is not available to members of the public and that Westbrooke Alternative Asset Management does not provide tax advice.
Following strong support from our clients, the first close for the capital raise for the Westbrooke Real 2024 Vintage has been oversubscribed. In this context, we are running a waiting list in terms of which investors will be admitted based on our transaction pipeline. In order to join the list please click on the button below.
key investment highlights
Up to 250%* tax deductible based on cash invested in the year that the Solar PV assets are brought into use for the first time
Partnering with established and reputable operators who are materially invested alongside us
Target to return all investor cash invested within 2 years**
Investment in green energy assists South Africa’s energy crisis
Target de-risked cash yield on Cash Invested of:
- First 5 years – average approximately 7% per annum
- Years 6 to 10 – average approximately 12% per annum
- Thereafter – average approximately 25% per annum
Committed drawdown Fund where investors cash is only required at the time of the project commissioning
Investment into a diverse portfolio of commercial and industrial (C&I) solar PV projects which are underpinned by contractual cash flows backed by quality end-users
Westbrooke has developed a high-quality pipeline of executable solar PV projects
* This applies to solar PV investments brought into use for the first time post-March 1st 2023. Although not the intention, the Fund can invest in existing projects which meet the Fund’s investment mandate which may have been brought into use for the first time pre-March 1st 2023. These projects would only qualify for a tax deduction up to 200% based on the Cash Invested.. For more detail on how the enhanced Section 12B tax deduction works, please refer to the table below.
**Assumes the investor is an individual/trust that pays tax at the maximum marginal tax rate of 45%.
illustrative example based on R1.2m cash invested
|Cash Invested||R1.2m||Drawn down in increments over the 2024 tax year|
|Gearing at a project level||R0.8m - R1.2m||Will vary depending on the specific underlying project considerations|
|Total Investment||R2m - R2.4m||Aggregate of Cash Invested and Gearing|
|Section 12B deduction @ 125% of Total Investment||R2.5m -R3m||Assuming all Cash Invested is drawn|
|Percentage Section 12B deduction based on Cash Invested||200% - 250%||Targeted Gearing at an underlying project level is 40% but will vary depending on the specific underlying project considerations|