100% Tax Deduction
The graphic draws attention to the differences between traditional investments and Section 12J investments, with both investments yielding 12% annual growth. The traditional investment over a 5 year period does not reach the original pre-tax amount earned by the investor. The comparative Section 12J investment realises the investor a near 80% growth in pre-tax money earned.
Section 12B of the income tax act allows companies to depreciate investments into renewable technology entirely in the first year.
The unique reinvesting model implemented by Rencell takes advantage of the Section 12B deduction by not having to pay income tax on revenue before being able to reinvest excess cashflows. The reinvestment of cashflows yields substantially greater returns for investors, as it increases the number Solar Systems exponentially over time, roughly doubling every 5 years.
This principle also alleviates the largest risk in the renewables industry, technology becoming outdated. As Rencell continues to reinvest excess revenue into acquiring new Solar Systems it ensures that the average age of a Solar System in the portfolio never exceeds 6 years as at any given point no less than 50% of the assets in the portfolio will have been acquired in the past 5 years.
This makes the portfolio more valuable to investors as the portfolio continues to self-diversify through gaining more clients as more systems are deployed lowering risk while adopting new technology as new systems are purchased over time continually rejuvenating the fund. This continuous process of reinvesting goes beyond the financial realm as the assets that it accumulates result in ever larger CO2 reductions and a greater number of consumers are able to save money on their power bills.
Asset Underpin Peace of Mind Investment
Rencell is owned by its shareholders and it in turn owns shares in the subsidiaries (Qualifying Companies) that own the assets.
In the unlikely event that Rencell was to liquidate its assets and distribute the proceeds to its investors, the below demonstrates how the investors are likely to receive at least their Risk Capital investment back (the after-tax money they would have received had they not made the 12J investment).
Assuming the fund is liquidated at the end of its 3rd year of operations, it would have increased its number of assets by 50%.
Had the Solar Systems been bought by consumers this would have cost roughly R200k for a 10Kwp system while the fund is able to build the same system for R100k each as it is doing a large-scale role out and can claim VAT on the installation. This same system after 3 years need only be sold for R37K to recover 55% of invested capital. This means system would be sold directly to consumers for R37K where consumer would otherwise have had to pay R200k for the same system a 81.5% discount.
The fund would recover 37% of its NAV, as the NAV had increased by 50% to R1 500 through reinvesting growth a new NAV of R550 per share would be realised. The fund would perform a share buy back returning investors their Risk Capital.
This is a worst-case scenario with very conservative figures given, and only serves to demonstrate the value of investing into a fund that exploits both Section 12J and Section 12B to mitigate investor risk.
Investment with Impact
As excess revenue is continuously reinvested into acquiring additional Solar Systems the fund will experience exponential growth over time, this results in the above-mentioned principles of self-diversification and rejuvenation but it also increase the social impact that the investment made.
The impact of the investor’s funds doubling roughly every 5 years resulting in higher CO2 reductions, more consumers are able to save money on their power bills and more jobs are created to maintain and administer the systems.
Over time this effect becomes significant, with an original investment of R500k saving only 6.5 tons of CO2 a month, a R10 000 – monthly saving to the consumer and marginally contributing to a direct job. After 20 years these solar benefits would have increased 16 fold, reducing CO2 emissions by 104 tons a months, savings consumers R160 000 a month (present value) and sustaining a direct job.
Rencell offers investors a product that enables them to magnify their Social Impact investment by as much as 16 fold if held for 20 years. This a R500k investment into Rencell would match the social impact of a R8million investment made into a comparative energy fund.
Integration of the Latest Technology
The rate at which renewable technology has evolved and improved has enticed many and allured investors for decades but this same strength has been its – achilles heel as large projects would quickly become outdated and no longer be profitable. This has been the biggest shortcoming of the industry but a necessary evil to allow for continual innovation and improvement giving rise to the products currently available on the market today.
While other funds in the market are aware of this phenomenon and have taken steps to reduce its impact on their funds it remains an issue. The principle of reinvesting excess funds into underlying assets is not a new one and is common outside of the renewable energy sector, the renewable energy sector has not been able to take advantage of this principle because of the scale of projects, time necessary to facilitate construction (often taking 3-6months per site) and funds required to finance each project.
With Rencell having a working model for the residential solar market for the first time a portfolio of small Solar Systems has been created, because each system takes 2-3 days to commission and won’t be worth more than 0.3% of the funds total value it is able to continually reinvest into new Solar Systems using the latest technology ensuring the portfolio remains contemporary and relevant in the market. Using this principle of reinvestment Rencell is able to overcome the achilles heel that has plagued renewable technology for decades.
End User Impact
Rencell offers investors a unique investment product that goes beyond value creation for the investor but offers the consumers a comparable value proposition in the form of monthly savings. This value proposition to consumers is not unique to the residential market as it is the primary catalyst for the technology’s adoption in the commercial environment across the world. The residential market differs significantly in one main aspect and that is the quantum of the savings by the consumer.
Residential electrical consumers have had to contend with high electrical prices for decades as providers stumbled upon a commodity that is easy to sell at significant mark-ups with no alternative. As a result, residential consumers stand to save significantly more per Kwh of electricity consumed from an alternative source than commercial consumers. For this reason, investments into the residential solar sector stand to effect far greater savings to the consumer than a comparative investment into a commercial energy fund.
Apart from the higher savings, the savings are being passed onto private consumers not large businesses, with the current economic climate putting significant pressure on consumers the savings offered by Rencell to consumers is a welcome relief from the continually escalating cost of living.
Real-time Investment Monitoring
In addition to the innovative application of Section 12J and Section 12B tax deductions and allowances Rencell is bringing live investment monitoring to investors..
Through the online portal, investors are able to monitor and delve deeper into their investment performance in real-time and from the comfort of their own home.
High Investor Returns
Rencell offering investors one of the highest returns in the Section 12J market as well as a more desirable revenue stream. Rencell is able to offer investors a reliable stable revenue stream with a predictable terminal value.
Rencell offers investors a return that is largely made up of capital growth and capital being returned to the investor with an annuity income to compliment this large terminal value.
The Investment yields are made up as follows, underlying asset yields 12.5%, the yield is magnified to 17% with the 12J deduction, the yield is further magnified to 22% with the 12B deduction.
Investment Opportunity Accessible to All
As Rencell is aiming to save middle class households money on their monthly power bills the decision was made to lower the minimum investment to a point where those same individuals could be part of the Rencell shareholders. The minimum investment in Rencell is R10 000.