JSE-listed real estate investment trust Balwin Properties has, together with financial services provider Absa, launched South Africa’s first green home loan – the Absa Eco Home Loan.

The home loan will come with features and benefits that will appeal to customers looking to live green, the parties said on Thursday.

Balwin CEO Steve Brookes, during the launch event held at The Reid residential complex, in Sandton, said the idea of a green home loan was inspired by the International Finance Corporation’s (IFC’s) Green Bond.

He called this “the loan of the future”.

“I was impressed by how much they have achieved in driving climate-smart investment and saw an opportunity to extend this philosophy to our customers. My team and I set out to find a like-minded, innovative partner with the right technical expertise and delivery capabilities to develop such a product – Absa became an obvious choice,” he said.

“The Absa Eco Home Loan is testament to our commitment to create products and offerings that are centred on what the customer and the future of residential property needs. We recognise that sustainable living is a priority for our customers and so it must be a priority for us,” commented Absa home loans managing executive Geoff Lee.

The residential property developer last year achieved EDGE certification of 16 000 of its units, across seven of its built-to-sell developments. The IFC at the time confirmed that Balwin’s EDGE registration of 16 000 units was a global first, covering more homes than any single property developer in the world as at June 2019.

EDGE certification for new homes is implemented in South Africa by the Green Building Council South Africa (GBCSA), in partnership with IFC. The EDGE certification can be achieved once a home achieves a 20% reduction across energy consumption, water use and embodied energy in materials.

Brookes said it had become an imperative for the company to help its customers reduce energy costs while electricity tariffs continue to rise in South Africa.

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A leading South African bank is forecasting “exponential growth” for the country’s small-scale embedded generation (SSEG) market in the coming few years, having already committed to funding project pipelines worth more than R1-billion, mostly in the form of rooftop solar.

Nedbank CIB energy finance principal Duncan Abel tells Engineering News that the market has already expanded materially from close to zero only five years ago, in spite of ongoing regulatory uncertainty. Liberalisation of the grid, wheeling and battery storage will further fuel rapid growth, he asserts.

The bank is also a leading financier to South Africa’s utility-scale renewable energy programme, with over R35-billion committed to funding such projects.

The growth in SSEG has been underpinned by a sharp fall in the cost of solar photovoltaic (PV) technology in particular, as well as a desire among South African companies for tariff certainty in a context of ongoing, above inflation, Eskom hikes and load-shedding.

In addition, many SSEG deployments, particularly those being undertaken by multinationals operating in South Africa, are increasingly motivated by internal decarbonisation targets and commitments to the United Nations Sustainable Development Goals.

Abel says there is significant pent-up demand for small-scale deployments, which have hitherto been restricted mostly to sub-1 MW projects, owing to regulatory uncertainty regarding the licensing of larger plants.

Even absent any possible change to the regulations, Abel anticipates that demand will continue to increase strongly.

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​Sustainable finance solutions will be an important component of expanding the UK-Africa investment corridor, as Africa looks to plug a massive funding gap in key areas such as infrastructure, energy, and agriculture. To attract capital from the UK and elsewhere, African governments should consider measures to improve the ease of doing business and should ensure cost reflective tariffs to strengthen the business case for investment.

Providing funding for such large initiatives plays into a major strength of the UK – its large, diverse financial services ecosystem and preeminent financial centre.

London is expected to remain a key financing hub for African corporates and projects for the foreseeable future. In 2018, we helped raise over $18.8 billion of capital for our African clients from global markets, of which UK investors accounted for roughly a third.

African businesses see London as a vital fund-raising gateway, connecting global capital with fast growing businesses. Major flotations last year from the likes of Helios Towers and Airtel on the London Stock Exchange (LSE) – representing some of the biggest London IPOs of 2019 – speak to this. We expect an acceleration of LSE listing activity from African businesses this year and beyond.

It is important not to underestimate the asset that the City of London represents. London is such a vital financial hub and has the potential to increase rapidly its relationship with African corporates. It has liquid and mature financial markets, similar time zones to Africa, trusted judicial systems, and a common language (particularly for Anglophone countries).

Further to this, we know that there is significant appetite amongst UK investors to buy into Africa, as showcased by the recent South African $5 billion Eurobond., the largest issuance out of Sub-Saharan Africa. UK investors accounted for $900 million, or 18%, of the total issuance.

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The European Investment Bank has a draft policy currently being considered that would end all of their fossil fuel financing beyond 2020. The draft is due for a decision this fall.

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South Africa’s government, energy regulator and Eskom have often been criticised for obstructing the introduction of distributed, small-scale embedded generation (SSEG) which would help businesses to cut costs and ensure the stability of their power supply during load shedding.

But in fact, there are significant and far-sighted tax breaks which have been put in place by National Treasury to encourage and incentivise business owners to install their own generation in the form of grid-tied, rooftop or ground-mounted solar PV systems on buildings, parking lots, warehouses, factories, and farms.

Accelerated depreciation allowances
From 1 January 2016, a little-known amendment to Section 12B of the Income Tax Act (Act 58 of 1996) allows for depreciation in the year of commissioning of the full (100%) cost of a grid-tied solar PV system of less than 1 MW used for electricity generation by a business in the course of its operations.

The capital depreciation allowances for solar PV systems greater than 1 MW remained unchanged in the January 2016 amendment to the legislation, which continues to allow full depreciation over three years. This permits depreciation of 50% of the capital cost in the year of commissioning, 30% in the subsequent year, and 20% in the third year.

The accelerated depreciation allowance for solar PV systems applies whether they are installed for the business by contractors or developers, or paid for by the business in a credit sale agreement (as defined in Section 1 of the Value-Added Tax Act) – either upfront in a single payment or in multiple payments over an extended period.

The cost of the solar PV system allowed for accelerated depreciation includes its full direct capital cost, including design and engineering, project planning, delivery, foundations and supporting structures, solar PV panels, AC inverters, DC combiner boxes, racking, cables and wiring, and installation. Finance costs are excluded.

This allowance was confirmed in a binding private ruling by SARS dated 11 October 2018 (BPR 311) in respect of an application by a private company in South Africa to clarify the deductibility of the capital expenditure incurred to install solar PV systems at a number of sites owned and leased by the applicant. The systems were being installed to reduce the company’s electricity costs.

The improved business case
Whether paid for upfront after commissioning, or in multiple payments over an extended period, the benefits of this tax incentive to business owners, particularly for solar PV systems of less than 1 MW, are significant.

Where the company tax rate is 28% and payment is upfront, a 100% tax-deductible depreciation allowance in the year of installation and commissioning will result in a 28% nett discount on the purchase price of the system at the end of the tax year.

This significantly affects and reduces the payback period of a solar PV project of less than 1 MW.

Better still, when paying for the same solar PV system on a credit sale agreement through multiple payments over an extended period, the transaction can be cash-flow positive for the business over the lifetime of the solar PV plant in all but the first months to the end of the tax year during which commissioning takes place.

With these significant tax incentives, and the rapidly rising price of grid electricity, the business case for installation of grid-tied, rooftop and ground-mounted solar PV is fast becoming a no-brainer.

Shout out from the rooftops
What is most surprising, however, is how few business-owners and companies are aware of these tax breaks, which can make such a positive impact on their cashflow and bottom line.

This lack of awareness is perhaps a result of the difficulties faced in accessing relevant information on the subject from SARS itself.

For example, efforts to simply download or view the up-to-date amended Section 12B of the Income Tax Act from the SARS website and the public internet proved fruitless.

Similarly, no response or even acknowledgement of receipt was received to a query sent to the SARS media desk at sarsmedia@sars.gov.za

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Imagine a world where your travels didn't harm the environment and the fuel used in planes had a lower carbon footprint? This is the world we aspire to create.

The Waste to Wing Incubator, an 18-month initiative for 25 SMEs that will consist of interactive entrepreneur-led business workshops, mentorship, access to market, and investment readiness support for selected participants. 

The Waste to Wing project aims to prove the feasibility of a waste-based Sustainable Aviation Fuel industry in South Africa - it has been investigating the use of waste biomass as a feedstock for SAF production, which could revolutionise the aviation industry and reduce our flying carbon footprint. 

Eligibility Criteria
SMEs must be operational for more than 1 year
The business should be operational, sustainable and viable
The owner should be involved full-time in the business
​
The project is funded by the EU and forms part of the Switch Africa Green Programme, which is implemented by the EU and UN Environment. 

​Apply here.....
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Financial services group Nedbank reported an “overwhelmingly positive” market response on Tuesday to its pioneering listing of a renewable-energy bond on the Green Bond Segment of the JSE.

Nedbank became the first South African bank to list such an instrument on the bourse’s platform, which was itself launched in October 2017.

The proceeds will be used to provide financial support to solar and wind projects.

Nedbank CIB debt capital market origination head Bruce Stewart reported that the bond auction, which opened on April 24, “was significantly oversubscribed, demonstrating strong investor appetite for good-quality environmental, social and governance-focused assets".

​He added in a statement that the final pricing also exceeded initial expectations.

The bank received bids worth R5.5-billion,more than three times above the amount of R1.7-billion in bonds placed to fund renewables projects.

A diverse spread of investors subscribed for the bonds, including domestic asset managers and impact funds set up by foreign investors. At least 18 investors participated in the book, including the African Local Currency Bond Fund and the WWF fund.

The bond listing sought to build on the bank’s growing experience in the South African renewables sector, developed primarily through the funding of projects under government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Since 2011, 112 renewables projects with a combined investment value of R209.4-billion and a combined capacity of 6 422 MW have been procured through several REIPPPP bid windows.

To date, Nedbank has funded 42 of these transactions, worth a combined R40-billion.

The bond, Stewart said, allowed the bank to further extend support for the provision of clean energy in South Africa.

It also contributed towards the achievement of the United Nation’s Sustainable Development Goals, to which the bank had recently aligned its commercial activities.

Nedbank also recently confirmed that it would no longer participate in the funding of the Thabametsi and Khanyisa coal projects, named in 2016 as preferred bidders under South Africa’s coal procurement programme. The projects have yet to reach financial close.

The Nedbank Renewable Energy Bond was developed in line with International Capital Market Association Green Bond Principles and the Climate Bonds Standard. 

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T​he time is ripe for South African businesses to make applications for finance to develop renewable energy and energy-efficiency projects.

This is the view of the South African National Energy Development Institute (SANEDI) in the wake of load-shedding and energy price hikes.

SANEDI was established in 2011 under the National Energy Act, 2008. The Act provides for SANEDI to direct, monitor and conduct energy research and development, promote energy research and technology innovation, as well as undertake measures to promote energy-efficiency throughout the economy.

Financially-constrained Eskom, which supplies about 90% of SA's power, last month implemented stage four rotational load-shedding.

As the challenges at Eskom persist, SA has been making steady progress in incorporating renewables into the country's energy mix.

The South African government envisages that in 2030, the energy mix will consist of 34 000MW of coal, representing 46% of installed capacity; 11 930MW of gas, or 16% of installed capacity; 11 442MW of wind, or 15% of installed capacity; 7 958MW of photovoltaic (PV, or solar); and 4 696MW of hydropower, or 6% of installed capacity.

This was stipulated in the country's Integrated Resource Plan (IRP) 2018, a 20-year energy roadmap to meet SA's future power needs.

Electricity prices increased in SA from1 April. Last month, energy regulator Nersa said it had granted power utility Eskom the following tariff increases over the next three years: 9.41% or allowed revenue of R206.34 billion for 2019/2020; 8.10% or allowed revenue of R221.8 billion for 2020/2021, and 5.83% or allowed revenue of R233.1 billion for 2021/2022.

​SANEDI, which hosts SUNREF, an international lending programme that promotes green finance and energy innovation, has called on businesses to consider accessing SUNREF's green loans to develop renewable energy and energy-efficiency projects, in support of the country's efforts towards green transition.

SUNREF, developed by French Development Agency, is a programme relying on two pillars: a credit line to partner bank IDC, and a technical assistance facility hosted by SANEDI and funded by the State Secretariat for Economic Affairs in Switzerland.

The programme helps green projects become bankable and access financing from IDC. It is linked to a credit line with the IDC for around $60 million to fund projects that fit its mandate to promote energy-efficiency and renewable energy in SA.

Rob Short from SUNREF explains who can apply for the green loans: "It can be any business, in any sector, that wants to look at energy-efficiency or renewable projects in terms of its own internal processes or within its supply chain. As well as companies that provide manufacturing services or goods for the renewable energy and energy-efficiency sectors."

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A growing number of banks are offering incentives for businesses and small companies to install  Solar Photovoltaic (solar PV)  panels, Jack Radmore, GreenCape’s energy programme manager, said. 

He said a typical solar panel installation, to power a small home between 4-7kWp, can cost anything between R60,000 and R105,000, excluding battery costs. 

This translates into roughly R1.30 per kWh for the next 15 years, he said. 

Commercial tariffs sit between 85c and R1.70 per kWh and residential tariffs can go as high as R2.20 per kWh. 

Read GreenCape's full financial brief here
Radmore said for a medium-sized commercial system, roughly the size of 250kWp, the price increase to roughly R3.2 million, excluding battery costs.

This translates into roughly R0.90 per kWh for the next 15 years.

“It is very important to highlight that these upfront costs are no longer a barrier in the South African decentralised energy market,” Radmore told Business Insider South Africa.

“A number of innovative financial mechanisms exist that require no upfront capital from the customer.”

For example, he said, a power purchase agreement allows consumers to buy electricity per unit as they do from Eskom at a set price for between 12 and 15 years. 

Also read: With the new power price, solar geysers are almost – but not quite – starting to make financial sense
Radmore gave Business Insider South Africa a break down of what each bank is offering for solar panel installations. 

It is important to note that solar panels are VAT deductible, and qualifies for a 12b tax benefit which can result in additional savings of 28% on cost.