UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT PURSUANT TO REGULATION A
July 15, 2022
(Date of Report (Date of earliest event reported))
ENERGEA PORTFOLIO 3 AFRICA LLC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
86-2564467
(I.R.S. Employer Identification No.)
62 Clementel Drive, Durham, CT 06422
(Full mailing address of principal executive offices)
860-316-7466
(Issuer's telephone number, including area code)
Class A Investor Shares
(Title of each class of securities issued pursuant to Regulation A)
This IC Memo includes projections and forward-looking information that represent Energea's assumptions and expectations in light of currently available information. Except for statements of historical fact, the information contained herein constitutes forward-looking statements and they are provided to allow potential investors the opportunity to understand management's beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment. These forward-looking statements are not guarantees of future performance and necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance.
Executive Summary
CPOA Avondrust is a 150 kW (AC) rooftop solar installation to be located at 22 Rouwkoop Rd, Rondebosch, Cape Town, 7700 ("Project"). The Project will be connected to the local distribution grid.
This solar plant will be rented to Cape Peninsula Organisation for the Aged (CPOA), the roof owner and offtaker, through a take-or-pay contract for a period of 20 years.
Energea Portfolio 3 LLC ("Energea") will invest, through The Sun Exchange (SA) Bewind Trust ("Sun Exchange Trust"), a total of $ 99,025, which corresponds to a 46.39% participation on the Project with a projected IRR of 12.55% ($USD).
Key Information General Info
Project Owner | Energea Portfolio 3 LLC |
Project Location | Cape Town, South Africa |
Technology | Rooftop Solar |
System Size (AC/DC) | 150 kW/188 kWp |
Estimated Year 1 Production | 256 MWh |
Coordinates | 33.966101S 18.471080° E |
Roof Status | Verified by a third-party engineer |
Project Status | Notice to Proceed |
Useful Equipment Life (Years) | 25 |
Stakeholders
SPE | The Sun Exchange (SA) Bewind Trust |
Offtaker | Cape Peninsula Organisation for the Aged |
EPC Contractor | ACES Africa (PTY) LTD |
O&M Contractor | ACES Africa (PTY) LTD |
Roof Owner | Cape Peninsula Organisation for the Aged |
Asset Manager | The Sun Exchange (PTY) LTD. ("Sun Exchange") |
Uses of Capital and Project Economics
Project Hard Costs | 2,434,782 ZAR |
Project Soft Costs | 817,139 ZAR |
Developer Fee | 706,928 ZAR |
Total Project Financing | 3,958,848 ZAR |
Debt Funding | N/A |
Equity Funding | 3,958,848 ZAR |
Cell Owner IRR | 12.55% ($USD) |
Project Review
SPE
All activities related to the project have been made through Sun Exchange Trust and The Sun Exchange (PTY) LTD. ("Sun Exchange").
Site
CPOA, the offtaker, owns the propriety in which the project will be installed. The rights to use the roof for a 20-year term has been secured through the Asset Lease Agreement.
Origin Consulting Engineers ("Origin") did a roof inspection on the site. Based on their visual inspection and calculations, Origin confirmed that the parts of the roof that will be used to install the system has adequate structure to carry the extra load of the solar panels.
Design
The Project will employ 348 x 540 Wp solar modules manufactured by JA Solar, a Tier 1 module manufacturer based in China. The plant will also use one 110 kW SG110CX and one 50 kW SG50CX inverter manufactured by Sungrow.
Regarding Energy Production, the Project is estimated to produce 255.7 MWh/year with an AC Capacity Factor of 19.5%.
Interconnection
For properties within the City of Cape Town electricity supply area, Small-Scale Embedded Generation, such as the Project, must obtain a Permission to Install Letter from the municipality. The Project obtained this Permit on April 13th, 2022.
Once the installation of the Project is finished, a Commissioning Approval Letter will be issued by the City of Cape Town within 10 working days.
Offtaker
The Sun Exchange Trust and CPOA have signed an Asset Lease to Own Agreement on March 10th, 2022. This Revenue agreement stipulates a fixed tariff to be paid by CPOA per kWh generated by the system. The tariff is adjusted annually on July 1st. The main terms of the Revenue Agreement are show on the Table 1.
Table 1 - Asset Lease Agreement Main Terms
Revenue Contract Term | 20 years |
Asset Rental Rate | 1.47 ZAR/kWh |
Annual Adjustment | CPI + 2% |
EPC
ACES Africa (PTY) LTD ("ACES") has been selected as the EPC partner for the Project. ACES and Sun Exchange signed the turnkey contract on April 13th, 2022. The total contract price is 2,381,680 ZAR (exclusive of VAT), which includes the EPC service, 2 years of O&M and Spare Parts. Including VAT, the total contract price is estimated to be 2,434,782 ZAR (12.95 ZAR/Wp) or $ 167,916 ($ 0.89/Wp).
ACES will provide a warranty for all services for the first 2 years following the Commercial Operation Date. Additionally, the major equipment will be warrantied by the suppliers for an extended period, namely 10 years for Inverters and 25 years for modules.
Insurance
ACES will provide and maintain adequate insurance coverage at its costs, for all risks associated with the EPC until final completion.
After COD and during operation, Sun Exchange will provide and maintain an All Risks Propriety insurance for the project.
O&M
ACES will be the O&M service provider for the first 2 years of operation. This service includes Monitoring, Reporting, Module Cleaning, Preventative Maintenance, Saving Calculations and Support.
Financial Analysis
The resulting nominal IRR, in USD, of CPOA Avondrust is projected to be 12.55%, with an estimated payback of 8 years, 9 months, and 6 days from the NTP date. The income statement, cash flow statement and balance sheet up until 2030 (shown annually) are presented upon request.
Energea is acquiring a total percentage of ownership in the project of 46.39%, for a total investment of 99,024.47 USD for 23,249 solar cells.
This analysis makes use of an inflation assumption, using the latest average value from October 2021, of 5.00%, provided by the South African Department of Statistics, StatsSA, as a basis for defining the Consumer Price Index ("CPI"), being within the range of the South African Central Bank's target inflation of 3.00% to 6.00%.
Revenue
The source of the project's revenue originates from a 20-year term take-or-pay PPA contract with CPOA Avondrust, for a base price of 1.47 ZAR / kWh, readjusted annually on the anniversary of the COD by the South African CPI rate plus a 2% spread. The average customer savings during the period is estimated to be of 14%.
This analysis used a 30-day billing cycle to realize each month's revenue.
Operating Expenses
Only an asset management operating expense was assumed in the model, driven by the assumption that it contains, under its scope of contractual obligations, the aggregate work of all the required operations and maintenance for the project, as well as insurance, accounting, and other project related fees. The monthly value of the management fee is calculated as an 18.19% rake off the collected revenue in the project.
Capex
For this analysis, it was considered, in the model, the latest EPC prices supplied by The Sun Exchange, as seen on Table 1.
All prices listed on Table 2 are already grossed with a Value-Added Tax ("VAT") of 15,00%.
Lastly, no interconnection cost is assumed by the project.
Table 1 - Capital Expenditures Assumptions
Acquisition Costs | N/A | N/A |
| | |
Hard Costs | 2,434,782 ZAR | 12.95 ZAR/Wdc |
| | |
Soft Costs | 817,139 ZAR | 4.35 ZAR/Wdc |
| | |
Developer Fees | 706,928 ZAR | 3.76 ZAR/Wdc |
| | |
Pre-COD OpEx | N/A | N/A |
| | |
Total CapEx (All-In) | 3,958,848 ZAR | 21.07 ZAR/Wdc |
Total CapEx (All-In) | 272,352 USD | 1.45 USD/Wdc |
Taxes
No tax payments were assumed for this analysis.
Legal Review
Relevant Documents
A Legal review was performed in the project's available documentation. The most relevant documents are listed below:
1. Asset Lease to Own Agreement;
2. EPC Agreement.
Issues List
Table 2 - Issues List
Corporate Documents | No Corporate Documents were made available. |
Contract Summary
Table 3 - Asset Lease Agreement Summary
Contract | Asset Lease to Own Agreement |
Date | |
Parties | Cape Peninsula Organisation for the Aged as Lessee The Sun Exchange (SA) Bewind Trust as Lessor |
Term | 20 years from the Commercial Operation Date |
Object | Lease of the Asset by Lessee to Lessor |
Premises of the Asset | 22 Rouwkoop Rd, Rondebosch, Cape Town, 7700 |
Asset Rental Rate | R1.47 (kWh rate) |
Asset Rental Annual Escalation Rate and Frequency | CPI + 2% Annually on July 1st of each year |
Payment | Lessee shall pay the Asset Rental on a monthly basis within 14 days of invoice. |
Late Payment | 2% interest per month |
Currency | |
Termination | Lessor may terminate the Agreement if Lessee: (i) fails to pay any amount due in terms of this Agreement on the due date and remains in default for 14 (fourteen) Days or more after having been notified in writing to remedy such default; or (ii) fails to comply with its Minimum Uptake obligations for 90 (ninety) consecutive Days, or for a total period exceeding 120 (one hundred and twenty) Days calculated over any consecutive 12 (twelve) month period; or (iii) commits any other material breach of any of the terms of this Agreement and fails to remedy such breach within 14 (fourteen) Days after receipt of written notice to that effect by the other Party; or (iv) repeatedly breaches any of the terms of this Agreement and having been served with 3 (three) or more notices to remedy such breach by the other Party, notwithstanding that such breaches may subsequently have been remedied; or (v) takes any steps in contemplation of being placed under provisional or final liquidation, business rescue or attempts to compromise with its creditors, or if a final judgment of any court, sounding in money to the equivalent value of R50 000.00 (fifty thousand rand) or more, granted against it that remains unsatisfied for a period of 30 (thirty) Days after it has been granted; or (vi) has any of its property, movable or immovable, attached in execution or by any process of any court; or (vii) commits any act or omission which is an act of insolvency in terms of the Insolvency Act, 34 of 1936. |
Insurance | The Lessor shall comprehensively insure the Asset, with effect from the Commercial Operation Date, for an amount equal to the full insurable value of the Asset, the premiums and any increases payable in respect of such insurance being for the account of the Lessor. |
Voluntary Buy Out Option | Lessee has the Voluntary Buy-Out Option to, at any time, purchase the Asset from the Lessor. |
Table 4 - EPC Agreement Summary
Contract | Turnkey EPC Agreement |
Date | November 22nd, 2021 |
Parties | The Sun Exchange (PTY) LTD - as Customer ACES Africa (PTY) LTD - as Contractor |
Object | Contractor will manufacture and construct a photovoltaic power plant, with total electrical capacity of 187.92kWp, to be built on the roof of the facility located at 22 Rouwkoop Rd, Rondebosch, Cape Town and deliver such fully operational plant at the premises. |
Price | 2,381,680.66 South African Rand (exclusive of VAT) |
Warranty Period | 2 (two) years from the date of issuance of COD notice |
Delay Liquidated Damages | Appendix 13 - Delayed Liquidated Damages will be calculated by multiplying the Expected Asset Usage (kWh) for the pro-rata days when the Asset was non-operational multiplied by the energy tariff as defined in the lease agreement, for each day in excess of 15 (fifteen) business days after the scheduled date for practical completion up to and including the date of practical completion or the date the EPC is terminated in accordance with its terms, whichever occurs first |
Performance Liquidated Damages | If the guaranteed performance ratio is not achieved at the long term performance ratio test, and provided the achieved performance ratio at such performance ratio test is above the minimum performance ratio, the Contractor shall be liable to pay the Customer performance liquidated damages as calculated pursuant to Appendix 13 |
Termination by Contractor | In case of delay in payment by Customer for a period of more than 20 (twenty) business days |
Appendices | Appendix 1 Definitions Appendix 2 Solar Plant Appendix 3 Scope of Works Appendix 4 Pre-construction Protocol Appendix 5 Payment Plan Appendix 6 Commissioning Protocol Appendix 7 Post-construction Protocol Appendix 8 Notice To Proceed Appendix 9 Practical Completion Document Appendix 10 Technical Documentation Appendix 11 Practical Completion Certificate Appendix 12 Final Completion Certificate Appendix 13 Delay Liquidated Damages Appendix 14 Final Energy Yield Report Appendix 15 Environmental, Operational, Health and Safety Compliance Appendix 16 Administrative Requirements Appendix 17 Performance Tests Appendix 18 Company Guarantee Appendix 19 Commercial Operation Date Notice Appendix 20 O&M Scope of Work |
Documentation Checklist
Table 5 - Documentation Checklist
Design and Application | Bills | X |
Helioscope Reports | X |
Meter Data | X |
Site and Roof Assessment | X |
Self-Consumption Analysis | X |
Interconnection Application | Interconnection Application | X |
Permission to Install Letter | X |
Offtaker | Offtaker Credit Analysis | X |
Lease Agreement | X |
Incentives | |
EPC | Construction Set* | X |
Equipment Warranties | X |
Equipment Purchase Order | |
Equipment Datasheet | X |
EPC Contract | X |
EPC Insurance | |
Asset Management | O&M Agreement** | X |
Asset Management Agreement | |
Investment | Project Model | X |
*Under the EPC Scope
** O&M Terms in the EPC Contract
The Investment Committee members have reviewed the Project Memorandum and hereby approve the investment on the CPOA Avondrust Project.
Signatures
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Energea Global LLC
By MICHAEL SILVESTRINI
Name: Mike Silvestrini
Title: Co-Founder
Date July 15, 2022
