UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT PURSUANT TO REGULATION A
January 18, 2021
(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)
84-4475410
(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)
Anchor Foods is a 110 kW (AC) rooftop solar installation to be located at 10 Chatham Street, Cape Town, South Africa ("Project"). The Project will be connected to the local distribution grid.
This solar plant will be rented to 10 Chatham Street (Pty) Ltd., the roof owner and offtaker, through a take-or-pay contract for a period of 20 years.
The total cost of the project is $109,340 and it is expected a 11.96% IRR ($USD).
Project Owner | Energea Portfolio 3 LLC |
Project Location | Cape Town, South Africa |
Technology | Rooftop Solar |
System Size (AC/DC) | 110 kW/ 119 kWp |
Estimated Year 1 Production | 191 MWh |
Coordinates | 33.922351° S 18.496086° E |
Roof Status | Rented |
Project Status | Notice to Proceed |
Useful Equipment Life (Years) | 25 |
Stakeholders
SPE | T.B.D |
Offtaker | 10 Chatham Street (Pty) Ltd. |
EPC Contractor | ACES Africa (PTY) LTD |
O&M Contractor | ACES Africa (PTY) LTD |
Roof Owner | 10 Chatham Street (Pty) Ltd. |
Project Hard Costs | 1,508,793 ZAR |
Project Soft Costs | 65,992 ZAR |
Developer Fee | 196,524 ZAR |
Total Project Financing | 1,771,309 ZAR |
Debt Funding | N/A |
Equity Funding | 1,771,309 ZAR |
Project IRR | 13.08% (ZAR)/ 11.96% ($USD) |
SPE
The Project's Special Purpose Entity (SPE) has not been constituted yet. All activities related to the project have been made through The Sun Exchange (SA) Bewind Trust ("Sun Exchange Trust") and The Sun Exchange (PTY) LTD. ("Sun Exchange").
Site
10 Chatham Street (Pty) Ltd. ("Roof Owner"), 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.
The roof consists of structural steel rafters with timber purlins, and cladded with IBR metal roof sheets.
Origin Consulting Engineers ("Origin") did a site inspection on October 06th, 2021. Based on their visual inspection and calculations, Origin confirmed that the roof structure has adequate load capacity for the placement of solar panels. Additionally, they proposed that the solar panels should be fixed to the roof at the purlin position.
Design
The Project will employ 220 x 540 Wp solar modules manufactured by JA Solar, a Tier 1 module manufacturer based in China. The plant will also use a 110 kW SG110CX inverter manufactured by Sungrow.
Regarding Energy Production, the Project is estimated to produce 191 MWh/year with an AC Capacity Factor of 19.8%.
Interconnection
In 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 January 14th, 2021. Additionally. the City of Cape Town informed that there will be no incurred costs related to the interconnection and that the meter will be supplied by the municipality.
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 Offtaker is 10 Chatham Street (Pty) Ltd. ("Offtaker"). The Sun Exchange Trust and the Offtaker have signed an Asset Lease Agreement on September 28th, 2021. This Revenue agreement stipulates a fixed tariff to be paid by the Offtaker per kWh generated by the system. The tariff is adjusted annually on the contract's anniversary. 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 |
Resulting Energy Credit | 1.07 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 November 22nd, 2021. The total contract price is 1,564,747 ZAR, which includes the EPC service, 2 years of O&M and Spare Parts. From this scope, the turnkey EPC price is 1,508,793 ZAR (12.70 ZAR/Wp) or $ 90,135 ($ 0.78/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.
ACES will provide and maintain adequate insurance coverage at its costs, for all risks associated with the EPC until final completion. Energea Portfolio 3 LLC will be named additional insurer on the policy.
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.
The resulting nominal IRR, in USD, of Anchor Foods is projected to be 11.96%, with an estimated payback of 8 years, 4 months, and 10 days from the NTP date. The income statement, cash flow statement and balance sheet up until 2030 (shown annually) are presented on Exhibit I.
This analysis makes use of an inflation assumption, using the latest 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 10 Chatam Street, for a base price of 1.07 ZAR / kWh, readjusted annually on the anniversary of the Commercial Operation Date ("COD") by the South African CPI rate plus a 2% spread.
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 a 25.00% 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 2.
As part of the project's Soft Costs, it was budgeted an amount for both spare parts and preliminary engineering, both contained within ACES Africa's price breakdown provided by The Sun Exchange. A 3.00% contingency on the EPC total was also assumed.
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 2 - Capital Expenditures Assumptions
Acquisition Costs | N/A | N/A |
|
|
|
Hard Costs | 1,508,793 ZAR | 12.70 ZAR/Wdc |
Solar Modules | 723,861 ZAR | 6.09 ZAR/Wdc |
Solar Inverters | 80,244 ZAR | 0.68 ZAR/Wdc |
Mounting Materials | 85,739 ZAR | 0.72 ZAR/Wdc |
Electrical Materials | 311,490 ZAR | 2.62 ZAR/Wdc |
Civil Materials | 0.00 ZAR | 0.00 ZAR/Wdc |
Engineering Drawings | 17,664 ZAR | 0.15 ZAR/Wdc |
Site Works | 0.00 ZAR | 0.00 ZAR/Wdc |
Electrical Work | 175,333 ZAR | 1.48 ZAR/Wdc |
Mechanical Work | 0.00 ZAR | 0.00 ZAR/Wdc |
Others | 114,461 ZAR | 0.96 ZAR/Wdc |
|
|
|
Soft Costs | 65,992 ZAR | 0.56 ZAR/Wdc |
Contingency | 45,264 ZAR | 0.38 ZAR/Wdc |
Preliminary Engineering | 7,567 ZAR | 0.06 ZAR/Wdc |
Spare Parts | 13,161 ZAR | 0.11 ZAR/Wdc |
|
|
|
Developer Fees | 196,524 ZAR | 1.65 ZAR/Wdc |
|
|
|
Pre-COD OpEx | N/A | N/A |
|
|
|
Total CapEx (All-In) | 1,771,309 ZAR | 14.91 ZAR/Wdc |
Taxes
No tax payments were assumed for this analysis.
Relevant Documents
A Legal review was performed in the project's available documentation. The most relevant documents are listed below:
1. Certificate of Incorporation, Articles of Organization of 10 Chatham Street Property (PTY) LTD and Disclosure Certificate issued by the Commissioner of Companies & Intellectual Property Commission;
2. Deed of Guarantee and Suretyship;
3. Asset Lease Agreement;
4. EPC Agreement.
All contracts submitted are duly signed. There was no major red flag in the contracts/documents.
Issues List
Table 3 - Issues List
Lease Assignment | Signature Pending |
Contract Summary
Table 4 - Articles of Organization Summary
Contract | Articles of Organization of 10 Chatham Street Property (PTY) LTD |
Incorporation Date | November 8th, 2002 (originally incorporated under the name "Article Investments 31 (Proprietary) Limited" and changed to 10 Chatham Street Property (LTY) LTD on October 7h, 2003) |
Structure | Company with Share Capital |
Main Business | Property Holding and Investment as principal |
Capital | 1,000 Rand (one thousand Rand) divided into 1,000 (one thousand) ordinary par value shares of 1 (one) Rand |
Directors | Vivienne Wyenne Fok Roger Warr Siu You Fok |
Table 5 - Asset Lease Agreement Summary
Contract | Asset Lease Agreement |
Date | September 28th, 2021 |
Parties | The Sun Exchange (SA) Bewind Trust - As Lessor 10 Chatham Street (PTY) LTD - As Lessee |
Term | 20 years from the Commercial Operation Date |
Object | Lessor will lease to Lessee the asset, a photovoltaic electricity power generator, fixed to the premises of Lessee at 10 Chatham St., Maitland, Cape Town, 7405 |
Usage Fee | Lessee shall pay the usage fee in return for the use of the asset |
Payment | Monthly, within 14 (fourteen) days of receipt of each monthly invoice |
Late Payment | Interest of 2% (two per cent) per month |
Currency | South African Rand |
Termination | Lessee shall not sell the premises or terminate its lease of the premises (as appropriate), unless the new owner or occupant (as appropriate) assumes the Lessee's rights and obligations to the Lessor under the lease agreement prior to such sale or lease termination taking effect, provided that the Lessee shall remain bound to the lease agreement and be liable for payment of the usage fee until the assignment of the lease agreement to the new owner or occupant (as appropriate) has been effected and the new owner has formally and in writing agreed to be bound to the lease agreement. As an alternative, if the Lessee wishes to have the asset moved to alternative premises, this will be at the cost of the Lessee.
At the end of the term, if Lessee does not wish to renew the lease agreement for an additional period, the asset must be purchased by Lesssee. |
Insurance | Lessor shall insure the asset from the COD against loss, fire, accident, theft and damage for an amount equal to the full insurable value of the asset.
Lessor shall ensure that the EPC obtain and maintains adequate insurance cover for any damage caused to the building or other structures on the premises during installation of the asset and up to the COD, including in respect of consequential damages or other losses or damages incurred by the Lessee, which loss or damages are directly or indirectly caused by the asset, any EPC services or O&M services performed in respect of the asset, and the Lessee shall have no claim against the Lessor or the EPC for uninsured damages or loss suffered in this regard. |
Buy Out Option | Lessee has the option at any time to purchase the asset (and all its component parts) from Lessor. |
Table 6 - 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 118.8kWp, to be built on the roof of the facility located at 10 Chatham Street, Maitland, Cape Town, 7405 and deliver such fully operational plant at the premises. |
Price | 1,360,649.67 South African Rand |
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 7 - 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* | |
Equipment Warranties | ||
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 Anchor Foods Project.
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 January 18, 2022
