UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-U
CURRENT REPORT PURSUANT TO REGULATION A
October 18, 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
Zandvliet is a 100 kW (AC) rooftop solar installation to be located at 77 Musical Avenue, Macassar, Western Cape, South Africa ("Project"). The Project will be connected to the local distribution grid.
This solar plant will be rented to Zandvliet Care Facility ("Zandvliet"), 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 $ 75,000.00, which corresponds to a 74.54% participation on the Project with a projected IRR of 12.66% ($USD).
Key Information
General Info
Project Owner | Energea Portfolio 3 LLC |
Project Location | Cape Town, South Africa |
Technology | Rooftop Solar |
System Size (AC/DC) | 100 kW/138 kWp |
Estimated Year 1 Production | 208 MWh |
Coordinates | 34.059977° S 18.763462° E |
Roof Status | Verified by a third-party engineer |
Project Status | Notice to Proceed |
Useful Equipment Life (Years) | 25 |
Stakeholders
SPE | The Sun Exchange (SA) Bewind Trust |
Offtaker | Zandvliet Care Facility |
EPC Contractor | Dorman Projects (PTY) LTD |
O&M Contractor | TBD |
Roof Owner | Zandvliet Care Facility |
Asset Manager | The Sun Exchange (PTY) LTD. ("Sun Exchange") |
Uses of Capital and Project Economics
Project Hard Costs | 1,173,728 ZAR |
Project Soft Costs | 20,714 ZAR |
Developer Fee | 568,118 ZAR |
Total Project Financing | 3,958,848 ZAR |
Debt Funding | N/A |
Equity Funding | 1,762,560 ZAR |
Cell Owner IRR | 12.66% ($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
Baysville, 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. The roof structure is in a good condition and the sheeting on top as well. 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. On the report, Origin highlighted that two places on the trusses must be spliced due to breakages before the installation of the project.
Design
The Project will employ 255 x 540 Wp solar modules manufactured by Canadian Solar, a Tier 1 module manufacturer based in China. The plant will also use one 110 kW SG110CX inverter manufactured by Sungrow.
Regarding Energy Production, the Project is estimated to produce 208 MWh/year with an AC Capacity Factor of 23.7%.
Interconnection
The Project will be connected to the Eskom grid. The application for the connection of SSEG has been submitted for approval.
Offtaker
The Sun Exchange Trust and Zandvliet have signed an Asset Lease to Own Agreement on June 14th, 2022. This Revenue agreement stipulates a fixed tariff to be paid by Zandvliet per kWh generated by the system. The tariff is adjusted annually on June. 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 | 1.00 ZAR/kWh |
Annual Adjustment | CPI + 2% |
EPC
Dorman Projects (PTY) LTD ("Dorman") has been selected as the EPC partner for the Project. Dorman and Sun Exchange signed the turnkey contract on August 28th, 2022. The total contract price is 1,642,703 ZAR (exclusive of VAT).
Dorman 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
During construction, Dorman 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
The O&M partner will be selected in dully time, prior to the Project's COD. This service includes Monitoring, Reporting, Module Cleaning, Preventative Maintenance, Saving Calculations and Support.
Financial Analysis
The resulting nominal IRR, in USD, of Zandvliet is projected to be 12.66%, with an estimated payback of 9 years, 0 months, and 0 days from the NTP date. The income statement, cash flow statement and balance sheet up until 2030 (shown annually) are presented on the project portion of our website.
Energea is acquiring a total percentage of ownership in the project of 74.54%, for a total investment of 75,000.00 USD for 27,372 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 Zandvliet, for a base price of 1.00 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 34.64%.
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 28.10% 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 | 1,173,728 ZAR | 8.52 ZAR/Wdc |
| | |
Soft Costs | 20,714 ZAR | 0.15 ZAR/Wdc |
| | |
Developer Fees | 568,118 ZAR | 4.12 ZAR/Wdc |
| | |
Pre-COD OpEx | N/A | N/A |
| | |
Total CapEx (All-In) | 1,762,560 ZAR | 12.80 ZAR/Wdc |
Total CapEx (All-In) | 103,680 USD | 0.75 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
The Lease Agreement is duly signed and received the proper corporate authorization necessary to be signed. There was no major red flag in the contracts/documents.
Contract Summary
Table 2 - Asset Lease to Own Agreement Summary
Contract | Asset Lease to Own Agreement |
Date | June 27th, 2022 |
Parties | The Sun Exchange (SA) Bewind Trust - As Lessor Zandvliet Care Facility - 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 77 Musical Avenue, Macassar, Western Cape, South Africa |
Asset Rental Rate (kWh) | R1.00 |
Asset Rental Annual Escalation Rate | CPI+2% |
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 |
Insurance | Lessor shall insure the asset from the COD 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. |
Buy Out Option | Lessee has the option at any time to purchase the asset (and all its component parts) from Lessor. |
Remedy of Lessee | Lessee's remedy against the Lessor for a breach of any obligation is to claim specific performance. Lessee is precluded from cancelling the agreement pursuant to Lessor's breach. |
Dispute Resolution | Arbitration |
EPC Company | Dorman Projects |
Table 3 - EPC Agreement
Contract | Turnkey EPC Agreement |
Date | August 29th, 2022 |
Parties | The Sun Exchange (PTY) LTD - as Customer Dorman Projects (PTY) LTD - as Contractor |
Object | Contractor will design, procure, manufacture, construct, install and test a fully operational photovoltaic power plant, with total electrical capacity of 137.7kWp. |
Price | 1,642,703.00 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 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 according 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 |
Documentation Checklist
Table 4 - 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 | |
EPC Contract | X |
EPC Insurance | |
Asset Management | O&M Agreement** | |
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 Zandvliet Project.
Signature
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 October 18, 2022
