Dear 12J Investors,
As 2025 draws to a close, we find ourselves reflecting not only on the past twelve months but on the remarkable journey we’ve shared over the past few years. What began as an ambitious idea has evolved into a diversified, investor-backed renewable energy portfolio, now comprising exposure to 38 income-generating renewable energy and related assets, all proudly managed by Futureneers under the 12J tax incentive.
TL;DR
The fund concluded a challenging year by meeting its 10% operational return target, demonstrating robust management and prudent project selection.
- 2026 marks the critical five-year compliance cycle closure, signaling a shift to the planned exit phase.
- The proactive liquidity strategy involves refinancing the secure asset portfolio to enable the Fund to execute efficient, structured share buybacks.
- Investors can expect an Exit Survey and detailed Liquidity Proposal in early 2026 as we focus on maximizing final returns.
It’s an incredible milestone, and it wouldn’t have been possible without you, our investors who believed not only in the vision, but more importantly, in us as fund managers right from the start. For that, we’re deeply grateful.
Looking ahead, 2026 will be a defining year. It marks the fifth year of our 12J compliance cycle, the point where we must both complete capital deployment and begin preparing structured exit opportunities for investors. Balancing those two goals (growth and liquidity), will be at the heart of everything we do next year.
The Past Year in Review
2025 was a year that tested both our resolve and our adaptability. Despite a tougher and more competitive environment, we successfully rolled out 19 new rooftop solar systems, a clear sign that our entrepreneurial and hands-on approach continues to deliver results. In a market where access to quality projects is becoming more limited, this proactive engagement has kept our pipeline alive and our capital productively deployed.
Beyond rooftop solar, we’ve also successfully stepped into funding of electricity smart metering most notably in the Upington Municipality. Our model is certainly different and exciting and allowed us to partner with a vendor to control the cashflows directly rather than waiting to be paid by the Municipality. This gives us far greater security, and because the funding cycles are shorter (around three years), it opens more flexible and timely exit opportunities for investors compared to traditional 20-year solar PPAs.
Navigating a Changing Market
This year also brought a few shifts in the broader investment landscape that shaped our strategy.
- Competition intensified as several new Section 12B and 12BA funds entered the market. With the easing of load-shedding, demand slowed while capital supply remained strong. This simply means many investors were chasing a limited number of quality projects, resulting in tighter pricing, thinner margins, and more aggressive bidding from funders desperate to deploy their capital.
- At the same time, many corporations adopted a “wait-and-see” approach, delaying long-term Power Purchase Agreements until there’s more clarity around “wheeling” and energy-trading regulations. This cautious stance has temporarily limited viable opportunities and pushed traditional project owners like us to compete directly with wheeling providers and emerging energy traders, a dynamic we’re watching closely as it could reshape the PPA landscape in the years ahead.
- On a brighter note, equipment costs continued to reduce, which improves end-user project economics. Battery prices are also trending downwards, though we’re not yet at the point where large-scale storage is financially viable in the absence of load-shedding.
Despite these headwinds, the 12J Fund achieved its target operational return of 10% (before management fees and tax), with the most recent dividend paid earlier this quarter exactly as forecasted. This performance underscores what we’ve always believed: prudent project selection and disciplined capital management matter, especially in volatile markets. It has been difficult, but we are proud of our track record over the past few years consistently meeting our original forecasts.
The Road Ahead: 2026 and Beyond
As we head into 2026, our goals are clear and focused:
- Deploy the remainder of our committed capital by 30 June 2026, and
- Begin creating liquidity and structured exit pathways for investors who wish to realise returns.
Creating liquidity within a private, unlisted structure is never simple, but it’s something we’ve been planning for well in advance. Section 12J funds are inherently illiquid, with only a limited pool of potential buyers. In most cases, only Futureneers Capital (the 12J Fund itself) or existing investors are the only realistically positioned purchasers of these shares.
What further constrains the marketability of 12J shares is the highly regulated environment in which these funds operate, coupled with the fact that purchasers of “second-hand” 12J shares no longer receive any associated tax benefits. Over the past two years, the rise of new Section 12B investment vehicles, offering investors immediate tax deductions, has intensified this challenge, drawing market attention and capital away from secondary 12J transactions.
The Strategy to Create Liquidity
The most practical solution, therefore, is for the 12J Fund itself to buy back shares from investors wishing to exit. However, it’s important to note that, under Section 12J requirements, the Fund was obliged to fully deploy its available cash into qualifying solar projects, a target we have successfully achieved, and will continue to achieve into 2026. To facilitate future share buybacks, these underlying projects will now need to be refinanced, thereby unlocking the necessary liquidity to fund investor exits.
Of course, this comes with its own set of challenges:
- Timing: Balancing project roll-out and investor exits is a delicate dance, we must stay compliant while freeing up cash liquidity.
- Bank financing terms: Most commercial lenders will only finance solar assets over 10 years, even though solar assets generate income for 20 years, which puts pressure on cashflows.
- Security and gearing limits: Banks are conservative, they often cap debt funding at a value of asset value and normally insist on at least 30% of equity to remain invested as a “first-loss” cover for their loans. The bank’s requirements for security may therefore limit the scope and the manner in which we can refinance.
Our Plan Going Forward
- First quarter 2026: Begin formal engagement with banks to explore and secure refinancing options for the 12J portfolio. We believe that a portfolio approach is the best manner to address the refinance of the various projects, but the banks may insist on excluding certain individual projects.
- March/April 2026: Circulate an Investor Exit Survey to gauge preferences, whether investors wish to exit, remain invested, or adopt a hybrid approach.
- Post-survey: Based on feedback and market conditions, present a detailed Liquidity and Exit Proposal for investor consideration.
Reminder: Exit Tax Implications
A friendly reminder - even after the five-year 12J holding period, any exit will still trigger Capital Gains Tax or Dividends Withholding Tax under current 12J SARS rules since the base cost of your original investment is zero (having claimed a 45% section 12J tax deduction upfront). As a rough guide, investors should plan for an effective tax rate of around 20% on their entire exit proceeds.
Taking into account the feedback of the Exit Survey described above and considering tax implications to shareholders, we will also during the course of next year provide investors with suggested options to potentially mitigate their tax liabilities.
Final remarks
Thank you again for your continued support of Futureneers Energy. As always, we as fund managers remain invested next to you, and the success of the fund and our shareholders will remain our ultimate strategic drivers.
Should you have any questions do not hesitate to reach out to us.
Warm regards from your Futureneers Energy team,
Jaco, Deon, Robbi and Mike