The structured energy solution is at its core, an investment that is funded through a ring-fenced loan secured through tax credits and carbon credits. Residual debt balance is paid down through the net cashflow related to the normal electricity consumption costs.
- Virtually zero/ring-fenced balance sheet impact at the outset;
- Zero net increase in electricity-related costs at the outset;
- Electricity supply security;
- Electricity price security;
- Earn fungible carbon credits and create Sustainable Development Goal impacts;
The investment builds an embedded, passive electricity supply business within the business, which has the potential to generates consistent, reliable income. Cost to establish is zero from the investor’s cash resources and balance sheet.
Procedure and Investment Mechanics
- The investor must commit to the investment before the end of their tax year. There must be sufficient time before the end of the tax year to enable the complete installation of the required equipment to qualify for the tax deduction.
- The client pays over 10% of the envisaged tax savings/recoupment to move to the planning stage.
- The client pays over 10% of the baseline carbon credit value for year 1 to cover the cost to develop the carbon credits for the lifespan of the project.
- A comprehensive assessment of the client needs, and requirements is then done, and a project plan is then developed.
- If the project has a long completion lead time, the project may only qualify for the following tax year.
- The Impact consortium will source finance for the project, which will require only the installed equipment as collateral.
- Once complete, the full tax claim can then be made, and the tax reduction related to the project is then paid over to the Impact Consortium.
- The investor then enjoys an immediate benefit in the form of supply and price security from the capacity that the system can deliver if for their own use. If the equipment was installed for a third-party use, the investor will start generating a return on their investment in the form of quarterly cash payments. The initial returns are expected to be in the order of 4% to 5%, rising once the carbon credits are monetized and further once the capital cost if fully amortized. The ultimate target return is between 15% and 20%.The structured energy solution is at its core, an investment that is funded through a ring-fenced loan secured through tax credits and carbon credits. Residual debt balance is paid down through the net cashflow related to the normal electricity consumption costs.