UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-A/A
Regulation A - Offering Circular
PART II - INFORMATION REQUIRED IN OFFERING CIRCULAR
024-11579
(Commission File Number)
September 1, 2023
(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 Form 1-A/A filing for Energea Portfolio
3 Africa LLC is an amendment to the Form 1-A filed on July 9, 2021, and
qualified on August 2, 2021.
AN
OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED
IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS AMENDED
OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR
QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE. WE MAY ELECT TO SATISFY OUR
OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN
TWO BUSINESS DAYS AFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL
WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
Page 1
FORM 1-A
Regulation A Offering Statement
Part II - Offering Circular
Energea Portfolio 3 Africa LLC
62 Clementel Drive
Durham, CT 06422
(860) 316-7466
www.energea.com
September 1, 2023
This Offering Circular Follows the Form 1-A Disclosure
Format
Energea
Portfolio 3 Africa LLC is a limited liability company organized under the laws
of Delaware, which we refer to as the "Company." The Company is offering to
sell to the public up to $75,000,000 of limited liability company interests
designated as "Class A Investor Shares." The price of the Class A Investor
Shares, as of December 31st, 2022, is $1.00 per share and the
minimum initial investment is $100.
We
are selling these securities directly to the public through the website,
www.energea.com, which we refer to as the "Platform." Currently, we are not
using a placement agent or a broker and we are not paying commissions to
anyone.
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Price to Public
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Commissions
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Proceeds to Issuer
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Proceeds to Others
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Each Class A Investor Share
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$1.00
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Zero
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$1.00
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Zero
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Total
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$75,000,000
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Zero
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$75,000,000
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Zero
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We
refer to the offering of Class A Investor Shares pursuant to this Offering
Circular as the "Offering." The Offering was qualified by the U.S. Securities
and Exchange Commission ("SEC") on August 2, 2021, and will end on the sooner
of (i) a date determined by the Company, or (ii) the date the Offering is
required to terminate by law.
The
purchase of these securities involves a high degree of risk. Before investing,
you should read this whole Offering Circular, including "Risks of Investing."
THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS JUDGEMENT UPON
THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERM OF THE
OFFERING. NOR DOES IT PASS JUDGEMENT UPON THE ACCURACY OR COMPLETENESS OF ANY
OFFERING CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED
PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE
COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.
GENERALLY,
IF YOU ARE A NON-ACCREDITED INVESTOR, NO SALE MAY BE MADE TO YOU IN THIS
OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE
GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT
RULES
APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY
REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE
ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL
INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV. FOR
MORE INFORMATION, SEE THE "LIMIT ON AMOUNT A NON-ACCREDITED INVESTOR CAN INVEST" SECTION.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION UNIFORM LEGEND:
YOU
SHOULD MAKE YOUR OWN DECISION AS TO WHETHER THIS OFFERING MEETS YOUR INVESTMENT
OBJECTIVES AND RISK TOLERANCE LEVEL. NO FEDERAL OR STATE SECURITIES COMMISSION
HAS APPROVED, DISAPPROVED, ENDORSED, OR RECOMMENDED THIS OFFERING. NO
INDEPENDENT PERSON HAS CONFIRMED THE ACCURACY OR TRUTHFULNESS OF THIS
DISCLOSURE, NOR WHETHER IT IS COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
ILLEGAL.
THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY BY CONTRACT AND THERE
WILL BE NO READY MARKET FOR RESALE. YOU COULD BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
EXECUTIVE SUMMARY
Our Business
Energea Portfolio 3 Africa LLC ("Company") is a
limited liability company, treated as a corporation for tax purposes, organized
under the laws of Delaware. The Company and its day-to-day operations are
managed by Energea Global LLC ("Manager") located in Durham,
Connecticut. The Company was created to invest in the acquisition, development,
and operations of solar energy projects in various countries in Africa, but
mainly in South Africa (each a "Project"). The Projects will sell power
and, in some cases, environmental commodities, to offtakers who purchase the
electricity or the environmental commodities under long term contracts (we
collectively refer to offtakers of electricity and environmental commodities as
"Customers").
The Offering
The
Company is offering to investors up to a total of $75,000,000 of Class A
Investor Shares, per year, to finance the purchase and development of a
portfolio of solar energy Projects.
The
cash flow generated by a Project will first be used to pay for the Project's
operating expenses (such as operations and maintenance costs, landscaping and
project-level insurance) and all additional cash flow will be sent to the
Company. The Company then pays its expenses (such as accounting fees, financial
audits, banking fees and portfolio-level insurance). The remaining cash is
distributed to the owners of the Class A Investor Shares ("Investors") who will
have the right to receive:
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Monthly
distributions sufficient to amortize their investment in the Company over the
projected life of the Project, plus
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A
7% per year compounded preferred return; plus
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70%
of any additional cash flow.
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Owners
of the Class A Investor Shares will have no voting rights.
CAUTION:
ALTHOUGH THE CASH FLOW FROM OUR PROJECTS WILL LARGELY BE ESTABLISHED BY
CONTRACT IN ADVANCE, THERE IS NO GUARANTY THAT OUR PROJECTS WILL GENERATE ANY
POSITIVE CASH FLOW.
Page 3
TABLE OF CONTENTS
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Page 4
RISKS OF INVESTING
BUYING
CLASS A INVESTOR SHARES IS SPECULATIVE AND INVOLVES SIGNIFICANT RISK, INCLUDING
THE RISK THAT INVESTORS COULD LOSE SOME OR ALL OF THEIR MONEY. THIS SECTION
DESCRIBES SOME OF THE MOST SIGNIFICANT FACTORS THAT THE COMPANY BELIEVES MAKE
AN INVESTMENT IN THE CLASS A INVESTOR SHARES RISKY. THE ORDER IN WHICH THESE
FACTORS ARE DISCUSSED IS NOT INTENDED TO SUGGEST THAT SOME FACTORS ARE MORE
IMPORTANT THAN OTHERS.
The Track Record of Our Principals Does Not Guaranty
Success: The principals of the
Company and the Manager have been involved in the solar industry for over 15
years, developing more than 400 solar projects. See "Past Performance." However, past performance is never a guaranty of
future results, and the success of our principals in other solar projects does
not guaranty that the Company will be successful.
Risks Associated with Renewable Energy Projects: The market for renewable energy is changing rapidly.
If renewable technology proves unsuitable for widespread commercial deployment
or if demand for renewable energy products, especially solar energy products,
fails to develop sufficiently, we might not be able to find enough Projects
that satisfy our requirements. The factors influencing the widespread adoption
of renewable energy technology include but are not limited to:
cost-effectiveness of renewable energy technologies as compared with
conventional technologies; performance and reliability of renewable energy
products as compared with conventional energy products; and the success of
other enabling technologies such as battery storage and Distributed Energy
Resource Management Systems.
Fluctuations in Income: Some of our agreements with Customers provide for
payment based on the actual production of electricity from the Project. Thus,
our income will fluctuate based on factors beyond our control, including the
number of sunny days.
Competition:
There are other investors actively pursuing solar projects in Africa, and we
expect the number of competitors to increase as the market grows. Some of our
competitors could be larger and enjoy a lower cost of capital. Aggressive
pricing by competitors or the entrance of new competitors could reduce the
Company's ability procure investable Projects.
Our Customers Might Default: The Company will have a variety of Customers,
including businesses and schools. Some Customers could default. A default would
hurt the Project in question financially, reducing the anticipated returns.
We Might Own Only a Small Number of Projects: If the Company is successful raising the full
$75,000,000 it is trying to raise, the Company would likely invest in between
100 and 200 Projects. The less money the Company raises, the fewer Projects it
will own. If the Company owns only a small number of Projects, Investors will
be exposed to greater concentration risk.
Possible
Changes in Governmental Policies:
Political developments are impossible to predict. It is possible that one or
more African countries will adopt laws hostile to our business, making it more
difficult or even impossible to generate profits.
Operational Risks: The Projects are subject to operating and technical risks, including
risk of mechanical breakdown, failure to perform according to design
specifications, labor and other work interruptions and other unanticipated
events that adversely affect operations. The success of each Project, once
built, depends in part upon efficient operations and maintenance.
Construction and Development Risks: In most cases, the Company will invest in Projects
before construction is complete. Construction of any kind involves risks,
including labor unrest, bad weather, design flaws, the unavailability of
materials, fluctuations in the cost of materials, and labor shortages. Delays
are common, which could adversely affect the economics of a Project.
Equipment Supply Constraints: The construction of renewable energy facilities
relies on the availability of certain equipment that may be in limited supply,
such as solar modules, trackers, inverters, and monitoring systems. Much of
this equipment comes from China. There is no guarantee that the production of
this equipment will match demand, and this may adversely impact the ability to
build Projects.
Risks Associated with Investments Outside the U.S.: All of the Company's Projects will be in Africa.
Projects outside the United States are subject to certain risks that generally
do not apply to investments within the United States. Such risks include the
following:
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Historically,
the markets of developing countries have been more volatile than the markets
of developed countries.
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Developing
countries may have less developed legal and taxation systems.
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The
governments of developing countries may be more unstable and more likely to impose
capital controls, nationalize a company or industry, place restrictions on
foreign ownership and on withdrawing money from the country, and/or impose
punitive taxes that could adversely affect prices.
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The
economies of developing countries may be dependent on relatively few
industries that are more susceptible to local and global changes.
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The
legal systems of developing countries might be less reliable in terms of
enforcing contracts.
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Page 5
Foreign Currency Exposure: Our contracts will be denominated foreign
currencies, mostly the South African rand. Thus, our Investors will be exposed
to the risks associated with fluctuations in the exchange rates, which could
hurt (or help) the Company's returns. While the Manager might be able to hedge
the Company's foreign currency exposure to some degree, such hedging may be
expensive and may not be entirely effective.
Risks Upon Disposition of Investments: If the Company sells a Project, it might be required
to make representations about the business and financial affairs of the
Project, and to indemnify the purchaser if those representations prove to be
inaccurate or misleading. These arrangements may result in contingent
liabilities, which might ultimately require Investors to return some or all of
the distributions they have received pursuant to 6 Del. C. §18-607, which
provides, among other things, that if a member of a limited liability company
receives a distribution that causes the limited liability company to be
insolvent, the member must return the distribution.
Regulatory Risks: All of the Projects will be subject to extensive regulatory
requirements, including those imposed by environmental, safety, labor and other
regulatory and political authorities. These regulatory requirements could
impose substantial costs on the Projects. Further, should any Project fail to
comply with one or more regulatory requirements, it could result in substantial
fines and penalties and even a shutdown of the Project.
Unavailability of Insurance Against Certain
Catastrophic Losses: Certain losses
of a catastrophic nature, such as earthquakes, wars, terrorist attacks or other
similar events, may be either uninsurable or insurable at such high rates that
to maintain such coverage would cause an adverse impact on the related Project.
As a result, not all Projects may be insured against all possible risks. If a
major uninsured loss occurs, the Company could lose both the amount it invested
in and anticipated profits from the affected Project(s).
Potential Environmental Liability: The Projects, like any large-scale physical plant,
could cause environmental contamination under some circumstances. Further, the
entity that owns the physical assets of the Project could be found liable for
environmental contamination that occurred before the Project was built. The
cost of remediation and penalties could be very large.
Liability for Personal Injury and Damage to Property: The Company could be held liable for accidents and
injuries at the Project site. The Company will carry insurance to protect
against the potential losses, but the insurance might not be adequate.
We Might Raise More than $75,000,000: Under Regulation A, the Company is allowed to raise a
maximum of $75,000,000 each year. Should the Company raise the full $75,000,000
it is trying to raise, it might decide to raise more, in a subsequent year. In
that case an early Investor could own a much larger portfolio of Projects than
he, she, or it expected.
No Participation in Management: Investors will have no voting rights and no right to
participate in the management of the Company or the Projects. Instead, the
Company's Manager will make all decisions. You will have the ability to replace
our Manager only under very limited circumstances, as described in "Summary of LLC Agreement and
Authorizing Resolution - Management."
Reliance on Management: The success of the Company and its Projects will
depend in part on the skills of our Manager. If a key member of our Manager's
executive team resigned, died, or became ill, the Company and its Investors
could suffer.
Sale of Other Securities: In this Offering, the Company is selling Class A
Investor Shares. However, the Company could at any time sell other Class A
Investor Shares or other classes of securities to raise additional capital. A
different class of securities could have greater rights than those associated
with the Class A Investor Shares, including but not limited to preferential
rights to distributions.
Limitations on Rights in Investment Agreement: To purchase Class A Investor Shares, you are required
to sign our Investment Agreement. The Investment Agreement will limit your
rights in several important ways if you believe you have claims against us
arising from the purchase of your Class A Investor Shares:
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Any
claims arising from your purchase of Class A Investor Shares must be brought
in the state or federal courts located in Wilmington, Delaware, which might
not be convenient to you.
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You
would not be entitled to recover any lost profits or special, consequential,
or punitive damages. However, that limitation does not apply to claims
arising under Federal securities laws.
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Forum Selection Provision: Our Investment Agreement and our LLC Agreement both
provide that disputes will be handled solely in the state or federal courts
located in Delaware. We included this provision primarily because (i) the
Company is organized under Delaware law, (ii) Delaware courts have developed
significant expertise and experience in corporate and commercial law matters
and investment-related disputes (which typically involve very complex legal
questions), particularly with respect to alternative entities (such as LLCs), and
have developed a reputation for resolving disputes in these areas in an
efficient manner, and (iii) Delaware has a large and well-developed body of
case law in the areas of corporate and alternative entities law and
investment-related disputes, providing predictability and stability for the
Company and its Investors. This provision could be unfavorable to an Investor
to the extent a court in a different jurisdiction would be more likely to find
in favor of an Investor or be more geographically convenient to an Investor. It
is possible that a judge would find this provision unenforceable and allow an
Investor to file a lawsuit in a different jurisdiction.
Section 27 of the Exchange Act provides that Federal
courts have exclusive jurisdiction over lawsuits brought under the Exchange
Act, and that such lawsuits may be brought in any Federal district where the
defendant is found or is an inhabitant or transacts business. Section 22 of the
Securities Act provides that Federal courts have concurrent jurisdiction with
State courts over lawsuits brought under the Securities Act, and that such
lawsuits may be brought in any Federal district where the defendant is found or
is an inhabitant or transacts business. Investors cannot waive our (or their)
compliance with Federal securities laws. Hence, to the extent the forum
selection provisions of the Investment Agreement or the LLC Agreement conflict
with these Federal statutes, the Federal statutes would prevail.
Page 6
Waiver of Right to Jury Trial: The Investment Agreement and the LLC Agreement both
provide that legal claims will be decided only by a judge, not by a jury. The
provision in the LLC Agreement will apply not only to an Investor who purchases
Class A Investor Shares in the Offering, but also to anyone who acquires Class
A Investor Shares in secondary trading. Having legal claims decided by a judge
rather than by a jury could be favorable or unfavorable to the interests of an
owner of Class A Investor Shares, depending on the parties and the nature of
the legal claims involved. It is possible that a judge would find the waiver of
a jury trial unenforceable and allow an owner of Class A Investor Shares to
have his, her, or its legal claim decided by a jury. In any case, the waiver of
a jury trial in both the Investment Agreement and the LLC Agreement do not
apply to claims arising under the Federal securities laws.
Conflicts of Interest: The interests of the Company and the Manager could
conflict with Investor interests in a number of ways, including:
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Investor's
interests might be better served if the principals of the Company and Manager
devoted their full attention to the Company's business. Instead, they will
also be managing other businesses and business interests simultaneously.
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Our
Manager will receive fees based, in part, on the amount of cash flow the
Projects generate. The Manager might, therefore, have an incentive to raise
more capital, and invest in more Projects, than they would otherwise, leading
them to invest in Projects with lower estimated returns.
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The
Manager might create other entities that invest in solar projects in Africa.
Conflicts could arise as to whether a given Project should be acquired by the
Company or a different entity.
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The
lawyers who prepared this Offering Statement, the LLC Agreement, and the
Investment Agreement represent the Company, not the Investor. Investors must
hire their own lawyer (at their own expense) if they want their interests to
be represented.
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Risk of Failure to Comply with Securities Laws: The current Offering relies on an exemption under
Regulation A of the Securities and Exchange Commission. The Company has relied
on the advice of securities lawyers and believe the Company qualifies for the
exemption. If the Company did not qualify, it could be liable to penalties
imposed by the federal government and state regulators, as well as to lawsuits
from Investors.
No Market for the Class A Investor Shares; Limits on
Transferability: There are several
obstacles for an Investor who wishes to sell or otherwise transfer their Class
A Investor Shares:
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There
will be no established market for the Class A Investor Shares, meaning the
Investor could have a hard time finding a buyer even though Investors will
have the option of selling their Class A Investor Shares on the Platform.
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Although
the Company offers a limited right of redemption, there is no guaranty that
an Investor who wants to sell his, her, or its Class A Investor Shares will
be able to do so.
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Class
A Investor Shares may not be transferred without the Company's consent, which
we can withhold in our sole discretion. The Company also has a right of first
refusal to purchase any Class A Investor Shares proposed to be transferred.
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Corporate Governance Risk: As a non-listed company conducting an exempt offering
pursuant to Regulation A, the Company is not subject to a number of corporate
governance requirements that an issuer conducting a registered offering or
listed on a national stock exchange would be. For example, the Company does not
have (i) a board of directors of which a majority consists of "independent"
directors under the listing standards of a national stock exchange, (ii) an
audit committee composed entirely of independent directors and a written audit
committee charter meeting a national stock exchange's requirements, (iii) a
nominating/corporate governance committee composed entirely of independent
directors and a written nominating/corporate governance committee charter
meeting a national stock exchange's requirements, (iv) a compensation committee
composed entirely of independent directors and a written compensation committee
charter meeting the requirements of a national stock exchange, and (v)
independent audits of the Company's internal controls.
The Company is an "Emerging Growth Company" Under the
JOBS Act: Today, the Company
qualifies as an "emerging growth company" under the JOBS Act of 2012. If the
Company were to become a public company (e.g., following a registered offering
of its securities) and continued to qualify as an emerging growth company, it would
be able to take advantage of certain exemptions from the reporting requirements
under the Securities Exchange Act of 1934 and exemptions from certain investor
protection measures under the Sarbanes Oxley Act of 2002. Using these
exemptions could benefit the Company by reducing compliance costs but could
also mean that Investors receive less information and fewer protections than
they would otherwise. However, these exemptions - and the status of the Company
as an "emerging growth company" in the first place - will not be relevant
unless and until the Company becomes a public reporting company.
The
Company has elected to delay complying with any new or revised financial
accounting standard until the date that a company that is not an "issuer" (as
defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to
comply with such new or revised accounting standard, if such standard also
applies to companies that are not issuers. As a result, owners of Class A
Investor Shares might not receive the same disclosures as if the Company had
not made this election.
Breaches
of Security: It is possible that our
Platform, systems or the systems of third-party service providers could be
"hacked," leading to the theft or disclosure of confidential information
Investors provide to us. Because techniques used to obtain unauthorized access
or to sabotage systems change frequently and generally are not recognized until
they are launched, the Company, Manager and our service providers may be unable
to anticipate these techniques or to implement adequate defensive measures.
The Foregoing Are Not Necessarily The Only Risks Of
Investing
Please Consult With Your Professional Advisors
Page 7
OUR COMPANY AND BUSINESS
Energea
Portfolio 3 Africa LLC ("Company") is a limited liability company,
treated as a corporation for tax purposes, organized under the laws of
Delaware. The Company and its day-to-day operations are managed by Energea
Global LLC ("Manager"). The Company was created to invest in the
acquisition, development, and operations of solar energy projects in various
countries in Africa (each a "Project"). The Projects will sell power
and, in some cases, environmental commodities, to offtakers who purchase the
electricity or the environmental commodities under long term contract (we
collectively refer to offtakers of electricity and environmental commodities as
"Customers").
Investment
Strategy
The
Company sources its Projects from other companies who specialize in developing
solar projects in Africa, which we refer to as "Development Companies."
The Company's relationship with Development Companies can take several
different forms. Sometimes a Development Company will not only identify a
potential project, but also permit, engineer and construct it. Sometimes a
Development Company will provide operations and maintenance support for a
Project after it's built. Sometimes a Development Company will sell us a
Project and exit entirely.
The
Manager does not currently own a development company in Africa and the Company
acquires all projects from unrelated companies, but we may stand up or acquire
a Development Company if projects from third parties become overpriced, if an
exceptional market opportunity presents itself or if deal flow is slow and we
require additional development capacity.
Development
Companies are compensated for their work and their risk. This may include a
developer fee or a continued economic interest in the Project.
The
Manager reviews projects submitted by the Development Companies to identify
projects that represent the greatest risk-adjusted returns. We are specifically
searching for projects in countries with favorable economies and renewable
energy policies, projects with credible Customers and projects where the
Manager has a high degree of confidence in successful implementation.
We
believe we will be able to continue to acquire new Projects in the future,
which we anticipate will have the following characteristics:
|
·
|
Power
Capacity: We intend to focus on
Projects of between 0.1 megawatts and 10 megawatts. (NOTE: The capacity of a
solar project is determined in accordance with "standard testing conditions"
established by certain laboratories worldwide. The actual output of a solar project
fluctuates with solar irradiance.)
|
|
|
|
|
·
|
Locations: We select locations based primarily on:
|
|
|
|
|
|
o
Demand for alternative energy;
|
|
|
|
|
|
o
Efficient access for maintenance;
|
|
|
|
|
|
o
Interconnection points with the electricity grid;
|
|
|
|
|
|
o
Solar irradiance; and
|
|
|
|
|
|
o
Country and state-level policies that enable the development of renewable
energy projects.
|
|
|
|
|
·
|
Right
to Land: Some Projects owned by the
Company will be installed on Customer's rooftops, others will be located on
remote parcels of real estate. In either scenario, the Company will obtain
rights to access the Project to construct and maintain the Project ("Site
Access"). For rooftop Projects, Site Access is most-commonly granted
through the Power Purchase Agreement or Solar Lease with the Customer. For
Projects on remote real estate, we will either purchase or lease the property
to ensure adequate Site Access is obtained.
|
|
|
|
|
·
|
Connecting
Projects to the Electric Grid: Most
Projects acquired or constructed by the Company will require permission to
interconnect to the local electric grid. This permission is granted by the
local interconnecting utility company through an interconnection agreement
and an associated permission to operate. In the case of certain smaller
projects, interconnection rights may be granted through national and utility
policy and not require an individual interconnection agreement.
|
|
|
|
|
·
|
Our
Solar Equipment: We use the same
basic equipment used across the solar industry: the solar panels themselves,
which turn sunlight into electrical energy; and the inverters, which convert
the direct current from the panels to the alternating current used in homes
and businesses. However, we buy our equipment only from certain manufacturers
known for high quality and financial strength.
|
|
|
|
|
·
|
Country-Level
Policies and Environmental Commodities:
Some regions in Africa have certain policies to promote the development of
renewable energy projects. There are a wide range of policy types that
include carbon credits, property and sales tax exemptions, net metering and
community solar (referred to as "wheeling" in the South African context). The
Company will seek to optimize those country-level policies in order to
increase the expected return on investment for Investors which may include
transactions with third parties to monetize carbon and renewable energy
credits.
|
In
most cases Investors are not exposed to many Project-level risks until all
these conditions are satisfied. However, the Company might make exceptions and
fund earlier-stage expenses for especially promising Projects.
Page 8
Investment
Committee
When
we find a Project that meets the fundamental criteria described above, we
consider the Project for investment at a multi-disciplinary committee of
experienced renewable energy executives of the Manager ("Investment
Committee"). To approve a Project for funding, a unanimous approval of the
Project by the Investment Committee is required to move forward. The same memo
prepared by the Manager for each Project and used by the Investment Committee
to make an investment decision is provided to Investors through Form 1-U
submittals to the SEC and on the Platform (see links to each Project Memo below
in Our Investments).
Sun Exchange
The
Company expects many of its Projects to be developed by a particular
Development Company named The Sun Exchange (Pty) Ltd. ("Sun Exchange"),
an independent, unrelated company engaged in the business of developing solar
power projects in southern Africa. The Company and Sun Exchange have entered
into an agreement (the "Investment Services Agreement") that, among
other things, gives the Company (i) a first right of refusal over all solar
projects developed by Sun Exchange, and (ii) control rights over all Projects
in which the Company participates, even if the Company owns less than a
majority interest in a Project.
Each
of our Projects with Sun Exchange are structured as follows:
|
·
|
Projects
consist of rooftop or ground-mounted installations at the customer's
location, e.g., on the roof of a school. That said, Sun Exchange may
pursue other types of solar projects as renewable energy policies in African
countries continue to evolve.
|
|
|
|
|
·
|
The
Company will purchase and own solar cells used in the Projects.
|
|
|
|
|
·
|
The
Company will contribute the solar cells to The Sun Exchange (SA) Bewind Trust
(the "Trust") pursuant to an agreement called a "Cell Owner
Agreement".
|
|
|
|
|
·
|
Projects
will be owned by the Trust. The Company will have control over each Project
pursuant to the Investment Services Agreement and the Cell Owner Agreement.
|
|
|
|
|
·
|
The
Trust signs an agreement with a Customer who agrees to purchase the
electricity produced by the solar cells for 15 or 20 years ("Solar Lease
Agreement").
|
|
|
|
|
·
|
The
Trust signs an agreement with Sun Exchange to manage the development,
construction, implementation and administration of the Project which we refer
to as an "Asset Management Agreement".
|
|
|
|
|
·
|
The
Trust will sign an agreement with a third party to engineer, procure and
construct the Projects we refer to as a "Construction Contract".
|
|
|
|
|
·
|
In
some cases, the Trust will sell environmental commodities produced by the
Projects to Customers pursuant to a contract we refer to as an "Purchase
and Sale Agreement for Environmental Commodities."
|
Although
the final terms and conditions of each contract named above may differ from
Project to Project, the rights and obligations of the parties will generally be
consistent across all of the Projects.
The
revenue from our Projects will consist primarily of the payments we receive
from Customers under Solar Lease Agreements, Cell Owner Agreements and the
Purchase and Sale Agreements for Environmental Commodities. The Projects will
make a profit if their revenues exceed their expenses.
Currently,
the Company plans to hold the Projects indefinitely, creating a reliable stream
of cash flow for Investors.
Diversification, Other DevCos and
Other Project Types
The
Manager believes the best investment strategy for African markets requires
small investments in a broad base of Projects in multiple countries and
developed by multiple Development Companies. The average risk of default by a
Customer of a Solar Lease Agreement is higher in Africa than it may be in other
markets, thus diversification is central to our investment strategy. Placing
small investments (<$1,000,000 per project) in the early stages of the
portfolio's development will help reduce risk of loss as a whole and increase
the level of impact on the local communities and businesses in which we invest.
That said, every Project is vetted for its financial credibility by the
Investment Committee and only approximately 10% of projects we've reviewed have
qualified for an investment to date.
Page 9
Competition
Our
net income depends, in large part, on our ability to source, acquire and manage
investments with attractive risk-adjusted yields. We compete with many other
entities engaged in renewable energy in the African market, including
individuals, corporations, private funds, and other entities engaged in
renewable energy investment activities, many of which have greater financial
resources and lower costs of capital available to them than we have. In
addition, there are numerous companies with asset acquisition objectives
similar to our Manager, and others may be organized in the future, which may
increase competition for the investments suitable for us.
Competitive
variables include market presence and visibility, amount of capital to be
invested per Project and underwriting standards. To the extent that a
competitor is willing to risk larger amounts of capital in a particular project
or to employ more liberal underwriting standards when evaluating potential
investments than we are, our investment volume and profit margins could be
impacted. Our competitors may also be willing to accept lower returns on their
investments and may succeed in buying the assets that we have targeted for
acquisition. Although we believe that we are well positioned to compete
effectively in each facet of our business, there is enormous competition in the
market and there can be no assurance that we will compete effectively or that
we will not encounter increased competition in the future that could limit our
ability to conduct our business effectively.
Limited
Liability Company Agreement
The
Company is governed by a Limited Liability Company Agreement dated March 12,
2021, which we refer to as the "LLC Agreement." The Class A Investor
Shares being offered were created by the Manager under an Authorizing
Resolution pursuant to section 3.1 of the LLC Agreement.
The
LLC Agreement establishes Energea Global LLC, a Delaware limited liability
company, as the Manager.
Management
The
Manager has complete discretion over all aspects of the business conducted by
the Company. For example, the Manager may (i) admit new members to the Company;
(ii) enter into contracts on behalf of the Company; (iii) borrow money; (iv)
acquire and dispose of Projects; (v) determine the timing and amount of
distributions to Members; (vi) create new classes of limited liability company
interests; (vii) determine the information to be provided to the Members;
(viii) grant liens and other encumbrances on the Projects of the Company; and
(ix) dissolve the Company.
Investors
who purchase Class A Investor Shares will not have any right to vote on any
issue other than certain amendments to the LLC Agreement, or to remove the
Manager.
The
Manager can be removed for "cause" under a procedure set forth in section 5.6
of the LLC Agreement.
The
term "cause" includes:
|
·
|
An
uncured breach of the LLC Agreement by the Manager; or
|
|
|
|
|
·
|
The
bankruptcy of the Manager; or
|
|
|
|
|
·
|
Certain
misconduct on the part of the Manager, if the individual responsible for the
misconduct is not terminated.
|
A
vote to remove the Manager for cause must be approved by Investors owning at
least two-thirds of the outstanding Class A Investor Shares. Whether "cause"
exists would then be decided in arbitration proceedings conducted under the
rules of the American Arbitration Association, rather than in a court
proceeding.
These
provisions are binding on every person who acquires Class A Investor Shares,
including those who acquire Class A Investor Shares from a third party, i.e.,
not through the Platform.
Leverage
Per
the Offering Circular, the Company might borrow money to invest in Projects,
depending on the circumstances at the time. It states that if the Company needs
to move quickly on a Project and has not yet raised enough capital through the
Offering, it might make up the shortfall through borrowing. The Manager will
make this decision on an as-needed basis. Neither the Company nor the Projects
currently have any loans.
Page 10
Factors Likely to Impact the Performance of the
Company
The
ability of the Company to conduct its business successfully depends on several
critical factors including, but not limited to:
|
·
|
Adequate
performance by Sun Exchange and other Development Companies: The Company relies in large part on the
Development Companies, like Sun Exchange, to do a good job developing the
Projects from start to finish. Like many companies in Africa, some of the
Development Companies we may work with might be small and run into cash
problems that may affect their ability to perform and meet their contractual
obligations to the Company.
|
|
|
|
|
·
|
Government
Policies and Tariffs: Given the
environmental and economic benefits of solar power, the Company expects the friendly
attitude of certain African governments to continue. As we have seen in other
markets, however, environmentally friendly policies can change quickly. If
the governments in African markets where we have Projects succumb to pressure
from incumbent energy producers, it could impose additional costs on the
Projects.
|
|
|
|
|
·
|
Foreign
Exchange Risk: Some of our Projects
sell electricity and/or environmental commodities in foreign currencies. The
Manager collects payments from operating Projects monthly and converts the
foreign currency into USD prior to making distributions to Investors. Should
any of those foreign currencies weaken against the USD, actual distributions
made to our Investors could be smaller than anticipated.
|
|
|
|
|
·
|
Customer
Credit Risk: unlike developed
economies, many African economies are small and lack a broad base of quality
Customers. To achieve the scale and diversification anticipated by the
Company, we will need to invest in many Projects with many African companies.
Some of these companies would not meet the underwriting standards of a
conventional bank in the United States and may have shorter financial track
records. They may have exposure to unfavorable market conditions, they may be
affected by macro-economic trends in African markets and may be otherwise
unable to make their payment obligations under contracts.
|
Offices and Employees
The
Company's offices are located at 62 Clemental Drive, Durham, CT 06422. The
Company has no employees. For the year ended December 31, 2022, the Company
used employees and services provided by the Manager. The Company's total
payroll-related expenses during its most recent fiscal year was $0.00.
Our Revenue
The
revenue from our Projects consists primarily of the payments we receive from
Customers under Solar Lease Agreements and Purchase and Sale Agreement for
Environmental Commodities. The Company may also produce revenue by selling
Projects and collecting penalty payments from contractors who fail to meet
certain terms and conditions set forth in the Construction Contracts ("Liquidated
Damages"). The Company's total revenue during its most
recent fiscal year was $13,040.
Our Operating Costs and Expenses
The
Company incurs a variety of costs and expenses, including:
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·
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banking
fees;
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|
|
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|
·
|
legal
expenses;
|
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|
|
·
|
payments
to the Manager for fees and carried interest;
|
|
|
|
|
·
|
payments
to third parties to operate and maintain the Projects;
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|
|
|
·
|
payments
to U.S. states to comply with their respective securities law ("Blue Sky
Laws");
|
|
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|
|
·
|
debt
service and transactional payments (where we borrow money at the Company
level);
|
|
|
|
|
·
|
annual
financial audit expenses.
|
|
|
|
|
·
|
U.S.
taxes.
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Page 11
The
Projects also incur a variety of costs and expenses, including:
|
·
|
payments
to third parties to operate and maintain the Projects;
|
|
|
|
|
·
|
lease
payments to landowners;
|
|
|
|
|
·
|
debt
service and transactional payments (where we borrow money at the Project
level);
|
|
|
|
|
·
|
utilities;
|
|
|
|
|
·
|
Property
taxes;
|
|
|
|
|
·
|
banking
fees;
|
|
|
|
|
·
|
taxes
levied in African countries;
|
|
|
|
|
·
|
project
insurance.
|
The Company's total operating
expenses for the most recent fiscal year were $18,860.
Sale of the Projects
Currently,
the Company plans to hold its interest in the Projects indefinitely, creating a
reliable stream of cash flow for Investors. Should the Company decide to sell
its interest in one or more Projects, however, the Manager's experience in the
industry suggests that the Projects could be sold for a profit:
|
·
|
Yield
and Cashflow: Many investment funds
look for reliable cashflows generating a targeted yield. From the perspective
of such a fund, any of the Projects or indeed the entire portfolio of
Projects would be an attractive investment. With both revenue and most
expenses locked in by contract, the cash flow should be predictable and
consistent for as long as 20 years.
|
|
|
|
|
·
|
Project
Consolidation: Some of the Projects
will be too small or unusual for institutional buyers to consider on their
own. The Company could package these Projects into a larger, more
standardized portfolio that will be attractive to these larger, more
efficiency-focused players. In the aggregate, the portfolio of Projects is
expected to generate 50+ megawatts of power with relatively uniform power
contracts, engineering standards, and underwriting criteria. A portfolio of
that size can bear the fees and diligence associated with an
investment-banker-grade transaction.
|
|
|
|
|
·
|
Cash
Flow Stabilization: When the
Company buys a Project, it will typically share the construction risk with
the Development Company that originated the Project. Larger investors are
generally unwilling to take on construction risk and will invest only in
projects that are already generating positive cash flow, referred to as
"stabilization." Thus, the Company will invest in Projects before
stabilization and sell them after stabilization. Institutional investor
interest in the Portfolio should increase as the Portfolio stabilizes.
|
|
|
|
|
·
|
Increase
in Residual Value: When the Company
invest in a Project, the appraisal is based solely on the cash flows
projected from executed contracts, with no residual value assumed for the
Project. Truthfully, there is a high probability that a Project will continue
to create revenue after its initial contract period in the form of a contract
extension, repositioning, or sale into the merchant energy markets. This
creates a sort of built-in "found value" for our Projects, which may be
realized upon sale.
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Page 12
PAST PERFORMANCE
Greenskies Renewable Energy LLC
Mike
Silvestrini co-founded Greenskies Renewable Energy LLC ("Greenskies") with a
$35,000 family loan in 2008. Under Mike's leadership, Greenskies:
|
·
|
Built
more 400 solar projects ranging from 200kW to 5MW, across 23 states from
California to North Carolina.
|
|
|
|
|
·
|
Closed
and managed over $500 million of project finance.
|
|
|
|
|
·
|
Signed
some of America's largest corporations as customers, including Wal-Mart,
Sam's Club, Amazon, and Target, as well as schools, universities,
municipalities, and several large utilities.
|
|
|
|
|
·
|
Did
not experience a single customer default.
|
|
|
|
|
·
|
Created
thousands of direct and indirect jobs.
|
|
|
|
|
·
|
Built
best-in-industry information technology.
|
|
|
|
|
·
|
Was
named one of the Best Places to Work by the Hartford Courant in 2016.
|
|
|
|
|
·
|
Was
sold in 2017 for an enterprise value in excess of $165 million.
|
The
business of Greenskies is very similar to the business of the Company. The type
and the size of solar project is similar, the construction methods are similar,
and the equipment itself will be nearly identical.
CAUTION:
Past performance does not guaranty future results. Even though Mr. Silvestrini
was successful with Greenskies, there are many reasons why the Company might
not be successful, including all of those listed in "Risks of Investing."
Other Solar Energy Funds
Energea
Global, the Manager of the Company, is also the manager of three other funds
formed to acquire and operate solar power projects:
|
·
|
Energea
Portfolio 2 LLC, which was formed to acquire and operate projects located in
Brazil with residential and small business customers.
|
|
|
|
|
·
|
Energea
Portfolio 4 USA LLC, which was formed to acquire and operate projects located
in the United States.
|
Both
companies are conducting offerings under Regulation A, as illustrated by the
following:
|
Energea Portfolio 2 LLC
|
Energea Portfolio 4 USA LLC
|
Date of Qualification
|
08/13/2020
|
07/01/2021
|
Seeking
to Raise
|
$75,000,000
|
$75,000,000
|
Raised Through 12/31/22
|
$5,569,154
|
$1,383,082
|
Solar
Projects Acquired
|
13
|
4
|
Page 13
THE COMPANY'S
PROJECTS
Our Investments
As
of December 31, 2022, we have invested into eight (8) Projects, each of which
were described more fully in various filings with the SEC since the date our
Offering Circular was initially qualified by the SEC (e.g. August 2, 2021).
Please see Project Memo links for in-depth information regarding each project
as well as our website, www.energea.com.
Project Name
|
Amount Invested
|
% Ownership
|
Project Memo
|
Anchor Foods
|
$109,334
|
100.00%
|
|
Baysville
|
$25,000
|
25.98%
|
|
Connaught Park
|
$411,362
|
100.00%
|
|
CPOA Avondrust
|
$99,025
|
46.39%
|
|
CPOA Trianon
|
$163,624
|
100.00%
|
|
Nhimbe Fresh
|
$24,631
|
1.74%
|
|
Spar Lulekani
|
$23,369
|
6.72%
|
|
Zandvliet
|
$74,999
|
74.54%
|
|
Total
|
$931,343
|
|
|
Key Contracts
The
following summarizes the key contracts between the Company and Sun Exchange,
both of which are attached as Exhibits.
The
Parties:
|
·
|
The
Sun Exchange, Inc. ("Sun Exchange"): A company organized in South Africa
to develop solar power projects.
|
|
|
|
|
·
|
The
Sun Exchange (SA) Bewind Trust (the "Trust"): A trust established in
South Africa to own and operate solar power projects.
|
Neither
Sun Exchange nor the Trust is related to the Company or the Manager.
Investor
Services Agreement - Exhibit 1A-6A
Parties
|
Energea Global LLC (the Manager), Sun Exchange, and the Trust.
|
Date
|
April 13, 2021
|
Summary
|
This contract gives the Company the exclusive right to invest in
solar projects developed by the Sun Exchange for a period of time, and also
gives the Company control rights in each solar project in which it chooses to
invest.
|
Page 14
Cell
Owner Agreement - Exhibit 1A-6B
Parties
|
Energea Global LLC (the Manager) and the Trust.
|
Date
|
June 23, 2021
|
Summary
|
Solar electricity projects consist of an array of solar
photovoltaic cells together with other equipment. The solar cells convert
sunlight - more exactly, the photons of which sunlight is comprised - to
electricity using a semiconductor material.
A given solar project will include thousands, or tens of
thousands, of solar cells. The Trust allows investors to participate in a
given solar project by purchasing solar cells that will be used in the
project. Thus, the Company has purchased solar cells that will be used in the
Nhimbe Project, alongside solar cells purchased by other investors.
This contract governs the relationship between the solar cell
owners and the Trust. Among other things, the contract:
· Gives each owner the right to receive
a pro rata share of the distributions generated by the project,
based on the number of solar cells owned.
· Requires the Trust to operate the project in
accordance with industry standards.
· Requires the Trust to maintain and repair the
solar cells.
· Requires the Trust to maintain insurance for
the project.
· Provides for the disposition of the solar
cells upon project termination.
· Imposes certain restrictions on the Trust.
· Requires the solar cell owners to indemnify
the Trust if the customer defaults.
|
Page 15
SECURITIES BEING
OFFERED: THE CLASS A INVESTOR SHARES
Description of Securities
The
Company is offering to the public up to $75,000,000 of Class A Investor Shares,
which represent limited liability company interests in the Company. All of the
rights and obligations associated with the Class A Investor Shares are set
forth in:
|
·
|
The
LLC Agreement, which is attached as Exhibit 1A-2B; and
|
|
|
|
|
·
|
The
Authorizing Resolution, which is attached as Exhibit 1A-2C.
|
Price of Class A Investor
Shares
The
price for a Class A Investor Share in the Company is computed on the Platform
to equalize Investors in response to differences between them that could arise
from buying Class A Investor Shares at different times. For example, changes in
the value of the Company and/or the Projects at different times could result
from:
|
·
|
changes
in USD/BRL FX rate that differ from the FX rates we estimated when the
initial share price was calculated;
changes
in U.S. and Brazilian inflation rates that differ from the rates we estimated
when the initial share price was calculated;
investing
in new Projects or selling Projects would change the projected cash flow for
the Company;
|
|
|
|
|
·
|
distributions
received by earlier investors;
|
|
|
|
|
·
|
changes
in baseline assumptions like Project costs, expenses and/or changes in tax
rates or electric rates;
|
To
determine the share price for a Class A Investor Share of the Company, we
compute an algorithm that resolves:
rIRR
= pIRR
Where:
|
·
|
rIRR
= Realized IRR of all existing Class A Investor Shares;
|
|
|
|
|
·
|
pIRR
= Projected lifetime IRR of a hypothetical $1 investor at share price "x".
|
Below
is a table of the price of Class A Investor Shares (the only class of investor
shares) at the close of each month since the initial offering.
Date
|
Share Price
|
Initial Share Price
|
$1.00
|
09 / 2021
|
$1.04
|
10 / 2021
|
$1.05
|
11 / 2021
|
$1.05
|
12 / 2021
|
$1.06
|
01 / 2022
|
$1.07
|
02 / 2022
|
$1.08
|
03 / 2022
|
$1.08
|
04 / 2022
|
$1.09
|
05 / 2022
|
$1.10
|
06 / 2022
|
$1.11
|
07 / 2022
|
$1.12
|
08 / 2022
|
$1.12
|
09 / 2022
|
$1.13
|
10 / 2022
|
$1.13
|
11 / 2022
|
$1.14
|
12 / 2022
|
$1.14
|
01 / 2023
|
$1.15
|
02 / 2023
|
$1.15
|
03 / 2023
|
$1.16
|
04 / 2023
|
$1.17
|
05 / 2023
|
$1.17
|
06 / 2023
|
$1.18
|
07 / 2023
|
$1.18
|
08 / 2023
|
$1.19
|
09 / 2023
|
$1.20
|
Page 16
Voting Rights
Investors
will have no right to vote or otherwise participate in the management of the
Company. Instead, the Company will be managed by the Manager, Energea Global,
exclusively.
Calculating Distributions
The
Company intends to make distributions monthly, as conditions permit. The
frequency and amount of distributions will be governed by the Company's LLC
Agreement and by the Authorizing Resolutions.
Distributions
are divided into two categories:
|
·
|
Distributions
of ordinary operating cash flow from the Projects; and
|
|
|
|
|
·
|
Distributions
of the net proceeds from "capital transactions" like the sale or refinancing
of Projects ("net proceeds" means the gross proceeds of the capital
transaction, reduced by the expenses of the transaction, including repayment
of debt).
|
Distributions
of ordinary operating cash flow will be made as follows:
Class
A Investors receive:
|
·
|
A
7% per year compounded preferred return ("Preferred Return"); plus
|
|
|
|
|
·
|
70%
of any additional cash flow.
|
Manager
Receives:
The
Preferred Return and the Promoted Interest are calculated as follows:
|
·
|
The
Manager calculates the projected monthly operating cash flows we expect the
Company to earn by owning the Projects. The Company's cash flow is an
aggregate of the contracts in place and other assumptions defined in each
Project Memo ("Projected Cash Flow").
|
|
|
|
|
·
|
The
Projected Cash Flow is used to calculate a targeted internal rate of return
("IRR") we expect the Company to achieve.
|
|
|
|
|
·
|
To
calculate the Preferred Return payment for each monthly distribution, the
Projected Cash Flow is multiplied by a percentage, such that the IRR of the
Company is 7% (the "Adjusted Operating Cash Flow").
|
|
|
|
|
·
|
Each
month, the Adjusted Operating Cash Flow for that month is distributed to
Investors, substantiating their Preferred Return.
|
|
|
|
|
·
|
If
the operating cash flow for any month exceeds the Adjusted Operating Cash
Flow, we distribute the excess 70% to investors and 30% to the Manager. The
30% to Manager substantiates the Promoted Interest.
|
|
|
|
|
·
|
If
the operating cash flow for any month is less than the Adjusted Operating
Cash Flow, the Investors receive all the cash flow for that month and the shortfall
is carried forward so that Investors catch up on their 7% Preferred Return
prior to any Promoted Interest is paid.
|
EXAMPLE:
By way of example, suppose the Company has the hypothetical Projected Cash Flow
below:
Capital Invested
|
Month 1
Operating Cash Flow
|
Month 2
Operating Cash Flow
|
Month 3
Operating Cash Flow
|
Month 4
Operating Cash Flow
|
Month 5
Operating Cash Flow
|
$10,000
|
$3, 500.00
|
$2,500.00
|
$4,000.00
|
$2,200.00
|
$3,000.00
|
Those
cash flows yield an IRR of 16.35%.
Page 17
To
calculate the Adjusted Operating Cash Flow, the Manager finds a single
percentage which, when multiplied by each month of Projected Cash Flow, yields
an IRR of 7% rather than 16.35%. For this hypothetical Operating Cash Flow ,
that single percentage is 79.767%. The Manager multiplies each year's Projected
Cash Flow by 79.767%:
Project
Cost
|
Month 1
Adjusted Operating Cash Flow
|
Month 2
Adjusted Operating Cash Flow
|
Month 3
Adjusted Operating Cash Flow
|
Month 4
Adjusted Operating Cash Flow
|
Month 5
Adjusted Operating Cash Flow
|
$10,000
|
$2,791.86
|
$1,994.19
|
$3,190.70
|
$1,754.88
|
$2,393.02
|
Thus,
for this hypothetical scenario, Investors would receive the first $2,791.86 of
operating cash flow in month 1, the first $1,994.19 in month 2, and so forth.
If the Company actually generated $3,500 of operating cash flow in month 1, as
projected, then Investors would receive the first $2,791.86 and the balance, or
$708.14, would be divided 70%, or $495.70, to Investors and 30%, or $212.44, to
the Manager.
Whether
to distribute operating cash flow or capital proceeds, and how much to
distribute, are in the sole discretion of the Manager. No returns are
guaranteed. Investors will receive distributions only if the Company generates
distributable cash flow from the Projects.
Distributions in Liquidation
Distributions
made in liquidation of the Company will be made in the manner described above,
depending on whether the distributions consist of ordinary operating cash flow
or net capital proceeds.
Preemptive rights
The
holders of the Class A Investor Shares will not have preemptive rights. That
means that if the Company decides to issue securities in the future, the
holders of the Class A Investor Shares will not have any special right to buy
those securities.
Liability to Make Additional Contributions
Once
an Investor pays for his, her, or its Class A Investor Shares, the Investor
will have no obligation to make further contributions to the Company. However,
there could be circumstances where an Investor who has received distributions
with respect to his, her, or its Class A Investor Shares is required to return
part or all of the distribution.
Withholding
In
some situations, the Manager might be required by law to withhold taxes and/or
other amounts from distributions made to Investors. The amount we withhold will
still be treated as part of the distribution. For example, if we distribute
$100 to an Investor and are required to withhold $10 in taxes, for our purposes
the Investor will be treated as having received a distribution of $100 even
though only $90 was deposited in the Investor's bank account.
No Guaranty
The
Company can only distribute as much money as the Company has available for
distributions. There is no guaranty that the Company will have enough money,
after paying expenses, to distribute enough to pay a 7% Preferred Return to
Investors or even to return all of their invested capital.
Transfers
Investors
may freely transfer their Class A Investor Shares, but only after providing the
Manager with written assurance that (i) the transfer is not required to be
registered under the Securities Act of 1933, and (ii) the transferor or the
transferee will reimburse the Company for expenses incurred in connection with
the transfer.
Mandatory
Redemptions
The
Manager may require an Investor to sell his, her, or its Class A Investor
Shares back to the Company:
|
·
|
If
the Investor is an entity governed by the Employee Retirement Income Security
Act of 1974, Code section 4975, or any similar Federal, State, or local law,
and the Manager determines that all or any portion of the assets of the
Company would, in the absence of the redemption, more likely than not be
treated as "plan assets" or otherwise become subject to such laws.
|
|
|
|
|
·
|
If
the Manager determines that the Investor has engaged in certain misconduct.
|
If
an Investor's Class A Investor Shares are purchased by the Company as provided
above, the price will be equal to 90% of the then-current value of such Class A
Investor Shares as determined by the Company in accordance with the methods
described above.
The
purchase price will be paid through the Platform.
Page 18
Limited Right of Redemption
An
Investor who has owned Class A Investor Shares for at least three years may
sell their shares through the Platform. Upon receipt of a redemption request,
via the Platform, the Manager shall use commercially reasonable efforts to
arrange for the purchase, although there is no guaranty that the necessary
funds will be available or that a buyer can be found. If the Manager is not
able to purchase or arrange for the purchase of the Class A Investor Shares,
the Investor may either rescind or maintain the request.
In
seeking to accommodate a request of redemption from an Investor, the Manager is
not required to do any of the following:
|
·
|
Buy
the Class A Investor Shares for its own account;
|
|
|
|
|
·
|
Contribute
money to buy the Class A Investor Shares;
|
|
|
|
|
·
|
Borrow
money or dispose of assets; or
|
|
|
|
|
·
|
Take
any other action the Manager believes would be adverse to the interests of
the Company, itself or its other Investors.
|
If
an Investor's Class A Investor Shares are purchased pursuant to a redemption
request, the price per share at the time of such redemption, as determined by
the methods described above.
If
more than one Investor asks the Manager to purchase or arrange for the purchase
of Class A Investor Shares, the Manager will consider the requests in the order
received.
Rights of Common Shares
Immediately
following the Offering the Company will have two classes of securities
outstanding: Class A Investor Shares and Common Shares. Investors will own all
the Class A Investor Shares while the Manager will own all the Common Shares.
The principal rights associated with the Common Shares are as follows:
|
·
|
Distributions: As the holder of the Common Shares, the Manager
will be entitled to the distributions described above.
|
|
|
|
|
·
|
Voting
Rights: The Common Shares will have
no voting rights per se. However, the Manager, in its capacity as the
manager of the Company, will control the Company.
|
|
|
|
|
·
|
Obligation
to Contribute Capital: Holders of
the Common Shares will have no obligation to contribute capital to the
Company.
|
|
|
|
|
·
|
Redemptions:
Holders of the Common Shares will have no right to have Common Shares
redeemed.
|
Page 19
LIMIT ON AMOUNT A
NON-ACCREDITED INVESTOR CAN INVEST
As
long as an Investor is at least 18 years old, they can invest in this Offering.
But if the Investor not an "accredited" investor, the amount they can invest is
limited by law.
Under
17 CFR §230.501, a regulation issued by the Securities and Exchange Commission,
the term "accredited investor" includes:
|
·
|
A
natural person who has individual net worth, or joint net worth with the
person's spouse or spousal equivalent, that exceeds $1 million at the time of
the purchase, excluding the value of the primary residence of such person;
|
|
|
|
|
·
|
A
natural person with income exceeding $200,000 in each of the two most recent
years or joint income with a spouse or spousal equivalent exceeding $300,000
for those years and a reasonable expectation of the same income level in the
current year;
|
|
|
|
|
·
|
A
natural person who holds any of the following licenses from the Financial
Industry Regulatory Authority (FINRA): a General Securities Representative
license (Series 7), a Private Securities Offerings Representative license
(Series 82), or a Licensed Investment Adviser Representative license (Series
65);
|
|
|
|
|
·
|
A
natural person who is a "knowledgeable employee" of the issuer, if the issuer
would be an "investment company" within the meaning of the Investment Company
Act of 1940 (the "ICA") but for section 3I(1) or section 3I(7) of the ICA;
|
|
|
|
|
·
|
An
investment adviser registered under the Investment Advisers Act of 1940 (the
"Advisers Act") or the laws of any state;
|
|
|
|
|
·
|
Investment
advisers described in section 203(l) (venture capital fund advisers) or
section 203(m) (exempt reporting advisers) of the Advisers Act;
|
|
|
|
|
·
|
A
trust with assets in excess of $5 million, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
sophisticated person;
|
|
|
|
|
·
|
A
business in which all the equity owners are accredited investors;
|
|
|
|
|
·
|
An
employee benefit plan, within the meaning of the Employee Retirement Income
Security Act, if a bank, insurance company, or registered investment adviser
makes the investment decisions, or if the plan has total assets in excess of
$5 million;
|
|
|
|
|
·
|
A
bank, insurance company, registered investment company, business development
company, small business investment company, or rural business development
company;
|
|
|
|
|
·
|
A
charitable organization, corporation, limited liability company, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets exceeding $5 million;
|
|
|
|
|
·
|
A
"family office," as defined in rule 202(a)(11)(G)-1 under the Advisers Act,
if the family office (i) has assets under management in excess of $5,000,000,
(ii) was not formed for the specific purpose of acquiring the securities
offered, and (iii) is directed by a person who has such knowledge and
experience in financial and business matters that such family office is
capable of evaluating the merits and risks of the prospective investment;
|
|
|
|
|
·
|
Any
"family client," as defined in rule 202(a)(11)(G)-1 under the Advisers Act,
of a family office meeting the requirements above, whose investment in the
issuer is directed by such family office;
|
|
|
|
|
·
|
Entities,
including Indian tribes, governmental bodies, funds, and entities organized
under the laws of foreign countries, that were not formed to invest in the
securities offered and own investment assets in excess of $5 million; or
|
|
|
|
|
·
|
A
director, executive officer, or general partner of the company selling the
securities, or any director, executive officer, or general partner of a
general partner of that issuer.
|
If
the Investor falls within any of those categories, then the Investor can invest
any amount permitted on the Platform. If the Investor does not fall within any
of those categories, then the most they can invest in this Offering is the
greater of:
|
·
|
10%
of their annual income; or
|
|
|
|
|
·
|
10%
of their net worth.
|
These
limits are imposed by law, not by the Company.
The
Company will determine whether an Investor is accredited when he, she, or it
creates an account on the Platform.
Page 20
SALE AND DISTRIBUTION OF SECURITIES
The
Company is offering to sell up to $75,000,000 of Class A Investor Shares to the
public.
The
Offering began on August 2, 2021, when our Offering Statement was "qualified"
by the SEC and will end on the sooner of (i) a date determined by the Company,
or (ii) the date the Offering is required to terminate by law.
Only
the Company is offering securities in this Offering. None of our existing
officers, directors, or stockholders is offering or selling any securities.
The
Company is not using an underwriter or broker to sell the Class A Investor
Shares and is not paying commissions. Class A Investor Shares will be offered
and sold only through the Platform.
The
Company reserves the right to reject any subscription to purchase Class A
Investor Shares in this Offering in whole or in part and for any reason (or no
reason). If the Company rejects an investment, it will return all the
Investor's money without interest or deduction.
After
the Offering has been "qualified" by the Securities and Exchange Commission,
the Manager intends to advertise the Offering using the Platform and through
other means, including public advertisements, social media and audio-visual
materials, in each case, only as we authorize and in compliance with 17 CFR
§251(d)(1)(iii), which provides that any written offers must be accompanied
with or preceded by the most recent offering circular filed with the SEC.
Although these materials will not contain information that conflicts with the
information in this Offering Circular and will be prepared with a view to
presenting a balanced discussion of risk and reward with respect to the Class A
Investor Shares, the advertising materials will not give a complete understanding
of this Offering, the Company, or the Class A Investor Shares and are not to be
considered part of this Offering Circular. The Offering is made only by means
of this Offering Circular and prospective Investors must read and rely on the
information provided in this Offering Circular in connection with their
decision to invest in Class A Investor Shares.
HOW TO INVEST
To
buy Class A Investor Shares, go to the Platform and follow the instructions.
You will be asked for certain information about yourself, including:
|
·
|
Your
name and address
|
|
|
|
|
·
|
Your
email address
|
|
|
|
|
·
|
Your
social security number (for tax reporting purposes)
|
|
|
|
|
·
|
Whether
you are an "accredited investor"
|
|
|
|
|
·
|
If
you are not an accredited investor, your income and net worth
|
You
will also be asked to sign an Investment Agreement, a copy of which is attached
as Exhibit 1A-4.
The
minimum investment is $100. You will pay for your Class A Investor Shares using
one of the options described on the Platform.
The
information you submit, including your signed Investment Agreement, is called
your "subscription." The Manager will review your subscription and decide
whether to accept it. The Manager has the right to accept or reject
subscriptions in our sole discretion, for any reason or for no reason.
When
and if the Manager confirms that your subscription is complete and decided to
accept your subscription, the Manager will release your money from the escrow
account to the Company.
Once
the Manager has accepted your subscription, you will be notified by email and
the investment process will be complete. The Manager will also notify you by
email if it does not accept your subscription, although it might not explain
why.
You
will not be issued a paper certificate representing your Class A Investor
Shares.
Anyone
can buy Class A Investor Shares. The Manager does not intend to limit
investment to people with a certain income level or net worth, although there
are limits on how much non-accredited investors may invest in this Offering.
For more information, please refer to "Limit On Amount a Non-Accredited
Investor Can Invest."
Page 21
USE OF PROCEEDS
The
Manager expects the Offering itself to cost about $50,000, including legal and
accounting fees - principally the cost of preparing this Offering Circular,
having the Offering "qualified" by the SEC, and filing notices with states
where our investors live, as required by state law. Otherwise, all of the
proceeds of the Offering, no matter how much we raise, will be used to invest
in Projects.
The
Manager will only cause the Company to invest in Projects when it is certain
that the Company can complete raise enough capital to complete the purchase of
the Project. The capital raised will not be used to compensate and officers or
directors and the Company has no employees.
The
Company and the Projects have operating expenses. We expect to pay for the
operating expenses with cash flow from the Projects, but if the Projects have
not earned enough revenue to pay for any given operating expense, the Manager
may use the proceeds from this offering to pay for such operating expense.
The
Manager may cause the Company to borrow money but does not anticipate any other
source of capital other than the capital raised from this offering and money it
may cause the Company to borrow to acquire Projects and pay for operating
expenses.
The
Company has not borrowed any money and has no plans to borrow anytime in the
near future, thus Projects are acquired on an unlevered basis with cash raised
from this Offering.
The
purpose of the Company is to acquire Projects and does not intend to acquire ay
assets or to make any investments or donations or otherwise use capital for
anything other than the Projects.
We
might invest in Projects using the Manager's capital before we have raised
enough capital from Investors. In that case we will replace the Manager's
capital with capital from Investors as soon as we raise it. To the extent the
Manager or its affiliates invest capital, they will do so on the same terms as
other Investors.
The
Company is not paying commissions to underwriters, brokers, or anybody else for
selling or distributing the Class A Investor Shares. Because we are not paying
any commissions, more of your money can go to work for you. In some cases,
retirement custodians, investment advisers, and other intermediaries will offer
to invest on behalf of their clients. In such cases, the custodian, adviser or
intermediary will be paid a fee from their client's invested funds. In such
cases, the client (rather than the Company) is paying those fees.
SUMMARY OF LLC AGREEMENT
AND AUTHORIZING RESOLUTION
The
Company as a whole is governed by an agreement called "Limited Liability
Company Agreement" dated April 30, 2021. We refer to this as the "LLC
Agreement."
The
Class A Investor Shares being offered in this Offering were created when the
Manager adopted a resolution pursuant to section 3.1 of the LLC Agreement. We
refer to this as the "Authorizing Resolution."
The
following summarizes some of the key provisions of the LLC Agreement and the
Authorizing Resolution. This summary is qualified in its entirety by the LLC
Agreement itself, which is included as Exhibit 1A-2B, and by the Authorizing
Resolution itself, which is included as Exhibit 1A-2C.
Formation and Ownership
The
Company was formed in Delaware on March 11, 2021 pursuant to the Delaware
Limited Liability Company Act.
Under
the LLC Agreement, ownership interests in the Company are referred to as
"Shares," while the owners, are referred to as "Investor Members."
Immediately
before this Offering, the only owner of the Company was the Manager. Investors
who buy Class A Investor Shares in the Offering will become owners, and the
Company might admit other owners in the future.
Shares and Ownership
The
interests in the Company are denominated by 501,000,000 "Shares". The Manager
may further divide the 500,000,000 Investor Shares into one or more series, by adopting
one or more authorizing resolutions.
The
Manager adopted the Authorizing Resolution to create the Class A Investor
Shares. Any Investor who buys Class A Investor Shares in the Offering will be
an "Investor Member" under the LLC Agreement.
The
Class A Investor Shares will be owned by Investors and are the subject of this
Offering. By adopting other authorizing resolutions, the Manager may create,
offer, and sell other series of Investor Shares in the future, which could have
rights superior to the rights of the Class A Investor Shares.
Page 22
Management
The
Manager has complete discretion over all aspects of the business conducted by
the Company. For example, the Manager may (i) admit new members to the Company;
(ii) enter into contracts on behalf of the Company; (iii) borrow money; (iv)
acquire and dispose of assets; (v) determine the timing and amount of
distributions to Members; (vi) create new classes of limited liability company
interests; (vii) determine the information to be provided to the Members;
(viii) grant liens and other encumbrances on the assets of the Company; (ix)
and dissolve the Company.
Investors
who purchase Class A Investor Shares will not have any right to vote on any
issue other than certain amendments to the LLC Agreement, or to remove the
Manager.
The
Manager can be removed for "cause" under a procedure set forth in section 5.6
of the LLC Agreement.
The
term "cause" includes:
|
·
|
An
uncured breach of the LLC Agreement by the Manager; or
|
|
|
|
|
·
|
The
bankruptcy of the Manager; or
|
|
|
|
|
·
|
Certain
misconduct on the part of the Manager, if the individual responsible for the
misconduct is not terminated.
|
A
vote to remove the Manager for cause must be approved by Investor Members
owning at least two-thirds of the outstanding Investor Shares. Whether "cause"
exists would then be decided in arbitration proceedings conducted under the
rules of the American Arbitration Association, rather than in a court
proceeding.
These
provisions are binding on every person who acquires Class A Investor Shares,
including those who acquire Class A Investor Shares from a third
party, i.e., not from the Company.
Exculpation and Indemnification of Manager
The
LLC Agreement protects the Manager and its employees and affiliates from
lawsuits brought by Investors. For example, it provides that the Manager will
not be responsible to Investors for mistakes, errors in judgment, or other acts
or omissions (failures to act) as long as the act or omission was not the
result of the Manager's (i) willful misfeasance, (ii) bad faith, or (iii) gross
negligence in the performance of, or reckless disregard of its duties under the
LLC Agreement. This limitation on the liability of the Manager and other
parties is referred to as "exculpation."
The
LLC Agreement also requires the Company to indemnify (reimburse) the Manager,
its affiliates, and certain other parties from losses, liabilities, and
expenses they incur in performing their duties. For example, if a third party
sues the Manager on a matter related to the Company's business, the Company
would be required to indemnify the Manager for any losses or expenses it incurs
in connection with the lawsuit, including attorneys' fees. However, this
indemnification is not available where a court or other juridical or
governmental body determines that the Manager or other person is not entitled
to be exculpated under the standard described in the preceding paragraph.
Notwithstanding
the foregoing, no exculpation or indemnification is permitted to the extent
such exculpation or indemnification would be inconsistent with the requirements
of federal or state securities laws or other applicable law.
The
detailed rules for exculpation and indemnification are set forth in section 6.2
of the LLC Agreement.
Obligation to Contribute Capital
Once
an Investor pays for his, her, or its Class A Investor Shares, he, she, or it
will not be required to make any further contributions to the Company. However,
if an Investor has wrongfully received a distribution he, she, or it might have
to pay it back.
Personal Liability
No
Investor will be personally liable for any of the debts or obligations of the
Company.
Distributions
Page 23
Transfers and First Right of Refusal
In
general, Investors may freely transfer their Class A Investor Shares. However,
if an Investor wants to sell Class A Investor Shares, the Investor may only
offer the Class A Investor Shares to the Manager via the Platform.
Death, Disability, Etc.
If
an Investor who is a human being (as opposed to an Investor that is a legal
entity) should die or become incapacitated, the Investor or his, her or its
successors will continue to own the Investor's Class A Investor Shares.
Fees to Manager and Affiliates
Mandatory Redemption
The
Manager may cause the Company to redeem (purchase) the Class A Investor Shares
owned by an Investor in any of three circumstances (in effect kicking the
Investor out of the deal) as described in "Securities Being
Offering - Mandatory Redemptions."
"Drag-Along" Right
If
the Manager wants to sell the business conducted by the Company, it may affect
the transaction as a sale of the Project owned by the Company or as a sale of
all the Shares in the Company. In the latter case, Investors will be required
to sell their Class A Investor Shares as directed by the Manager, receiving the
same amount they would have received had the transaction been structured as a
sale of assets.
Electronic Delivery
All
documents, including all tax-related documents, will be transmitted by the
Company to Investors via email and/or through the Platform.
Amendment
The
Manager may amend the LLC Agreement unilaterally (that is, without the consent
of anyone else) for a variety of purposes, including to:
|
·
|
Cure
ambiguities or inconsistencies in the LLC Agreement;
|
|
|
|
|
·
|
Add
to its own obligations or responsibilities;
|
|
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|
|
·
|
Conform
to this Offering Circular;
|
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|
·
|
Comply
with any law;
|
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|
|
·
|
Ensure
that the Company isn't treated as an "investment company" within the meaning
of the Investment Company Act of 1940;
|
|
|
|
|
·
|
Do
anything else that could not reasonably be expected to have, an adverse
effect on Investors.
|
An
amendment that has, or could reasonably be expected to have, an adverse effect
on Investors, requires the consent of the Manager and Investors holding a
majority of the Class A Investor Shares.
An
amendment that would require an Investor to make additional capital
contributions or impose personal liability on an Investor requires the consent
of the Manager and each affected Investor.
Information Rights
Within
120 days after the end of each fiscal year of the Company, the Manager will
provide Investors with (i) a statement showing in reasonable detail the
computation of the distributions made by the Company, and (ii) audited
financial statements of the Company.
In
addition, each year the Company will provide Investors with a detailed
statement showing:
|
·
|
The
fees paid to the Manager and its affiliates; and
|
|
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|
|
·
|
Any
transactions between the Company and the Manager or its affiliates.
|
In
each case, the detailed statement will describe the services performed and the
amount of compensation paid.
As
a "Tier 2" issuer under Regulation A, the Company will also be required to
provide investors with additional information on an ongoing basis, including
annual audited financial statements, annual reports filed on SEC Form 1-K,
semiannual reports filed on SEC Form 1-SA, special financial reports filed on
SEC Form 1-K, and current reports on SEC Form 1-U. If, however, our Class A
Investor Shares are held "of record" by fewer than 300 persons, these reporting
obligations could be terminated.
A Member's
right to see additional information or inspect the books and records of the
Company is limited by the LLC Agreement.
Page 24
U.S. AND AFRICAN TAXES
The
following summarizes the most significant taxes that will be imposed on the
Projects and the Company by countries and localities in Africa, as well as the
Federal income tax consequences of acquiring Class A Investor Shares. This
summary is based on the current tax laws of African jurisdictions, the current
U.S. Internal Revenue Code (the "Code"), the current regulations issued by the
Internal Revenue Service ("Regulations"), and current administrative rulings
and court decisions, all as they exist today. All of these tax laws could
change in the future.
This
is only a summary, applicable to a generic Investor. Your personal situation
could differ. We encourage you to consult with your own tax advisor before
investing.
African Taxes
The
Company's Projects could be located in any number of African countries. Each
country, and each local governmental units (e.g., states, towns, cities,
counties, municipalities, etc.) might include any number of taxes on the
Projects and the Company, including but not limited to income taxes, gross
receipts taxes, and value-added taxes. In selecting Projects, the Company will
take into account any material tax burdens. However, it is impossible to
predict the actual tax burden today.
U.S. Federal Income Taxes
Classification as a Corporation
The
Company will be treated as a corporation for federal income tax purposes. As a
corporation, Cash received by investors will be treated as a combination of
return of capital or qualified dividends. Qualified dividends will be taxed at the
capital gains tax rate of either 0%, 15%, or 20%, depending on the investor's
income tax bracket.
The GILTY tax on foreign
investments is more favorable to our investors under a corporate tax structure
as opposed to a partnership, where the tax on international assets would be
levied on individuals. Under a partnership an investor would be responsible for
37% of all foreign profits generated from an international investment. A
corporate tax structure allows the corporation to realize foreign tax credits.
Under this corporate tax reporting structure, the corporate entity would only
pay 21% tax on 50% of the foreign profits after foreign tax credits have been
applied.
When the Company closes
its books each year, it will post a profit/loss for that tax year. In
accordance with the IRS, taxable dividends can only result from profit/loss of
an "LLC treated as a corporation" which is how the Company is
classified. When the Company's profit/loss for the year is less than the total
distributions (which is often the case), the remaining distributions get filed
in Box 3 of the Investor's 1099-DIV as non-dividend distributions. These
distributions are non-taxable and are filed as a return of capital (and
subtracted from the basis). When the Investor sells their shares or are bought
out at the end of the portfolio's lifespan, the basis is what is used to
determine the capital gains or losses realized by the sale of the shares.
Investors
might be entitled to credits for taxes paid by the Company in African
countries.
The
Company is not expected to generate significant losses for federal income tax
purposes. If it does generate losses, each Investor may deduct his, her, or its
allocable share subject to the basis limitations of Code section 704(d), the
"at risk" rules of Code section 465, and the "passive activity loss" rules of
Code section 469. Unused losses generally may be carried forward indefinitely.
The use of tax losses generated by the Company against other income may not
provide a material benefit to Investors who do not have other taxable income
from passive activities.
Limitation on Capital Losses
An
Investor, who is an individual, may deduct only $3,000 of net capital losses
every year (that is, capital losses that exceed capital gains). Net capital
losses in excess of $3,000 per year may generally be carried forward
indefinitely.
Limitation on Investment Interest
Interest
that is characterized as "investment interest" generally may be deducted only
against investment income. Investment interests would include, for example,
interest paid by an Investor on a loan that was incurred to purchase Class A
Investor Shares and interest paid by the Company to finance investments, while
investment income would include dividends and interest but would not generally
include long term capital gain. Thus, it is possible that an Investor would not
be entitled to deduct all of his or her investment interest. Any investment
interest that could not be deducted may generally be carried forward
indefinitely.
Allocations of Profits and Losses
The
profits and losses of the Company will be allocated among all of the owners of
the Company (including the Investors) pursuant to the rules set forth in the
LLC Agreement. In general, the Company will seek to allocate such profits and
losses in a manner that corresponds with the distributions each owner is
entitled to receive, i.e., so that tax allocations follow cash
distributions. Such allocations will be respected by the IRS if they have
"substantial economic effect" within the meaning of Code section 704(b). If
they do not, the IRS could re-allocate items of income and loss among the
owners.
Page 25
Sale or Exchange of Class A Investor Shares
In
general, the sale of Class A Investor Shares by an Investor will be treated as
a sale of a capital asset. The amount of gain from such a sale will generally
be equal to the difference between the selling price and the Investor's tax
basis. Such gain will generally be eligible for favorable long-term capital
gain treatment if the Class A Investor Shares were held for at least 12 months.
However, to the extent any of the sale proceeds are attributable to
substantially appreciated inventory items or unrealized receivables, as defined
in Code section 751, the Investor will recognize ordinary income.
A
gift of Class A Investor Shares will be taxable if the donor-owner's share of
the Company's debt is greater than his or her adjusted basis in the gifted
interest. The gift could also give rise to federal gift tax liability. If the
gift is made as a charitable contribution, the donor-owner is likely to realize
gain greater than would be realized with respect to a non-charitable gift,
since in general the owner will not be able to offset the entire amount of his
adjusted basis in the donated Class A Investor Shares against the amount
considered to be realized as a result of the gift (i.e., the debt of the
Company).
Transfer
of Class A Investor Shares by reason of death would not in general be a taxable
event, although it is possible that the IRS would treat such a transfer as
taxable where the decedent-owner's share of debt exceeds the pre-death basis of
his interest. The decedent-owner's transferee will take a basis in the Class A
Investor Shares equal to its fair market value at death (or, in certain
circumstances, on the date six (6) months after death), increased by the
transferee's share of debt. For this purpose, the fair market value will not
include the decedent's share of taxable income to the extent attributable to
the pre-death portion of the taxable year.
Treatment of Distributions
Upon
the receipt of any distribution of cash or other property, including a
distribution in liquidation of the Company, an Investor generally will
recognize income only to the extent that the amount of cash and marketable
securities he, she, or it receives exceed the basis of his, her, or its Class A
Investor Shares. Any such gain generally will be considered as gain from the
sale of Class A Investor Shares.
The
Code imposes an alternative minimum tax on individuals and corporations.
Certain items of the Company's income and loss may be required to be taken into
account in determining the alternative minimum tax liability of Investors.
The
Company will report its income and losses using the calendar year. In general,
each Investor will report his, her, or its share of the Company's income and
losses for the taxable year of such Investor that includes December
31st, i.e., the calendar year for individuals and other owners using the
calendar year.
The
Company may, but is not required to, make an election under Code section 754 on
the sale of Class A Investor Shares or the death of an Investor. The result of
such an election is to increase or decrease the tax basis of the assets of the
Company for purposes of allocations made to the buyer or beneficiary which
would, in turn, affect depreciation deductions and gain or loss on sale, among
other items.
Tax Returns and Information; Audits; Penalties;
Interest
The
Company will furnish each Investor with the information needed to be included
in his federal income tax returns. Each Investor is personally responsible for
preparing and filing all personal tax returns that may be required as a result
of his purchase of Class A Investor Shares. The tax returns of the Company will
be prepared by accountants selected by the Company.
If
the tax returns of the Company are audited, it is possible that substantial
legal and accounting fees will have to be paid to substantiate our position and
such fees would reduce the cash otherwise distributable to Investors. Such an
audit may also result in adjustments to our tax returns, which adjustments, in
turn, would require an adjustment to each Investor's personal tax returns. An
audit of our tax returns may also result in an audit of non-Company items on
each Investor's personal tax returns, which in turn could result in adjustments
to such items. The Company is not obligated to contest adjustments proposed by
the IRS.
Each
Investor must either report Company items on his tax return consistent with the
treatment on the information return of the Company or file a statement with his
tax return identifying and explaining the inconsistency. Otherwise the IRS may
treat such inconsistency as a computational error and re-compute and assess the
tax without the usual procedural protections applicable to federal income tax
deficiency proceedings.
The
Code imposes interest and a variety of potential penalties on underpayments of
tax.
Other U.S. Tax Consequences
The
foregoing discussion addresses only selected issues involving Federal income
taxes and does not address the impact of other taxes on an investment in the
Company, including federal estate, gift, or generation-skipping taxes, or State
and local income or inheritance taxes. Prospective Investors should consult
their own tax advisors with respect to such matters.
Page 26
MANAGEMENT DISCUSSION
The
following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes thereto contained in this Offering Circular. The following discussion
contains forward-looking statements that reflect our plans, estimates, and
beliefs. Our actual results could differ materially from those discussed in
the Caution Regarding Forward-Looking Statements. Unless otherwise
indicated, the latest results discussed below are as of December 31, 2022.
Offering
Results
As
of December 31, 2022, we had raised total gross offering proceeds of $1,027,873
from settled subscriptions resulting from the sale of 943,189 Class A Investor
Shares.
As
of December 31, 2022, the Company invested $931,343 into Projects and had
$6,907 in liquidity. The difference between the amount that was raised in the
Offering and the amount we invested into Projects is a combination of capital
spend on operating expenses, start-up costs and cash on hand. As the Offering
continues to raise more capital, the Manager will cause the Company to invest
in more Projects.
We
expect to offer Class A Investor Shares in our Offering until we raise to the
amount of capital needed to afford the capital expenses of all Projects
approved by the Investment Committee. If we have fully-funded the cost of all
Projects through the Offering, we may decide to stop raising money until a new
Project is approved for investment by the Investment Committee.
Comments on the Market
The
majority of the Projects are located in South Africa, a nation facing many
significant problems that may result in instability and increased risk to the
Projects. The chief concerns facing the Projects in South Africa currently are
the election expected to take place in 2024, the weakening of the South African
rand and load shedding.
2024
South Africa Election
The
upcoming election looms amidst a backdrop of severe political turmoil, marked
by a noticeable decline in the quality of government services and its ability
to fulfill its duties to citizens. The ruling African National Congress ("ANC")
is facing a pivotal vote, potentially leading to the loss of power for the
first time since the inception of democracy in 1994.
The
repercussions for South Africa and the surrounding region are substantial.
Ongoing electricity shortages in South Africa and the weakening state of local
governments will transform the 2024 election into a referendum on the ANC's
performance. In the local elections of November 2021, the ANC was unable to
secure an absolute majority in the country's metropolitan municipalities. These
local contests provide a preview of what may unfold on the national stage.
There's
a prevailing sense of unease regarding the ability of any coalition government
to address the daunting challenges confronting South Africa. Escalating
corruption, coupled with the rapid deterioration of public infrastructure,
particularly the electricity supply (see "Load Shedding" below), have provided
opposition parties with an opportunity to challenge the ANC's longstanding
political dominance. The outcome hinges on whether opposition parties can
successfully form a coalition. This will determine whether South Africa can
make strides towards establishing a more open and competitive democracy, notwithstanding
recent setbacks, or if the country will experience further regression in the
medium term. The prevailing concern is whether a coalition government can
effectively tackle the challenges facing South Africa, given various
instabilities and the consistent shifts in government in most coalition-led
cities.
Exchange
Rates Between the South African Rand and the United States Dollar
Over
the past 24 months, the foreign exchange rates between the South African Rand
(ZAR) and the US Dollar (USD) have been subject to significant fluctuations.
This period has witnessed a mix of economic and geopolitical factors that have
influenced the value of these currencies relative to each other. Initially, the
South African Rand faced challenges due to uncertainties surrounding global
trade tensions and concerns about the country's domestic economic growth. These
factors led to periods of depreciation against the US Dollar, creating
volatility in the exchange rates.
However,
the Rand demonstrated resilience during certain periods as well. It managed to
regain some ground against the Dollar as commodity prices, especially precious
metals like gold and platinum, which South Africa is a significant producer of,
experienced price increases. Additionally, market sentiment and risk appetite
played a role in shaping the exchange rates during this period, with
fluctuations driven by shifts in investor confidence, global economic
indicators, and central bank policies, both in the United States and South
Africa.
Overall,
the foreign exchange rates between the South African Rand and the US Dollar
over the last 24 months have been dynamic, influenced by a range of internal
and external factors, making it essential for investors and businesses to
closely monitor these developments to navigate the potential impacts on trade,
investment, and financial planning.
Page 27
Load Shedding
Over
the past 24 months, South Africa has faced significant challenges with load
shedding, a practice where the national electricity utility, Eskom,
deliberately interrupts the power supply to prevent the grid from overloading.
Load shedding has been a recurrent issue due to various factors, including
aging power infrastructure, maintenance issues, financial troubles within
Eskom, and insufficient generation capacity. These factors have led to
scheduled power outages that have not only disrupted daily life for millions of
South Africans but have also had adverse effects on the country's economy.
Load
shedding has had far-reaching consequences, impacting both households and
businesses. Frequent power cuts have disrupted productivity, leading to
financial losses for businesses, especially in sectors heavily reliant on
continuous electricity supply, such as manufacturing and technology. Moreover,
the uncertainty caused by unpredictable load shedding schedules has eroded
investor confidence, making it challenging for businesses to plan and expand,
thereby hindering economic growth.
Efforts
to address this issue have included urgent infrastructure repairs, increased
focus on renewable energy sources, and calls for improved management within
Eskom. However, as of the past 24 months, the load shedding problem has
persisted, underscoring the need for sustained, comprehensive solutions to
stabilize the electricity supply, boost economic development, and enhance the
quality of life for South Africans.
Distributions
Provided
we have sufficient available cash flow, we intend to authorize and declare
distributions based on net income for the preceding month minus any amounts
held back for reserves.
While
we are under no obligation to do so, we have in the past and expect in the
future to declare and pay distributions monthly; however, the Manager may
declare other periodic distributions as circumstances dictate. Below is a table
depicting the distributions made from the company during 2022:
Distribution Date
|
Amount
|
Management Fees*
|
Promoted Interest*
|
01/26/22
|
$209.71
|
$0.00
|
$0.00
|
02/24/22
|
$120.23
|
$206.30
|
$0.00
|
03/29/22
|
$334.48
|
$0.00
|
$0.00
|
04/29/22
|
$331.59
|
$0.00
|
$0.00
|
05/31/22
|
$938.81
|
$91.78
|
$0.00
|
06/30/22
|
$1,084.96
|
$0.00
|
$0.00
|
07/29/22
|
$913.84
|
$0.00
|
$0.00
|
08/27/22
|
$1,119.77
|
$0.00
|
$0.00
|
09/27/22
|
$1,401.61
|
$0.00
|
$0.00
|
10/27/22
|
$1,801.99
|
$0.00
|
$0.00
|
11/29/22
|
$2,304.20
|
$0.00
|
$0.00
|
12/28/22
|
$3,101.53
|
$0.00
|
$0.00
|
Total
|
$13,662.72
|
$298.08
|
$0.00
|
*Note: Manager reserves the
right to reduce its fees for any reason or to protect the desired cash yield to
investors
Operating Results
For
the fiscal year ending December 31, 2022, the Company invested a total of
$774,010 and has generated $13,040 in revenue. Additional distributions were
made from a dividend recapitalization in the form of a loan from the Manager to
the Company.
As
of December 31, 2022, the Company has assets totaling $965,047 on its balance
sheet, including Projects currently owned by the Company valued of $931,343 and
current assets of $33,704. Liabilities totaled $17,585. The resulting members'
equity was $947,462.
Page 28
OUR MANAGEMENT TEAM
Names, Positions,
Etc. *
Name
|
Position
|
Term of Office
|
Approximate Hours Per
Week If Not Full Time
|
Executive
Officers
|
|
|
|
Mike Silvestrini
|
Managing Partner
|
At will
|
Full Time
|
Gray Reinhard
|
Managing
Partner
|
At will
|
Full Time
|
|
|
|
|
Key
Employees
|
|
|
|
Isabella Mendonça
|
General Counsel
|
At will
|
Full Time
|
Arthur Issa
|
Financial
Analyst
|
At will
|
Full Time
|
Tyler Hurlburt
|
Director of Investment
Relations
|
At will
|
Full Time
|
Marta Coehlo
|
Controller
|
At will
|
Full Time
|
Dave Rutty
|
Director of Construction
|
At will
|
Full Time
|
Kathy Koser
|
Director of Compliance
|
At will
|
Full Time
|
|
*
|
The
Company itself has no officers or employees. The individuals listed above the
Directors, Executive Officers, and Significant Employees of Energea Global,
the Manager of the Company.
|
Family Relationships
There
are no family relationships among the executive officers and key employees of
the Company or the Manager other than the fact that Marta Coelho, the Manager's
Controller, is the sister-in-law of Mike Silvestrini, the Managing Partner.
Ownership of Related Entities
Energea
Global, the Manager of the Company, is majority owned by Mike Silvestrini, a
resident of Chester, Connecticut.
Location of the Company and Manager
The
Company is a Delaware limited liability company with it's principle offices
located in Durham, Connecticut. The Manager is also a Delaware limited
liability company located in Durham, Connecticut with its headquarters located
in Chester, Connecticut.
Energea
Global may create an affiliated development company in Africa to perform
certain services related to the origination, development and operations of the
Projects. If such an entity is created, it would be owned and managed by
Energea Global.
Business Experience
Mike is an accomplished
professional with a strong commitment to renewable energy and environmental
sustainability. He's played a key role in the development of over 500 solar
projects across the United States, Brazil, and Africa, contributing to the global
transition to clean energy.
In addition to his role as
the Co-Founder & Managing Partner at Energea, Mike serves as a Board Member
of the Big Life Foundation, an organization dedicated to preserving over 1.6
million acres of wilderness in East Africa. Through community partnerships and
conservation initiatives, Big Life protects the region's biodiversity and
promotes sustainable practices.
Previously, Mike co-founded
and served as the CEO of Greenskies Renewable Energy LLC, a leading provider of
turnkey solar energy services. His expertise contributed to the development,
financing, design, construction, and maintenance of solar projects across the
United States. Notably, he was involved in solar installations on Target
Corporation stores and distribution centers, as well as capped landfills
throughout the northeast region of the U.S..
Mike's track record in
renewable energy, his involvement in hundreds of solar projects worldwide, and
his dedication to environmental sustainability position him as a driving force
in the global effort to combat climate change.
Mike
lives in Connecticut.
Page 29
Gray
Reinhard
Gray
is an experienced software engineer specializing in business intelligence tools
across multiple industries. Early in Gray's career, he worked primarily in
E-Commerce where he built and supported sites for over 20 brands including
several fortune 500 companies. From there, Gray moved into renewable energy
where he developed the project management software for the country's largest
commercial solar installer, Greenskies. This custom platform managed everything
from sales and financing to the construction, maintenance, and performance
monitoring of over 400 solar projects owned by the company.
Gray studied at Princeton University and
currently lives in Greenpoint, Brooklyn.
Isabella Mendonça
Isabella
is a corporate lawyer with experience in cross-border M&A transactions and
the drafting and negotiation of highly complex contracts and corporate acts in
different sectors, such as energy, oil & gas and infrastructure. Isabella
has previously worked as an attorney for Deloitte and Mayer Brown in Brazil,
where she was an associate in the Energy Group, working in regulatory,
contractual and corporate matters related to renewable energy project
development.
Isabella
studied law at Fundacão Getulio Vargas, in Brazil and has a master's degree
(LLM) from the University of Chicago. She lives in Lisbon Portugal.
Arthur Issa
Arthur
Issa, over the course of his career in Energea, has participated in the
successful closing process of more than 100 MW worth of project installed
capacity and their financial management, totaling an AUM of more than $100mm.
Arthur is responsible for keeping track of all matters related to Corporate and
Project Finance in Energea, through detailed financial modelling, reporting and
cash flow management, maximizing efficiency in the company's decision-making
process with reliable analytics Arthur has a B.S. in Production Engineering
from University Candido Mendes in Rio de Janeiro, Brazil,.
Tyler
Hurlburt
Tyler
Hurlburt is a former licensed Wealth Manager at Fortune 500 firms including
Ameriprise, Prudential, WellsFargo and TIAA. Tyler managed over $500M in
client's assets in previous role at TIAA. He has over 20 years' experience
within the financial service industry, as well as extensive experience in
portfolio management, risk mitigation, tax, and estate planning. Tyler holds a
MBA with honors from Saint Joseph's University.
Tyler
lives in Connecticut.
Marta
Coehlo
Marta
Coelho has served as the Controller at Energea since its inception, bringing
with her a wealth of experience and expertise in finance and accounting. As the
Global Controller, Marta plays a crucial role in managing all financial
aspects, including account management, taxation, and audits, for Energea's
diverse range of operating entities and projects across Africa, Brazil, and the
USA. With her keen attention to detail and strategic thinking, Marta ensures
compliance with regulations while optimizing the company's financial
performance. Her unwavering commitment to accuracy and precision makes her an
invaluable asset to the team.
Marta
lives in Connecticut.
Dave
Rutty
Dave
is a highly experienced electrician with over 12 years of expertise in building
and maintaining solar projects. At Energea, he plays a vital role in overseeing
construction and maintenance processes across all markets. Dave's extensive
experience brings a culture of expertise, meticulousness, and safety to our
emerging markets. As our resident problem-solver, he excels in tackling even
the most complex challenges with ease. No issue is too big or complicated for
Dave, making him an invaluable asset to our team.
Dave
lives in Connecticut.
Kathy
Koser
Kathy
is a pivotal manager at Energea, overseeing insurance, compliance, and human
resources with exceptional skill. Her meticulous approach ensures the seamless
functioning of these departments, contributing significantly to the company's
success. Kathy expertly evaluates insurance needs, formulates comprehensive
policies, and collaborates with external providers to secure optimal coverage.
Her deep understanding of compliance, particularly regarding regulation A Tier
II offerings, strengthens Energea's adherence to regulatory requirements.
Additionally, Kathy's effective human resources management fosters a positive
work environment, promoting productivity and employee satisfaction. Her
invaluable contributions keep the company (and its people!) on track and ensure
operational excellence.
Kathy
lives in New Hampshire.
Page 30
Legal Proceedings
Within
the last five years, no Director, Executive Officer, or Significant Employee of
the Company has been convicted of, or pleaded guilty or no contest to, any
criminal matter, excluding traffic violations and other minor offenses.
Within
the last five years, no Director, Executive Officer, or Significant Employee of
the Company, no partnership of which an Executive Officer or Significant
Employee was a general partner, and no corporation or other business
association of which an Executive Officer or Significant Employee was an
executive officer, has been a debtor in bankruptcy or any similar proceedings.
COMPENSATION OF
MANAGEMENT
Overview
The
Manager makes money from the Company in (only) three ways:
|
·
|
They
receive fees;
|
|
|
|
|
·
|
They
invest alongside Investors and receive the same distributions as Investors;
and
|
|
|
|
|
·
|
They
receive the Promoted Interest.
|
All
three forms of compensation are discussed below.
The
Company itself does not have any employees or payroll. For example, Mike
Silvestrini, the Managing Partner of the Manager, does not receive any salary,
bonuses, or other compensation directly from the Company. Instead, all his
compensation is paid from the fees paid to the Manager and from the Promoted
Interest. The same is true for all the other executive officers and employees.
Fees
Type
of Fee
|
Description
|
Reimbursement
|
The Company must reimburse the Manager for expenses the Manager
incurs in connection with the Offering before the Offering Circular is
qualified by the Securities and Exchange Commission.
Estimate: We currently estimate that those expenses will be
approximately $100,000.
|
|
|
Asset Management
|
The Manager will charge the Company a monthly asset management
fee equal to 0.167% of the aggregate capital that has been invested in
Projects that have begun to generate distributions.
Estimate: The amount of the asset management fee will depend on
(i) how much capital is raised in the Offering, and (ii) the value of our
Projects.
|
|
|
Developer
|
The Manager might originate and develop Projects that are
acquired by the Company. If so, the Manager shall be entitled to compensation
that is no greater than 5% of the Project's cost.
Estimate: The amount of the developer fee will depend on the
number of Projects the Manager develops for the Company and their cost. We
cannot make a reasonable estimate at this time.
|
Page 31
Co-Investment
The
Manager (and possibly its affiliates) might purchase Class A Investor Shares.
If so, they will be entitled to the same distributions as other Investors.
Promoted Interest
As
described in "Securities
Being Offered - Distributions," the
Manager is entitled to receive certain distributions from the Company that we
refer to as the Manager's "Promoted Interest." How much money the Manager
ultimately receives as a Promoted Interest depends on several factors,
including:
|
·
|
The
total returns the Company is able to achieve;
|
|
|
|
|
·
|
When
those returns are achieved;
|
|
|
|
|
·
|
When
the Company distributes money to Investors; and
|
|
|
|
|
·
|
The
amount of expenses the Company incurs.
|
Report to Investors
No
less than once per year, the Company will provide Investors with a detailed
statement showing:
|
·
|
The
fees paid to the Manager and its affiliates; and
|
|
|
|
|
·
|
Any
transactions between the Company and the Manager or its affiliates.
|
In
each case, the detailed statement will describe the services performed and the
amount of compensation paid.
Method of Accounting
The
compensation described in this section was calculated using the accrual method
of accounting.
Stages of Development
The
stages of the Company's organization, development, and operation, and the
compensation paid by the Company to the Manager and its affiliates during each
stage, are as follows:
Stage
of Company
|
Compensation
|
Organization of Company
|
· Reimbursement of Expenses
|
|
|
Acquisition of Projects
|
· Asset Management Fee
|
|
·
Developer Fee
|
|
|
Operation
of Projects
|
·
Asset Management Fee
|
|
· Promoted Interest
|
|
|
Sale of Projects
|
· Asset Management Fee
|
|
·
Promoted Interest
|
Page 32
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTION
As
of the date of this Offering Circular, we anticipate that the Company may enter
into transactions with related parties in one circumstance: where the Company
invests in a Project developed by a related Development Company and where the
Company hires a party related to the manager to perform Operations and
Maintenance services. Any such arrangement will be substantially the same terms
as transactions with an unrelated Development Company or Operations and
Maintenance service provider.
The
Company might enter into other transactions with related parties. If so, any
compensation paid by the Company to the related party shall be (i) fair to the
Company, and (ii) consistent with the transaction that would be paid to an
unrelated party.
By
"related party" we mean:
|
·
|
The
Manager;
|
|
|
|
|
·
|
Any
Director, Executive Officer, or Significant Employee of the Company or the
Manager;
|
|
|
|
|
·
|
Any
person who has been nominated as a Director of the Company or the Manager;
|
|
|
|
|
·
|
Any
person who owns more than 10% of the voting power of the Company or the
Manager; and
|
|
|
|
|
·
|
An
immediate family member of any of the foregoing.
|
Security Ownership of Manager and Certain
Securityholders
The following table sets
forth the approximate beneficial ownership of our Common Shares as of December
31, 2022, for each person or group that holds more than 10.0% of our Common
Shares, for each director and executive officer of our Manager and for the
directors and executive officers of our Manager as a group.
All Common Shares are owned
by Energea Global LLC, the Manager, not by individuals. The individuals named
below, as well as other employees of the Manager may own Class A Investor
Shares that they purchased privately through the Platform in the same manner as
any Investor.
Name of Beneficial Owner
(1)(2)
|
Number of Shares Beneficially Owned
|
Percent of All Shares
|
Michael
Silvestrini
|
None
|
NA
|
Christopher Sattler
|
None
|
NA
|
Gray Reinhard
|
None
|
NA
|
All directors and executive
officers of our Manager as a group (3 persons)
|
-
|
-
|
|
(1)
|
Under SEC rules, a
person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power," which includes the power to dispose of or to direct
the disposition of such security. A person also is deemed to be a beneficial
owner of any securities which that person has a right to acquire within 60
days. Under these rules, more than one person may be deemed to be a
beneficial owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which he or she has no economic or
pecuniary interest.
|
|
|
|
|
(2)
|
Each listed beneficial
owner, person or entity has an address in care of our principal executive
offices at 62 Clementel Drive, Durham, CT 06422.
|
Page 33
FINANCIAL STATEMENTS
Independent
Auditors Report
To the Members of
Energea Portfolio 3 Africa LLC
Opinion
We
have audited the accompanying financial statements of Energea Portfolio 3 Africa LLC (the "Company"), which comprise
the balance sheets as of December 31, 2022 and 2021, and the related statements
of operations, changes in members' equity, and cash flows for the year ended
December 31, 2022 and the period March 11, 2021 (date of inception) to December
31, 2021, and the related notes to the financial statements.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Energea Portfolio 3 Africa LLC as of December 31, 2022 and 2021,
and the results of its operations and its cash flows for the year ended
December 31, 2022 and the period March 11, 2021 (date of inception) to December
31, 2021, in accordance with accounting principles generally accepted in the
United States of America.
Basis
for Opinion
We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Our
responsibilities under those standards are further described in the Auditors'
Responsibilities for the Audit of the Financial Statements section of our
report. We are required to be independent of the Company and to meet our other
ethical responsibilities in accordance with the relevant ethical requirements
relating to our audit. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities
of Management for the Financial Statements
Management is responsible for the
preparation and fair presentation of the financial statements in accordance
with accounting principles generally accepted in the United States of America,
this includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements,
management is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Company's
ability to continue as a going concern within one year after the date that the
financial statements are available to be issued.
Auditors'
Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors'
report that includes our opinion. Reasonable assurance is a high level of
assurance but is not absolute assurance and therefore is not a guarantee that
an audit conducted in accordance with generally accepted auditing standards
will always detect a material misstatement when it exists. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood
that, individually or in the aggregate, they would influence the judgment made
by a reasonable user based on the financial statements.
In performing an audit in accordance with
generally accepted auditing standards, we:
•
Exercise
professional judgment and maintain professional skepticism throughout the
audit.
•
Identify
and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, and design and perform audit procedures
responsive to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements.
•
Obtain
an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal
control. Accordingly, no such opinion is expressed.
•
Evaluate
the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the
overall presentation of the financial statements.
•
Conclude
whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the Company's ability to continue
as a going concern for a reasonable period of time.
We are required to communicate with those
charged with governance regarding, among other matters, the planned scope and
timing of the audit, significant audit findings, and certain internal control
related matters that we identified during the audit.
Hartford, Connecticut
April
28, 2023
Page 34
Balance Sheets
For
the year ended December 31, 2022 and the period March 11, 2021 (date of
inception) to December 31, 2021
|
2022
|
|
2021
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash equivalents
|
$ 6,907
|
|
$ 103,437
|
Other current assets
|
26,797
|
|
250
|
Total current assets
|
33,704
|
|
103,687
|
|
|
|
|
Investments in solar energy projects
|
931,343
|
|
157,334
|
|
|
|
|
Total assets
|
$ 965,047
|
|
$ 261,021
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and accrued expenses
|
$ 3,085
|
|
$ 41,722
|
Due to related entity
|
14,500
|
|
61,027
|
|
|
|
|
Total liabilities
|
17,585
|
|
102,749
|
|
|
|
|
Members' equity
|
947,462
|
|
158,272
|
|
|
|
|
Total liabilities and stockholders' equity
|
$ 965,047
|
|
$ 261,021
|
Statements
of Operations
For
the year ended December 31, 2022 and the period March 11, 2021 (date of
inception) to December 31, 2021
|
2022
|
|
2021
|
|
|
|
|
Revenue
|
$ 13,040
|
|
$ 572
|
|
|
|
|
Portfolio
operating expenses:
|
|
|
|
Professional fees
|
11,415
|
|
5,720
|
Other general and administrative expenses
|
7,445
|
|
17,957
|
Total portfolio operating expenses
|
18,860
|
|
23,677
|
|
|
|
|
Net Loss
|
$ (5,820)
|
|
$ (23,105)
|
Page 35
Statements
of Changes in Members' Equity
For
the year ended December 31, 2022 and the period March 11, 2021 (date of
inception) to December 31, 2021
|
Common
Shares
|
|
Investor
Shares
|
|
Managing
Member Equity
|
|
Total
Members' Equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members'
equity, March 11, 2021 (Inception)
|
-
|
|
$ -
|
|
-
|
|
$ -
|
|
$ -
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of investor shares, net of issuance costs of $37,250
|
|
|
-
|
|
211,367
|
|
181,949
|
|
-
|
|
181,949
|
Issuance of common shares
|
1,000,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Non-dividend
distributions
|
-
|
|
-
|
|
-
|
|
(572)
|
|
-
|
|
(572)
|
Net loss
|
-
|
|
-
|
|
-
|
|
-
|
|
(23,105)
|
|
(23,105)
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity, December 31, 2021
|
1,000,000
|
|
-
|
|
211,367
|
|
181,377
|
|
(23,105)
|
|
158,272
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of investor shares
|
-
|
|
-
|
|
731,822
|
|
808,673
|
|
-
|
|
808,673
|
Non-dividend
distributions
|
-
|
|
-
|
|
-
|
|
(13,663)
|
|
-
|
|
(13,663)
|
Net loss
|
-
|
|
-
|
|
-
|
|
-
|
|
(5,820)
|
|
(5,820)
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity, December 31, 2022
|
1,000,000
|
|
$ -
|
|
943,189
|
|
$ 976,387
|
|
$ (28,925)
|
|
$ 947,462
|
Statements of
Cash Flows
For
the year ended December 31, 2022 and the period March 11, 2021 (date of
inception) to December 31, 2021
|
2022
|
|
2021
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
Net loss
|
$ (5,820)
|
|
$ (23,105)
|
Changes in assets and liabilities:
|
|
|
|
Other current assets
|
(26,547)
|
|
(250)
|
Accounts payable and accrued expenses
|
(38,637)
|
|
41,722
|
Due to related entities
|
(46,527)
|
|
61,027
|
Total cash flows from operating activities
|
(117,531)
|
|
79,394
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Investments in solar energy projects
|
(774,009)
|
|
(157,334)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Proceeds from issuance of investor shares
|
808,673
|
|
219,199
|
Investor shares issuance costs
|
-
|
|
(37,250)
|
Non-dividend distributions
|
(13,663)
|
|
(572)
|
Total cash flows from financing
activities
|
795,010
|
|
181,377
|
|
|
|
|
(Decrease)/increase in cash
|
(96,530)
|
|
103,437
|
|
|
|
|
Cash at the beginning of the period
|
103,437
|
|
-
|
|
|
|
|
Cash at the end of the period
|
$ 6,907
|
|
$ 103,437
|
Page 36
Notes to
Financial Statements
For
the year ended December 31, 2022 and the period March 11, 2021 (date of
inception) to December 31, 2021
Business
organization and operations
Energea Portfolio 3 Africa LLC is a Delaware Limited
Liability Corporation (the "Company") formed to invest in a portfolio of solar energy projects in Africa. The
Company is managed by Energea Global LLC (the "Manager"). The Company works in
close cooperation with stakeholders, project hosts, industry partners and
capital providers to produce best-in-class results. The Company commenced operations on March 11, 2021.
The Company's activities are subject to significant risks
and uncertainties, including the inability to secure funding to develop its
portfolio. The Company's operations have been, and will be, funded by the
issuance of membership interests. There can be no assurance that any of these
strategies will be achieved on terms attractive to the Company. During 2021,
the Company initiated a Regulation A Offering for the purpose of raising
capital to fund ongoing project development activities. The Company is offering
to sell equity interests designated as Investor Shares to the public for up to
$75,000,000. The initial price of the Investor Shares sold in 2022 was $1.00.
To date, the Company has invested into eight projects. Through December 31,
2022, the Company has raised $990,622, net of $37,250 share issuance costs,
from the offering.
In
some cases, the Company may purchase an entire project and in other cases, it
may purchase fractional shares of a project through its relationship with The
Sun Exchange (SA) Bewind Trust ("Sun-Ex") ("solar cells"). When the Company
purchases solar cells of a project, the Company maintains control over the
entire project through a series of negative covenants that give the Company
control of financing, selling, or replacing the asset manager of the entire
project, even though the Company may only own a small portion of outstanding
solar cells that comprise the project.
Basis of
presentation
The financial statements have been prepared on the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America ("US GAAP") and Article 8 of Regulation S-X of the rules
and regulations of the SEC.
Evaluation for Impairment
We calculate the carrying value of each asset, which is
historical cost minus the fair market value of the asset. To the extent the
fair market value is greater than the historical cost, the asset is not
impaired. To the extent the fair market value is less than the historical cost,
the asset is considered impaired and a loss equal to the difference is
recognized in the balance sheet of the asset and consolidated at the Company.
We adhere to the GAAP requirements for impairment under IAS-36.
Use of estimates
The preparation of the financial statement in conformity
with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statement. Actual results could differ from those estimates.
Cash and cash
equivalents
Cash and cash equivalents includes cash on hand, deposits
at commercial banks and short-term cash equivalents with original maturities of
90 days or less.
Revenue recognition
Revenue
is recognized when the Customer is invoiced for the monthly rent in accordance
with FASB ASC 606-10-50 .
Income taxes
The Company has elected to be taxed as a C-Corporation
for Federal, State, and local income tax reporting purposes. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets, including tax loss and credit carryforwards, and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established to reduce deferred tax assets to the amount expected
to be realized. As of December 31, 2022 and 2021, deferred taxes of $7,788 and
$6,221, respectively, have been fully reserved by a valuation allowance. Any income taxes currently due are not material to
the consolidated financial statements for the year ended December 31, 2022 and the period of March 11, 2021 (date of inception)
to December 31, 2021
The Company also concluded that there are no uncertain
tax positions that would require recognition in the consolidated financial
statements. Interest on any income tax liability is reported as interest
expense and penalties on any income tax liability are reported as income
taxes. The Company's conclusions regarding uncertain tax positions may be
subject to review and adjustment at a later date based upon ongoing analysis of
tax laws, regulations and interpretations thereof, as well as other factors.
Page 37
Foreign
Currency Exchange Transactions
Revenue
is transacted in the local currency, South African Rand (R$), and are
recorded in U.S. dollars translated using the average exchange rate for the
period. Realized exchange gains and losses are netted against revenue on the
accompanying statement of operations. Realized translation gains/(losses) for
the year ended December 31, 2022, and the
period of March 11, 2021 (date of inception) to December 31, 2021, were
$(1,916) and $44, respectively.
Extended
Transition Period
Under
Section 107 of the Jumpstart Our Business Startups Act of 2012, the Company is
permitted to use the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act for complying with new or revised accounting standards.
This permits the Company to delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. The Company
has elected to use the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards that have different effective dates for public and private companies
until the earlier of the date that the Company (i) is no longer an emerging
growth company or (ii) affirmatively and irrevocably opt out of the extended
transition period provided in Section 7(a)(2)(B). By electing to extend the
transition period for complying with new or revised accounting standards, these
consolidated financial statements may not be comparable to companies that adopt
accounting standard updates upon the public business entity effective dates.
Subsequent events
On
November 29, 2021, the Company entered into a cell owner agreement with Sun-Ex
for 100% of the cell units in the project Anchor Foods for an aggregate
purchase price of $109,334. The balance is carried at cost on the balance
sheet.
On
March 20, 2021, the Company entered into a cell owner agreement with Sun-Ex for
1.74% of the cell units in the project Nhimbe Fresh Packhouse & Cold Store
for an aggregate purchase price of $24,631. The balance is carried at cost on
the balance sheet.
On
April 3, 2021, the Company entered into a cell owner agreement with Sun-Ex for
6.72% of the cell units in project SPAR Lulekani for an aggregate purchase
price of $23,369. The balance is carried at cost on the balance sheet.
On
May 31, 2022, the Company entered into a cell owner agreement with Sun-Ex for
100% of the cell units in project CPOA Trianon Retirement Village for an
aggregate purchase price of $163,624. The balance is carried at cost on the
balance sheet.
On
May 31, 2022, the Company entered into a cell owner agreement with Sun-Ex for
46.39% of the cell units in project CPOA Avondrust Court for an aggregate
purchase price of $99,025. The balance is carried at cost on the balance sheet.
On
September 9, 2022, the Company entered into a cell owner agreement with Sun-Ex
for 25.98% of the cell units in project Baysville School of Skills for an
aggregate purchase price of $25,000. The balance is carried at cost on the
balance sheet.
On
September 9, 2022, the Company entered into a cell owner agreement with Sun-Ex
for 74.54% of the cell units in project Zandvliet Care Facility for an
aggregate purchase price of $74,999. The balance is carried at cost on the
balance sheet.
On
December 1, 2022, the Company entered into a cell owner agreement with Sun-Ex
for 100% of the cell units in project Connaught Business Park for an aggregate
purchase price of $411,361. The balance is carried at cost on the balance
sheet.
The
Company may borrow from the Manager, without interest, from time to time. The
purpose of the related party transactions is for reimbursement for startup
costs, cash flow shortfalls, capital needed to complete investments in Projects
and loans used for dividend recapitalization to make distributions in advance
of receiving payments from Customers. As of December 31, 2022 and 2021, the
Company had $14,500 and $61,027, respectively, payable to the Manager, which is
included in due to related entity on the accompanying balance sheets.
Common Shares
The
Company authorized 1,000,000 common shares, which as of December 31, 2022 and
2021, 1,000,000 are issued and outstanding. The shares represent membership
interests in the Company.
Page 38
Investor Shares
The
Company authorized 19,000,000 investor shares, which as of December 31, 2022
and 2021, 943,189 and 211,367, respectively are issued and outstanding. The
shares represent membership interests in the Company.
The
provision for income tax expense for the year ended December 31, 2022 and the period of March 11, 2021 (date of inception)
to December 31, 2021 consists of the following:
|
2022
|
|
2021
|
Current
|
$ -
|
|
$ -
|
Deferred
|
-
|
|
-
|
Provision for Income Tax Expense
|
$ -
|
|
$ -
|
Significant
components of the Company's deferred income tax assets and liabilities are as
follows at December 31, 2022 and 2021:
|
2022
|
|
2021
|
Deferred tax asset
|
|
|
|
Net Operating Loss
|
$ 7,788
|
|
$ 6,221
|
Valuation Allowance
|
(7,788)
|
|
(6,221)
|
Total
|
-
|
|
-
|
|
|
|
|
Deferred tax liability
|
-
|
|
-
|
|
|
|
|
Net deferred tax asset/(liability)
|
$ -
|
|
$ -
|
As of December 31, 2022 and 2021, the Company has total
net operating loss carryovers of $28,925 and $23,105, respectively, which will
expire at various dates. The Company is subject to tax in U.S.
|
2022
|
|
2021
|
Income tax at statutory rate
|
$ (1,222)
|
|
$ (4,852)
|
State income taxes, net of federal benefit
|
(345)
|
|
(1,369)
|
Change in VA
|
1,567
|
|
6,221
|
|
$ -
|
|
$ -
|
|
|
|
|
Effective
tax rate
|
21%
|
|
21%
|
In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this assessment.
After consideration of all of the information available, management believes
that significant uncertainty exists with respect to future realization of the
deferred tax assets and has therefore established a full valuation allowance.
For the year ended December 31, 2022 and the period of March 11, 2021 (date of inception)
to December 31, 2021, the change in valuation allowance was $1,567 and $6,221,
respectively. As of December 31, 2022 and 2021, the valuation allowance was
$7,788 and $6,221, respectively.
Page 39
GLOSSARY OF DEFINED TERMS
Adjusted Operating Cash Flow
|
For each Project, the actual projected monthly operating cash
flows reduced by a fixed percentage to yield an internal rate of return of 6%
for the Project.
|
Authorizing Resolution
|
The authorization adopted by the Manager pursuant to the LLC
Agreement that created the Class A Investor Shares.
|
Class A Investor Shares
|
The limited liability company interests in the Company being
offered to Investors in this Offering.
|
Code
|
The Internal Revenue Code of 1986, as amended (i.e., the Federal
tax code).
|
Company
|
Energea Portfolio 3 Africa LLC, a Delaware limited liability
company, which is offering to sell Class A Investor Shares in this Offering.
|
Development Company
|
A company focused on acquiring and/or developing solar power
projects.
|
Energea Global
|
Energea Global LLC, a Delaware limited liability company, which
is owned by Michael Silvestrini and Chris Sattler and serves as the Manager.
|
Exchange Act
|
The Securities Exchange Act of 1934.
|
Financial Model
|
The financial model prepared by the Manager for each Project,
projecting all the costs and distributions of the Project.
|
Greenskies
|
Greenskies Renewable Energy, LLC, a Delaware limited liability
company founded by Michael Silvestrini.
|
Investor
|
Anyone who purchases Class A Shares in the Offering.
|
Investor Services Agreement
|
The agreement between the Company and Sun Exchange captioned "Investor
Services Agreement."
|
IRR
|
Internal rate of return.
|
LLC Agreement
|
The Company's Limited Liability Company Agreement dated March
21, 2021.
|
Manager
|
Energea Global LLC, a Delaware limited liability company.
|
Manager Shares
|
The limited liability company interests in the Company that will
be owned by the Manager.
|
Nhimbe Project
|
The first solar project in which the Company has invested.
|
Offering
|
The offering of Class A Investor Shares to the public pursuant
to this Offering Circular.
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Offering Circular
|
The Offering Circular you are reading right now, which includes
information about the Company and the Offering.
|
Platform
|
The Internet site located at www.energea.com.
|
Project
|
A solar power product in which the Company invests.
|
Promoted Interest
|
The right of the Manager to receive distributions under the LLC
Agreement, over and above its right to receive distributions in its capacity
as an Investor.
|
Regulations
|
Regulations issued under the Code by the Internal Revenue
Service.
|
SEC
|
The U.S. Securities and Exchange Commission.
|
Securities Act
|
The Securities Act of 1933.
|
Sun Exchange
|
Sun Exchange, Ltd., a company organized under the laws of South
Africa.
|
USD
|
United States dollars.
|
ZAR
|
South African rand (currency).
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Page 40
FORM 1-A
Regulation A Offering Statement
Part III - Exhibits
Energea Portfolio 3 Africa LLC
62 Clementel Drive
Durham, CT 06422
(860) 316-7466
www.energea.com
September
1, 2023
The
following Exhibits are filed as part of this Offering Statement:
Exhibit
1A-2A
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Exhibit 1A-2B
|
|
Exhibit
1A-2C
|
|
Exhibit 1A-4
|
|
Exhibit
1A-6A
|
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Exhibit 1A-6B
|
|
Exhibit
1A-11
|
|
Exhibit 1A-12
|
|
Exhibit
1A-15.1
|
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SIGNATURES
Pursuant
to the requirements of Regulation A, the issuer certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form 1-A and has duly caused this offering statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Durham,
State of Connecticut, on August 31, 2023.
Energea
Portfolio 3 Africa LLC
By: Energea
Global LLC
By MICHAEL
SILVESTRINI
Name: Mike Silvestrini
Title: Co-Founder and
Managing Partner
This
Offering Statement has been signed by the following persons in the capacities
and on the dates indicated.
By MICHAEL
SILVESTRINI
Name: Mike Silvestrini
Title:
Co-Founder and Managing Partner
Date:
September 1, 2023
Page 41