As filed with the
Securities and Exchange Commission on May 15, 2024
(Amendment No. 3)
Part II -
Information Required in Offering Circular
Preliminary
Offering Circular dated May 15, 2024
AN OFFERING STATEMENT PURSUANT
TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). 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 PRELIMINARY
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.
Energea Portfolio
3 Africa LLC
Up to $50,000,000
in Class A Investor Shares
[DATE]
This Offering
Circular Follows the Form 1-A Disclosure Format
Energea Portfolio 3 Africa LLC
(the "Company", "us", "we", "our" and similar terms) is a limited
liability company organized under the laws of Delaware to invest in the
acquisition, development, and operation of community solar energy projects in
Africa (each a "Project"). The Company's day-to-day operations are
managed by Energea Global LLC (the "Manager"). The Company is currently offering
up to $50.0 million in limited liability company interests designated as "Class
A Investor Shares"(the "Offering") pursuant to Regulation A ("Regulation A")
of the Securities Act of 1933, as amended (the "Securities Act"). Through
December 26, 2023, a prior offering sold 2,253,875 Class A Investor Shares and
raised approximately $2,577,000 in capital (the "Prior Offering"). The current
price of the Class A Investor Shares is $1.25 per Class A Investor Share, and
the minimum initial investment is $100.
There is currently no
established secondary market for the Class A Investor Shares, and Investors may
not be able to sell their Class A Investor Shares. While Investors should view
an investment in the Company as long-term, the Company offers a Redemption Plan
in order to provide Investors with an opportunity to obtain liquidity. See
"Securities Being Offered: The Class A Investor Shares-Summary of LLC Agreement
and Authorizing Resolution-Redemption Plan" and "Risk Factors-No Market for the
Class A Investor Shares; Limits on Transferability".
Purchasers
of Class A Investor Shares may not be able to sell their shares except by
submitting a Redemption Request to the Company through our
Manager's website, www.energea.com.
Pursuant to the Redemption Plan, Investors must hold their Class A Investor
Shares for at least 60 days before they can request redemption of their Class A
Investor Shares via the Platform; if the Manager agrees to honor a Redemption
Request, they have 90 days to make payment on such redemption; and the Manager
may, in its sole discretion, amend, suspend, or terminate the Redemption Plan
at any time without prior notice. Additionally, Class A Investor Shares may not
be transferred without the Company's consent, which can be withheld in its sole
discretion, and the Manager has a right of first refusal to purchase any Class
A Investor Shares proposed to be transferred. See
"Securities Being Offered: The Class A Investor Shares-Summary of LLC Agreement
and Authorizing Resolution-Redemption Plan" and "Risk Factors-No Market for the
Class A Investor Shares; Limits on Transferability".
Investors should note that
the Manager may decide to sell the Projects or the Company at any time. Should
the Manager decide to sell the Company, Investors could be forced to sell their
Class A Investor Shares at the direction of the Manager. See "Securities Being
Offered: The Class A Investor Shares-Summary of LLC Agreement and Authorizing
Resolution-Drag-Along Right".
We are selling Class A Investor
Shares directly to the public through our Manager's website, www.energea.com
(the "Platform"). Neither the Company nor any affiliated entity involved
in the Offering is a member firm of the Financial Industry Regulatory
Authority, Inc. ("FINRA"), and no person associated with us will be
deemed to be a broker solely by reason of his or her participation in the sale
of our Class A Investor Shares. Investors will not pay upfront selling
commissions or broker fees in connection with the purchase of Class A Investor
Shares. We will reimburse our Manager for certain expenses incurred on our
behalf, and pay our Manager certain fees, as described further under "Compensation
of Directors and Executive Officers".
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Per Share
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Total Maximum
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Public
Offering Price
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$1.25
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$50,000,000
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Organization, Offering and
Marketing Expenses
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$0.0625
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$2,500,000
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Proceeds
to the Company from this Offering to the Public
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$1.1875
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$47,500,000
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This is a
"best efforts - no minimum" offering. The Offering will commence as soon as
our offering statement is "qualified" by the SEC and will end on the date we
raise the maximum amount being offered, unless earlier terminated by the
Company. We will reimburse the Manager for organization, offering and marketing
expenses in an amount up to 5% of the total Offering amount raised. See
"Use
of Proceeds". Any such amounts in excess of such 5% will be paid, without
reimbursement, by the Manager.
The purchase of these
securities involves a high degree of risk. Before investing, you should read
this entire offering circular and exhibits hereto, including "Risk Factors"
beginning on page 3.
THE SEC DOES NOT PASS UPON THE
MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE
OFFERING, NOR DOES IT PASS JUDGEMENT UPON THE ACCURACY OR COMPLETENESS OF ANY
OFFERING CIRCULAR OR OTHER SOLICITING MATERIALS. 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 ARE EXEMPT FROM REGISTRATION.
GENERALLY, 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 "LIMIT ON AMOUNT A NON-ACCREDITED INVESTOR CAN INVEST".
NEITHER THE SEC 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.
Page i
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Page ii
Caution Regarding
Forward-Looking Statements
We
make statements in this offering circular that are forward-looking statements.
The words "outlook," "believe," "estimate,"
"potential," "projected," "expect,"
"anticipate," "intend," "plan," "seek,"
"may," "could" and similar expressions or statements
regarding future periods are intended to identify forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties
and other important factors that could cause our actual results, performance or
achievements, or industry results, to differ materially from any predictions of
future results, performance, or achievements that we express or imply in this
offering circular or in the information incorporated by reference into this
offering circular.
The
forward-looking statements included in this offering circular are based upon
our current expectations, plans, estimates, assumptions and beliefs that
involve numerous risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
our control. Although we believe that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, our actual
results and performance could differ materially from those set forth in the
forward-looking statements. Factors which could have a material adverse effect on
our operations and future prospects include, but are not limited to:
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our ability to
effectively deploy the proceeds raised in our Offering;
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ability to attract and
retain Investors to the Platform;
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risks associated
with breaches of our data security;
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public health
crises, pandemics and epidemics, such as those caused by new strains of
viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS)
and, most recently, the novel coronavirus (COVID-19);
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climate change
and natural disasters that could adversely affect our Projects and our
business;
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changes in economic
conditions generally and the renewable energy and securities markets
specifically;
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limited ability to
dispose of assets because of the relative illiquidity of renewable energy
Projects;
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our failure to
obtain necessary outside financing;
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risks associated with
derivatives or hedging activity;
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intense competition in
African renewable energy markets that may limit our ability to attract or
retain energy offtakers;
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defaults under Supporting
Contracts (see "Summary of Supporting Contracts");
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increased interest
rates and operating costs;
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the risk associated
with potential breach or expiration of a ground lease, if any;
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our failure to
successfully construct, interconnect, operate or maintain the Projects;
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exposure to liability relating
to environmental and health and safety matters;
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the failure of
Projects to yield anticipated results;
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our level of debt and
the terms and limitations imposed on us by our debt agreements;
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our ability to retain
our executive officers and other key personnel of our Manager;
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Page 1
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the ability of our
Manager to source, originate and service our loans;
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the ability for our
engineering, procurement and construction contractors and equipment
manufacturers to honor their contracts including warranties and guarantees;
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regulatory changes
impacting our business or our assets (including changes to the laws governing
the taxation of corporations and SEC guidance related to Regulation A, or the
Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"));
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changes in business
conditions and the market value of our Projects, including changes in renewable
energy policy, interest rates, prepayment risk, operator or borrower defaults
or bankruptcy, and generally the increased risk of loss if our investments
fail to perform as expected;
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our ability to
implement effective conflicts of interest policies and procedures among the
various renewable energy investment opportunities sponsored by our Manager;
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our compliance with
applicable local, state and federal laws, including the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), the Investment Company
Act of 1940, as amended, and other laws; and
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changes to U.S.
generally accepted accounting principles ("U.S. GAAP").
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Any of the assumptions
underlying forward-looking statements could be inaccurate. You are cautioned
not to place undue reliance on any forward-looking statements included in this
offering circular. All forward-looking statements are made as of the date of
this offering circular and the risk that actual results will differ materially
from the expectations expressed in this offering circular will increase with
the passage of time. We undertake no obligation to publicly update or revise
any forward-looking statements after the date of this offering circular,
whether because of new information, future events, changed circumstances or any
other reason. Considering the significant uncertainties inherent in the
forward-looking statements included in this offering circular, including,
without limitation, those named above and those named under "Risk
Factors" herein, the inclusion of such forward-looking statements should
not be regarded as a representation by us or any other person that the
objectives and plans set forth in this offering circular will be achieved.
Summary and Risk
Factors
Executive Summary
Our Business
Energea Portfolio 3 Africa LLC (the
"Company") is a limited liability company organized under the laws of
Delaware. The Company has elected to be treated as a corporation for tax
purposes. The Company's day-to-day operations are managed by Energea Global LLC
(the "Manager").
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 we collectively refer to as "Customers") who purchase the
power or the environmental commodities under long term contracts.
Projects will be owned by a
special-purpose entity (the "Holdco"). Holdco is organized as a South
African limited liability company, the South African equivalent of a U.S.
limited liability company. Holdco is a wholly owned subsidiary of the Company. Thus,
the liabilities of a Project held in one SPE will not affect the assets of
another Project held in a different SPE.
Page 2
The Offering
The Company is offering up to $50.0
million of Class A Investor Shares pursuant to Regulation A. The proceeds of
our Offering will be used to develop and construct Projects currently owned by
the Company and other Projects which the Company might acquire in the future. The
Prior Offering was initially qualified by the SEC on August 2, 2021 and through
December 26, 2023 raised approximately $2,577,000 from the sale of a total of
2,253,875 shares.
Company Operations and Other Matters
Cash flow from Projects can be
generated in three ways: (i) payments from Customers under Solar Leases, (ii) proceeds
from the sale or refinance of Projects and (iii) Liquidated Damages (i.e. delay
penalties) from contractors under Construction Agreements as further described
in "Summary of Supporting Contracts" and "Distributions". Cash
flow will first be used to pay operating costs and expenses, including fees and
reimbursements payable to our Manager (see "Our Operating Costs and Expenses").
The remaining cash flow, if any, is distributed to the owners of our Class A
Investor Shares ("Investors") and the Manager in the following order of
priority:
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First, a 7% per year preferred return to Class A Investors
(the "Preferred Return");
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Thereafter, any additional cash flow 70% to the Investors
and 30% to the Manager (the "Promoted Interest").
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See "Compensation to Directors
and Executive Officers" and "Calculating Distributions" for more
detailed information regarding fees and distributions payable to the Manager.
CAUTION: ALTHOUGH THE CASH FLOW
FROM OUR PROJECTS WILL LARGELY BE ESTABLISHED BY CONTRACT IN ADVANCE, THERE IS
NO GUARANTEE THAT OUR PROJECTS WILL GENERATE ANY POSITIVE CASH FLOW.
Investors in the Class A Investor
Shares have no voting rights.
Risk Factors
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. You should carefully consider the following
risk factors in conjunction with the other information contained in this
offering circular before purchasing the CLASS A INVESTOR SHARES.
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, our Projects might not be able to
generate enough revenues to achieve and sustain profitability. 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 ("DERMS").
Fluctuations in Income from
Projects: Solar Leases typically provide for fluctuations in rent based on
changes in energy prices and/or changes in consumer prices. Thus, it is
possible that our income from one or more Projects could decrease.
Net Losses: We have in the
past and may in the future incur net losses. If our operating expenses exceed
our expectations, our financial performance could be adversely affected. If our
revenue does not grow to offset these increased expenses, we may not be profitable.
In future periods, we may not have any revenue growth, or our revenue could
decline.
Distributions to Investors:
Whether to distribute operating cash flow or capital proceeds, and how much to
distribute, is at the sole discretion of the Manager. No returns are guaranteed,
and Investors will receive distributions only if the Company generates
distributable cash flow from the Projects. Investors will not have any recourse
in the event we are unable to pay distributions. To the extent that we do not
make a profit, any such distributions to Investors will be considered a return
of capital for U.S. federal income tax purposes. To date, the Company has not
made a profit, although it has had distributable cash flow. See "Management
Discussion and Analysis of Financial Condition and Result of
Operation-Distributions."
Distributions Generally:
Our ability to achieve our investment objectives and to pay distributions
depends upon the performance of our Manager in the acquisition of our Projects
and the ability of our Manager to source investment opportunities for us. In
the event we are unable to timely locate suitable investments, we may be unable
or limited in our ability to pay distributions and we may not be able to meet
our investment objectives. If we pay distributions from sources other than our
cash flow from Projects, we will have less funds available for investments and
your overall return will be reduced.
Page 3
Competition:
There are other solar developers 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 to find high-quality 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 to
Investors.
We Might Own Only a Small
Number of Projects: If the Company is successful in raising the current
maximum offering amount of $50.0 million in this Offering, the Company would
likely acquire or invest in between 50 and 100 Projects. If the Company raises
significantly less than the maximum offering amount, it may not be able to
invest in as many Projects. If the Company owns only a small number of
Projects, Investors will be exposed to greater concentration risk.
Possible
Changes in Governmental Policies: The Projects depend on South Africa
energy policy. These policies could expire, phase-out over time, require
renewal by the applicable authority, or become a victim of political pressure. The
South African government has instituted several changes to their policy over
the past several years. Some of those changes have positively affected our
business while others have had a negative impact. The new policies could
disfavor solar projects in general and our Projects in particular.
Delays in
Connecting to Power Grid: The Projects must be physically connected to the
power grid, a process that involves sophisticated engineering and government
regulation. Delays are not uncommon. For example, the utility involved might be
required to perform physical upgrades to allow for the safe and consistent
generation, distribution, and/or transmission of electricity from a Project to
the grid. Delays in the performance of the interconnecting utility's
obligations to make such grid upgrades can negatively impact the financial
performance of the Projects.
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.
Load Shedding: 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 (the largest utility in South Africa),
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 and the Projects.
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, the
load shedding problem has persisted.
Construction
and Development Risks: In some cases, the Company will invest in Projects
before construction is complete. Construction of any kind involves risk,
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 construct
and the cost of the Projects.
Page 4
Finding Credible Development
Companies and Projects: Attracting and retaining relationships with
Development Companies who can originate Projects with quality Customers is
critical to the success of the Company (see "Investment Strategy"). If
we are unable to acquire a large enough volume of quality Projects, our revenues
may be lower than projected.
Discount Rates We Offer Our
Customers: Offering competitive discount rates to entice Customers to sign
a Solar Lease is a key strategy that underpins the success of the Company.
Setting appropriate rates that balance profitability with Customer incentives
is a delicate balancing act. If other solar companies offer more competitive
discount rates for Customers, we may be unable to find Customers for our
Projects.
Exchange Rates Between the
South African Rand and the United States Dollar: The foreign exchange rates
between the South African rand ("ZAR") and the U.S. dollar ("USD")
have been subject to significant fluctuations. A mix of economic and
geopolitical factors have influenced the value of these currencies relative to
each other. Initially, the ZAR 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 USD,
creating volatility in the exchange rates. Overall, the foreign exchange
rates between the ZAR and USD 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. Unexpected weakness of the ZAR
versus the USD will have a negative impact on the returns of the Company.
Risks Associated with Investments Outside the U.S.: All
of the Company's Projects will be in African countries; primarily South Africa.
Projects located in developing countries such as South Africa may be subject to
certain risks that generally do not apply to investments in developed countries
such as 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
accounting systems. The legal systems of developing countries might be less
reliable in terms of enforcing contracts.
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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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South Africa faces security challenges, and the Projects
can be vulnerable to theft, vandalism, and damage. Ensuring robust security
measures is essential to mitigate these risks and protect project assets. If
we are unable to properly secure the Projects, the Projects could be
negatively affected by crime, which could reduce our net income.
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Development challenges, such as land acquisition,
permitting delays, and poor infrastructure, can hinder progress and increase
costs of the Projects. Navigating these obstacles is crucial to the
successful development of our Projects. Ineffective land acquisition
practices, slow reaction to permitting delays or selecting sites with poor
infrastructure can negatively affect the financial performance of the
Projects and the Company.
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Imprecise Language
Translations: All of the Company's legal contracts in South Africa will be
written in English, but certain documents we rely on for due diligence may be
written in Afrikaans or other languages. Given that these languages have
different historical and cultural roots, it is possible that some of the
materials or proceedings may not directly translate across languages and any
deviation from the Company's intentions, especially with respect to some of the
more technical terms or work involved, may cause disruptions or
misunderstandings that may negatively impact the Projects.
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.
Page 5
Regulatory
Risks: The Projects will be subject to extensive regulatory requirements,
including those imposed by South African environmental, safety, labor and other
regulatory and political authorities. These regulatory requirements may impose
substantial costs on the Projects or Holdco. Further, should any Project or the
Holdco fail to comply with one or more regulatory requirements, it could result
in substantial fines and penalties or a shutdown of the Project or the Holdco.
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 Projects.
Potential
Environmental Liability: The Projects, which may include large-scale
physical plants as well as rooftop solar and battery installations, could cause
environmental contamination under some circumstances. Further, the Holdco 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 Holdco will carry
insurance to protect against the potential losses, but the insurance might not
be adequate.
Global or National Economic
Conditions: An economic slowdown in South Africa could affect our Customers
and therefore our Projects.
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 Manager will make all decisions. You will have the ability to replace our
management team only under very limited circumstances, as described in "
Summary
of LLC Agreement and Authorizing Resolution."
Reliance
on Management: The success of the Company and its Projects will depend in
part on the skills of our Manager and its management team. If our Manager fails
to retain its key personnel, the Company and its Investors could suffer.
Sale of
Other Securities: The Company could, at any time, sell Class A Investor
Shares other than those being offered by this Offering, for example, in a
private placement, or could sell 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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Manager's Drag-Along Rights: The
Manager may decide to sell the Projects or the Company at any time. Should the
Manager decide to sell the Company, Investors could be forced to sell their
Class A Investor Shares at the direction of the Manager according to the
Manager's drag-along rights granted to them in the Operating Agreement (see "Summary
of LLC Agreement and Authorizing Resolution.").
Page 6
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 the state of 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.
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 the interests of Investors in a number of ways, including:
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Our Manager and its officers perform similar roles for
other entities that are affiliated with the Manager and are not required to
devote all of their time and effort to the Company and are only required to
devote such time to our affairs as their duties require.
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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 borderline Projects.
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The entire business of the Manager consists of investing
in solar projects, including solar projects in South Africa. There could be
conflicts between Projects they decide to invest in through the Company and
projects they invest in through other vehicles.
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Risk of Failure to Comply with
Securities Laws: The Offering relies on an exemption from registration with
the SEC pursuant to Regulation A. If the Offering did not qualify for exemption
from registration under the Securities Act, the Company could be subject to
penalties imposed by the federal government and state regulators, as well as to
lawsuits from Investors.
We may be subject to claims for recission or damages from
our Investors: During the Prior Offering,
we may not have been eligible for an exemption from registration under the
Securities Act for certain sales of Class A Investor Shares because we did not
file a post-qualification amendment on at least an annual basis with updated
financial statements as required by Rules 251(d)(3)(i)(F) and 252(f)(2)(i) of
Regulation A, and because of the at-the-market prohibition in Rule
251(d)(3)(ii) of Regulation A. Unless another exemption from registration under
the Securities Act is available for these sales, we may be subject to claims
for recission or damages for sales of up to $1,820,739 of Class A Investor
Shares that were made following the first anniversary of the initial
qualification of the Prior Offering.
Page 7
No Market for the Class A
Investor Shares; Limits on Transferability: There is currently no
established market for the Class A Investor Shares. An Investor who wishes to
sell or otherwise transfer their Class A Investor Shares may be limited
because:
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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
for its shares.
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Although the Company offers a Redemption Plan, there is no
guarantee that an Investor who wants to sell his, her, or its Class A
Investor 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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Our
Manager reserves the right to reject any Redemption Request for any reason or
no reason or to amend or terminate the Redemption Plan without prior notice.
Therefore, you may not have the opportunity to make a Redemption Request prior
to a potential termination of the Redemption Plan and you may not be able to
sell any of your Class A Investor Shares back to us pursuant to the Redemption
Plan. Moreover, if you do sell your Class A Investor Shares back to us pursuant
to the Redemption Plan, you may not receive the same price you paid for the
Class A Investor Shares being redeemed. In addition, pursuant to our Redemption
Plan, an Investor may only (a) have one outstanding Redemption Request at any
given time and (b) request that we redeem up to $50,000 worth of Class A
Investor Shares per each Redemption Request.
For more information regarding
the Redemption Plan, see "SECURITIES BEING OFFERED: THE CLASS A INVESTOR
SHARES-Summary of LLC Agreement and Authorizing Resolution- Redemption Plan".
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 Exchange Act 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.
Unanticipated changes in our
tax laws that may impact us, the enactment of new tax legislation, or exposure
to additional income tax liabilities could affect our profitability: We are
obligated to comply with income tax laws in the regions where we operate,
including recent changes like the Inflation Reduction Act. These evolving tax
regulations could impact our financial health. We also face potential tax
audits that may result in additional tax assessments, with uncertain outcomes.
Changes to our effective tax rate, driven by shifts in our operational
structure, could have significant effects on our financial well-being.
Dilution
The sale of shares is exclusively
facilitated through the Platform, where shares are available at a fixed price
per Class A Investor Share. The price was determined by our Manager (see "Price
of Class A Investor Shares"). The Company sells shares to raise capital for
the purchase and construction of Projects. As new Investors purchase Class A
Investor Shares, existing Investors may be temporarily diluted until new
Projects are acquired, constructed and contribute to monthly cash flow.
One notable aspect of our policy
is that there are no shares allocated to executives, officers, promoters, or
any affiliated individuals as compensation or commissions. We firmly adhere to
a level playing field philosophy, ensuring that all individuals associated with
the Company, regardless of their roles, have no privileged access to shares
beyond what is offered through the Platform. This strict adherence to equity underscores
our dedication to treating every Investor equally.
Page 8
Plan of Distribution and Selling Securityholders
The Company offering to sell up
to $50,000,000 of Class A Investor Shares to the public. This Offering is being
conducted as a continuous offering pursuant to Rule 251(d)(3) of Regulation A,
meaning that while the offering of securities is continuous, active sales of
securities may happen sporadically over the term of the Offering. Further, the
acceptance of subscriptions, whether via the Platform or otherwise, may be
briefly paused at times to allow us to effectively and accurately process and
settle subscriptions that have been received.
The Offering will commence as
soon as this offering statement is "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 of their securities of the Company in this Offering.
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.
This is a "best efforts - no
minimum" offering. This means that the Offering does not have a minimum
threshold amount that we must raise before we can have a closing. Even if a
very small number of Class A Investor Shares are sold, the Company does not
plan to return funds to Investors.
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 promptly return all the Investor's money without interest
or deduction.
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 (see "Limit on the
Amount a Non-Accredited Investor Can Invest").
After the Offering has been
"qualified" by the SEC, 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 the rules and regulations of Regulation A. 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.
Use of Proceeds
We expect to use all of the net
proceeds of this Offering,
after organization, offering
and marketing expenses, to acquire, develop and construct new Projects. For
more information regarding our investment strategy, see
"Description of
Business-Investment Strategy". For more information regarding current
Projects, see
"Description of Property-Projects Acquired and Owned". Investing
in new Projects is subject to a number of risks, including those set forth
under "
Risk Factors-Construction and Development Risks", and if costs of
new Projects exceed estimates, our Use of Proceeds may be impacted and we may
not be able to invest in as many new Projects.
We expect to pay for operating
expenses for the Company and current Projects 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
such operating expense. The types of operating expenses at the Project and
Company level are described in "Our Operating Costs and Expenses".
The capital raised in this
Offering will not be used to compensate officers or directors as the Company
has no employees. However, offering proceeds may be used to pay fees owed to
the Manager and its affiliates (see "Compensation of Directors and Executive
Officers-Fees and Other Compensation"). The Company does not expect to pay
fees to the Manager from the proceeds of the Offering. Fees are instead paid
with revenue produced by the Projects. However, it is possible that the revenue
from the Projects would be insufficient to pay management fees, at which time,
fees may be paid for from the proceeds of this Offering. We currently do not
anticipate that any fees will be paid to the Manager or its affiliates from the
proceeds of the Offering, however we expect to use offering proceeds to
reimburse the Manager for Organization, Offering and Marketing Expenses as set
forth in the table below.
The Manager may make short term advances
to the Company to make payments on an as-needed basis. We do not anticipate any
additional sources of capital apart from funds from operations, the advances,
and funds generated through this Offering to fund the acquisition, development
and construction of Projects and to cover start-up costs and expenses.
Page 9
It is important to note that no
capital will be allocated to any Project until it has received formal approval
from the Investment Committee and has been reported in accordance with the
appropriate procedures. In the interim, we may invest in short-term, highly
liquid investments. Such short-term investments will not earn as high of a
return as we expect to earn on our investments in 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 price and terms as other Investors. See "Compensation
of Directors and Executive Officers-Co-Investment."
The table below sets forth our
estimated use of proceeds from this Offering assuming we sell $50.0 million in
Class A Investor Shares. This is a "best efforts" offering. This Offering does
not have a minimum to close. The Company is not paying commissions to
underwriters, brokers, or anyone else in connection with the sale or
distribution of the Class A Investor Shares. In some cases, retirement
custodians, investment advisers, and other intermediaries will offer to invest
on behalf of their clients. In such cases, the custodian, adviser, or
intermediary will be paid a fee from their client's invested funds. In such
cases, the client (rather than the Company) is paying those fees.
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Maximum
Offering
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10% of Maximum
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25% of Maximum
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50% of Maximum
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Amount (1)
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Amount
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Amount
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Amount
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Gross Offering Proceeds
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$
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50,000,000
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5,000,000
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12,500,000
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25,000,000
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Less:
Organization, Offering and Marketing Expenses(1)
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$
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2,500,000
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250,000
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625,000
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1,250,000
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Estimated fees paid to Manager
from this Offering
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$
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-
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-
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-
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-
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Net Proceeds from this Offering
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$
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47,500,000
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4,750,000
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11,875,000
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23,750,000
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Estimated Amount Available for
Completion of Existing Projects
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$
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0.00
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0.00
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0.00
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0.00
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Estimated Amount Available for New Projects
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$
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47,500,000
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4,750,000
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11,875,000
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23,750,000
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TOTALS
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$
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50,000,000
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5,000,000
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12,500,000
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25,000,000
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(1) The Company will
reimburse the Manager in an amount up to 5% of proceeds from this Offering to
pay for organization and offering expenses, including marketing expenses. Any
such amounts in excess of such 5% will be paid, without reimbursement, by the
Manager.
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Description of
Business
Offices and Employees
The Company's offices are located
at 52 Main Street, Chester, CT 06412. The Company itself has no employees.
Rather, the Company has engaged the Manager to manage the Company and utilizes
employees and services provided by the Manager as described more fully in the
section "
Directors, Executive Officers & Significant Employees".
Page 10
Company Overview
Energea Portfolio 3 Africa LLC is
a limited liability company, treated as a corporation for tax purposes,
organized under the laws of Delaware as of March 11, 2021. The Company and its
day-to-day operations are managed by the Manager, Energea Global LLC. The
Company was created to invest in the acquisition, development, construction and
operation of solar energy Projects in various countries in Africa with a focus
on South Africa. The Projects will sell power and, in some cases, environmental
commodities, to offtakers who purchase the electricity under long term contract
(we collectively refer to offtakers of electricity "Customers").
Projects are owned by a
special-purpose entity (the "Holdco"). Holdco is organized as a South
African limited liability company, the South African equivalent of a U.S.
limited liability company. Holdco is a wholly owned subsidiary of the Company.
The revenue from our Projects
consists primarily of the payments we receive from Customers under Solar Leases
(see "Summary of Supporting Contracts"). The Company will make a profit
if revenues from Projects exceed their expenses plus those expenses of the
Company (see "Our Operating Costs and Expenses").
The Company generally plans to
hold the Projects indefinitely, creating a reliable stream of cash flow for
Investors. Should the Company decide to sell Projects in the future, however,
the Manager would consider the following factors:
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Yield and Cashflow: Many investment funds look for
reliable cashflows generating a targeted yield. With both revenue and most
expenses locked in by contract, the cash flow from any Project or portfolio
of Projects should be predictable and consistent for as long as 25 years.
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Project Consolidation: Some of the Projects will be
too small or unusual for institutional buyers to consider purchasing 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, a portfolio of Projects might
be 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
institutional-grade transaction or securitization.
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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 may acquire Projects before stabilization and sell them after
stabilization. Institutional investor interest in the Portfolio should
increase as the portfolio stabilizes.
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Increase in Residual Value: When the Company
acquires a Project, the appraisal is based solely on the cash flows projected
from executed Project Rental Contracts, with no residual value assumed for
the Project. 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 of energy 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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Investment Strategy
The Company sources its Projects
from other companies who specialize in developing solar projects in Africa ("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.
Page 11
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 does not currently
own a Development Company in Africa and the Company acquires all Projects from
unrelated Development Companies. The Manager 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. If the Company were to acquire a
Project from a Development Company that is related to the Manager, we will cap
the related-party development fee at 5.0% of the overall Project's cost, which
we believe is below the standard market rate for developing a Project.
The Manager reviews Projects
submitted by the Development Companies to identify investments that represent
the greatest potential for risk-adjusted returns. We are specifically searching
for Projects in countries with favorable economic conditions, large addressable
markets and well-defined renewable energy policies, like South Africa. The
Manager has a strong preference for Projects with credible Customers, albeit
adjusted for the context of African economies.
The Manager believes the best
investment strategy for African markets requires small investments in a broad
base of Projects in a concentrated geographic area. The average risk of default
by a Customer of a Solar Lease is higher in Africa than it may be in other
markets, thus diversification is central to the Company's investment strategy.
Placing small investments (<$2,000,000 per Project) 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 20% of
Projects we've reviewed have qualified for an investment to date.
We primarily invest in Projects
with the following characteristics:
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Power Capacity: We
intend to focus on Projects of between 0.1 megawatts and 2 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.)
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Locations: We select
locations based primarily on:
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o Demand for alternative
energy;
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o Efficient access for
maintenance;
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o Easy interconnection
points with the electricity grid;
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o Strong solar irradiance;
and
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o Country and state-level
policies that enable the development of renewable energy Projects.
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Right to Site: Some
Projects owned by the Company will be installed on Customer's rooftops, while
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 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.
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Connecting Projects to the
Electric Grid: Most Projects acquired or constructed by the Company will
require permission to interconnect to the local electric grid ("Interconnection").
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.
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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.
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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.
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Page 12
The Sun Exchange
As of the date of this Offering,
the Manager has sourced the most Projects from a Development Company named The
Sun Exchange. The Sun Exchange is a small Development Company based in Cape
Town, South Africa. They are a recognized brand in the South African solar
market and have a pipeline of projects that meet the investment criteria
described above. We expect to continue to source Projects from The Sun Exchange
in the foreseeable future as well as from other Development Companies.
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"). As of the date of
this Offering Circular, the Investment Committee consists of a Managing Partner
(Mike Silvestrini), General Counsel (Isabella Mendonca), a Financial Analyst
(Arthur Issa) and the Director of Operations and Maintenance (David Rutty). To
approve a Project for funding, a unanimous approval of the Project by the
Investment Committee is required to move forward. A copy of the memorandum
prepared by the Manager for each Project and used by the Investment Committee
to make an investment decision is provided to Investors on the Platform and in
our filings with the SEC.
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 transaction 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 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.
Our Revenue
From a recognition standpoint, we
recognize the revenue from both the Solar Lease and the Purchase and Sale
Agreement for Environmental Commodities when the invoice is sent to the Customer.
Revenue for the Company comes
from the Projects. Revenue for the Projects comes from the payments we receive
from Customers under Solar Leases and any Purchase and Sale Agreement for
Environmental Commodities. The Company may also produce revenue by selling
Projects.
For the fiscal years ended
December 31, 2023 and 2022, respectively, the Company's total revenue was
$85,420 and $13,040, respectively, which is broken down below:
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Revenue Recognition
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Amount as of
12/31/2023
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Amount as of
12/31/2022
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Solar Lease Agreements
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$85,420
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$13,040
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Purchase and Sale Agreement for Environmental Commodities
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$0
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$0
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Sale of Projects
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$0
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$0
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Our Revenue Recognition Policy
follows ASC-606 which is a five-step procedure:
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Procedure
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Example
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Step
1 - Identify the Contract
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Solar
Lease Agreement
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Step 2 - Identify the
Performance Obligations
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Delivery of electricity from
solar plant
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Step
3 - Determine the Transaction Price
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Amount
contractually signed with customer
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Step 4 - Allocate the
Transaction Price
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Obligation is satisfied by
transferring control of the electricity produced to the customer
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Step
5 - Recognize Revenue
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At a
point in time when the customer is invoiced
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Page 13
Our Operating Costs and Expenses
The Company incurs a variety of
costs and expenses, including:
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banking fees;
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legal expenses;
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payments to the Manager for fees
and carried interest;
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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);
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accounting expenses
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annual financial audit expenses;
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depreciation;
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U.S. taxes.
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The Projects also incur a variety
of costs and expenses, including:
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payments to third parties to
operate and maintain the Projects;
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lease payments to landowners
(if applicable);
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debt service and transactional
payments (where we borrow money at the Project level);
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utilities;
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Property taxes;
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banking fees;
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taxes levied in African
countries;
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depreciation;
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Project insurance.
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The Company's total operating
expenses for the fiscal year ended December 31, 2023 were $95,014.
Page 14
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 General Intangible Low-Tax Income ("GILTI")
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.
Taxation of
Dividends
The income of the Company will
consist primarily of cash available for distribution ("CAFD") received
from the Holdco in the form of a dividend. Because the Holdco is a foreign
company, these dividends will be "non-qualified dividends" within the meaning
of the Code and therefore subject to tax at ordinary income tax rates
("qualified dividends," including dividends from most U.S. corporations, are
subject to tax at preferential rates).
Foreign Tax
Credit
The Company, but not the
Investors, might be entitled to credits for taxes paid by the Holdco in South
Africa.
Page 15
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.
Alternative
Minimum Tax
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.
Taxable Year
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.
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.
Each Investor must either report
Company items on his or her 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.
Page 16
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.
Summary of Supporting Contracts
The Company will cause the SPEs
to enter into four main contracts for each Project:
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Purchase and Sale Agreements:
When the Manager identifies a project that it believes, in its sole
discretion, meets the investment criteria of the Company, it signs a
"Purchase and Sale Agreement" to acquire the rights to the Project from a
Development Company.
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Solar Leases: In all
cases, the SPEs will sell electricity produced by the Projects to Customers
pursuant to a contract we refer to as a "Power Purchase Agreement."
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Construction Contracts:
To build the Projects, the SPE will hire a third party to provide
engineering, procurement, and construction services pursuant to a contract we
refer to as a "Construction Contract."
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Asset Management Agreements:
The SPE will then hire a third party to operate the maintain the Projects
pursuant to a contract we refer to as a "Project Maintenance Contract."
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Although the final terms and
conditions and contract title might differ from Project to Project, the rights
and obligations of the parties will generally be consistent across all of the
Projects.
Purchase and
Sale Agreement
The principal terms of typical
Purchase and Sale Agreements are as follows:
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The Seller agrees to sell and the Buyer agrees to purchase
a "project", which is generally defined in an exhibit and includes the rights
to a signed Solar Lease with a customer.
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The contract establishes the price.
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Seller transfers the project to Holdco.
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Solar Lease
The principal terms of typical Solar
Leases are as follows:
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The lease will, at a minimum, establish the:
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o rate the Customer will pay per kWh produced by the
project;
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o an annual rate escalator, usually CPI + 2%;
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o the term of the contract, which is usually 20 years;
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o the exact location of the project on the Lessee's
premises.
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Page 17
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The Lessor shall pay for and manage the process of constructing
the project. Upon the final completion of the construction phase, the Lessor
agrees to lease the solar facility to the lessee.
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Lessor agrees to produce a monthly invoice that is the
amount of kWh generated during the month (as confirmed by a meter reading)
multiplied by the energy rate. Lessee agrees to pay such invoice.
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Lessee will not interfere with the project in any way
including the erection of a physical structure that could cast a shadow on
the project.
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Lessor agrees to engineer, procure and construct the
project at the agreed upon location.
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Lessee agrees that is it should breach the obligation to
pay the lease invoice for more than 60 days, it would be forced to pay an
early termination fee which is established as a table in the agreement for
each of the 20 possible years where such a breach could occur.
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Lessee may also exercise the option to buy the project for
the same price as the early termination price at their discretion.
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At the end of the Term, provided that the Lessee is not in
any breach of the agreement, the project will automatically transfer to the
Lessee for no cost.
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The Lessor will insure the project.
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Disputes will be arbitrated by the South African Institute
of Chartered Accountants (for financial disputes) or another expert agreed to
by the parties.
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The Lessor is entitled to any and all environmental
attributes generated by the project.
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Construction
Contracts
The principal terms of typical
construction contracts are as follows:
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The contractor will provide all the services needed to
design and build a Project on a turnkey basis, including:
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o Producing estimates of the potential electrical
capacity;
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o Creating engineering drawings;
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o Supplying materials; and
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o Installing, assembling, and testing the equipment.
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For its services, the contractor will be entitled to a
fixed fee.
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The fixed fee will be paid in accordance with a schedule
based on progress milestones.
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The contractor will (i) be responsible for payment of all
taxes, charges, tax contributions, and social security contributions related
to the services performed; and ensure that all of its personnel are duly
registered, are performing services in accordance with applicable laws, and
are paid all wages, salary, labor, and social security charges for their
work.
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The contractor will provide the Holdco with certain
warranties for its services and the equipment supplied.
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The contractor must maintain certain specified insurance
coverages.
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The contractor is subject to various penalties for failure
to perform including Liquidated Damages.
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Page 18
Asset
Management Agreement
The principal terms of typical Asset
Management Agreements are as follows:
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The third-party contractor will provide all services
required to operate and maintain the Project, including:
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o Providing all personnel, equipment, and materials
required for the efficient operation of the Project;
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o Preparing all supporting documentation and information
related to the use and operation of the Project;
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o Inspecting transmission lines and substations at least
twice annually and preparing a report suggesting services and maintenance to
be performed on the Project;
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o Preparing and implementing operation and maintenance
instructions, guides, and procedures specific to the Project, including
contingency plans as necessary;
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o Performing routine inspections of the Project to
ensure compliance with manufacturer's operation and maintenance standards;
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o Determining, and to the extent possible, performing or
managing any additional services as necessary to remedy any actual or
potential problems with the Project;
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o Registering the Project and all relevant equipment
with the appropriate authorities; and
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o Managing the supply of all equipment inventory and
spare parts.
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All services will be performed in accordance with their
respective owner/operator manuals, applicable manufacturer and vendor
warranties and specification, prudent operating practices and applicable
laws.
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The contractor will regularly communicate with the SPE
concerning the Project, including:
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o When any work is being done on the Project, holding
monthly meetings;
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o Providing monthly reports;
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o Providing daily bulletins on the operation of the
Project;
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o Preparing monthly management; and
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o Providing a report on any technical work performed on
a Project.
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The SPE will pay the third-party contractor a fixed
monthly fee plus an additional amount for unexpected parts or services not
part of the Scope of Work. The fixed monthly fee is subject to adjustment
based on inflation.
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The initial term of the contract is 60 months.
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Page 19
Material Legal Proceedings
As of the date of this Offering
Circular, neither the Company nor the Holdco are currently involved in any
material legal proceedings.
Factors Likely to Impact the Performance of the
Company
See "Market Outlook and Recent
Trends" for information about the 2024 South Africa election, foreign
exchange rates and loadshedding, each of which are factors likely to impact the
performance of the Company.
The ability of the Company to
conduct its business successfully depends on several other critical factors
including, but not limited to:
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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.
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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.
|
Description of
Property
The only property owned by the
Company are the Projects.
Projects Acquired and Owned
As of the date of this Offering
Circular, we have invested into fourteen (14) Projects, each of which are described
more fully in filings with the SEC linked below. The table below lists the
total amount the Company invested into each Project, the estimated cost of each
Project and the percent of ownership the Company has in each Project. Please
refer to the links in the column labeled "Form 1-U" for the Project Memo which
gives in-depth information regarding each Project such as its location, the
system size, contractors used to construct the Project, information about other
stakeholders, information about the buyer of the energy and environmental
commodities and the estimated economics of the Project. The Project Memos can
also be found on the Platform.
|
Project Name
|
Project Size (AC)
|
Amount Invested
|
% Ownership
|
Estimated Cost
|
Form 1-U
|
|
Spar
Lulekani
|
360kW
|
$23,369
|
6.72%
|
$23,369
|
|
|
Nhimbi Fresh
|
500kW
|
$24,631
|
1.74%
|
$24,631
|
|
|
Anchor
Foods
|
110kW
|
$109,334
|
100%
|
$109,334
|
|
|
CPOA Avondrust
|
150kW
|
$99,024
|
46.39%
|
$99,024
|
|
|
CPOA
Trianon
|
100kW
|
$163,624
|
100%
|
$163,624
|
|
|
Zandvliet
|
100kW
|
$74,999
|
74.54%
|
$74,999
|
|
|
Baysville
|
100kW
|
$25,000
|
25.98%
|
$25,000
|
|
|
Connaught Park
|
400kW
|
$411,362
|
100%
|
$411,362
|
|
|
CPOA
Quadrant Gardens
|
100kW
|
$90,710
|
100%
|
$90,710
|
|
|
CPOA Constantia Place
|
125kW
|
$115,108
|
100%
|
$115,108
|
|
|
Laerskool
Havinga
|
100kW
|
$191,151
|
100%
|
$191,151
|
|
|
Bosmandam High School
|
100kW
|
$148,234
|
100%
|
$148,234
|
TBD
|
|
Montagu
High School
|
100kW
|
$182,256
|
100%
|
$182,256
|
TBD
|
|
CPOA Eventide
|
50kW
|
$98,806
|
100%
|
$98,806
|
TBD
|
|
Total
|
|
$1,757,608
|
|
$1,757,608
|
|
Page 20
Management
Discussion and Analysis of Financial Condition and Result of Operation
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 herein (see "Caution Regarding
Forward-Looking Statements"). Unless otherwise indicated, the latest
results discussed below are as of June 30, 2023.
Summary
of Key Accounting Policies
Investments
For financial statement purposes, the Company accounts for
investments in solar projects (Projects) under ASC 360. The Projects are
carried at cost and will be depreciated on a straight-line basis over the
estimated useful life of the related assets.
Impairment
The Company evaluates for impairment under ASC 360,
utilizing the following required steps to identify, recognize and measure the
impairment of a long-lived asset (group) to be held and used:
|
|
·
|
Indicators
of impairment - Consider whether indicators of impairment are present
|
|
|
|
|
|
|
·
|
Test
for recoverability - If indicators are present, perform a recoverability test
by comparing the sum of the estimated undiscounted future cash flows
attributable to the long-lived asset (group) in question to its carrying
amount (as a reminder, entities cannot record an impairment for a held and
used asset unless the asset first fails this recoverability test).
|
|
|
|
|
|
|
·
|
Measurement
of an impairment - If the undiscounted cash flows used in the test for
recoverability are less than the carrying amount of the long-lived asset
(group), determine the fair value of the long-lived asset (group) and
recognize an impairment loss if the carrying amount of the long-lived asset
(group) exceeds its fair value.
|
Revenue
Recognition
The
company follows ASC 606 guidelines for revenue recognition. To apply this
principle, the standard establishes five key steps:
|
|
·
|
Step
1: Recognize the contract with the customer
|
|
|
|
|
|
|
·
|
Step
2: Specify performance obligations
|
|
|
|
|
|
|
·
|
Step
3: Establish transaction price
|
|
|
|
|
|
|
·
|
Step
4: Allocate transaction price to performance obligations
|
|
|
|
|
|
|
·
|
Step
5: Recognize revenue
|
Market Outlook and Recent Trends
The majority of the Projects are
located in South Africa, a nation grappling with flagrant racial tension,
economic disparity, and political instability. These problems that may result
in 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 21
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 the Projects' net income for the preceding month minus
any amounts held back for reserves. Cash flow is first used to pay
Project-level operating expenses prior to determining distributable cash flow
(as defined below). Cash flow from Projects
can be generated in three ways:
|
|
·
|
payment from Customers under
Solar Leases;
|
|
|
|
|
|
|
·
|
proceeds from the sale or
refinance of Projects; and
|
|
|
|
|
|
|
·
|
Liquidated Damages under
Construction Agreements (see below).
|
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, our Manager may
declare other periodic distributions as circumstances dictate.
To
date, the Company has not made a profit, although it has had distributable cash
flow. To the extent the Company has distributable cash flow but has not made a
profit, such distributions are generally considered a return of capital for
U.S. federal income tax purposes and reported to Investors on a Form 1099-B. To
the extent the Company makes distributions from profits in the future, such distributions
will be classified as dividends and reported to Investors on a Form 1099-DIV.
Please
note that in some cases, Investors have cancelled their purchase of Class A
Investor Shares after distributions were made. In that case, the distribution
allocated to that Investor is returned to the Company and the bookkeeping is
updated to reflect the change in cash distributed. Thus, all figures below are
subject to change.
Below
is a table depicting the fees paid and distributions made from the Company
since inception. Note that whenever the table shows that the Manager has
received its Promoted Interest, the Investors have received their full
Preferred Return, as defined in "Allocations of Distributions". In
those cases where the Manager does not receive its Promoted Interest,
distributions were not sufficient to distribute to Investors their Preferred
Return.
|
Distribution Date
|
Distributable Cash Flow
|
Preferred Return
|
Promoted Interest*
|
Total Class A Investor Distributions (Including Preferred
Return)
|
Cash on Cash Yield**
|
|
|
|
4/6/21
|
-
|
-
|
-
|
-
|
-
|
|
|
4/26/21
|
-
|
-
|
-
|
-
|
-
|
|
|
5/21/21
|
-
|
-
|
-
|
-
|
-
|
|
|
7/29/21
|
-
|
-
|
-
|
-
|
-
|
|
|
8/26/21
|
-
|
-
|
-
|
-
|
-
|
|
|
9/23/21
|
116.81
|
81.826
|
-
|
116.81
|
0.24%
|
|
|
10/30/21
|
241.58
|
169.228
|
-
|
241.58
|
0.50%
|
|
|
11/30/21
|
101.74
|
74.352
|
-
|
101.74
|
0.06%
|
|
|
12/24/21
|
112.23
|
79.768
|
-
|
112.23
|
0.06%
|
|
|
2021 Total
|
$572.36
|
$405.17
|
$0.00
|
$572.36
|
0.86%
|
|
|
1/26/22
|
209.71
|
148.459
|
-
|
209.71
|
0.08%
|
|
|
2/24/22
|
120.23
|
85.325
|
-
|
120.23
|
0.03%
|
|
|
3/29/22
|
334.48
|
232.937
|
-
|
334.48
|
0.08%
|
|
|
4/29/22
|
331.59
|
236.001
|
-
|
331.59
|
0.07%
|
|
|
5/31/22
|
938.81
|
677.229
|
-
|
938.81
|
0.15%
|
|
|
6/30/22
|
1084.96
|
782.657
|
-
|
1084.96
|
0.16%
|
|
|
7/29/22
|
913.84
|
700.277
|
-
|
913.84
|
0.13%
|
|
|
8/27/22
|
1119.77
|
846.482
|
-
|
1119.77
|
0.14%
|
|
|
9/27/22
|
1401.61
|
1020.152
|
-
|
1401.61
|
0.18%
|
|
|
10/27/22
|
1801.99
|
1280.11
|
-
|
1801.99
|
0.23%
|
|
|
11/29/22
|
2304.2
|
1636.874
|
-
|
2304.2
|
0.26%
|
|
|
12/28/22
|
3101.53
|
2203.287
|
-
|
3101.53
|
0.31%
|
|
|
2022 Total
|
$13,662.72
|
$9,849.79
|
$0.00
|
$13,662.72
|
1.82%
|
|
|
1/26/23
|
3528.87
|
2542.37
|
98.65
|
3430.22
|
0.31%
|
|
|
2/24/23
|
3995.29
|
2847.59
|
114.77
|
3880.52
|
0.31%
|
|
|
3/27/23
|
3605.33
|
2603.73
|
100.16
|
3505.17
|
0.25%
|
|
|
4/27/23
|
4540.45
|
3332.65
|
120.78
|
4419.67
|
0.29%
|
|
|
5/26/23
|
5011.38
|
3352.247
|
248.87
|
4762.51
|
0.28%
|
|
|
6/26/23
|
5923.7
|
4054.7
|
186.9
|
5736.8
|
0.30%
|
|
|
7/25/23
|
3239.31
|
2223.81
|
101.55
|
3137.76
|
0.16%
|
|
|
8/28/23
|
2294.09
|
1826.447
|
0
|
2294.09
|
0.10%
|
|
|
9/27/23
|
2759.92
|
1863.809
|
80.65
|
2679.27
|
0.11%
|
|
|
10/27/23
|
4554.37
|
3233.481
|
118.88
|
4435.49
|
0.18%
|
|
|
11/24/23
|
5540.1
|
3916.421
|
144.26
|
5395.84
|
0.22%
|
|
|
12/26/23
|
8703.84
|
6194.688
|
225.83
|
8478.01
|
0.33%
|
|
|
2023 Total
|
$53,696.65
|
$37,991.94
|
$1,541.30
|
$52,155.35
|
2.84%
|
|
|
1/26/24
|
7,974.79
|
5732.77
|
202.13
|
7,772.66
|
0.28%
|
|
|
2/27/24
|
14,209.99
|
10479.42
|
0.00
|
14,209.99
|
0.47%
|
|
|
3/26/24
|
13,000.00
|
9424.71
|
178.76
|
12,821.24
|
0.40%
|
|
|
4/26/24
|
13,792.76
|
10164.67
|
181.40
|
13,611.36
|
0.41%
|
|
|
2024 Total
|
$48,977.54
|
$35,801.57
|
$562.29
|
$48,415.25
|
1.56%
|
|
|
TOTAL
|
$116,909.27
|
$84,048.48
|
$2,103.59
|
$114,805.68
|
7.08%
|
|
*Note: Energea reserves the
right to reduce its Asset Management Fees and Promoted
Interest payments for any reason or to protect the desired cash yield to
Investors. For more information regarding the Asset Management Fees and Promoted Interest paid to our Manager, see
"Compensation of Directors and Executive Officers" below.
**Note: Monthly Cash on cash
yield values are calculated by dividing the Investor Distributions amount
(which also includes distributions to the Manager or its affiliates if they own
Class A Investor Shares) by the total cost basis of all outstanding shares at
the time the distribution is issued. Year-end cash on cash yields are
calculated by summing all monthly cash on cash yields for the respective year.
Page 22
Calculating
Distributions
The Company
intends to make distributions monthly, to the extent the Manager, in its
discretion, determines that cash flow is available for distributions. To date,
the Company has not made a profit, although it has had distributable cash flow.
Below are the activities of the Company that generate the cash flow which could
be used to fund distributions:
Sources of Distributable Cash Flow
|
|
·
|
Sale of Energy under Solar
Leases
|
|
|
|
|
|
|
·
|
Sale of Environmental
Commodities under Purchase and Sale Agreements for Environmental Commodities
|
|
|
|
|
|
|
·
|
Net Proceeds from Capital
Transactions
|
|
|
|
o Originates from the sale
or refinancing of Projects
|
|
|
|
o Net proceeds are the
gross proceeds of the capital transaction minus associated expenses,
including debt repayment
|
|
|
|
|
|
|
·
|
Liquidated Damages from
Construction Agreements
|
|
|
|
o Penalties paid by EPC
Contractors when Projects are delivered behind schedule
|
|
|
|
o LDs are not booked as revenue
but are considered distributable cash flow
|
When the
Company has distributable cash flow and the Manager determines to make a
distribution, here is an overview of how these distributions are allocated and
calculated:
Page 23
Allocation of Distributions
Cash flow, if any, is distributed to the Investors and the
Manager in the following order of priority:
|
|
·
|
First, a preferred return equal
to a 7% IRR to Class A Investors (the "Preferred Return").
|
|
|
|
|
|
|
·
|
Thereafter, any additional cash
flow 70% to the Investors and 30% to the Manager (the "Promoted Interest")
|
Calculation of Preferred Return
The Manager discounts each month
of Estimated NOI (see "Price of Class A Investor Shares") by the same
discount rate until the cash flow results in an internal rate of return ("IRR")
of 7% ("Adjusted NOI"). The IRR is calculated using the XIRR function
and is based upon the price an Investor paid per Class A Investor Share. The
resulting Adjusted NOI is the monthly distribution that would need to be paid
to Investors for them to receive their Preferred Return. Since all months of
Estimated NOI are discounted evenly, the Adjusted NOI maintains the same
seasonality curve as the Estimated NOI. If the actual NOI for any month is less
than the Adjusted NOI, the Investors receive all the cash distributed that
month and the shortfall is carried forward so that Investors catch up on their
Preferred Return prior to any Promoted Interest being paid. The IRR is
calculated based upon the price an Investor paid per Class A Investor Share,
and not on any revenue or profit achieved by the Company. To the extent the
Company has distributable cash flow but has not made a profit, such
distributions are considered a return of capital for U.S. federal income tax
purposes.
Calculation of Promoted Interest
If the Manager determines that a
distribution can be made with distributable cash flow, and the amount of
distributable cash flow is greater than the Adjusted NOI for the month (and the
Investors are therefore on track to receive their Preferred Return), the
Manager will receive a Promoted Interest. Any
distributable cash flow that is greater than the Adjusted NOI (plus any
shortfall from previous months) will be divided between the Manager and the
Investors where the Manager will get 30% of the excess and Investors will get
70% of the excess.
Past Operating Results
Since inception, the Company has
steadily increased its ownership over a portfolio of commercial and industrial
sized solar projects in South Africa. The main Customers for the Company have
been schools and a chain of retirement homes called CPOA. We have focused the
majority of our Project activity in two major South Africa urban centers:
Johannesburg and Cape Town.
While the overall returns we
expected from the Projects were negatively impacted by an increase in the
frequency of Load Shedding and a weakening of the ZAR (see Market Outlook
and Recent Trends). While a weaker ZAR results in lower-than-expected cash
flow, and thus, dividend yield, it also creates a favorable investment
environment where USD can be used to buy assets, like Projects, at attractive
prices.
Some of the Projects we own have
now been operational for more than six months and have stabilized their
generation behavior, setting the Company on a path of consistent, long-term
monthly cash distributions for the next two decades.
Operating Results for Fiscal
Years ended December 31, 2023 and 2022
For the fiscal years ended
December 31, 2023 and 2022, respectively, the Company invested a total of
$1,446,628 and $931,343 and generated revenue of $85,420 and $13,040. The total
operating expenses for the Company amounted to $95,014 for the fiscal year
ended December 31, 2023 and $18,860 for the fiscal year ended December 31,
2022, including professional fees, advertising and marketing, software
subscription, taxes, and other general and administrative expenses.
Consequently, the Company incurred a loss from operations, totaling $9,594 for
the fiscal year ended December 31, 2023 and $5,820 for the fiscal year ended
December 31, 2022.
As of December 31, 2023, the
Company had assets totaling $2,577,214 on its balance sheet, comprised of cash
on hand of $1,109,421, investments in solar energy projects, net of
depreciation in the amount of $1,446,628, account receivable and other current
assets in the amount of $21,165. The Company's total Liabilities and members'
equity was $2,577,214, Liabilities totaled $164,829 and $2,412,385 of equity
owned by the Investors.
As of December 31, 2022, the
Company had assets totaling $965,047 on its balance sheet, comprised of cash on
hand of $6,907, investments in solar energy projects in the amount of $931,343,
and other current assets in the amount of $26,797. The Company's total
Liabilities and members' equity was $965,047, Liabilities totaled $17,585 and
$947,462 of equity owned by the Investors.
Leverage
The Company might borrow money to
invest in Projects, depending on the circumstances at the time. 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 24
Liquidity and Capital Resources
We will obtain the capital required to
purchase new Projects and conduct our operations from the proceeds of the
Offering and any future offerings we may conduct, from secured or unsecured
financings from banks and other lenders, from short term advances from the
Manager and from undistributed funds from our operations. As of December 31,
2023, the Company had $1,109,421 of cash on hand and equivalents, which will be
used to complete the acquisition of new Projects including Bosmandam High
School, CPOA Eventide, Montagu High School and other Projects approved by the
Investment Committee.
Method of Accounting
The compensation described in
this section was calculated using the accrual method in accordance with GAAP
rules.
Directors,
Executive Officers & Significant Employees
Names, Positions,
Etc.
The Company itself has no
officers or employees. The individuals listed below are the Managing Partners,
Executive Officers, and Significant Employees of Energea Global, the Manager of
the Company.
|
|
Position with Manager
|
Age
|
Term of Office
|
Approximate Hours Per Week If Not Full Time (1)
|
|
Executive Officers
|
|
|
|
|
|
Mike Silvestrini
|
Managing Partner
|
43
|
01/01/2017 - Present
|
Full Time
|
|
Gray Reinhard
|
Managing Partner
|
39
|
01/01/2020 - Present
|
Full Time
|
|
|
|
|
|
|
Significant Employees
|
|
|
|
|
|
Isabella Mendonça
|
General Counsel
|
32
|
10/02/2020 - Present
|
Full Time
|
|
Arthur Issa
|
Financial Analyst
|
29
|
05/23/2018 - Present
|
Full Time
|
|
Tyler Hurlburt
|
Director of Investment Relations
|
45
|
11/03/2020 - Present
|
Full Time
|
|
Marta Coelho
|
Controller
|
51
|
12/07/2018 - Present
|
Full Time
|
|
Dave Rutty
|
Director of Construction
|
34
|
06/13/2022 - Present
|
Full Time
|
|
Kathy Koser
|
Director of Compliance
|
43
|
08/01/2021 - Present
|
Full Time
|
(1) The above listed employees do
not record specific hours to each Company managed by Energea Global. Rather,
the employees focus their full-time and energy to each Project, portfolio, or
process as needed. The Manager cannot estimate number of hours per week spent
managing this or any particular Company as the employees are salaried. The work
required to manage the Company and other companies managed by Energea Global
changes from time to time depending on the number and frequency of Projects
resulting from the amount they raise in each Offering. As the companies grow,
dedicated staff are brought in to exclusively manage a specific company. As of December
31, 2023, there are no staff members exclusively dedicated to the Company and
it is managed by the Manager's executive team and certain significant
employees.
Family Relationships
Marta Coelho, the Manager's
Controller, is the sister-in-law of Mike Silvestrini, the Managing Partner.
There are no other family relationships among the executive officers and
significant employees of the Manager.
Page 25
Ownership of
Related Entities
Energea Global, the Manager of
the Company, is majority owned by Mike Silvestrini, a resident of Chester,
Connecticut.
Business Experience
Mike is an accomplished
professional with a strong commitment to renewable energy and environmental
sustainability. He has 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.
Since 2017, Mike has been the
Co-Founder & Managing Partner at Energea Global LLC. In his capacity as Co-Founder
& Managing Partner of the Manager, Mike is a director of the Investment
Committee which determines the investment strategy for the Company. To date,
Energea Global manages 3 funds formed to acquire and operate solar power
projects: the Company, Energea Portfolio 2 LLC, and Energea Portfolio 4 USA
LLC. See "Other Solar Energy Funds" below for the status of each fund's
offerings.
Since 2015, Mike has served 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.
From 2008 to 2017, 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.
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.
Prior to joining Energea in
January 2020, Gray served as the CTO of Dwell Optimal Inc. which assists
businesses providing employees with travel accommodations.
Gray studied at Princeton
University.
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.
From 2016 until she joined
Energea Global, Isabella was an associate in the corporate and securities
practice at Mayer Brown in the Rio de Janeiro office.
Isabella studied law at Fundacão
Getulio Vargas, in Brazil and has a master's degree (LLM) from the University
of Chicago.
Page 26
Arthur Issa
Arthur Issa was one of the first
employees at Energea Global, starting in May, 2018. 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 at Energea Global, 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
From 2006 until he joined the
Energea Global team, Tyler Hurlburt was a licensed Wealth Manager at Fortune
500 firms including Ameriprise, Prudential, Wells Fargo 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.
Marta Coelho
Since its inception in 2018,
Marta Coelho has served as the Controller at Energea Global, 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 Global's diverse range of
operating entities and projects across Africa, Brazil, and the USA.
Dave Rutty
Dave is a highly experienced
electrician with over 12 years of expertise in building and maintaining solar
projects. At Energea Global, 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.
From 2020 to 2022, Dave served as
a Managing Partner at SRES, a solar contracting company based in the
northeastern U.S. Prior to that, Dave was served as the Vice President of
Operations and Maintenance at Greenskies Renewable Energy LLC.
Kathy Koser
Kathy is a pivotal manager at
Energea, overseeing insurance, compliance, and human resources with exceptional
skill. 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.
From 2018 to 2021, Kathy was an
account associate and executive assistant for the sales team at RoomReady, an
AV and technology services company.
Legal Proceedings Involving
Executives and Directors
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.
Other Solar Energy Funds
Energea Global, the Manager of
the Company, is also the manager of two other funds formed to acquire and
operate solar power projects, each of which is conducting an offering under
Regulation A:
|
|
·
|
Energea Portfolio 2 LLC ("Portfolio
2"), which was formed to acquire and operate projects located in Brazil
with residential and small business customers.
|
|
|
|
|
|
|
·
|
Energea Portfolio 4 USA LLC ("Portfolio
4"), which was formed to acquire and operate projects located in the
United States.
|
Each company is conducting an
offering under Regulation A. The current status of each of the Company's,
Portfolio 2's and Portfolio 4's current and prior offerings, as of the date of
this Offering Circular, is below:
|
|
Energea
Portfolio 2 LLC
|
Energea Portfolio
3 Africa LLC
|
Energea
Portfolio 4 USA LLC
|
|
Date of Prior Offering Qualification
|
08/13/2020
|
08/2/2021
|
07/01/2021
|
|
Offering Amount Raised Through 12/26/23
|
$11,923,332.92
|
$2,577,293.75
|
$2,911,945.62
|
|
Solar Projects Owned
|
Eleven
|
Eleven
|
Four
|
|
Prior Offering Status
|
Terminated
|
Terminated
|
Terminated
|
|
Current Maximum Offering Amount
|
$50,000,000
|
$50,000,000
|
$50,000,000
|
|
Current Offering Status
|
Awaiting Qualification
|
Awaiting Qualification
|
Awaiting Qualification
|
Page 27
Compensation
of Directors and Executive Officers
Overview
Our Manager is compensated as
follows:
|
|
·
|
They receive fees and other compensation, including for
services provided;
|
|
|
|
|
|
|
·
|
They may invest alongside Investors and, if so, will
receive the same distributions as Investors;
|
|
|
|
|
|
|
·
|
They receive the Promoted Interest;
and
|
|
|
|
|
|
|
·
|
They receive interest on loans to the Company.
|
The Company itself does not have
any employees or payroll. The executive officers and employees of our Manager
are compensated directly by the Manager from the fees and Promoted Interest paid to the Manager by the
Company.
Fees and Other
Compensation
|
Type of Fee
|
Description
|
|
Reimbursement of Organization, Offering
and Marketing Expenses
|
The Company must reimburse the
Manager for expenses the Manager incurs in connection with the Offering
before the Offering Circular is qualified by the SEC.
As of the date of this Offering
Circular, we estimate that those expenses will be approximately $60,000.
|
|
|
|
|
Asset Management Fees
|
The Manager will charge the
Company a monthly asset management fee equal to 0.167% of the aggregate
capital that has been invested in the Company.
|
|
|
|
|
Promoted Interest
|
See "Promoted Interest"
below
|
|
|
|
|
Developer Fees
|
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 5.0% of the Project's cost.
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.
|
|
|
|
|
Interest on Loans
|
The Manager might lend to the
Company to fund the acquisition or investment in Projects or for other
purposes. Such a loan will bear interest at market rates.
The amount of interest will
depend on the amount and term of any such loans.
|
|
|
|
|
O&M and Credit Management
Services
|
Energea may provide O&M
services to the Projects owned by the Company at market rates.
|
Page 28
Co-Investment
The Manager and its affiliates
might purchase Class A Investor Shares. If so, they will be entitled to the
same distributions as other Investors. If such investment is made to facilitate
the Company's acquisition of or investment in Projects before there are
sufficient offering proceeds, the Manager will be entitled to redeem its Class
A Investor Shares from additional Offering proceeds as they are raised.
Promoted Interest
As described in "Calculating
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.
|
Reporting Compensation 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.
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
|
|
|
· Interest on Loans
|
|
|
|
|
Operation of Projects
|
· Asset Management Fee
|
|
|
· Promoted Interest
|
|
|
· O&M Service Fees
|
|
|
|
|
Sale of Projects
|
· Asset Management Fee
|
|
|
· Promoted Interest
|
Page 29
Security Ownership
of Manager and Certain Securityholders
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.
The following table sets forth
the approximate beneficial ownership of our Class A Investor Shares as of May
1, 2024, for each person or group that holds more than 10.0% of our Class A
Investor Shares, and for each director and executive officer of our Manager and
for the directors and executive officers of our Manager as a group.
|
Name of Beneficial Owner (1)(2)
|
Number of
Shares Beneficially Owned
|
Amount and
Nature of Beneficial Ownership Acquirable
|
Percent of All
Shares
|
|
Energea Global LLC
|
12,566
|
N/A
|
0.4320%
|
|
Michael Silvestrini
|
161(3)
|
N/A
|
0.0055%
|
|
Christopher Sattler
|
0(3)
|
N/A
|
0.0000%
|
|
Gray Reinhard
|
9
|
N/A
|
0.0003%
|
|
All directors and executive
officers of our Manager as a group (3 persons)
|
170
|
N/A
|
0.0058%
|
|
-
|
|
-
|
|
(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 52 Main Street, Chester, CT 06412.
|
|
|
(3)
|
Includes shares beneficially
owned by Energea Global LLC, under the control of its Class A Shareholders.
Notably, Michael Silvestrini and Chris Sattler, as the largest principal
shareholders, hold 38.90% and 29.34% of the shares of Energea Global LLC,
respectively.
|
Interest of
Management and Others in Certain Transactions
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 or a subsidiary of 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.
|
Page 30
As of the date of this Offering
Circular, the Company has entered into transactions with related parties as set
forth below:
|
|
·
|
Credit Advance: The Company entered into several
credit advances from the Manager to accelerate the availability of capital
needed to make certain small payments. These amounts are recorded as
due-to/due-from transactions and no interest is charged to the Company for
these advances.
|
Securities
Being Offered: the Class A Investor Shares
Description of
Securities
The Company is offering up to $50,000,000
of Class A Investor Shares. All of the rights and obligations associated with
the Class A Investor Shares are set forth in:
Price of Class A Investor Shares
The fixed price of Class A
Investor Shares was determined by calculating the Net Asset Value ("NAV")
of the Company and dividing the NAV by the total number of outstanding shares.
The NAV is calculated as the Net Present Value ("NPV") of the Estimated
Net Operating Income ("Estimated NOI") of the Company.
The Estimated NOI calculation
begins with an estimation of revenue. Since the Company currently does not have
any Contracts for the Sale of Environmental Commodities and since we do not
anticipate the sale of any Project, revenue comes from Solar Leases. We
estimate monthly energy produced by each Project using predictive software
called PVsyst. PVsyst is a vital tool in the solar industry for designing,
simulating, and analyzing the performance of photovoltaic systems. Its
comprehensive features enable precise predictions of solar power generation ("kWh"),
considering a wide range of variables and site-specific conditions. To estimate
monthly revenue for each Project, the energy rate described in the Solar Lease
("Energy Rate") is multiplied by kWh throughout the term of the Solar
Lease.
We then deduct all of the
expected operating expenses at the Project and Company level (see "Our
Operating Costs and Expenses") from the revenue. These expenses are fairly
easy to estimate as they are either consistent and predictable (like a bank
fee) or fixed by contract (like an Asset Management Agreement). By subtracting
the estimated operating costs and expenses from the estimated revenue, we
establish a monthly Estimated NOI. We then use an XIRR calculation to compute
the NPV of that Estimated NOI using the Project's IRR as the discount rate in
the NPV equation. For example, if the Estimated NOI would result in a 12% IRR,
we use 12% as the discount rate when calculating the NPV of the Estimated NOI.
Therefore, the NPV of the
Estimated NOI using the IRR as the discount rate establishes the NPV of the
Company. When we divided the NPV of the company by the number of outstanding
Class A Investor Shares, we arrive at a price per share.
Page 31
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 exclusively.
Limited
Liability Company Agreement
The Company is governed by a
Limited Liability Company Agreement dated March 12, 2021 (the "
LLC Agreement").
A copy of the LLC Agreement
can be found here. 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. A copy of
the Authorizing Resolution can be found
here.
The LLC Agreement establishes
Energea Global LLC, a Delaware limited liability company, as the Manager.
Summary of LLC Agreement and 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, a copy of
which
can be found here, and
by the Authorizing Resolution itself, a copy of which can be found
here.
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."
Shares and Ownership
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 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 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.
Management
The Manager has complete
discretion over all aspects of the business conducted by the Company. For
example, the Manager may (i) create classes of Investor Shares with such terms
and conditions as the Manager may determine in its sole discretion; (ii) issue
Shares to any person for such consideration as the Manager maybe determine in
its sole discretion, and admit such persons to the Company as Investor Members;
(iii) engage the services of third parties to perform services on behalf of the
Company; (iv) enter into one or more joint ventures; (v) purchase, lease, sell,
or otherwise dispose of real estate and other assets, in the ordinary course of
business or otherwise; (vi) enter into leases and any other contracts of any
kind; (vii) incur indebtedness on behalf of the Company, whether to banks or
other lenders; (viii) determine the amount of the Company's Available Cash and
the timing and amount of distributions to Members; (ix) determine the
information to be provided to the Members; (x) grant mortgages, liens, and
other encumbrances on the Company's assets; (xi) make all elections under the
Code and the provisions of State and local tax laws; (xiii) file a petition in
bankruptcy; (xiv) discontinue the business of the Company; and (xv) 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.
Page 32
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 seventy five percent
(75%) 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 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 liable to the Company 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 fraud or
willful misconduct 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, if it is judicially determined
that such Manager is not entitled to be exculpated under the standard described
in the preceding paragraph by the LLC Agreement, such Manager shall promptly
reimburse the Company for any reimbursed or advanced expenses.
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, the Investor will have no obligation to
make further contributions to the Company (except for the return of
distributions under certain circumstances as required by Sections 18-215, 18-607
and 18-804 of the Delaware LLC Act, as described in more detail under "Liability
To Make Additional Contributions" below.).
Personal
Liability
No Investor will be personally
liable for any of the debts or obligations of the Company.
Distributions
The manner in which the Company
will distribute its available cash is described in "Securities Being Offered
Calculating Distributions".
Page 33
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. The Manager generally has a first right
of refusal to purchase Class A Investor Shares pursuant to Article 8 of the LLC
Agreement. See "Risk Factors-No Market for the Class A Investor Shares; Limits
on Transferability."
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
The Company will pay certain
management fees and other fees to the Manager, as summarized in "Compensation
of Directors and Executive Officers".
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.
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·
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If the Manager determines that
the Investor has engaged in certain misconduct described in the LLC
Agreement.
|
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 share price of such Class A Investor Shares as published
on the Platform.
The purchase price will be paid
by wire transfer or other immediately available funds.
"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:
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·
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Cure ambiguities or
inconsistencies in the LLC Agreement;
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·
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Add to its own obligations or
responsibilities;
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·
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Conform to this Offering
Circular;
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·
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Comply with any law;
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·
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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; and
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·
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Do anything else that could not
reasonably be expected to have, a material adverse effect on Investors.
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Page 34
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, delete or modify any
amendments listed in Section 11.3 of the LLC Agreement or impose personal
liability on an Investor requires the consent of the Manager and each affected
Investor.
Information
Rights
Within a reasonable period 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 amount
distributed, and the manner in which it was distributed (ii) a balance sheet of
the Company, (iii) a statement of income and expenses, and (iv) such additional
information as may be required by law. The financial statements of the Company
need not be audited by an independent certified public accounting firm unless
the Manager so elects or the law so requires.
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.
Distributions
in Liquidation
Distributions made in liquidation
of the Company will be made in the manner described "Calculating
Distributions", 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 (except for the
return of distributions under certain circumstances as required by Sections
18-607 and 18-804 of the Delaware LLC Act).
Under Section 18-607 of the
Delaware LLC Act, a limited liability company may not make a distribution to a
member if, after the distribution, all liabilities of the limited liability
company, other than liabilities to members on account of their member interests
and liabilities for which the recourse of creditors is limited to specific
property of the limited liability company, would exceed the fair value of the
assets of the limited liability company. The Delaware LLC Act provides that a member
who receives a distribution and knew at the time of the distribution that the
distribution was in violation of Section 18-607 of the Delaware LLC Act shall
be liable to the limited liability company for the amount of the distribution
for three years.
Under Section 18-804 of the
Delaware LLC Act, a limited liability company is required to distribute its
assets: (i) first to creditors, to the extent otherwise permitted by law, in
satisfaction of the limited liability company's liabilities other than
liabilities for which payment has been made and distributions to members and
former members; (ii) unless otherwise provided in its limited liability company
agreement, to members and former members in satisfaction of liability for distributions
under the Delaware LLC Act; and (iii) unless otherwise provided in its limited liability
company agreement, to members first for the return of their contributions and
second respecting their limited liability company interests, in the portions in
which they share in distributions. The Delaware LLC Act provides that a member
who receives a distribution and knew at the time of the distribution that the
distribution was in violation of Section 18-804 of the Delaware LLC Act shall
be liable to the limited liability company for the amount of the distribution
for three years.
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.
Page 35
No
Guarantee
The Company can only distribute
as much cash flow as the Company has available for distributions (see "Distributions").
There is no guarantee that the Projects will generate enough cash flow, after
paying expenses, to distribute enough to pay a positive return to Investors or
even to return all their invested capital.
Redemption Plan
Investors
should note that the Manager may, in its sole discretion, amend, suspend, or
terminate the Redemption Plan at any time without prior notice for any reason,
and the Manager reserves the right to reject any Redemption Request at any time
for any reason.
Our Class A Investor Shares are
currently not listed on a national securities exchange or included for
quotation on a national securities market, and currently there is no intention
to list our Class A Investor Shares. While
Investors should
view an investment in the Company as long-term, we are adopting a redemption
plan ("
Redemption Plan") whereby an investor has the opportunity to
obtain liquidity.
At any time after sixty (60) days
following the purchase of Class A Investor Shares, an Investor may request
redemption of their Class A Investor Shares in accordance with the Company's
Redemption Plan as set forth herein.
In order to submit a redemption
request (a "Redemption Request") Investors must (1) submit a
time-stamped request via the Platform, (2) have no more than one outstanding
request at any given time, and (3) request that the Company redeem no more than
$50,000 worth of Class A Investor Shares per request. In addition, the
Redemption Plan is subject to certain liquidity limitations, which may
fluctuate depending on the liquidity of the Company. We reserve the right to
reject any Redemption Request at any time to protect our operations and our
non-redeemed Investors, to prevent an undue burden on our liquidity, or for any
other reason, including, what we deem to be a pattern of excessive, abusive or
short-term trading.
As calculated below, the
redemption price ("Redemption Price") may be reduced by a discount based
on the time of the Redemption Request, rounded down to the nearest cent. The
Redemption Price will be equal to (i) the current price of the Class A Investor
Shares in effect at the time the Redemption Request is made, reduced by (ii)
the aggregate sum of distributions, if any, with record dates during the period
between the Redemption Request date and the redemption date. The current price
of the Class A Investor Shares is published on the Platform, and Investors will
be informed of the estimated Redemption Price at the time a Redemption Request
is submitted which shall be subject to the adjustment for distributions
described above.
Based on the time when an
Investor submits a Redemption Request, the Redemption Prices are set forth below:
|
Holding Period from Date
of Settlement
|
Redemption Price (as
percentage of per share redemption price)(1)
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|
Settlement date to 60 days
|
No Redemptions
|
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60 days to 3 years
|
95.0
|
%(2)
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More than 3 years
|
100.0
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%(3)
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(1)
|
The Redemption Price will
be the per share price for our Class A Investor Shares in effect as of
the time the Redemption Request is made (i) reduced by any distributions, if
any, with record dates during the period between the Redemption Request date
and the redemption date and (ii) rounded down to the nearest $0.01.
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(2)
|
For Class A Investor Shares
held between 60 days and three (3) years, the Redemption Price includes a
fixed 5.0% discount based on the per share price for our Class A Investor
Shares in effect at the time of the Redemption Request.
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|
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(3)
|
There is no discount to
redemptions of Class A Investor Shares held at least three (3) years.
|
Investors may withdraw their
Redemption Request at any time before the redemption is paid. If we agree to
honor a Redemption Request, such Redemption Request will be paid within 90
days.
In light of the SEC's current
guidance on redemption plans, we generally intend to limit redemptions in any
calendar quarter to Class A Investor Shares whose aggregate value is 5.00% of
the NAV of all of our outstanding Class A Investor Shares on the last business
day of the preceding quarter, with excess capacity carried over to later
calendar quarters in that calendar year, up to a maximum of 20.00% of the NAV
of all of our Class A Investor Shares outstanding during any calendar year.
Notwithstanding the foregoing, we are not obligated to redeem Class A Investor
Shares under the Redemption Plan.
We cannot guarantee that the
funds, if any, set aside for the Redemption Plan will be sufficient to
accommodate all Redemption Requests. In the event our Manager determines, in
its sole discretion, that we do not have sufficient funds available to redeem
all of the Class A Investor Shares for which Redemption Requests have been
submitted, such pending Redemption Requests will be honored on a first in first
out basis, if at all. In the event that not all Redemption Requests are being
honored in a given quarter, due to reaching the 5.00% quarterly limit or
otherwise, the Redemption Requests not fully honored will carry over to the
first business day of the next quarter and Investors will not need to submit a
new Redemption Request the following quarter. Investors will be notified within
10 days of submitting a Redemption Request whether their request for Redemption
has been accepted or denied.
We intend to limit Investors to
one (1) Redemption Request outstanding at any given time, meaning that, if an
Investor desires to request more or less Class A Investor Shares be redeemed,
such Investor must first withdraw the first Redemption Request. For Investors
who hold Class A Investor Shares with more than one record date, Redemption
Requests will be applied to such Class A Investor Shares in the order in which
they settled, on a first in first out basis - meaning, those Class A Investor
Shares that have been continuously held for the longest amount of time will be
redeemed first. In addition, we intend to limit Redemption Requests to $50,000
worth of Class A Investor Shares per Redemption Request.
In addition, our Manager may, in
its sole discretion, amend, suspend, or terminate the Redemption Plan at any
time without prior notice, including to protect our operations and our
non-redeemed Investors, to prevent an undue burden on our liquidity, following
any material decrease in our NAV, or for any other reason. In the event that we
suspend our Redemption Plan, we expect that we will reject any outstanding
Redemption Requests and do not intend to accept any new Redemption Requests. In
the event that we amend, suspend or terminate our Redemption Plan, we will file
an offering circular supplement and/or Form 1-U, as appropriate, and post such
information on the Platform to disclose such action. Therefore, you may not
have the opportunity to make a Redemption Request prior to any potential
termination of our Redemption Plan.
Page 36
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:
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|
·
|
Distributions: As the
holder of the Common Shares, the Manager will be entitled to the
distributions of the Promoted Interest.
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·
|
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.
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|
·
|
Obligation to Contribute
Capital: Holders of the Common Shares will have no obligation to contribute
capital to the Company.
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|
·
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Redemptions: Holders of
the Common Shares will have no right to have Common Shares redeemed.
|
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:
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|
·
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Your name and address
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·
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Your email address
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·
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Your social security number
(for tax reporting purposes)
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·
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Whether you are an "accredited
investor"
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·
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If you not an accredited
investor, your income and net worth
|
You will also be asked to sign an
Investment Agreement, a copy of which is available
here.
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 you invest, your money will
be held in an escrow account with a third party until your subscription is
reviewed and the Manager decides whether to accept it. 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.
Page 37
Limit On The 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 SEC, the term "accredited investor" means:
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|
·
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A natural person who has
individual net worth, or joint net worth with the person's spouse, that
exceeds $1 million at the time of the purchase, excluding the value of the
primary residence of such person;
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·
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A natural person with income
exceeding $200,000 in each of the two most recent years or joint income with
a spouse exceeding $300,000 for those years and a reasonable expectation of
the same income level in the current year;
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·
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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;
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·
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A business in which all the
equity owners are accredited investors;
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·
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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;
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·
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A bank, insurance company,
registered investment company, business development company, or small
business investment company;
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·
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A charitable organization,
corporation, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets exceeding $5 million; and
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|
·
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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:
|
|
·
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10% of their annual income; or
|
|
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|
·
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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.
Additional Information
We have
filed with the SEC an offering statement under the Securities Act on
Form 1-A regarding this Offering. This Offering Circular, which is part of
the offering statement, does not contain all the information set forth in the
offering statement and the exhibits related thereto filed with the SEC,
reference to which is hereby made. Upon the qualification of the offering
statement, we will be subject to the informational reporting requirements that
are applicable to Tier 2 companies whose securities are qualified pursuant to
Regulation A, and accordingly, we will file annual reports, semi-annual reports,
and other information with the SEC. The SEC maintains a website at www.sec.gov that
contains reports, information statements and other information regarding
issuers that file with the SEC.
The
information incorporated by reference herein is an important part of the
offering statement and this Offering Circular. The following documents
previously filed with the SEC are incorporated by reference into the offering
statement and this Offering Circular:
|
|
·
|
the Company's Annual Report for
the fiscal year ended December 31, 2023 on Form
1-K |
You may
review these filings on our website and may also request a copy of these
filings at no cost, by contacting us at:
ENERGEA PORTFOLIO 3 AFRICA LLC
52 Main Street
Chester, CT 06412
www.energea.com
(860)-316-7466
So long
as we remain subject to the periodic reporting requirements of Regulation A,
within 120 days after the end of each fiscal year we will file on the SEC's
EDGAR website an annual report on Form 1-K. The annual report will contain
audited financial statements and certain other financial and narrative
information that we are required to provide to investors.
We also
maintain a website at www.energea.com, where there may
be additional information about our business, but the contents of that site are
not incorporated by reference in or otherwise a part of this Offering Circular.
Page 38
Index to Financial
Statements
The
financial statements of the Company can be found in:
|
·
|
" Item 7. Financial Statements" of the Company's
Annual Report on Form 1-K for the fiscal year ended December 31, 2023, which
can be found here. |
which is incorporated herein by reference.
Glossary of Certain Defined Terms
|
Adjusted Operating Cash Flow
|
For each Project, the actual estimated monthly operating
cash flows reduced by a fixed percentage to yield an internal rate of return
of 6% for the Project.
|
|
Advisers Act
|
Investment
Advisers Act of 1940.
|
|
Asset Management Agreements
|
The contract whereby the Company or Holdco will hire a
third party to operate and maintain the Projects.
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Authorizing Resolution
|
The authorization adopted by the
Manager pursuant to the LLC Agreement that created the Class A Investor
Shares.
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|
Blue Sky Law
|
State securities regulations.
|
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CAFD
|
Cash available for distribution.
|
|
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.
|
|
Construction Contract
|
The contract whereby the Company
or Holdco will hire a third party to provide to provide engineering,
procurement, and construction services for a Project.
|
|
Customer
|
Offtaker of electricity and environmental commodities.
|
|
DERMS
|
Distributed Energy Resource
Management Systems.
|
|
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.
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|
Energy Rate
|
The price per kWh
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|
Estimated NOI
|
Estimated Net Operating Income.
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|
Exchange Act
|
The Securities Exchange Act of 1934.
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|
Financial Model
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The financial model prepared by
the Manager for each Project, projecting all the costs and distributions of
the Project.
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GILTI
|
General Intangible Low-Tax Income, a federal U.S. tax on
profits made by companies outside the United States.
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Holdco
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A South African Limited
Liability Company we created to own and operate the Projects, and a wholly
owned subsidiary of the Company.
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|
Investment Committee
|
A multi-disciplinary committee of experienced renewable
energy executives of the Manager which decides which Projects the Company
will invest in.
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|
Investor
|
Anyone who purchases Class A
Shares in the Offering.
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|
Investor Services Agreement
|
The agreement between the Company and Sun Exchange
captioned "Investor Services Agreement."
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|
IRR
|
Internal rate of return.
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JOBS Act
|
Jumpstart Our Business
Startups Act of 2012
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|
kWh
|
A single,
billable unit of energy generated by a Project
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|
LLC Agreement
|
The Company's Limited Liability Company Agreement dated
March 12, 2021.
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|
Manager
|
Energea Global LLC, a Delaware
limited liability company.
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|
Manager Shares
|
The limited liability company interests in the Company
that will be owned by the Manager.
|
|
NAV
|
Net Asset Value
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NPV
|
Net Present Value
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|
Offering
|
The offering of Class A Investor
Shares to the public pursuant to this Offering Circular.
|
|
Offering Circular
|
The Offering Circular you are reading right now, which
includes information about the Company and the Offering.
|
|
Platform
|
The Manager's website:
www.energea.com
|
|
Power Purchase Agreement
|
Term used for the contract that Customers sign in the
Solar Lease.
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|
Preferred Return
|
A 7% per year preferred return
to Class A Investors before the Manager earns a Promoted Interest.
|
|
Prior Offering
|
Energea Portfolio 3 Africa LLC's initial offering
qualified on August 2, 2021.
|
|
Project
|
A solar power product in which
the Company invests.
|
|
Project Maintenance Contract
|
When the SPE hires Energea Africa to perform the actual
O&M services.
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|
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.
|
|
Redemption Plan
|
The redemption plan whereby Investors may request
redemption of their Class A Investor Shares following 60 days after purchase.
|
|
Redemption Price
|
The price at which Redemption
Requests will be processed, based on the current price per Class A Investor
Shares at the time the Redemption Request is made, reduced by the aggregate
sum of distributions, if any, with record dates during the period between the
Redemption Request date and the redemption date, and subject to a discount
based on the time the Redemption Request is submitted.
|
|
Redemption Request
|
A request for redemption submitted through the Platform
for up to $50,000 in Class A Investor Shares.
|
|
Purchase and Sale Agreement
|
The contract whereby the Company
or Holdco will use to purchase a project from a seller/Development Company.
|
|
Regulations
|
Regulations issued under the Code by the Internal Revenue
Service.
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|
Regulation A
|
Regulation A of the Securities
Act of 1933 is an exemption from registration requirements for public
offerings.
|
|
SEC
|
The U.S. Securities and Exchange Commission.
|
|
Securities Act
|
The Securities Act of 1933.
|
|
Solar Lease
|
The agreement signed by the Customer to purchase the
electricity produced by the Project.
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Sun Exchange
|
Sun Exchange, Ltd., a company
organized under the laws of South Africa.
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USD
|
The currency of the United States called dollars.
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|
U.S. GAAP
|
United States Generally Accepted
Accounting Principles.
|
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ZAR
|
South African rand (currency).
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Page 39
PART III - Exhibits
Index to Exhibits and Description of
Exhibits
|
Exhibit No.
|
Description of Exhibit
|
|
2.1**
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2.2*
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2.3*
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3.1**
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4**
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6.1**
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6.2**
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11.1*
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11.2*
|
Consent of Goodwin Procter (included in Exhibit 12)
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12*
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* Filed herewith
** Previously filed
Page 40
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 Chester, State of Connecticut, on May 15,
2024.
Energea
Portfolio 3 Africa LLC
By: Energea Global LLC
By /s/ MICHAEL SILVESTRINI
Name: Michael Silvestrini
Title: Co-Founder and Managing
Partner
This offering statement has been
signed by the following person in the capacities and on the date indicated.
By /s/
MICHAEL SILVESTRINI
Name: Mike Silvestrini
Title: Co-Founder and Managing
Partner of Energea Global LLC (Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
Date: May 15, 2024
