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Fedgroup has an interesting idea to invest into solar.


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It will take 5-7 years for the asset to pay for itself. Then 11% (estimated? There is probably a power purchase contract for this bit so it can be guaranteed to some extent) year on year. So if all goes to plan you get maybe 250% on the original investment, double your money in 15 years kind of thing.

The question is whether this is a safer less-risky option than say just putting the money in STX40. With STX40 you get exposure to more classes and on average it will outperform the 11% projected here. So you have to weigh up the risk of the panel you bought failing prematurely with the risk of a stock-market crash.

I'm inclined to say you might be better off buying a conservative ETF ... :-)

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I am by no means even closely involved in investments, but what I do know the markets are getting a wee bit interesting as time goes on.

For the safer investment, panels will have a 20-25 year warranty, not the cheaper ones we favour, so I would guess this could be a very neat investment.

EDIT: R5200 per panel is invested, with estimated 11%+ return over 20 years, all insured and all that.

Here is the link: https://fedgroup.co.za/#/browse/wealth/directownership/ourprojects

Brochure: https://fedgroup.co.za/assets/downloads/life/direct-ownership/FedGroup-Solar-panel-owner.pdf

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The other risk though is that solar generated power becomes so cheap that your return becomes vanishingly small. Currently power prices are benchmarked against coal and other non renewables, but that may not be always the case if solar becomes really ubiquitous. (And fossil increasing iniquitous).  

maybe the carbon credits will be worth something?

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Personally I think this is an ambitious venture at best and few thing that would concern me.

  • " Returns are secured through a contract with the building owner to pay a monthly fee, determined by the amount of electricity generated " this in itself is flawed as one would imagine that it would be energy used and not generated.. but it could also be a typo..
  • What will the investment cost be , in other words what will Fed Group charge to manage the investment and how can it be regulated. With normal unitrusts there is a lot of regulations towards this and one wonders how "ownership" of solar panels will relate to this.
  •  " At the end of the 20-year term, owners can take physical ownership of the panel, or sell it back at a guaranteed residual value of R1 000. " they might as well say you "give" it away as R1000 in 20 years is R 250 in today's money @ 7% inflation ...
  • Then you have the liquidity of your investment. The model is that you buy Solar panels and you are then the owner of them , what will happen if you need the cash , will someone else then buy the second hand panels from you and at what value? Is there a depreciation on the value if so this will imply that Capital is "reducing" year on year and that the "rental income" will compensate for this.
  • As to the matter of risk involved , you are effectively tying up an investment for 20 years that is a hell of a long term investment , yes you will receive the monthly "rent" but your capital is still tied up.
  • Then there is all the factors of equipment failure and all that but I suspect that this will form part of the "fees and charges".

As a rule risk of investment is measured by the investment horizon of the capital invested , in other words if you invest your money how long time would you need if you needed the cash again. If your horizon is 20 years ( so you would not need access to the funds over a term of 20 years) this will put you in a pure equity asset class (Shares) and I for one will then bet my money on shares.  

Maybe a noble idea but I for one steer clear of all these "new age" type investment models as it is uncharted waters and you work flippen hard to earn your money..

Anyway my 5c worth just from the hip without going into detail of the model.. :P

 

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18 minutes ago, PaulF007 said:

you are effectively tying up an investment for 20 years

In 2017 they will make it so that you can sell your panel/s.

But I hear your concerns Paul. I also think the R5200 per panels needs to be broken down if someone is interested in this scheme. I rather take my chances on my own or with a broker if I do go into investments.

If this is really viable, maybe Sanlam / Old Mutual etc will follow same in due course. Time will tell.

But then we have government not keen on green energy coupled with the fact that Eskom is headless again with no idea who is going to step in with the Guptagate expose still going strong. That could also affect such an investment in due course. 

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This looks line a similar product than the one where you bought shipping containers a few years back.  In the end the only one making money is the person managing the investment.

The documents available on their website are more marketing documents that actual information. My questions:

So I buy the panel today, do I pay for it today? If so will i get interest on my money until the project is actually installed (When 70% of the panels are sold)?  

What management fee with FedGroup earn for doing the "work"?

How will my income be calculated? The claim 9% return in the first month? How was this calculated. And when is month 1 (Next month or in 6-12 months time when the installation is completed)

Who guarantees the R1,000 buy back (Agree with PaulF007 - Actually nothing in today's terms)

In the end a nice idea but I would rather spend the money on 2 more panels on my roof.

 

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