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Thabiso KaliEnergy engineer · CEM

For finance, commercial and investment people

Efficiency upgrade and section 12L calculator

After-tax cash flow of an efficiency investment for a tax-paying company, with and without the section 12L allowance. The reference case is the one in the section 12L case study, and the matching Excel workbook gives the same answers.

Inputs

Pre-filled with the reference case (the same inputs as the Excel model). Results update as you type. Jump to results

Project
R
kWh/yr
years
Tariff and running costs
R/kWh
%/yr
R/yr
%/yr
Tax and section 12L
%
years

Straight line from year 1.

R/kWh
years

12L claimed from year 1 for this many years. One 12-month claim per measure is the normal case.

%

Results

NPV at 12.0%: R2.54m with 12L, R2.44m without. IRR 26.9% with 12L, 26.1% without.

After-tax returns with and without the section 12L allowance
After taxWithout 12LWith 12L
NPV at 12.0%R2.44mR2.54m
IRR26.1%26.9%
Simple payback
3.72 years
Pre-tax, capex ÷ year-1 net saving
NPV added by 12L
R103k
4.2% of the NPV without it
12L allowance claimed
R428k
Tax saved R115k (undiscounted)

Cumulative after-tax cash flow

Rand, nominal, by year. Hover a bar for its value; every value is in the table below.

  • Without 12L
  • With 12L
Year−R4m−R2mR0R2mR4mR6mR8m0Year 0, Without 12L: −R3.5mYear 0, With 12L: −R3.5m1Year 1, Without 12L: −R2.6mYear 1, With 12L: −R2.5m2Year 2, Without 12L: −R1.7mYear 2, With 12L: −R1.6m3Year 3, Without 12L: −R702kYear 3, With 12L: −R586k4Year 4, Without 12L: R355kYear 4, With 12L: R471k5Year 5, Without 12L: R1.5mYear 5, With 12L: R1.6m6Year 6, Without 12L: R2.5mYear 6, With 12L: R2.6m7Year 7, Without 12L: R3.6mYear 7, With 12L: R3.7m8Year 8, Without 12L: R4.8mYear 8, With 12L: R4.9m9Year 9, Without 12L: R6.1mYear 9, With 12L: R6.2m10Year 10, Without 12L: R7.5mWithout 12L R7.5mYear 10, With 12L: R7.6mWith 12L R7.6m
SensitivityWhich inputs move the answer most (tornado)Show
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OutputReferenceCurrent inputs
NPV with 12LR2.54mR2.54m
IRR with 12L26.9%26.9%
NPV without 12LR2.44mR2.44m
IRR without 12L26.1%26.1%
Simple payback3.72 years3.72 years
Changed from referenceNoneNone

Annual cash flow

R'000 unless stated. Tax may be negative: the deductions shelter the company's other taxable income. Scroll sideways for all columns.

YearTariff
R/kWh		SavingsMaintenanceTax
depreciation		12L
allowance		Tax
without 12L		Tax
with 12L		Cash flow
without 12L		Cash flow
with 12L		Cumulative
without 12L		Cumulative
with 12L
0–––––––−3,500−3,500−3,500−3,500
12.20990−50700428−6551875991−2,625−2,509
22.381,069−53700–−86−86931931−1,694−1,578
32.571,155−55700–−108−108992992−702−586
42.771,247−58700–−132−1321,0571,057355471
52.991,347−61700–−158−1581,1281,1281,4831,599
63.231,455−64––−376−3761,0151,0152,4982,614
73.491,571−67––−406−4061,0981,0983,5963,712
83.771,697−70––−439−4391,1871,1874,7844,899
94.071,832−74––−475−4751,2841,2846,0676,183
104.401,979−78––−513−5131,3881,3887,4557,571

Reference case: 450,000 kWh a year saved for R3,500,000, with the 12L allowance at R0.95/kWh claimed for 1 year.

Download the Excel model (.xlsx)

Built from the same specification as this calculator, so you can trace every number.

Method

Savings
savings_y = kWh saved × tariff × (1 + esc)^(y − 1)
Tax depreciation
capex ÷ depreciation years, straight line from year 1
Section 12L allowance
allowance_y = rate × kWh saved, for the years claimed from year 1
R0.95 per kWh of verified savings. One 12-month claim per measure is the normal case.
Tax
tax_y = tax rate × (savings − maintenance − depreciation − allowance)
It can be negative: the deductions shelter the company's other taxable income.
After-tax cash flow
CF_0 = −capex, CF_y = savings − maintenance − tax
Simple payback
capex ÷ (year-1 savings − year-1 maintenance), before tax

Assumptions

  • A tax-paying company with enough other income to use every deduction in the year it arises.
  • Constant annual kWh savings, no savings decay, no M&V or SANEDI certification costs, no VAT.
  • Straight-line tax depreciation over the years you enter; the real write-off depends on the asset (for example section 11(e) or 12C).
  • Claiming 12L for more than one year needs new, additional savings each year (SARS Interpretation Note 95 resets the baseline annually).

Sources

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