Tsitsikamma Community Wind Farm Investment

Press Release: Kruger International’s funds becomes first unit trusts in SA to invest directly in infrastructure for renewable energy.

14 October 2020

For immediate release (Amended version.)

Listing announcement: Gaia Fund Managers and Kruger International Asset & Wealth
Management addresses the need for infrastructure-based investments in South Africa with new
fund

Fund focusing on renewable energy, a South African first.

Gaia Fund Managers and Kruger International Asset and Wealth Management are pleased to announce
the listing of South Africa’s first preference shares with an infrastructure focus on 4 Africa Exchange
(4AX).

Gaia Fund Managers, together with Kruger International, plan to list Gaia Fund 1 Limited (the Fund) next
week Thursday (22 October). The Fund’s A preference shares will trade under the ticker 4AGF1A (ISIN:
ISIN ZAE400000101) on 4AX.

The preference shares will be bought by Kruger International’s various funds. The proceeds of the listing
will be used by the Fund to buy a 16% indirect shareholding in the Tsitsikamma Community Wind Farm.

With the saving and retirement industry recognising the important role it can play in bringing about social
change by supporting South Africa’s infrastructure needs, there is a dearth of viable options available. As
listed companies with a pure or major focus on the South African economy struggle to deliver returns to
investors, the managers of retirement funds and other savings are now looking for alternative asset
classes to obtain sufficient returns.

Says Dr Hendrik Snyman, chief investment officer at Gaia Fund Managers: “With the local stock
exchange having underperformed over the past number of years and with limited options available, it is
necessary for asset managers to be innovative in obtaining returns for their investors. Globally, there has
been a trend whereby asset managers are looking to alternative assets to provide resilience to negative
market movements, price irrationality or a lack of returns.”

Hein Kruger, managing director of Kruger International, says: “We are proud to offer a novel investment
opportunity that combines assured, solid returns with sustainable energy, infrastructure and community
ownership. Through the Kruger Ci Prudential Fund, Kruger Ci Balanced Fund and Kruger Ci Equity Fund,
clients can now have exposure to the operational wind farm within a safe, regulated and tax-effective way
where the impressive returns inherently adjust by inflation each year.

“Kruger’s co-investors in the wind farm near Humansdorp in the Eastern Cape include the Tsitsikamma
Development Trust (9%) and Cennergi (75%), a wholly owned subsidiary of listed company Exxaro
Resources. This is a true ESG (environmental, social and governance) investment. The community trust
receives investor returns for their shares. The construction has already benefitted the local community
through infrastructure upgrades, a new community centre, cattle fencing and bush clearing. Since then,
the wind farm contributes 2.1% of its revenue quarterly to enterprise and socio-economic development in
the surrounding communities.”

The wind farm is a renewable energy project with an installed capacity of 95 MW, situated near
Humansdorp in the Eastern Cape’s Koukamma Local Municipality. It became operational on 17 August
2016, offering a measurable track record in output performance. This project and its various service
providers have met and exceeded expectations with the power produced since operations started,
surpassing the P50 (base case) forecast. The performance of the project to date reflects the quality of the
wind resource, equipment and service providers, according to Snyman.

The listing of the Fund’s preference shares, with its focus on clean energy, takes place as the South
African Government ramps up the supply of renewable energy to the national electricity grid. On
25 September 2020, the Minister of Mineral Resources and Energy, Gwede Mantashe, gazetted a key
determination under national legislation to procure a total of 11 800 MW of electricity, of which 6 800 MW
will be from renewable sources.

“This investment contributes to much-needed infrastructure in South Africa and investment diversification
in an alternative asset class for us as the investors. We are proud to include Gaia Fund 1, with the wind
farm as its first asset, in the Kruger Ci funds,” says Kruger.

Collective Investment Schemes and retail investors have struggled to directly access infrastructure
investments for several reasons. First, they are not readily available. Second, they are not usually listed
on stock exchanges. Lastly, those options which are listed are subject to deflated prices owing to the lack
of a readily traded market that understands the underlying principles of the asset class.

Snyman explains: “Infrastructure as an asset class can provide investors with stable inflation-linked cash
returns while preserving their capital. However, the current means of gaining access to these projects
includes a daunting and protracted process requiring, among other things, negotiating lengthy contracts.
This process is far removed from investors’ ordinary means of acquiring shares on a trading platform and,
therefore, acts as a significant investment barrier to entry and exit. In addition to the process, the unlisted
equity available in the projects precludes certain Collective Investment Scheme portfolios from acquiring
interests in the projects. A listed security removes many of the entry and exit barriers for investors and
allows infrastructure to take up its rightful place as an asset class in many investor portfolios.”

By listing the Fund, collective investment scheme portfolios are able to increase their allocation to
infrastructure through preference shares, from a threshold of 5% to a maximum of 10%, and yet retain the
benefits of price stability. The ability to do this will open a unique market opportunity for future collective
investment scheme portfolios to invest in 4AX-listed infrastructure projects through new issuances of
preference shares in the Gaia Fund 1.

“Kruger International as an innovative fund manager collaborated with Gaia Fund Managers as a pioneer
in the infrastructure investment space in South Africa to come up with a solution to access infrastructure
investments for their investors,” adds Snyman. “Kruger International’s funds will hold all of the preference
shares, allowing them to accurately mark their value on a daily basis; meaning that as an asset manager,
they are less exposed to market irrationality and/or information asymmetry.”

Gaia Fund 1’s A preference shares will be 4AX’s seventh equity listing. 4AX, as a new low-cost, fully
licensed equity and debt exchange, took up the challenge with Kruger International and Gaia Fund
Managers to list these industry-first preference shares. 4AX provides security for investors, giving the
required financial transparency and regulatory oversight without the obstructive burden and costs
associated with legacy exchanges. As such, the cost and admin associated with listing are no longer
prohibitive.

According to Eugene Booysen, CEO of 4AX: “4AX brings to the market an efficient and alternative
regulatory model which reduces regulatory costs and inefficiencies but promotes and adheres to the
highly regarded financial regulatory standards in South Africa. 4AX focuses on being a safe and simple
digital marketplace redesigning finance and access to capital and thereby enabling inclusive growth.”

About GAIA Fund Managers

Gaia Fund Managers was formed in Cape Town in 2012 and incorporated in 2015 for the purpose of facilitating the investment of long-term investor capital in infrastructure projects in Southern Africa.

Gaia Fund Managers is considered a leading specialist secondary market infrastructure transaction team in the Southern African region, having concluded:

  • The first significant secondary market transaction in the South African renewable energy programme with Japan’s Sumitomo Corporation as the seller.
  • The largest renewable energy secondary market transaction in South Africa to date in collaboration with a consortium of investors and regional banks with Gestamp Renewables as the counterparty

Gaia Fund Managers, as first mover and brand leader, has concluded 11 renewable energy and one toll
road transaction to a value in excess of R3.5 billion.

The Fund was established by Gaia Fund Managers as an investment vehicle for the express purpose of
providing institutional investors access to infrastructure investments in South Africa.

It is the objective of Gaia Fund Managers to utilise the Fund to conclude additional investments in
infrastructure on behalf of its clients.

Gaia Fund Managers, via an Asset Management Agreement, will manage the Fund as well as the
interests of the respective preference shareholders in the underlying projects.

For more information, visit http://www.gaia.group.

Collective investment schemes (“CIS”) are generally medium to long-term investments. The value of
participatory interests or the investment may go down as well as up and past performance is not necessarily
a guide to future performance. Ci does not provide any guarantee either with respect to the capital or the
return of a portfolio. CIS are traded at ruling prices and can engage in borrowing and scrip lending. Forward
pricing is used. The Kruger portfolios are portfolios established and administered by Ci, and Kruger
International has been appointed to manage and market the portfolios. Ci retains full legal responsibility for
the co-named portfolios. Additional information on the portfolios may be obtained, free of charge, directly
from Kruger International or Ci. Ci Collective Investments (RF) Pty Ltd (“Ci”) is authorised in terms of the
Collective Investment Schemes Control Act to administer the portfolios. Ci is a non-voting ordinary member
of the Association for Savings & Investment South Africa (ASISA).

GAIA Fund Managers and Kruger International are authorised financial services providers.

For more information, contact:

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