Incentives for funding Projects

The Reserve has two mechanisms that allows it to increase its value over time:

• As per the Protocol specification, the income from the Reserve’s Projects is reinvested in the origination of new Projects. The Reserve only does not regenerate itself (doesn’t lose value over time), but also creates value by originating new Projects, and grows its TVL.

• A participant of the Protocol purchasing pWatts provides new, external liquidity intended to fund new Projects to be included into the Reserve.

The first mechanism not only replaces the lost value of the Reserve due to the asset depreciation, but also creates more value that gets added to the Reserve over time, creating a compounded interest effect and rewarding uWatt holders. However, this growth rate is still not enough for fulfilling the purpose of Unergy, which aims to close the global funding gap on sustainability investments. For this reason, more incentives are needed to attract participants that provide external liquidity for including new Projects into the Reserve to grow it much more quickly.

pWatts are swapped for uWatts the moment the corresponding Project becomes operational. The value they obtain after the Project is swapped is not the value calculated according to the cost of origination (price of infrastructure and installation), but rather the initial value of the Project calculated according to the future cash flows of the Project.

The initial financial evaluation and validation of the Projects ensure that the value gain ($G$) due to the asset origination stays in a range between 10% and 20%. When the project becomes operational, the value received by the pWatt holders corresponds to the value of the Project according to its expected future cash flows, hence receiving a profit equivalent to $G$ (paid out in uWatts), and taking into account that the time it takes to originate a new Project is around 6 to 10 months, which means that, an investor should perceive a ~20% annualized return for purchasing pWatts and waiting for the Projects to start operations.