South Africa invests R1 billion in massive Free State gas plant

The government’s Central Energy Fund (CEF) will invest R1 billion for a 10% stake in Tetra4, the Renergen-owned gas producer developing a massive project near Virginia in the Free State, estimated to be worth over R1 trillion.

Renergen announced on Monday that the parties had concluded a term sheet for the purchase following negotiations.

The CEF is a state-owned diversified energy company that reports to the Department of Mineral Resources and Energy.

Its investment mandate is focused on contributing to the energy security of South Africa through exploration, acquisition, development, marketing, and strategic partnerships.

Renergen CEO Stefano Marani said the investment results from long-term discussions between CEF and Renergen.

“During this time, the CEF team have been amazing to deal with, and I am very pleased to be able to welcome them as a major investor in our future,” said Marani. “Renergen and the CEF’s relationship goes back many years.”

“Importantly, during this time, Renergen has successfully grown Virginia in size and scale, highlighted by the growth both of our helium and methane reserves, which have finally reached the critical mass to enjoy CEF’s involvement.”

CEF CEO Dr Ishmael Poolo said the company’s participation was in line with being a “strategic investor” in the energy value chain to support the region’s energy needs.

“I, along with the Renergen Board and management team, look forward to building on the strong strategic partnership with CEF as we embark on Phase 1 operations in April and establishing Virginia as a significant domestic and global gas producer,” said Marani.

Renergen added that should binding contracts between the parties not be executed after 141 days, the purchase price shall be renegotiated in good faith.

Stefano Marani, Renergen CEO

The agreement with CEF follows Renergen’s announcement of a strategic partnership with Canadian company Ivanhoe Mines, owned by billionaire financier Robert Friedland.

The company will get a 4.35% stake in Renergen through the placement of around 5.6 million shares worth approximately R200.6 million. That funding will be used for Phase 2 of the project.

“To sign CEF and Ivanhoe Mines in the space of two weeks as major investors and strategic partners highlights the significant growth of the company and the critical role Virginia will play in the future supply of clean energy as well as in-demand helium,” said Marani.

Turning R8 into R1.46 trillion

While Renergen has been listed on the JSE for several years, it made the news in October 2021 following reports about its massive helium discovery.

The company’s directors originally only planned to extract liquified natural gas when they purchased the gas rights for the 187,000-hectare piece of land in 2012 for $1 — about R8 at the time.

But their initial tests at the site showed high concentrations of helium that were substantially better than the average recorded at other extraction facilities around the world.

The company estimates the reserve could be as large as 9.74 billion cubic metres, bigger than the known reserves of the entire US.

Overall, the founders surmised the project could be worth more than $100 billion (R1.46 trillion).

Helium is considered a valuable resource due to its unique characteristics and limited supply.

It is used in a wide range of applications, including:

  • Manufacturing of fibre-optic cables, microchips, and other electronic equipment
  • Treatment of respiratory conditions like asthma
  • Cooling medium for magnets in MRI machines
  • Inflation of vehicle airbags
  • Added in breathing mixtures of deep-sea diving cylinders, to reduce the proportion of nitrogen to oxygen
  • Space rocket launches, with super-cooled helium used to force fuel hydrogen and oxygen rocket fuel into the rocket engine

Now read: TotalEnergies wants to develop South African gas discoveries

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South Africa invests R1 billion in massive Free State gas plant