Energy14.01.2025

Massive problems for “R8 investment worth R1.45 trillion”

South African renewable energy company Renergen is two and a half years late in becoming the country’s first helium producer, and its failure to deliver the sought-after gas has put the company in deeper financial trouble.

In the first nine months of 2024, Renergen splurged R145 million on operations while it only made R42 million from its liquified natural gas (LNG) customers.

It also spent R114.5 million on property plant and equipment investments and paid R231 million to pay off just a portion of a R1.24 billion debt.

In its last annual report, the company said it had just R23 million in cash left. Financial experts believe it may be on its last legs without a huge funding injection.

Sasfin Securities’ David Shapiro has advised investors to avoid buying Renergen’s shares.

During 2024, the value of a Renergen share plummeted by 50%, making the company one of the JSE’s worst performers.

Renergen’s main operation — the Tetra4 Virginia Gas Project in the Free State — has fallen well short of the company’s goals in the past few years.

It first started making promises to supply helium about seven years ago.

This would come from a 187,000-hectare piece of land for which its founding directors — Stefano Marani and Nick Mitchell — purchased gas extraction rights for just $1 in 2012, worth about R8 at the time.

The initial plan was to produce LNG from the site but surveys showed that there was substantial helium to be extracted — which would be a first for South Africa.

While the general public may be most familiar with helium for its use in floating balloons, the gas is highly sought-after for its unique properties in a wide range of other applications.

Helium is used in semiconductors, fibre optic cable manufacturing, respiratory treatments, and rocket launches.

Renergen’s helium discovery only really started making news headlines after the company revised its estimates on the size and concetrations of the helium reserve in October 2021.

Initial tests found that concentrations of the gas were between 2% and 4%, but subsequent exploration put the figure as high as 12%.

For reference, a concentration as low as 0.3% is sufficient to warrant extraction in the US, the world’s largest helium producer.

The company said its survey estimated the reserve measured 9.74 billion cubic meters, which would make it bigger than any of the known helium reserves in the US.

The exploration put the value of the helium at roughly $100 billion, working out to R1.45 trillion at the time.

The announcement piqued investors’ interest and sent Renergen’s share price from just above R20 in October 2021 to over R42 by April 2022.

Phase 1 of Renergen’s Virginia Gas Project

Two and a half years of delays

Construction of the Virginia Gas Project began in 2019 and Renergen told CNBC Africa that it would start delivering helium by the end of July 2022.

That would have made Renergen one of just eight liquid helium producers worldwide.

However, production was delayed, which Marani said was due to a component being installed incorrectly.

In early 2023, Marani would not give a new expected launch date for the operation but said helium production was “close.”

The company’s share price had slumped back to roughly the same level it was before the announcement of the helium find by the middle of 2023. Its decline continued over the next year and a half.

As of Friday, 10 January 2025, a Renergen share cost R4.54, 89% less than at its R42.70 peak price in April 2022.

The company expected the plant would produce 5,000kg of helium and 675 tonnes of LNG per day upon completion. Neither of those targets have come anywhere close to realisation.

Renergen previously said it produced roughly 30 tonnes of LNG per day in early 2023, which it planned to increase to 50 daily tonnes by the end of that year.

However, in the last reported quarter, it produced 1,124 tonnes of LNG, working out to about 12 tonnes per day. That is less than half of what Renergen said it was producing by 2023.

MyBroadband asked Renergen for feedback on its latest progress in starting helium production and increasing its LNG output but had not received a response by the time of publication.

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