SA helium and natural gas producer Renergen has secured $500m (R9.5bn) in debt funding from the US International Development Finance Corporation, and a further $250m from Standard Bank for the construction of phase 2 of its Virginia Gas Project in the Free State.
This will enable it to become a substantial liquefied natural gas (LNG) and helium producer in SA, which is sorely in need of energy and jobs.
At close of trade on the JSE, the company’s share price was 7.59% higher at R20.26, after leaping almost 10% on the news.
Renergen’s subsidiary, Tetra4, wholly owns the Virginia Gas Project, which is SA’s only onshore petroleum development right. The development contains one of the highest concentrations of helium in the world.
Helium is a byproduct of natural gas, and is used in the production of semiconductor computer chips, cellphones and space exploration.
Tetra’s production rights cover an area of 187,000ha.
Renergen, which is also listed on the Australian stock exchange, became the first SA company to produce LNG in September 2023.
The company made its first commercial LNG deliveries in December. It also started producing helium in January, which made SA one of only eight countries in the world to do so.
Once the company completes phase two of the project after 2026, it aims to produce five tonnes of liquid helium a day for export and 34,400 gigajoules of LNG for local use.
Full production will help it generate an estimated R5.7bn to R6.2bn in earnings before interest, taxes, depreciation and amortisation (ebitda) a year.
The company is now in phase 1 of the project, which it expects will bring in about 300kg of helium daily and 2,700GJ of LNG.
Renergen CEO Stefano Marani told Business Day: “After 10 years of bringing this project to fruition, we are finally at the stage where we will see the Virginia Gas Project reach its real potential.
“The team has been incredible, and I couldn’t ask to work with a better group.”
The loans are subject to conditions including raising sufficient funding via a Nasdaq listing planned for later this year.
The company’s share is popular among retail investors in SA, but it has not yet attracted major SA institutional interest.
However, it is expected that a listing in the US will increase the company’s share price considerably enabling it to raise more finance.
Many other global helium exploration companies that are listed on the Canadian and US stock exchanges have enjoyed higher valuations and share prices before producing any of the gas.
The US development bank still has to approve a contractor with sufficient engineering, technical and financial capacity to manage a project of such a large size.
The conditional approval for the project, which was opposed by local environmentalists, comes as a huge win for Renergen and SA.
The Centre for Environmental Rights (CER) had written to the US international bank and urged it not to fund the project on environmental concerns.
Any energy development in SA faces strong push back from environmental groups.
“Having achieved this major milestone bears testament to the quality of the Virginia Gas Project and the impact it can have both locally and globally.
“The many months of hard work are starting to lay the foundations for the phase 2 plant, and we are excited to be working with our partners in the US, and to be welcoming our new SA partners, Standard Bank, on this exciting journey,” said Marani in a statement.
Renergen is on tight budget for day to day operations.
The company is not yet profitable, but it is selling LNG to ceramic and bathroom retailer Italtile and the Ardagh Group (formerly Consol Glass).
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