Renergen CEO Stefano Marani says listing on the Nasdaq would be a game changer for the company whose liquid helium plant in Virginia, Free State, came online last month, making South Africa one of eight countries to produce it.
Liquid helium is primarily used in the manufacture of semiconductors, which were in short supply in the last two years. It is also used for making fibreoptic cables and magnetic resonance imaging (MRI) machines, and in the launching of rockets.
This week JSE-listed Renergen said it would seek shareholder approval for an initial public offering and a listing on the Nasdaq later this year as part of funding for phase 2 of the project. It is also listed on A2X and ASX.
Marani said the rationale to list on the Nasdaq boiled down to having an investor base with an appetite for transition energy players who understood the oil, gas and helium sectors well enough to give fair valuations.
“One does not need to look too far to see the stocks that are listed both on the JSE and the Nasdaq, and you see what kind of valuation they have relative to the South African peers that are only listed in South Africa,” he said.
“The only way we are going to overcome this mispricing of the current share price is by going to a market with a significantly deeper liquidity pool with an investor base that completely understands oil and gas and helium and so that is the natural progression.”
He said there were no plans to delist from the JSE. The natural progression for Renergen was to become a mainstream international player by having a listing on the Nasdaq.
“We will have greater visibility. We will be recognised in the US market, which is the world’s biggest helium market. The energy transition is a very important thematic in the US and from that perspective there is a premium that gets paid for energy transition plays. We are an ideal energy transition play from an inevitability perspective”.
He said the amount of funding Renergen was raising was not huge and there was misconception about the dilution of the share price.
“From a debt perspective the two lenders we are working with will provide a package of $750m (R12.8bn) ... from that perspective it is a tiny transaction by US standards.”
He believed the market was overestimating the dilution of the share price. “All will be revealed in due course, and we will make it clear. People have missed the trick. I get a sense that people are thinking we will issue a huge amount of stock for the purposes of building phase 2. It is simply not going to be the case.”
He said when stage 2 was in full operation, predicted to be in 2026, total production was forecast at 700t of LNG a day and 4.5t of helium a day. “It is between 7-8% of the entire global helium consumption.”
He acknowledged delays in phase 1 of the project.
“We had some issues with the conduction oil and there were leaks in the vacuum chambers for the helium cylinder. The team put their noses to the grindstone and we worked through the Christmas period and in January managed to get everything going. We own the fact that we overshot and we delayed in October with the turning on of the helium that created a little bit of negative sentiment around the share price”.
Marani said the company had had naysayers for the last 10 years predicting that the project would never happen. “Now there is nothing left for them to say that we cannot do; we have done it all. My firm belief is the share price will correct.”
Marani and COO Nick Mitchell acquired the petroleum production rights on a farm in the Free State for $1 in 2013. Through its subsidiary Tetra4, Renergen is South Africa’s first and only onshore gas production right holder, housing the Virginia Gas Project.
The company began delivering the country's first locally produced commercial LNG late last year.
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