Renergen ready to tackle Nasdaq IPO and Phase 2 production expansion

Renergen’s liquid natural gas and helium operations outside Virginia, in the Free State. SUPPLIED.

Renergen’s liquid natural gas and helium operations outside Virginia, in the Free State. SUPPLIED.

Published Jul 1, 2024


Renergen has started its new financial year off on a high note after the recent first commercial liquid helium production, and the road ahead looks promising as the company seeks to bring in equity capital from the US, says chief executive Stefano Marani.

“While it wasn’t a smooth year, mired in volatility and setbacks, we are in a very strong position with domestic energy markets in drastic need of new sources of energy; global helium markets in need of supply chain diversification to stabilise the recurring helium crises; and formidable supporters backing our world class project,” he wrote in the company’s annual report, released on Friday.

Marani said he had moved to the US in early August 2023 to lay the foundations for a Nasdaq IPO, along with establishing a helium distribution base.

“This has proved to be a highly successful move, with the company having already established many relationships within the US oil and gas industry, increasing awareness of Renergen and our helium reserve. As we draw closer to the finalisation of the listing, we will continue to develop these relationships and solidify our presence as a South African company with a presence and supply chain in the largest economy in the world.”

With the recent commencement of helium production and resumption of strong LNG production, the focus was now on growing subsurface development and bringing the exciting plans for the Phase 2 plant development to fruition, he said.

The past year had been one in which they had met arguably the most important milestones in the lifespan of the company, which is South Africa’s only commercial onshore producer of helium and liquid natural gas (LNG).

Commercial helium production had been delayed through the year because despite the helium train liquefying first helium in the previous year, the plant suffered a leak in the vacuum insulation of the cold box, which meant repairs were needed before commercial operations could commence.

“Once repaired, we recommenced commissioning and the ball would once again bounce away from us when we took the decision to bring forward scheduled maintenance in a bid to limit overall down time. The first maintenance of the mixed refrigerant compressors revealed flaws in the manufacturer’s recommended start-up procedures, which led to component failures and additional delays,” he said. These issues had been resolved.

Renergen had secured $750 million debt funding for Phase 2, following a due diligence and studies by external parties and international experts. The US government reconfirmed its commitment by approving an additional $500m loan towards the development of Phase 2. Standard Bank of South Africa also committed to $250m.

“These funding lines are key to unlocking the expansion of the Virginia Gas Project,” said Marani.

Another milestone was selling a stake in a subsidiary, Tetra4, to energy investment partners Mahlako Private equity firm, Mahlako Energy Fund 1 Partnership, to establish Mahlako Gas Energy along with Third Way Investment Partners, who collectively acquired a 5.5% stake in Tetra4 for R550m.

“This investment was a landmark investment in the country, showcasing to the international community that investment in the natural gas industry is now open to investment,” he said. The deal also gave the company increased access to capital.

He said South Africa continued to grapple with unreliable power from the main utility, while most of the country’s oil refineries were no longer in operation, adding strain to the financial system due to the increased imports of refined fuel.

More recently, a “gas cliff” that involved the shut down of the primary natural gas source to Johannesburg from Mozambique via the Republic of Mozambique Pipeline Investments Company (ROMPCO) pipeline, was expected to occur at about the same time as Renergen’s Phase 2 was anticipated to start production.

Helium markets had also been in tight supply since 2017, which had led to significant increases in helium pricing.

He said the US CHIPS Act incentivised the construction of semiconductor fabrication facilities in the US, which along with the big growth in demand for artificial intelligence chips and a rapid increase in space exploration, meant that demand was anticipated to outstrip supply for some time.