Renergen plans to commercialise Phase 2 of its helium production in 2026 and has secured several 10-15 year off-take agreements with global industrial gas companies for over half of the anticipated production.
The balance of the helium was for international spot market sales, the group said yesterday in its first consolidated annual financial report following a transition in the year to February 28, 2023 from an exploration to a production company.
Regarding LNG (liquefied natural gas) from Phase 2, Renergen expected to contract most of the production on five to eight-year agreements, servicing the industrial, logistics and gas to power sectors, with the agreements expected to be finalised closer to commissioning, when the group also anticipated being able to obtain favourable pricing given the scarcity of energy sources in South Africa.
The subsidiary Tetra4 commissioned the Virginia Gas Project in September 2022 with the production and sale of LNG, increasing group revenue 388.5% to R12.7 million in the year to February 28, while the attributable loss fell to R27.7m from a R33.8m loss the year before.
A listing on the Nasdaq Stock Market was planned for this year, the proceeds of which would form one of the sources of funding to develop Phase 2.
Other funding sources were a $750m (R13.7 billion) debt package with the International Development Finance Corporation (DFC) for a loan of up to $500m, with Standard Bank South Africa mandated to underwrite $250m.
Another potential source of funding was the 10% disposal of Tetra4 to the Central Energy Fund (CEF) for R1bn, with the due diligence for this completed and stakeholder engagement was under way.
The group said not all the Nasdaq listing proceeds would be released in stages to limit dilution to shareholders. Renergen intended to raise $150m from the initial Nasdaq placement this year, market permitting, and no further equity funding was anticipated to be raised for the first 12 months following the initial public offering.
The South African government has designated the Virginia Gas Project as a strategic integrated project (SIP). The SIP status ensures the project benefits from reduced time lines for government approvals while increasing visibility when the government prepares the country’s strategic energy objectives.
The DFC and Standard Bank had commenced credit approval processes for the Phase 2 debt package.
Shareholders had approved the issue of 67.5 million shares on the Nasdaq Stock Market.
Renergen said demand for LNG and helium continued to increase locally and globally, with many countries viewing LNG as a leading transition energy for the foreseeable future.
South Africa’s energy crisis had significantly increased demand for LNG.
Helium prices continued to surpass past price records and prices were likely to remain elevated, the group said.
Renergen said it was “perfectly positioned”” to become a significant player in the local LNG and international helium markets given its high helium concentrations and relatively low extraction costs.
LNG deliveries under Phase 1 were increasing. Helium production would be ramped up to 300kg per day, the maximum capacity of the plant.
Phase 2 involves drilling more wells, construction of additional natural gas gathering pipelines, the construction of a much larger processing and liquefaction facility, and the associated road tanker distribution and downstream customer dispensing facilities.
Phase 2 was expected to produce about 34 400 GJ of LNG and around 4200 kg of liquid helium per day once in full production.
BUSINESS REPORT