Prominent South African energy company under siege

Renergen’s share price has plummeted by over 50% over the last year as investors lost trust in the energy company’s ability to deliver on its promises.

Renergen is South Africa’s first onshore natural gas explorer and the first integrated producer of both liquefied helium (LHe) and liquefied natural gas (LNG).

Its biggest asset is the Virginia Gas Project, which it claims contains one of the richest helium concentrations recorded globally.

“The Virginia Gas Project comprises production rights for 187,000 hectares of gas fields in Welkom, Virginia, and Theunissen, in the Free State,” it said.

The company has made lofty promises about its ability to produce liquefied helium and liquefied natural gas.

Renergen told investors it would generate 52 tons of liquefied natural gas and 400kg of helium per day from Phase 1 of the Virginia Gas Project.

In 2016, Renergen also announced that it had signed a deal with Afrox to supply it with helium. Commercial sales were set to commence in 2018.

The company did not come close to meeting these targets. By mid-2024, reported between 8 and 9 tons of LNG production per day and an operating loss of R135 million.

More importantly, Renergen has failed to commercially produce and sell helium. Instead, it has provided investors with excuse after excuse.

Renergen CEO Stefano Marani has also been under fire for false claims regarding the company’s helium production.

On 12 August 2024, Marani told Zunaid Suleman from Benzinga All Access that the company reached a significant milestone in helium production.

He said Renergen was around a year behind schedule for turning on the helium. However, they had now done so.

“We have now finally managed to get the helium module on. We are producing liquid helium and putting it into our customers’ tanks,” he said.

Marani added that he was “really proud to say that we are deriving revenue from the helium as well”.

Renergen’s latest reviewed interim consolidated financial statements for the six months ended 31 August 2024 contradicted Marani’s claims.

The company said one of its key priorities was “delivering the first container of liquid helium to our customer”. This shows that it has not delivered any helium to customers.

Shareholders grew tired of the company’s excuses, and Renergen’s share price plummeted by 89% since its peak in 2022.

The share is now trading at around 70% lower than when it was listed on the Johannesburg Stock Exchange (JSE) in 2015.

Analyst opinion about Renergen

Protea Capital Management founder and CEO Jean Pierre Verster said he would have liked to short Renergen if he could.

Verster, who manages his own hedge funds at Protea Capital Management, is well known for predicting the collapse of Steinhoff and African Bank.

He told Business Day TV he would not invest in Renergen and wished he had a short position in the company.

A short position in a share is an instrument that allows an investor to profit when a company’s share price falls.

Verster said he would have shorted Renergen. However, the company’s share trading was too illiquid for him to do so.

“When all this nonsense started, and you compare what their reports said the reserves were versus what they produced, there were questions,” he said.

He added that questions remain about Renergen’s gas reserves, which is why he will not advise investing in the company.

Cilandia Capital’s activist investment manager, Albie Cilliers, also alleged that Renergen does not have the gas reserves it claims to have.

Cilliers said Renergen has failed to prove that its helium and natural gas reserves live up to the Sprouce report’s findings.

He said that Renergen’s actual production data since the company started producing LNG in October 2022 does not support the assumptions and data used by Sproule in its 2021 report.

Marani hit back, saying the company does not make any “claims” regarding its reserves at the Virginia Gas Project.

Rather, Renergen publishes reports stating reserves and resources following the SAMOG codes per the JSE’s guidelines, which are available on the company’s website.

“These reports are prepared by independent US and Canadian-qualified petroleum engineers,” he said.

One of Renergen’s most important resources is a 2021 report released by Sproule, which said the Virginia Gas Field holds significant potential for methane and helium production.

Renergen facing significant challenges

Renergen faces numerous challenges, including environmental problems, a fight with a solar project in its operation area, and raising much more money.

In August 2024, Renergen’s Tetra4 project suffered a blow following an objection by the Centre for Environmental Rights (CER) to its integrated water and waste management plan.

Renergen responded, saying it is unlikely to impact the timing of Phase 2 because its select drilling programme is fully authorised under the Production Right granted in 2012.

It is also involved in a dispute over the construction of the Springbok Solar project, which Independent Power Producer SOLA Group owns.

The company claimed that the ongoing construction of the Springbok Solar project was in an area designated for future natural gas extraction.

On Monday, 11 November 2024, SOLA announced that the Mineral Resources Department had rejected Renergen’s suspension application.

SOLA Group’s co-founder and executive director, Chris Haw, said it means that the Springbok Project could continue construction.

Another problem is that Renergen needs a large amount of money to continue developing the Virginia Gas Project.

It plans to raise money through a Nasdaq listing in the United States. However, tensions between South Africa and the United States can hamper these plans.

These problems and Renergen’s ongoing financial challenges have raised questions about its ability to raise enough money to continue operating.

David Shapiro from Sasfin Securities said he could not see Renergen making it and would not advise people to buy the stock.

“It will take a huge amount of money and effort to get this thing productive to a point where you are making big profits,” he said.

“The more I look at Renergen, the more nervous I get about the operation. Sooner or later, they need to get big money.”