Renergen’s life is still a gas

There were two announcements released by Renergen yesterday. One was a formal financial report and the other was an excitement-filled update on progress at the Virginia Gas Project. Nobody can ever accuse Renergen of not injecting a little passion into SENS.

The financial report in question is a preliminary report on the year ended February 2022. As I often remind you, the company’s valuation is not based on anything you’ll find in the income statement. The key Virginia Gas Project is still being brought into operation, which is why Renergen gives such frequent and detailed updates on its progress.

Revenue was just R2.6 million and the loss attributable to shareholders was R33.8 million. See what I mean?

Operating costs decreased by R6.8 million thanks to lower consulting fees and employee costs, along with swings in net foreign exchange. The benefits were mitigated to some extent by listing costs and other legal and professional fees.

In September 2021, Renergen made a final drawdown of R112.1 million on the loan facility from the US International Development Finance Corporation. The local Industrial Development Corporation (IDC) gave Renergen a loan facility of R160.7 million in December 2021, of which Renergen has used R158.8 million. Developing a resource production facility isn’t a cheap exercise.

The real story behind the company is found beyond the financials. Renergen has been busy securing LNG and helium offtake agreements and has enjoyed 5 out of 6 drilling successes from the exploration campaign.

To give more context to the achievements, offtake agreements with Consol Glass and a subsidiary of Italtile have already covered 60% of planned phase 1 production of LNG. The remaining 40% is going to the logistics market in a dual fuel application for heavy trucks.

On the helium side, 65% of planned phase II production has already been contracted under take-or-pay contracts that are between 10 and 15 years in length. The group is hanging on to the rest, with an intention to place it in the spot market.
In and amongst all this, Renergen also developed a transportation solution for vaccines called Cryo-Vacc. Demand for vaccines has fallen off a cliff, but Renergen may be able to find a market for the technology in verticals like gene therapy and similar niches. Renergen spent R10.9 million developing this solution, so they need to generate a return somehow. It pales in comparison o the R260.7 million on the Virginia Gas Plant in this period but is still a meaningful number.

Renergen had R95 million in unrestricted cash reserves at the end of the period. Subsequently, Ivanhoe Mines subscriber for shares for over R200 million. A much larger deal is the planned sale of 10% of Renergen’s operating subsidiary to the Central Energy Fund for R1 billion. The proceeds will be used for the phase II development.

The share price is up 18% this year and over 60% in the past twelve months.

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