Energy company Renergen has become a polarising topic among investors and industry analysts, with a sharp divide between diehard supporters and increasingly audible critics.
Once hailed as the country’s gateway to the global helium market, Renergen now faces mounting scrutiny from critics who argue that its promises outweigh its production realities. The company’s market value has plunged from a peak of R43 in March 2022 to the current 514c and it has yet to make its first helium sale.
Renergen’s latest financial results, for the six months to end-August 2024, showed revenue increasing 7.7% but costs surging 90%, leading to a steep drop in gross profit to R882,000. The company’s operating loss increased to R65m.
However, CEO Stefano Marani remains confident in the company’s ability to scale up helium production and achieve profitability. “We’re cautiously optimistic that we’re on the right track.”
He says Renergen is implementing a multistep funding strategy, including an upcoming Nasdaq IPO underwritten by Standard Bank. “We have got to go through some regulatory processes with the SEC [Securities & Exchange Commission], but we have other irons in the fire that we are looking at. It is premature to divulge too much.”
On Tuesday Renergen issued about 7.4-million shares in a private placement pitched at 533c to raise about R39m as part of a multistep plan to shore up the required capital to complete Phase 1C, bolster general working capital and fund the expansion of the Virginia Gas Project. Renergen developed the Virginia project due to the rising global demand for helium. It is the country’s first commercial natural gas facility and its first liquid helium plant.
Helium became a sought-after commodity, as a 2024 report by market research firm IDTechEx indicated global demand would almost double in 10 years.
The project’s expansion is divided into two main phases and multiple substages. November 2022 saw the company’s first production of liquefied natural gas (LNG), and it achieved helium liquefaction two months later. This followed some delays due to problems caused by Covid, according to Marani. The final stage of phase 1 will be to reach full capacity by drilling additional wells.
However, Renergen’s helium production suffered significant setbacks due to a cooling box leak, discovered in mid-2023. According to Marani, early signs of the issue may have been overlooked by the plant’s original equipment manufacturer, contributing to substantial maintenance delays and costs. While Marani says it is “a little bit unfair” to pile all the blame on Renergen, he does acknowledge at least some responsibility for the delays.
That’s blatantly incorrect. All of the company’s drilled wells produce good volumes of helium
— CEO Stefano Marani
After the maintenance shutdown, the company is now producing 75kg of helium a day, Marani says, still significantly below capacity and not enough to cool down the special shipping container now on site. To be stored as a liquid, helium has to be cooled to about -270°C.
“We need to get production levels up by drilling more wells and connecting those in.” Renergen is also waiting for a pre-cooled container to arrive from abroad, says Marani.
Renergen’s plans to enter the global helium market were met with excitement 20 years ago, but since then the voices of sceptics have grown louder.
Activist investment manager Albie Cilliers, one of the company’s most outspoken detractors, has accused it of inflating its resource estimates and failing to provide clear evidence of commercially viable helium production. He cites repeated delays, underwhelming production figures and concerns over financial sustainability.
“They couldn’t produce enough gas from the beginning, it has been too long. Even if they reached full capacity, the flow rate [of the helium wells] is too low to cool down that ISO container quickly enough.”
Based on the assumptions in a 2021 report by energy consultants Sproule, which Renergen uses to support its claims of substantial helium and LNG reserves, Cilliers suggests that Renergen should be producing far more helium and LNG than it is.
While Cilliers questions the accuracy of Renergen’s reported reserves, Marani maintains that the issue lies in scaling production rather than the presence of helium itself.
“That’s blatantly incorrect. All of the company’s drilled wells produce good volumes of helium,” says the CEO. “At present, the concentration of helium in the gas is in line with expectation and that the plant is designed for, we simply need to increase the volume of overall gas coming into the plant.”
Marani says “17 or 18" wells are currently connected.
On why more wells have not already been drilled, he says: “We opted for [developing the asset into a revenue-generating asset], as it creates jobs, produces goods and becomes part of building the local economy. This route prioritises the building of the plant, which is what we have been focused on.”
Ivy Asset Management director Bruce Main, an advocate for Renergen, argues that its LNG production is crucial for energy diversification, particularly as Sasol faces depleting reserves in Mozambique.
“There seems to be a resistance or lack of support for such innovative projects, possibly due to cultural or economic conservatism. This could hinder the nation’s progress in transitioning to a more diversified and sustainable economy.”
The next few months will be critical for Renergen, with its ability to ramp up production, secure financing, and deliver its first helium sale being closely watched. For now, industry analysts remain divided on whether this is a worthwhile investment or a no-go area.
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