Renergen plans to raise equity to ramp up South Africa’s first LNG project

By David Whitehouse
Posted on Monday, 19 September 2022 06:00

Stefano Marani, CEO of Renergen, speaks during the media launch of Renergen's working prototype cold-chain storage called Cryo-Vacc, in Johannesburg
Stefano Marani, CEO of Renergen. REUTERS/Sumaya Hisham

South Africa’s Renergen plans to raise equity to move into second phase production at its Virginia natural gas and helium project, CEO Stefano Marani tells The Africa Report.

Between $150m and $200m in equity will be needed to take production into its second phase, Marani says. Renergen switched on the project, South Africa’s first commercial liquefied natural gas (LNG) plant, this month.

The Virginia project is in the Free State, about 250km southwest of Pretoria. In June, Renergen signed a retainer letter with the US International Development Finance Corporation to evaluate making a loan of up to $500m for the second phase. According to research by Hannam & Partners, phase two will cost about $900m. The project is also being backed by South Africa’s state-owned Central Energy Fund, which is investing R1bn ($57m).

Marani says a total of $750m in debt has been lined up, and he is aiming for financial close in the first quarter of 2023. This would pave the way for an equity raise, and a start to construction in the second quarter. The second phase would then go into operation in 2025. Renergen trades on the stock market in South Africa and Australia, and Marani says it’s too early to say where the equity will be sought.

  • Phase one LNG capacity is 2,700 gigajoules (GJ) per day, rising to 24,000 GJ in the second phase. First phase helium capacity of 350 kg per day will rise to 5,000kg in the second phase.

The company may also be able to achieve diversification into cold storage logistics.

  • During the Covid-19 pandemic, Renergen devised a system to allow vaccines to be transported at temperatures of -70°C.
  • The company is now working to repurpose the technology for other medical applications and aims to bring a product to market in the next 12 months, Marani says.

Transition fuel

Hannam & Partners argue that gas is an essential transition fuel in South Africa. Converting trucks to run off batteries won’t work as the energy density of batteries is not enough to power trucks on the road in South African conditions, with payloads of 50 tonnes, for 10 to 14 hours a day, their research argues.

South Africa has about 400,000 heavy-duty trucks, and Hannam & Partners estimates that about 50,000 could convert to LNG over the next 10 years. Marani says LNG for trucks will be a “major cost benefit” for South African consumers struggling with rising inflation as the cost of logistics will be reduced.

Focus on the development of LNG in Mozambique means that “no-one has given thought to South Africa’s LNG industry”, Marani says. “But we have started production ahead of Mozambique.”

Onshore LNG development in Mozambique, led by France’s Total, has been delayed by an extremist Islamic insurgency in the north of the country, with no sign of the project resuming. Offshore LNG production has been unaffected, and Italy’s Eni has said it will start output by the end of this quarter.

  • Sasol imports gas into South Africa from the declining Pande and Temane gas fields in southern Mozambique via the Rompco pipeline.
  • Some of Sasol’s South African clients, Marani says, may find supply being curtailed in early 2023 as reserves are depleted. Renergen’s project, he says, is “a natural shoe-in for that supply”.

Bottom line

Renergen is confident it can benefit from the delay in Mozambique’s onshore northern LNG development and declining gas reserves in the south.

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