March 2022

Renergen CEO Stefano Marani on its R1 billion investment from the Central Energy Fund.

SIMON BROWN: I’m chatting now with Stefano Marani, CEO of Renergen. A disclaimer, I hold shares in Renergen. Stefano, I want to touch on the R1 billion that you kind of raised yesterday; there are some Ts & Cs. Before I do, phase one [of the Virginia Gas Project] – you were out there, what was it, already six, eight weeks ago, I suppose – must be close to being commissioned now?

STEFANO MARANI: It’s just a few weeks away, and it’s impressive to see. Literally, now every single time that we go down, whether it’s five, six days a week or two weeks apart, you notice a visible change to the plant.

SIMON BROWN: So stuff is properly happening there. Let’s move to capital. It’s no secret that you need a fair chunk of cash for phase two, which is markedly bigger. At the president’s investment conference last week you said that you were going to [need] about R14 billion. You announced yesterday a billion from the Central Energy Fund. You announced just recently Ivanhoe Mines taking a stake in the business as well. It’s moving along. You are on track, I suppose in a sense. You’re starting to raise that cash and get proper money to make phase two happen?

STEFANO MARANI: Look, this process probably started in September last year, just after we announced the update in the reserves. So now we’re starting to see the fruits of all of that labour coming to fruition. I’ll be honest; compared to raising the capital for the first plant the first time around, it’s been significantly easier, also not without pointing out the obvious – that we’ve had some phenomenal tailwinds the last few weeks.

SIMON BROWN: Absolutely. The helium story just gets more and more weird almost sort of by the week to your point. You did that initial LNG [liquefied natural gas], which was a really, really small proof of concept, then the phase one. That was always a sense of de-risking, and I suppose proving to the world that the reserves are there – and certainly they are – and that you and your team can execute on this.

STEFANO MARANI: Yes. Look, there are always nay-sayers. I know for a fact that there are one or two geologists who are still running around saying that there’s actually no gas in the Free State at all. It’s like, really, have you seen any of the wells? But there are always going to be nay-sayers and, and it’s been a rite of passage. I think the most important thing over here is this needs to signal the start of South Africa’s gas economy. Look what it did to the US economy just after the financial crisis. We need that kind of tailwind for the country, and we believe that this is a good catalyst.

The government’s Central Energy Fund (CEF) will invest R1 billion for a 10% stake in Tetra4, the Renergen-owned gas producer developing a massive project near Virginia in the Free State, estimated to be worth over R1 trillion.

Renergen announced on Monday that the parties had concluded a term sheet for the purchase following negotiations.

The CEF is a state-owned diversified energy company that reports to the Department of Mineral Resources and Energy.

Its investment mandate is focused on contributing to the energy security of South Africa through exploration, acquisition, development, marketing, and strategic partnerships.

Renergen CEO Stefano Marani said the investment results from long-term discussions between CEF and Renergen.

“During this time, the CEF team have been amazing to deal with, and I am very pleased to be able to welcome them as a major investor in our future,” said Marani. “Renergen and the CEF’s relationship goes back many years.”

“Importantly, during this time, Renergen has successfully grown Virginia in size and scale, highlighted by the growth both of our helium and methane reserves, which have finally reached the critical mass to enjoy CEF’s involvement.”

CEF CEO Dr Ishmael Poolo said the company’s participation was in line with being a “strategic investor” in the energy value chain to support the region’s energy needs.

“I, along with the Renergen Board and management team, look forward to building on the strong strategic partnership with CEF as we embark on Phase 1 operations in April and establishing Virginia as a significant domestic and global gas producer,” said Marani.

Renergen added that should binding contracts between the parties not be executed after 141 days, the purchase price shall be renegotiated in good faith.

The agreement with CEF follows Renergen’s announcement of a strategic partnership with Canadian company Ivanhoe Mines, owned by billionaire financier Robert Friedland.

The company will get a 4.35% stake in Renergen through the placement of around 5.6 million shares worth approximately R200.6 million. That funding will be used for Phase 2 of the project.

“To sign CEF and Ivanhoe Mines in the space of two weeks as major investors and strategic partners highlights the significant growth of the company and the critical role Virginia will play in the future supply of clean energy as well as in-demand helium,” said Marani.

Load shedding in South Africa increased by 38% in 2021 with more than 2,400 gigawatt hours (GWhs) shed, says professional services firm PwC.

This is the equivalent of an estimated 1,136 hours of power outages – equal to three hours per calendar day, the group said in a research note this week.

Based on these figures, PwC estimates the adverse impact of load-shedding in 2021 was a reduction in real GDP growth of up to 3.1 percentage points, costing the economy up to 400,000 potential jobs.

“According to the Presidency, South Africa has a shortfall of around 4,000MW of electricity generating power. It is possible that this shortfall is significantly larger given that Eskom’s energy availability factor (EAF) was revised downward from 72% to 63% in its latest Medium-Term System Adequacy Outlook (2022-2026),” PwC said.

Looking ahead, Eskom chief executive Andre de Ruyter said recently the power utility expects 29 days of load-shedding during February and March and a total of 61 days during the April-August period.

In both cases, this suggests load shedding every third day, PwC said.

“A country’s power system should supply cost-effective electricity to customers in an efficient, reliable, and …