Renergen in trouble

Renergen is facing serious legal and environmental challenges and has missed numerous deadlines, which has caused many investors and analysts to avoid the stock.

Renergen was listed on the JSE in June 2015, promoting itself as a company focusing on alternative energy solutions.

Its main asset is the Virginia gas project, which the company said could produce large quantities of liquid natural gas (LNG) and liquid helium (LHe).

Renergen told investors it would generate 52 tonnes of LNG and 400 kg of helium per day from phase 1 of the project. However, this has not materialised to date.

Although the company has produced and sold some liquid natural gas, it has not sold any helium.

The company has also failed to show that it can profitably produce and sell liquid natural gas and liquid helium.

Renergen’s finances are a mess. Its results for the six months ended 31 August 2024 showed that revenue increased by 8% to R25.61 million.

However, its costs increased by 90%, and its gross profit plummeted, falling from R10.76 million to R882,000.

The company’s operating loss deepened to R65.13 million, while its total loss for the period deepened by 63% to R70.71 million.

For the six months through August 2024, Renergen recorded its biggest loss before tax, R85 million, which was over three times greater than its revenue for the period.

The company is piling up losses at an increasing rate, with almost a quarter of a billion in cumulative losses before tax in the past 18 months.

A particularly concerning sign was that Renergen’s H1 2025 interest expense was R25.2 million, up from R8.9 million. This means revenue is basically the same as its interest expense.

However, the company’s interest expense is growing far faster than revenue, which is not a good situation.

Renergen previously told investors it would generate earnings before interest, taxes, depreciation, and amortisation (EBITDA) of R5.9 billion to R6.2 billion by 2027.

The date is drawing nearer, and the company has not been able to generate even 1% of its EBITDA target in revenue.

Renergen faces environmental challenges

In August 2024, news broke that Renergen’s Tetra4 project could not proceed with its expansion or undertake any associated activities.

This followed an objection by the Centre for Environmental Rights (CER) to the project’s integrated water and waste management plan.

The objection raised concerns about the project’s risks to an important aquifer, including groundwater contamination with radioactive materials such as radium and uranium.

Tetra4 – previously known as Molopo South Africa Exploration and Production – is Renergen’s primary asset and core to the company’s gas production.

Following the news, Renergen released a SENS announcement claiming that the appeal has not delayed the progress on Phase 2.

It added that it is unlikely to impact the timing of Phase 2 due to the fact that its select drilling programme is fully authorised under the Production Right granted in 2012.

It said the Minster requested that Tetra4 expand upon the Impact Assessment Reports to address areas for improvement.

“Once the additional information has been incorporated, a revised report is to be submitted to registered I&APs for a further review,” it said.

“We are pleased with the progress and believe that the remaining information to be provided will satisfy the requirements to obtain a positive EA.”

Renergen versus Patrice Motsepe SOLA project

Renergen recently disputed the construction of the Springbok Solar project, owned by Independent Power Producer SOLA Group.

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

Springbok Solar Project is a 195 MWp solar project that will add more than 435,000 MWh of clean energy to the South African grid.

Renergen holds an onshore petroleum Production Right granted in 2012 under the Mineral and Petroleum Resources Development Act (MPRDA).

SOLA said that its Springbok project had obtained all necessary lawful authorisations to begin constructing its facility and insisted Renergen was consulted.

SOLA said Renergen has subsequently appealed several of the project’s approvals and initiated legal proceedings.

On Monday, 11 November 2024, SOLA announced that the Mineral Resources Department has 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.

“SOLA is a 100% South African company and has been constructing solar projects for more than 15 years,” Haw said.

“We are confident we have followed all legal processes. The department’s decision confirms we have all lawful permits and may continue construction on the plant.”

SOLA said Springbok Solar submitted written evidence showing it consulted with Renergen on ten occasions over two years.

These consultations were done through officially prescribed National Environmental Management Act processes and on a bilateral basis.

Haw said that Renergen raised no objection during any of these engagements, which means they were not concerned that their solar project construction would affect the company.

“This view is shared by independent geologists and supported by Renergen’s published drilling plans,” Haw said.

“It shows no evidence to permit or drill any wells on or within two kilometres of the solar facility footprint.”

He said Springbok Solar will continue to use all legal avenues to defend its rights and those of its employees, local community, and shareholders.

Analyst warning

Many prominent analysts and investors have warned that there is a lot of risk associated with Renergen.

David Shapiro from Sasfin Securities said that 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 told Business Day TV.

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

Devin Shutte, head of investment at The Robert Group, said Renergen had no margin for error.

“There is very little room to breathe at this stage. You just don’t see the talk translate into action,” he said.

The market’s reaction towards Renergen reflects Shapiro and Shutte’s warning about the mining company.

The share price is down over 80% since its peak in 2022, when the company was hyped up as a potentially big helium and LNG player.

It is currently trading at much lower levels than when it was listed in June 2015, which shows that investors have lost trust in Renergen.