Big problems at South African energy company

Investors are dumping Renergen shares as the company faces mounting problems, and questions are being raised about its survival.

Renergen was one of the worst-performing shares on the Johannesburg Stock Exchange (JSE) in 2024, losing over 50% of its value.

The downward pressure continued in 2025, with the company’s share price hitting an all-time low this week.

Renergen’s financial challenge was shown in a quarterly update published on the JSE’s stock exchange news service (SENS) on 31 December 2024.

The update showed that Renergen was using money faster than it could generate it, placing it under severe pressure.

After burning through all of its borrowed funds, Renergen received a R550 million investment at the beginning of 2024, which gave it some cash flow relief.

Since then, for the 9-month 2024 operating period, it has only received R42 million in cash from customers while burning through R145 million from operating activities.

Additionally, it used R114.5 million in investing activities spent on property plant and equipment and explorations costs and R231 million to pay off debt.

In its last annual report, Renergen reported that it had total interest-bearing debt of R1.24 billion.

After less than a year, Renergen is left with only R23 million in cash from the R550 million it received from its BBBEE investor and is looking for more money.

In its most recent quarterly results, Renergen revealed that it is working closely with lenders and investors to cover its short-term liquidity (cash) needs.

It is clear that Renergen is under severe financial strain and that it needs an urgent capital injection to fund its operations.

One of its biggest challenges is that its planned Liquefied Natural Gas (LNG) and Liquefied Helium (LHe) plans did not materialise.

It fell far short of what it promised investors and what was needed to make the company a profitable enterprise.

After seven years of promising to start supplying Afrox with helium, Renergen has not reported a single sale of helium.

It is also significantly underperforming based on its LNG promises. Renergen said it would deliver around 4,700 tons of LNG per quarter.

Renergen only produced 1,124 tons of LNG in the current quarter and is still reporting significant losses.

The Renergen share price, shown in chart below, shows the decline over the last twelve months.

Renergen facing numerous challenges

Renergen is facing numerous challenges, including environmental problems and a fight with a solar project over the area where it operates.

In August 2024, Daily Investor reported 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.

Renergen responded, saying it is unlikely to impact the timing of Phase 2 because its select drilling programme is fully authorised under the Production Right granted in 2012.

It is also involved in a dispute over the construction of the Springbok Solar project, which is 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.

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

These problems and Renergen’s ongoing financial challenges have raised questions about its ability to raise enough money to continue operating.

David Shapiro from Sasfin Securities said 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 said.

“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.