Strange twist in Renergen saga

In a surprise development, Mahlako Gas Energy elected to exercise its put option for its Renergen shares, which Renergen is now opposing.

Renergen is a South African energy company, listed on the Johannesburg Stock Exchange (JSE), and the first onshore natural gas explorer in the country.

It produces liquefied natural gas (LNG) and liquid helium (LHe) through its Virginia Gas Project in the Free State.

The company has made headlines for missing liquid helium production deadlines and landing in financial trouble.

Most of its financial challenges seemed to have been resolved after ASP Isotopes announced that it had agreed to buy Renergen.

Protea Capital Management founder and CEO Jean Pierre Verster said Renergen was in a lot of trouble and that this deal could be seen as a bailout.

However, the acquisition will not be a cash deal. Renergen shareholders will get ASP Isotopes shares listed on the JSE.

This means that Renergen investors who are not upbeat about ASP Isotopes’ prospects would look to sell their shares.

On Wednesday, 10 July 2025, Renergen released a statement saying that Mahlako Gas Energy elected to exercise its put option following a put option event.

A put option gives the holder, in this case, Mahlako, the right to sell their shares at a pre-determined share price.

Mahlako Gas Energy and Renergen

To understand the issue, it is essential to revisit 27 December 2023, when Mahlako Gas Energy invested R550 million in Renergen for a 5.5% stake in Tetra4 as a BEE investor.

As part of the original transaction, Mahlako Gas Energy was granted a put option on its Tetra4 investment.

This option gave Mahlako the right to sell its R550 million investment back to Renergen if certain trigger events occurred.

The agreement stated that the put option could be exercised if any of the following events occurred:

• An unremedied material breach of the Agreement.
• If Tetra4 does not meet the environmental and social standards of the International Finance Corporation.
• If Tetra4 engages in prohibited activities such as child labour, racism, trading in banned waste products, or similar conduct.
• Dealing with sanctioned parties on the United Nations Security Council Sanctions List.
• Renergen no longer owns 50% of Tetra4.
• Tetra4 loses its environmental authorisation.

The statement said that Mahlako exercised its put option, which means that Mahlako wants to sell its share in Tetra4 back to Renergen.

It is important to note that the holder of a put option has the right to exercise the put (sale), which means Renergen would be obligated to buy the Tetra4 shares from Mahlako under the terms of the put option agreement.

Renergen explained that it “categorically disputes that the put option has been lawfully or validly exercised” and that it would challenge the validity of the transaction.

At the time of Mahlako Energy’s R550 million investment in 2023, Renergen had a market cap of around R1.8 billion.

Based on Renergen’s market cap at the time, Mahlako should have received a 30.5% stake in Tetra4 for an investment of R550 million.

Mahlako Energy, however, agreed to a 5.5% stake in Tetra4, which means that Mahlako Energy purchased the shares at a valuation of R10 billion.

The original statement outlining the Mahlako deal did not specify the put option strike price. This is the share price at which Mahlako could exercise its put option.

Renergen did, however, state that the put option price —the price at which Mahlako would sell its shares back to Renergen —has yet to be determined.

Renergen’s bold claims

Renergen’s aggressive defensiveness in buying Mahlako’s shares may come as a surprise to investors.

Renergen’s CEO, Stefano Marani, recently said, “This Tetra4 Virginia Gas Project has the potential to become the biggest helium project in the world.”

Based on Marani’s claims, it may seem strange that Renergen is not jumping to buy back the 5.5% stake from Mahlako.

If Renergen were to buy out Mahlako Energy at Renergen’s current market cap, the 5.5% would be worth only R94.6 million.

Renergen has yet to report any helium sales, and the company continues to report record losses. It is also in deep financial trouble, having breached debt covenants on most of its debt.

Most of Renergen’s debt is securitised by the assets of the Tetra4 gas plant. This puts the whole plant at risk if further debt covenant breaches occur.

Since its latest financial reports, Renergen has R1.1 billion in debt and only R28 million cash in the bank.

Its balance sheet shows that Renergen does not have the money to buy back the shares from Mahlako.