Renergen has addressed recent social media criticisms of its company and a R655 million transaction closely linked to its CEO Stefano Marani, which saw its share price fall over 20% in a week.
Most of the criticism surrounds Renergen’s R655 million transaction to acquire 90% of the Virginia Gas Project (VGP), closely linked to Marani.
Much of the social media debate involved comments from Cilandia Capital’s activist investment manager, Albie Cilliers.
Cilliers said Molopo Energy sold 100% of the VGP to Windfall Energy for R5 million. He then sold 90% to Renergen for R655 million.
Windfall Energy was initially listed in 2011 as Windfall 66 Properties, which then became Windfall Energy and was voluntarily deregistered in 2017.
Marani is the director and owner of Windfall Energy, which Cilliers said raised questions on how he turned “R5 million into R728 million virtually overnight”.
In response to this and other criticisms, the company released a SENS announcement last week saying the “recent negativity initiated on social media […] has acted as a catalyst to place downward pressure on the company’s share price”.
Renergen claimed this was an “opportunistic attack” on the company and that it would “consider appropriate next steps”.
However, in a SENS announcement released this morning, Marani acknowledged that Renergen’s initial response was inappropriate and “we need to do better”.
“Upon reflection, we should rather have engaged Cilliers directly to address his concerns,” he said.
“We now have an opportunity to address these concerns and to reassure stakeholders of the Company’s fundamentals.”
The rest of the announcement consists of Renergen addressing the criticisms of the company one by one.
Amongst other questions, Renergen addressed the uncertainty surrounding the intrinsic value of the VGP at the time of its acquisition by Windfall Energy.
When Windfall Energy acquired the asset, it did so for a $1 consideration, assuming its liabilities, and a R50 million interest-free obligation payable exclusively from distributable profits.
Over approximately two years, Windfall Energy embarked on an extensive exploration campaign, utilising skills from Reservoir Engineers in Canada.
Following verified discoveries and incorporating acquired geological data, the 2P Reserves were upgraded from 17.9 BCF of methane in 2013 to 82 BCF of methane and, for the first time, helium.
Renergen said Deloitte’s Qualified Reservoir Engineer in Canada valued the uplifted asset at R2.2 billion using 1P Reserves in June 2015.
Renergen’s acquisition of the VGP came about when Windfall Energy’s management engaged with Renergen on a share-for-share deal, which included a cash injection.
The negotiated transaction was presented to shareholders, which was unanimously voted in favour of by Renergen shareholders and approved with all relevant information and regulatory disclosures contained in the circular.
An independent, fair and reasonableness opinion, based on a third-party valuation by Mazars, was required by the JSE and Takeover Regulatory Panel due to the fact that Marani was deemed a related party.
The pricing negotiation for the sale and subsequent shareholder vote excluded Marani, who was recused.
Cilliers also criticised the company for its alleged links to Trillian and its service provider, Integrated Capital Management. Both companies have been linked to the Guptas and mentioned in the Zondo state capture report.
Cilliers said Trillian and ICM were the joint lead arrangers for Renergen’s listing, bringing up questions about the company’s potential links to state capture.
In the SENS announcement released this morning, Renergen said ICM was a book runner and prepared the listing filings with the JSE on the company’s behalf in early 2015.
ICM also acted as the joint advisor on the de-SPAC process thereafter.
Renergen clarified that Trillian Asset Management, not Trillian Capital Partners, was a joint book runner for the company and a broker custodian for several shareholders.
Renergen’s initial public offering was concluded in June 2015, and Trillian Asset Management was acquired by Trillian Capital Partners several months later.
“Since then, there have been no further links between Renergen and these companies,” it said.
Renergen also disputed claims that Trillian Asset Management owned 24% of the company.
It said Trillian Asset Management was merely a custodian holding scrip on behalf of beneficial shareholders in the company, in the same way other custodians hold scrip for investors.
Renergen has also come under fire from analysts claiming that Marani and Renergen COO Nick Mitchell are selling off shares in the company and not declaring it to shareholders.
The company said that save for a single donation by each director to direct family members and shares disposed to cover tax liabilities arising from exercising share options in the approved remuneration schemes, Marani and Mitchell have not disposed of any shares.
“On the contrary, they have increased their net positions,” the company said.