Renergen fails to produce helium

Renergen’s latest update revealed that it still could not show that it can profitably produce liquid helium (LHe) and liquid natural gas (LNG).

In its latest quarterly update, Renergen said its Helium system integration was nearly complete, with no significant issues detected.

“The OEM supplier arrived on site in late February 2024 to complete the final step in commissioning of the plant, which is progressing well,” it said.

It provided further technical details and that it was “completing the last set of pre-checks and assessments before embarking on the next step of commercial liquification for customers”.

As promising as it sounds, it is nothing the market has not heard before. For years, Renergen has promised that commercial helium production was just around the corner.

However, to date, the company has failed to show that it can profitably produce helium and deliver it to clients.

Renergen further told investors that it produced 154 tons of liquid natural gas (LNG) in February 2024.

This comes as it transitioned the plant from a complete outage into operating plant status. It will now focus on ramping up production and increasing efficiency and reliability.

Renergen’s LNG results were well below estimates. It was expected to generate between 48 and 52 tonnes of LNG per day from only its phase 1 expansion.

Its quarterly report stated it could only produce 154 tons of LNG from 15 to 28 February, which translates to a mere 11.8 tons of LNG per day.

Limited financial information

Renergen’s latest update contained very limited operational financial information and lacked fundamental financial metrics.

It did not provide any information on its revenue or profitability. It only provided investors with a cash flow statement.

The company’s cash flow deficit from operating activities was R23.2 million in the past quarter and R57.4 million in the past year.

Simply put, it shows that Renergen is not able to generate positive operating cash flows from its day-to-day activities.

Therefore, the cash generated from its LNG sales cannot cover the cash it burns to run its operations.

It was striking that Renergen’s cash flow deficit increased in the last quarter. This means it needs regular equity raises to continue operating.

Cilandia Capital activist investment manager Albie Cilliers – a vocal Renergen critic – said Renergen would eventually go bankrupt without regular capital raises.

He said the company’s cost of production and the amount of gas it produces per well is too little to justify economic returns on shareholder capital.

“Renergen is a share for gamblers and speculators, not serious investors, in my opinion,” he said.

No commercial helium – five years after first deadline

Five years after Renergen’s first deadline to commercially produce helium, it still has not sold any helium.

Renergen’s first commitment to commercially produce LHe came in May 2016, when it announced signing a major deal with Afrox.

This deal would have enabled Afrox, which has since been acquired by Linde, to source and supply LHe locally by 2018/19.

Curiously, Afrox and Linde did not want to comment on the current status of their relationship with Renergen.

However, they asked that an image with a Linde Tanker at Renergen’s Virginia plant be removed. Linde did not elaborate on why it did not want its tanker associated with the project.

After the 2019 deadline was missed, Renergen provided new guidance. It said it would produce 350 kg of LHe daily by 2021. Again, this did not materialise.

In an October 2023 update, Renergen promised to start producing helium by the end of 2023. Once again, this did not materialise.

Renergen blamed cooling equipment problems. It first reported these problems in June 2023 and said the repairs were completed in September 2023.

On 29 December 2023, Renergen said the helium cold box had successfully been recommissioned and tested.

“We are now looking to progress with final system integration so that commercial liquid helium production can commence,” it said.

“Our customer will be moving their helium iso-container back to the site in order for us to fill it directly to improve filling time.”

However, the latest quarterly update revealed that Renergen has yet to complete its integration of the helium system.

Renergen has, to date, failed to show that it could produce commercial helium. Instead, it has missed numerous deadlines with more promises every time.

PROMISE	REALITY
In May 2016, Renergen announced that it signed a major deal with Afrox. It said that this deal will enable Afrox to locally source and supply LHe by 2018/19.	Failed – To date, there has been no mention of any LHe sales to Afrox. Afrox also provided no comment to Daily Investor regarding this deal. After publishing an article on the Afrox and Renergen deal, Afrox requested Daily Investor to remove its logo from the cover image.
In August 2019, Renergen said it would be producing 350 kg of LHe per day by 2021.	Failed – To date, there has been no proof that Renergen has ever commercially produced any helium.
In January 2023, Renergen said it produced its first LHe at the Virginia Gas Project and that all components of Phase 1 were operational.	Failed – Renergen has yet to record revenue from LHe. CEO Stefano Marani said the company has not produced any helium for sale yet due to an LHe coldbox leak. The first mention of the leakage was only made in June 2023, giving Renergen six months to produce and sell their helium since the production announcement.
In October 2023, Renergen said it was on track to commence LHe production before the end of 2023.	Failed – In February 2024, Renergen said its LHe system repair is complete but is awaiting final integration and testing.
In December 2023, Renergen said its LHe coldbox had succesfully been recommissioned and tested. Renergen said that 2024 will see stable helium production	Failed – In February 2024, Renergen said it suffered delays during its planned maintenance and LHe coldbox repairs. LHe production remained shut down, and the equipment manufacturers are only expected to integrate the LHe system into the plant after the Chinese New Year – only then will LHe production begin.
In February 2024, Renergen said its LHe system repair was complete, following delays, but it is awaiting final integration and testing. This should occur after the Chinese New Year – only then will LHe production begin.	Failed (to date) – Renergen has not yet integrated the helium system and has not produced any LHe. It also failed on its phase 1 estimates of 48-52 tons of LNG production per day and only achieved 11.8 tons per day in February.
Renergen stated it was completing the last set of pre-checks and assessments before collectively embarking on the next step of commercial Helium liquification for customers.	To be determined.