Renergen achieves massive milestone

Renergen announced this morning that it has produced liquid helium at its Virginia Gas Project.

In a SENS announcement this morning, the company informed shareholders that it has achieved this significant milestone for its Virginia Gas Project.

Renergen explained that, since 2 April 2024, the Original Equipment Manufacturer (OEM) has brought its helium cold box to the appropriate temperature in order to liquefy helium in batches from its wells. 

“Part of this process involved the purification of the helium to a level of 99.999% purity, which has been validated by an independent 3rd party laboratory,” the company said.

It said the OEM is now ensuring that the operating conditions are satisfactory to commence the performance test, at which stage the helium train will be put into continuous operation mode.

“To provide assurance that future shutdowns and restarts will be smooth, the helium train will be taken off-line, and the process will recommence from ambient conditions to ensure repeatability and that every process in the production cycle is documented and recorded with the OEM present,” the company said.

“Importantly, LNG production has not ceased at any stage throughout the process and will continue to operate,” said Renergen CEO Stefano Marani. 

“The OEM will complete any necessary checks and balances in the coming weeks before embarking on the performance test, however, all liquid helium produced is recoverable and will be used to fill tanks for customers.”

Latest results

This announcement comes after Renergen released its results for the 12-month period that ended 29 February 2024 last week.

The company’s results showed that the more LNG it produced and sold, the bigger its losses. At the time of reporting, it had also failed to produce commercial helium.

Renergen, through its wholly-owned subsidiary Tetra4, commenced producing and selling LNG in September 2022.

Tetra4’s LNG production steadily increased in the first half of 2024, averaging approximately 17 tonnes a day.

However, the LNG plant was placed on maintenance from September 2023 to early February 2024.

Despite the maintenance, the positive start to the 2024 financial year contributed to an overall revenue increase of 128.4% – from R12 million to R29 million.

This is where the good news stopped. The revenue was minuscule compared to Renergen’s promised target EBITDA of between R5.7 billion and R6.2 billion by 2027.

Another major challenge is that costs increased far faster than revenue. Its operating expenses increased from R43 million to R147 million, a R104 million increase from the previous year.

Security expenditure increased from R322,000 to R7.5 million, and employee costs increased from R2.8 million to R25.7 million.

Renergen’s LNG selling and distribution expenses went up by 444% – from R1.5 million to R7.9 million.

Simply put, Renergen’s cost of selling LNG is rising much faster than its revenue from sales. The more it sells, the more money it loses.

As a result, the company reported an operating loss of R135 million. This means that for every R1 of additional revenue Renergen generated, it extended its operating loss by R6.1.

Renergen reported a net loss of R110 million thanks to a R37.2 million tax credit it received. It means the company made more “money” from this tax credit than the revenue it produced.

Renergen reported total LNG production of 2,876 tonnes for the 2024 financial year, which translates to between 8 and 9 tons of LNG per day.

This is significantly less than the 52 tons of LNG per day that Renergen promised would be produced in 2024.