Renergen struggling

To date, Renergen has failed to show that it can profitably produce liquefied natural gas (LNG) and helium. It has also failed to meet its own targets.

On Thursday, Renergen released its results for the six months ended 31 August 2024, which showed poor results for the gas producer.

Revenue increased by 8% to R25.61 million. However, its costs rose by 90%, from R13 million to R24.73 million.

Renergen’s gross profit declined by 92%, and its operating loss deepened to R65.13 million. The company’s total loss for the period was R70.71 million.

The most concerning part of Renergen’s results was that it had not sold any helium to customers.

Three months ago, Renergen CEO Stefano Marani said they were “producing liquid helium (LHe) and putting it into our customers’ tanks” and “deriving revenue from the helium”.

However, the company’s latest results showed that this was misleading. Renergen did not sell any helium and derived no revenue from it.

It made many investors doubt the company’s prospects and whether it could ever meet its lofty LNG and LHe production promises.

Renergen has completed the development of Phase 1 of its Virginia Gas Project (VGP), the company’s main asset.

The Virginia Gas Project is in the Free State and comprises exploration and production rights of 1,870 km² of gas fields.

According to FNB, Renergen was expected to produce 310 kg of helium and 50 tonnes of LNG per day by the first half of 2024.

This translates into around 9.3 tonnes of LHe and 1,500 tonnes of LNG per month, or 9,150 tonnes of LNG and 57 tons of LHe every six months.

However, the company’s latest results showed that it sold no helium and only produced 2,388 tonnes of LNG over the last six months.

Renergen said production averaged 274 tonnes and 521 tonnes per month during the first and second quarters of the 2024 financial year, respectively.

 “LNG production averaged 455 tonnes per month during the first quarter ended 31 May 2024,” Renergen said. This is well below the expected monthly production of 1,500 tonnes of LNG.

Renergen told investors the LNG plant was operating at approximately 35% nameplate capacity.

Renergen finances

The plant’s poor performance has filtered through to Renergen’s finances. It has racked up significant losses, and its interest expenses are rising.

Renergen’s revenue increased slightly from R23.8 million to R25.6 million over the last six months. Therefore, it generates around R4.3 million in revenue per month.

The company’s H1 2025 interest expense was R25.2 million, up from R8.9 million. This means revenue is basically the same as its interest expense.

However, the company’s interest expense is growing far faster than revenue – this is not a good position to be in.

The chart below shows Renergen’s revenue over the last four years, broken down into half-yearly amounts.

It is particularly concerning that Renergen barely generated a gross profit. Its gross profit was R882,000, which represents a mere 3% gross profit margin.

The gross profit shows what’s left of revenue after all direct production costs are paid. The higher this margin, the better.

For the six months through August 2024, Renergen recorded the biggest loss before tax it has ever reported, R85 million, over three times greater than its revenue for the period.

The company is piling up losses at an increasing rate, with almost a quarter of a billion in cumulative losses before tax in the past 18 months.

It also reported an operating loss of R65.1 million. This means that the company is not profitable after all direct and indirect production costs have been paid.

Renergen told investors it would generate earnings before interest, taxes, depreciation, and amortisation (EBITDA) of R5.9 billion to R6.2 billion by 2027.

The date is drawing nearer, and the company has not been able to generate even 1% of its EBITDA target in revenue.