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Afrox, Renergen, Nu-World, Octodec

Being listed on the JSE AltX board and with a market cap of under R1bn, Renergen is not on many investors’ radars. There is good reason to believe it will not always be the case for this alternative and renewable energy group.

In August 2015, Renergen acquired a 90% stake in Molopo SA Exploration & Production, subsequently renamed Tetra4. Tetra4 is the only holder of onshore natural petroleum gas exploration rights in SA.

When the deal was struck, Molopo had already proved the existence of a substantial reserve of methane gas. As a bonus the reserve also contains a high concentration of helium.

Tetra4 has secured production rights over a substantial 187,000 ha single block in the Free State around Virginia, Welkom and Theunissen. It also holds natural gas exploration rights over a further 98,000 ha in the same area and 52,000 ha around Evander, Mpumalanga.

Explorative drilling is ongoing in the main 187,000 ha block, known as the Virginia project. With it comes a ramping up of proven reserves. “Proven reserves are increasing as we gain more geological information,” says Renergen CEO Stefano Marani.

In the latest assessment of the Virginia project’s reserves

undertaken in mid-2016 by international consultancy Venmyn Deloitte, proven reserves were put at 32.4bn cubic feet (cf) and valued at R2.2bn.

In all probability, the Virginia project’s reserves are significantly higher. Venmyn Deloitte put proven and probable reserves at 100.9bn cf and proven, probable and possible reserves at 256.4bn cf.

However, proven reserves are already sufficient for Renergen to meet its strategic objectives. “We have the critical mass we need,” says Marani. “Any increase in proven reserves from now on will add further blue-sky potential.”

The Virginia project’s reserve also has an amazing characteristic. “It is in a constant state of regeneration,” says Marani. “It is the first methane reserve in the world found to do this.”

Renergen has already taken the first important step in the commercialisation of its methane reserve. In May 2016 it began supplying compressed natural gas (CNG) to Megabus, a unit of KAP’s Unitrans logistics division. CNG is used to power 10 buses operating from Megabus’s Virginia depot.

“Cost savings are quite significant,” says Marani. “CNG is cheaper than petrol or diesel and also allows far longer intervals between oil changes.”

There is a misconception — born out of fire risks methane creates in some mines — that methane is a dangerous gas.

“Methane is a lot safer than petrol and diesel and vastly safer than LPG (liquefied petroleum gas),” he says.

Renergen’s helium reserve also represents a valuable asset. “Our reserve has a concentration of 3%-4% by volume (of methane),” says Marani. “It is one of the highest concentrations in the world.”

The helium reserve grabbed the attention of the world’s largest industrial gas company, Linde Group, owner of a 53% controlling stake in Afrox. Renergen and Linde entered into an agreement in May 2016 to commercialise the reserve.

A plant which will separate the helium from methane is under construction and due to begin production in 2018 or 2019. “Afrox will operate it and distribute the helium for which we will be paid an international market-related price,” says Marani.

Renergen is no low-risk investment, but it is one with exciting prospects, highlighted by its ability to attract KAP, Linde and Afrox as partners.