The government-owned Central Energy Fund (CEF) plans to invest R1 billion into the Virginia Gas Project, South Africa’s only onshore petroleum production right, via the acquisition of a 10 percent stake in Renergen subsidiary Tetra4, which owns 100 percent of the project.
Renergen’s share price surged 10.6 percent to R43.49 yesterday morning after the deal was announced. The transaction follows hard on the heels of a strategic shareholder agreement signed between Renergen and Canada-based Ivanhoe Mines two weeks ago, and the share price has surged 36 percent over three weeks.
Proceeds from the CEF subscription will be used to further the development of Phase II of the Virginia Gas Project by Renergen, with Phase I expected to start this month, a statement said yesterday.
The investment by the CEF provides exposure to economic participation in South Africa’s first onshore petroleum production right.
A term sheet had been agreed with the CEF, which, if binding agreements were executed within the stipulated time period, would see the CEF invest R1bn into Tetra4 Proprietary.
If binding contracts were not executed after 141 days, the purchase price would be renegotiated in good faith.
The CEF is a state-owned diversified energy company with an investment mandate focused on contributing to the energy security of South Africa.
CEF CEO Dr Ishmael Poolo said in a statement: “Our participation in the Renergen project is in line with the newly adopted strategy of being a ‘strategic investor’ in the energy value chain that is geared to support the region’s energy needs, leading the energy security and just transition programme for South Africa.”
“Renergen and the CEF’s relationship goes back many years. During this time, Renergen has successfully grown Virginia in a size and scale, highlighted by the growth of both of our helium and methane reserves, which have finally reached the critical mass to enjoy CEF’s involvement,” CEO Stefano Marani said yesterday.
He said the investment commitment was a result of long-term discussions between CEF and Renergen, and during this time, “the CEF team have been amazing to deal with, and I am very pleased to be able to welcome them as a major investor in our future.”
The aim is to establish the Virginia project as a significant domestic and global producer of methane, a more environmentally friendly energy source used extensively for power generation in other markets and for home heating, and helium, a gas in short supply globally that has a number of major industrial and technological uses.
“The future is extremely bright for Renergen, and shareholders should be excited by what we are building. To sign CEF and Ivanhoe Mines in the space of two weeks as major investors and strategic partners highlights the significant growth of the company and the critical role Virginia will play in the future supply of clean energy as well as in-demand helium,” said Marani.
Ivanhoe Mines has three main joint venture projects in Southern Africa, the development of new underground mines at Kamoa-Kakula in the Democratic Republic of Congo (DRC), the Platreef palladium-rhodium- platinum-nickel-copper-gold discovery in South Africa and the upgrading of the Kipushi zinc, copper-germanium-silver mine in DRC.
Renergen’s partnership sees the Canadian miner taking a 4.35 percent stake in Renergen, raising about R200.6 million in the process, in a transaction that could, through various options and conditions, be a precursor to Ivanhoe possibly increasing its stake to up to 55 percent and injecting a further $250 million (R3.63bn) into the project.
BUSINESS REPORT ONLINE