JSE-listed Renergen says its Virginia gas project in the Free State could generate estimated earnings before interest, tax, depreciation and amortization (Ebitda) of between R5.7bn and R6.2bn. , once phases 1 and 2 have been completed, the plants are in full production.
Renergen, in January announced that it had successfully produced both liquefied natural gas (LNG) and liquid helium from the Phase 1 pilot plant.
Phase 2 will result in the construction of a significantly larger plant.
Once completed, the company expects the Virginia project to deliver a substantial amount of energy to the South African economy, while transforming the country into one of the world’s largest helium exporters.
In determining the Ebitda estimate, Renergen has considered the potential production capacity of both Phase 1 and Phase 2, current favorable energy prices, the current demand environment, a weaker rand against the dollar and other macroeconomic indicators.
Ebitda is expected to be achieved in the year following the completion of construction, but is unlikely to be before 2027.
Renergen notes that its Ebitda estimate is based on the assumptions that Phase 2 is fully funded and successfully built; that the long-term rand:dollar depreciation is in line with respective jurisdictional interest rate differentials; that the long-term spot price of liquid helium is about $600/mcf; and a long-term LNG base price of around R250/GJ.
In addition, these assumptions do not take into account the costs of distribution, storage and dispensing, he notes.
The Phase 1 pilot plant is designed to produce a maximum of 2,700 GJ of LNG and about 350 kg of liquid helium per day.
Phase 2 is currently expected to produce about 34,400 GJ of LNG and about 4,200 kg of liquid helium per day in its first full financial year of production.
In accordance with previous announcements, the Company intends to reach financial close from various sources of financing.
A final investment decision (FID) on Phase 2 is expected to be made in the second half of this year.
Shortly after reaching the FID, Phase 2 is expected to achieve debt financing approval of up to $500 million from the US International Development Finance Corporation and up to $250 million from a mandated global bank, the anticipated point at which lenders fully commit to debt financing.
