JSE-listed Renergen says its Virginia gas project, in the Free State, could generate an estimated R5.7-billion to R6.2-billion in earnings before interest, taxes, depreciation and amortisation (Ebitda) once the Phase 1 and 2 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.
Upon completion, the company expects the Virginia project will deliver a substantial amount of energy to the South African economy, while also transforming the country into one of the world’s largest helium exporting countries.
In determining the Ebitda estimate, Renergen has considered the potential production capacity of both Phase 1 and Phase 2, current favourable high energy prices, the current demand environment, a weaker rand relative to the dollar and other macroeconomic indicators.
The Ebitda estimate is expected to be reached in the financial year after construction has been completed but is unlikely to be before full-year 2027.
Renergen points out that its Ebitda estimate relies on the assumptions that Phase 2 is fully funded and successfully built; that the rand:dollar long-term depreciation is in line with the respective jurisdictional interest rate differentials; that the liquid helium long-term spot price is about $600/mcf; and a long-term base LNG price of about R250/GJ.
Moreover, such assumptions do not take into account the costs of distribution, storage and dispensing, it 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 a day.
It is currently anticipated that Phase 2 will produce about 34 400 GJ of LNG and about 4 200 kg of liquid helium a day in its first full financial year of production.
In line with previous announcements, the company intends to reach financial close on several sources of funding.
A final investment decision (FID) on Phase 2 is expected to be made in the second half of this year.
Shortly after reaching 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 the lenders are fully committed to financing the debt.