Executive Summary

In this report, we review Renergen’s FY25 results for the period ending 28 February 2025, released on 19 May 2025, as well as the offer by ASP Isotopes Inc to purchase all the outstanding shares of Renergen.

Financials:

·       Revenue improved by 80%, from R29 million in FY24 to R52.1 million in FY25. The increase was driven by improved production and higher LNG prices.

·        Cost of sales rose by R61.3 million to R80.2 million, mainly due the following:

o   Depreciation increased by R32.7 million.

o   Fuel and lubrication costs rose by R9.7 million, due to a larger asset base leading to increased machine hours.

o   Utility costs increased by R14.7 million, impacted by increased machine hours and the commissioning of the LHe production plant.

·     A gross loss of R28.1 million was recorded for FY25 compared to a gross profit of R10.1 million in FY24.

·  Other operating expenses also weighed on profitability, rising by 34% from R146.9 million to R196.8 million.

·    The interest expense and imputed interest surged to R81.1 million in the current year, from R22.7 million in FY24, due to a reduction in the capitalisation rate of borrowing costs relating to assets under construction. The capitalisation rate for borrowing costs declined from 79% to 19% during FY25.

·     A net loss for the year of R246.9 million was recorded, an increase of 125% from R109.8 million from the loss in FY24.

Production and prices received:

·        LNG sales volumes totalled 4 633 tonnes, a 74% increase when compared to 2 660 tonnes in FY24.

·        Average LNG sales prices rose by 3.7%, from R217/gigajoule to R225/gigajoule.

Analyst thesis

Renergen possesses valuable and unique assets, including a high helium concentration relative to its peers and ambitious growth plans. However, operational challenges have led to Renergen, at times, not being able to capitalise on higher gas prices. As a capital-intensive business, Renergen’s future growth depends on costly exploration, which must be financed through either additional debt, placing further pressure on the balance sheet, costs, and debt covenants, or equity issuance. The latter is particularly unattractive given the current low share price, which would lead to significant dilution to raise the required capital. Additionally, there is a going concern risk, though this may ease as the company ramps up to nameplate capacity and performance improves over time.

Results

The substantial rise in cost of sales and operating expenses was primarily driven by the expansion of the asset base during the year. This led to increased machine operating hours, which in turn resulted in higher costs. The notable increases in other operating expenses were:

·        Insurance costs increased by R8.6 million.

·        Repairs and maintenance costs increased by R12.1 million.

·        Legal and professional fees increased by R6.4 million.

·        Executive directors' remuneration costs increased by R11.4 million.

·        Depreciation and amortisation increased by R9.9 million.

·        Selling and distribution expenses increased by R3 million.

Interest expenses also impacted the bottom line, driven by a reduction in the capitalisation rate from 79% to 19%, as the balance of plant and LNG/LHe processing plant were transferred from assets under construction to assets in use during the period. The interest expense increased by R58.4 million for FY25.

The company also indicated that the intention to list Renergen on the Nasdaq has not changed and that they still anticipate raising R2.9 billion. The Group anticipates receiving $795 million in funding from DFC and SBSA, which includes the refinancing of Phase 1 debt.

The high court ruled in the company’s favour against NERSA that the company does not require a license for trading in gas when the trading occurs outside of the piped gas industry.  

Valuation

Table 3: Valuation