Renergen (ASX:RLT) OPIC loan agreement


by Jessica Amir

Renergen Limited (ASX:RLT) Q&A session with CEO Stefano Marani on the OPIC loan agreement, its significance and the future growth of helium.

Jessica Amir:
You're watching The Finance News Network. I'm Jessica Amir. Joining us now is an emerging LNG and helium producer Renergen (ASX:RLT) . The company's CEO Stefano Marani is joining us from South Africa.

Jessica Amir: Hi Stefano. Great to speak to you again. Welcome back to the network.

Stefano Marani: Thank you very much for having me again.

Jessica Amir: First up Stefano, just tell us why the announcement of the US government body OPIC and their loan agreement with Renergen (ASX:RLT) is so significant.

Stefano Marani: When we came to the market with the IPO in June we had announced at the market that the OPIC funds were committed but they were still subject to the execution of the final loan agreement. That needed to take place by September of this year. That potentially left some investors seeing that there was still some potential risk. The execution of this loan agreement now eliminates any possible risk relating to this contract. The funds are now committed and we'll be receiving the first disbursement within the coming days. Beyond that, the second reason why we feel that this is such a critical milestone for us, is that the loan in and of itself just reiterates the strong endorsement from the United States government in, not only this project and the fact that this is a great project, but also in the increasing importance of helium as an industrial gas.

Jessica Amir: What are the terms of the loan?

Stefano Marani: It's a US$40 million loan. 12 years in maturity with a grace period on principal repayments of slightly shy of three years. It's a fixed rate loan, I will say annually. The benefit of the fixed rate loan is that we see yield currently, given the global financial situation, as being quite low. Therefore we believe that we got quite favourable long-term low financing repayments.

Jessica Amir: Stefano, how will the proceeds of the loan be used?

Stefano Marani: The proceeds from this loan are going to be towards the construction of phase I. That's critically important because it means that we then go into operation and start generating positive cashflow from phase I. Phase I is obviously a relatively modest operation at 2,700 gigajoules per day of LNG and about 350 kilograms of helium per day. But once combined with the proceeds from the IPO, from June early this year, it allows us to now explore a specific sandstone track where we discovered helium concentrations of 11 per cent. The next phase on that will be the commencement of drilling in the sandstone. Obviously this is where we see the much larger scale rollout, which would then mean Renergen could potentially become one of the major global helium players.

Jessica Amir: Changing pace now to the helium market itself, just tell us about the current market conditions.

Stefano Marani: To say that they are constrained is a bit of an understatement. It's been a confluence of many factors that have led to a situation where the market is heavily under supplied. You had the United States strategic reserve, colloquially known as the BLM, having its last auction of course in 2018. The result of that has been strategic supplies from the US are now, and are, dwindling and almost out. Combined with that, in 2023, you'll see a potential shutdown of another major supply, called the Hugoton Field. All of this is just adding pressure on the supply side. You've got Qatar, which is bringing another potential plant online but right now the timeline for that isn't cast in stone. The Russia plant, the Amur project, is still awhile away.

Stefano Marani: You got these big potential supplier opportunities to try and correct some of the imbalances caused by the shutdown of the BLM, but these are very, very long lead items. They're very difficult plants to construct, when the concentrations are as low as they are in some of the other fields. Which means that it's a very complex process to get new supplier up and running.

Stefano Marani: We see this as a sweet spot for Renergen, specifically by virtue of the fact that our concentrations are as high as they are. Our geology is as easy as it is to extract gas. It means that we can quite nicely slot into this specific supply gap.

Jessica Amir: Just lastly Stefano, before we let you go, what are the next milestones for Renergen?

Stefano Marani: The next step, obviously the immediate step, is drawing down an OPIC loan. That allows us to go and order the liquefiers and commence construction. The construction phase, we will obviously be providing updates both on Twitter and on the website, with pictures of breaking ground, et cetera. The next big milestone for investors to pay attention to is the commencement of drilling in the sandstone. This is obviously the event that a lot of the shareholders are interested in seeing, particularly given the magnitude of that sandstone. And identifying what's contained in that sandstone.

Jessica Amir: Wonderful.

Jessica Amir: Stefano Marani, thank you so much for the update.

Stefano Marani: Thank you very much for your time.


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