South Africa’s Central Energy Fund (CEF) is considering buying into Renergen’s Virginia gas project, paying 1 billion rand ($69 million) for a 10% stake.
The two sides have signed a non-binding term sheet. The two sides have 141 days to reach a binding agreement.
Renergen said that, if successful, it would use the proceeds to fund the second phase of work at the Virginia project. It follows a significant investment by Ivanhoe Mines in Renergen earlier this month.
CEF would take a 10% in Tetra4 Proprietary, the unit holding 100% of the Virginia gas project.
The first phase of production at Virginia is expected to start in April.
Stefano Marani, CEO of Renergen, said the two companies had a relationship going back years. “Today’s investment commitment is a result of long-term discussions between CEF and Renergen”, he said.
“I along with the Renergen Board and management team look forward to building on the strong strategic partnership with CEF as we embark on Phase 1 operations in April and establishing Virginia as a significant domestic and global gas producer,” Marani said.
Striking deals with Ivanhoe and CEF within two weeks “highlights the significant growth” of Renergen, Marani said. The Virginia project will play a critical role “in the future supply of clean energy as well as in-demand helium”.
CEF CEO Ishmael Poolo said buying into the Renergen project aligned with its strategy of strategic investing. The aim is to “support the region’s energy needs, leading the energy security and just transition programme for South Africa”.
A note from Hannam & Partners said CEF’s funds would reduce Renergen’s spending at Virginia “and gives confidence to the potential debt providers. These deals give Renergen the opportunity to consider a larger project to monetise more of its substantial reserves and resources”.