Picture: ISTOCK
Picture: ISTOCK

Junior energy company Renergen has secured an eight-year, R218m loan from the Industrial Development Corporation (IDC) to help fund a 107km pipeline and associated installations for its Tetra4 natural gas project near Virginia in the Free State.

The IDC’s decision to grant the loan was in line with its strategy of supporting gas as a cleaner energy source, said Hilton Lazarus, the IDC’s head of base and speciality chemicals.

Renergen CEO Stefano Marani said on Wednesday that the company would decide in due course whether the equity component of the loan would take the form of mezzanine capital or a share issue. It would depend on what was in the best interests of shareholders.

Lazarus said the IDC would consider taking shares in Renergen in future.

Conditions to the loan include completion of an environmental impact assessment, a final review of the geology and an equity contribution from Renergen.

The environmental impact assessment had been completed without objections and was waiting for a final decision from the regulators, said Marani.

Lazarus said the Tetra4 project was situated in an undeveloped area and its development would encourage job creation and local entrepreneurship. The IDC was keen to promote greater gas use in industries such as power-generation.

Marani said gas from Tetra4 was classified as a renewable resource because it was generated as methane from bacterial consumption of carbonaceous rock deep underground.

Construction of the pipeline would begin before the end of 2017 if all regulatory approvals were received and it should be in operation before the end of June 2018.

The pipeline would be 2m underground, below farmland. There were no plans at this stage to extend the pipeline to industrial and municipal customers in the area, Marani said.

Renergen’s share price was unchanged on Wednesday at R10, which was well below the R77 a share valuation of the 100-billion cubic feet of proven and probable gas reflected in its latest reserves and resources statement. The company will publish its year-end financial report before the end of May.

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