Energy: Uncle Sam makes $59m investment in helium through Renergen
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Dual-listed Renergen (ASX:RLT, JSE:REN) has secured a $US40m ($59.03m) loan from the US government to start its LNG and helium project in South Africa — underpinning the importance of helium.
It told its shareholders this morning that the first payments from a loan secured from the US government’s Overseas Private Investment Corporation (OPIC) should be hitting its bank account over the coming days.
The news edged shares up 5.6 per cent to 76c on Wednesday morning.
It’s already locked in an offtake deal with Linde Global Helium, but has also previously said it’s in negotiations with the likes of Megabus, Anheuser-Busch and Black Knight Logistics for its LNG.
Renergen has also appointed a lead engineering, procurement and construction contractor on the project, and with the engineering and funding now locked in Renergen said revenue from the project should start flowing from the first half of 2021.
CEO Stefano Marani said the fact the US government was getting involved in making the project happen spoke to helium’s strategic importance.
“Today’s announcement is special on multiple fronts, not only does the agreement provide access to an efficient source of capital to progress the Virginia gas project towards production, but it is also a huge endorsement by the US government through the OPIC of both the project and the significant importance of securing helium supply,” he said.
The $40m loan has a 12-year term with a (just less than) three-year grace period — and was fixed against the US Treasury yield curve — making it a fairly favourable loan given the current environment.
So, what’s the big deal about helium?
It turns out that helium isn’t just used in party balloons.
The US is super-keen to secure new supplies of the stuff because according to Edison research there’s about to be a global shortage of helium.
The shortage is going to last until the start up of new projects in Qatar and Russia, but “any delay in production from these two sources will materially adversely impact on the global supply of helium.”
Meanwhile, the US Bureau of Land Management, which controls about 20 per cent of the world’s supply is set to close down from 2021.
What’s more, helium’s fairly irreplaceable as far as it goes, and there’s no way of manufacturing helium artificially.
Helium’s usually a by-product of natural gas processing — which also means it’s a fairly finite material.