RENERGEN LIMITED Incorporated in the Republic of South Africa (Registration number: 2014/195093/06) JSE Share code: REN A2X Share code: REN ISIN: ZAE000202610 LEI: 378900B1512179F35A69 Australian Business Number (ABN): 93 998 352 675 ASX Share code: RLT (“Renergen” or “the Company” or together with its subsidiaries “the Group”) AUSTRALIAN STOCK EXCHANGE APPENDIX 4E - PRELIMINARY FINAL REPORT Current reporting period Year ended 28 February 2023 (2023) Previous period Year ended 28 February 2022 (2022) RESULTS ANNOUNCEMENT TO THE MARKET 2023 2022 Change Change Rm Rm Rm % Revenue 12.7 2.6 10.1 388.5% Loss after tax attributable to ordinary shareholders 26.7 33.8 (7.1) -21.0% Total comprehensive loss attributable to ordinary shareholders 26.7 33.8 (7.1) -21.0% Change Change Cents Cents Cents % Basic and diluted loss per share 19.86 27.73 (7.87) -28.4% • Renergen presents its first condensed consolidated annual financial statements as a production company, through its subsidiary Tetra4 Proprietary Limited (“Tetra4”). The commissioning of the Virginia Gas Project (“VGP”) in September 2022 transitioned Tetra4 from an exploration company. Tetra4 commenced the production and sale of liquefied natural gas (“LNG”) in September 2022 which increased the Group’s revenue by 388.5%. • The loss after tax and total comprehensive loss attributable to ordinary shareholders decreased significantly by 21.0% or R7.1 million mainly as a result of the following: o An increase of R4.8 million in the gross profit contribution; o An increase of R9.9 million in other operating income primarily driven by net foreign exchange gains and the selling profit on finance lease receivables; and o An increase of R3.4 million in interest income due to higher cash balances from the Company’s fund-raising initiatives and higher interest rates, which were offset by: ▪ An increase of R7.2 million in share-based payments expenses reflecting the implementation of the Share Appreciation Rights Plan (“SAR Plan”) for a full 12-month period compared to 3 months in the prior comparative period. Awards under the SAR Plan were first granted in December 2021. ▪ An increase of R4.7 million in other operating expenses mainly due to an increase in marketing and advertising costs to improve brand visibility as the Group approached the commissioning of Phase 1 of the VGP, higher listing costs due to an additional 20.8 million shares which were issued during the year, and an increase in advisory fees relating to the Group’s proposed listing on the Nasdaq Stock Market, strategy, risk management and legal matters. 2023 2022 Change Change Cents Cents Cents % Tangible net asset value per share 413.38 106.74 306.64 287.3% Change Change Rm Rm Rm % Total assets 1 900.9 1 164.7 736.2 63.2% ⚫ The increase in the Group’s tangible net asset value per share is mainly attributable to further investments in property, plant and equipment to complete Phase 1 of the VGP and an increase in restricted cash, which were funded from capital raised during the year which amounted to R573.9 million from various placements on the Australian Securities Exchange (“ASX”) and the Johannesburg Stock Exchange (“JSE”). The growth in tangible net assets was offset by increases in the Group’s debt mainly driven by foreign exchange losses, an increase in the rehabilitation provision due to exploration activities undertaken during the year, an increase in trade payables and revenue received in advance from a customer. The tangible net asset value per share also reflects the impact of 20.8 million additional shares issued during the year. PRELIMINARY FINAL FINANCIAL STATEMENTS Please refer to pages 10 to 34 of this report wherein the following are provided: • Condensed consolidated statement of profit or loss and other comprehensive income for the year ended 28 February 2023; • Condensed consolidated statement of financial position as at 28 February 2023; • Condensed consolidated statement of changes in equity for the year ended 28 February 2023; • Condensed consolidated statement of cash flows for the year ended 28 February 2023; and • Notes to the condensed consolidated financial statements. The condensed consolidated financial statements presented have not been audited or subject to a review by the external auditors. The audit of the Group’s financial statements for the year ended 28 February 2023 is currently ongoing. OTHER DISCLOSURE REQUIREMENTS Dividend or distribution reinvestment plans Renergen did not declare dividends during the year ended 28 February 2023 (2022: nil). Entities over which control has been gained or lost during the year On 25 August 2022, Renergen formed a new wholly owned subsidiary, Cryovation Proprietary Limited (“Cryovation”), to hold its CryovaccTM business. A description of the Cryovation operations is provided on page 27 of this report. Details of associates and joint ventures The Group does not have associates or joint ventures. Additional Appendix 4E disclosure requirements and commentary on significant features of the operating performance, results of segments, trends in performance and other factors affecting the results for the period are contained in the financial report accompanying this announcement. ENTITY NAME: RENERGEN LIMITED Incorporated in the Republic of South Africa (Registration number: 2014/195093/06) JSE Share code: REN, A2X Share code: REN, ISIN: ZAE000202610 Australian Business Number ABN: 93998352675 ASX Share code: RLT (“Renergen” or “the Company” or together with its subsidiary “the Group”) PRELIMINARY FINAL REPORT RESULTS COMMENTARY The year ended 28 February 2023 (“FY2023”) was both remarkable and momentous for all at Renergen and to our various stakeholders who worked alongside us as we transitioned Renergen from an exploration company to a production company with global ambitions. Renergen, through its wholly owned subsidiary Tetra4, commenced production of LNG in September 2022 and successfully produced liquefied helium (“LHe”) in January 2023. Not long after the commencement of LNG production, the South African government designated the VGP as a strategic integrated project (“SIP”) under the Infrastructure Development Act 23 of 2014, as Renergen has demonstrated its ability and intention to become a significant player in alleviating South Africa’s energy crisis. This SIP status elevates Renergen’s VGP within the hierarchy of local projects ensuring it benefits from significantly reduced timelines for all approvals required from government whilst increasing visibility when government prepares the country’s strategic energy objectives. Going into FY2023, our strategic intent was clear – we aimed to commission Phase 1 of the VGP and progress the Phase 2 expansion. As we review the outcomes of FY2023, despite the delays, we are satisfied with what we achieved during the year. Noteworthy for the year under review is Tetra4’s first- time generation of revenue from the production and sale of LNG under long-term take or pay agreements since September 2022. Other key developments during the year under review are summarised below: • Successful completion of the due diligence by the Central Energy Fund SOC Limited (“CEF”) to invest R1.0 billion for a 10% ownership stake in Tetra4. • Completion of due diligence for Phase 2 funding by the US International Development Finance Corporation (“DFC”) and Standard Bank of South Africa (“SBSA”), who have commenced their credit approval processes. • Evaluated and selected Worley RSA Proprietary Limited (“Worley”) for the scope of Owners Engineer role to execute the expansion of the VGP. • Early success in the production drilling campaign from several wells. • Completion of gravity and aeromagnetic surveys of the Phase 2 area, as well as obtaining and reinterpreting 3D seismic data highlighting significantly more reservoir targets for drilling. • Approval by shareholders for the issuance of 67.5 million shares through a listing and public offering of Renergen shares on the Nasdaq Stock Market (post period). Renergen continues to operate against a backdrop of increased demand for LNG and helium both locally and globally. Many countries now see LNG in particular as one of the leading transition energies for the foreseeable future. This growth in demand for LNG has been met with supply issues brought about by the Russia/Ukraine war and a need for alternative energy sources, escalating the supply/demand tension on energy prices. South Africa’s energy crisis has forced many companies to seek alternatives to the grid to power their operations, which has significantly increased demand for LNG given its low carbon footprint and versatility to provide stable energy around the clock. Helium prices have continued to surpass past price records and with limited new suppliers coming online over the next few years and current suppliers finding it difficult to maintain consistency of supply, prices are likely to remain elevated. Increased semiconductor fabrication capability out of the USA, following their recent stimulus packages, has significantly increased demand, which is increasing supply/demand, similar to LNG. Renergen is perfectly positioned to become a significant player in the local LNG and international helium markets given its exceptionally high helium concentrations and relatively low extraction costs. Review of operations VGP – Phase 1 LNG The VGP commenced production of the South Africa’s first commercial LNG on 5 September 2022, and from 19 September 2022 the plant began operating 24-hour shifts. Production will be ramped up to a steady rate of 2 700 GJ per day in FY2024, which is the maximum capacity of the plant. During commissioning of the plant, we announced a minor setback with the conduction oil system providing lubrication and heating to the plant. Since the intervention in November 2022, where the conduction oil system was repaired, this system has been operating as designed resulting in regular deliveries to our customers. We are pleased to report that we are seeing a positive production trend with LNG deliveries steadily increasing. Helium Since announcing initial helium liquefaction, the commissioning teams have been working hard to integrate and optimize the two liquefaction trains, ensuring a smooth performance testing of the combined LNG/LHe system. Production will be ramped up to a steady rate of 300 kg per day in FY2024, which is the maximum capacity of the plant. VGP – Phase 2 The Company commenced the development of the VGP Phase 2 expansion in March 2020. Phase 2 is categorised as a standalone expansion of the VGP through the drilling of additional wells, the construction of additional natural gas gathering pipelines and the construction of a significantly larger (c.12 times) processing and liquefaction facility, and the associated road tanker distribution and downstream customer dispensing facilities. Phase 1 operations are self-sufficient and will not be impacted by the planned expansion. To date, the Company has completed feasibility studies and front-end engineering design for the VGP Phase 2 expansion and has selected Worley for the scope of owners engineer role, evaluated and shortlisted potential engineers and submitted the environmental, social, impact assessment to regulatory authorities. It is anticipated that Phase 2 will produce approximately 34 400 GJ of LNG and around 4 200 kg of liquid helium per day once in full production. Renergen’s goal is to achieve commercial operation of Phase 2 during 2026 calendar year. In anticipation of securing an attractive debt financing package for Phase 2, the Company has secured several 10 to 15 year take-or-pay offtake agreements with several top-tier global industrial gas companies for just over half of the anticipated liquid helium production. The balance of the liquid helium is earmarked for sales in the international spot market and will allow the Company to participate in the existing liquid helium commodity price upside. All liquid helium sales agreements are denominated in US Dollars with pricing increasing annually at the rate of growth of the United States Consumer Price Index. With respect to LNG from Phase 2, Renergen expects to contract a majority of the Phase 2 LNG on 5 to 8 year take-or-pay agreements, servicing the industrial, logistics and gas to power industries. It is expected that the LNG offtake agreements in Phase 2 will be finalised closer to the Phase 2 plant coming into operation, and the Company anticipates being able to obtain favourable pricing given the scarcity of energy sources in South Africa where energy prices have historically escalated at levels above those of domestic inflation rates. In line with previous announcements, the Company is pursuing several sources of funding for Phase 2, which may include each, or any, of the following: • An aggregate debt package of US$750.0 million. In this regard the Company has secured a debt retainer letter with the DFC for the provision of a loan of up to US$500.0 million to finance the development of Phase 2 and has mandated SBSA Africa to fully underwrite the remaining US$250.0 million. • A 10% disposal of Tetra4 to the CEF for R1.0 billion. In this regard the CEF successfully completed due diligence pertaining to this acquisition and engagement with various stakeholders is currently underway to bring this transaction to fruition. • A potential international public offering (“IPO”), subject to market and other conditions, the proceeds of which are intended to comprise a portion of the equity funding for Phase 2 construction (see IPO section below). Upon completion of Phase 2 of the VGP, the Company expects that it will deliver a substantial amount of energy to the South African economy and will also transform South Africa into one of the world’s large helium exporting countries. Exploration activities In March 2022, we achieved early success from two wells in our drilling campaign – Frodo and Balrog and saw an increase in the flow rate from a previously drilled well, R2D2, which following clean-up operations increased its flow rate by 18 000 standard cubic feet (“scf”) per day (or 15%). Frodo achieved a flow rate of 23 000 scf per day and Balrog a flow rate of 90 000 scf per day, the latter through a diverter and following clean-up. The success of the exploration techniques applied to these wells will guide future exploration initiatives. Frodo was sited using only the latest fault structure interpretation, while Balrog was sited using Tetra4’s “conviction scoring” AI methodology, based on non-invasive markers with no other geological input. The wells were drilled to intersect the planned fracture sets at around 500m total vertical depth and will feed into Phase 1 of the VGP. In June 2022 we drilled a new gas blower, Gandalf, the third well in our drilling campaign for the year under review. Gas was intersected at 480m from surface with a flow rate of around 90 000 scf per day. The target depth is 1 200m and after initial testing the well was cased in preparation to drill to the full depth. At present the drillers are preparing to drill through the cement and further to the target depth. During the second quarter of the financial year a new well, Han, was drilled to a measured depth of 624m, striking gas of approximately 80 000 scf per day. Drilling was halted to log the well to delineate the gas bearing features in the well. During the same period, the Don Vito well, previously drilled in June 2021 as a vertical pilot hole to log and determine the depth to the base of the Karoo (to plan the trajectories of wells R2D2 and C3PO), was examined and commenced flowing gas. This was interpreted to indicate that with the passage of time the well cleaned up naturally. The well is now producing approximately 75 000 scf per day. Given that the well was a pilot well and was not anticipated to produce gas, it is now being completed for production before being connected to the Phase 1 gas gathering pipeline. In addition to the drilling campaign carried out during the year under review as outlined above, gravity and aeromagnetic surveys were also undertaken and completed in September 2022. The data is now being interpreted to improve the resolution of the geological model and optimise drillhole location accuracy in the Phase 2 area. These surveys, together with seismic data reprocessed during the third quarter, have provided enhanced resolution on a number of potential gas bearing features, including their extent, depth and orientation. In addition, several significant magnetic highs have been identified in the western part of the reserve area and are of particular interest as they are a series of cap rock above other newly identified gas bearing structures. IPO On 8 March 2023, Renergen announced its intention to issue 67.5 million shares (“Specific Issue Shares”), including such ordinary shares represented by American Depositary Shares and Chess Depositary Interests, by way of a proposed IPO on the Nasdaq Stock Market in the United States of America. Renergen obtained the approval of its shareholders to issue the Specific Issue Shares (“Special Authority”) at a general meeting of shareholders held on 11 April 2023. While the primary driver for Renergen seeking approval for the Specific Authority is to secure funding for the continued development of Phase 2 of the VGP, not all the proceeds that can be raised in terms of the Specific Authority are required immediately. Therefore, Renergen will place the Specific Issue Shares with new investors and/or existing shareholders in various stages (“Placements”) and will utilise part of the Specific Authority on each Placement, as and when required, to limit dilution to existing shareholders. Renergen intends to raise US$150.0 million from the initial Placement during 2023, market permitting, and no further equity funding is anticipated to be raised for the first 12 months following the successful conclusion of the proposed IPO. Further details pertaining to the proposed IPO are available in the circular issued to shareholders on 8 March 2023 which is available on the Renergen website at https://www.renergen.co.za/wp- content/uploads/2023/03/RenCircular-Mar2023.pdf (“Circular”). Details in this announcement relating to the proposed IPO should be read together with the information contained in the Circular. Financial review Financial performance • The Group reported a loss after tax of R26.7 million for the year ended 28 February 2023 compared to R33.8 million in the prior comparative period, a decrease of R7.1 million, primarily arising from an improved gross margin contribution from the newly commissioned LNG operations, higher net foreign exchange gains and other income, and higher interest income, which were offset by: o higher interest and share-based payment expenses; and o higher other operating expenses. Gross margin contribution The Group reported a gross profit of R4.0 million for the year under review compared to a gross loss of R0.8 million in the prior comparative period, an improvement of R4.8 million. This reflects improved margins from the LNG operations which commenced in September 2022. Prior to September 2022 the Group only sold compressed natural gas (“CNG”) which had significantly lower margins. Sales of CNG ceased when Phase 1 was commissioned in September 2022 and the Group is now focusing on its LNG and liquefied helium operations. There were no helium sales during the year under review as the helium module is yet to be fully commissioned. Foreign exchange gains and other income Net foreign exchange gains and the selling profit on finance lease receivables are included within other operating income in the statement of profit or loss and other comprehensive income and are disclosed in note 13 of the condensed consolidated annual financial statements presented. Overall, other operating income increased by R9.9 million to R13.6 million (2022: R3.7 million) mainly due to the developments outlined below. • The further weakening of the Rand against major currencies during the year under review resulted in an increase in net foreign exchange gains of R6.0 million to R9.6 million (2022: R3.6 million). The Group holds cash balances denominated in US Dollars as security for the DFC borrowings (see note 4) and transacts in currencies including the Australian Dollar, Euro and British Pound in undertaking its operations. • During the second half of the financial year, following the commissioning of Phase 1 of the VGP and the commencement of operations at the plant, the Group entered new finance leases whereby it leases storage tanks and related infrastructure to its customers under 8-year agreements. The facilities are used by customers to store LNG supplied by Tetra4 and to convert it to natural gas for use in their operations. The initial recording of these leasing arrangements resulted in the recognition of a profit of R3.9 million. Interest income Overall, total interest income increased by R3.4 million to R3.7 million (2022: R0.3 million). Higher cash balances from the Company’s fund-raising initiatives and higher interest rates during the year under review resulted in an increase in interest income by R2.0 million to R2.3 million (2022: R0.3 million). In addition, the Group’s new leasing arrangements contributed interest income amounting to R1.4 million (2022: Rnil). Share-based payment expenses In December 2021, the Group implemented an equity-settled Share Appreciation Rights Plan (“SAR Plan”). The increase in share-based payment expenses by R7.2 million to R10.3 million (2022: R3.1 million) is attributable to the Plan being in effect for a full 12-month period compared to a 3-month period in the prior year. The SAR Plan is a 5-year plan under the terms of which the Governance, Ethics, Transformation, Social and Compensation Committee makes once-off awards of forfeitable shares to the Executive Directors, prescribed officers, senior management, and general employees of the Group who can influence the growth of the Company. Interest expense The Group’s interest expense primarily comprises imputed interest on borrowings and interest on leasing arrangements (with the Group as lessee). Total interest expense increased by R0.4 million to R4.6 million (2022: R4.2 million) primarily due to an increase in imputed interest on the Molopo borrowings highlighted in note 9 of the condensed consolidated annual financial statements presented. Interest on the DFC and Industrial Development Corporation borrowings is capitalised in line with the Group’s policy which requires that borrowing costs directly attributable to the construction of assets that take a substantial period of time to get ready for use are included in the cost of the asset. These capitalised borrowing costs are disclosed in note 9 of the condensed consolidated annual financial statements presented. Other operating expenses Overall, other operating expenses increased by R4.7 million to R42.9 million (2022: R38.2 million) primarily due to: • An increase in marketing and advertising costs by R2.7 million due to sponsorship costs which have improved brand visibility as the Group approached the commissioning of Phase 1 of the VGP; • An increase in listing costs by R1.2 million due to an additional 20.8 million shares issued and listed during the year; and • An increase of R2.1 million in advisory fees relating to the Group’s proposed IPO, strategy, risk management and legal matters. These increases in other operating expenses were offset by an overall decrease of R1.3 million in other operating expenses arising from cost-saving initiatives, the impact of the Group’s capitalisation policy and a decrease in depreciation during the year. Other operating expenses mainly comprise computer and IT expenses, security costs, insurance, travel costs and depreciation. Financial position The Group’s Net Asset Value (“NAV”) increased by R553.9 million to R840.2 million as at 28 February 2023, an increase of 194% year-on-year. This growth in NAV can be attributed mainly to: • Further investments in the Group’s property, plant and equipment (“PPE”) and intangible assets aided mostly by equity proceeds raised during the year (see Fund Raising section below). As mentioned in the operational review, the Group completed the construction of Phase 1 of the VGP and drilled a number of exploratory wells during the year. The increase in PPE and intangible assets amounted to R652.5 million which includes capitalised borrowing costs and foreign exchange differences after considering annual depreciation of PPE. The additions outlined in notes 2 and 3 of the condensed consolidated annual financial statements presented reflect expenditure on PPE and intangible assets exclusive of capitalized borrowing costs and unrealised foreign exchange differences. • Funds raised during the year were also applied to increase restricted cash balances which serve as security for the repayment of the DFC and Industrial Development Corporation (“IDC”) borrowings. At any given time, the balances held as restricted cash primarily represent amounts due to the DFC and IDC within a six-month period and increased by R54.0 million during the year under review. • The recognition of finance lease receivables amounting to R54.6 million arising from the Group’s leasing of equipment and infrastructure required for the delivery, storage, utilisation and conversion of LNG to natural gas. The leases came into effect for the first time during the year under review with the Group as lessor. • Increases totalling R14.5 million attributable to the Group’s remaining assets – trade and other receivables, the deferred tax asset and inventory, offset by a decrease of R39.4 million in the Group’s cash and cash equivalents. Increases in the Group’s asset base as outlined above were offset by: • A net increase in borrowings totalling R88.2 million arising from foreign exchange losses due to the weakening of the Rand against the US Dollar and interest charged on borrowings, offset by payments made during the year as fully set out in note 9 of the condensed consolidated annual financial statements presented. • An increase in trade and other payables amounting to R70.7 million primarily reflecting costs associated with finalising the construction, testing and commissioning of Phase 1 of the VGP which were payable at year-end. • A net increase totalling R23.4 million in the Group’s other liabilities mainly attributable to revenue received in advance from a customer and an increase in the rehabilitation provision due to the exploration activities undertaken during the year. Fund raising FY2023 marked significant success in our fund-raising initiatives. The Company raised R573.9 million (2022: R113.2 million) from various placements on the ASX and JSE as fully set out in note 8 of the condensed consolidated annual financial statements presented. As highlighted above, funds raised from these investments were applied to progress and complete Phase 1 of the VGP and to fund pre- development costs relating to Phase 2. Changes in directorate On 6 February 2023, Renergen announced that Alex Pickard and Francois Olivier had stepped down from their roles as Non-executive Directors of the Company with effect from that date. On the same day Renergen announced the retirement with immediate effect of Bane Maleke. Thembisa Skweyiya and Dumisa Hlatswayo were appointed as Independent Non-executive Directors of Renergen on 6 February 2023, replacing the outgoing Directors. Thembisa Skweyiya was also appointed to Renergen’s Governance, Ethics, Transformation, Social and Compensation Committee, and Dumisa Hlatshwayo to Renergen’s Audit, Risk and IT Committee. It is further noted that this was in line with our rotation and succession planning for Board members hence the immediate appointment of our incoming Board members. Biographies of the new Directors are available on the Renergen website www.renergen.co.za. Litigation update There have been no further developments since our last update contained in the reviewed condensed consolidated interim financial statements for the six months ended 31 August 2022 published by the Group on 28 October 2022. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION The Condensed Consolidated Statement of Financial Position of the Group as at 28 February 2023 is set out below: R’000 Notes 2023 2022 ASSETS Non-current assets 1 729 356 1 008 317 Property, plant and equipment 2 1 371 748 807 027 Intangible assets 3 241 842 154 023 Deferred taxation 53 236 43 529 Restricted cash 4 14 435 3 738 Finance lease receivables 5 48 095 - Current assets 171 525 156 377 Inventory 147 - Finance lease receivables 5 6 464 - Trade and other receivables 6 31 657 27 032 Restricted cash 4 77 552 34 257 Cash and cash equivalents 7 55 705 95 088 TOTAL ASSETS 1 900 881 1 164 694 EQUITY AND LIABILITIES Equity 840 204 286 312 Share capital 8 1 134 750 563 878 Share-based payments reserve 21 099 11 354 Revaluation reserve 598 598 Accumulated loss (316 243) (289 518) LIABILITIES Non-Current Liabilities 860 323 803 949 Borrowings 9 806 558 773 056 Lease liabilities 1 108 1 407 Revenue received in advance 15 093 - Provisions 37 564 29 486 Current Liabilities 200 354 74 433 Borrowings 9 104 457 49 784 Provisions 2 400 1 272 Lease liabilities 1 184 1 775 Trade and other payables 10 92 313 21 602 TOTAL LIABILITIES 1 060 677 878 382 TOTAL EQUITY AND LIABILITIES 1 900 881 1 164 694 CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME The Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income of the Group for the 12-month period ended 28 February 2023 is set out below: R’000 Notes 2023 2022 Revenue 12 12 687 2 637 Cost of sales (8 684) (3 412) Gross profit/(loss) 4 003 (775) Other operating income 13 13 630 3 736 Share-based payments expense (10 278) (3 115) Other operating expenses (42 879) (38 207) Operating loss (35 524) (38 361) Interest income 3 675 275 Interest expense and imputed interest (4 583) (4 217) Loss before taxation (36 432) (42 303) Taxation 14 9 707 8 553 LOSS FOR THE YEAR (26 725) (33 750) TOTAL COMPREHENSIVE LOSS FOR THE YEAR (26 725) (33 750) Loss attributable to: Owners of the Company (26 725) (33 750) LOSS FOR THE YEAR (26 725) (33 750) Total comprehensive loss attributable to: Owners of the Company (26 725) (33 750) TOTAL COMPREHENSIVE LOSS FOR THE YEAR (26 725) (33 750) Loss per ordinary share Basic and diluted loss per share (cents) 16 (19.86) (27.73) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY The Condensed Consolidated Statement of Changes in Equity of the Group for the 12- month period ended 28 February 2023 is set out below: Total equity attributable to Share-based equity holders payments Revaluation Accumulated of the R’000 Share capital reserve reserve loss Company BALANCE AT 1 MARCH 2021 453 078 8 500 598 (255 768) 206 408 Loss for the year - - - (33 750) (33 750) Total comprehensive loss for the year - - - (33 750) (33 750) Issue of shares 113 376 (261) - - 113 115 Share issue costs (2 576) - - - (2 576) Share-based payments expense - 3 115 - - 3 115 BALANCE AT 28 FEBRUARY 2022 563 878 11 354 598 (289 518) 286 312 Loss for the year - - - (26 725) (26 725) Total comprehensive loss for the year - - - (26 725) (26 725) Issue of shares 574 447 (533) - - 573 914 Share issue costs (3 575) - - - (3 575) Share-based payments expense - 10 278 - - 10 278 BALANCE AT 28 FEBRUARY 2023 1 134 750 21 099 598 (316 243) 840 204 Note 8 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS The Condensed Consolidated Statement of Cash Flows of the Group for the 12- month period ended 28 February 2023 is set out below: R’000 Notes 2023 2022 Cash flows used in operating activities (70 904) (79 175) Cash used in operations 15 (72 903) (78 941) Interest received 2 307 275 Interest paid (308) (509) Cash flows used in investing activities (440 781) (306 956) Investment in property, plant and equipment 2 (352 448) (260 723) Disposal of property, plant and equipment 2 55 - Investment of intangible assets 3 (88 388) (46 233) Cash flows from financing activities 471 233 347 227 Proceeds from share issue 8 573 914 113 115 Share issue costs 8 (1 367) (2 576) Proceeds from borrowings 9 - 270 989 Repayment of borrowings 9 (99 186) (31 293) Lease liabilities – lease payments (2 128) (3 008) TOTAL CASH MOVEMENT FOR THE YEAR (40 452) (38 904) Cash and cash equivalents at the beginning of the year 7 95 088 130 878 Effects of exchange rate changes on cash and cash equivalents 1 069 3 114 TOTAL CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 55 705 95 088 NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 1. Basis of preparation The consolidated annual financial statements for the year ended 28 February 2023 have been prepared in accordance with the framework concepts, the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and in accordance with and containing the information required by the International Accounting Standard 34: Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB), Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the ASX Listing Rules and the requirements of the South African Companies Act of 2008, as amended. The consolidated annual financial statements have been prepared on the historical cost basis except for land that is carried at a revalued amount. Significant accounting policies applied in the preparation of the consolidated annual financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements. Amendments to accounting standards and new accounting pronouncements which came into effect for the first time during the financial year did not have a material impact on the Group. These condensed consolidated annual financial statements have been prepared on a going concern basis. The condensed consolidated annual financial statements are presented in South African Rand which is the Company's functional and presentation currency. All monetary information is rounded to the nearest thousand (R'000), except where otherwise stated. JSE shareholders should note that this form does not meet the JSE reporting requirements as this information is issued in line with the ASX Listing Rules. The condensed consolidated annual financial statements presented have not been audited or reviewed by the Group’s external auditor. 2. Property, plant and equipment 2023 2022 Cost or Accumulated Net book Cost or Accumulated Net book R’000 valuation depreciation value valuation depreciation value Assets under 1 342 450 - 1 342 450 785 460 - 785 460 construction Right-of-use asset – 2 243 (2 243) - 2 243 (1 590) 653 head office building Land – at revalued 3 473 - 3 473 3 473 - 3 473 amount Plant and machinery 23 164 (13 504) 9 660 22 928 (11 345) 11 583 Furniture and fixtures 1 240 (846) 394 1 024 (691) 333 Motor vehicles 10 375 (1 924) 8 451 2 152 (1 962) 190 Office equipment 243 (135) 108 171 (108) 63 IT equipment 1 148 (772) 376 910 (581) 329 Right-of-use assets - 5 603 (2 488) 3 115 4 526 (1 462) 3 064 motor vehicle Office building 2 065 (682) 1 383 2 065 (476) 1 589 Lease hold improvements: Office equipment 142 (140) 2 142 (128) 14 Furniture and fixtures 3 064 (728) 2 336 885 (609) 276 TOTAL 1 395 210 (23 462) 1 371 748 825 979 (18 952) 807 027 NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 2. Property, plant and equipment (continued) Environmental 2023 At 1 March rehabilitation At 28 February 1 R’000 2022 Disposal costs2 Additions Depreciation 2023 Assets under construction 785 460 (50 309) 9 026 598 093 - 1 342 450 Right-of-use asset – head office building3 653 - - - (653) - Land – at revalued amount 3 473 - - - - 3 473 Plant and machinery 11 583 - - 236 (2 159) 9 660 Furniture and fixtures 333 - - 216 (155) 394 Motor vehicles4 190 - - 8 557 (296) 8 451 Office equipment 63 - - 72 (27) 108 IT equipment 329 - - 238 (191) 376 Right-of-use assets - motor vehicle 3 064 - - 1 076 (1 025) 3 115 Office building 1 589 - - - (206) 1 383 Lease hold improvements: Office equipment 14 - - - (12) 2 Furniture and fixtures 276 - - 2 179 (119) 2 336 TOTAL 807 027 (50 309) 9 206 610 667 (4 843) 1 371 748 1 - Attributable to the derecognition of the carrying amounts of assets leased by the Group to customers under finance leases (see note 5). 2 – Increase in the rehabilitation provision due to additional exploration activities undertaken during the year. 3 - The lease for the head office building expired in June 2022 and the Group is currently on a short-term lease for office space. 4 – A vehicle with a Rnil book value was disposed for R55 000. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 2. Property, plant and equipment (continued) Pledge of assets Tetra4 concluded finance agreements with the DFC on 20 August 2019 and the IDC on 17 December 2021. All assets under construction and the land are held as security for the debt under these agreements. Pledged assets under construction and land have a carrying amount of R1.3 billion as at 28 February 2023 (2022: R788.9 million), representing 100% (2022: 100%) of each of these asset categories. Additions and borrowing costs Additions include unrealised foreign exchange differences attributable to the DFC loan, interest capitalised as part of borrowing costs in line with the Group’s policy and non-cash additions to right-of-use assets. These costs and exchange differences were capitalised within assets under construction. The Group’s borrowings are disclosed in note 9. A reconciliation of additions to exclude the impact of capitalised borrowing costs, foreign exchange differences and non-cash additions to right-of-use assets is provided below: Capital commitments R’000 2023 2022 Additions as shown above 610 667 305 866 Capitalised borrowing costs attributable to the DFC loan (note 9) (38 846) (31 293) Unrealised foreign exchange losses attributable to the DFC loan (note 9) (120 290) (10 619) Capitalised borrowing costs attributable to the IDC loan (note 9) (23 950) (3 231) Non-cash additions (74 057) - Non-cash additions to right-of-use assets (1 076) - Additions as reflected in the cash flow statement 352 448 260 723 Capital commitments attributable to assets under construction are disclosed in note 17. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 3. Intangible assets 2023 2022 Accumulated Accumulated amortisation amortisation and Net book and R’000 Cost impairment value Cost impairment Cost Acquired intangible assets Exploration and 217 459 (32) 217 427 137 161 (32) 137 129 development costs Computer software 6 647 (1 373) 5 274 4 184 (804) 3 380 Internally developed intangible assets Development costs – 15 666 - 15 666 11 466 - 11 466 Cryo-VaccTM Development costs – Helium Tokens System 3 475 - 3 475 2 048 - 2 048 TOTAL 243 247 (1 405) 241 842 154 859 (836) 154 023 Additions – Additions – At 28 At 1 March separately internally February 2022 Amortisation 2023 acquired developed 2023 R’000 Exploration and development costs 137 129 80 298 - - 217 427 Computer software 3 380 2 463 - (569) 5 274 Development costs – Cryo-VaccTM 11 466 - 4 200 - 15 666 Development costs – Helium Tokens System 2 048 - 1 427 - 3 475 TOTAL 154 023 82 761 5 627 (569) 241 842 Impairment of exploration and development costs A Reserve and Resource Evaluation Report (“Evaluation Report”) was completed as at 1 September 2021 by Sproule Incorporated (“Sproule”), an independent sub-surface consultancy based in Calgary, Canada. The evaluation was both a geologic and economic update, based on technical and economic data supplied by Tetra4. Material changes to this Evaluation Report compared to the last one completed in 2019 were the inclusion of 5 new completed wells, the initial flow testing of two wells with new “slant completions”, a more detailed sub- surface geologic model, updated capital expenditure and operating costs, updated currency exchange rates, new gas sales agreements and an updated field development plan. Management has not obtained an updated evaluation report to support the impairment assessment as at 28 February 2023, as it is considered that such an update will likely reflect an increase in the value of the Virginia Gas Field given the successful outcomes of exploration activities undertaken during the year and the increase in liquid helium and LNG prices, amongst other factors. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 3. Intangible assets (continued) The independent Reserve and Resource estimates and associated economics contained in the Evaluation Report are prepared in accordance with the Society of Petroleum Engineers (“SPE”) Petroleum Resources Management (“PRMS”) guidance. Proved Plus Probable Helium and Methane Reserves (“2P Gas Reserves”) measured at 420.5 BCF (billion cubic feet) as at 1 September 2021 (2019: 142.4 BCF) with a net present value of R31.0 billion (2019: R9.8 billion). The net present value above equates to the recoverable amount and was determined using value-in-use calculations were future estimated cash flows attributable to the 2P Gas Reserves were discounted at 15% (2019: 15%). In order to determine whether the Group’s exploration and evaluation assets were impaired as at 28 February 2023 the carrying amount of these assets of R217.4 million (2022: R137.1 million) was compared to the recoverable amount of R31.0 billion (2022: R9.8 billion) which resulted in no impairment charge being recognised for the year under review (2022: Rnil). Management concluded that the impairment assessment is not sensitive to a change in the recoverable amount or other factors due to the significant headroom of R30.8 billion (2022: R30.9 billion), being the difference between the carrying amount of exploration and evaluation assets of R137.1 million (2022: R137.1 million) and their recoverable amount of R31.0 billion (2022: R31.0 billion). Development costs – Cryo-VaccTM Development costs comprise expenditure incurred during the internal development of Cryo-VaccTM vaccine storage units. No amortisation was recognised during the year as the storage units have not yet been brought into use. Development costs include costs that meet the criteria required by IFRS and are directly attributable to the development of the storage units. At 28 February 2023 the development costs are not impaired based on an assessment performed by management. Development costs – Helium Tokens System Development costs comprise expenditure incurred during the internal development of the helium tokens system. Once fully developed, these tokens will be traded and will allow holders to purchase helium from Tetra4. No amortisation was recognised during the year as the tokens have not yet been brought into use. Development costs include costs that meet the criteria required by IFRS and are directly attributable to the development of the tokens. At 28 February 2023 the development costs are not impaired based on an assessment performed by management. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 4. Restricted cash R’000 2023 2022 Non-current Environmental rehabilitation cash guarantee 6 021 3 738 Eskom Holdings SOC Limited ("Eskom") cash guarantee 8 414 - 14 435 3 738 Current Debt Service Reserve Account (DSRAs) 77 552 34 257 DFC 61 733 34 257 IDC 15 819 - TOTAL 91 987 37 995 Environmental Rehabilitation Cash Guarantee The Group has an obligation to manage the negative environmental impact associated with its exploration and drilling activities in the Free State. In this regard, the Group has recognised a rehabilitation provision of R40.0 million (2022: R30.8 million). Tetra4 has invested R6.0 million (2022: R3.7 million) in a cash deposit account which has been ringfenced for use towards the settlement of the environmental rehabilitation obligation. Interest earned on the cash deposit account is re-invested. This restricted cash has been classified as a non-current asset as the rehabilitation programme is not expected to commence in the next 12 months. Eskom cash guarantee The Eskom guarantee represents amounts held as security for the due payment of electricity accounts and as an early termination guarantee. DSRAs DFC As part of the terms of the DFC finance agreement (see note 9) Tetra4 is required at any given date, to reserve in a US dollar denominated bank account the sum of all payments of principal, interest and fees required to be made to the DFC within the next 6 months. Should Tetra4 default on any payments due and payable, the DFC reserves the right to fund the settlement of amounts due from this bank account. The bank account is restricted and all interest earned accrues to Tetra4. This interest is recorded in interest income on the Statement of Profit or Loss and Other Comprehensive Income. IDC Similar to the terms of the DFC finance agreement, Tetra4 is also required to reserve in a Rand denominated bank account the sum of all payments of principal, interest and fees required to be made to the IDC within the next 6 months. Should Tetra4 default on any payments due and payable, the IDC reserves the right to fund the settlement of amounts due from this bank account. The bank account is restricted and all interest earned accrues to Tetra4. This interest is recorded in interest income on the Statement of Profit or Loss and Other Comprehensive Income. The DRSAs are held as security for the DFC and IDC loans (see note 9). Foreign exchange gains amounting to R9.8 million (2022: R1.8 million) were recognised during the year under review with respect to the DFC DSRA. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 5. Finance lease receivables R’000 2023 2022 Finance lease receivables 54 559 - 54 559 - Non-current 48 095 - Current 6 464 - 54 559 - Finance lease arrangements During the 2023 financial year end, Tetra4 entered into finance leasing arrangements, as a lessor, with Ceramics and Ardagh Glass Packaging for certain equipment and infrastructure required for the delivery, storage, utilisation and conversion of LNG to natural gas. The average term of finance leases entered into is 8 years. Generally, these lease contracts do not include extension options and provide for the transfer of the ownership of the leased assets to the lessees upon the fulfilment of contract provisions, including but not limited to the settlement of all amounts due to Tetra4 under the lease contracts. Tetra4’s finance lease arrangements do not include variable payments or lease modifications. The average effective interest rate contracted approximates 9.2% per cent per annum. The directors of the Group estimate the loss allowance on finance lease receivables at the end of the reporting period at an amount equal to lifetime ECLs using the simplified approach as the lessees are also the Group's only trade debtors. None of the finance lease receivables at the end of the reporting period is past due. The directors of the Group therefore consider that the finance lease receivables are not impaired. NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (continued) 5. Finance lease receivables (continued) The maturity analysis of finance lease receivables including the undiscounted lease payments to be received is as follows: R’000 2023 2022 Year 1 11 823 - Year 2 10 040 - Year 3 10 040 - Year 4 10 040 - Year 5 10 040 - Year 6 onwards 26 457 - Total undiscounted lease payments receivable 78 440 - Less: unearned interest income (23 881) - Net investment in the lease 54 559 - Undiscounted lease payments analysed as: Recoverable after 12 months 66 617 - Recoverable within 12 months 11 823 - 78 440 - Net investment in the ...