Tlou Energy Limited is an ASX, AIM and BSE listed company focused on delivering power in Botswana and southern Africa through the exploration and development of gas and solar.
Power Purchase Agreement (PPA)
During the quarter, the Company agreed an interim 2MW CBM Pilot PPA with Botswana Power Corporation (BPC) which is viewed by the Company as a major step forward. Regulatory approvals have been completed and the Company is awaiting a meeting with BPC to sign the PPA. The interim PPA facilitates connection to the power grid and first revenue for the Company. A pathway to revenue generation is key for the Company and once connected to the grid, expansion of the project is expected to be relatively straightforward.
Tlou also received the formal certificate of its Electricity Generation Licence from Botswana Energy Regulatory Authority (BERA) during the quarter along with conditions of the licence. The licence has a term of 15 years, is for the generation of 2 MW of CBM gas and solar power generation at the Lesedi project for sale to BPC at the approved BPC tariff, as well as a series of standard conditions.
With a PPA agreed and a generation licence, the Lesedi project has been largely de-risked with various regulatory approvals in place that facilitate project development including:
· A Mining Licence for gas development valid until 2042;
· Environmental Impact Assessment (EIA) approval for upstream development comprising production wells, water handling, seismic, gas gathering pipelines and a gas processing facility;
· EIA approval for downstream development comprising 20MW of gas fired power generation and 20MW of solar generation;
· EIA approval for power station site and transmission line;
· Serowe Sub-Land Board approval for transmission line wayleave application (subject to compensation agreements). In addition, the route survey has been completed.
10 MW Tender
The Company submitted a proposal to Botswana's Ministry of Mineral Resources Green Technology and Energy Security (MMGE) in 2018 for the development of a 10MW CBM Gas-to-Power plant. The 10MW proposal is separate to the 2MW interim PPA. BPC and MMGE continue to assess the 10MW proposal and will advise the Company in due course. The Company understands that the tender is currently being assessed by the Attorney General's Chambers in Gaborone. The adjudication of this tender may be delayed due to the Covid19 pandemic and the Company has not been provided with an expected timeline for when final award of the tender will be confirmed.
Lesedi 3 & 4 Production Pods
The Lesedi 3 and 4 production pods have now produced gas for many months with sustained gas flow rates having been achieved from both pods. Increased sustained gas flow rates are anticipated to take some considerable time, based on the currently available data. However, it is anticipated that drilling of additional wells in the area will facilitate the dewatering process.
Lesedi 4 continues to dewater and produce gas, while Lesedi 3 has been shut-in during the quarter under review. Shutting-in wells reduces unnecessary expenditure and stops the flaring of gas. Bringing a pod back on-line should not take too long given the current understanding of the production process gleaned from the comprehensive data base acquired.
Covid19 has had an impact on business in Botswana. Many businesses including government departments are operating at reduced capacity and some staff are working from home. Airports remain closed to international travel so some of Tlou's senior management and field staff have no access to the country which may impact corporate negotiations and field operations. The Company has senior staff on-site at all times to manage the field operations including monitoring of the Lesedi 4 production pod.
One of the last key items to unlock the value of Tlou's assets is connection to the electricity grid. Once connected to the grid and generation assets are in place, Tlou can produce power from gas and solar (subject to any outstanding approvals) to deliver first revenue from electricity sales. The Environmental and Social Impact Assessment for the transmission line has been completed, as well as route alignment and associated surveys.
The Company plans to construct the ~100 Km transmission line to connect the Lesedi project to the electricity grid at Serowe as soon as possible. Tlou has commenced the detailed design and engineering of the 66kV overhead line and 66kV line feeder bay extension at the Serowe substation. This work is being completed in consultation with Mott MacDonald in Gaborone. Detailed design and engineering is expected to take a number of months to complete and will include the preparation of pre-qualification documents with the objective of Tlou short-listing bidders to be invited to tender for construction of the transmission line.
Project finance discussions are continuing with parties within and external to Botswana. Project finance is expected to be effectively split into tranches, the first being transmission line funding to enable connection to the grid and commence initial generation and thereafter expansion of both gas and solar power generation capacity. As announced previously, the Company is evaluating both debt and equity funding options or a mix of both. Tlou's objective is to source finance with the lowest cost of capital and with the least risk going forward.
Post the end of the quarter the Company successfully completed an entitlement offer and placement raising A$3.0 million (~£1.65 million, ~BWP 24 million). The entitlement offer and placement comprised the issue of 63,096,876 new ordinary shares at a price of A$0.04 (£0.022, BWP0.32). In addition, a further 11,921,978 shares will be issued under the offer subject to approval at a general meeting of the Company.
At this time, the Company's share capital is comprised of 513,277,061 Ordinary Shares. There are no shares held in Treasury. Therefore, the total number of Ordinary Shares with voting rights is 513,277,061. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company. In addition, the Company has issued 51,548,411 unlisted share options exercisable at any time at A$0.08 per share up until expiry on 20 July 2022.
The Company has three project areas in Botswana:
· Lesedi Project - Development, Exploration
· Mamba Project - Exploration
· Boomslang Project - Exploration
Lesedi CBM Project Area, Botswana
Licences: Mining Licence 2017/18L, Prospecting Licences 001 & 003/2004 and 35 & 37/2000
Ownership: Tlou Energy Limited 100%
The Lesedi project covers an area of approximately 3,800 Km2 and consists of four Coal and CBM Prospecting Licences (PL) and a Mining Licence. The Mining Licence area is currently the focal point for the Company's operations and includes the Lesedi 3 and 4 production wells or 'pods'.
The Lesedi project is the Company's most advanced project, with plans in place to install gas-fired electricity generators and connect to the power grid in Botswana. The project has full environmental approval which includes gas extraction, electricity generation and construction of transmission lines. In addition, the Company has approval for 20MW of solar generation. CBM power is ideal for use in conjunction with solar projects.
Tlou has the only CBM Mining Licence in Botswana. A mining licence is required by an operator to develop a CBM asset. This licence spans a large 900 Km2 area and is valid until 2042 so the Company has security of tenure over the project.
Tlou has the only independently certified CBM gas reserves in Botswana, with 252 Billion Cubic Feet (BCF) of 3P gas Reserves certified in the Lesedi project area. In addition, the 3C Contingent Gas Resources are approximately 3 Trillion Cubic Feet (TCF). The potential upside from further successful development of this area is substantial.
Mamba Project Area, Botswana
Licences: Prospecting Licences 237-241/2014
Ownership: Tlou Energy Limited 100%
The Mamba project consists of five Coal and CBM PL's covering an area of approximately 4,500 Km2. The Mamba area is considered to be highly prospective being situated adjacent to Tlou's Lesedi project and being on-trend with the asset that has produced the encouraging results observed to date. In the event of a gas field development by Tlou, the Mamba area provides the Company with considerable flexibility and optionality. Geographically, the Mamba project area is approximately 50 Km closer to the Orapa Power station than the Lesedi project area.
Independently certified 3P Gas Reserves of 175 BCF are already in place at the Mamba project. Further core-hole drilling and a proposed seismic survey of the area could significantly expand the reserves footprint across the Mamba project area.
The Mamba area has the potential to become a separate revenue generating development project in addition to the proposed development at Lesedi.
Boomslang Project Area, Botswana
Licence: Prospecting Licence 011/2019
Ownership: Tlou Energy Limited 100%
The Company's most recently acquired Prospecting Licence, PL011/2019 designated "Boomslang", is valid for an initial term of 3 years. The licence area is approximately 1,000 Km2 and is situated adjacent to the Company's existing licences. The Boomslang area is also located on-trend with the asset that has produced the encouraging results observed to date at the Lesedi project and considered to be highly prospective.
The Boomslang licence area provides the Company further flexibility and optionality for development of different projects.
The Company is awaiting confirmation of environmental approval to commence exploration operations in the Boomslang area. Subject to any delay that may result from Covid19, this approval is expected to be granted later this year, thereafter and subject to available funds initial exploration operations are planned for this area.