Tlou Energy a company focused on delivering power in Botswana and southern Africa through the exploration and development of gas and solar, has provided an operational update for the quarter ending 31 March 2021. The Lesedi Power Project is the Company’s most advanced project. Tlou plans to develop gas and solar power generation assets at Lesedi with the sale of electricity into the regional power grid. In addition, the Company has two large exploration areas designated Mamba and Boomslang.
The Company is seeking project finance to build infrastructure to connect the Lesedi power project to the existing electricity grid in Botswana. This infrastructure includes transmission lines, electrical substations as well as the installation of gas and solar generation assets.
Project finance discussions are at an advanced stage with a very reputable Botswana-based entity. Due to confidentiality the Company is unable to name the entity concerned at this time. However, we can confirm that their investment committee and board have discussed the project financing and are favourably disposed to Tlou’s proposal. They are now proceeding with a third-party technical review of the project as part of their due diligence process. Once this report is assessed an investment decision can be made.
The Lesedi project is proposed to be developed in two phases. Phase One involves transmission line construction, substations, grid connection, electricity generators and potentially the drilling of additional gas wells. The ~100 Km transmission line will run from the Lesedi project to the town of Serowe where it will connect to the existing power grid. Initial generation is proposed to be up to 2MW of electricity. Funding required for Phase One is ~USD $10m which can be staged if necessary or prudent to do so.
Phase Two funding is for the expansion of electricity generation up to 10MW. This will involve drilling gas wells and the purchase of additional electricity generation assets. The funding required for Phase Two is ~USD $20m. Upon successful completion of Phase One and Two, the Company plans to expand the project beyond 10MW.
During the quarter, the Company successfully raised gross proceeds of £2.625 million pursuant to the placing of 75,000,000 new shares at an issue price of 3.5 pence per share. The funds raised are planned to go towards commencement of transmission line construction. While this work proceeds, Tlou will also continue its negotiations with other financiers for further development of the Lesedi project.
Boomslang Project – Environmental Impact Statement (EIS) Approved
Botswana’s Department of Environmental Affairs (DEA) has approved the EIS for Tlou’s Boomslang project. The Boomslang Prospecting Licence PL011/2019 is located adjacent to the Company’s Lesedi power project.
All proposed project activities outlined under the EIS have been authorised. These include:
Tlou believes the Boomslang project can complement the more mature Lesedi and Mamba projects, particularly given the presence of the highly prospective Serowe coal seam. The Lesedi and Mamba projects primarily target the deeper Morupule coal seam.
EIS approval for exploration of the Boomslang permit (Tlou 100%) represents another key milestone for the Company. Successful exploration and development of the Boomslang area could facilitate Tlou’s longer term strategy of expansion beyond the current Lesedi project area.
Lesedi Project – Commencement of Development
The Company plans to commence work on the development of the Lesedi project as soon as possible. Key stages to achieve first revenue are as follows:
Following the recent capital raising, the Company has funds in place to allow the transmission line construction to commence.
Transmission Line Tender
As outlined above, the first phase of development will be the construction of a transmission line to connect to the electricity grid. The line will be ~100 Km in length with a 66kV overhead cable. The route has been surveyed and full environmental approval is in place. The line will predominantly cross relatively flat, arid terrain with the last ~5 Km being through the outskirts of the Serowe township.
The Company had issued tenders for the construction of the transmission line and substations and post quarter end tenders were awarded to Zismo Engineering (Pty) Ltd (“Zismo”) for the construction of the overhead lines and to OptiPower for construction of substations at Lesedi and Serowe. The Company looks forward to finalising the contracts with both groups and subsequent commencement of construction.
10MW Power Purchase Agreement (PPA)
During the quarter, the Company received correspondence from advisors assisting the Government of Botswana in the execution of their Coal Bed Methane (CBM) program for the development of up to 100MW of CBM fueled pilot power plants.
The aim of this process is to secure a 10MW PPA between Tlou and the national energy utility, Botswana Power Corporation (BPC). The advisors have confirmed that they are reviewing project documents including the draft PPA. The Company is focused on progressing this to a conclusion as soon as possible.
Other items
Orapa Gas Supply Tender
Botswana Power Corporation has issued a tender for the supply and delivery of natural gas to the Orapa 90MW power plant. The power plant provides power to the Orapa diamond mine – one of the largest diamond mines in the world. Orapa is currently running on intermittent grid power and emergency diesel generation. Anglo American PLC, owner of the De Beers group and co-owner of Orapa along with the Government of Botswana, has publicly stated their objective to move to cleaner fuel sources.
Gas from Tlou’s nearby discoveries could be ideally suited to assist with meeting their cleaner energy objectives. The Company will review the tender documentation and subject to meeting the eligibility criteria, plan to submit a response. The tender closes in May 2021.
Hydrogen
The Company is looking into the potential of using gas and solar to produce Hydrogen power. These early-stage plans may lead to a trial project hosted at the Company’s field operations in Botswana.
Forward plan
Key focus areas include:
Project Areas
The Company has three project areas in Botswana:
Boomslang Project Area, Botswana
Licence: Prospecting Licence 011/2019
Ownership: Tlou Energy Limited 100%
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.
The Boomslang licence area provides the Company further flexibility and optionality for development of different projects.
There have been no ground operations completed in the Boomslang area as the Company only received environmental approval to commence exploration activities during the quarter. Subject to funding, initial exploration work is planned for this area. Like the Lesedi and Mamba areas, the Boomslang project could produce solar and gas-fired power.
The status of the Boomslang area licence is as follows:
The project is significantly de-risked. The Company produced its first gas in 2014, has a Mining (or development) Licence valid to 2042 and 10 Prospecting (or exploration) Licences. The Company’s project acreage covers a vast area spanning approximately 9,300 Km2 in total.
Tlou’s Lesedi and Mamba projects already benefit from significant independently certified 2P gas Reserves of ~41 Billion Cubic Feet (BCF). In addition, 3P gas Reserves of ~427 BCF and Contingent Gas Resources of ~3,043 BCF provide significant additional potential.
The Company is planning an initial scalable power project. Following successful implementation of this first scalable project, the Company looks forward to evaluating longer-term prospects for the delivery of additional electricity to Botswana and to neighbouring countries.
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