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Govt, Tlou Energy close to seal deal for construction of 10MW plant

Negotiations between the Government and Tlou Energy on establishing a Coal Bed Methane (CMB) gas-to-power plant in the country have reached final stages ahead of commencing development work, the energy company has announced.

The Power Purchase Agreement (PPA) negotiations between the independent power producer and the Government will see Tlou Energy constructing a 10MW power generation plant in the Lesedi CMB area with the generated power sold to the Government-owned Botswana Power Corporation (PBC). This was announced this week by Tlou Energy chairman, Martin McIver, in a notice to shareholders in the company’s 2019 annual report.

“With the company selected as a preferred bidder for this project, Tlou is now in the final stage of the process, being negotiations with the government on a Power Purchase Agreement (PPA) ahead of commencing the development work,” he said. However, McIver said the negotiations will remain confidential until the government is in a position to make an announcement.  “These PPA negotiations are confidential and are being led by the government of Botswana.”

“The submission, which was assessed on eligibility, technical and financial criteria, outlined a staged development commencing with up to 10MW of power generation and included the required connection into Botswana’s national power distribution network,” added McIver. In October last year, Tlou Energy submitted its proposal for development of a pilot CBM gas‐to‐power project to the Ministry of Mineral Resources, Green Technology and Energy Security with permission being granted in May this year.

McIver said steady progress had been made towards establishing Tlou Energy as a key power player in Botswana and the company has also been selected as a preferred bidder for the development of the CBM gas-to-power plant in the country. “This was a key target during the year, as we work towards our goal of becoming a regional power provider in southern Africa through the development of our CBM assets,” the Tlou Energy chairman told shareholders.

He said the company was also privileged to have the support of the forward‐thinking government of Botswana, which announced in 2016 that CBM, a relatively clean source of energy and more competitively priced than solar and diesel, is to be included as part of the country’s forward plan to combat power deficiency. Over the last 12 months, Tlou Energy has completed a work programme, which included drilling of two dual lateral development wells in the Lesedi project. The wells (Lesedi 3 and 4) are located adjacent to the proposed central gas gathering and power generation facility and are currently producing gas.

“With CBM development not previously established in Botswana, Tlou is pioneering CBM development in the region. Successful results from Tlou’s projects could potentially impact a whole new CBM basin and be a significant boost not only for Tlou, but for the whole region,” the company’s shareholders were informed. McIver said upon completion of the initial project, the Tlou Energy would look to expand further and the gas field would be connected to the regional grid, thereby opening the possibility for the company in providing power across the region, through the Southern African Power Pool (SAPP).

“Following the successful implementation of this first project, the company looks forward to evaluating longer-term prospects for the delivery of electricity from CMB in Botswana to neighbouring countries.” Meanwhile, Tlou Energy, Managing Director, Anthony Gilby said his company had made significant advancement in the last one year. In the same notice to shareholders, Gilby said Tlou Energy had established Botswana’s Independent Certified Gas Reserve with enough “2P gas already in place to complete the currently proposed 10 MW power project.

“Tlou has a 100% owned project over approximately 9 300 km2, with enormous scope for gas reserve expansion.  The company has built an experienced in‐country operational workforce.  Landholder agreements are either in‐place or being finalised,” said Gilby adding Botswana investors through pension funds were now the largest shareholder group in Tlou Energy aligning the country’s interest with that of the broader shareholder base.

“At the time of writing, a stabilised gas flow from Lesedi 3 and Lesedi 4 has been achieved. It is anticipated that, based on industry norms, the stabilised gas flow from the Lesedi wells should increase with time until a peak is reached,” the MD said. The electricity market in southern Africa continues to suffer from chronic shortage of supply, so development of gas and gas‐fired power in the region remains a very attractive commercial option for the SADC region. Tlou Energy is listed on the Australian Securities Exchange, London’s AIM market and the Botswana Stock Exchange.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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