Tlou Energy, a Botswana Stock Exchange (BSE) listed gas-to-power Company this week revealed that it has been selected by Ministry of Mineral Resources, Green Technology and Energy Security to develop Coal Bed Methane fueled power projects for Government of Botswana.
The company shared this information in a communique dispatched by to the market on Monday 20 May 2019. In October 2018 the Company submitted its comprehensive response to the Request for proposal (RFP) for the Development of a Maximum of 100 MW of Coal Bed Methane Fueled Power Plants in Botswana after Government published an inquiry to the market and requested for prospective bidders to express interest.
Tlou says its submission outlined a staged development commencing with up to 10MW of generation as well as outlining project feasibility, proposed field development, installation of power generation facilities and supply of power into the grid in Botswana. The RFP was assessed across three different criteria, Compliance, Technical and Financial of the competing bidders, of which Tlou’s proposal received the highest pass mark for the compliance and technical stage.
The financial stage required the calculation of a Leveled Cost of Energy (LCOE) for the project, with Tlou’s proposal having the most competitive LCOE. Furthermore Tlou says it emerged victorious because of its ability to operate efficiently using very experienced personnel coupled with the geological knowledge gained over many years of operating in Botswana.
“We can confirm that the Company has now received written confirmation from the government of Botswana that it has been chosen as a preferred bidder for the Development of a “Maximum of 100 MW of Coal Bed Methane Fueled Power Plants in Botswana” states Tlou in this week’s statement.
Last week in a statement dated 15 May 2019, Tlou Energy alerted the market of a decision by Public Procurement and Asset Disposal Board (PPADB) published in the Botswana Daily Newspaper dated 14 May 2019 which Government requested negotiations between two bidders being Tlou Energy and Sekaname (Pty) Ltd, a decision that posed uncertainty on Tlou’s camp.
On Monday Tlou’s Managing Director, Tony Gilby said the approval of the Company’s tender now represents great relieve and progress for Tlou. “The proposal that we submitted was very competitive and we welcome this decision by Government. We look forward to working together to deliver a successful power project. The effort put in by our team over recent years has been phenomenal and this result makes it all worthwhile,” he said.
Gilby highlighted that the company will now progress with additional work on the ground to deliver a Gasâ€toâ€Power solution that can bring significant benefits to the country and to our shareholders. Early this month Department of Environmental Affairs under the same Ministry approved Tlou Energy’s Environmental Impact Statement (EIS) for up to 20MW Coal Bed Methane power generation, a 66 KV Transmission Line to Serowe as well as a Sola Farm of up to 20 MW, the company revealed in a statement released 1st May 2019.
Tlou Energy commenced work on its application for an EIS for downstream development being power generation and transmission in late 2018. The EIS addresses the social and environmental context of the area surrounding the planned development of the Lesedi project which includes CBM power generation of up to 20MW, a 66kV transmission line to Serowe and a Solar Farm of up to 20MW.The Company already had approval in place for its upstream activities which comprises of development drilling and exploration.
In the statement, also published by Botswana Stock Exchange Limited, the BSE listed energy outfit noted that DEA approval confirmed that their EIS for proposed downstream development adequately identifies and effectively mitigates the anticipated impacts associated with the proposed activity. According to Tlou Energy The EIS authorization which will be valid for thirty (30) years and may be subject to renewal at the end of this period is another important project milestone which highlights the progress being made by the Company in its aim to deliver CBM power in Botswana and Southern Africa.
Tlou Energy, also listed on the Australian Securities Exchange (ASE) and the London Stock Exchange Alternative Investment Market (AIM) is focused on delivering Gasâ€toâ€ Power solutions in Botswana and southern Africa to alleviate some of the chronic power shortage in the region. The company is developing projects using coal bed methane (CBM) natural gas.
Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfil its power requirements. As 100 percent owner of the most advanced gas project in the country, the Lesedi CBM Project, Tlou Energy says it provides investors with access to a compelling opportunity using domestic gas to produce power and displace expensive diesel and imported power.
Since establishment, Tlou has significantly derisked the project in consideration of its goal to become a significant gasâ€to power producer. The Company flared its first gas in 2014 and has a 100% interest over its Mining License and ten Prospecting Licenses covering an area of 9,300 Kilometer square in total The Lesedi and Mamba Projects already benefit from significant independently certified 2P gas Reserves of 41 BCF.
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.
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.
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”