Tlou Energy Limited , a Botswana Stock Exchange listed energy outfit this week announced a watershed investment transaction that will further resource the company’s quest for revenue generating production and ultimately increased shareholder value.
The company which its core business is delivering Gas-to-Power solutions in Botswana and Southern Africa revealed on Tuesday 16th April that it has successfully completed an equity placement to sophisticated investors totaling BWP 21.8 million. According to a statement from Tlou which is also listed on the Australian Stock Exchange(ASX) as well as London Stock Exchange Alternative Investment Market (AIM) the placement has been completed at BWP0.75 per share, which is approximately a 4% premium to the closing Australian Stock Exchange share price on Monday, 15 April 2019 of AUD$0.096. Tlou further reveals that the funds have been raised from both a long term existing shareholder as well as a new Botswana based fund manager.
The Placement comprises the issue of 29,066,650 new ordinary shares representing 6.46 percent of the enlarged share capital at an issue price of BWP0.75 approximately AUD $ 0.10 or £0.055 per share. 28,000,000 of the Placement shares will be issued to an existing shareholder, The Botswana Public Officers Pension Fund, FNB Nominees (Pty) Ltd, Gaborone (BPOPF). Following this placement BPOPF will hold 47,230,769 shares of the enlarged share capital of the company, representing a 10.49 percent holding of Tlou Energy Limited.
Tlou Energy says that the proceeds of the placement along with existing cash provides further working capital for ongoing activities which includes exploration and downstream development work, continued gas flow testing at the recently Completed production wells and efforts to secure a power purchase agreement.The Placement price represents approximately a 4 percent premium to the closing ASX share price on Monday, 15 April 2019 of $0.096 and approximately a 2 percent premium to the 15 day volume weighted average price, for Tlou’s shares traded on the ASX of AUD$0.979.
Furthermore the company says placement shares will be issued within the Company’s Listing Rule 7.1 and 7.1A placement capacity, recently refreshed by shareholders at the 2018 Annual General Meeting and, as such, shareholder approval for the issue of the Placement shares will not be required. “Application will be made for the quotation of the Placement Shares to trading on the ASX, AIM and the BSE, with admission to trading on the ASX expected to occur at 9.00am on 23 April 2019 (AEST), admission to AIM at 8.00am on 24 April 2019 and admission to BSE on 25 April 2019” elaborate the company in a statement released on Tuesday.
Following admission of the Placement shares, the total number of the Company's ordinary shares on issue will be 450,180,185. The Company has no shares in treasury. This figure of 450,180,185 ordinary shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.
When commenting on the equity placement Tlou Energy Managing Director Tony Gilby noted that the placement will go a long way into providing the necessary working capital for the company. “We welcome the confidence shown in the Company by the fund managers who participated in this strategic placement. It has been one of the Company’s stated goals to increase the local ownership of the company as we believe this will have long term benefits for both the local and international shareholders. It is very pleasing to welcome to our registry a new local fund manager, along with further investment by our largest shareholder, and I would like to thank them for their support,” he said.
In October last year Non-Bank Financial Institution Regulatory Authority (NBFIRA) granted Tlou Energy Limited, “local asset’’ status, The granting of 'local asset status' to Tlou was noted as a positive development, as investment and pension funds that are domiciled in Botswana would now invest in Tlou Energy’s coal bed methane (“CBM”) Gas-to-Power Project and in return Tlou Shares would now also be treated as part of the funds’ local allocation of investments.
It was observed that the granting of the local asset status would bolster Tlou Energy share demand by the local investment space and also spark investor confidence and positive performance of the company’s share price.Tlou Energy which listed on the Botswana Stock Exchange Limited main board late last year is gearing itself to being an instrumental developer of gas-to-power projects in Southern Africa using coal bed methane (“CBM”) natural gas from its gas field in Botswana.
Since establishment, the Company has significantly derisked the project in consideration of its goal to become a significant gastopower producer. The Company flared its first gas in 2014 and has a 100 percent interest over its Mining Licence and ten Prospecting Licences covering an area of 9,300 Km2 in total.The Lesedi and Mamba Projects already benefit from significant independently certified 2P gas Reserves of ~41 BCF.In addition, 3P gas Reserves of ~427 BCF and Contingent Gas Resources of ~3,043 BCF provide significant additional potential.
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”