Limited funds derail Tlou commercial gas flow ambitions
Tlou Energy, a Botswana Stock Exchange listed junior exploration company developing Botswana’s first coal bed methane (CBM) natural gas project has signaled limited funds as an impediment to desired progress in archiving its commercial gas flow targets.
The company shared this update through its business update for the last quarter of 2019, released this week. During 2019, Tlou commenced production testing at two Pods in the Lesedi project, namely Lesedi 3 and Lesedi 4. The aim of the production testing was to establish a commercial gas flow rate from one or both of these pods.
Tlou announced at end of second quarter 2019 that initial gas flow rates of approximately 20 Mscfd (thousand standard cubic feet per day) from each of Lesedi 3 and Lesedi 4 were archived. The Company‘s targets are a minimum sustained gas flow rate in the region of 80-100 Mscfd from each production pod.
In this latest operation reports the energy outfit which is also listed on the Australia Securities Exchange and London‘s Alternative Investment Market( AIM) revealed that gas flow rates have continued to fluctuate both up and down with periodic short-term rates observed which have been much higher than those initially announced.
“We will not be in a position to announce an increased rate until such time that higher levels are sustained and confirmed by our advisors, we are operating in a region where commercial CBM had not been produced before so there is no comparable data from this operating environment regarding how long it may take, or if it is even possible, for a commercial gas flow to be achieved,” shared Tlou Directors.
However the company says based on information to date, the Company has no reason to believe that the targeted commercial gas flow rates will not be achieved noting that they are generally pleased with well performance to date. Tlou Energy Managing Director Anthony Gilby says as junior exploration and Development Company, Tlou’s funds are limited and therefore caution is being taken by the Company to try and ensure that the production wells are managed without risking damage to, or loss of, either production pod. “This impacts the length of time taken to produce a commercial gas flow,” he said.
CBM gas production testing involves the extraction of water and gas from a coal seam. Typically, the water rate starts high and as this reduces, the gas rate increases. The reports states that since the Lesedi 3 and 4 pods have been in production, water rates have reduced with the aim of taking as much water as possible out of the underground coal seam reservoir. “Once this is achieved, the coal is expected to be more gas saturated and therefore the gas flow rate should increase significantly.”
Anthony Gilby reiterated that to achieve increased gas saturation is not a simple process as it requires careful management of pressure levels within the wells noting that each of the Lesedi 3 and 4 production pods consist of three wells – one vertical production well and two intersecting lateral wells.
“The Lesedi 3 and 4 pods are producing water in isolation which makes dewatering a slower and more difficult exercise than would otherwise be the case in a full field development. In a field development scenario, an array of wells would be located adjacent to each other which would serve to facilitate dewatering,” he said.
BDC FUNDING
To further finance the project and ensure smooth exploration works towards achieving target commercial gas rates Tlou Energy has turned to wholly government owned investment arm Botswana Development Corporation (BDC) for funding. “We are in continuous negotiations with Botswana Development Corporation (BDC) to fund development of this watershed project, the first 10MW of the Lesedi CBM Gas-to-Power project in Botswana and we have received an indicative non-binding term sheet as the negotiations have progressed,” revealed Tlou MD.
Gilby stated that the initial proposal forms the basis for further discussion and negotiation prior to finalization and thus remains confidential. “Further details will be provided if and when a binding term sheet is agreed,” he said. BDC is owned by the Government of Botswana with a mandate to provide financial assistance to commercially viable projects. Tlou says it is also in discussions with other parties interested in funding the Company though debt, equity and mezzanine finance.
SUPPLYING POWER TO GOVERNMENT
Tlou Energy‘s end goal is to deliver Gas-to-Power solutions in Botswana and southern Africa to alleviate some of the chronic power shortage in the region. In 2019 the company submitted a tender to Ministry of Minerals Resources, Green Technology and Energy Security (MMGE) for the Development of a CBM-fueled power plant in Botswana and was subsequently selected as a preferred bidder.
If successful, ongoing negotiations will result in the Company agreeing a Power Purchase Agreement (PPA) with the Government of Botswana, whereby Botswana Power Corporation (BPC), the national electricity utility would purchase the power produced by Tlou at the Lesedi CBM project. According to the report Government has taken additional time to assess their proposal including appointing qualified persons to assess the project. This was done to insure proper due diligence as CBM gas-to-power projects are new in Botswana,
To prevent further delays and allow Tlou to secure finance, Tlou has requested an interim PPA so that development of the Lesedi CBM gas-to-power project can commence sooner rather than later. Tlou Executives explained that the initial PPA could then be superseded by the final PPA once the MMGE has completed its assessment and negotiation.
In addition to the planned CBM development, Tlou also has environmental approval for 20MW of solar power generation. The company says Solar and CBM electricity generation can work extremely well together, with CBM providing base load power when solar is not available.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.