Tlou Energy says it has requested an initial power purchase agreement (PPA) from government of Botswana as it awaits response for the Ministry of Minerals Resources, Green Technology and Energy Security’s (MMGE) tender for the Development of a CBM-fueled power plant in the country . The company said in an operational report – quarter ending 31 December 2019 that this was in light of the fact that as CBM gas-to-power projects are new in Botswana, “the government has taken additional time to assess Tlou’s proposal including appointing qualified persons to assess the project”
“To prevent further delays and allow Tlou to secure finance, the company has requested an initial (or interim) PPA so that development of the Lesedi CBM gas-to-power project can commence sooner rather than later. This initial PPA could then be superseded by the final PPA once the MMGE has completed its assessment and negotiation,” Tlou noted in the update.
“Crucially for Botswana, Tlou’s project is consistent with the government’s objective of a Botswana which is energy secure, has diversified and cleaner energy sources, and is a net energy exporter. The government will also benefit from the development of a new industry, additional employment opportunities and a cleaner source of local independently produced power, ultimately leading to energy security for Botswana.”
Tlou Energy submitted a tender to 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 PPA with government whereby Botswana Power Corporation (BPC), the national electricity utility, would purchase the power produced by Tlou at the Lesedi CBM project. The Lesedi project covers an area of approximately 3,800 Km2 and consists of four Coal and CBM Prospecting Licences (PL) and a Mining Licence. The Mining Licence area is currently the focal point for the company’s operations and includes the gas producing Lesedi 3 and 4 development wells or ‘pods’.
The Lesedi project is the company’s most advanced project, with plans in place to install gas-fired electricity generators and connect to the power grid in Botswana. Subject to results, the first electricity sales could commence in late 2020.
The project has full environmental approval which includes gas extraction, electricity generation and construction of transmission lines. In addition, the Company has approval for 20MW of solar generation. Clean CBM power is ideal for use in conjunction with solar projects.
Tlou has the only CBM Mining Licence in Botswana. A mining licence is required by an operator to develop a CBM asset. This licence spans a large 900 Km2 area and is valid until 2042 so the Company has security of tenure over the project.
During 2019, the company commenced production testing at two Pods in the Lesedi project, namely Lesedi 3 and Lesedi 4. The aim of the production testing is to establish a commercial gas flow rate from one or both of these pods.
The company previously announced initial gas flow rates of approximately 20 Mscfd (thousand standard cubic feet per day) from each of Lesedi 3 and Lesedi 4. The Company is aiming for a minimum sustained gas flow rate in the region of 80-100 Mscfd from each production pod.
Project Finance
The company’s continues its negotiation with Botswana Development Corporation (BDC) to fund development of the first 10MW of the Lesedi CBM Gas-to-Power project in Botswana and has received an indicative non-binding term sheet as the negotiations have progressed. This initial proposal forms the basis for further discussion and negotiation prior to finalisation and remains confidential. Further details will be provided if and when a binding term sheet is agreed. BDC is owned by the Government of Botswana with a mandate to provide financial assistance to commercially viable projects.
The company is also in discussions with other parties interested in funding the Company though debt, equity and mezzanine finance.
Project areas
The Company has three project areas in Botswana:
· Lesedi Project – Development, Exploration
· Mamba Project – Exploration
· Boomslang Project – Exploration
