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Tlou Energy to constructively advance project finance efforts

Production pods are in place, an interim PPA has been inked and the company intends to initially seek project funding to install power lines

Tlou Energy Limited - Tlou Energy to constructively advance project finance efforts

Tlou Energy Ltd (LON:TLOU) told investors it can constructively advance project finance efforts whilst ‘on-the-ground’ access in Botswana is restricted amidst the coronavirus (COVID-19) pandemic.

In a quarterly update, the company said that “discussions with potential project finance partners progressed during the quarter with the company evaluating debt or equity funding or a mix of both."

It added: “Tlou's objective is to source the lowest cost of capital with the least risk going forward.”

As it draws up plans for the coal bed methane (CBM) fuelled gas-to-power project, the group said it aims to secure funds required for the electrical transmission lines over the next few months, allowing work to start during the second half of 2020.

READ: TLOU shares soar as it lands interim PPA in Botswana

The construction of the transmission lines will be the initial focus as this is the principal next step, in terms of project risk reduction as the initial CBM production pods are in place.

Production pods Lesedi 3 & 4 have now been flowing gas for a number of months, with sustained rates achieved from both pods. The rates are expected to increase over ‘considerable’ time, though this can be accelerated with additional new wells to facilitate quicker dewatering. Such an option is being considered, but, no decisions have been made by Tlou yet.

Tlou has, meanwhile, opted to shut-in one or possibly both production pods temporarily because the initial primary object, data gathering for the gas-to-power project, has successfully been achieved. A ‘shut-in’ will preserve gas that would otherwise be flared and will reduce unnecessary expenditure, it added.

The company also used the quarterly update to guide investors on the measures being undertaken during the coronavirus pandemic. Presently, it is reducing overheads to preserve funds.

It said: “The COVID-19 outbreak and the impact on financial markets is challenging for many companies including Tlou and the government of Botswana has declared a State of Emergency,”

“It is difficult to predict just how long the impact of COVID-19 will last and the ultimate effect it may have on the company. Therefore, Tlou considers it to be prudent to significantly reduce overheads so that existing funds last longer and to enable the company more time to conclude commercial and project finance negotiations.”

Quick facts: Tlou Energy Limited

Price: 3.9 GBX

Market: AIM
Market Cap: £20.48 m

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