Tlou Energy (LON:TLOU) recent Q1 update highlights steady progress on its pioneering Lesedi coal bed methane (CBM) gas-to-power project in Botswana. With the first electricity sales expected by mid-2025, the project represents a significant step forward for the company and a promising addition to Botswana’s energy landscape.
The company has prioritised infrastructure enhancements, specifically focusing on boosting gas flow rates to achieve stable electricity output. Construction on the Lesedi substation, a critical component for exporting power through the main transmission line, has now reached around 85% completion, a leap from the 75% mark in late September. In a strategic move, Tlou has also partnered with a supplier to provide power generation equipment that will use 1.4MW Cummins engines, poised for delivery upon request.
However, Tlou’s journey hasn’t been without challenges. As part of gas production efforts, Tlou continues to dewater its two active well pods, Lesedi-4 and Lesedi-6. Gas production has yet to stabilise fully due to interference from coal fines affecting the downhole pumps. Nevertheless, Tlou remains optimistic, with ongoing refinements in its operational methods aimed at addressing this issue. By resolving this, the company expects gas production rates to improve, setting a firm foundation for future CBM drilling and stable electricity production.
Tlou’s Q1 results, prepared under Australian GAAP, reveal operating cash flows of (A$0.8m) and investing cash flows of (A$1.7m). As of the end of September 2024, the company’s cash reserves stood at A$0.9m. Support remains robust, with a significant shareholder, Ian Campbell of ILC Investments, extending an offer for a loan facility of up to A$5m, providing additional financial flexibility as Tlou advances its plans.
An important strategic shift is Tlou’s planned delisting from the London AIM market, announced on 28 October. After this transition, Tlou’s shares will continue trading in Australia and Botswana, with shareholders set to vote on the proposal at the AGM on 26 November. This move reflects Tlou’s intent to streamline its listing presence while focusing on core projects and funding development activities locally.
Reflecting on the project’s overall outlook, Daniel Slater of Zeus Capital notes, “It is positive to see Lesedi continuing to advance towards first electricity sales. There is clearly a problem to solve on how the wells are dewatered and dealing with the coal fines, though once this is achieved we are optimistic that gas production rates should improve from existing wells, and also that subsequent wells will also benefit and flow gas more efficiently, more quickly.”
Final Thoughts
Tlou Energy’s Lesedi project holds strong potential to transform Botswana’s energy sector, backed by significant CBM resources and a solid plan for future electricity sales. As the company progresses through its development milestones, it’s clear that their commitment to delivering sustainable, local energy remains steadfast. Investors and stakeholders alike will be watching closely as Tlou approaches its 2025 target and explores broader opportunities in renewable energy with additional solar and hydrogen capacity planned.
