Tlou Energy has agreed an interim 2 MegaWatts (MW) Coalbed Methane (CMB) pilot Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC).
In a statement to the shareholders, the company, which is looking to become the first to produce power through CMB in Botswana, explained the agreement is undergoing final regulatory formalities.
Although the terms of the agreement remain confidential at the request of BPC, Tlou view the development as a major step towards becoming a power producer.
Tlou, which describes itself as Southern Africa’s most advanced CBM natural gas company, says it remains in discussion with potential financers for the project. The would-be backers have been waiting for the interim to be put in place, which facilitates connection to the power grid and first revenue for the company.
Tlou Managing Director, Anthony Gilby, says a pathway to revenue generation is key to financiers and once connected to the grid, expansion of the project is seen as a relatively straightforward.
In 2018, Tlou submitted a proposal to the Minsitry of Mineral Resources, Green Technology and Energy Security for the development of a 10MW CBM Gas-to-Power.
This proposal is still being assessed by government and is separate to the 2MW interim PPA.
Explaining the slow progress, Minister of Minerals, Lefoko Moagi stressed this was new territory for Botswana and thus they were treading extremely carefully.
“We have not been in this space of CBM before. So we needed to get a transaction advisor, someone who can advise us on how we peg our rates and things like that when we negotiate a contract such that we are not unduly charged exorbitantly because we did not know where the rate should be,” Moagi admitted recently in response to Voice Money enquiries.
According to the Minister, the process of securing a transactional advisor is at ‘an advanced stage’.
Moagi further disclosed that to enable Tlou to continue talking to its financers, government gave them a temporary PPA.
“This will be superceded by a formal PPA that would be advised by the transactional advisor. This temporary PPA gives them the leeway to now go to the financiers, to say please don’t walk away from the project, there is light at the end of the tunnel because once they have the official PPA, they will then move into the development stage of the project,” noted Moagi, adding power produced from the project would be put into the national grid.