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Tlou Energy : CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2024
Tlou Energy : CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER
About this update from Tlou Energy Ltd
Tlou Energy Limited ABN 79 136 739 967 Consolidated Financial Statements for the half-year ended 31 December 2024 Tlou Energy Limited - Half-year report December 2024 Corporate Directory ABN 79 136 739 967 Directors Martin McIver Anthony Gilby Gabaake Gabaake Colm Cloonan Hugh Swire Company Secretary Solomon Rowland Administration & Registered Office 210 Alice Street Brisbane QLD 4000 Australia Telephone: +61 7 3040 9084 Auditors BDO Audit Pty Ltd Level 10 12 Creek Street Brisbane QLD 4000 Bankers Westpac Banking Corporation GPO Box 3433 Sydney NSW 2001 Share register Australian Securities Exchange Ltd (ASX Code: TOU) Botswana Stock Exchange (BSE Code: TLOU) Page 2 Tlou Energy Limited - Half-year report December 2024 Contents Directors' report 4 Auditor's independence declaration 10 Consolidated statement of comprehensive income 11 Consolidated statement of financial position 12 Consolidated statement of changes in equity 13 Consolidated statement of cash flows 14 Notes to the consolidated financial statements 15 Directors' declaration 24 Independent auditor's review report 25 Page 3 Tlou Energy Limited - Half-year report December 2024 Directors' report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or the 'Group') consisting of Tlou Energy Limited (referred to hereafter as the 'Company' or "Tlou") and the entities it controlled at 31 December 2024. Directors The names of the directors who held office at any time during the half-year and up to the date of this report are: Martin McIver Non-Executive Chairman Anthony Gilby Managing Director & Chief Executive Officer Gabaake Gabaake Executive Director Colm Cloonan Finance Director Hugh Swire Non-Executive Director Directors have been in office since the start of the half-year to the date of this report unless otherwise stated. Principal Activities The principal activity of the consolidated entity is to explore and evaluate power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power. No revenue from these activities has been earned to date, as the consolidated entity is still in the exploration and evaluation or pre-development stage. There have been no significant changes in the nature of the group's principal activities during the half -year. Review and results of operations The loss for the half-year after income tax amounted to $3,766,513 (December 2023 loss $1,821,374). Information on operations and results during the period are set out below. Lesedi Project The project area has four Prospecting Licenses (PL) and a Production Licence which is the focus area for the development of T lou's independently certified gas reserves and contingent resources. The table below summarises the status of the Lesedi licences: Licence Expiry Status Production Licence 2017/18L August 2042 Current PL 001/2004 March 2026 Current PL 003/2004 March 2026 Current PL 035/2000 March 2025 Current PL 037/2000 March 2025 Current PL renewal applications are submitted three months prior to expiration. Renewal applications were submitted for PL035/2000 and PL037/2000 in December 2024. Lesedi Gas-to-Power project The past six months have marked significant progress for Tlou Energy with its flagship Lesedi Gas-to-Power Project ("Lesedi") advancing towards first power sales in 2025. Key milestones include the near completion of the Lesedi substation and continue d optimisation of gas production. With Lesedi positioned as Botswana's leading gas project, Tlou is ideally placed to address the region's growing demand for reliable baseload power. Located on a strategic 40km² site in Botswana's Central Sandveld, Lesedi is ideally placed to leverage market demand to scale rapidly. This strategic location provides ample space for expansion of Tlou's gas-to-power initiatives. Ongoing developments at Lesedi include the following key elements: Gas production Electricity generation Substation construction Transmission and sale of electricity Page 4 Tlou Energy Limited - Half-year report December 2024 Directors' report continued Gas Production Gas is produced via lateral (horizontal) drilling techniques where one vertical production well is intersected by two lateral wells to form a Dual Lateral Production Pod ("Pod"). Currently, Tlou operates two Pods that are poised to support initial power ge neration. During the reporting period Tlou focussed on dewatering the target coal reservoir to enhance gas flow rates with operations undertaken to achieve more consistent rates. A key issue addressed is the coal fines or particles that can cause the downhole pump to block and therefore constrain dewatering and gas production. The Company is meticulously monitoring the dewatering process. This involves closely overseeing the drawdown of water from the production wells while limiting any issues that could affect gas flow. By maintaining stringent control over this process, Tl ou aims to optimise gas extraction efficiency and enhance consistent gas production rates. The next phase of production well drilling is scheduled for 1H25 subject to additional funding being secured. Power Generation The Company is in discussions with power generation suppliers to install power generators at Lesedi. One proposal is for the use of reciprocating 1,375 kW Cummins branded gas engines with GE generators. It is planned that power generators will be supplied and installed in phases, commensurate with gas production capacity. 1,375 kW generators can take up to 220m 3 of methane per hour with actual power generation output subject to various factors including the temperature and altitude. Transmission Line Electricity generated at Lesedi will be sold into the grid via the 66kV transmission line that has been constructed by the Co mpany. Construction of the 100km line is complete with minor finishings, including connecting the line to the Lesedi substation and the installation of switch gear remaining. These final works will be completed before the line is energised. The line is currently under care and maintenance. Once operational, it will grant Tlou access to the Botswana power market and the wider Southern African Power Pool providing the Company access to an enormous electricity market. Substation The generators will tie in with the transmission line via an electrical substation at Lesedi . The substation includes a 5MVA step-up transformer which will facilitate around 5MW of generation. Further transformers will be added as the project grows with the substation designed for expansion up to 25MW. The substation's design is carefully aligned with the Company's strategic vision to facilitate the rapid expansion of generat ion capacity. The Company aims to scale up generation as gas production increases, contingent upon securing additional power purchase agreements and funding. Page 5 Tlou Energy Limited - Half-year report December 2024 Directors' report continued Other Project Areas In addition to the Lesedi project the Company has two other areas of interest adjacent to Lesedi known as the Mamba and Boomslang projects. Mamba Project The Mamba project is in the exploration and evaluation phase with further operations required on the licences. It consists of five Prospecting Licences covering an area of approximately 4,500 km 2 . The Mamba area is situated adjacent to Lesedi. In the event of successful drilling results at Mamba, it is envisioned that this area would be developed as a separate project from Lesedi. T he Mamba area provides the Company with flexibility and optionality. The status of the Mamba licences is as follows: Licence Expiry Status PL 237/2014 December 2025 Current PL 238/2014 December 2025 Current PL 239/2014 December 2025 Current PL 240/2014 December 2025 Current PL 241/2014 March 2026 Current Further work on the Mamba project is proposed once the Lesedi project is in production. The next stage of operations is likely to inc lude a seismic survey and the drilling of core-holes. Boomslang Project Prospecting Licence, PL011/2019 designated "Boomslang", is approximately 1,000 km 2 and is situated adjacent to the Company's existing licences. To date, the Company has not carried out ground operations in the Boomslang area. Like the Mamba project t he first stage of operations is likely to include a seismic survey following by core-hole drilling. The status of the Boomslang licence is as follows: Licence Expiry Status PL 011/2019 June 2026 Current Significant changes in the state of affairs During the half-year ended 31 December 2024, there were no other significant changes to the state of affairs of the consolidated entity other than those stated above and disclosed in the financial report and notes thereof. Matters subsequent to the end of the half-year On 31 January 2025, all 16,350,000 performance rights lapsed. Other than the matters discussed in this report, there has not arisen in the interval between the end of the half -year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to a ffect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods . Page 6 Tlou Energy Limited - Half-year report December 2024 Directors' report continued Likely developments, risks and expected results of operations The Company has drilled wells in the Lesedi project area and plans to drill further wells to produce CBM gas. These wells are designed to achieve sufficient gas flow rates for the Company's initial project development. The gas flow rates from these wells a re vitally important to assess the viability and commerciality of the Lesedi project. However, at the date of this report the level of gas that may be produced from the project, if gas flow rates can be sustained, and if gas production rates will be at commercial rates is not yet known. Further wells will also be required to produce sufficient gas for the planned Lesedi project. The Company is evaluating additional projects such as solar power and high-density computational facilities including crypto currencies. These projects may be subject to regulatory approvals. No guarantee can be given in relation to the results of the Company's operations, gas flow rates, regulatory approvals being granted or the ability to secure the funds required to progress all or any of the Company's existing or planned operations. The Company is subject to risks which may have a material adverse effect on operating and financial performance. Tlou's Risk Management Policy can be found on the Company's website. It is not possible to identify every risk that could affect the busi ness or shareholders. Any actions taken to mitigate these risks cannot provide complete assurance that a risk will not materialise or have a material adverse effect on the business, strategies, assets or performance of the Company. A list of risks currently cons idered material and mitigation strategies are set out below. This is not an exhaustive list and risks are outlined in no particular order. Risk Description Mitigation Funding The Company will need to raise additional debt and/or The Company has operated in Botswana for over a equity funds to support its ongoing operations or decade with extensive local and international implement its planned activities and strategies. This relationships with investors who have supported the includes but is not limited to funding to complete the Company. infrastructure necessary to connect to the power grid and generate electricity at the Lesedi project and funds The Company actively manages its capital to facilitate drilling of additional gas wells to deliver requirements and maintains close relationships with sufficient gas for development of the proposed 10MW potential investors. power project and any additional projects. There can be no assurance that such funding will be available The Company continues to explore sources of when required or on satisfactory terms or at all. Inability equity capital as well as long-term and short-term to find sufficient funds may result in the delay or debt or mezzanine capital. abandonment of certain activities which would likely have an adverse effect on the Company's progress. Health and The project operations are in a remote location, in a The Company employs highly skilled and Safety sometimes-harsh environment and involves the use of experienced personnel where possible. The Chief heavy machinery and equipment. Operations Officer is supported by a dedicated Safety, Health and Environment (SHE) officer and a paramedic is also on duty at all times at the field operations. The Company has a training and safety management system and external audits of the safety management system are conducted. All visitors to site are given a safety briefing. Page 7 Tlou Energy Limited - Half-year report December 2024 Directors' report continued Freedom to The Company has licences to operate over 8,000 The Company continues to support regular and Operate square km and has had continued access to key extensive Government engagement activities to licence areas when required. Negative sentiment interest and educate lawmakers to the country's towards the project or industry may impair Tlou's natural resource opportunities as well as keep up to freedom to operate. Changes to key Government date with changing national power strategies and personnel and/or national policy could also impact requirements. ability to operate effectively. Tlou supports and interacts with a wide network of local stakeholders including farmers and landowners to try and ensure that the needs of the community are being met and that the project can provide benefits for all stakeholders including providing long term and sustainable employment opportunities. Environment Botswana's natural habitat, water and wildlife needs to Tlou has full environmental approval in place for be protected. Botswana rigorously enforces its development of the gas-to-power project. The environmental regulations so the risk of fines or other Company aims to not just meet environmental liabilities for noncompliance is commensurately high. requirements but exceed them. The Company uses local specialists to support its ongoing permit renewals, environmental assessments and licence applications. Continual monitoring of actual and potential impacts on the environment is practiced to try and ensure that any impact on the natural habitat is eliminated or minimised. Climate Climate change initiatives could have an impact on Tlou's Lesedi gas-to-power project aims to be part Tlou's operations in the future. Climate initiatives could of a power market in sub-Saharan Africa that will have a material impact on fossil fuel projects such as move away from carbon intensive coal and diesel Tlou's Lesedi gas-to power project. fired power generation. While also a fossil fuel, gas can be a transitional fuel that could assist with providing base load power until such time that sustainable and/or renewable power sources can provide reliable 24-hour base load power. The Company is aware that it may need to adapt its process to meet future climate needs and will continue to assess new information as it becomes available. Power Sales The Company has signed a 10MW Power Purchase The Company works closely with its contractors and Agreement (PPA) with Botswana Power Corporation engineers to progress infrastructure projects in a (BPC) with the aim for first power to be supplied into timely manner. the national grid in 2025. There is a risk that the grid connection infrastructure, sustainable gas flows, or Management continues to explore opportunities with availability of generators could be delayed thereby other potential customers across the region, postponing first power sales. No other agreements are potentially via the Southern African Power Pool or currently in place for sale of power or gas to other within Botswana. parties. Additionally, the Company aims to diversify its products including potentially producing solar power and developing high-density computational facilities including crypto currencies. Page 8 Tlou Energy Limited - Half-year report December 2024 Directors' report continued Geological The Company has over 8,000 square km of licence Tlou has invested in seismic surveys and core hole Risk areas part of which has not had significant CBM drilling to identify areas of lower risk prior to operations to date. There remains significant geological conducting further exploration and evaluation. This risk in these areas and subject to operational results strategy is planned for undeveloped areas of the these areas may not be commercial. project. After a decade of operating in the region and supported by external resource certifications, the operations team have and continue to develop an excellent knowledge of the geological area to help de-risk future exploration and evaluation operations. Remote The Company operates over 100km from established The Company has on-site paramedic support and Operations medical and engineering support facilities in the closest has invested in its own stock of equipment so that it urban area which increases costs and risks as well as can operate as autonomously as possible over a requiring adequate insurance. greater range of activities. A purpose-built field operations camp is in place which is suitable for full development of the initial 10MW project and for further expansion. People The Company may lose key executives and The Company continues to search for skilled staff to management. The Company operates in a competitive grow the team to satisfy the Company's needs and environment in relation to talented corporate and ideally to have a lead person and back-up support technical personnel. person for all key positions. In addition, implementation of appropriate staff training and succession plans is a key target. The Company offers incentives and development opportunities for key executives and management to attract the best talent to the Company. Environmental regulation The Directors are satisfied that adequate systems are in place for the management of its environmental responsibilities and c ompliance with its various licence requirements and regulations. The Directors are not aware of any breaches of these requirements and to the best of their knowledge, all activities have been undertaken in compliance with environmental regulations. Rounding of amounts The company is of a kind referred to ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the directors' report and financial report. Amounts in the directors' report and financial report have been rounded off to the nearest dolla r in accordance with the instrument. Auditor's Independence Declaration The auditor's independence declaration for the half-year ended 31 December 2024 has been received and is attached to this report. Signed in accordance with a resolution of the Board of Directors. Anthony Gilby Managing Director Brisbane 10 March 2025 Page 9 Tlou Energy Limited - Half-year report December 2024 Auditor's independence declaration Tel: +61 7 3237 5999 Level 10, 12 Creek Street Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEPENDENCE BY R J LIDDELL TO THE DIRECTORS OF TLOU ENERGY LIMITED As lead auditor for the review of Tlou Energy Limited for the half-year ended 31 December 2024, I declare that, to the best of my knowledge and belief, there have been: No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and No contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Tlou Energy Limited and the entities it controlled during the period. R J Liddell Director BDO Audit Pty Ltd Brisbane, 10 March 2025 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of A.C.N. 050 110 275 Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and A.C.N. 050 110 275 Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Page 10 Attention : This is an excerpt of the original content. To continue reading it, access the original document here .