The content of this blog / podcast (or content associated with it) is not intended as investment advice. My strategy is largely focussed on small to micro cap stocks. There is a, potentially, high reward, which comes with a high risk. Please do your own research.
Tlou Energy is an AIM and ASX listed company focused on delivering power in Botswana and the broader southern African region through the development of coal bed methane (‘CBM’) projects.
I have written 2 previous blog on Tlou, you can access them at the bottom on this page.
Share Price: 6.25p
Market Cap: £14.82m
11 Quick Reasons to Add Tlou Energy #TLOU to your Watchlist
1. Botswana a Democratic Stable Country
Since indepence in 1966 it has maintained a strong tradition of stable representative democracy, with a consistent record of uninterrupted democratic elections. [Source: Wikipedia]
2. Fast Growing Economy
It’s sustained economic growth has averaged 5% per annum over the past decade, it has been one of the fastest in the world. [Source: World Bank]
3. Energy Shortage
Botswana’s stated energy shortfall in 2015 was 288mw. Their energy shortfall is predicted to rise by 31% to 1,017MW by 2025.
4. Proactive and Cooporative Government.
Botswana have, for a long time, relied on expensive and environmentally unsound deisel for their power supply. So the governent have sought and spearheaded initiatives to find a new, clean energy supply. Coal bed methane is amongst one of the favoured methods.
Market Leader – Most Advanced Coal Bed Methane to Power Project in Botswana
5. Independently Certified Gas Reserves
On October the 12th 2016, Tlou was the first company to achieve initial certification and have subsequently had them upgraded, on 15th February, to 261.1 BCF (3P). Their 3c contigent resources stand at 3.18 TCF.
6. Environmental Impact Assessment
The EIA was approved by Botswana’s Department of Environmental Affairs on 29th September 2016.
7. Request for Proposal from Government
On 10th January 2017, Tlou Energy received a request for proposal from Botswana Government to provide up to 100MW of CBM power from its Lesedi project.
8. Partnered with Independent Power Coporation (IPC)
IPC is a British power development company, specialising in high efficiency, low emissions, gas fired power plants. They provide a complete operations and maintenance service for power generation and distribution assets to negotiate with various third parties on the terms of an off-take agreement, network access and project funding.
7. They Have Cash
On March 24th 2017, Tlou raised £3.1m at 6p. The share price is still only 6.25p.
8. Market Capitalisation
Of course there’s still a way to go, with first power to grid expected to be in H2 2019 but this project has been significantly de-risked since Tlou floated, on AIM, in November 2015 at 6.5p and the market cap is still just c. £15m.
Over the next 2 years, if Tlou continue to complete their stated milestones, as they have been doing, then they have the potential to be valued at several multiples of £15m.
Shore Capital have a current target price of 25p.
They Have Gas Reserves Of:
Colm Cloonan, Finance Direcor suggested, in a podcast with me, a 50mw powerstation would need approximately 80 – 90 Bcf of gas to run it for 20 years.
Tony Gilby stated, on a podcast, that revenue generated from a 100 mw powerstation would be between $100 – $150m per annum.
Arrow Energy listed on the ASX on 17 August 2000 at $0.20 valuing the company at A$25.6m. At the time of it’s takeover, 9 years later, Arrow was valued at $5 billion with a share price of $5.87.
After his time at Arrow Energy, Tony went on to become Managing Director of Sunshine Gas.
In August 2006 Sunshine Gas had a market cap of $98m. In 2008 BG Group acquired Sunshine Gas as part of an AU$5.2 billion takeover of Queensland Gas Company Limited in 2008. “The price was very good for our shareholders,” comments Gilby, “so we weren’t complaining.”
This valued Sunshine Gas at around $1.1billion.
Although Botswana is the initial focus, IPC CEO Peter Earl describes it as a showcase for future projects. CEO of Tlou Energy, Tony Gilby has also mentioned, several times, that they have eyes on supplying the South African region.
South Africa, a neighbour of Botswana, also suffers with energy supply issues. When you consider that their 53m population created a 5,994MW shortfall in 2015, you can obviously see the massive potential here.
Even ignoring this, the near term goal of supplying Botswana is also a very attractive proposition.
With IPC, Tlou are proposing to create a 100mw powerstation and yet Botswana’s stated shortfall was 288mw in 2015. This is also predicted to increase by 31% to 1,017MW by 2025. So there’s plenty of potential in Botswana alone.
It’s worth noting that Tlou Energy hold 100% rights to their gas resources and up to 50% equity in the powerstation.
This is very important because it seems there’s plenty of demand for CBM to power in Botswana and across the Southern African regions. So wherever the power goes to, from whatever powerstation in Botswana, Tlou (being the only company with certified gas reserves) are likely to be supplying the gas.
I would assume authorities would be more than happy to extend powerstations capacity, as long as there’s gas reserves to support it and it’s relatively easy to do, by adding self contained power modules.
Why do I asssume this?
If Tlou and IPC get to the stage where they start exporting power to South Africa, the Botswanan Government will also collect revenue.
As this power all comes from Tlou’s reserves, this is the key for me.
The more resources Tlou can prove up into reserves, the better. It’s these gas reserves that will dictate how much power can be produced and how much money Tlou can generate. So keep and eye on those reserve upgrades.
The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.
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The content of this blog / podcast (or content associated with it) is not intended as investment advice. Please do you own research.