Tlou’s Gas to Power project will be complimented by a Gas to Hydrogen pilot in partnership with Synergen Met – an interesting development that should diversify the companies revenue streams and further appeal to ESG investors
Tlou Energy featured in my recent blog where I selected three companies that I believe have been oversold and/or are offer compelling risk vs reward (RvR) from their current levels particularly as the valuations have hit rock bottom. Each company for different reasons in my opinion has the potential to return multiples from their current share price.
In fact since the article Tlou is trading over 30% up and the latest news has somewhat upped the anti!.
Lets recap…
Tlou are developing their gas to power project in energy starved Botswana, they recently raised at 3.5p and have an estimated c.£3m in cash. Market Cap is £17m (2.95p) down from a high of around 16p in 2018.
The company have been awaiting a PPA (Power Purchase Agreement) award hoping to attain a 10MW contract rising to 100MW. the company would make roughly £1m per MW in annual revenue so you can see the long-term upside. What makes that long-term upside more interesting is they have huge reserves with 3TCF of 3C resource and significant proven and probable reserves.
A key recent development however was that Tlou now have a 1MW PPA and most importantly permission to connect to the grid and are in fact building the power line to the substation from the project location. So when they are into the grid they have power nearly ready to feed and can scale that power up with financing Capex.
It’s been bit of a rocky road trying to secure the 10MW PPA with Botswana Power Corporation but the latest company update gives a clear steer that they could be close to the finishing line with confidentiality agreements now in place with the Government and likely funders.
It may also be no co-incidence that Tlou have just announced Heads of Agreement with an Australian company Synergen Met to establish a pilot Gas to Hydrogen/Carbon project. In fact the following slide from their website sums up what this should look like nicely.
The reason I mention co-incidence is that as some other investor I was talking to pointed out, it’s a possibility that financing partners wanted a bit more ESG focus on their investment.
Basically Tlou are partnering with Synergen who are due to list on the ASX this year with Tlou also intending to invest in the IPO. This is interesting as it gives some vertical integration across the Gas/Hydrogen energy spectrum and it’ll be a front-runner.
Both companies will work on a pilot project to use Tlou’s existing gas that is currently flowing at Lesedi and use Synergen’s proven methane to hydrogen/carbon solution. Assuming it’s successful and I can’t see why it wouldn’t be this adds a potentially very lucrative additional business that can run in conjunction with the Lesedi Gas to Electricity project.
I must admit I have dabbled in Tlou in the past and it’s not really paid off but I feel changes could be a foot. We have to remember the gas reserves are huge and slowly but surely progress is being made.
I’m not one to right off a company due to its history if I can see forward investment potential from such a low base balancing risk and reward and when I look at the fact they have a huge gas resource and have actually secured environmental permits, the license to produce, an initial 1MW PPA and permission to connect to the grid with now an additional green energy business that if proven could have huge upside – I’m wondering why I haven’t bought more !
Disclaimer
Research materials prepared based upon my own analysis and research. Accuracy cannot be guaranteed and research notes should not be taken as investment advice. Please always do your own research.
I’ve been invested in Tlou sine 2018. Have averaged down as the price fell and as cash became available to me. The long wait has been painful but has also allowed me to invest via my annual ISA and SIPP allowances. Great write up and let’s see what the next few weeks bring. Finally great to have some good news!