Tlou Energy Limited

("Tlou" or "the Company")

Interim Results

The Company is pleased to announce its interim results for the six months ended 31 December 2022. The report is available on the Company's website: tlouenergy.com/reports

The Company has progressed steadily over the past six months and remains on track to get gas fired power into the grid in Botswana.

Highlights:

·    Construction of the transmission line to connect Tlou's Lesedi gas-to-power project to the electricity grid has continued and is now approximately 50% complete.

·    Construction of the new operations facility including workshops, maintenance facilities, accommodation and associated infrastructure for the first phase of development is nearing completion.

·    Engineering and design of the next production well has been completed with drilling set to begin in March 2023.

·    Gas production continues at the Lesedi 4 production well.

·    ~AUD $5m was raised during the reporting period from a new strategic investor and currently Tlou's largest shareholder.

Tlou's Managing Director, Mr Tony Gilby commented, "The past six months has seen good progress at the Lesedi Power Project. The transmission line work is going well, substation construction will continue during the year, the generation site is coming together and further production well drilling is set to commence. We remain focused on delivering first power and earning first revenue for the Company as soon as possible."

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About Tlou

Tlou is developing energy solutions in Sub-Saharan Africa through gas-fired power and ancillary projects. The Company is listed on the ASX (Australia), AIM (UK) and the BSE (Botswana). The Lesedi Gas-to-Power Project ("Lesedi") is 100% owned and is the Company's most advanced project.  Tlou's competitive advantages include the ability to drill cost effectively for gas, operational experience and Lesedi's strategic location in relation to energy customers. All major government approvals have been achieved.

Forward-Looking Statements

This announcement may contain certain forward-looking statements.  Actual results may differ materially from those projected or implied in any forward-looking statements.  Such forward-looking information involves risks and uncertainties that could significantly affect expected results.  No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved.  You are cautioned not to place any reliance on such statements or forecasts.  Those forward-looking and other statements speak only as at the date of this announcement. Save as required by any applicable law or regulation, Tlou Energy Limited undertakes no obligation to update any forward-looking statements.

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 2022.

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:

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 develop power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power, solar power, and hydrogen projects. 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 $2,245,259 (December 2021 loss $1,271,339). Information on operations and results during the period are set out below.

Lesedi Project

The Lesedi Project consists of four Prospecting Licences (PL) and a Production Licence. The first stage of development is a 10MW power generation facility which will be located in the Company's Production Licence area.

The status of the Lesedi licences is as follows:

Lesedi Gas-to-Power project

The Company is working on bringing the Lesedi 10MW gas to power project into production as quickly as possible and, subject to available funding, Tlou plans to rapidly expand to 25MW and beyond. The first electricity generated at the Lesedi project will be sold under a 10MW Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC), the national power utility in Botswana. Once in full production 10MW of generation could provide annual revenue equivalent to approximately US$10m. The project is moving towards development with the construction of transmission lines, substations as well as the field operations facility and generation site.

Transmission Line Construction

To connect to Botswana's power network, a 100 km transmission line is being built from the Lesedi project to join the grid near the town of Serowe. Construction is being done by Zismo Engineering Pty Ltd (Zismo) with progress at the end of February 2023 of approximately 50%. The line is expected to be completed around 3Q23.

Substation Construction

Substations are required at either end of the transmission line, one to tie Tlou's generators to the transmission line at Lesedi and another to integrate the line with the existing BPC substation at Serowe. This work will be completed by South African based OptiPower, a division of Murray & Roberts Ltd. This work is expected to be completed around late 2023 or early 2024.

Lesedi Operations Facility

Work is continuing on a purpose-built operations facility for the initial 10MW development and to allow for rapid project expansion thereafter. This project is being undertaken by Tlou through its consultant contractor African Gas Services (AGS) and it is expected to be completed during 2023. AGS is also undertaking the management and construction of the power plant and gas gathering network.

Drilling and Gas production

The Lesedi 4 production pod continues to produce gas. A key focus in the coming year is to drill more production wells for the 10MW project. Methane production of approximately 220-250 mcfd (thousand cubic feet per day) is expected to be required for 1MW of power generation. Work has commenced in preparation for the Company's next production pod, Lesedi 6, with drilling expected to commence in March 2023. This includes drilling of a core-hole to assess coal depth followed by the vertical production well and two lateral wells. Once drilling is complete, the pod will be flushed and then commence dewatering and gas production. Thereafter, drilling of more production pods is planned.

Mamba Project

The Mamba project consists of five PL's covering an area of approximately 4,500 Km². The Mamba area is situated adjacent to Lesedi. In the event of a gas field development by Tlou, the Mamba area provides the Company with flexibility and optionality. 

The Mamba project is in the exploration and evaluation phase with further operations required on these licences. The next stage of operations will be core-hole drilling to assess coal qualities in different areas. In the event of successful drilling results at Mamba, it is envisioned that this area would be developed as a separate project from Lesedi.

The status of the Mamba licences is as follows:

Boomslang Project

Prospecting Licence, PL011/2019 is approximately 1,000 Km² and is situated adjacent to the Company's existing licences. To date, the Company has not carried out ground operations in the Boomslang area, but core-hole drilling is being planned to assess coal qualities in the permit area.

The status of the Boomslang licence is as follows:

Significant changes in the state of affairs

During the half-year ended 31 December 2022, 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

In January 2023, the Company issued 87,653,278 ordinary shares at $0.035 per share. The total issue share capital following issue of these shares is 830,715,710. 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 affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.

Likely developments and expected results of operations

The Company has drilled development wells in the Lesedi project area which have produced CBM gas. These wells were designed to achieve enhanced gas flow rates in the area proposed for the Company's initial project development. The gas flow rates from these wells are vitally important to assess the viability of the Lesedi project and the Company is yet to confirm commercial gas flow rates and there is no guarantee that the required rates can or will be achieved. In addition, further wells flowing commercial gas volumes will be required to produce sufficient gas for the planned Lesedi project.

The Company is advancing plans to develop ancillary projects in addition to the gas-fired power project. 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 business 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 considered material and mitigation strategies are set out below. This is not an exhaustive list and risks are outlined in no particular order.

Auditor's Independence Declaration

The auditor's independence declaration for the half-year ended 31 December 2022 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

9 March 2023

Consolidated statement of comprehensive income for the half-year ended 31 December 2022

Consolidated statement of financial position as at 31 December 2022

Consolidated statement of changes in equity for the half-year ended 31 December 2022

Consolidated statement of cash flows for the half-year ended 31 December 2022

Notes to the consolidated financial statements for the half-year ended 31 December 2022

Note 1.    Significant accounting policies

Introduction

Tlou Energy Limited (Tlou) is a company domiciled and incorporated in Australia. The Financial Report for the half-year ended 31 December 2022 consists of the Financial Statements of Tlou Energy Limited and the entities it controlled during the period ('Consolidated Entity' or the 'Group').

Compliance with accounting standards

The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting.

The half-year financial report does not include all the notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report of the group for the year ended 30 June 2022 and any public announcements made by Tlou during the interim reporting period in accordance with the continuous disclosure requirements of the Corporation Act 2001.

Basis of preparation

The financial statements have been prepared on an accruals basis and are based on historical costs except for derivative financial instruments which are measured at fair value through profit and loss. The financial report is presented in Australian dollars.

The accounting policies and methods of computation applied by the Consolidated Entity in the consolidated interim financial report are the same as those applied by the Consolidated Entity in its consolidated financial report as at and for the year ended 30 June 2022, except as noted below.

New and revised standards

A number of new or amended standards became applicable for the current reporting period. The impact of the adoption of these standards did not have any impact on the group's accounting policies and did not require retrospective adjustments.

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates that the consolidated entity will continue to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

Because of the nature of the operations, exploration or pre-development companies, such as Tlou Energy Limited, find it necessary on a regular basis to raise additional cash funds for future exploration and development activity and meet other necessary corporate expenditure. The Company has recently completed an equity capital raising but will require additional funding for ongoing operations and working capital requirements for the next 12 months. Subject to the results of these operations the consolidated entity may also need to raise additional capital to expand and develop the project further. Accordingly, the consolidated entity is in the process of investigating various options for the raising of funds which may include but is not limited to an issue of shares or the sale of exploration assets where increased value has been created through previous exploration activity.

At the date of this financial report, none of the above fund-raising options have been concluded and no guarantee can be given that a successful outcome will eventuate. The directors have concluded that as a result of the current circumstances there exists a material uncertainty that may cast significant doubt regarding the consolidated entity's and the Company's ability to continue as a going concern and therefore the consolidated entity and Company may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the current status of the various funding options currently being investigated and making other enquiries regarding other sources of funding, the directors have a reasonable expectation that the consolidated entity and the Company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report.

The interim financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts nor to the amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.

Fair values

The fair values of Consolidated Entity's financial assets and financial liabilities approximate their carrying values. No financial assets or financial liabilities are readily traded on organised markets in standardised form.

Accounting estimates and judgements

Critical estimates and judgements are continually evaluated and are consistent with those disclosed in the previous annual report. 

Exploration & evaluation assets

In a prior period, the Consolidated Entity converted a prospecting licence into a mining licence.  A mining licence allows the commencement of commercial development. Management has not commenced amortisation of the exploration and evaluation assets held in relation to the mining licence as the Consolidated Entity has not yet entered into production of a commercially viable resource.

Note 2.    Expenses

Note 3.    Other current assets

Note 4.    Exploration and evaluation expenditure

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

Note 5.    Contract costs

The Company has contract with a third party for the construction of a transmission line from the Company's Lesedi Power Project to the town of Serowe in Botswana. The expected cost of this contract is approximately BWP 60m (~$7m). Of this expected total, $3,562,329 has been capitalised at 31 December 2022.

Once the transmission line and associated infrastructure is completed and approval is granted by the relevant authority in Botswana, the transmission line will be connected to the existing power grid in Botswana. Under current legislation, on connection to the existing grid all ownership, rights and responsibilities for the transmission line and associated infrastructure will transfer to Botswana Power Corporation, the national power utility in Botswana and current owner of the existing power grid.

Note 6.    Convertible notes

The parent entity issued convertible notes totalling US$5,000,000 on 24 January 2022. The notes are convertible into ordinary shares of the parent entity, at the option of the holder at the higher of:

(a)   A 10% discount to the weighted average traded price of the Company's shares on the ASX over the 90 days prior to the Conversion Date; and

(b)   A$0.06

The notes incur interest at 7.75% and the Company may capitalise interest for the first 18 months, thereafter, interest must be paid at each six-month anniversary of issue date. The notes expire on 24 January 2027, being 5 years after issue.

Note 7.    Contributed equity

*Ordinary shares issued during the half-year

Options

At 31 December 2022, there were no options for ordinary shares in Tlou Energy Limited on issue.

Performance rights

The following table shows the number, movements and exercise price of performance rights for the period ended 31 December 2022.

Note 8.    Contingent liabilities

The Directors are not aware of any contingent liabilities at 31 December 2022.

Note 9.    Segment information

Identification of reportable segments

Operating segments are identified on the basis of internal reports that are regularly reviewed by the executive team in order to allocate resources to the segment and assess its performance. The Company currently operates in one segment, being the exploration, evaluation and development of coalbed methane resources and power generation in southern Africa.

Segment revenue

As at 31 December 2022 no revenue has been derived from its operations (2021: $nil).

Segment assets

Segment non-current assets are allocated to countries based on where the assets are located as outlined below.

Note 10. Commitments

Exploration expenditure:

To maintain an interest in the exploration tenements in which it is involved, the consolidated entity is required to meet certain conditions imposed by the various statutory authorities granting the exploration tenements or that are imposed by the joint venture agreements entered into by the consolidated entity.  These conditions can include proposed expenditure commitments.  The timing and amount of exploration expenditure obligations of the consolidated entity may vary significantly from the forecast based on the results of the work performed, which will determine the prospectivity of the relevant area of interest. Subject to renewal of all prospecting licences, the consolidated entity's proposed expenditure obligations which are not provided for in the financial statements are as follows:

Contract Assets:

The consolidated entity has agreed contracts to construct a transmission line for approximately BWP 60m (~$7m) and substations for approximately BWP 42m (~$4.8m). In relation to the transmission line 3,526,329 has been capitalised at 31 December 2022 ($948,446 at 30 June 2022). No costs had been incurred in relation to the substation contract at the reporting date.

Note 11. Events occurring after reporting date

In January 2023, the Company issued 87,653,278 ordinary shares at $0.035 per share. The total issue share capital following issue of these shares is 830,715,710. 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 affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.