REG - Tlou Energy Ltd - Final Results
20/09/2022 07:00
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RNS Number : 9419Z Tlou Energy Ltd 20 September 2022
20 September 2022
Tlou Energy Limited
("Tlou" or "the Company")
Final Results
Tlou Energy Limited is pleased to announce its 2022 results. The Annual Report
and Consolidated Financial Statements for the year ended 30 June 2022 are
available on the Company's website: https://tlouenergy.com/reports
Highlights:
· Power Purchase Agreement signed with Botswana Power Corporation - the
first of its kind in Botswana
· Commencement of construction of the transmission line to connect
Tlou's Lesedi gas-to-power project to the electricity gid
· Work underway on a new operations base including accommodation and
associated infrastructure for the first phase of development and further
expansion
· Progress on development of a hydrogen and solid carbon project to
complement the gas-to-power project
· US$5m raised via a convertible note with Tlou's largest and
supportive shareholder, Botswana Public Officers Pension Fund
· Further gas production from the Lesedi 3 and Lesedi 4 production
wells
Tlou's Managing Director, Mr Tony Gilby commented, "The past year has seen the
Company achieve some very significant targets. Signing the PPA and being the
first Independent Power Producer (IPP) in Botswana to do so was a major
accomplishment. Starting work on the transmission line grid connection was
another notable success and we are grateful for the continued support of
BPOPF. We look forward to the next steps in development of our gas-to-power
project and achieving first revenue which is now firmly within our grasp."
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
By Authority of the Board of Directors
Mr. Anthony Gilby
Managing Director
****
For further information regarding this announcement please contact:
Tlou Energy Limited +61 7 3040 9084
Tony Gilby, Managing Director
Solomon Rowland, General Manager
Grant Thornton (Nominated Adviser) +44 (0)20 7383 5100
Harrison Clarke, Colin Aaronson, Ciara Donnelly
Arden Partners (UK Broker) +44 (0) 20 7614 5900
Simon Johnson
Public Relations
Ashley Seller +61 418 556 875
About Tlou
Tlou is developing energy solutions in Sub-Saharan Africa through gas-fired
power, solar power and hydrogen 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.
Chairman's letter
Dear Shareholders,
We continue to make excellent progress towards establishing ourselves as a key
power player in Botswana and Southern Africa through the exploration and
development of gas and solar.
During the year we signed an initial five-year 10MW power purchase agreement
(PPA) with the Botswana Power Corporation (BPC), a major step forward for
Tlou.
Following on from the signing of the PPA, Tlou commenced the construction of
the 100 km transmission line from the Lesedi project to the grid. Completion
of the transmission line is expected in mid-2023. Substations at either end of
the transmission lines are expected to be completed in the second half of
2023, with sale of electricity thereafter. Connecting the Lesedi project to
the grid is expected to open additional offtake opportunities across Botswana
and via the Southern African Power Pool.
Tlou's two production wells, Lesedi 3 and Lesedi 4, continued to produce gas
during the reporting period. Lesedi 3 has been temporarily shut in while
Lesedi 4 is still dewatering. Gas flow rates are expected to continue to
increase, particularly when additional wells are drilled to assist with
dewatering of the reservoir as part of a full field development. Tlou's
current 2P gas reserves stand at approximately 41 billion cubic feet (~7.2m
BOE).
The Company has also acquired land in the Lesedi project area where work is
underway on developing a new purpose-built operations facility including
accommodation and associated infrastructure. The new facility will support the
delivery and expansion of the Lesedi project.
The Company's Mamba and Boomslang project areas are located adjacent to the
Lesedi project. Tlou will continue to develop these projects and successful
exploration and development of these projects could allow the Company to
progress these areas separately to Lesedi, with the potential for gas-fired
power, solar power and hydrogen production.
We are privileged to have the continued support of the government of Botswana
and the inclusion of coal bed methane (CBM) as part of the country's forward
plan to combat power deficiency.
The Company signed a heads of agreement with Synergen Met Pty Ltd (SM) for the
construction and commissioning of a hydrogen and solid carbon prototype to be
installed at the Lesedi Project. SM is a specialist in plasma torch and
pyrolysis technology. Leveraging on the Company's gas and solar
developments, a successful prototype would expand commercial offtake
opportunities available to the Company.
In November 2021, the Company successfully raised USD 5 million through a
convertible note with the Botswana Public Officers Pensions Fund (BPOPF). The
funds raised will allow the company to progress the development of the Lesedi
project, including the construction of the overhead transmission lines to
connect the project to the electricity grid.
This has been a highly active year for Tlou. We look forward to another
successful year ahead. I would like to take this opportunity to thank the Tlou
Board, management, field staff and advisers, and most importantly our
shareholders for their continued support during this exciting time for Tlou.
Yours faithfully,
Martin McIver
Chairman
Managing Director's Report
Dear Shareholders,
Tlou Energy has steadily advanced the Lesedi Gas-to-Power Project over the
past year.
Funding was secured from Botswana Public Officers Pension Fund (BPOPF) to
build a transmission line connecting the project to the existing electricity
grid. Work on the power line route commenced earlier this year and is
scheduled for completion in 2023.
The Lesedi 3 and 4 production wells have flowed gas for a prolonged period. A
review of the geotechnical data suggests that only a fraction of the lateral
well bores have successfully dewatered to date. It is apparent that with
further drilling to shield the production wells from water influx along with
some modifications of the lateral well path, significantly increased gas flow
rates are probable.
Gas is becoming an increasingly valuable commodity of late particularly when
discovered reserves are in an advanced state of development such as Tlou's.
During 2022, energy supplies and power markets have experienced severe
dislocation stemming initially from post-COVID reflation policies and
subsequently from the Ukrainian situation with its associated sanctions.
As a result, global power prices have had extreme surges. In the U.K.
consumers are seeing substantial increases in gas and electricity bills from
pre-pandemic levels. In August, Sasol as South Africa's main natural gas
supplier, doubled gas prices and has regulatory room to increase them again.
Within Europe the extreme price dislocations have been compounded by policies
whereby countries have sought to rely on highly intermittent renewable
energies, such as solarPV and wind power, to provide essential 24/7 base-load
and peaking power. This potential policy misstep is being recognised more
widely, including within Africa.
This situation is seeing a fundamental global reassessment of the benefits of
natural gas. Specifically within Southern Africa, it is also being recognised
as a 'transition fuel' - enabling the installation of renewables, such as
solarPV, by providing the supporting flexibility of the essential base-load
and peaking power. Tlou Energy is now well positioned to meet the growing
energy requirements of Southern Africa via an optimal mix of gas and solarPV
power.
Risks still exist within the Lesedi project and include the ultimate gas flow
rate, government bureaucracy and adequate funding to name a few. Tlou
continues to work on reducing these risks as we progress.
Successful completion of our proposed drilling campaign targeted for the first
half of next year could lead to a significant increase in gas flow rates over
and above those already achieved. Such a result would substantially advance
the Company's fortunes. Tlou plans to have the Lesedi Power Project producing
its first electricity into the grid towards the end of next year and is
focussed on meeting that objective.
Yours faithfully,
Anthony (Tony) Gilby
Managing Director
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 'parent entity') and the entities it controlled at 30 June 2022.
General Information
Directors
The following persons were directors of Tlou Energy Limited during the whole
of the financial year and up to the date of this report, unless otherwise
stated:
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
Dividends
There were no Dividends recommended or paid during the financial year.
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.
Significant changes in the state of affairs
There were no other significant changes to the state of affairs of the
consolidated entity other than those disclosed in the financial report and
notes thereof.
Review and results of operations
The loss for the year after interest amounted to $4,329,116 (30 June 2021:
$2,054,237).
The loss is higher than the prior period which is due in part to the return to
more normal operating conditions post the COVID-19 pandemic restrictions. In
addition to the increased activity and associated costs, a number of mainly
non-cash items are included on the statement of comprehensive income that were
not in the prior period. This includes impairment of previously capitalised
exploration and evaluation expenditure relating to non-core project areas,
interest on the convertible notes issued during the year, share based payments
re performance rights, and an expense in relation to the fair value of
financial instruments. These items alone account for approximately $1.3m of
the loss for the year.
Operationally the focus during the year was on further development of the
Lesedi project and in particular construction of a transmission line to
connect the Lesedi project to the existing grid. The transmission line work
began in 2022 and costs to date are classed as contract assets on the
statement of financial position.
Spending on exploration and evaluation, transmission lines and other assets
was approximately $2.9m for the period. Capital proceeds of US$5m were
received from Tlou's largest shareholder, Botswana Public Officer's Pension
Fund, via the issue of a convertible note. Cash at the end of the year
amounted to approximately $7.87m.
Gas-to-power
The Company's operations during the year were based on development of the
Lesedi Power Project (Lesedi). Lesedi is the Company's most advanced project.
The Lesedi project area consists of three Prospecting Licences (PL) and a
Production Licence. The first stage of development is a 10MW power generation
facility which will be located in the Production Licence area.
Electricity generated at the 10MW gas fired power facility will be sold under
a Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC), the
national power utility in Botswana. To connect to Botswana's power grid, a 100
km transmission line is being built from Lesedi to join the grid near the town
of Serowe. Work is underway on this project and the line is scheduled for
completion in mid-2023. Substations are also required at either end of the
transmission line. These are expected to be completed in the second half of
2023. Sale of electricity can start thereafter. Once in full production, 10MW
of generation could provide annual revenue of approximately US$10m.
Work is also underway on developing a new purpose-built operations facility
including accommodation and associated infrastructure required for the initial
10MW development and to allow for rapid project expansion thereafter.
Gas will be required to generate electricity for sale. Two production wells
Lesedi 3 and Lesedi 4 continued to produce gas during the year. Lesedi 3 has
been temporarily shut-in and Lesedi 4 continues to produce. Lesedi 3 (when
back in production) and Lesedi 4 are expected to produce increased gas flow
rates particularly when additional wells are drilled to assist with dewatering
of the reservoir as part of a full field development and to provide sufficient
gas for the 10MW development. Tlou's current 2P gas reserves stand at
approximately 41 billion cubic feet (~7.2m BOE).
The transmission line currently under construction is expected to have a
capacity of up to 25MW. With 10MW already committed under the PPA with BPC,
the Company is also marketing the additional 15MW of power to other potential
off-takers.
In addition to the Lesedi project area, the Company also holds six other
prospecting licences (PL) at varying stages of exploration and evaluation.
These include the Mamba project which consists of five PL's covering an area
of approximately 4,500 Km(2) and the Boomslang licence (approx. 1,000 Km(2)).
Both Mamba and Boomslang areas are situated adjacent to Lesedi. In the event
of a gas field development by Tlou, these areas provide the Company with
flexibility and optionality.
Other opportunities
Gas-to-power is the Company's key focus. However other potential revenue
generating avenues are continually being investigated and will be pursued if
commercially viable.
Tlou continues to advance plans for development of solar power. Solar
generation can work as a standalone project and in addition to the planned
gas-fired generation. Botswana is an ideal location for solar power with high
levels of irradiation. A standalone solar project can assist with power
requirements during daylight hours, however Tlou's solar and gas could be
combined to provide reliable baseload power, with solar generation during
daylight hours and gas-fired power used when solar is unavailable. This
approach could reduce carbon emissions compared to Botswana's existing coal
and diesel fired generation, plus a combined solar and gas approach also
reduces potential grid stability issues.
Tlou is also looking into hydrogen production. The hydrogen economy is rapidly
developing and could open additional business opportunities. Tlou is
developing a hydrogen strategy in conjunction with its partners with the aim
of producing hydrogen as well as carbon black or graphite via methane
pyrolysis.
In addition to the above Tlou is looking at monetising currently flared gas.
One potentially viable option is the mining of crypto currencies, and the
Company has successfully completed a small crypto mining trial at its field
camp. The trial used excess field camp electricity to run crypto mining units
to produce Bitcoin. This has established proof of concept and built in-house
technical expertise. The next stage will involve powering the crypto miners
using electricity generated from the Lesedi 4 production well, i.e., using gas
which would otherwise be flared. Following this and subject to results, the
Company may expand the project.
Matters subsequent to the end of the financial year
There has not been any matter or circumstance, other than that referred to in
this report and disclosed in the financial statements or notes thereto, that
has arisen since the end of the period, that has significantly affected, or
may significantly affect, the operations of the consolidated entity, the
results of these operations, or the state of affairs of the consolidated
entity in future financial years.
Likely developments, risks 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 management are confident that commercial gas flows
can be achieved. However, at the date of this report the level of gas that can
and will be produced from the project and if it will be at commercial rates is
not yet known. In addition, further wells will also be required to produce
sufficient gas for the planned Lesedi project.
The Company is advancing plans to develop solar, hydrogen, solid carbon and
crypto mining 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.
Risk Description Mitigation
Funding The Company will need to raise additional debt and/or equity funds to support The Company has operated in Botswana for over a decade with extensive local
its ongoing operations or implement its planned activities and strategies. and international investor relationships who have supported the Company
This includes but is not limited to funding to complete the infrastructure
necessary to connect to the power grid and generate electricity at the Lesedi
project and funds to facilitate drilling of additional gas wells to deliver
sufficient gas for development of the proposed 10MW power project. There can The Company actively manages its capital requirements and maintains close
be no assurance that such funding will be available when required or on relationships with potential investors. The Company continues to explore
satisfactory terms or at all. Inability to find sufficient funds may result in sources of both equity and debt capital.
the delay or abandonment of certain activities which would likely have an
adverse on the Company's progress.
Health and Safety The project operations are in a remote location, in a sometimes-harsh The Company employs highly skilled and experienced personnel where possible.
environment and involves the use of heavy machinery and equipment. The Chief 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.
Freedom to Operate The Company has licences to operate over approximately 8,000 square km and has The Company continues to support regular and extensive Government engagement
had continued access to key licence areas when required. Negative sentiment activities to interest and educate lawmakers to the country's natural resource
towards the project or industry may impair Tlou's freedom to operate. Changes opportunities as well as keep up to date with changing national power
to key Government personnel and/or national policy could also impact ability strategies and requirements.
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 be protected. Botswana Tlou has full environmental approval in place for development of the
rigorously enforces its environmental regulations so the risk of fines or gas-to-power project. The Company aims to not just meet environmental
other 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.
Power Sales The Company has signed a 10MW Power Purchase Agreement (PPA) with Botswana The Company works closely with its contractors and engineers to progress
Power Corporation (BPC) with the aim for first power to be supplied into the infrastructure projects in a timely manner.
national grid in 2023. There is a risk completion that the grid connection
infrastructure could be delayed thereby postponing first power sales. No other
agreements are currently in place for sale of power or gas to other parties.
Management continues to explore opportunities with other potential customers
across the region, potentially via the Southern African Power Pool or within
Botswana. The Company also aims to diversify its products including
potentially producing solar power, hydrogen, solid carbon products and mining
crypto currencies.
Geological Risk The Company has approximately 8,000 square km of licence areas part of which Tlou has invested in seismic surveys and core hole drilling to identify areas
has not had significant CBM operations to date. There remains significant of lower risk prior to conducting further exploration and evaluation. This
geological risk in these areas and subject to operational results these areas strategy is planned for undeveloped areas of the project. After a decade of
may not be commercial. 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 Operations The Company operates over 100km from established medical and engineering The Company has on-site paramedic support and has invested in its own stock of
support facilities in the closest urban area which increases costs and risks equipment so that it can operate as autonomously as possible over a greater
as well as requiring adequate insurance. range of activities. A purpose-built field operations camp is under
construction which will be suitable for full development of the initial 10MW
project and for further expansion.
People The Company may lose key executives and management. The Company operates in a The Company continues to search for skilled staff to grow the team to satisfy
competitive environment in relation to talented corporate and technical the Company's needs and ideally to have a lead person and back-up support
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 compliance 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.
Information on Directors
Martin McIver MBA
Special Responsibilities
Non-Executive Chairman
Member of the Audit Committee
Member of the Risk Committee
Chairman of the Nomination & Remuneration Committee
Interest in Shares and options 812,102
Ordinary Shares
750,000 Performance Rights
Experience
Martin holds an MBA (International) from the American Graduate School of
International Management, a Graduate Diploma in Applied Finance and Valuations
(FINSIA/Kaplan) and a Bachelor of Business (Marketing) from the Queensland
University of Technology.
Martin has over 15 years' experience as General Manager for mining services
companies including bulk and dangerous goods logistics, and drilling
services. Martin was the Executive General Manager of the Mitchell Group, a
vertically integrated coal and coal seam gas company with investments and
operations across Australia, Asia and Africa. Prior to joining the Mitchell
Group, Martin was a Director in Mergers and Acquisitions with
PricewaterhouseCoopers.
Martin was appointed Non-Executive Director in September 2010 and is currently
the Chief Financial Officer of PWR Holdings Limited (ASX:PWH). During the past
three years Martin has not served as a director of any other ASX listed
companies.
Anthony Gilby B.Sc. (First Class Honours)
Special Responsibilities
Managing Director and Chief Executive Officer
Member of the Audit Committee
Member of the Nomination & Remuneration Committee
Interest in Shares and options 34,489,580
Ordinary Shares
750,000 Performance Rights
Experience
Tony was appointed Managing Director and Chief Executive Officer in March 2012
and has over 30 years' experience in the oil and gas industry. He is a
founding director of Tlou Energy Limited.
Tony was awarded a Bachelor of Science (First Class Honours) degree in Geology
from the University of Adelaide in 1984, and also won the University Medal in
Geology (Tate Memorial Medal). Tony began his career working as a well-site
geologist for Delhi Petroleum in the Cooper Basin. He subsequently joined ESSO
Australia. His roles with ESSO included exploration geology, geophysics,
petrophysics and a period of time working in the Exxon Production Research
Centre in Houston studying the seismic application of sequence stratigraphy.
On his return to Australia, he continued to work with ESSO in a New Ventures
capacity working on a variety of projects prior to relocating to Brisbane
where he worked for MIM Petroleum and the Louisiana Land and Exploration
Company (LL&E). In 1996, he left LL&E to take on a consulting role as
well as the acquisition of prospective Queensland acreage in a private
capacity. This work culminated with the founding of Sunshine Gas Limited where
he remained Managing Director until its sale in late 2008. He is a former
Non-Executive director of ASX listed Comet Ridge Limited.
Gabaake Gabaake M.Sc.
Special Responsibilities
Executive Director
Member of the Risk Committee
Member of the Nomination & Remuneration Committee
Interest in Shares and options 385,999
Ordinary Shares
2,750,000 Performance Rights
Experience
Gabaake graduated with a Bachelor of Science degree in Geology from the
University of Botswana in 1986 followed by a Masters degree in groundwater
hydrology from the University College of London in 1989.
Gabaake is a Botswana citizen based in Gaborone. He is a former Botswana
Government senior public servant having worked as Permanent Secretary at the
Ministry of Minerals, Energy and Water Resources. Prior to that, he served at
the Ministry of Local Government.
Gabaake has served on various private company boards including De Beers Group,
Debswana Diamond Company (Pty) Limited and Diamond Trading Company Botswana.
During the past three years, Gabaake has not served as a director of any other
ASX listed companies.
Colm Cloonan FCCA
Special Responsibilities
Finance Director
Member of the Audit Committee
Member of the Nomination & Remuneration Committee
Interest in Shares and
options 1,931,112 Ordinary
Shares
4,750,000 Performance Rights
Experience
Colm is a Fellow of the Association of Chartered Certified Accountants (FCCA)
with 20 years' experience in various finance roles.
Colm joined Tlou in 2009 at the early stages of the Company's activities and
has been with the Company through all phases of its operations and development
to date. Colm has worked in Europe and Australia in a range of finance roles
including audit and business services, as well as providing financial and
management accounting services to clients in various industries including
power generation in Australia.
Colm studied accountancy at the Galway-Mayo Institute of Technology in
Ireland. During the past three years Colm has not served as a director of any
other ASX listed companies.
Hugh Swire BA (Hons)
Special Responsibilities
Non-Executive Director
Chair of the Risk Committee
Member of the Nomination & Remuneration Committee
Interest in Shares and options 10,065,921
Ordinary Shares
500,000 Performance Rights
Experience
Hugh started his career working with Mahon China, an established investment
management and advisory partnership based in Beijing. Active in China since
1985, Mahon China have over 3 decades of experience advising foreign companies
with investments and corporate activities in China. Hugh has remained a
Partner of the firm and now supports UK / EU companies from London looking to
expand and find partners in China or increasingly support Chinese companies
looking to make investments internationally.
After leaving Mahon China, Hugh spent a decade working for Investment funds
and international banks in Hong Kong and Tokyo where he worked for Nomura as
well as in London for JP Morgan where he was Vice President.
Since 2010, Hugh has been focused on supporting fast growing UK companies in
the low carbon and technology sectors by investing growth capital in Water
Powered Technologies Ltd, a leading innovator in zero energy water management
systems as well as MWF Ltd, one of the largest suppliers of renewable heat in
the UK, which has since been sold to Aggregated Micro Power Holdings plc. Hugh
also helped found a leading technology education company Black Country Atelier
Ltd, which provides specialist training courses to students globally in 3D
printing (CAM) digital electronics and CAD.
Hugh still travels to China after studying Chinese at Oxford University
graduating with a BA Hons. During the past three years Hugh has not served
as a director of any other ASX listed companies.
Remuneration Report - audited
This report outlines the remuneration arrangements in place for the key
management personnel of the consolidated entity.
Remuneration policy
Ensuring that the level of Director and Executive remuneration is sufficient
and reasonable is dealt with by the full Board. The Remuneration Policy of
Tlou Energy Limited has been designed to align the objectives of key
management personnel with shareholder and business objectives. The Board of
Tlou Energy Limited believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best key management
personnel to run and manage the consolidated entity, as well as create shared
goals between key management personnel and shareholders.
The Board's policy for determining the nature and amount of remuneration for
the executive Directors and senior executives of the consolidated entity is as
follows:
· The remuneration policy is developed by the Board after seeking,
if appropriate, professional advice from independent external consultants.
· Executives employed by the consolidated entity receive a base
salary (which is based on factors such as length of service and experience),
inclusive of superannuation, fringe benefits, options, and performance
incentives where appropriate. If performance incentives are put in place these
will generally only be paid once predetermined key performance indicators have
been met.
· Executives engaged through professional service entities are paid
fees based on an agreed market based hourly rate for the services provided and
may also be entitled to options and performance-based incentives.
· Incentives paid in the form of options or performance rights are
intended to align the interests of management, the Directors and Company with
those of the shareholders. In this regard, executives are prohibited from
limiting risk attached to those instruments by use of derivatives or other
means.
The Board reviews executive remuneration arrangements annually by reference to
the consolidated entity's performance, executive performance and comparable
information from industry sectors.
Key management personnel including Non-executive Directors located in
Australia and employed executives receive the superannuation guarantee
contribution required by the Commonwealth Government, which is currently 9.5%
and do not receive any other retirement benefits. Individuals, however, can
chose to sacrifice part of their salary to increase payments towards
superannuation.
Non-Executive Director Remuneration
The Board's policy is to remunerate Non-Executive Directors for time,
commitment, and responsibilities. The Board determines payments to the
Non-Executive Directors and reviews their remuneration annually, based on
market practice, duties, and accountability. Independent external advice is
sought when required.
The maximum aggregate amount of fees that can be paid to Non-Executive
Directors is $500,000 per year. This was approved by shareholders at a general
meeting held on 10 July 2012.
Fees for Non-Executive Directors are not linked to the performance of the
consolidated entity, however, to align Directors interests with shareholder
interests, where possible the Directors are encouraged to hold shares in the
Company. There is no minimum holding prescribed in the Constitution.
Performance conditions linked to remuneration
The Board provides advice on remuneration and incentive policies and practices
and specific recommendations on remuneration packages and other terms of
employment for executive Directors, other senior executives, and Non-Executive
Directors. The aim is to ensure that reward for performance is competitive and
appropriate for the results delivered.
Remuneration and the terms and conditions of employment for executive
Directors and Company executives are reviewed annually having regard to
performance and relative comparative information and are approved by the Board
following independent professional advice, as required. In this respect,
consideration is given to normal commercial rates of remuneration for similar
levels of responsibility.
Key management personnel during the financial year ended 30 June 2022
Directors
Martin
McIver
Non-Executive Chairman
Anthony
Gilby
Managing Director and Chief Executive Officer
Gabaake Gabaake
Executive Director
Colm
Cloonan
Finance Director
Hugh
Swire
Non-Executive Director
Executives
Solomon Rowland
Company Secretary
There were no other key management personnel of the consolidated entity during
the financial year ended 30 June 2022.
Details of remuneration
Details of remuneration of each of the Directors and executives of the
consolidated entity during the financial year are set out in the table below.
Benefits and Payments for the year ended 30 June 2022
Short-term Post Long Share
benefits Employment term based
benefits benefits payments
Salary & Fees Cash Bonus Superannuation Leave Benefits Total Cash Remuneration Performance Rights Equity Compensation Total
Directors $ $ $ $ $ $ $
M McIver 44,000 - 4,400 - 48,400 - 0.0% 48,400
A Gilby 152,365 - 6,545 - 158,910 - 0.0% 158,910
G Gabaake 106,210 - 10,621 - 116,831 77,400 39.8% 194,231
C Cloonan 119,367 - 34,256 - 153,623 154,800 50.2% 308,423
H Swire 44,000 - - - 44,000 - 0.0% 44,000
Total Directors 465,942 - 55,822 - 521,764 232,200 753,964
Executives
S Rowland 160,254 - 16,025 - 176,279 - 0.0% 176,279
Total Executives 160,254 - 16,025 - 176,279 - 176,279
Total 626,196 - 71,847 - 698,043 232,200 930,243
During the 2022 year, performance rights were issued to key management
personnel as outlined later in this report under the heading Performance
Rights. No key management personnel received other performance related
bonuses, cash bonuses, termination benefits or non-cash benefits during the
year.
Benefits and Payments for the year ended 30 June 2021
Short-term Post Long
benefits Employment term
benefits benefits
Salary & Fees Cash Bonus Superannuation Leave Benefits Total Cash Remuneration Total
Directors $ $ $ $ $ $
M McIver 12,000 - 1,410 - 13,410 13,410
A Gilby 146,787 - 6,353 7,575 160,715 160,715
G Gabaake 83,596 - 13,614 2,756 99,966 99,966
C Cloonan 132,456 - 23,548 - 156,004 156,004
H Swire 12,000 - - - 12,000 12,000
L Mohohlo 11,000 - - - 11,000 11,000
Total Directors 397,839 - 44,925 10,331 453,095 453,095
Executives
S Rowland 141,027 - 13,398 30,001 184,426 184,426
Total Executives 141,027 - 13,398 30,001 184,426 184,426
Total 538,866 - 58,323 40,332 637,521 637,521
During the 2021 year, no proportion of the remuneration of any key management
personnel was performance based. No key management personnel received cash
bonuses, performance related bonuses, termination benefits or non-cash
benefits during the year.
Service agreements
The following outlines the remuneration and other terms of employment for the
following personnel during the reporting period which are formalised in
employment contracts for services.
Anthony
Gilby
Managing Director and Chief Executive Officer
Term of Agreement: Mr
Gilby's services are provided in a personal capacity. The agreement has no
fixed term.
Base
Fee:
Mr Gilby waived 75% of his contracted rate up to the end of the reporting
period. The amount waived will not be payable by the Company at a future date.
The annual cost to the Company excluding share-based payments (if any), after
taking account of the 75% deduction, adjustments for industry standards and
CPI was approximately $159,000. From 1 July 2022 Mr Gilby's salary will revert
to 50% of his contracted rate.
Termination Benefit: No
termination benefit is payable if terminated for cause.
Termination Notice: The
Company may give Mr Gilby three months' notice or pay 1.5 times his contracted
salary in lieu of notice to terminate the Agreement.
Solomon Rowland
Company Secretary
Term of Agreement: Mr
Rowland's services are provided in a personal capacity. The agreement has no
fixed term.
Base Fee:
Mr Rowland has agreed to waive up to 25% of his current contracted rate up to
the end of the reporting period. The amount waived will not be payable by the
Company at a future date. The annual cost to the Company excluding share-based
payments (if any), after taking account of the 25% deduction, adjustments for
industry standards and CPI was approximately $176,000.
Termination Benefit: No
termination benefit is payable if terminated for cause.
Termination Notice: The
Company may give the Company Secretary six months' notice of its intention to
terminate the Agreement.
Gabaake Gabaake
Executive Director
Term of Agreement: Mr
Gabaake's services are provided in a personal capacity. The agreement has no
fixed term.
Base Fee:
Mr Gabaake has agreed to waive up to 22% of his current contracted rate up to
the end of the reporting period. The amount waived will not be payable by the
Company at a future date. The annual cost to the Company excluding share-based
payments (if any), after taking account of the 22% deduction, adjustments for
industry standards and CPI was approximately $117,000.
Termination Benefit: No
termination benefit is payable if terminated for cause.
Termination Notice: The
Company may give the Executive Director six months' notice of its intention to
terminate the Agreement.
Colm Cloonan
Finance
Director
Term of Agreement: Mr
Cloonan's services are provided in a personal capacity. The agreement has no
fixed term.
Base
Fee:
Mr Cloonan waived 50% of his contracted rate up to the end of the reporting
period. The amount waived will not be payable by the Company at a future date.
The annual cost to the Company excluding share-based payments (if any), after
taking account of the 50% deduction, adjustments for industry standards and
CPI was approximately $154,000. From 1 July 2022 Mr Cloonan's salary will
revert to his full contracted rate.
Termination Benefit: No
termination benefit is payable if terminated for cause.
Termination Notice: The
Company may give the Finance Director six months' notice of its intention to
terminate the Agreement.
Key management personnel shareholdings
The number of ordinary shares in Tlou Energy Limited held by each key
management person of the consolidated entity during the financial year is set
out below. These figures do not include any shares issued post year end.
30 June 2022 Balance at beginning of year Granted as remuneration during the year Additions Disposals Balance at date of resignation / appointment Balance at end of year
M McIver 812,102 - - - - 812,102
A Gilby 34,489,580 - - - - 34,489,580
G Gabaake 385,999 - - - - 385,999
C Cloonan 1,931,112 - - - - 1,931,112
H Swire 10,065,921 - - - - 10,065,921
S Rowland 475,000 - - - - 475,000
48,159,714 - - - - 48,159,714
Key management personnel Options
The number of options in Tlou Energy Limited held by each key management
person of the consolidated entity during the financial year is set out below.
These figures do not include any options issued post year end. The options in
this table are attaching options to shares that were issued.
30 June 2022 Balance at beginning of year Granted as remuneration during the year Additions Expired Balance at date of resignation / appointment Balance at end of year
M McIver - - - - - -
A Gilby 6,249,999 - - - - 6,249,999
G Gabaake 27,571 - - - - 27,571
C Cloonan 375,000 - - - - 375,000
H Swire 2,750,415 - - - - 2,750,415
S Rowland 87,500 - - - - 87,500
9,490,485 - - - - 9,490,485
Note: All the above options expired on 20 July 2022. There are no options
outstanding at the date of this report.
Performance rights
Performance Rights are linked to the share price performance of the Company,
ensuring alignment with the interests of the Company's shareholders. For the
Performance Rights to vest and, therefore, become exercisable by a
participant, certain performance conditions are required to be met as set out
below. On vesting, holders of Performance Rights will be entitled to acquire
Tlou Energy Limited ordinary shares at nil cost.
Performance rights held by key management personnel at 30 June 2022 are as set
out below:
30 June 2022 Tranche Issue Date Opening Balance Issued Value Exercised Lapsed Balance at Year End Unvested
M McIver (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(iii) 31-Jan-17 250,000 - 34,000 - - 250,000 250,000
-
A Gilby (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(iii) 31-Jan-17 250,000 - 34,000 - - 250,000 250,000
-
G Gabaake (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(iii) 31-Jan-17 250,000 - 34,000 - - 250,000 250,000
(iv) 15-Dec-21 - 1,000,000 41,800 - - 1,000,000 1,000,000
(v) 15-Dec-21 - 1,000,000 35,600 - - 1,000,000 1,000,000
-
C Cloonan (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(iii) 31-Jan-17 250,000 - 34,000 - - 250,000 250,000
(iv) 15-Dec-21 - 2,000,000 83,600 - - 2,000,000 2,000,000
(v) 15-Dec-21 - 2,000,000 71,200 - - 2,000,000 2,000,000
-
H Swire (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
-
S Rowland (i) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(ii) 19-Oct-18 250,000 - 21,575 - - 250,000 250,000
(iii) 31-Jan-17 250,000 - 34,000 - - 250,000 250,000
Total 4,250,000 6,000,000 661,100 - - 10,250,000 10,250,000
Tranche Performance conditions and expiry date
(i) To vest the share price needs to be AUD $0.165 or greater for a period of 10
consecutive trading days. These performance rights expire on 31/01/2025.
(ii) To vest the share price needs to be AUD $0.22 or greater for a period of 10
consecutive trading days. These performance rights expire on 31/01/2025.
(iii) To vest the share price needs to be AUD $0.28 or greater for a period of 10
consecutive trading days. These performance rights expire on 31/01/2024.
(iv) To vest the share price needs to be AUD $0.10 or greater for a period of 10
consecutive trading days. These performance rights expire on 31/01/2025.
(v) To vest the share price needs to be AUD $0.165 or greater for a period of 10
consecutive trading days. These performance rights expire on 31/01/2025.
Shares issued on exercise of performance rights
Other than as shown in the table above, no other shares were issued on
exercise of performance rights up to the date of this report.
Relationship between remuneration and Company performance
The factors that are considered to affect shareholder return during the last
five years is summarised below:
2022 2021 2020 2019 2018
Share price at end of financial year ($) 0.028 0.039 0.040 0.12 0.10
Market capitalisation at end of financial year ($M) 17 23 18 52 35
Loss for the financial year ($) (4,329,116) (2,054,237) (12,950,601) (3,216,695) (2,810,730)
Cash spend on exploration programs ($) (1,991,033) (797,340) (1,766,761) (6,942,758) (3,330,951)
Director and Key Management Personnel remuneration ($) 930,243 637,521 1,033,623 1,560,338 1,168,943
Given that the remuneration is commercially reasonable, the link between
remuneration, Company performance and shareholder wealth generation is
tenuous, particularly in the exploration and development and pre-development
stage. Share prices are subject to market sentiment towards the sector and
increases or decreases may occur independently of executive performance or
remuneration.
The Company may issue options or performance rights to provide an incentive
for key management personnel which, it is believed, is in line with industry
standards and practice and is also believed to align the interests of key
management personnel with those of the Company's shareholders.
No remuneration consultants were used in the 2022 financial year.
Other transactions with key management personnel and their related parties
2022 2021
$ $
Payment for goods and services:
Office rent paid to The Gilby McKay Alice Street Partnership, a 12,900 12,000
director-related entity of Anthony Gilby.
Terms and conditions: Transactions between related parties are on normal
commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated. There were no amounts payable as at 30
June 2022 (2021: Nil).
(End of Remuneration Report)
Company secretary
Mr Solomon Rowland was appointed Company Secretary on 19 August 2015 and
continues in office at the date of this report. Mr Rowland is a commercial
lawyer with over 20 years' experience in various private, government and
in-house legal roles. Solomon holds a Juris Doctor from the University of
Queensland.
Prior to joining Tlou Energy Limited as Legal Counsel in February 2013,
Solomon worked for Crown Law representing various Queensland government
departments in a range of legal matters. During his time in government,
Solomon was involved in advising government departments on commercial,
corporate governance and policy matters as well as representing the state in
various courts, tribunals, and commissions of inquiry. Solomon brings many
years of experience in commercial, advocacy, administrative and planning and
environment law.
Meetings of directors
The number of meetings of the consolidated entity's Board of Directors and
committees held during the year ended 30 June 2022, and the number of meetings
attended by each Director are listed below. The Nomination & Remuneration
committee comprises the full board.
Board / Nomination & Remuneration Committee Audit Committee Risk Committee
Attended Held Attended Held Attended Held
M McIver 11 11 2 2 4 4
A Gilby 11 11 2 2 - -
G Gabaake 10 11 - - 4 4
C Cloonan 11 11 2 2 - -
H Swire 11 11 2 2 4 4
Held: represents the number of meetings held during the time the director held
office or was a member of the relevant committee.
Shares under option
There were no unissued ordinary shares of Tlou Energy Limited under option at
the date of this report.
Grant date Expiry date Exercise price 1/07/2021 Issued Exercised* Expired 16/09/2022
20-Jul-20 20-Jul-22 $0.08 57,509,400 - 6,250 57,503,150 -
*Shares issued on 18 July 2022 following exercise of options.
Issued performance rights at the date of this report are as follows:
Vesting Date Vesting Price 1/07/2021 Issued Exercised Expired 16/09/2022
19 October 2018 $0.165 2,225,000 - - - 2,225,000
19 October 2018 $0.22 2,225,000 - - - 2,225,000
31 January 2017 $0.28 2,275,000 - - - 2,275,000
15 December 2021 $0.10 - 3,000,000 - - 3,000,000
15 December 2021 $0.165 - 3,000,000 - - 3,000,000
6,725,000 6,000,000 - - 12,725,000
Shares issued on the exercise of options and performance rights
Other than those disclosed in the tables above there were no ordinary shares
of Tlou Energy Limited issued during or since the year ended 30 June 2022 on
the exercise of options or performance rights granted or up to the date of
this report.
Indemnity and insurance of officers
The consolidated entity has indemnified the Directors and executives of the
consolidated entity for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is
a lack of good faith.
During the financial year, the consolidated entity paid a premium in respect
of a contract to insure the Directors and executives of the consolidated
entity against a liability to the extent permitted by the Corporations Act
2001. The contract of insurance prohibits disclosure of the nature of
liability and the amount of the premium.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act
2001 for leave to bring proceedings on behalf of the Company, or to intervene
in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Currency and rounding
The financial report is presented in Australian dollars and amounts are
rounded to the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section
307C of the Corporations Act 2001 can be found on page 24.
Auditor
BDO Audit Pty Ltd continues in office in accordance with section 327 of the
Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to
their statutory audit duties where the auditor's expertise and experience with
the Company and/or the consolidated entity are important.
The Board of Directors has considered the position and, in accordance with
advice received from the Audit Committee, is satisfied that the provision of
the non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The Directors are satisfied
that the provision of non-audit services by the auditor, as set out below, did
not compromise the auditor independence requirements of the Corporations Act
2001 for the following reasons:
· all non-audit services have been reviewed to ensure they do not
impact the impartiality and objectivity of the auditor; and
· none of the services undermine the general principles relating to
auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants.
Details of the amounts paid or payable to the auditor for non-audit services
provided during the year are set out below.
2022 2021
$ $
Non-audit services - BDO Australia
Tax consulting and compliance services 9,575 13,900
Total 9,575 13,900
This report is made in accordance with a resolution of Directors, pursuant to
section 298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
Anthony Gilby
Director
Brisbane, 19 September 2022
2022 Annual Reserves Statement
Tlou Energy Limited is pleased to present its Annual Reserves Statement for
the period ending 30 June 2022. There has been no adjustment to the net gas
reserves and contingent resources of the Company since the last upgraded
reserves were announced on 20 February 2018. Please refer to the ASX
announcement on 20 February 2018 for full details of the consolidated entity's
gas reserves and contingent resources.
An independent review of the Company's gas reserves and contingent resources
is planned which may result in an upgrade or downgrade of the current gas
reserves and contingent resources. Having conducted an internal review of its
gas reserves and resources position during the reporting period and satisfying
itself that there was no new data available that might materially increase or
decrease the reserves or resources estimates reported during the reporting
period, the Company hereby presents the net gas reserves and contingent
resources on a combined basis as well as for each of its individual tenements
as at 30 June 2022.
Location Project Tlou Interest Gas Reserves (BCF)
30/06/2022 30/06/2021 30/06/2022 30/06/2021 30/06/2022 30/06/2021
1P* 1P 2P* 2P 3P 3P
Karoo Basin Botswana Lesedi CBM 100% 0.34 0.34 25.2 25.2 252 252
(all coal seams)
PL001/2004,
ML 2017/18L
Karoo Basin Botswana Mamba CBM 100% 0.01 0.01 15.5 15.5 175 175
(Lower Morupule coal)
PL238/2014 -
PL241/2014
Karoo Basin Botswana PL003/2004, 100% - - - - - -
PL037/2000
Total 0.35 0.35 40.7 40.7 427 427
Location Project Tlou Interest Gas Contingent Resource (BCF)
30/06/2022 30/06/2021 30/06/2022 30/06/2021 30/06/2022 30/06/2021
1C 1C 2C** 2C** 3C 3C
Karoo Basin Botswana Lesedi CBM 100% 4.6 4.6 214 214 3,043 3,043
(all coal seams)
PL001/2004,
ML 2017/18L
Karoo Basin Botswana Mamba CBM 100% - - - - - -
(Lower Morupule coal)
PL238/2014 -
PL241/2014
Karoo Basin Botswana PL003/2004, 100% - - - - - -
PL037/2000
Total 4.6 4.6 214 214 3,043 3,043
ASX Listing Rules Annual Report Requirements
*Listing Rule 5.39.1:
· All 1P and 2P petroleum reserves recorded in the table are
undeveloped and are attributable to unconventional gas.
· 100% of all 1P and 2P petroleum reserves are located in the Karoo
Basin in Botswana.
*Listing Rule 5.39.2:
· All 1P and 2P petroleum reserves reported are based on unconventional
petroleum resources.
Listing Rule 5.39.3:
· The table shows the 2P and 3P petroleum reserves as at 30 June 2022
and comparative petroleum reserves certified at 30 June 2021.
Governance Arrangements and Internal Controls Listing Rule 5.39.5:
· Tlou Energy has obtained all its gas reserves and resources reported
as at 30 June 2022 from external independent consultants who are qualified
petroleum reserves and resource evaluators as prescribed by the ASX Listing
Rules.
· Tlou Energy estimates and reports its petroleum reserves and
resources in accordance with the definitions and guidelines of the Petroleum
Resources Management System 2007, published by the Society of Petroleum
Engineers (SPE PRMS).
· To ensure the integrity and reliability of data used in the reserves
estimation process, the raw data is reviewed by senior reservoir and
geological staff and consultants at Tlou Energy before being provided to the
independent reserve certifiers. Tlou Energy has not and does not currently
intend to conduct internal reviews of petroleum reserves preferring to appoint
independent external experts prior to reporting any updated estimates of
reserves or resources to ensure an independent and rigorous review of its
data.
· Tlou Energy reviews and updates its gas reserves and resources
position on an annual basis to ensure that if there is any new data that might
affect the reserves or resources estimates of the Company steps can be taken
to ensure that the estimates are adjusted accordingly.
** Listing Rule 5.40.1:
· All 2C contingent resources recorded in the table are
undeveloped. 100% of the reported 2C contingent resource is attributable to
unconventional gas.
· The geographical areas where the 2C contingent resources are
located is the Karoo Basin in Botswana.
Listing Rule 5.40.2:
· The table shows the 2C and 3C contingent resources as at 30 June
2022 as against the previous year. The net 2C and 3C contingent resources did
not increase from the 2021 year to the 2022 year.
· There were no other changes to the 2C and 3C contingent resources
since the announcement on 20 February 2018.
Listing Rule 5.44:
· The estimates of Reserves and Contingent Resources appearing in
the 2022 Annual Reserves Statement for Tlou Energy Limited and its
subsidiaries are based on, and fairly represent, information and supporting
documentation determined by the various qualified petroleum reserves and
resource evaluators listed below.
· The gas reserves and resource estimates for the Lesedi CBM
Project provided in this report were released to the Market on 20 February
2018 ('Announcement'). Tlou Energy confirms that it is not aware of any new
information or data that materially affects the information included in the
Announcement and that all the material assumptions and technical parameters
underpinning the estimates in the Announcement continue to apply and have not
materially changed. The gas reserve and resource estimates are based on and
fairly represents, information and supporting documentation and were
determined by Dr. Bruce Alan McConachie of SRK Consulting (Australasia) Pty
Ltd, in accordance with Petroleum Resource Management System guidelines which
were issued in 2007 and were in use in February 2018. The most recent changes
to these guidelines, which revised those 2007 guidelines, was issued in June
2018. These revised guidelines will form the basis of any future assessments.
The guidelines were re-affirmed by Mr Carl D'Silva of SRK. Mr D'Silva is
considered to be a qualified person as defined under the ASX Listing Rule 5.42
and has given his consent to the use of the resource figures in the form and
context in which they appear in this report.
Notes to Net Reserves and Resources Table:
1) Gas Reserve and Resource numbers have been rounded to the nearest
whole number.
2) Gas Resource numbers have been rounded to the nearest tenth for
amounts less than 100 BCF, otherwise to the nearest whole number.
3) Tlou's Gas Reserves have not been adjusted for fuel or shrinkage and
have been calculated at the wellhead (which is the reference point for the
purposes of Listing Rule 5.26.5).
4) Contingent Gas Resources are (100%) Unrisked Gross and are derived
from the SRK certification at 31 March 2015 for all coal seams (as previously
announced by Tlou on 9 April 2015) with adjustment for the gas volumes which
have now been certified by SRK in the Gas Reserves category.
5) ASX Listing Rule 5.28.2 Statement relating to Prospective Resources:
The estimated quantities of petroleum gas that may potentially be recovered by
the application of a future development project(s) relate to undiscovered
accumulations. These estimates have both an associated risk of discovery and a
risk of development. Further exploration appraisal and evaluation is required
to determine the existence of a significant quantity of potentially moveable
hydrocarbons.
6) Prospective Gas Resources are (100%) Unrisked Gross and are derived
from a report to Tlou from Netherland, Sewell and Associates Inc (NSAI) dated
16th February 2012 regarding certification for all coal seams located in the
remaining prospecting licences (as previously announced by Tlou in its
prospectus dated 20 February 2013).
Consolidated Statement of Comprehensive Income for the year ended 30 June 2022
Consolidated
Note June 2022 June 2021
$ $
Interest income 9 482
Other income - 50,000
Expenses
Employee benefits expense 3 (683,630) (603,271)
Depreciation expense 9 (547,217) (597,189)
Impairment - exploration and evaluation assets 7 (166,054) -
Foreign exchange gain/(loss) (153,643) 122,403
Share issue costs - -
Interest expense 13 (241,917) -
Share based payment expense 3 (232,200) -
Professional fees (284,451) (202,317)
Occupancy costs (18,048) (12,000)
Other expenses 3 (1,311,694) (812,345)
Fair value gain/(loss) on financial instruments 14 (690,271) -
LOSS BEFORE INTEREST AND TAX (4,329,116) (2,054,237)
Income tax 4 - -
LOSS FOR THE PERIOD (4,329,116) (2,054,237)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations (1,717,869) (303,597)
Tax effect - -
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS) (1,717,869) (303,597)
TOTAL COMPREHENSIVE INCOME/(LOSS) (6,046,985) (2,357,834)
Earnings per share
Cents Cents
Basic loss per share 5 (0.7) (0.4)
Diluted loss per share 5 (0.7) (0.4)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated Statement of Financial Position as at 30 June 2022
Consolidated
Note June 2022 June 2021
$ $
CURRENT ASSETS
Cash and cash equivalents 6 7,875,025 6,385,384
Trade and other receivables 424,220 267,258
Other current assets 178,887 2,201
TOTAL CURRENT ASSETS 8,478,132 6,654,843
NON-CURRENT ASSETS
Exploration and evaluation assets 7 49,232,167 48,855,466
Other non-current assets 8 602,112 626,352
Property, plant and equipment 9 366,492 844,336
Contract assets 10 948,446 -
TOTAL NON-CURRENT ASSETS 51,149,217 50,326,154
TOTAL ASSETS 59,627,349 56,980,997
CURRENT LIABILITIES
Trade and other payables 11 563,599 135,127
Derivatives 14 696,153 -
Lease liabilities 13,792 13,167
Provisions 12 319,903 297,636
TOTAL CURRENT LIABILITIES 1,593,447 445,930
NON-CURRENT LIABILITIES
Convertible notes 13 7,263,643 -
Derivatives 14 67,600 -
Lease liabilities 56,530 73,153
Provisions 12 113,000 114,000
TOTAL NON-CURRENT LIABILITIES 7,500,773 187,153
TOTAL LIABILITIES 9,094,220 633,083
NET ASSETS 50,533,129 56,347,914
EQUITY
Contributed equity 15 106,763,927 106,763,927
Reserves (6,716,016) (5,230,347)
Accumulated losses (49,514,782) (45,185,666)
TOTAL EQUITY 50,533,129 56,347,914
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity for the year ended 30 June 2022
Contributed Equity Share Based Payments Reserve Foreign Currency Translation Reserve Accumulated Losses Total
$ $ $ $ $
Consolidated
Balance at 1 July 2020 99,753,504 736,587 (5,852,354) (43,131,429) 51,506,308
Loss for the period - - - (2,054,237) (2,054,237)
Other comprehensive income, net of tax - - (303,597) - (303,597)
Total comprehensive income - - (303,597) (2,054,237) (2,357,834)
Transactions with owners in their capacity as owners
Share based payments - 189,017 - - 189,017
Shares issued, net of costs 7,010,423 - - - 7,010,423
7,010,423 189,017 - - 7,199,440
Balance at 30 June 2021 106,763,927 925,604 (6,155,951) (45,185,666) 56,347,914
Balance at 1 July 2021 106,763,927 925,604 (6,155,951) (45,185,666) 56,347,914
Loss for the period - - - (4,329,116) (4,329,116)
Other comprehensive income, net of tax - - (1,717,869) - (1,717,869)
Total comprehensive income - - (1,717,869) (4,329,116) (6,046,985)
Transactions with owners in their capacity as owners
Share based payments - 232,200 - - 232,200
- 232,200 - - 232,200
Balance at 30 June 2022 106,763,927 1,157,804 (7,873,820) (49,514,782) 50,533,129
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash Flows for the year ended 30 June 2022
Consolidated
Note June 2022 June 2021
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (inclusive of GST and VAT) (2,461,808) (1,515,086)
Interest received 9 482
Other receipts - 50,000
GST and VAT received 93,187 41,953
NET CASH USED IN OPERATING ACTIVITIES 25 (2,368,612) (1,422,651)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation assets (1,991,033) (797,340)
Payment for subsidiaries, net of cash acquired - -
Payment for contract assets (647,967) -
Payment for property, plant and equipment (274,654) (42,556)
NET CASH USED IN INVESTING ACTIVITIES (2,913,654) (839,896)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares - 7,725,754
Proceeds from issue of convertible debt securities 13 7,036,000 -
Issue costs (167,973) (526,314)
Payments of lease liabilities (15,997) (12,217)
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,852,030 7,187,223
Net (decrease)/increase in cash held 1,569,764 4,924,676
Cash at the beginning of the period 6,385,384 1,576,471
Effects of exchange rate changes on cash (80,123) (115,763)
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 6 7,875,025 6,385,384
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
Notes to the financial statements
Note 1. Significant accounting policies
Introduction
This financial report includes the consolidated financial statements of Tlou
Energy Limited (the "Company") and its controlled entities (together referred
to as the "consolidated entity" or the "group").
The separate financial statements of the parent entity, Tlou Energy Limited,
have not been presented within this financial report as permitted by the
Corporations Act 2001. Supplementary information about the parent entity is
disclosed in note 28.
Tlou Energy Limited is a public company, incorporated and domiciled in
Australia. Its registered office and principal place of business is 210 Alice
St, Brisbane, QLD 4000, Australia.
The following is a summary of the material and principal accounting policies
adopted by the consolidated entity in the preparation of the financial
report. The accounting policies have been consistently applied to all the
years presented, unless otherwise stated.
Operations and 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.
Currency
The financial report is presented in Australian dollars, rounded to the
nearest dollar, which is the functional and presentation currency of the
parent entity.
Authorisation of financial report
The financial report was authorised for issue on 19 September 2022.
Basis of preparation
These general purpose financial statements have been prepared in accordance
with Australian Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board and the Corporations Act 2001. Tlou
Energy Limited is a for-profit entity for the purposes of preparing the
financial statements.
Compliance with IFRS
The consolidated financial statements of Tlou Energy Limited also comply with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Historical cost convention
The consolidated 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.
Critical accounting estimates
The preparation of the financial statements requires the use of certain
critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the consolidated entity's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial
statements are disclosed in note 2.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at financial year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in
profit or loss. Refer to Note 16 for accounting policy on translation of
foreign operations.
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 a capital raising by way of convertible note (refer to note 13)
which is expected to fund ongoing operations and working capital requirements
for the next 12 months. Subject to the results of these operations the
consolidated entity may 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 additional 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. The Consolidated Entity does not expect the COVID-19 pandemic to
adversely impact its ability to raise further capital.
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 financial report does not include adjustments relating to the
recoverability or classification of recorded assets amounts or to the amounts
or classification of liabilities that might be necessary should the
consolidated entity not be able to continue as a going concern.
COVID-19 Impacts
The Company's field operations remained relatively unaffected by COVID-19,
however corporate and administrative functions were partly impacted. Staff
worked remotely when possible and followed enhanced social distancing and
health and safety procedures. Access to Botswana by external staff and
consultants was restricted for some time but the situation has now returned to
normal.
Accounting Policies
(a) Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the
consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the
consolidated entity. They are deconsolidated from the date that control
ceases.
The acquisition method of accounting is used to account for business
combinations by the consolidated entity.
Intercompany transactions, balances, and unrealised gains on transactions
between consolidated entity companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the transferred asset. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the
consolidated entity.
(b) Income recognition
Interest
Interest income is recognised as interest accrues using the effective interest
method. This is a method of calculating the amortised cost of a financial
asset and allocating the interest income over the relevant period using the
effective interest rate, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Other income
Other income is recognised when it is received or when the right to receive
payment is established.
(c) Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs to sell
and value-in-use. The value-in-use is the present value of the estimated
future cash flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped together to form a
cash-generating unit.
(d) Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses, and assets are recognised net of the amount of associated
GST, unless the GST incurred is not recoverable from the tax authority. In
this case it is recognised as part of the cost of the acquisition of the asset
or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable
or payable. The net amount of GST recoverable from, or payable to, the tax
authority is included in other receivables or other payables in the
consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows
arising from investing or financing activities which are recoverable from, or
payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the tax authority.
(e) Comparative figures
When required by accounting standards comparative figures have been adjusted
to conform to changes in presentation for the current financial year.
(f) Financial Instruments
Classification
The group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either through
OCI, or through profit or loss); and
· those to be measured at amortised cost.
The classification depends on the group's business model for managing the
financial assets and the contractual terms of the cash flows.
Measurement
At initial recognition, the group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are solely payment of principal and
interest.
Impairment
The group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase
in credit risk.
For trade receivables, the group applies the simplified approach permitted by
AASB 9, which requires expected lifetime losses to be recognised from initial
recognition of the receivables.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their fair value
at each reporting date. The fair value adjustment is through profit or loss.
(g) Leases
The Group leases office space and a leasehold property. Office contracts are
typically made for fixed periods of 1 to 5 years but may have extension
options. Lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions. Leasehold property is for periods up
to 50 years.
Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a
present value basis.
Lease Liabilities
Lease liabilities include the net present value of the following lease
payments:
Ø fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
Ø variable lease payment that are based on an index or a rate, initially
measured using the index or rate as at the commencement date;
Ø amounts expected to be payable by the Group under residual value
guarantees;
Ø the exercise price of a purchase option if the group is reasonably certain
to exercise that option; and
Ø payments of penalties for terminating the lease, if the lease term reflects
the group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability. The lease payments are
discounted using the interest rate implicit in the lease. If that rate cannot
be readily determined, which is generally the case for leases that relate to
building premises, the entity's incremental borrowing rate is used, being the
rate that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security, and conditions.
To determine the incremental borrowing rate, the Group uses recent third-party
financing received by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing was
received, making adjustments specific to the lease (e.g., term, country,
currency, and security).
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use Assets
Right-of-use assets are measured at cost comprising the following:
Ø the amount of the initial measurement of lease liability;
Ø any lease payments made at or before the commencement date less any lease
incentives received;
Ø any initial direct costs; and
Ø restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
Low Value Assets
Payments associated with leases of low value assets are recognised on a
straight-line basis as an expense in profit or loss. Low value assets comprise
small items of office equipment.
(h) Borrowings
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are
subsequently measured at amortised cost using the effective interest method.
The Consolidated entity's financial liabilities measured at amortised cost
include trade and other payables and the host liability of convertible notes.
Convertible notes
The conversion feature included in convertible notes is assessed to determine
if it satisfies or fails the fixed-for-fixed requirement to be classified as a
compound financial instrument containing an equity component. If this
requirement is failed the notes are separated into the host liability and the
derivative liability component of the notes.
Subsequent to initial recognition any changes in fair value of the derivative
liability at each balance date are recognised in profit or loss.
The host liability is subsequently recognised on an amortised cost basis until
extinguished on conversion or maturity of the notes.
(i) Revenue
The consolidated entity currently does not recognise any revenue from the sale
of gas but may do in future.
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which
the consolidated entity is expected to be entitled in exchange for
transferring goods or services to a customer. For each contract with a
customer, the consolidated entity: identifies the contract with a customer;
identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration
and the time value of money; allocates the transaction price to the separate
performance obligations on the basis of the relative stand-alone selling price
of each distinct good or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
Contract costs
The consolidated entity has recognised an asset in relation to contract costs
in relation to the Power Purchase Agreement (PPA) entered into with the
Botswana Power Corporation (BPC). As part of that agreement the consolidated
entity entered into a Connection Agreement whereby Tlou Energy Limited is to
develop, construct and finance a 66kV transmission line for the connection of
the gas fuelled power plant to the BPC network and transfer same to BPC.
Expenditure on the transmission line is considered a contract cost under AASB
15 as it was an incremental cost of obtaining the PPA 10MW contract with BPC.
This is presented within non-current assets in the statement of financial
position - refer Note 10.
The asset will be amortised on a straight-line basis over a 10-year period,
consistent with the pattern of recognition of the associated revenue once
revenue from the contract begins (construction of the transmission line has
not yet been completed as at 30 June 2022).
The consolidated entity updates the amortisation if there's a significant
change in the consolidated entity's expected timing of transfer to the
customer of the goods or services to which the asset relates. Such a change is
accounted for as a change in accounting estimate.
The consolidated entity recognises an impairment loss in profit or loss to the
extent that the carrying amount of an asset recognised exceeds: the remaining
amount of consideration that the consolidated entity expects to receive in
exchange for the goods or services to which the asset relates; less the costs
that relate directly to providing those goods or services and that have not
been recognised as expenses.
The consolidated entity recognises in profit or loss a reversal of some or all
of an impairment loss previously recognised when the impairment conditions no
longer exist or have improved. The increased carrying amount of the asset will
not exceed the amount that would have been determined (net of amortisation) if
no impairment loss had been recognised previously.
(j) New Accounting Standards and Interpretations
There were no new or revised accounting standards adopted that had any impact
on the Group's accounting policies and required retrospective adjustments.
(k) New Standards and Interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 30 June 2022 reporting periods. The consolidated entity
has decided against early adoption of these standards. The consolidated entity
has assessed the impact of these new standards that are not yet effective and
determined that they are not expected to have a material impact on the
consolidated entity in the current or future reporting periods and on
foreseeable future transactions.
Note 2. Critical accounting judgements, estimates and
assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its judgements and
estimates in relation to assets and liabilities. Management bases its
judgements, estimates and assumptions on historical experience and on other
various factors, including expectations of future events, management believes
to be reasonable under the circumstances. The resulting accounting judgements
and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Exploration & evaluation assets
The consolidated entity performs regular reviews on each area of interest to
determine the appropriateness of continuing to carry forward costs in relation
to that area of interest. These reviews are based on detailed surveys and
analysis of drilling results performed to reporting date.
Deferred Tax assets
The Company is subject to income taxes in Australia and jurisdictions where it
has foreign operations. Significant judgement is required in determining the
worldwide provision for income taxes. There are certain transactions and
calculations undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The consolidated entity estimates its
tax liabilities based on the consolidated entity's understanding of the tax
law. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the current
and deferred income tax assets and liabilities in the period in which such
determination is made.
In addition, the consolidated entity has recognised deferred tax assets
relating to carried forward tax losses to the extent there are sufficient
taxable temporary differences (deferred tax liabilities) relating to the same
taxation authority and the same subsidiary against which the unused tax losses
can be utilised. However, utilisation of the tax losses also depends on the
ability of the entity, which is not part of the tax consolidated group, to
satisfy certain tests at the time the losses are recouped. Due to the parent
entity acquiring the entity that holds the losses it is expected that the
entity will fail to satisfy the continuity of ownership test and therefore
must rely on the same business test. As at 30 June 2022 the consolidated
entity has not received advice that the losses are unavailable, however should
this change in the future the consolidated entity may be required to
derecognise these losses.
Note 3. Expenses
Consolidated
June 2022 June 2021
Loss before income tax includes the following specific expenses: $ $
Employee benefits expense
● Defined contribution superannuation expense 64,637 47,767
● Performance rights 232,200 -
● Other employee benefits expense 618,993 555,504
915,830 603,271
Other expenses include the following specific items:
● Travel and accommodation costs 75,695 8,407
● Consultants 443,082 277,753
● Stock exchange, advisory, secretarial fees 258,001 298,061
● Insurance 73,156 80,146
Note 4. Income Tax
The income tax expense or benefit for the period is the tax payable on that
period's taxable income based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and unused tax losses and under and over
provision in prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences
at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
· When the deferred income tax asset or liability arises from the
initial recognition of goodwill or an asset or liability in a transaction that
is not a business combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
· When the taxable temporary difference is associated with
investments in subsidiaries, associates or interests in joint ventures, and
the timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and
unused tax losses only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are
reviewed each reporting date. Deferred tax assets recognised are reduced to
the extent that it is no longer probable that future taxable profits will be
available for the carrying amount to be recovered. Previously unrecognised
deferred tax assets are recognised to the extent that it is probable that
there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally
enforceable right to offset current tax assets against current tax
liabilities; and they relate to the same taxable authority on either the same
taxable entity or different taxable entities which intend to settle
simultaneously.
Consolidated
June 2022 June 2021
$ $
Loss before income tax (4,329,116) (2,054,237)
Tax at the domestic tax rates applicable to profits in the country concerned (1,298,735) (616,271)
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income:
Other non-deductible items 1,142,896 71,431
Difference in overseas tax rates (97,877) (233,976)
Deferred tax asset not recognised 253,716 778,816
Income tax benefit - -
Recognised deferred tax assets
Unused tax losses 6,327,074 6,924,354
6,327,074 6,924,354
Recognised deferred tax liabilities
Assessable temporary differences 6,327,074 6,924,354
6,327,074 6,924,354
Net deferred tax liability recognised - -
Unrecognised temporary differences and tax losses
Unused tax losses and temporary differences for which no deferred tax asset 45,777,185 42,174,829
has been recognised
The deductible temporary differences and tax losses do not expire under
current tax legislation. Deferred tax assets have not been recognised in
respect of these items because it is not probable that future taxable profit
will be available against which the consolidated entity can utilise these
benefits.
Note 5. Earnings per share
Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
the owners of Tlou Energy Limited, excluding any costs of servicing equity
other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year.
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued
for no consideration in relation to dilutive potential ordinary shares.
Consolidated
June 2022 June 2021
$ $
Reconciliation of earnings used in calculating basic and diluted loss per
share:
Loss for the year attributable to owners of Tlou Energy Limited (4,329,116) (2,054,237)
Loss used in the calculation of the basic and dilutive loss per share (4,329,116) (2,054,237)
Weighted average number of ordinary shares used as the denominator
Number Number
Number used in calculating basic and diluted loss per share 600,199,039 538,346,800
Options and performance rights are considered to be "potential ordinary
shares" but were anti-dilutive in nature and therefore the diluted loss per
share is the same as the basic loss per share.
Note 6. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of
changes in value.
Consolidated
June 2022 June 2021
$ $
Cash at bank 7,875,025 6,385,384
7,875,025 6,385,384
Note 7. Exploration and Evaluation
Assets
Exploration and evaluation expenditure incurred is accumulated in respect of
each identifiable area of interest. Such expenditures comprise net direct
costs and an appropriate portion of related overhead expenditure but do not
include overheads or administration expenditure not having a specific nexus
with a particular area of interest. These costs are only carried forward to
the extent that they are expected to be recouped through the successful
development of the area or where activities in the area have not yet reached a
stage which permits reasonable assessment of the existence of economically
recoverable reserves and active or significant operations in relation to the
area are continuing.
Accumulated costs in relation to an area no longer considered viable are
written off in full in the year the decision is made. Regular reviews are
undertaken on each area of interest to determine the appropriateness of
continuing to carry forward costs in relation to that area of interest.
Consolidated
June 2022 June 2021
$ $
Exploration and evaluation assets 49,232,167 48,855,466
49,232,167 48,855,466
Movements in exploration and evaluation assets
Balance at the beginning of period 48,855,466 48,163,968
Exploration and evaluation expenditure during the year 1,926,164 912,029
Impairment expense (166,054) -
Foreign currency translation (1,383,409) (220,531)
Balance at the end of period 49,232,167 48,855,466
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.
There is a risk that one or more of the exploration licences will not be
extended, or that the terms of the extension are not favourable to Tlou. This
could have an adverse impact on the performance of Tlou. The consolidated
entity is not aware of any reasons why the licences will not be renewed.
The group has relinquished one prospecting licence and the related expenditure
previously capitalised has been fully impaired and written off.
Note 8. Other non-current assets
Inventory and well consumables are valued at lower of cost and net realisable
value. Inventory and well consumables are allocated to exploration and
evaluation expenditure when the assets are used in operations.
Consolidated
June 2022 June 2021
$ $
Inventory and well consumables - at cost 602,112 626,352
602,112 626,352
Note 9. Property, Plant and Equipment
Plant and equipment is stated at historical cost less accumulated depreciation
and impairment. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Depreciation and amortisation is calculated on a straight-line basis to write
off the net cost of each item of plant and equipment and right of use assets
over their expected useful lives as follows:
Plant and equipment 3-7 years
Right-of-use assets over the actual or expected term
of the lease
The residual values, useful lives and depreciation methods are reviewed, and
adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when
there is no future economic benefit to the consolidated entity. Gains and
losses between the carrying amount and the disposal proceeds are taken to
profit or loss.
Consolidated
June 2022 June 2021
$ $
Right-of-use assets, plant and equipment at cost 4,186,262 4,249,527
Accumulated depreciation (3,819,770) (3,405,191)
366,492 844,336
Movements in Carrying Amounts
Movement in the carrying amounts between the beginning and the end of the
current financial year:
Balance at the beginning of year 844,336 1,273,953
Additions 104,254 175,194
Depreciation and amortisation (547,217) (597,189)
Foreign exchange movements (34,881) (7,622)
Carrying amount at the end of year 366,492 844,336
Included in property, plant and equipment are right-of-use assets with a
carrying value of $70,323 (2021: $82,114).
Note 10. Contract costs
Consolidated
June 2022 June 2021
$ $
Contract costs - transmission line 948,446 -
948,446 -
The Company entered a contract during the reporting period for the
construction of 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, $948,446 has been
capitalised at 30 June 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 11. Trade and Other Payables
These amounts represent liabilities for goods and services provided to the
consolidated entity prior to the end of the financial year and which are
unpaid. Due to their short-term nature they are measured at amortised cost and
not discounted. The amounts are unsecured and are usually paid within 30 days
of recognition.
Consolidated
June 2022 June 2021
$ $
Current
Trade payables 445,994 47,320
Accruals 95,337 78,911
Other payables 22,268 8,896
563,599 135,127
The carrying values of trade and other payables approximate fair values due to
short-term nature of the amounts. These are non-interest bearing.
Note 12. Provisions
Provisions are recognised when the consolidated entity has a present (legal or
constructive) obligation as a result of a past event, it is probable the
consolidated entity will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount recognised as
a provision is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the risks and
uncertainties surrounding the obligation. If the time value of money is
material, provisions are discounted using a current pre-tax rate specific to
the liability. The increase in the provision resulting from the passage of
time is recognised as a finance cost.
Rehabilitation
The provision represents the estimated costs to rehabilitate wells in licences
held by the consolidated entity. This provision has been calculated based on
the number of wells which require rehabilitation and the expected costs to
rehabilitate each well, taking into consideration the type of well and its
location.
Employee benefits
Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and
annual leave expected to be settled within 12 months of the reporting date are
recognised in current liabilities in respect of employees' services up to the
reporting date and are measured at the amounts expected to be paid when the
liabilities are settled.
Long service leave
The liability for long service leave is recognised in current and non-current
liabilities, depending on the unconditional right to defer settlement of the
liability for at least 12 months after the reporting date. The liability is
measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on national corporate
bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Employee benefits - Botswana Severance
A provision has been recognised for employee benefits relating to severance
pay payable in Botswana.
Severance pay
As per the Botswana Labour a provision is calculated for each Botswana based
employee of one day per month of service, which can be paid out after 60
months or when employment ends. The benefit rises to two days per month after
the first 60 months.
Consolidated
June 2022 June 2021
Current $ $
Employee benefits 189,912 199,738
Employee benefits - Botswana severance 129,991 97,898
319,903 297,636
Non-current
Rehabilitation 113,000 114,000
113,000 114,000
Movements in rehabilitation provision during the year
Balance at the beginning of the year 114,000 114,000
Completed during the year (1,000) -
Carrying amount at the end of the year 113,000 114,000
Note 13. 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.
The notes fail the fixed-for-fixed requirement to be classified as a compound
financial instrument containing an equity component. As a result, the notes
have been separated into the host liability and the derivative liability
component of the notes.
On initial recognition the fair value of the embedded derivative has been
calculated first with the residual value being assigned to the host liability,
as shown below:
Consolidated
June 2022 June 2021
$ $
Face value of notes issued 7,036,000 -
Derivative - refer note 14 (73,482) -
Issue costs (167,673) -
Host liability on initial recognition 6,794,845 -
Interest expense 241,917 -
Interest paid - -
Effect of foreign exchange movement 226,881
Non-current host liability 7,263,643 -
Total Borrowings 7,263,643 -
Interest expense is calculated by applying the effective interest rate of
8.08% to the host liability component.
The initial fair value of the derivative portion of the note was determined
using a binomial option model on issue date.
The host liability is subsequently recognised on an amortised cost basis until
extinguished on conversion or maturity of the notes.
The derivative is subsequently recognised at fair value at each reporting date
- refer note 14 for further details.
Note 14. Derivatives
Consolidated
June 2022 June 2021
Current $ $
Opening balance - -
Fair value movement recognised in profit or loss 696,153 -
Closing balance 696,153 -
Consolidated
June 2022 June 2021
Non-current $ $
Opening balance - -
On initial recognition 73,482 -
Fair value movement recognised in profit or loss (5,882) -
Closing balance 67,600 -
Current derivatives relate to a forward contract entered by the Company to
sell USD and purchase BWP.
Non-current derivatives relate to the conversion feature included in the
convertible notes issued on 24 January 2022 - refer Note 13. The initial fair
value and the value as at 30 June 2022 of the derivative portion of the note
was determined using a binomial option model.
Fair value measurements
The fair value of financial assets and financial liabilities must be estimated
for recognition and measurement or for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements
by level of the following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable
market data (unobservable inputs) (level 3).
The fair value of the consolidated entity's derivatives is determined using
valuation techniques as they are not traded in an active market. These
valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity specific estimates. The
conversion feature derivative is considered to be a level 3 measurement as the
binomial pricing model includes unobservable inputs.
Foreign currency forward contracts have been valued using the present value of
future cash flows based on the forward exchange rates at balance date. The
foreign currency forward contract is considered to be a level 3 measurement as
the valuation model includes unobservable inputs.
Changes in the value of the derivatives that have been recognised are included
in the tables above.
Note 15. Contributed equity
Issued and paid-up capital is recognised at the fair value of the
consideration received by the consolidated entity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Consolidated
June 2022 June 2021 June 2022 June 2021
Shares Shares $ $
Opening balance 600,199,039 450,180,185 106,763,927 99,753,504
Issue of ordinary shares during the year - 150,018,854 - 7,725,754
Share issue costs - - - (715,331)
Ordinary shares ‑ fully paid 600,199,039 600,199,039 106,763,927 106,763,927
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the
proceeds on the winding up of the Company in proportion to the number of, and
amounts paid on, the shares held. The fully paid ordinary shares have no par
value. On a show of hands every member present at a meeting, in person or by
proxy, shall have one vote and upon a poll, each share shall have one vote.
The Company does not have authorised capital or par value in respect of its
issued shares.
Capital risk management
The capital structure of the consolidated entity consists of equity
attributable to equity holders of the parent entity, comprising issued capital
and reserves as disclosed in the Consolidated Statement of Changes in Equity.
When managing capital, management's objective is to ensure the parent entity
continues as a going concern and to maintain a structure that ensures the
lowest cost of capital available and to ensure adequate capital is available
for exploration and evaluation of tenements. In order to maintain or adjust
the capital structure, the consolidated entity may seek to issue new shares.
Consistent with other exploration companies, the consolidated entity,
including the parent entity monitors capital on the basis of forecast
exploration and development expenditure required to reach a stage which
permits a reasonable assessment of the existence or otherwise of an
economically recoverable reserve.
Note 16. Reserves
Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising
on translation of foreign controlled entities.
The financial report is presented in Australian dollars rounded to the nearest
dollar, which is Tlou Energy Limited's functional and presentation currency.
Foreign operations
The assets and liabilities of foreign operations are translated into
functional currency using the exchange rates at the reporting date. The
revenues and expenses of foreign operations are translated into functional
currency using the average exchange rates, which approximate the rate at the
date of the transaction, for the period. All resulting foreign exchange
differences are recognised in the foreign currency translation reserve in
equity. The foreign currency reserve is recognised in profit or loss when the
foreign operation or net investment is disposed of.
Share Based Payments Reserve
The share-based payments reserve is used to record the share-based payment
associated with options and performance rights granted to employees and others
under equity-settled share-based payment arrangements.
Note 17. Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided
to employees and other service providers.
Equity-settled transactions are awards of shares, options or performance
rights over shares that are provided to employees or other service providers
in exchange for the rendering of services. Cash-settled transactions are
awards of cash for the exchange of services, where the amount of cash is
determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant
date. Fair value is independently determined using either the Binomial or
Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date
and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine whether the consolidated
entity receives the services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a
corresponding increase in equity over the vesting period. The cumulative
charge to profit or loss is calculated based on the grant date fair value of
the award, the best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting
date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value.
Therefore, any awards subject to market conditions are considered to vest
irrespective of whether or not that market condition has been met provided all
other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised
as if the modification has not been made. An additional expense is recognised,
over the remaining vesting period, for any modification that increases the
total fair value of the share-based compensation benefit as at the date of
modification.
If the non-vesting condition is within the control of the consolidated entity
or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the consolidated
entity or employee and is not satisfied during the vesting period, any
remaining expense for the award is recognised over the remaining vesting
period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on
the date of cancellation, and any remaining expense is recognised immediately.
If a new replacement award is substituted for the cancelled award, the
cancelled and new award is treated as if they were a modification.
Employee Share Options and Performance Rights
Share Options and Performance Rights may be granted to certain personnel of
the Company on terms determined by the directors or otherwise approved by the
Company at a general meeting.
Share options are granted for no consideration. Options and entitlements to
the options are vested on a time basis and/or on specific performance-based
criteria such as share price increases or reserves certification. Options
granted as described above carry no dividend or voting rights. When
exercisable, each option is convertible to one ordinary share.
Performance Rights are linked to the share price performance of the Company,
ensuring alignment with the interests of the Company's shareholders. For the
Performance Rights that are issued but not yet exercised at the date of this
report to vest and, therefore, become exercisable by a participant, certain
performance conditions are required to be met as set out below. On vesting,
holders of Performance Rights will be entitled to acquire Tlou Energy Limited
ordinary shares at nil cost.
Options
At 30 June 2022, the following options for ordinary shares in Tlou Energy
Limited were on issue. 6,250 of these options were converted to ordinary
shares in July 2022. All the remaining options expired on 20 July 2022.
Issued to: Grant Date Exercise Price Expiry Date 30/06/2022 30/06/2021
Shareholders 20-Jul-20 $0.08 20-Jul-22 37,509,400 37,509,400
Service providers 20-Jul-20 $0.08 20-Jul-22 20,000,000 20,000,000
57,509,400 57,509,400
Options may be granted on terms determined by the directors or otherwise
approved by the company at a general meeting. The options are granted for no
consideration. Options and entitlements to the options are vested on a time
basis and/or for services provided or on specific performance-based criteria.
Options granted as described above carry no dividend or voting rights. When
exercisable, each option is convertible to one ordinary share.
The fair value of options at grant date is determined using generally accepted
valuation techniques that take into account exercise price, the term of the
option, the impact of dilution, the share price at grant date, the expected
price volatility of the underlying share, the expected dividend yield and the
risk-free rate for the term of the option/performance right and an appropriate
probability weighting to factor the likelihood of the satisfaction of
non-vesting conditions. The expected volatility is based on historic
volatility, adjusted for any expected changes to future volatility due to
publicly available information.
Performance Rights
At 30 June 2022, the following performance rights were on issue.
No. of Performance Rights Reference Date of Approval Share price at approval date Vesting Price
2,225,000 (i) 17-Oct-18 $0.11 $0.165
2,225,000 (ii) 17-Oct-18 $0.11 $0.22
2,275,000 (iii) 10-Nov-16 $0.14 $0.28
3,000,000 (iv) 24-Nov-21 $0.064 $0.10
3,000,000 (v) 24-Nov-21 $0.064 $0.165
Performance Condition
(i) The closing price of Shares being 50% or more above the price at the date of
shareholder approval for a period of 10 consecutive trading days.
(ii) The closing price of Shares being 100% or more above the price at the date of
shareholder approval for a period of 10 consecutive trading days.
(iii) The closing price of Shares being 100% or more above the price at the date of
shareholder approval for a period of 10 consecutive trading days.
(iv) The closing price of the Shares being 50% or more above the price at the date
of shareholder approval or AUD$0.10 whichever is the greater, in the Company
for a period of 10 consecutive trading days.
(v) The closing price of the Shares being 100% or more above the price at the date
of approval or AUD$0.165 whichever is the greater, in the Company for a period
of 10 consecutive trading days.
Fair value of options granted
The fair value at grant date is determined using a binomial option pricing
model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2022
included:
(a) Performance rights are granted for no consideration and vest based on
the conditions noted above
(b) exercise price: $nil
(c) grant date: 24 November 2021
(d) expiry date: 31 January 2025
(e) share price at grant date: $0.064
(f) expected price volatility: 100%
(g) expected dividend yield: 0%
(h) risk-free interest rate: 1.44%
The expected price volatility is based on the historic volatility (based on
the remaining life of the options), adjusted for any expected changes to
future volatility due to publicly available information.
The following table shows the number, movements and vesting price of
performance rights for the 2022 year.
Date of Approval Vesting Price 1/07/2021 Issued Exercised Expired 30/06/2022
17 October 2018 $0.165 2,225,000 - - - 2,225,000
17 October 2018 $0.22 2,225,000 - - - 2,225,000
10 November 2016 $0.28 2,275,000 - - - 2,275,000
24 November 2021 $0.10 - 3,000,000 - - 3,000,000
24 November 2021 $0.165 - 3,000,000 - - 3,000,000
6,725,000 6,000,000 - - 12,725,000
The following table shows the number, movements and vesting price of
performance rights for the 2021 year.
Date of Approval Vesting Price 1/07/2020 Issued Exercised Expired 30/06/2022
17 October 2018 $0.165 2,475,000 - - 250,000 2,225,000
17 October 2018 $0.22 2,475,000 - - 250,000 2,225,000
10 November 2016 $0.28 2,275,000 - - - 2,275,000
7,225,000 - - 500,000 6,725,000
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transaction recognised during
the year were as follows:
Consolidated
June 2022 June 2021
$ $
Performance rights 232,200 -
232,200 -
The weighted average remaining contractual life of performance rights
outstanding at the end of the period is 2.41
years (2021: 3.26 years).
Note 18. 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:
Consolidated
June 2022 June 2021
Minimum expenditure requirements $ $
● not later than 12 months 451,575 438,647
● between 12 months and 5 years 165,103 761,157
616,678 1,199,804
Contract Assets:
The consolidated entity also has entered into a contract to construct a
transmission line for approximately BWP 60m (~$7m). Of this expected total,
$948,446 has been capitalised at 30 June 2022. Refer Note 10 for further
details
Note 19. Financial instruments
Overview
The consolidated entity's principal financial instruments comprise
receivables, payables, cash and term deposits. The main risks arising from the
consolidated entity's financial assets are interest rate risk, foreign
currency risk, credit risk and liquidity risk.
This note presents information about the consolidated entity's exposure to
each of the above risks, its objectives, policies, and processes for measuring
and managing risk. Other than as disclosed, there have been no significant
changes since the previous financial year to the exposure or management of
these risks.
The consolidated entity holds the following financial instruments:
Consolidated
June 2022 June 2021
Financial Assets $ $
Cash and cash equivalents 7,875,025 6,385,384
Trade and other receivables 424,220 267,258
8,299,245 6,652,642
Financial Liabilities
Trade and other payables 633,921 221,447
Convertible notes 7,263,643 -
Derivatives 763,753 -
8,661,317 221,447
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial
risks: market risk (including foreign currency risk, price risk and interest
rate risk), credit risk and liquidity risk. The consolidated entity's overall
risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the financial performance
of the consolidated entity. The consolidated entity uses different methods to
measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate, foreign exchange and other
price risks and ageing analysis for credit risk.
Key risks are monitored and reviewed as circumstances change (e.g. acquisition
of new entity or project) and policies are created or revised as required. The
overall objective of the consolidated entity's financial risk management
policy is to support the delivery of the consolidated entity's financial
targets whilst protecting future financial security. During the current year
the consolidated entity has entered into a foreign exchange forward contract
to mitigate its foreign exchange risk. Given the nature and size of the
business and uncertainty as to the timing and amount of cash inflows and
outflows, the consolidated entity does not enter into any other derivative
transactions (apart from its foreign exchange forward contract) to mitigate
the financial risks. In addition, the consolidated entity's policy is that no
trading in financial instruments shall be undertaken for the purpose of making
speculative gains. As the consolidated entity's operations change, the
Directors will review this policy periodically going forward.
The Board of Directors has overall responsibility for the establishment and
oversight of the risk management framework. The Board reviews and agrees
policies for managing the consolidated entity's financial risks as summarised
below. These policies include identification and analysis of the risk exposure
of the consolidated entity and appropriate procedures, controls, and risk
limits.
Risk management is carried out by senior finance executives (finance) under
policies approved by the Board of Directors. Finance identifies, evaluates,
and hedges financial risks within the consolidated entity's operating units
where appropriate.
(a) Interest rate risk
Exposure to interest rate risk arises on financial assets and financial
liabilities recognised at reporting date whereby a future change in interest
rates will affect future cash flows or the fair value of fixed rate financial
instruments. The consolidated entity is also exposed to earnings volatility on
floating rate instruments.
A forward business cash requirement estimate is made, identifying cash
requirements for the following period (generally up to one year) and interest
rate term deposit information is obtained from a variety of banks over a
variety of periods (usually one month up to six-month term deposits)
accordingly. The funds to invest are then scheduled in an optimised fashion to
maximise interest returns.
Interest rate sensitivity
A sensitivity of 1% interest rate has been selected as this is considered
reasonable given the current market conditions. A 1% movement in interest
rates at the reporting date would have increased (decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant.
Profit or loss Equity
1% increase 1% decrease 1% increase 1% decrease
$ $ $ $
Consolidated - 30 June 2022
Cash and cash equivalents 78,750 (78,750) 78,750 (78,750)
Consolidated - 30 June 2021
Cash and cash equivalents 63,854 (63,854) 63,854 (63,854)
Interest rate risk on other financial instruments is immaterial.
(b) Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to
meet its financial obligations as they fall due. The Board's approach to
managing liquidity is to ensure, as far as possible, that the consolidated
entity will always have sufficient liquidity to meet its obligations when due.
Ultimate responsibility for liquidity risk management rests with the Board of
Directors. The consolidated entity manages liquidity risk by maintaining
adequate reserves and by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and
liabilities. This is based on the undiscounted cash flows of the financial
liabilities based on the earliest date on which they are required to be paid.
At the end of the reporting period the consolidated entity held cash of
$7,875,025 (2021: $6,385,384).
The following table details the remaining contractual maturity for
non-derivative financial liabilities.
Within Between Total Contractual Carrying
1 Year 1 - 5 years Cash Flows Amount
Consolidated - 30 June 2022 $ $ $ $
Trade and other payables 577,391 56,530 633,921 633,921
Convertible notes & derivatives 696,153 10,341,158 11,037,311 8,027,396
Consolidated - 30 June 2021
Trade and other payables 148,294 73,153 221,447 221,447
(c) Foreign exchange risk
As a result of activities overseas, the consolidated entity's consolidated
statement of financial position can be affected by movements in exchange
rates. The consolidated entity also has transactional currency exposures. Such
exposures arise from transactions denominated in currencies other than the
functional currency of the relevant entity.
The consolidated entity's exposure to foreign currency risk primarily arises
from the consolidated entity's operations overseas. Foreign exchange risk
arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the entity's
functional currency. The risk is measured using sensitivity analysis and cash
flow forecasting.
During the current year the consolidated entity has entered into a foreign
exchange forward contract to mitigate its foreign exchange risk. Apart from
this contract the consolidated entity's policy is to generally convert its
local currency to Pula, Rand, or US dollars at the time of transaction. The
consolidated entity, has on rare occasions, taken the opportunity to move
Australian dollars into foreign currency (ahead of a planned requirement for
those foreign funds) when exchange rate movements have moved significantly in
favour of the Australian dollar, and management considers that the currency
movement is extremely likely to move back in subsequent weeks or months.
Therefore, the opportunity has been taken to lock in currency at a favourable
rate to the consolidated entity. This practice is expected to be the
exception, rather than the normal practice.
The consolidated entity's exposure to foreign currency risk at the reporting
date, expressed in Australian dollars, was as follows:
2022 2022 2022 2022 2021 2021 2021 2021
USD BWP ZAR GBP USD BWP ZAR GBP
A$ A$ A$ A$ A$ A$ A$ A$
Financial Assets
Cash and cash equivalents 6,143,514 339,500 20,969 1,188,501 26,105 31,605 26,107 5,771,868
Trade and other receivables - 389,727 - - - 264,594 - -
Financial Liabilities
Trade and other payables - (443,622) - - - (55,520) - -
Net Financial Instruments 6,143,514 285,605 20,969 1,188,501 26,105 240,679 26,107 5,771,868
Foreign currency rate sensitivity
Based on financial instruments held at 30 June 2022, had the Australian dollar
strengthened/weakened by 10% the consolidated entity's profit or loss and
equity would be impacted as follows:
Profit or loss Equity
10% 10% 10% 10%
Increase Decrease Increase Decrease
2022 $ $ $ $
Dollar (US) (614,351) 614,351 (614,351) 614,351
Pula (Botswana) (28,561) 28,561 (28,561) 28,561
Rand (South Africa) (2,097) 2,097 (2,097) 2,097
Pound (UK) (118,850) 118,850 (118,850) 118,850
2021
Dollar (US) (2,611) 2,611 (2,611) 2,611
Pula (Botswana) (24,068) 24,068 (24,068) 24,068
Rand (South Africa) (2,611) 2,611 (2,611) 2,611
Pound (UK) (577,187) 577,187 (577,187) 577,187
Forward foreign exchange rates
As noted above the consolidated entity has entered into foreign exchange
forward contracts to mitigate its foreign exchange risk. The maturity and
settlement amounts of the consolidated entity's outstanding forward foreign
exchange contracts at the reporting date were as follows:
Sell US Dollars
2022 2021
Buy Pula (BWP) USD$ USD$
Maturity:
0 - 3 months 679,488 -
3 - 6 months 2,652,635 -
6 - 12 months 1,632,602 -
The valuation of the forward exchange contract was based on a market reference
rate of 12.43BWP compared to a strike price of 11.6BWP. Based on the financial
instruments held as at 30 June 2022, had the Pula weakened/ strengthened by
10% against the US dollar with all other variables held constant, the movement
in the value of the forward foreign exchange contract would not have been
material to the consolidated entity's financial statements.
(c) Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a
customer or counterparty to a financial instrument fails to meet its
contractual obligations. This arises principally from cash and cash
equivalents and trade and other receivables. The consolidated entity's
exposure and the credit ratings of its counterparties are continuously
monitored by the Board of Directors.
The maximum exposure to credit risk at the reporting date is the carrying
amount of the financial assets as summarised in the table above.
Credit Risk Exposures
Trade and other receivables
Trade and other receivables comprise primarily of VAT and GST refunds due.
Where possible the consolidated entity trades with recognised, creditworthy
third parties. The receivable balances are monitored on an ongoing basis. The
consolidated entity's exposure to expected credit losses is not significant.
Cash and cash equivalents
The consolidated entity has a significant concentration of credit risk with
respect to cash deposits with Westpac Banking Corporation, First National Bank
Botswana, and First National Bank South Africa. However, significant cash
deposits are invested across banks to mitigate credit risk exposure to a
particular bank. AAA rated banks are used where possible and non-AAA banks are
utilised where commercially attractive returns are available.
Note 20. Key Management Personnel
Key management personnel comprise directors and other persons having authority
and responsibility for planning, directing and controlling the activities of
the consolidated entity.
Key management personnel compensation
The aggregate compensation made to directors and other members of key
management personnel of the consolidated entity is set out below:
Consolidated
June 2022 June 2021
$ $
Short-term employee benefits 626,196 538,866
Post-employment benefits 71,847 58,323
Other long-term benefits - 40,332
698,043 637,521
Share based payments 232,200 -
930,243 637,521
Note 21. Auditors' Remuneration
During the year the following fees were paid or payable for services provided
by the auditor of the consolidated entity:
Consolidated
June 2022 June 2021
$ $
Audit services
Auditing or reviewing the financial statements - BDO Australia 48,675 49,250
Auditing or reviewing the financial statements - BDO Botswana 34,580 27,819
Non-audit services - BDO Australia
Tax consulting and compliance services 9,575 13,900
Total 92,830 90,969
Note 22. Contingent Liabilities
The Directors are not aware of any contingent liabilities (2021: nil).
Note 23. Related Party Transactions
Parent entity
The legal parent entity is Tlou Energy Limited.
Subsidiaries
Interests in subsidiaries are set out in note 26.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2022 2021
$ $
Payment for goods and services:
Office rent paid to The Gilby McKay Alice Street Partnership, a 12,900 12,000
director-related entity of Anthony Gilby.
There were no amounts payable as at 30 June 2022 (2021: Nil).
Note 24. Segment Reporting
Reportable Segments
Operating segments are identified based on internal reports that are regularly
reviewed by the executive team 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 in Southern Africa.
Segment revenue
As at 30 June 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:
June 2022 June 2021
$ $
Botswana 51,147,251 50,321,772
Australia 1,966 4,382
51,149,217 50,326,154
Note 25. Cash Flow Information
Consolidated
June 2022 June 2021
$ $
Reconciliation of cash flow from operations
Loss for the period (4,329,116) (2,054,237)
Depreciation 547,217 597,189
Share-based payments 232,200 -
Impairment charge - exploration and evaluation assets 166,054 -
Fair value (gain)/loss on financial instruments 690,272 -
Capitalised interest 241,917 -
Net exchange differences 43,997 (25,915)
Changes in operating assets and liabilities, net of the effects of purchase
and disposal of subsidiaries:
Decrease/(increase) in trade and other receivables (56,631) (60,459)
Increase/(decrease) in trade payables and accruals 113,596 (26,336)
Increase/(decrease) in other payables (15,997) -
Decrease/(increase) in prepayments (5,053) 85,481
Increase/(decrease) in provisions 2,932 61,626
(2,368,612) (1,422,651)
Refer to Notes 13 and 14 for non-cash investing or financing activities during
the year.
Note 26. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and
results of the following subsidiaries in accordance with the accounting policy
described in note 1.
Name of entity Country of incorporation Class of shares Equity holding %
June 2022 June 2021
Tlou Energy Botswana (Proprietary) Ltd Botswana Ordinary 100 100
Technoleads International Inc Barbados Ordinary 100 100
Tlou Energy Exploration (Proprietary) Limited Botswana Ordinary 100 100
Sable Energy Holdings (Barbados) Inc Barbados Ordinary 100 100
Tlou Energy Resources (Proprietary) Limited Botswana Ordinary 100 100
Copia Resources Inc Barbados Ordinary 100 100
Tlou Energy Corp Services Botswana (Proprietary) Limited Botswana Ordinary 100 100
Madra Holdings (Barbados) Inc Barbados Ordinary 100 100
Tlou Energy Solutions (Proprietary) Limited Botswana Ordinary 100 100
Pula Holdings Inc Barbados Ordinary 100 N/A
Tlou Energy Generation Proprietary Limited Botswana Ordinary 100 N/A
Pula Holdings Inc and Tlou Energy Generation Proprietary Limited were
incorporated during the year. These companies have not yet traded.
Note 27. Matters subsequent to the end of the financial year
There has not been any matter or circumstance, other than that referred to in
this report and disclosed in the financial statements or notes thereto, that
has arisen since the end of the period, that has significantly affected, or
may significantly affect, the operations of the consolidated entity, the
results of these operations, or the state of affairs of the consolidated
entity in future financial years.
Note 28. Parent entity disclosures
Parent
June 2022 June 2021
$ $
Current assets 7,650,332 6,381,260
Non-current assets 30,255,800 30,218,134
Total assets 37,906,131 36,599,394
Current liabilities 1,000,468 263,935
Non-current liabilities 7,331,243 -
Total liabilities 8,331,711 263,935
Net assets 29,574,420 36,335,459
Contributed equity 106,763,925 106,763,927
Share based payment 1,157,804 925,604
Accumulated losses (78,347,309) (71,354,072)
Total equity 29,574,420 36,335,459
Loss for the period (6,993,237) (2,124,228)
Total comprehensive income (6,993,237) (2,124,228)
Commitments, Contingencies and Guarantees of the Parent Entity
The Parent Entity has no commitments for the acquisition of property, plant
and equipment, no contingent assets, contingent liabilities or guarantees at
reporting date.
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