Tlou Energy Ltd (LON:TLOU) said Phase 1 financing for its Lesedi project is at an advanced stage with due diligence presently underway.
The counterparty is presently confidential but the company described it as a very reputable Botswana-based entity and it is proceeding with a third-party technical review of the project.
The review is a part of the due diligence and it is a precursor to an investment decision.
Tlou intends to fund the Lesedi coal bed methane gas-to-power project in two phases, with the first requiring around US$10mln of funding, received in stages if necessary, to establish an operation capable of 2 megawatts of power generation.
For Phase 1, Tlou will need to install a transmission line, substations, grid connection, electricity generators and possibly drill additional gas wells.
Phase 2 will require US$20mln to expand up to a 10 MW capacity with more gas wells and further electricity generation assets.
In the quarter, which ended 31 March, the company raised £2.625mln in a share placing priced at 3.5p. The capital injection is earmarked for the start of the transmission line construction.
The transmission line will be 100 kilometres, overhead, in length crossing predominantly flat arid terrain, with the last 5 kilometres going through the outskirts of the Serowe township.
A power purchase agreement is in place for the 2MW Phase 1 capacity and work is advancing to secure a PPA for the 10MW project.
The company also noted its intention to integrate renewables. “Initial development of the Lesedi project is planned to be up to 10MW of power.
“With plans for solar and gas-fired power, these can be standalone operations or a hybrid solution with gas-fired power able to provide back-up power when solar is not available.”