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Thornback, not sure why you think a hydrogen option to power the Orapa turbines would potentially eliminate the need for a pipeline to Orapa. Help me to understand your thinking please?
Mr Smith, your post from yesterday about the options available to us given existing cash constraints... I'd go along with most of what you say in that post. My sense remains that investment will become (readily) available on one of two events materialising - Orapa comes off or the PPA materialise.
I do not see any investor parting with money for a hydrogen project - the value proposition is simply too risky at present.
On the chances of Orapa coming off or the PPA materialising then... I'm skeptical about Orapa - nothing happening in Bots seems to work 1st time round and it always takes ages longer than anticipated.
The PPA is a different story. I've previously posted here that I thought the PPA will materialise end June. Bots needs the power and they simply cannot continue to rely on SA's Eskom. It might not be exactly end June, but it cannot be far off now.
Mr Smith, the process of making hydrogen is a continuous process. Can't stop / start it.
This means solar as energy-input into the process, has challenges. Solar would need significant storage to make it through the night. Possible of course but CAPEX-hungry.
Mr Smith, the process of making hydrogen is a continuous process. Can't stop / start it.
This means solar as energy-input into the process, has challenges. Solar would need significant storage to make it through the night. Possible of course but CAPEX-hungry.
DTE, ja. I guess it is easier to respond with the "same identity" story than to the content of the post.
For the record... I'm not Mrmoagi. Not Donkey either. But if it makes you happy... knock yourself out
MM... in principle yes. The hydrogen market is a market of great interest for most energy companies. No beef with anything you say about that but always keeping in mind that the tech for methane-to-clean-hydrogen is pretty leading edge / bleeding edge still.
I've got a problem with the other word in the heading though... the "pivoting" word. We've been a CBM exploration company - then pivoting to a CBM-to-power company - then pivoting to a CBM-to-power plus solar-on-the-side company - now pivoting to a CBM-to-power plus solar-on-the-side with hydrogen-thrown-in company.
My good friend Mr. Smith sees this as massively positive because you know... there are all these different markets we can choose from. LOL!
Thing is... it costs a lot of money to open up a new market. Lots and lots of it. The decision makers in the company have not even opened up the gas market in Botswana (CNG to industrial users or Orapa) before they started opening up the power market in Botswana and now we're heading towards opening up the hydrogen market before the gas market or the power market is open.
Dunno... where is the cash going to come from for this exercise? Who is going to invest into a company that keeps pivoting away from that which it recently defined as its core business?
TB yes. The company cannot do gas to Orapa, build solar power, build CBM power and do hydrogen at the same time.
Developing a set of capital-intensive, long lead-time and diverse products into brand-new and diverse markets is not a good idea (I'm being polite here). It can certainly not be successfully executed in the middle of nowhere in Botswana.
A limited study into hydrogen to understand a possible future product for the company is just fine - one needs to have a road-map in mind.
I just had another look at the announcement and I cannot really tell what the plan is - just developing a hydrogen-to-market strategy in parallel to the CBM-to-power project or actually developing a blue hydrogen production pant at the same time as the CBM-to-power project?
The latter option would be insanely risky.
MM, hydrogen is certainly worth a look at.
My understanding is that the hydrogen work is at an initial study phase now. That's OK - the technology for blue hydrogen (one assumes) is at a fairly early stage of development but it is a market that shows signs of massive growth. Interesting development...
DtE, yes - one would guess that there would have been a number of draft documents - each one a little better than the previous version as the feedback from different Ministries are incorporated.
At some point we need a final draft that Govm't is happy with though?
Mr M - Ja, maybe madness but it depends on how much effort went into the document prior to it being issued.
We often see PPAs where it is not allowed to be marked up at all. Dunno hey... speculating a little bit as I said
Some thoughts on the PPA negotiation process... I'm speculating a little bit here based on what I know about Botswana's procurement processes and some of the posts on here and from Twitter. I.e. don't hold me to it please.
The ALSF PPA process has now been running for around 3 months. This is more than enough time to draft a commercially acceptable PPA from scratch. However....
Some considerations regarding the ALSF process:
1. There are a large number of Ministries with their fingers in this one - Treasury, the MMGE (Ministry of Mineral Resources, Green Technology and Energy Security), BPC itself and possibly the Ministry of Defence, Justice and Security (the Government's in-house lawyers reside in there). One would expect that the ALSF project had to align these diverse internal Ministries 1st. Takes time...
2. All of the Botswana Govmt's procurement processes for large tenders run through an agency called the PPADB - Public Procurement and Asset Disposal Board. Their role originally was a corruption-busting role but there are those who say that it became a stumbling block over time. They would be required to sign off on the PPA.
More time....
3. Tlou's PPA vs. Kalahari / Sekaname's PPA... It seems as if the Tlou PPA would be a lot easier than the Kalahari PPA. Ours would be all-equity financed (I think) but the Kalahari project would require North of $500m to complete. I can't remember the exact number but there has been articles in the press quoting a large number. The point is that a $500m+ project will be project-financed and that requires a bankable PPA - certainly more complicated than an all-equity-financed PPA could be. It is hard to call this one - does the ALSF team do one PPA that fits both parties or are there two different PPA's? Dunno...
If it is a one-size-fits-all scenario, it adds even more time....
4. The tariffs quoted back in 2018 is certainly not valid any longer. Different exchange rates. Different capital costs. Different O&M costs. Different logistical channels post COVID. How they address this issue in the PPA is beyond me but my sense is that the ALSF's lawyers will knock up something that has a logical base and then ask for feedback on the wording in the PPA.
Speculating on a time-line then...
We'll receive a DRAFT PPA in the next couple of weeks. It cannot possible go on later than end June one would want to think. I.e. we use End June as a worst-case scenario.
After that, there should be a period of around a month (?) for negotiation between us and the ALSF team / MMGE.
Final PPA signed off by not later than end July (worst-case). If things go well maybe by the end of June (best-case).
TG can only go look for finance once the final PPA is in place.
MM, your all-caps post from Tuesday pm (copied below) is a very interesting post. I'm (very) familiar with the workings of the SAPP but this post contains information that is new to me. It is positive for us and I thank you for sharing this quote from the Hon Minister Moagi.
I'm wondering about how this export mechanism will actually work and my sense is that it will be different from neighbouring country to neighbouring country. Do you know how it will work? Any info will be much appreciated.
IN ADDITION TO DRIVING TOWARDS THE GOAL FOR SELF-SUFFICIENCY IN LOCAL POWER GENERATION THROUGH INCREASED PARTICIPATION OF INDEPENDENT POWER PRODUCERS (IPPS), MR MOAGI UNDERLINED THAT THE AUTHORITY CONTINUED TO FACILITATE PRIVATE INVESTMENT IN POWER GENERATION FOR EXPORTS.
MM, the all-caps quote from the Minister below is very interesting. Thanks for sharing this - it is new information for me ??
Do you know how the mechanism to achieve this will actually work?
ADDITION TO DRIVING TOWARDS THE GOAL FOR SELF-SUFFICIENCY IN LOCAL POWER GENERATION THROUGH INCREASED PARTICIPATION OF INDEPENDENT POWER PRODUCERS (IPPS), MR MOAGI UNDERLINED THAT THE AUTHORITY CONTINUED TO FACILITATE PRIVATE INVESTMENT IN POWER GENERATION FOR EXPORTS.
DTE, ideally one would actually like the share to reflect its real value. That way there are no surprises in future. Thing is... the company is early-phase which makes it difficult to get to the "real" value of the share.
There unfortunately are ppl on here trying to "talk" the share up by posting factually inaccurate or misleading information.Let's call them out.
MM, your post from Monday 17.05...
"With regards to Tlou selling to customers within Botswana itself, this is something of a moot point as the BPC is required to take all and any power produced in Botswana under the country's import substitution policy - replacing the very expensive and strategically dangerous reliance on Eskom imports. So there's the ready market."
We totally agree that Botswana's reliance on Eskom imports, is a dangerous thing. That is why I'm into this share.
I don't see the "ready market" you refer to though. The buyer / BPC is a monopoly that wants to protect its own bottom line and even though there may be an import substitution policy (I'm not familiar with it), I'd very much like to know what it says on price / tariff.
BPC went through a couple of auctions on solar PV with massive interest - some of it from the big European utilities who are out to buy market share in Africa. They price their tariffs for these bids on a breakeven basis.
I struggle to see how we convince a monopoly to buy power from us at a tariff that is higher than what they got from the various auctions.
Dunno... sounds like a very risky "ready market" to me.
MM, your post Monday 16.55. It is a good post. Thanks for sharing your views on the SAPP issue.
If I may borrow directly from your post and comment on the membership categories that is available...
7 Membership Categories
Applicants shall apply and be considered for one of the following categories:
a) National Power Utility
b) Operating Member
c) Market Participant
Now, if we were to find a home for Tlou amongst the 3 categories of membership that is available... (quoting directly from the document that you refer to)
a) National Power Utility?
Nah... I think we can agree Tlou does not fit into this box
b) Operating member?
From the SAPP document you quote:
3.9 “Operating Member” means a Member which:
a) operates a permanent generation facility of total capacity of at least 300 MW physically
connected to the SAPP Grid at a voltage level of at least 110 kV; and/or,
b) operates a transmission system of 110 kV and above which is physically connected to
the SAPP Grid at a voltage level of at least 110 kV; and,
c) has capability to provide ancillary services
Nah... this is for the big boys. Tlou does not do 300MW and it is not connected to the SAPP grid at a voltage level of 110kV+.
I.e. Tlou does not fit into this box.
c) Market Participant?
Again... from the SAPP document you quote:
3.7 Market Participant means a Member which:
a) operates or contracts generation capacity or a load of at least 5 MW that is physically
connected to the SAPP Grid at a minimum voltage of 110 kV; and
b) complies with respective national legislation on cross-border trading; and,
c) is not be tied to a single buyer contract; or, where such contract exists, must have
counter party consent to trade the contracted power on the market; and,
d) possess capability of balancing agreed schedules or must have a contract for balancing
agreed schedules with a SAPP operating member
Closer. But no banana. Tlou does not fit into this box either (grid connection at 66kV and a contract for balancing agreed schedules).
It would seem to me that Tlou does not fit into any box prescribed for SAPP membership. Or am I missing something?
DTE, I see TG made the statement you refer to below prior to having completed the market-study referred to in your post. Maybe look for a subsequent statement correcting the (incorrect) one you refer to?
Most of what I posted (simple non-controversial facts) can be verified here...
http://www.sapp.co.zw/
I thought I'd clarify the workings of the electricity market in Botswana for the benefit of all.
1st thing to know is that the SAPP consists of 12 member countries for whom their individual electricity-markets look very similiar. The markets are all heavily regulated and typically have only one buyer of electricity - this being the national utilities such as Eskom SA), BPC (Botswana), ZESCO (Zambia), etc.
None of the countries have an ISMO. An ISMO (Independent System and Market Operator) is a pre-requisite for a deregulated market in which an IPP can sell its electricity into the spot market / day ahead market / intra-day market / FPM / etc.
In the absence of an ISMO, the national utility acts as the single buyer of all electricity generated within its borders. The utility then sells the surplus or buys the shortfall in the SAPP market.
The volumes on the SAPP are thin as bulk power is often bought through multi-year contracts and the short-term shortfall is bought on the SAPP's trading platform. Botswana's Achilles heel is its heavy reliance on SA's Eskom. Eskom's troubles are well publicised and pose a major, major risk to the economies of the entire region.
In this regard, Tlou is very, very well positioned as a potential future provider of electricity into the national grid.
Thing is... the laws and regulations governing the provision of electricity in Botswana needs a major overhaul. SA has been trying to introduce an ISMO for almost 20 years now but still struggles with liberating the grid. Africa...
Botswana typically waits for SA to do something and then follows the example of its bigger Southern neighbour. Botswana have not even started looking at establishing an ISMO yet and any talk of selling electricity on the spot market is just hot air. It is not possible...
Can Tlou sell electricity from its planned solar PV plant to individual companies? No.
Can Tlou sell electricity from its CBM and / or solar PV plant to anybody else than BPC? No. Maybe in future but not now.
Does that mean Tlou is a sell? No, I don't think so. The fundamentals for a good story is in place.
But don't kid yourselves about solar PV and / or power from CBM into a "spot market" or into the SAPP. That is just BS.
Mr Smith, the fact that you type something in all caps, does mot make it so.
Here is the "spot market" in Southern Africa. Except that only BPC can access the SAPP. We cannot - it is an exclusive club for the various national utilities to trade. Prices mostly vary from 2c/kWh to 12c/kWh.
http://www.sappmarket.com/
As for private PPA's... It is not possible in Botswana (yet) because BPC is the designated buyer of all energy. Phone BERA to confirm if you want to.
Or you can do the obvious... if we could sell to anybody, why has this not happened in the last 5 years or so?
Not trying to disagree with you for the sake of disagreeing with you - this place will be a better place if there is less wild conjecture and more facts.
OK....
Mr Smith's response to 3 very basic questions.
1) You got that right. Nobody. Well done Mr. Smith.
Because by law only BPC buys electricity in Botswana. So you can relax about safeguarding "our electricity" from the countries prepared to go to war to buy "our electricity"
2) No. Just no. Go find out what colour the ions are before commenting on anything relating to hydrogen. Hint... it is not about the ions. It is all about the carbon balance for different industrial production processes.
3) No. One does not raise finance on promises of war. A commercially acceptable PPA with an entity that has an acceptable counter-party risk comes first. Then financing.
No PPA means no finance.
On the SAPP....Yes we can sell to the SAPP if we have the required authorisation. At the tariff of the day of course. But we need to finance and build the damn plant before that yes? So who will provide the finance looking into it's crystal ball on the SAPP tariffs for the next 20 years? Really? Really Mr Smith?