Tlou Energy Regulatory News (TLOU)

Tlou Energy Limited

("Tlou" or "the Company")

Final Results

Tlou Energy Limited is pleased to announce its 2023 results. The Annual Report and Consolidated Financial Statements for the year ended 30 June 2023 are available on the Company's website: https://tlouenergy.com/reports

Highlights:

· Construction of the transmission line to connect Tlou's Lesedi gas-to-power project to the electricity grid is 90% complete

· A new 3-well production pod (Lesedi 6) has been drilled and the lateral wells of Lesedi 4 have been redrilled and are being put into the production phase

· 4,000 hectares of land has been acquired for the Lesedi project which will including the central gas processing facility, planned power generation assets and further gas wells

· Significant funds were raised from ILC Investment Pty Ltd who is now Tlou's largest shareholder with 34.86% of the Company

Tlou's Managing Director, Mr Tony Gilby commented, "The past year has seen the Company make good progress toward the target of supplying electricity into the power grid in Botswana. The transmission line work is nearing completion, substations are in progress and new wells are being completed ahead of expected gas flow.

It has not been easy and has taken a lot of time, effort and money to get to this stage. There remain significant challenges ahead.

Nonetheless, I believe gas will continue to play a very important, if not vital role for many years to come in order to meet increasing energy demand in southern Africa. We look forward to moving Tlou Energy's Lesedi project into production and are grateful to our shareholders for their continuing support."

By Authority of the Board of Directors

Mr. Anthony Gilby

Managing Director

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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.

For further information regarding this announcement please contact:

About Tlou

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

Forward-Looking Statements

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

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 evaluation of our gas to power project. 

During the year Tlou progressed the construction of transmission lines to connect the Lesedi project to the grid, acquired a 4,000-hectare farm for the central processing facility, contracted the construction of the Lesedi substations, and the next phase of the production drilling commenced.

One of the final stages in the evaluation of the Lesedi project is commencement of the 10MW gas to electricity operation. To connect this project to the Botswana power grid, Tlou engaged Zismo Engineering Pty Ltd to construct a 100 km transmission line from the Lesedi project to Serowe. Construction of the 66kV transmission line is over 90% complete and is expected to be fully completed in the coming months. Tlou has also engaged South African based Optipower, a division of Murray & Roberts Ltd to undertake the construction of associated substations as part of the grid connection.

Tlou has acquired a 4,000-hectare property within the Lesedi project area. The property will be the location of the power generation assets, central processing facility, mechanical workshops, stores, casing and core yards, medical centre including helipad, and accommodation units.

Production drilling recommenced with the completion of the Lesedi 6 production pod and the drilling of new lateral sections of the Lesedi 4 pod. Lesedi 6 is the first of a series of new pods, funds permitting, that the Company will drill to supply gas for the initial 10MW project. While Lesedi 4 has produced gas for several years, redrilling of the laterals is aimed at providing straighter lateral sections to improve dewatering and gas flow. Tlou's current 2P gas reserves stand at approximately 41 billion cubic feet (~7.2m BOE).

The Company's Mamba and Boomslang project areas are located adjacent to the Lesedi project. Tlou will continue to evaluate these projects and successful results could allow the Company to progress these areas separately to Lesedi, with the potential for gas-fired power.

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. 

During the 12-month period ending 30 June 2023, the Company successfully raised approximately AUD 14.8 million in equity and AUD 2.0 million loan funding to support ongoing project development. The Company's major shareholder ILC Investments Pty Ltd (ILC) now holds 34.86% of the Company's ordinary shares.

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,

This year has been one characterised by significant activity in the field with our primary focus being the advancement of the Lesedi project.

We have recently completed drilling of additional gas production wells, with the Lesedi 4 and Lesedi 6 pods now dewatering ahead of expected gas flow. Additional drilling is planned at the Lesedi project as well as in our exploration tenements subject to available funding as we ready ourselves to generate first electricity as part of the final evaluation stage for the Lesedi project.

Tlou plans to have the Lesedi gas to power project producing electricity in 2024 and remains driven to ensuring the objective is met.

Southern Africa continues to operate under a severe energy deficit. This has the potential to impose significant constraint on economic activities, provision of public services, and quality of life, as well as on adoption of new technologies in various sectors such as education, agriculture, and finance.

Tlou Energy aims to be part of the solution to solve the regional energy deficit beginning with integrating gas fired power into the grid in Botswana.

With gas expected to be a vital part of the regional power mix in the coming years Tlou Energy is well positioned to become a significant power supplier.

We continue to monitor projects risks and opportunities and work towards creating value for all stakeholders.

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 2023.

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:

Dividends

There were no dividends recommended or paid during the financial year.

Principal activities

The principal activity of the consolidated entity is to explore, evaluate and develop power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power. 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 $4,241,208 (30 June 2022: $4,329,116).

As a pre-revenue entity a loss for the year is expected and is in line with expectations. The key focus for the Company continues to be the Lesedi project area and specifically the work in relation to the planned 10MW gas-to-power project. Payments for exploration and evaluation assets amounted to $11,886,628 over the year which included $5,802,386 on construction of transmission lines and substations that will connect the Lesedi project to the electricity grid in Botswana. Payment to suppliers and employees over the year was $3,164,020. Significant project funding was also acquired during the year, totalling $14,853,721 in equity and $2,000,000 by way of a loan. Most of these funds were received from ILC Investment Pty Ltd who is now the Company's largest shareholder at 34.86%.

Gas to Power Project

The Lesedi power project ("Lesedi") is Tlou's most advanced project. The first electricity to be generated at Lesedi is planned to go towards satisfying a 10MW Power Purchase Agreement (PPA) that has been signed with Botswana Power Corporation (BPC), the national power utility in Botswana. The Lesedi project currently has several components underway as part of the final evaluation stage including the construction of transmission lines, substations, a field operations facility and generation site as well as production well drilling.

Transmission Line and Substations

Lesedi is approximately 100km from the nearest BPC substation connection in Serowe. To connect to the national grid, the Company is undertaking the construction and installation of a 100km 66kV transmission line. This, together with the ongoing drilling program should enable the Company to connect and provide electricity into Botswana's power network.

The construction of the 66kV transmission line continued throughout the year and is over 90% complete. Key items outstanding include a road crossing and further stringing of the line. Transmission line work is on track to be completed later this year and in advance of planned first power into the grid.

Substations are required at either end of the transmission line, one to tie Tlou's generators to the transmission line at Lesedi and another to integrate the line with the existing BPC substation at Serowe. The planned substation at Lesedi is currently designed for an initial 5MW of power. The Company is now assessing options that may allow the current substation design to be adapted to facilitate expansion beyond 10MW. Based on the current timetable the substations are expected to be completed around Q2 2024.

Drilling Operations

Coalbed Methane (CBM) gas is the feedstock for power generation at Lesedi. The planned gas production wells to be used are referred to as Dual Lateral Pods that consist of three wells in total, one vertical production well intersected by two lateral wells drilled horizontally through the target reservoir section for several hundred metres. The Company recently drilled a new pod (Lesedi 6) and also redrilled the lateral sections of an existing pod, Lesedi 4. The aim of redrilling the Lesedi 4 lateral wells is to provide straighter lateral sections compared to the original lateral wells. The Lesedi 4 pod has flowed gas for a number of years and these straighter laterals are expected to assist with removing water from the reservoir to more efficiently dewater and flow gas. Both Lesedi 4 and Lesedi 6 pods were flushed to clear the wells and now have production equipment installed for dewatering ahead of gas production. In addition to requiring sufficient gas form Lesedi 4 and Lesedi 6, the Company will need to drill further wells that can supply sufficient gas for the planned 10MW project.

Exploration and Evaluation

As well as 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 Km2 and the Boomslang licence (approx. 1,000 Km2). The Mamba and Boomslang licences are situated adjacent to Lesedi and could provide the Company with flexibility and optionality subject to results. 

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 is drilling wells in the Lesedi project area to produce CBM gas. These wells are designed to achieve sufficient gas flow rates for the Company's initial project development. The gas flow rates from these wells are vitally important to assess the viability and commerciality of the Lesedi project. However, at the date of this report the level of gas that may be produced from the project and if gas production rates will be at commercial rates is not yet known. Further wells will also be required to produce sufficient gas for the planned Lesedi project.

The Company is evaluating additional projects including solar power and possibly hydrogen production, carbon black/graphite production and crypto currencies 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.

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 1,097,816 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 50,000,000 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 4,581,387 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

Chair of the Audit Committee

Member of the Nomination & Remuneration Committee

Interest in Shares and options 12,065,921 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.

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 2023, and the number of meetings attended by each Director are listed below. The Nomination & Remuneration committee comprises the full board.

Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.

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 11% 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 2023

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 2023.

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 2023

During the 2023 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. The share-based payments amount included in the table above relate to performance rights granted in the 2022. These amounts were not paid to staff. The figures represent an accounting valuation attributed to the performance rights. This valuation has been spread across 2022 and 2023.

Benefits and Payments for the year ended 30 June 2022

During the 2022-year, performance rights were issued to key management personnel as outlined in the 2022 annual 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.

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 has 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 $336,000.

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 $196,000.

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: The annual cost to the Company excluding share-based payments (if any), adjustments for industry standards and CPI was approximately $141,000.

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: The annual cost to the Company excluding share-based payments (if any), adjustments for industry standards and CPI was approximately $261,000.

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.

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.

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 2023 are as set out below:

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:

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 2023 financial year.

Other transactions with key management personnel and their related parties

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 2023 (2022: Nil).

(End of Remuneration Report)

Shares under option

There were no unissued ordinary shares of Tlou Energy Limited under option at the date of this report.

Performance rights

Issued performance rights at the date of this report are as follows:

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 2023 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.

Indemnity and insurance of auditor

The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor.

During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity.

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.

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, 29 September 2023

2023 Annual Reserves Statement

Tlou Energy Limited is pleased to present its Annual Reserves Statement for the period ending 30 June 2023. 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 2023.

This information was prepared and first disclosed under the SPE-PRMS 2007. It has not been updated since to comply with the SPE-PRMS 2018 on the basis that the information has not materially changed since it was last reported.

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 2023 and comparative petroleum reserves certified at 30 June 2022.

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 2023 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 2023 as against the previous year. The net 2C and 3C contingent resources did not increase from the 2022 year to the 2023 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 2023 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 2023

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 2023

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 2023

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 2023

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 30.

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 explore, evaluate and develop power solutions in Sub-Saharan Africa through Coalbed Methane (CBM) gas-fired power. 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 29 September 2023.

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 18 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 is currently discussing potential equity investments with interested parties. These funds will be needed to fund ongoing operations and working capital requirements for the next 12 months. In addition, the consolidated entity may need to raise further capital to expand and develop its projects. 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.

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.

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 goods or services 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.

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 2023 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.

Management has considered whether Tlou is still in the E&E phase or has moved into development. The projects should still be classified as E&E as the technical and commercial feasibility has not been established. In particular:

· whilst there has been independently certified gas reserves and contingent resources whether or not these reserve gas flow rates will be of a commercial quantity has not been established;

· funding for the commercialisation of reserves and for a commercial level of production has not been confirmed; and

· a final investment decision has not been made.

At the date of this report the Directors consider that Tlou is still in the E&E phase. While the Company has made significant strides during 2023, the three points above are still relevant, i.e. (i) commercial gas flow rates are yet to be established, (ii) agreed funding to commercialise the project is not yet in place, (iii) we have not reached a final investment decision. Based on these facts and despite the progress this year the project remains in the E&E stage. 

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 2023 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