The strategic deal today will allow Pure Hydrogen to own a 20% stake in a potentially well-funded ASX listed company.

Multi-channel energy company Pure Hydrogen (ASX:PH2) has signed an agreement to secure a 19.99% post-IPO stake in Botsgas, which is planning to list on the ASX later this year.

In the deal, PH2 will swap its 21% stake in the Serowe Gas Project for a 19.99% stake in the post-IPO listed company, which will be renamed Botala Energy.

As joint-venture (JV) partners in the Botswana Coalbed Methane (CBM) Serowe project, Pure Hydrogen will still retain a 30% stake following today’s agreement, which will be free carried until December 2023 for up to $6.1 million.

Additionally, Pure Hydrogen and BotsGas have confirmed a separate deal today to establish the Serowe Hydrogen Hub renewable energy business in Botswana.

The Hub will be targeting 50MW of power generation, which will potentially allow the country to become energy independent from neighbouring South Africa.

The Serowe Project

The Serowe 3 coalbed methane (CBM) well is currently being drilled with a target depth of 500 metres on the Serowe Project in Botswana.

It is the second well of a six-well appraisal drilling campaign, and could provide significant energy to Botswana, which is looking to become an energy independent country.

PH2 is running the project in partnership with domestic gas company BotsGas, which is funding the initial appraisal programs that are designed to prove out gas reserves at the site.

Due to COVID-19 restrictions currently in place in Botswana, PH2 said its local drill team will break at the conclusion of drilling Serowe-3, with commencement at Serowe-4 expected to commence before the end of the September quarter.

Under the terms signed today, Pure Hydrogen’s 19.99% stake in BotsGas is likely to be around 28,025,616 ordinary shares.

In addition, it is expected that Pure Hydrogen will receive approximately 4,313,981 options in BotsGas.

A priority offer of BotsGas shares will be made to the shareholders of Pure Hydrogen, which is subject to conditions including Botsgas raising a minimum of $7 million in the IPO.

“This is a good transaction for Pure Hydrogen as we secure a cornerstone stake in what will be a well-capitalised ASX-listed company dedicated to its operations in Botswana,” commented Pure Hydrogen’s CEO, Scott Brown.

“We retain a significant free-carried portion of the large prospective Serowe project, and the transaction enables us to expand our hydrogen operations into Africa where there is considerable government support.”

The Serowe Hydrogen Hub

The planned establishment of the Serowe Hydrogen Hub will target 50MW in power generation.

The Hub is expected to be one of the largest in Africa, with Pure Hydrogen providing hydrogen support for the project, which will be eligible for several financing programs that apply in the country.

The market for green energy in Botswana has been accelerating recently, following the development of the country’s renewable energy strategy alongside the World Bank.

The goal of the strategy is to allow the country to become energy independent from neighbouring South Africa.

Botswana is also currently planning to add a mix of renewable energy and natural gas power generation through independent power producer (IPP) projects.

These projects had previously not been able to operate due to regulatory framework challenges.

Pure Hydrogen says that apart from hydrogen, other green energy projects including solar are also being considered with the JV – drawing on the company’s established partnerships and operations in the Australian hydrogen sector.

This article was developed in collaboration with Pure Hydrogen, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.