ANNUAL REPORT

2016

CORPORATE INFORMATION

ACN 107 708 305

Directors

Mr T Fontaine Non-Executive Chairman

Mr T Wheeler Managing Director

Mr R Wheeler Non-Executive Director Mr N Featherby Non-Executive Director

Company secretary

Ms B Nichols

Registered office

Suite 9, 5 Centro Avenue

Subiaco WA 6008

Tel: (08) 9226 1356

Fax: (08) 9226 2027

Share register

Computershare Investor Services Level 11, 172 St Georges Terrace

Perth WA 6000 www.computershare.com Tel: (08) 9323 2000

Fax: (08) 9323 2033

Principal place of business

Suite 9, 5 Centro Avenue

Subiaco WA 6008

Tel: (08) 9226 1356

Fax: (08) 9226 2027

Auditors

HLB Mann Judd

Level 4, 130 Stirling Street

Perth WA 6000

Corporate Governance Statement

The Corporate Governance Statement together with policies is available on the Company website www.magnumgpl.com/about-us/corporate-governance/

Securities Exchange Listing Magnum Gas & Power Limited shares are listed on:

Australian Securities Exchange (ASX: MPE)

Botswana Stock Exchange (BSE: MAGNUM)

TABLE OF CONTENTS

CHAIRMANS' LETTER 2

MANAGING DIRECTORS' REPORT 3

DIRECTORS' REPORT 10

AUDITOR'S INDEPENDENCE DECLARATION 20

STATEMENT OF COMPREHENSIVE INCOME 21

STATEMENT OF FINANCIAL POSITION 22

STATEMENT OF CHANGES IN EQUITY 23

STATEMENT OF CASH FLOWS 24

NOTES TO THE FINANCIAL STATEMENTS 25

DIRECTORS' DECLARATION 61

INDEPENDENT AUDITOR'S REPORT 62

ASX ADDITIONAL INFORMATION 64

Chairmans' Letter

Dear Fellow Shareholder,

I'm pleased to report that the long-term efforts in Botswana are finally looking like they will provide for growth opportunities for your company.

The demand for power in Botswana and the surrounding countries remains strong. At a power and infrastructure conference in Gaborone in October 2015, it was forecast that Botswana's power demand would increase from 711 MW in 2015 to over 1,100 MW by 2025. The countries reliance on imported power is still strong, with 42% of its 2015 energy requirements being imported. Considerable opportunities exist for companies that can help meet the power needs of this growing region.

In July this year, the Government of Botswana committed to include 100 MW of power from coal bed methane ("CBM") into its future power plans. Magnum is in discussions with the Government as to what steps would be required for us to participate in providing a portion of this power. The primary steps include drilling wells, and certifying reserves. The company is currently raising the necessary capital, and plans to commence these activities early in 2017. Magnum is also considering potential farm-in opportunities to help fund and accelerate this programme. It is hoped that Magnum will then be included as a potential supplier for the 100 MW, however if we are not, we believe in this energy hungry market we will be able to find a commercial market for the gas.

In August 2015, Magnum submitted a proposal to the Government of Botswana to build a 100 MW solar power station. This was in response to an Expression of Interest from the Government. Magnum has established a strong network of international partners to build power projects from 1 MW to 1,000 MW. Formal letters of support were obtained from these companies. The Company has not had a response to the submission and will focus on its CBM activities.

Finally, Magnum is pleased to welcome a new major investor, and a new board member to the company. Nathan Featherby, Executive Chairman of Ochre Group Holdings Limited is joining the company to work with Magnum to look for new opportunities.

Your directors are pleased to have your support and are looking forward to an active 2017 building on Botswana opportunities, and looking for new ones for the benefit of all shareholders.

Tom Fontaine Chairman

Managing Director's Report

During the past financial year;

• The Botswana Government announced steps initiated to support the development of the CBM gas industry and power self-sufficiency. Including the proposed development of 100MW of CBM fuelled pilot power plants as part of its Independent Power Producer Programme. Along with commitments to the development of a low carbon energy portfolio, including converting the 90MW Orapa power station to gas and the tendering and development of 100MW of solar power

• Magnum progressed the design, strategic relationships and offtake discussions for a pilot power generation project eg 10MW to help commercialise the Central CBM gas field.

• Magnum progressed discussions with industrial and commercial users regarding supply of their energy (eg. 0.5 - 5 MW) needs, with Solar power and/or Gas (CNG) fuel/power

• Magnum further developed its relationship with Sky Blue Capital with the signing of an MOU to source and supply Sky Blue Capital developments with gas

• Magnum made submissions to the Government of Botswana regarding building 100MW of solar power generation. This was in addition to the submissions Magnum previously made to the Government of Botswana for supply of CBM gas to the existing 90MW Orapa Power station.

Overview

This year, Magnum focused on becoming an integrated energy supplier in Botswana, by developing and progressing potential solar and gas projects. The company progressed preliminary design work on large scale gas and solar projects aimed at both the domestic and export markets. Magnum also worked to expedite small scale power generation and a revenue stream for the company from smaller industrial and commercial scale projects.

Magnum was motivated to become a more integrated energy company as it was difficult to progress the exploration and commercialisation of the CBM acreage without a well-defined local commercial gas offtake. It was recognized that what is required in the region is not 'gas' but is 'energy', which could include a gas component. By broadening its focus, the company could look at commercial energy opportunities which may also lead to defining a more specific market for our own CBM. During this time, the company and others continued to lobby the government to commit to a gas offtake.

In July this year, the government committed to buy 100 MW of power from Botswana CBM producers. This outcome was hoped for and expected, but there was no forewarning of the timing of this decision. It is however a very positive development and, as a result, the company will return its primary focus to the development of its CBM assets.