Islandmagee Gas Storage Project Update

RNS Number : 6851V

Infrastrata PLC

10 April 2019

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

10 April 2019

InfraStrata plc

("InfraStrata" or the "Company")

Islandmagee Gas Storage Project Update

InfraStrata plc (AIM: INFA), the UK quoted company focused on the development of natural gas storage capacity, is pleased to provide a general update on recent progress with respect to the Company's Islandmagee gas storage project (the "Project").

Due diligence has been ongoing with our second potential equity partner since January 2019. This work stream has now been completed after review of all aspects of the Project.  The Project also had a similar degree of scrutiny applied to it in Q3/Q4 2018 by another potential equity partner.  Our current discussions are now focussed on these two highly interested parties.

In relation to our offtake negotiations we have currently narrowed the field down to three potential offtake partners from six, whom we, and our potential equity partners, believe will be a good long-term match for the Project.  Our negotiations and analyses were assisted by our recently commissioned report from market leading consultants to provide more detailed analyses on our revenue model, as detailed in our announcement of 7 March 2019. This report assessed actual income (assuming our planned facility was in operation) for the past ten years and our forward projections for the next ten years. These results have exceeded our expectations and have also been shared with our potential partners.  The results clearly demonstrate increasing volatility in the UK gas market since the closure of Centrica's Rough gas storage facility and indicate that storage revenues could achieve highs of 50 - 60 p/th during the course of the next decade.

Current discussions are well underway between the potential equity and offtake partners to reach an agreement on an acceptable contract length and structure of the offtake agreement that will facilitate formal agreements being entered into.  We are keen to conclude these discussions as soon as is practicable whilst ensuring that we get the best deal possible for the Company.

Further, we have received the results from both our construction EPC and  Owner's Engineer  tenders. Whilst we still have more evaluation works to undertake, these bids appear to be consistent with the FEED P90 estimates produced by Costain which indicate the likely construction costs of the facility.   We will continue to evaluate the results and intend entering into formal negotiations in the coming weeks with the aim to negotiating a construction contract thereafter which will be entered into ahead of our planned final investment decision ("FID") at the end of H1 2019.

As previously indicated, we have made good progress on the debt front with indicative terms received from two banks. Early indications are that our potential equity partners may provide a portion or all the debt in addition to the equity. This will be further evaluated after an offtake agreement is entered into.  A combined debt and equity deal from a single provider will increase the speed at which FID can be undertaken.  As we move towards the construction phase of the Project, we have commenced recruitment activities to build a high performing team that will deliver the Project and facilitate the planned injection of first gas late in 2022.

John Wood, Interim Chairman and Chief Executive Officer, commented: "We have made good progress during 2019 and we now have a clear route to commercialisation of our Project. We identified a clear scope of works that was required to be undertaken to facilitate progression.  We have been working through these items in recent weeks and having completed those actions. We are now clearly focused on the offtake agreement terms that we hope will bring one of our potential equity partners onboard.  We remain committed to FID by the end of H1 2019.  We are pleased that the second detailed due diligence process by a potential equity partner has been completed."

For further information, please contact:

InfraStrata plc John Wood, Chief Executive and Interim Chairman	c/o Yellow Jersey [phone]
Allenby Capital Limited (AIM Nominated Adviser & Joint Broker) Jeremy Porter / Liz Kirchner	[phone]
SI Capital Limited (Joint Broker) Nick Emerson	[phone]
Yellow Jersey Tim Thompson / Henry Wilkinson	[phone]

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Notes to editors:

InfraStrata is an independent gas storage company focused on the UK and Ireland. Further information is available on the Company's website: www.infrastrataplc.com 

Background on the Islandmagee Storage Project

The Islandmagee gas storage project is a proposed salt cavern gas storage facility located on Islandmagee in County Antrim, Northern Ireland. The Board of InfraStrata believes that the proposed 500 million cubic metres natural gas cavern storage facility will provide over 25% of the UK's natural gas storage once constructed. The facility will be situated adjacent to the Scotland Northern Ireland (gas) Pipeline (SNIP) and the Moyle 500-megawatt electricity interconnector. Work commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility Regulator. In 2015 a well was drilled to core the salt and confirm the technical feasibility of the project, supported in part by the European Commission. The Front End Engineering and Design (FEED) element of the project was completed in November 2018 and the FEED report was submitted to the European Union in December 2018 in accordance with the Company's grant conditions.  To date approximately £14.5m has been invested in the project.

Further information is available on the company's website: www.infrastrataplc.com 

The Front End Engineering & Design (FEED) and Insitu Downhole Testing programme for the Islandmagee gas storage project is co-financed by the European Union's Connecting Europe Facility.

Disclaimer releasing the European Union from any liability in terms of the content of the dissemination materials:

"The sole responsibility of this publication lies with the author. The European Union is not responsible for any use that may be made of the information contained therein."

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