TIDMINFA
RNS Number : 2195S
Infrastrata PLC
07 March 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.
07 March 2019
InfraStrata plc
("InfraStrata" or the "Company")
Project Update
InfraStrata plc (AIM: INFA), the UK quoted company focused on
the development of natural gas storage capacity, is pleased to
provide an update on recent progress with the Company's Islandmagee
gas storage project (the "Project").
Due diligence being conducted by potential equity partners in
the Project has been ongoing for several weeks and we expect this
process to complete towards the end of March. We have, thus far,
received no adverse comments to give us any cause for concern. It
has, unfortunately, taken longer than expected to get this process
up to full speed after the Christmas holiday period. Whilst we are
going through this process we also continue to work with our other
potential equity partners, some of whom have already undertaken a
full due diligence process, and therefore, as previously reported,
various options remain active in relation to equity funding.
We have made good progress on the debt front with indicative
terms now received from two interested banks. As the other elements
of the Project firm up, these discussions will be further
advanced.
We have today issued a deadline extension to 25 March 2019 for
our Invitation to Tender ("ITT") for an EPC (engineering,
procurement and construction) contractor, after a request from two
of the parties interested. We are keen to receive the most
comprehensive and detailed bids, hence the decision to grant such
an extension to all parties.
In relation to our offtake negotiations we have had one
additional organisation that has become involved in these
discussions with a view to taking capacity in the gas storage
facility. In order to provide a stronger negotiating platform, we
have engaged with market leading consultants to provide more
detailed analyses on our revenue model. This will assess actual
income (assuming our planned facility was in operation) for the
past ten years and more importantly focus on the increasing spreads
and volatile market conditions in the next five years now that the
full effects of the closure of Centrica's Rough gas storage
facility last year are being felt across the UK gas market. This
report is due to be received later this month. As part of the
ongoing discussions with two of the interested offtake parties we
have been requested to explore the Floating Storage and
Regasification Unit (FSRU) concept further (which would enable
liquefied natural gas (LNG) to be re-gasified for transfer to and
from our gas storage caverns). We have, therefore, awarded the
concept development study to Costain in order to address this
matter.
We have now had time to fully digest the results of the recent
FEED works that were completed during 2018. We have spent
considerable time reviewing the results with our specialist
sub-surface owner's engineer report from Atkins. Based on the
results of our analysis, we are now comfortable that the required
volume of up to 500 mcm (as per the original licence and planning
approvals) can be achieved from 7 caverns rather than the 8 caverns
that had been included in the FEED. The reason for including 8
caverns during the FEED process was to ensure that the worst-case
scenario in relation to CAPEX was considered prior to this detailed
review being undertaken. This is not an uncommon position to adopt.
Another UK salt cavern facility has been able to achieve the same
volume with a 30% reduction in the number of caverns as planned for
during the FEED process. We have only reduced from our initial
estimated number of caverns by 12.5%. Therefore, as we progress
further, we still have room for potential improvement during the
construction phase. This reduced level of CAPEX will naturally
improve the economics of the Project. In addition, we have now
reviewed the OPEX details that have come out of the FEED study and
will be updating the economic model to take into account the
revised information provided and ensure consistency across all
documents.
Whilst planning a Project such as the Islandmagee Gas Storage
Project, numerous applications are made to the relevant
authorities, with permissions and licenses issued and required at
different points within the Project lifecycle. All approvals and
draft approvals are subject to certain conditions, some of which
have been addressed during the FEED process and some that will be
carried right through to the end of the construction process.
We are aware of recent discussions around our Draft Marine
License. This draft license was issued after numerous
communications, consultations and detailed discussions at a marine
stakeholder group meeting hosted by Northern Ireland's Department
of Agriculture, Environment and Rural Affairs (DAERA). We were
notified of certain actions that would be required to be undertaken
prior to conversion of the draft license to a full licence.
Therefore, as a result of the work undertaken during FEED we have
now submitted to DAERA an updated Brine Dispersion Model, Shadow
Habitats Regulation Assessment and a detailed Diffuser Arrangement.
We will also be providing a draft marine monitoring plan in the
very near future. In our opinion, all the studies show better
results than previously indicated and within the current regulatory
guidelines, hence we believe that the draft marine licence will be
converted into a full marine licence at the appropriate time.
Further, DAERA has provided InfraStrata with clear guidance that
any changes to our initial submission would result in a delay to
our proposed construction timeframe, but we are pleased to confirm
that we have reconfirmed to DAERA that nothing material has changed
from our initial application and that we are progressing as
planned.
Over the coming weeks, we will be undertaking the next phase of
land acquisitions and complete on the easement transactions as
planned. We are continuing with further engineering related works
and documentation preparation to ensure that we can commence
enabling works on site within the next few weeks. We recently met
with a large group of political representatives from Mid & East
Antrim Council, the Northern Ireland Assembly and Westminster to
update them on our progress. We will be holding local meetings
towards the end of March 2019 to ensure local residents are fully
briefed and up to date with progress on the Project.
We are in the final stages of preparing the final funding
drawdown submission for the FEED studies that were funded on a
matched basis by the EU. Our draft submission is due to be audited
in the next 10 days prior to its submission which will enable the
final balance to be repaid by the EU. We continue to work on our
submission for the next round of EU funding. However, our
application route is highly dependent on the outcome of the current
BREXIT negotiations. We remain optimistic that we will continue to
be eligible to participate and possibly receive further EU funding.
However, for the avoidance of doubt, no grant monies have been
included in our economic models or in any of our discussions with
equity and debt providers. Any EU grant monies received will
certainly improve the economics of the Project but, equally, a lack
thereof, will not fundamentally alter the economics given that we
have not attributed any cash inflows via EU grants in our economic
models.
John Wood, Chief Executive Officer, commented: "It has been a
busy start to the year with numerous work streams being progressed.
It is encouraging that we have been able to locate further savings
in the CAPEX which we believe will lead to an improvement in the
Project economics. We are very excited to now be in the
commercialisation process and in the final furlong prior to our
planned final investment decision at the end of H1 2019. We are
encouraged by the strong support the Project has and the growing
realisation that our Project is required to help ensure security of
energy supply. We remain on track for the Project to become
operational during 2023".
For further information, please contact:
InfraStrata plc c/o Yellow Jersey
John Wood, Chief Executive +44 (0)20 3735
8825
Allenby Capital Limited (AIM Nominated
Adviser & Joint Broker) +44 (0)20 3328
Jeremy Porter / Liz Kirchner 5656
SI Capital Limited (Joint Broker) +44 (0) 20 3871
Nick Emerson 4038
Yellow Jersey +44 (0)20 3735
Tim Thompson 8825
-S-
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 GBP14.5m 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.
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END
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