RNS Releases
08 November 2016 - Holding in Company PDF Print E-mail

InfraStrata plc (AIM: INFA), the gas storage company focused on the UK and Ireland, was informed today that Mr Alan Booth’s shareholding in the Company fell below 3 per cent. as a result of dilution from the issue of ordinary shares by the Company on 27 January 2016 and further, that he no longer has a notifiable interest in the Company’s issued share capital.

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04 November 2016 - Islandmagee project update & Board restructuring PDF Print E-mail

InfraStrata plc (AIM: INFA), the gas storage company focused on the UK and Ireland, is pleased to announce the selection of Front-End Engineering Design (“FEED”) contractors for the above-ground facilities and the sub-surface elements of its Islandmagee gas storage project (the “Project”) and associated loan funding to partially finance the development of the Project. The Company also announces an organisational restructuring and Board changes as part of its development strategy.

Highlights:

  • The FEED contractors have proposed to provide secured loans in aggregate of up to £1m for the FEED process, subject to contract, which will be conditional upon InfraStrata securing the remaining funding for the FEED.
  • The loans will sit alongside the European Union (“EU”) grant for 50% of the FEED costs (paid in two tranches), resulting in approximately 75% of the total projected FEED cost being conditionally funded.
  • To complete the FEED and commercialisation process and provide bridge finance between the two EU grant tranches, as well as working capital for the Company during this phase, will require a further £3m of funding which the Company is seeking.
  • Restructuring of InfraStrata’s Board from January 2017, to focus on the next phase for the Company and Project.
  • InfraStrata will re-locate to Belfast, minimising corporate overheads and enabling dedication of all resources towards bringing the Project to construction.

Selection of Front-End Engineering Design contractors

Following the completion of a tendering process, InfraStrata is pleased to announce that it has selected FEED contractors for the Project’s above-ground facilities and for the sub-surface elements. The FEED will include a detailed plant design specification for the Project, a detailed project plan and cost estimate. The aim is for the FEED contractors to complete their work by the end of 2017 so that should funding then be forthcoming, the Project is ready to move to construction.

Both the FEED contractors have an international reputation and have both worked on many of the existing salt cavern storage projects in the UK.

Associated new secured loan funding arrangements and remaining funding requirements

One of the criteria of the tender process to select FEED contractors was for prospective contractors to show a flexible approach and a willingness to share risk and reward. InfraStrata is pleased to announce that it has agreed to put in place secured loan arrangements by which both FEED contractors will each provide loans to the project company, Islandmagee Storage Limited (“IMSL”), in aggregate of up to £1m against a total anticipated FEED budget of £4m (the “Loans”). The Loans, which are subject to contracts being agreed, will be repayable at the Final Investment Decision (“FID”), when a decision will be made whether to proceed to construction, or on 31 December 2018, whichever is earlier. The Loans will be secured on the assets of IMSL and attract interest at 10 per cent. per annum, which will be rolled up and paid on the Loan repayment date. The FEED contracts and the Loans will be conditional upon securing the remaining funding for the FEED. The Loans, alongside the EU grant for 50% of the FEED costs announced in June 2016, will result in approximately 75% of the total projected FEED cost being conditionally funded.

At this juncture, in addition to funding from the EU and the Loans, a further amount of approximately £3m will be required to complete the FEED and commercialisation process, inclusive of corporate overheads, working capital and bridging finance on the EU grant. The bridging finance, which may be in the form of debt, is required to cover the timing of receipt of funds from the European Commission grant which they pay in two stages: €1.6m of EU grant monies has already been received by the Company with the balance receivable once the FEED work has been completed, which is targeted for the end of 2017.

The Company is examining its options with its advisers for securing the necessary balance of funding to enable work to commence on the FEED in the shorter term and ideally by this calendar year end. Further announcements in this regard will be made as appropriate.

Recent progress and restructuring proposals to meet future requirements in the next phase of the Project

Significant progress has been made on the Project during 2016, including further stakeholder engagement, investing in the land assembly for the Project, securing the supply chain for the FEED, securing the EU grant, conducting a monetisation process and, with input from the monetisation process, developing the parameters and phasing of the Project to meet expected future market demands.

Plans are now being developed to restructure the teams at InfraStrata and IMSL in the coming months to match the skill requirements for the next phase of the Project, as well as to appoint necessary advisers and technical consultants.

The Board of InfraStrata will be geared towards regulatory and corporate governance matters, with a focus on securing the funds to develop the Project. As part of this focus and to minimise corporate overheads, InfraStrata will re-locate to Belfast in January 2017, with all of its resources being dedicated to bringing the Project to construction. Andrew Hindle will step down from his role as CEO of InfraStrata effective 1 January 2017, but will remain a Non-Executive Director of the Company. Andrew, a Chartered Geologist, will continue to advise on the Project in a technical capacity. Stewart McGarrity, current Financial Director and Anita Gardiner, current Commercial Development Director, will become Joint Managing Directors, bringing vital and complementary skills required for the execution of the next phase of the Project.

Stewart McGarrity has extensive and broad experience in senior financial and commercial roles for major global infrastructure projects, including working on the construction and development of the Hong Kong International Airport. Anita Gardiner has been managing the Project since joining InfraStrata in 2014 and previously held various project and managerial positions with BP in the UK and India, most recently as Business Development Manager for BP Gas Marketing where she had responsibility for asset development and origination activities across Europe.

Background on monetisation of the Project

As previously announced, the Company’s strategy has been to seek funding arrangements during 2016, in order to commence a FEED and commercialisation process by calendar year end.

During 2016 the Company organised an extensive monetisation process through Centrus Advisors LLP and VSA Capital Ltd, both having been appointed in March 2016. A wide range of options were explored, from investment into the Project alongside the EU grant, risk sharing with contractors, or the sale of the entire Project to a third party.

As a result of the findings from this process, together with the positive changes in the fundamentals of the gas storage market and the supportive Competent Person Report announced in October 2016, the Board decided to restructure its business with the goal of attracting the remaining risk capital required to take the Project through to FID. The restructuring has included increasing InfraStrata’s equity position from 65% to 90% in IMSL and seeking to divest all the Company’s other remaining business interests, as announced in September 2016.

As part of a commercialisation process to run alongside the FEED in 2017, InfraStrata will seek to secure capacity contracts to support further project finance. During the monetisation process, the Company had a number of discussions regarding the Project with interested parties. The feedback at that time with respect to investment in gas infrastructure was that it would be preferable for the FEED to be completed and for the Project to have sufficient certainty with regards to revenues, including contracted revenues where possible, in order to support the additional project finance that would be required.

The proposed new Loans from the FEED contractors will be an important component alongside the EU grant funding in supporting the Project to reach FID and thereby enable the Project to proceed thereafter to full construction at a currently estimated cost of approximately £300m. The Directors of InfraStrata believe that proceeding with the Project to FID will provide InfraStrata with a greater number of monetisation options in the future, with such options having the potential to optimise the return to shareholders.

Commenting, Ken Ratcliff, Chairman of InfraStrata, said:

" The Board of InfraStrata is delighted to have secured world leaders in the provision of engineering services to gas storage projects for the next stage of the Project. The risksharing approach of the contractors as technical experts is very welcome and shows a shared belief in the delivery of the Islandmagee project.

The increased emphasis on using renewable generation and the ongoing issues prevailing at existing, ageing, gas storage facilities in the UK, reinforces the existing fundamentals that support our commitment to develop this project. To meet the Project’s demands, we are fully focused upon identifying the specific skill sets required, whilst keeping corporate overheads to a minimum. The relocation to Belfast and the proposed Board changes are designed to achieve these goals to maximum effect at minimum cost."

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21 October 2016 - CPR of the gas storage market and economic model for Islandmagee PDF Print E-mail

InfraStrata plc (AIM:INFA), the gas storage company focussed on the UK, is pleased to announce the publication of a competent person report (the “Report”) on the gas storage market in the UK and a review of the revenue assumptions for InfraStrata’s economic model of the Islandmagee gas storage project (the “Project”) by The Energy Contract Company (“ECC”), a leading commercial consultancy in the global oil and gas industry.

The full report titled “The gas storage market in the UK and review of revenue assumptions in economic model for the Islandmagee gas storage project” will be available shortly on the Company’s website, www.infrastrata.co.uk, with a summary of its findings below.

The revenue model for the Project was based on assumptions of volatility and summer-winter price spreads by Baringa Partners (“Baringa”), an independent business and technology consultancy, for InfraStrata. ECC concluded that the underlying assumptions in the Baringa model are reasonable.

This revenue model formed the basis for InfraStrata determining the Project’s cashflow over a 20 year period. InfraStrata’s economic model assumes a capital expense and pre-operations operating expense of £308m in aggregate, utilising 65% debt. InfraStrata has estimated the net present value (NPV) of the Project to be £67m at an 8% discount rate and £38m at a 10% discount rate. ECC has not reviewed these NPV estimates.

The report was commissioned as part of the Company’s strategy to seek funding arrangements to sit alongside a grant of up to €4.024m from the EU in order to commence a Front-End Engineering Design (FEED) and commercialisation process by year end, and in order to proceed to a Final Investment Decision (FID) for the Project in late 2017.

Commenting, Andrew Hindle, CEO of InfraStrata said:

" With the majority of UK gas storage in two ageing facilities, the Board of InfraStrata considers it imperative for new investment in modern flexible facilities in the UK in order to meet the gas demands of the future. Gas is assuming an important role in supporting renewable generation in the UK, whilst it continues to heat the nation, provide energy for cooking and contributes to wider lower carbon transportation in the form of Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG). The Report convincingly confirms our beliefs.

The Report by ECC is third party confirmation for what are attractive revenue assumptions for the Project and these revenues demonstrate the potential value of the project."

The executive summary points in the Report are as follows:

  • Most gas sold in the UK is used for space heating, so demand has always varied significantly from day to day, due to temperature variations. In future these short term variations in demand should become significantly greater. UK Government energy policy now emphasises the need to replace power generation from fossil fuels with electricity generated from renewable sources, such as wind. As wind does not blow every day, gas fired generation will have to make up the deficit. Short term gas demand levels will therefore vary increasingly, depending on whether the wind is blowing or not.
  • Many of the traditional means of meeting peak gas demand such as swing from offshore fields and interruptible gas sales contracts have almost disappeared now, but have been replaced by other sources of peak supply, such as pipeline gas imports from the rest of Europe and LNG imports. However, there are some drawbacks to reliance on these sources in future. Historic data shows gas suppliers in the rest of Europe are reluctant to supply the UK in cold winter conditions, if it means that they might be short of gas themselves. There are also problems with LNG as a source of peak gas, as the long-time lags for the delivery of LNG cargoes mean that it is difficult for LNG producers and traders to react to high prices in the UK market, which might have collapsed by the time a cargo arrives in the UK.
  • In the rest of Europe the traditional means of supplying supplementary gas to meet peak demand was to use gas storage, although this was always less common in the UK. Gas storage levels in the UK are very low compared to the rest of Europe. Average storage capacity is only equivalent to 6.4% of annual demand in the UK compared to 25-35% in the other major markets in Europe.
  • The problem in the UK has been exacerbated by recent technical problems on the Rough storage facility, which has severely restricted injection this summer. There have also been problems on the Hornsea storage facility. Both of these facilities, which account for almost 75% of UK gas storage capacity, are now over 30 years old and their continuing availability in the longer term must be subject to some doubt.
  • The cessation of injection at Rough this summer seems to have led to a surge in price volatility from late August onwards. From October 2013 to July 2016 the Short term Gas Volatility Index averaged 34%. However in the last month or so this has more than trebled to 126%. This surge in volatility has potentially great significance for the Islandmagee project. Salt cavern storage projects such as Islandmagee depend on short term volatility to enable the users to gain from injecting gas on low price days and producing later on when prices have risen. The greater the volatility the more profitable the project.
  • Overall the conclusion is that due to the increased use of renewable generation, gas demand will become even more variable on a short term basis in future. The existing means of meeting this variation in demand may well be inadequate in future, so price volatility is likely to increase in future and could increase significantly.
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26 September 2016 - Revision to Baron Oil option PDF Print E-mail

InfraStrata plc (AIM:INFA), announces that it has agreed to a modification of the option held by Baron Oil Plc (“Baron”) to acquire equity in Islandmagee Storage Limited (“IMSL”), the gas storage development company owned 90% by the Company.

On 19 August 2016, the Company announced that it had repaid a loan from Baron and had amended the option which accompanied the loan from Baron, so that Baron had an option to acquire a 15% interest in IMSL for a payment of £1,536,498 until 31 March 2017. This option has been revised, so that Baron now has an option to acquire the number of ordinary shares of 1p in InfraStrata that represents 16.666% of the enlarged ordinary share capital of InfraStrata (from time to time) for a payment of £1,536,498, until 31 March 2017. Exercise of the option in full is conditional on InfraStrata having the requisite authorities under the Companies Act 2006 to issue new ordinary shares in the Company, which will be sought at the Company’s next general meeting of shareholders (or earlier if required).

This is part of an ongoing programme of re-structuring of the Company, as it seeks to focus entirely on the Islandmagee gas storage project. This also follows the Company’s announcement on 13 September 2016 that it had increased its interest in IMSL to 90%.

The Directors of InfraStrata have also decided to divest the Company’s remaining oil and gas exploration interests and intend to commence a process to achieve this shortly.

Following these changes, InfraStrata will also seek a re-classification of the Company’s sector classification. It is proposed to reclassify the Company to the Utility sector 7573 Gas Distribution. If the Industry Classification Benchmark approves this re-classification, then the change is anticipated to be implemented in December 2016.

Commenting, Andrew Hindle, CEO of InfraStrata said:

“The amendment to Baron’s option and the other proposals announced today are important aspects of InfraStrata’s transition to the only AIM-quoted company entirely focused on gas storage and we will be reviewing our management and technical requirements to ensure that all resources will be entirely dedicated to development of the project. ”

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13 September 2016 - Acquisition of additional equity in Islandmagee Storage Limited PDF Print E-mail

InfraStrata plc (AIM:INFA), the independent petroleum exploration and gas storage company, is pleased to report that its wholly owned subsidiary, InfraStrata UK Limited (“IS-UK”), has acquired an additional 25% equity stake in Islandmagee Storage Limited (“IMSL”), the developer of the gas storage facility in Northern Ireland which is a joint venture with Moyle Energy Investments Limited (“Moyle”), a wholly owned subsidiary of Mutual Energy Limited (“Mutual”).

Following the acquisition IS-UK will own 90% of Islandmagee Storage Limited with Moyle holding 10%.

These changes in interests are achieved by IMSL issuing IS-UK with an additional 250 ordinary shares fully paid for cash at par. For Moyle, who joined the project in May 2008, the transaction will mean that at Final Investment Decision (“FID”) it will no longer have the shareholder obligation to advance its share of outstanding funding to date to IMSL of approximately £2m plus interest (LIBOR + 1%) to retain its interest. This sum has been loaned to IMSL by IS-UK. Instead going forward Moyle will be required to advance IMSL 10% of any future shareholder loans made by IS-UK prior to FID. IMSL will however remain liable to repay all existing funding provided by IS-UK.

Gas storage is essential for storing surplus gas for use during high demand periods and to offset any interruptions in the supply chain. It is envisaged that the Islandmagee gas storage facility will play an important role in future gas supply to Northern Ireland, Republic of Ireland and Great Britain, particularly the fast supply of gas to meet shortterm demand surges. High injection and withdrawal flow rates are two unique properties associated with fast acting salt cavern gas storage such as Islandmagee.

The Company is seeking to complete funding arrangements to sit alongside a grant of up to €4.024m from the EU in order to commence a Front-End Engineering Design (“FEED”) and commercialisation process by year end, in order to proceed to a FID for the project in late 2017. The Company is in receipt of €1.6m from the EU as the initial 40% advance of the €4.024m.

Commenting on the acquisition, Andrew Hindle, CEO of InfraStrata said:

“InfraStrata represents the only AIM-listed company with a focus on gas storage and this focus, and the importance of the project, has never been greater as we look to complete funding for a FEED and commercialisation process. There has been much reporting recently in the press about the potential for a structural change in the gas storage market partially due to the reduction of capacity at the Rough facility, which accounts for approximately two-thirds of UK storage capacity. Management believe that there has not been a better rationale for investing in gas storage for a number of years and the importance of new modern facilities to provide the necessary security. The acquisition of the additional interest in Islandmagee Storage Limited is part of a strategy for a focus of management resources on the successful delivery of maximum value from the project to InfraStrata’s shareholders. ”

Commenting on the acquisition, Paddy Larkin, CEO of Mutual said:

“Mutual is delighted that it will continue to have a key role in this strategically important project for Northern Ireland. The new shareholding level is better aligned with our long-term interests and capability and we look forward to working closely with all project stakeholders to make the project a success. ”

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