Infrastrata Share Chat (INFA)

Worth remembering MB's expertise!! "Within the last five years Matthew has obtained significant experience and knowledge through working in a role as Head of Capital Projects for a UK regional government authority. He therefore, has significant experience with the EU funding framework.  The Board believes that these skills are going to be very beneficial to InfraStrata and will ensure the Company maximises its potential in this area."

Wow indeed ..Yep .if you read and follow Spud,McCadder,Snowman and others here you will note that the BOD ARE on the case and ahead of the game as is The FEED schedule.Equity funding with E.U. And Gov. Grant Aid is the clue for the next stage ..stay confident and be assured thst even if the market wobbles with current world news and Brexit troubles SS Infa will ride the waves !!

Great news indeed but not for poor Naz who I imagine will be breaking out in cold sweats now.

Not direct treasury money, but guaranteed by the government.
Risk free to the lender!

I for one was not expecting a possible outcome like this!

Game changer if full £40million comes through, I would actually be extremely happy with 25% of that

Spud, are you saying that 40 from the EU grant, and the other 80 from HMTreasury in the way of a loan?

That would be like going to Heaven without dying. Don't think it works like that in reality.

65% of the capex is covered by the UK Guarantee Scheme (basically a bank loan)

Again!....BoD take a bow!

Yes, I was wondering that as well.

So the Capex for the first two caverns is estimated at £120mn. An EU grant of £40mn leaves £80mn to be funded, let's assume 1/3rd equity, 2/3rds loans. The lending banks would probably need prior offtake agreements in place covering a minimum storage commitment of 50% of capacity. Doable.

Then comes the hard bit. Where will Infa get circa £27mn of equity to maintain 100% ownership (1/3rd of 80)? Some nimble financial engineering is required at this point.

This is brilliant news this morning.....nazareme now suck on that lol

If we get full grant it means we have a chance of keeping 100% of islandmagee storage! !!!

to the week. All shaping up nicely. Should give the SP a nice shove upwards......come on!

RNS Number : 9698D
Infrastrata PLC
15 October 2018




15 October 2018

InfraStrata plc

("InfraStrata" or the "Company")

Islandmagee Gas Storage Project - New EU Grant Application

InfraStrata plc (AIM: INFA), the UK quoted company focused on the development of natural gas storage capacity, is pleased to announce that it has submitted a new "grant for works" application in respect of its Islandmagee gas storage project (the "Project") to the EU (European Union) pursuant to the requirements of the Connecting Europe Facility grant reference: "CEF-Energy-2018-2". It should be noted that this new application does not impact the Company's existing EU grant for FEED ("Front End Engineering Design") works. As announced on 11 October 2018 FEED is progressing ahead of schedule with almost 70% of the pre-established milestones having been achieved.

The application has been submitted for a grant intervention rate of 33.14%. This equates to a grant amount of circa £40 million towards the total construction cost of the Project's first phase of an initial two storage caverns.

The Company will receive notification from CEF-Energy-2018-2 in February 2019 (or such later date as publicly notified by the EU) detailing whether the application was successful, and if so, the level of funding granted. The notification timeframe aligns with the Company's planned H1 2019 programme of activities for final investment decision ("FID"), procurement of a contractor and the commencement of the engineering works.

A key element that must be submitted as part of the grant (for it to be eligible for funding) is an independently prepared Cost Benefit Analysis ("CBA") for the Project. The Company duly commissioned this independent report from Energy Reform Consulting Services and the results demonstrated the clear need for the Project. The report highlighted the fact that just a single day's power outage will cost the UK economy in excess of £1.1 billion at its peak, with an average daily cost of £700 million.

The CBA demonstrates a strong investment to benefit ratio and clearly underpins the Directors' belief that this Project could be a key piece of strategic infrastructure for the UK. A copy of the CBA will be uploaded onto the Company's website by the end of the day tomorrow. Whilst a Brexit "No Deal" generally increases uncertainty, the Directors do not believe that it will affect this application as the UK government (as part of the "no deal" papers published) has stated that it will honour PCI (EU Project of Common Interest) project funding in the event of leaving the EU with no deal.

John Wood, Chief Executive Officer commented "I would like to thank the team for their extremely hard work and efforts in submitting the grant application by the designated deadline and we look forward to receiving the decision in February 2019. We now continue to focus on the last few elements of the FEED works and the conclusio

The security of supply issue is the reason for highlighting the below article not the short term volatility that storage ultimately benefits from. A tightness in LNG supplies from 2020 demonstrates the reduced ability to call on gas from this particular area especially during times of peak demand. With tightness of the rest of the market overall and now Brexit the issue of energy security and ultimately adequate storage will become an issue for gas traders scrambling to secure adequate supplies of gas in the winter. A perfect storm in the making imo.

I agree O& W, it is about trading the short term volatility

There is also the security of supply side of things, current Russian supply routes at almost maximum capacity, any unplanned outages from UKCS or Norway combined with a demand spike could be a real problem for UK and Ireland.
That's where the 2nd and 3rd phase islandmagee could help with greatly imo

I think that longer term reports of a possible structural squeeze on LNG supply/demand are missing the point of what Infa are about. Their IslandMagee salt cavern storage project is all about short-term injection and delivery, building on expected higher volatility of prices in the short-term. The project will not be inventorying natural gas simply to benefit from a long position, firmly held. As long as there is that volatility for traders to take advantage of,it doesn't matter at what LEVEL natural gas prices have reached.

I ain't got a clue Snowman!

My post wasn't suggesting any of the options were in the mix for future caverns, just pointing out the potential and the fact Costain have experience in all.

"There may be room for two or three more similar-sized or larger sites, Mr Wood said."

Quote from the recent Irish Independentinterview

Timera Snapshot: Winter gas alert. European market tight into winter. Russia key marginal supplier but flows routes near max capacity. https://t.co/OHN1nApMCw https://t.co/LtoKKemC2V

Check out @TimeraEnergy’s Tweet: https://twitter.com/TimeraEnergy/status/1050684786442989568?s=09

https://timera-energy.com/global-gas-market-risk-shifting-to-the-upside/
Upside risk in 2020s is rising

Beyond the 2019-21 horizon, the global gas balance has tightened given an expectation of a continuation of the strong Asian demand growth experienced across 2016-18. This means the risk of a gas market squeeze in 2022-25 has increased substantially.

Chart 2 illustrates the balance of the LNG market if Asia continues on its current high demand growth trajectory. The chart shows the supply and demand balance in the LNG market (top panel), and European gas market (middle panel). It also shows LNG market balance based on current committed supply (bottom panel).

https://timera-energy.com/wp-content/uploads/2018/10/Market-balance-1.jpg

The bottom ‘market balance’ panel highlights two important implications of the current rate of Asian demand growth:

There is little to no surplus LNG spilling into Europe over the 2019-21 horizon
The LNG market needs new supply from 2022.
FIDs for new liquefaction projects have been thin on the ground since 2016. The only projects of scale that have committed to proceed are the Qatari expansion & the Shell led Canada LNG project announced last week.

These projects are not enough to meet the supply gap given the current pace of demand growth. Projects take 4 to 5 years to come online post FID. This means the timing and scale of new FIDs over the next 12 months will likely be critical to determining how tight the LNG market will be across the 2022-25 horizon. The risk of a sharp squeeze is increasing.

Does JW mean LNG terminals?
Close to our project or different location.?
Same location for hydrogen...? caverns 5&6 say?../would whole new Feed have to be done or would existing planned infrastructure cope with hydrogen as well with minor mods?

In the recent conference call JW made reference to "other uses" for salt caverns

From my research, apart from gas storage, salt caverns can be used for the following

CAES (compressed air energy storage)

Hydrogen storage (decarbonisation of grid)

CCS (Carbon Capture Storage)

interesting to note our FEED partner Costain is involved with all the above!! ( hiding in plain site)
https://www.costain.com/what-we-do/oil-gas/decarbonisation/

The projected 12% IRR for the project is imo conservative and with the CEO's vision for Islandmagee to become a big hydrocarbon hub I believe an IRR could turn out to be 20% a year or more for the next 40+ yrs if the facility is used to it's full potential.

Taken from one of the RNS's earlier this year...........

"Independent verification work undertaken by an international consultancy firm demonstrates a robust return on investment from the Project with a baseline internal rate of return ("IRR") of 12%, with potential for further improvement in certain scenarios, including access to additional grant funding and an extension to the operational life of the Project"

Snowman100 --great post ..nearly there and spot on EXCEPT the penultimate paragraph --have another read ----it just needs one word changing "will" to "are "

JW and the BOD ARE on top of the case,be fully assured.Now that FEED is on schedule and substantially sorted they have no issues with sorting out equity finance ( not investor cash this time) funding. They ARE on the case as we post !!

Always remember that any Lender or participating partner (such as say Costain ) will have the comfort of E.U backing ( Brexit or no bl**dy Brexit) full support from our wonderful erstwhile Gov and of course the Northern Ireland Finance Initiative --The BOD ARE well up to the task --thanks for your post ,Mike

mcadder,

Do you have a sense yet of the IRR range for the owner/operator of the IslandMagee project?

Energy security is going to become even more of a hot topic over the next few years and the fact remains that our reliance on Imports is dangerously high leaving us wide open to disruption during outages, peak demand, Brexit, any planned maintenance or force majeure etc. Fracking imo will always be in a fairly limited capacity but either way wherever the gas is sourced we still need somewhere to store it. But in terms of the economics of storage long range storage was just no longer economically viable for several reasons. Add in the estimated refurbishment costs of over £1B to make the failing wells safe for operation and it's no surprise the decision was made to extract the remaining gas from Rough and close it.
However the loss of 3BCM of storage is equivalent to 6 Infa facilities. The future of storage will be the development of more fast cycle MRS sites like that of Infa where the economics do stack up.

Snowman - regarding the potential LNG project it is still just that until it is actually built however they both offer different benefits in terms of security of supply.
Both would compliment each other imo. But either way Islandmagee would be the only UGS facility on the whole island of Ireland LNG facility or no LNG facility. It is also the only proven suitable location in Ireland where salt cavern storage is suitable due to the geology of the area.