INFA.L Regulatory News (INFA)

3 July 2019

InfraStrata plc

("InfraStrata" or the "Company")

Islandmagee 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").

Project Funding Partners & Final Investment Decision (FID)

The Company achieved a transformational milestone for the Project on 11 June 2019 when it entered into a Binding Term Sheet with Vitol SA for the proposed offtake of the entire storage capacity of the Project for 12 years. The Company announced that it had agreed a term sheet with Vitol SA that, once converted into a full gas storage agreement in due course, will underpin cumulative Project revenues for the first 12 years of operation of the gas storage facility, expected to be approximately £600 million to £780 million before costs at full operating capacity. Over the 40 year lifetime of the facility operations, cumulative revenues are expected to be between £2 billion and £2.60 billion before costs at full operating capacity. The directors of InfraStrata believe that not only does this outline agreement validate the need for gas storage for the whole of the UK, but in due course will also provide an invaluable contribution to the local Northern Ireland economy in terms of direct and indirect employment. The Company has now proceeded to the next stage of this process to draft and agree the Gas Storage Agreement (GSA) with Vitol SA, based on the binding pricing and capacity terms agreed in the Term Sheet, and that will cover the entire capacity of the Project, being 500 million cubic metres across all seven caverns once constructed and fully operational.

The signing of the Term Sheet has enabled InfraStrata to continue to progress detailed discussions with potential equity and debt partners in the UK and Europe for the funding of the construction of the Project and pre-construction works, and this is a key priority for the Board. Discussions include proposals for a convertible debt facility that can be converted to equity at the Project level. Since the announcement of the Term Sheet, the Company has been able to provide the potential funding partners with additional financial modelling, that includes revenue sensitivities, construction costs and the contracting methodology, all of which demonstrate the Project's technical and economic viability.

After receiving and fully analysing all Project construction offers, InfraStrata has now refined its main construction strategy. The main focus is to de-risk the Project, as much as possible, during construction and to better integrate the various construction services as well as centralise the common requirements of the selected contractors. This is expected to lead to increased cost savings, operational efficiencies and ultimately reduce the impact on the local area within Islandmagee.

The Company remains committed to obtaining a FID to fund the construction of the Project by the end of 2019, which can then lead to first injection of gas in 2022 and full commercial gas storage operations in 2023. This is subject to agreement with the Company's chosen funding partner. Further details will be announced as soon as possible.

Marine Licence

The Company continues to make significant progress on the marine licence and confirms that it has submitted all the reports that were last formally requested by the Department for Agriculture, Environment and Rural Affairs in Northern Ireland (DAERA) as follows:

· Shadow Habitats Assessment

· Updated Brine Model

· Independent Verification of Brine Model

· Environmental Monitoring Plan

InfraStrata expects feedback on these reports from DAERA in due course, which is a normal step in the process of being granted a full marine licence. Further, as an EU Project of Common Interest (PCI), the Project is entitled to receive expedited processing timeframes in relation to licencing and permitting. InfraStrata is working closely with DAERA so that the full and proper process required for the issuance of a full marine licence can be completed as soon as possible.

As the Project moves towards the construction phase, the Company has awarded minor contracts to update environmental baseline surveys that will be required prior to the construction process commencing. This piece of work will be completed in due course and kept ready before construction activities commence. As the Company has previously stated, it sees no reason why the full marine licence will not be issued once due process has been adhered to and been completed.

EU Grants

The final EU application to receive the remaining grant monies of EUR1.6m for the FEED work that was completed last year continues to be progressed and the funds are now expected to be received from the EU later this year after all final audits have been completed. This is currently an ongoing process and InfraStrata expects to receive this already-approved grant (which was subject to completion of the FEED to the satisfaction of the EU and according to set milestones that the Company believes it has met) once all the external audit formalities have been duly completed. The Company is confident of receiving the monies in due course but is subject to the due process and timetable of the EU.

As announced on the 14 June 2019, an application was made to the EU for a sum of EUR9,299,446.00 to enable the FEED study in order to facilitate the reverse flow of the Scottish Northern Ireland Pipeline (SNIP). The Company expects to hear of the outcome of this application by the end of 2019. A reversal of the SNIP will enable the full capacity of the Project to be utilised once all proposed seven caverns are constructed and ready for operation, expected by 2024/5. Additionally, the Company is considering other strategies including virtual trading of gas between Northern Ireland and mainland Britain in order to fully maximise the storage capacity made available by 2024/25. This will not only increase trading optionality but will also help in balancing of the two networks during peak demand days.

John Wood, Chief Executive Officer, commented: "We are now at a very exciting stage of the Islandmagee Gas Storage Project. Having underpinned our future revenues with an innovative offtake structure, we have been able to fully model the future income streams for the next 12 years. This has assisted in our negotiations with potential project funding partners. As we did with the Term Sheet with Vitol, we will take the required time to negotiate the best long term deal we can so as to ensure our long term interests and those of our shareholders are protected."

For further information, please contact:

-ENDS-

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."