INFA.L Regulatory News (INFA)

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:

-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."