Binding Term Sheet - storage capacity offtake

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.

11 June 2019

InfraStrata plc

("InfraStrata" or the "Company")

Binding Term Sheet for long-term storage capacity offtake at the Islandmagee Gas Storage Facility

InfraStrata plc (AIM: INFA), the UK quoted company focused on the development of natural gas storage capacity, is pleased to announce that its subsidiary, Islandmagee Energy Limited, has signed a binding term sheet ("Term Sheet") with Vitol SA ("Vitol") to enter into a Gas Storage Agreement for long-term storage capacity offtake at the Company's proposed gas storage facility in Islandmagee, Northern Ireland (the "Facility").

Vitol's primary business is energy trading and it trades over 7.4 million barrels of crude oil and products a day. The firm is privately owned with 40 offices globally with its largest operations in Bahrain, Geneva, Houston, London, Rotterdam and Singapore.

Under the Term Sheet, Vitol will, on an exclusive basis and subject to conditions precedent and final agreement, enter into a 12-year Gas Storage Agreement ("GSA") with Islandmagee Energy Limited to utilise the capacity of all seven gas storage caverns proposed at the Facility, totalling 500mcm. Construction of the caverns is planned to commence in late 2019 (subject to funding) and first gas is then expected to be injected under the GSA in the fourth quarter of 2022, with full commercial operations planned to commence in storage year 2023-24 (which runs from 1 April each year).

The storage capacity charge that has been agreed between Vitol and InfraStrata will incorporate a multi-layer optimisation structure absorbing the intrinsic and extrinsic pricing elements of the UK gas markets that are available to a storage operator. In addition, given the high-performance characteristics of the Facility, it will be able to capture significant incremental value generated by sudden movement events ("SUMO Events") as well as to help balance the overall UK gas network. SUMO Events typically occur during periods of high volatility, when the gas networks are stressed either by over- or under-supplies relative to demand.

InfraStrata has carried out extensive modelling work over the past few months which indicates that had the Facility been in operation for the past ten years, the effective storage capacity charge would have averaged in the region of 28-38 pence per therm annually as the storage operator's (currently Islandmagee Energy Limited) share of the overall revenues. Once the entire working volume of 500mcm is made available to Vitol, this would translate into projected annual revenues of between £50 million and £65 million at project level before operating, maintenance and other costs. This level of a storage capacity fee structure is in keeping with InfraStrata's expectations of its brand new, state-of-the-art fast cycle Facility.

The Term Sheet has an initial term of 12 months and thereafter can be extended for successive periods of 6 months by written agreement between both parties. The Term Sheet outlines the principal terms of the proposed GSA, which both parties will now proceed to negotiate and aim to finalise as soon as possible.

Michael Curran, Head of Gas Trading Vitol commented: "This store will provide reliable, flexible and long-term solutions to our regional and global client base. Gas is an essential complement to wind and solar and, as the energy mix evolves, we anticipate its role will grow. We are very pleased in this first step of our relationship with InfraStrata and will look to partner with them on suitable projects in future."

John Wood, Chief Executive Officer commented: "We are extremely happy to welcome Vitol on board as the exclusive offtake partner for our Islandmagee gas storage project. We have spent considerable time working with Vitol to ensure that the agreement reached has a positive outcome for both parties. Whilst subject to final contract, this is the first commercial gas storage deal that has been entered into in the UK for several years, clearly demonstrating the market demand for this type of storage facility. We are excited and look forward to working in conjunction with Vitol for many years to come."

Having now underpinned the Facility's future revenue stream, subject to execution of the GSA, the Company will continue to focus on completing discussions and agreeing terms with EPC contractors and potential equity and debt partners to provide funding at the project level to enable FID (final investment decision) for construction of the Facility. As per the Company's announcement on 09 May 2019, the Term Sheet for seven caverns means that FID for Phase 2 (caverns 3 to 7) will be advanced by approximately 12 months from Q4 2020 to Q4 2019, with the knock-on effect that FID for Phase 1 (caverns 1 &2) is expected to also be taken in Q4 2019.

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."