Infrastrata (LSE:INFA) has raised more than £900,000 to help fund the construction of its Islandmagee gas storage project in Northern Ireland. The company has conditionally raised £925,000 by placing shares at 0.24p each with high net worth investors through new broker SI Capital.
The majority of the money raised will be put towards commencing and completing front-end engineering design (FEED) work at Islandmagee. The business said completing the FEED work will help to accelerate ongoing funding discussions with parties who have expressed a commercial interest in Islandmagee. Contractors are now in place to begin the FEED as soon as possible in compliance with the terms of Infrastrata’s EU funding grant, which provides up to 50pc of up-front costs.
After the costs of FEED work have been taken into account, Infrastrata believes it will still have sufficient working capital to last until the end of this year. What’s more, placing shares have a ‘one for two warrant’ attached to subscribe for further new ordinary shares at 0.48p each, exercisable within three years. This could potentially raise an additional £925,000 for the business.
Adrian Pocock, chief executive officer of Infrastrata, said: ‘We believe that Islandmagee is a highly significant project, particularly as gas storage capacity in the UK is significantly below the levels seen in other major European markets, as exacerbated by the recent closure of Centrica’s Rough facility, previously the UK’s largest natural gas storage site.”
“Infrastrata now needs to accelerate the commencement of the FEED work, and we will be communicating progress on this to the market, with commencement expected to be announced in the near future. In parallel, we are continuing discussions with potential storage customers, project level financing providers and other third parties who have expressed keen interest in this major infrastructure project. Further updates will be made in this regard as appropriate.
‘I would like to thank our shareholders for their support of the company. Historically, the pathway to reach this stage has been challenging, and in some respects, we consider that this reflects the largescale opportunity of the Project.”
Islandmagee is a proposed salt cavern gas storage facility that will enable gas to be delivered, stored, and then returned to the UK’s national transmission system. The project has a proposed 500m cubic metres of natural gas cavern storage, which is expected to provide over 25pc of the UK’s natural gas storage. This gas will be targeted at customers like Centrica, EDF and their peers.
According to its latest presentation, Infrastrata expects to complete Islandmagee’s FEED work by the end of the year before beginning construction in H1 2019 and targeting first gas in 2022. The project is expected to generate income from 2022 until 2060.
To date, the firm has invested around £11m in the project out of a total CapEx cost of £308m – a figure the board is attempting to reduce. Against this, modelled revenues for the project over 20 years once it is operational come in at £1.2bn.
Infrastrata is attempting to capitalise on a decline in the UK continental production of natural gas that has resulted in an increased reliance on international gas markets for supply. According to the Energy Contract Company, a consultancy in the global oil and gas industry, the average storage capacity in the UK is only equivalent to 6.4pc of annual demand. This compares to between 25-35pc in other major European markets.
With all this in mind, Pocock added that the firm continues to look undervalued with a current market cap of just £1.82m. He said:
‘Following completion of this strategic placing, the company’s market capitalisation at the placing price will be under £3m, which the board considers significantly undervalues the company and the strategic value, scalability and commercial potential of the Islandmagee project.’
‘Our primary objective is to progress the FEED and move towards construction and commercialisation of the project. We hope that our belief in the long-term value of the project will be recognised and that the company’s market capitalisation will begin to fairly reflect the value that we believe has been created to date and the potential growth thereafter.’
Pocock became chief executive of Infrastrata last year when more than 55pc of the firm’s shareholders voted to remove all four remaining board members including its former CEO and chairman. This followed a roller coaster ride for investors over the preceding year that saw the company warn in May that it risked running out of cash within months. The business was ultimately boosted after the Government announced a special £400million funding deal for infrastructure in Northern Ireland.