Infrastrata (LSE:INFA) advanced 2.8pc to 0.8p on Wednesday morning after revealing progress in its efforts to secure equity and offtake partners for its flagship Islandmagee gas storage project. In an update, the business said a second potential equity partner has now completed due diligence on all aspects of the Northern Ireland-based asset. This comes after another potential partner undertook a similar level of scrutiny in the second half of 2018. Infrastrata is now focusing its discussions on these two ‘highly interested’ parties.
Elsewhere, the firm said it has narrowed down its search for an offtake partner to three parties from six. It said its decisions here have been informed by a recently commissioned report that suggests UK gas market volatility will continue to increase over the next decade to lead gas storage revenues to reach highs of 50-60p/th.
Discussions are well underway between Infrastrata’s potential equity and offtake partners to reach an agreement on an acceptable contract length and structure. ‘We are keen to conclude these discussions as soon as is practicable while ensuring that we get the best deal possible for the company,’ the business added.
Meanwhile, Infrastrata said it has received results from its construction EPC and Owner’s Engineer tenders that appear to be in line with previously released cost estimates for building Islandmagee. The firm now intends to enter formal negotiations in the coming weeks to negotiate a construction contract that will be entered into ahead of its planned final investment decision at the end of H1 2019.
Finally, it said early indications suggest its potential equity partners could be interested in a debt and equity deal. This would increase the speed at which it can make its final investment decision.
Islandmagee is a proposed salt cavern gas storage facility that could hold 500,000,000 cubic metres of natural gas. Infrastrata’s board believes it will provide more than a quarter of the UK’s total natural gas storage once it is built. To date, around £14.5m has been invested in Islandmagee, supported in part by EU funding. Depending on what way the company’s final investment decision goes this year, construction of Islandmagee is slated to take place from 2019 to 2022.
Interim chairman and chief executive officer John Wood said: ‘We have made good progress during 2019 and we now have a clear route to commercialisation of our Project. We identified a clear scope of works that was required to be undertaken to facilitate progression. We have been working through these items in recent weeks and having completed those actions. We are now clearly focused on the offtake agreement terms that we hope will bring one of our potential equity partners onboard. We remain committed to FID by the end of H1 2019. We are pleased that the second detailed due diligence process by a potential equity partner has been completed.’
Infrastrata’s shares took a big hit last month after the firm said that due diligence being undertaken by its potential funding partners had ‘unfortunately’ taken longer than expected since Christmas. It added that the due diligence had been ongoing at full speed for several weeks and was expected to complete towards the end of March.