Agreement on gas storage co-o

RNS Number : 3875O

Infrastrata PLC

29 June 2010

 



For Immediate Release

29 June 2010

PRESS RELEASE

 eCORP and Infrastrata reach agreement on gas storage co-operation

The Directors of Infrastrata plc (AIM: INFA) ("Infrastrata" or "the Company") are pleased to announce that a Memorandum of Understanding ("MOU") has been signed with US independent energy company eCORP International, LLC ("eCORP") relating to Infrastrata's gas storage projects in the UK. In addition, other agreements are being set up relating to the Company's other gas storage projects in continental Europe.

UK Projects

The main agreed terms of the MOU, which are subject to final due diligence and formal agreements being agreed, are as follows:

Portland Project, England

eCORP will acquire 50% of the share capital of the project company, Portland Gas Limited, in return for funding the next £22 million of project expenditure. Following the completion of the transaction Infrastrata and eCORP will each own 50% of the project.

In advance of entering into the MOU with eCORP, the Company terminated the Co‑operation Agreement which it had signed in October 2009 with a group of parties that had expressed an interest in acquiring a stake in the Portland Project. Infrastrata believes that the proposed arrangements with eCORP are beneficial to the Company as they extend to a broad range of the Company's activities and they allow the Company to develop the Portland Project further with eCORP before bringing it to market. Under the terms of the agreement with eCORP, the project will be developed in phases with drilling of the first cavern well being the initial activity. It is anticipated that drilling will commence in the summer of 2011. Infrastrata and eCORP will jointly provide Portland Gas Limited with technical services under an agreement in connection with the development of the project.

Islandmagee Project, Northern Ireland

eCORP will acquire 40% of the share capital of the project company, Islandmagee Storage Limited, in return for funding the project through to the Financial Investment Decision ("FID") at which stage project financiers would be prepared to commit to fund the full construction of the Islandmagee Project. Funding to this point is expected to be up to £6 million and will include the drilling of the first cavern borehole. Infrastrata's share in the project will reduce from 65% to 39% and Mutual Energy's share from 35% to 21%. At the point of full project funding Infrastrata and Mutual will receive up to an additional £5 million in cash (Infrastrata up to £3.25 million). In addition to the funding outlined above, eCORP will refund all of the project development costs to date, estimated at £2.5 million, which have been paid for solely by Infrastrata.

Subject to securing planning permission for the project, the drilling of the first cavern well is expected to take place during 2011. The Infrastrata team with eCORP and Mutual Energy will jointly provide Islandmagee Storage Limited with technical services under an agreement in connection with the development of the project.

Continental Europe Projects

The main terms which relate to projects in continental Europe, and which are also subject to due diligence and formal agreements being agreed, are as follows:

Germany

It is proposed that eCORP will acquire 80% of the share capital of the project company in return for funding the project to first gas operations, should the project proceed to development. The transaction is subject to the agreement of Infrastrata's local project partner. Infrastrata's share in the project will then reduce from 80% to 16%. In addition to the funding outlined above, eCORP will refund Infrastrata's share of back-costs of the project estimated at £0.15 million. Under the terms of the proposed agreement Infrastrata will reimburse eCORP for Infrastrata's share of the development and construction costs within 90 days of first gas storage operations in order to retain its 16% interest. The project company recently submitted an application for an exploration licence over a salt dome in NW Germany. Infrastrata and its local partner will work with eCORP to identify further energy storage projects within an Area of Mutual Interest ("AMI") covering Germany and The Netherlands. If other projects were to be approved by eCORP, Infrastrata would retain a 12% interest on similar terms. Infrastrata will provide the project company with technical services under an agreement in connection with the development of the projects.

Spain

It is proposed that eCORP will acquire 100% of the share capital of the project company. Under the terms of the agreement eCORP will refund Infrastrata's share of back-costs of the project estimated at £0.25 million. Infrastrata will retain an option until 90 days after the commencement of gas storage operations to "buy-back" a 20% interest in the project in return for paying a pro-rata share of the development and construction costs. The project company submitted an application for an exploration licence in Andalucía in 2008. Infrastrata will work with eCORP to identify further salt gas storage projects within a further AMI covering Spain and France. If other projects were to be approved by eCORP, Infrastrata would retain an option to "buy-back" a 15% interest on similar terms. Infrastrata will provide eCORP with technical services under an agreement in connection with the development of the projects.

Commenting on the news, Andrew Hindle, CEO of Infrastrata plc said:

"eCORP, based in Houston and London, has a very experienced team which has developed and operated numerous gas storage facilities in the US. We are pleased to be working in partnership with eCORP across all of our projects, and will seek to develop further energy projects in the UK and Europe related to our project core areas.

We believe that significant value will be gained for shareholders by going forward with eCORP into the early stages of construction on the Portland Project. eCORP's interest in pursuing the Islandmagee Project at the same time means that the Project is now funded through the important planning and Front-End Engineering stages.

The investment relationship with eCORP in continental Europe, which provides clear funding to the point of first gas, allows Infrastrata to concentrate on its core skill of originating gas storage opportunities and should lead to the creation of further shareholder value.

Given the continuing difficult environment for funding major infrastructure projects we are pleased that the agreement with eCORP now puts the Company on a sound financial footing to build for the future. This far-reaching agreement with eCORP retains significant upside for shareholders."

Commenting on becoming a partner in the projects, Dr. John F. Thrash, Chairman and CEO of eCORP International, LLC said: 

"We are most pleased to have this opportunity to combine the natural gas storage expertise of our new partners in Europe with that of our existing team in the development of this exciting portfolio of projects. eCORP sees this as a major step in its plan to promote energy security in both Western and Eastern Europe."

For further information please contact:

Infrastrata plc

Andrew Hindle, Chief Executive Officer Craig Gouws, Chief Financial Officer	020 8332 1200
Financial PR - Buchanan Communications
Richard Darby James Strong	020 7466 5000
Nominated Advisor and Broker - Seymour Pierce
Jonathan Wright Richard Redmayne	020 7107 8000

Notes to Editors:

Background on Infrastrata plc

Infrastrata's business is focused on the development of two gas storage projects in the United Kingdom at Portland, Dorset and at Islandmagee, County Antrim, Northern Ireland. The two projects could between them provide over 10% of the total UK and Ireland peak daily demand in the latter part of the next decade.  The Company is also developing new projects in mainland Europe initially focussing on Germany and Spain.

Further information is available on the Company's website www.infrastrata.co.uk.

Background on eCORP International, LLC

eCORP International, LLC is a Delaware limited liability company based in Houston, Texas and London, England. The eCORP companies develop, operate and own natural gas storage facilities, and develop and explore conventional and unconventional natural gas prospects in the US and Internationally. eCORP has been engaged in the research and development of unconventional hydrocarbon production since 1979. eCORP has been engaged in the development and operation of independently owned natural gas storage facilities and related assets since 1984.

eCORP and its principals and affiliates have been involved in the development of several significant projects, including the following: 1) Bammel Field, Houston, Texas, 2) Rotherwood Storage Facility, Houston, Texas, 3) Katy Storage Project and Market Center, Houston, Texas, 4) Stuart Natural Gas Storage Facility, Southeast Oklahoma. 5) Stagecoach Natural Gas Storage Facility, Tioga County New York, and 6) Junction Natural Gas Storage Facility, Southwest Pennsylvania.

Further information is available on the Company's website www.ecorpusa.com.

Background on Portland Project

At a projected 1,000 million cubic metres ("mcm") or 35 billion cubic feet ("bcf") of working gas, the facility would be the largest of the publically announced onshore gas storage facilities in the UK. Planning permission was granted by Dorset County Council in May 2008 and Pipeline Construction Authorisation was granted by the BERR (now known as the Department of Energy and Climate Change) in July 2008. The gas storage facility is designed to inject or withdraw gas at 20mcm per day. The current estimate of total development cost for the project is £456m. The project will use brine compensation technology and will not require cushion gas. Further information is available on the website www.portland-gas.com.

Background on the Islandmagee Storage Project

The proposed 500 million cubic metres ("mcm") facility will be the largest on the island of Ireland and the first for Northern Ireland. It will make a significant contribution to the security of gas supplies. The facility is being designed to inject gas at 12 mcm and withdraw gas at 22 mcm per day. The cost of construction has been estimated at circa £250 million, including cushion gas.  The project is owned by Islandmagee Storage Limited an independent Northern Ireland registered company; a joint venture between Infrastrata UK Limited (part of the Infrastrata plc group of companies) and Moyle Energy Investments Limited (part of the Mutual Energy group of companies. Moyle Energy Investments Limited will require Regulatory approval to participate in the construction of the project; in the meantime Infrastrata UK Limited is providing 100% of the development capital via shareholder loans. Further information is available on the website www.islandmageestorage.com.

 

END

 

 

AGRKKFDDBBKBCAB