25th May 2016 14:17
LONDON (Alliance News) - InfraStrata PLC Wednesday said it has secured the remaining grant money being provided by the European Union for its Islandmagee gas storage project in Northern Ireland, stating it will use it as security to cover one of its loan facilities.
"The continued availability of EU grant funding for the next phase of the project, the front-end engineering and design, is a testament to the strategic importance of the project and to InfraStrata's ability to deliver these work programmes," said Chief Executive Andrew Hindle.
InfraStrata has secured the balance of the EU grant that is co-financing the project after submitting its final reports, securing a total of EUR1.8 million on Wednesday. The company plans to place the funds into an escrow account as security for the EUR1.8 million worth of bridging finance that was secured back in May 2015 from fellow London-listed Baron Oil PLC.
With the funds secured, InfraStrata will be due to make its first repayment to Baron Oil on the first day of August this year. Baron Oil agreed to provide that short-term finance to InfraStrata to bridge the receipt of the EU funds.
Notably, Baron Oil has the option to convert the loan balance into a 15% equity interest in the Islandmagee project, which if exercised would be carved off pro-rata from InfraStrata, which currently has a 65% interest, and from its partner Moyle Energy Investments Ltd, which holds the other 35%.
Baron Oil released its own statement Wednesday noting InfraStrata's announcement.
Islandmagee is consider important for both Ireland and Britain and was declared a "Project of Common Interest" by the EU back in October 2013, meaning the project is considered to not only benefit Northern Ireland but a much wider area. The project also is covered by the UK Guarantee Scheme.
The plan is to create seven caverns that would be capable of storing up to 500.0 million cubic feet of gas in Permian salt beds about a mile below surface. The Islandmagee-1 well was drilled last year in order for the core of the Permian salt to be extracted so development plans could be progressed.
To put the size of the project into perspective, Islandmagee would be able to satisfy all of Northern Ireland's gas demand for around 60 days once fully completed.
Strong transmission infrastructure is already in place to link the facility to all demand locations. Gas from the facility will be able to feed the Ireland onshore network via the South-North pipeline and via the Scotland to Northern Ireland pipeline and through the existing subsea interconnectors.
InfraStrata shares were up 27% to 2.70 pence per share on Wednesday following the announcement, whilst Baron Oil shares were up 4.0% to 0.650 pence.
By Joshua Warner; [email protected]; @JoshAlliance
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