The AIM-listed company owns 90% of the project (Mutual Energy, which owns the gas pipeline linking the North with Scotland, controls the other 10%) and has covered half of the development costs, mainly through EU grants.
However, it remains short of total required costs for pre-construction technical tests by around £2.2m (€2.5m). InfraStrata sees the project as being commercially viable if it can attract investment. To that end, it has launched a review to explore financing options. The company’s preferred option would be a farm-down, where an investor would inject funds in return for an equity stake in the asset, but a sale of the project, or some of its assets, will be considered if no investor materialises.
However, InfraStrata is in discussions with a number of interested parties. It is believed a number of oil and gas majors, infrastructure funds and British utility companies are interested.
InfraStrata currently has cash reserves of only £175,000 which will cover working capital needs up to early August. Depending on the results of the funding search, the aforementioned test work — or front end engineering design (FEED) — is targeted for completion by the end of 2017, allowing for a final investment decision to be taken next year.
While being at least five years away from operation, Islandmagee is already being viewed as a major supplier of the UK’s future gas needs as the country’s current main storage facility — Centrica’s Rough field in the North Sea — has aged and is becoming more costly to maintain.
Islandmagee will also help feed Ireland’s energy needs, 40% of the country’s electricity generation still being dependent on gas supply.
Islandmagee is InfraStrata’s sole asset. The company has relatively recently switched from being an oil and gas exploration business to a storage firm and last year sold off its onshore exploration assets in England and Ireland, where it had owned and operated the controversial Woodburn Forest prospect near Carrickfergus.
A recent push by a dissident shareholder to overhaul the InfraStrata board has, according to the company, proved a time-consuming and costly “significant distraction” to discussions with potential investors and “a deterrent to other funding options”.
However, management feels the changing face of the UK gas storage market will enhance the long-term strategic value of the Islandmagee project.