InfraStrata looking into developing UK FSRU project

The London Stock Exchange-listed InfraStrata, a company focused on the development of natural gas storage capacity, has entered into an exclusivity agreement with Meridian Holdings for an FSRU project in the United Kingdom.

The FSRU project involves developing a floating LNG  receiving port offshore Barrow-in-Furness, Cumbria in northwest England.

The project is designed to deliver re-gasified volumes of natural gas directly into the UK market via its own National Transmission System (NTS) interconnection at Barrow-in-Furness.

With approximately 30 percent of the UK’s gas supply expected to come from LNG in the future, the directors of InfraStrata believe the gas markets are providing a strong economic signal to pursue the development of facilities such as this FSRU project.

The company said the project is currently understood to be the first of its kind in the UK.

At a projected capacity of approximately 5 million tonnes per annum, it will not only add to the UK’s security of gas supply but will also help balance the gas network on peak demand days, the statement reads.

The project currently has planning permission and consenting issued by the Borough of Barrow-in-Furness for its offshore segment, a detailed review of which the company is currently undertaking.

Additionally, land parcels and easements required for the project’s onshore above ground installations (AGIs) and pipelines have been acquired or are subject to the exercise of option agreements held by Meridian Holdings.

A typical FSRU project such as this would entail an investment of up to £400 million ($498.5 million) with a construction period of approximately 3 to 4 years.

Accordingly, subject to satisfactory due diligence and final contract, InfraStrata, through its unit InfraStrata Energy UK, will be seeking investors to provide the necessary project and investment finance to enable an acquisition of the FSRU project that would include all of the above assets of the project, in addition to all the engineering data that Meridian has accumulated to date.

It is envisaged that the third-party project investors being sought would take equity stakes in InfraStrata Energy UK, reducing InfraStrata to a minority stake, prior to the acquisition of the FSRU project by InfraStrata Energy UK.

Similar to the Islandmagee gas storage project, InfraStrata will seek an ongoing project management role along with a minority equity interest in the FSRU project.

Under the terms of the agreement, the company will have exclusivity for a minimum of three months (with extensions possible) in order to undertake the necessary technical, commercial and regulatory due diligence required to determine the FSRU project’s feasibility.

After the completion of due diligence, the company will proceed to structure a formal acquisition of the FSRU project by InfraStrata Energy UK with the backing of consortium investors and/or project financiers. The agreement shall terminate after 12 months, unless terminated earlier pursuant to its terms and there is no guarantee at this stage that any investment in or acquisition of the FSRU project will ultimately proceed.

Under the terms of the agreement, if the parties agree to proceed to a formal contractual agreement following the due diligence phase, Infrastrata has agreed to issue 25 million company shares to Meridian along with an agreement of a term sheet to proceed with further exclusivity and to negotiate a formal sale and purchase deal.

InfraStrata will issue further 75 million company shares to Meridian upon final investment decision and has agreed to make a cash contribution upon completion of the project acquisition.

John Wood, InfraStrata CEO said, “The UK gas market is witnessing a significant shift in its supply stack and LNG is set to form an important part. As an energy infrastructure company, we are looking at not only building a diverse portfolio of assets but also creating the ability for each asset to complement the others.”