Infrastrata announces placing to raise £1.5 million
InfraStrata, the UK quoted company focused on the development of natural gas storage capacity, has announced that it has raised £1.5 million (before expenses) through a placing of 125,000,000 new ordinary shares of 0.01p each in the company at an issue price of 1.2 pence per share.
The company continues to make progress with all potential equity providers for the Islandmagee gas storage project and detailed negotiations are underway with numerous parties who are at various stages of their due diligence and term sheet discussions.
The initial review of the additional funding offer that was received in the week commencing the 17th December 2018, as notified in the announcement dated the 27th December 2018, has now been completed.
Due to the nature of this additional potential equity provider and their indicative terms, InfraStrata has agreed that they will now proceed to the next stage and undertake detailed due diligence work.
Specialist advisers have already been appointed by this potential equity provider and work has commenced, which is expected to take around six weeks.
In order to maintain the Project schedule, momentum and utilise experience and work to date, we have carried out the Placing. The Placing will provide funding for various preparation and enablement works for the Project in readiness for construction of phase one (two gas storage caverns) once the final investment decision (‘FID’) has been made. In particular, the net proceeds of the Placing are expected to be used for:
- Land purchase (as announced on the 29th October and the 21st December 2018) and associated easement payments – £400,000
- Engineering design works to facilitate the £65 million savings identified in the FEED work – £350,000
- Pre-construction commencement documentation and further land surveys – £320,000
- Initial onsite enabling works – £300,000
- Total: £1,370 million
The Directors of InfraStrata consider that investing further in the Project at this stage will empower InfraStrata to negotiate a stronger equity retention position in the Project. By analysis of the critical path of planned construction activities, the company has identified scopes of work which can de-risk the Project for potential investors, which in turn is expected to add to an increased valuation of the Project.
As part of the company’s equity negotiations with all potential parties, recovering costs invested to date is one key commercial element of the deal and these additional costs will be included within that calculation.
The Board is looking to conclude equity negotiations to fund Project construction as soon possible once the latest potential equity provider has completed its due diligence.
This proposed deal and eventual partner will most likely be for the life of the Project and therefore it’s essential that all relevant issues are considered in detail at this stage.
The Project remains on track to undertake FID by the end of the first half of this year and whilst the company is striving to meet this target, there is no guarantee on the timing to conclude discussions with the potential equity and debt providers or that acceptable terms will ultimately be forthcoming or agreed.
Negotiations on the offtake agreement are also progressing well and are on track to link in with the Project equity provider in due course.
The company has now been able to validate all third-party assumptions in its financial models including the outline terms on which debt will be available to the company should it be required, depending on the equity/debt ratio preference of the selected Project equity provider.
John Wood, Chief Executive Officer, commented: “Whilst considering the undertaking of an equity placing at this stage, we have analysed the effect of further dilution versus the reduction of project risk, aiming to facilitate a better equity retention position in the longer term.
“We have undertaken the placing on terms we believe are in the best interests of the company at this time and I am pleased to confirm that no warrants will be issued as part of this placing. I understand that many shareholders are concerned about dilution, but we believe this placing is in the best interests of our long-term goals.”
Source: Energy-pedia