The Directors of Portland Gas says that Infrastrata UK Limited (IS-UK), a wholly owned subsidiary of the Company launched a process which will lead to the offer of shares in Portland Gas Holdings Limited (PGL), the developer of the Company’s proposed large and flexible gas storage facility at Portland in the UK (Portland Project).

The terms of the process are contained within an Information Memorandum (“IM”) which is available to qualifying companies who sign a confidentiality agreement, and where the issue of the IM to such companies benefits from an exemption to the rules relating to financial promotions. The proposal is that each investor will acquire a minimum of 10% of the shares in PGL together with an equivalent amount of firm capacity, injection and withdrawal rights. The investors would also benefit from access to interruptible capacity in the facility resulting from other holders of capacity not using their firm rights or through a net off of nominations. IS-UK will use a proportion of the proceeds from the sale of shares to invest alongside the other shareholders to construct the facility.

Following the introduction of new investors, PGL will be operated independently of IS-UK and run by a board of Directors nominated by shareholders. PGL will be the storage operator for what is planned to become the largest onshore gas storage facility in the UK designed to store 1,000 million cubic metres of gas (35 billion cubic feet, or 365 million therms).

Potential investors are being asked to express interest by the end of September 2009 to join a Co-operation Group (“Group”) which will facilitate the sharing of due-diligence activities and costs. PGL’s legal advisor, Field Fisher Waterhouse LLP, will draw up a Shareholder Agreement and a separate Capacity Agreement in consultation with the Group. In parallel, PGL’s project finance advisor, BNP Paribas, will work with the potential funders on the development of the financing structure. In Q1 2010 those who have participated in the Group will then have an opportunity to make a firm commitment to invest. At this point a process will take place to select investors and determine their shareholding in PGL.

A base case assumption for the first gas storage operations target is March 2014. However, IS-UK is working with contractors, Hydrock and CB&I, to try to enable first stored gas to be available for the winter of 2013/14 by fast-tracking the preparation of the wellpad for drilling operations (where work starts tomorrow 31st July 2009) and the specification of long-lead equipment. For this accelerated target, the offshore pipeline across Weymouth Bay would be constructed immediately following the Olympic and Paralympic Games in 2012.

Commenting on the news, Andrew Hindle, CEO of Portland Gas plc and a Director of IS UK said: “Following a period of informal discussions with potential interested parties, and the development of the commercial structure, we are pleased to be in a position to offer the major players in the UK gas industry an opportunity to share in the development of storage capacity important for the UK market.”

“The Portland Project is “shovel ready” for development and poised to take a key position in the gas supply chain in the UK. With the rapid decline in UK production from the North Sea, more gas storage is required to handle gas demand variation. With a high gas injection rate the project should be well positioned to support the new LNG suppliers (set to supply around 50% of UK gas supply by 2020*), through the injection of gas unloaded at the new terminals, and other importers of long-distance gas arriving by pipeline. The high withdrawal rate from the facility is projected to provide up to 7.5% of UK demand on a peak day.”

Tags: Portland Gas plc