ACS seeks to withdraw from Castor gas storage project

Spanish construction firm ACS said last week that Escal UGS, a company owned by ACS and Castor UGS (a partnership of Canadian oil and gas company Dundee Energy and private investors) will giving up its concession for the stalled €1.7 billion Castor gas storage project in Spain.

Last September, the Spanish government stopped activity at the Castor undersea storage facility after more than 200 minor earthquakes were detected in the area.

The project aimed at pumping gas into a disused oil field developed by Shell in the 1970s, some 20km from the coast of Valencia, that was going to allow Valencia to store the equivalent of three months gas supply.

The project was financed through the the first EU project bond under EU’s Europe 2020 Project Bond Initiative. European enhancement for the bonds came in the form of a €200 million liquidity line from the European Investment Bank (EIB).

The bond deal raised around €1.4 billion replacing the bank loans that funded the construction of the project over the past two years.

Last week, ACS said Escal UGS had begun to ask the European Investment Bank and bondholders for permission to abandon the project.

Ratings agency Fitch has downgraded the bonds from investment grade to BB+, or junk status.