Enagas to operate castor gas storage project during ‘hibernation period’

Enagás Transporte SAU has been appointed to manage the maintenance of the Spanish Castor gas storage operating concession during the hibernation period but the concession will not be assigned to the firm.

Enagás will perform no natural gas injection or extraction operations at the storage facility and will be responsible for maintaining it under secure conditions until its future has been decided.

The Spanish Council of Ministers approved a Royal Decree Law (RDL) to terminate the Castor operating concession and approved the hibernation of the facilities on 3 October 2014. The RDL recognises remuneration for Enagás from the gas system for the performance of this maintenance work at the gas storage facility which is currently in hibernation and suspended.

As manager of the facilities, Enagás must pay Escal UGS, a consortium composed by ACS, Enagas, and CLP, the value of the investment, €1.35 billion (US$2.66 billion), and will obtain collection rights from the Spanish gas system to ensure the payment of this amount is covered.

This means that the Spanish gas system will be able to meet the total payment for the recognised investment gradually over a period of 30 years, €80 million per year (including a financial remuneration of 4.3%), from January 2016.

Enagás has already made agreements with several financial entities to transfer these collection rights and the banks will advance the payment for the investment to Escal UGS SL.

Fitch Ratings says the Spanish Royal Decree Law (RDL) approved last Friday and a sale of related recovery payment rights to a number of financial institutions has no rating impact on Enagas S.A. Fitch Ratings reported in a statement:

We believe the SPA (sale and purchase agreement) eliminates the exposure of Transporte and Enagas, to financial, legal, regulatory and other risks related with the recovery payment rights. We consider the company’s exposure to the SPA counterparties as limited.