Oil and Gas

Spain seeks banks' help over gas storage plant Castor-sources

MADRID, Sept 10 (Reuters) - Spain is studying a plan that would save it from assuming the cost of helping underwater gas-storage facility Castor, which was abandoned after minor earthquakes in the area, sources said.

The two sources, with direct knowledge of the matter, said the government had appointed gas grid operator Enagas to reach an agreement with a group of banks so that a 1.4 billion euro ($1.8 billion) payment, owed to concession-holder Escal UGS, does not count against the already high public deficit.

The government ordered Escal UGS, jointly owned by Spanish builder ACS and Canada’s Dundee Energy, to cease gas injections into the plant last autumn after more than 200 minor earthquakes were detected in the area.

The facility, meant to store 30 percent of Spain’s daily gas consumption, was the first in Europe to issue ‘project bonds’, of which there are 1.4 billion euros outstanding.

“They’ve asked Enagas to intermediate so that the banks finance the bailout and, in exchange, receive payment rights from the gas system. This solution would be neutral for Enagas’ balance sheet,” one of the sources said.

Spain has one of the largest public deficits in the European Union after a property bubble burst in 2008 and prolonged recession gutted public coffers. The government has forecast it will cut the shortfall to below 3 percent of gross domestic product by 2016 from 6.6 percent last year.

1 US dollar = 0.7721 euro Writing by Paul Day; Editing by Julien Toyer/Ruth Pitchford