Multi-million pound British Salt deal close to completion
BRITISH Salt is today expected to announce the sale of ten huge underground caverns in Cheshire to energy company EDF in a multi-million pound deal.
EDF has bought the caverns from Cheshire-based British Salt, which is majority owned by private equity house Lloyds TSB Development Capital, to use as gas storage facilities.
Although the size of the deal has not been disclosed, it is understood to run into tens of millions of pounds, with EDF’s total investment in preparing the caverns for gas use, and building a new processing plant, running into hundreds of millions.
The sale is of pre-existing caverns created by the salt business to extract salt from the ground. The caverns are formed by forcing water under high-pressure into the ground over a number of years. The brine water is then pumped out to be processed by British Salt, and in this case will be replaced by gas.
The caverns, which lie 200m under the Middlewich countryside, are each around 150m deep and 100m wide. They will provide a total storage capacity of 36 million therms of gas when fully operational, expected to be around 2016.
They will be used by EDF for ‘fast cycle’ gas storage – where gas can be quickly pumped in and out as needed, allowing the company to take advantage of short-term fluctuations in the price of gas.
British Salt has previously sold four caverns in Cheshire to EDF several years ago, although in that deal British Salt created caverns specifically for gas storage.
The fact that these latest caverns have not been specifically created to store gas, has meant a large capital expenditure to ensure they are fit for purpose.
The scheme received planning back in May, and included permission for another gas processing facility at British Salt’s Warmington site.
Planning permission was also given for a further 11 salt cavities to be developed, which are expected to be sold in a similar deal in the future.
The deal is understood to be part of LDC’s original investment strategy, led by director Carl Wormald, when it backed a £100m management buyout of British Salt from US Salt Holdings in 2007.
British Salt, which has a £35m turnover and employs 125 staff, was backed by LDC in a £100m management buyout back 2007.
