Remuneration for underground gas storage includes three components: repayment of capital, return on investment and payment for operating and maintenance expenses. The capital cost of the project is returned in equal payments over the useful life of the asset, which is set at 10 years for all facilities except for the cushion gas, which is set at 20 years. A provisional remuneration regime may be implemented for the period between the granting of the concession and the start-up of the facility, which would provide early cash flow. After the end of the useful life, the “cost of extension of useful life” payment commences at half the rate that was paid in the last year of the useful life and continues for the remaining period of the concession (30 years plus two extensions of 10 years each).
Return on investment is based on the net investment multiplied by the remuneration rate. The remuneration rate is equal to the Spanish government’s 10-year bond rate plus 3.5% and is set for the full useful life of the facility. As with repayment of capital, after the end of the useful life, the cost of extension of useful life payment will commence at half the rate that was paid in the last year of useful life and continues for the remaining period of the concession. Payment for operating and maintenance includes both a fixed component and a variable component and is designed to cover actual operating and maintenance costs.
The Development Concession for the Castor Project is the primary regulatory approval needed to develop the Castor Project. It establishes the Castor Project within the regulatory framework as entitled to receive remuneration as outlined above. Following receipt of the Development Concession, a number of secondary permit applications were filed including:
In 2009, the Ministry of the Environment finalized and approved the completion of the Environmental Impact Declaration. The remaining permits were subsequently received.