Allen & Overy said today that the EUR1.4 billion project bond to finance the Castor underground gas storage facility in Spain underlined the market innovation designed to meet Europe's EUR2 trillion need for new infrastructure by 2020.

The Castor underground gas storage facility is jointly owned by Spanish construction company ACS and Canadian oil and gas company Dundee Energy. The facility will provide a 1.9 bcm strategic reserve (1.3 bcm of useful gas) for the Spanish gas system, representing a 30% increase in Spain’s current underground gas storage capacity.

Charles Poole-Warren, finance partner at Allen & Overy, said: “The success of this deal highlights the demand that exists in the market and investors' increasing comfort with structures that provide the support necessary to help kick-start capital market investment for large scale strategically important infrastructure projects."

The European Investment Bank has said it is hopeful the project bond initiative would establish itself as “a new asset class providing diversification and a strong credit rating”.

Tim Conduit, capital markets partner at Allen & Overy, commented: “We're seeing increasing demand from clients across the market to develop innovative structures that not only appeal to a broader group of investors but will help diversify funding sources. This is due at least partly to regulatory impacts on banks' ability to provide long-term financing solutions.”

Allen & Overy advised Banco Santander, who acted as global coordinator.  The A&O team was led by partners Charles Poole-Warren in Spain and Tim Conduit in London, with assistance from partner Ignacio Ruiz-Cámara and associates Adam Abdel-Aziz, Pablo Rodríguez, Tom Constance, Jean-Baptiste Gaudin and Peter Redo. Partners Henri Wagner and Frank Mausen and associates Pierre-Henry Maroteaux from A&O’s Luxembourg office were also involved.

The Castor transaction follows on Allen & Overy's development work on PEBBLE, a platform which facilitates the funding of greenfield project financing by institutional investors such as pension funds and insurance companies.