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9 May 2024
Renewable Energy

Ancala Agrees to Exit its Interest in Dragon LNG Group to VTTI

Ancala has agreed to sell its 50% interest in Dragon LNG Group to VTTI, a global leader in energy storage and developer of energy infrastructure.

Dragon is a liquefied natural gas (LNG) regasification terminal in Milford Haven. It is one of three LNG terminals in the UK. The terminal has a gas send out rate of up to 9bn cubic meters per annum, enough to supply 10% of the UK’s gas needs.

The news comes after an active ownership period in which LNG volumes through the terminal increased by approximately three times.

Ancala, an independent infrastructure manager, completed the acquisition of a 50% interest in Dragon in 2019. The other 50% interest is held by Shell who will remain a shareholder following the transaction.

Since Ancala’s acquisition, the infrastructure manager has worked closely with the business to invest in the terminal, develop and execute its net zero strategy, and enhance its operations. Dragon commissioned a reliquefaction plant which makes the terminal Europe’s only zero send-out regasification plant affording terminal users significant flexibility to reliquefy boil-off gas. Ancala also invested in a multi-million-pound overhaul of Dragon’s site to improve the terminal’s reliability and safety, the first major turnaround of the site in over 10 years.

Ancala has supported Dragon in its net zero journey, working with the business to install a 10MWp solar park on site which was commissioned in 2023. The solar park reduces Dragon’s scope 2 carbon emissions by around 2,500 tonnes per year and also provides renewable energy to local businesses.

Dragon has also submitted a planning application for a 13MWp wind farm. Together the renewables projects will supply a significant part of the terminal’s demand for power with self-produced, green electricity. There are further plans in place to do more in the future.

Dragon is also currently working in partnership with RWE, the largest power generator in Wales, to explore the construction of a Multi-Utility Services Transit (MUST). The MUST will connect industry across the Milford Haven Waterway and is a key component of the UK’s pathway to net zero, supporting the decarbonisation ambitions of the South Wales Industrial Cluster.

The transaction marks Ancala’s sixth exit from its first flagship infrastructure fund which continues to outperform.

Simon Ames, Managing Director, Dragon LNG, said:

“The Ancala team has been a valued partner and played a critical role in our work to enhance our terminal operations and accelerate our energy transition strategy. They have brought fresh thinking to unlock new opportunities and make improvements across the business.

“The terminal is in an exciting position to expand its role in contributing to the UK’s energy security and affordability whilst decarbonising our own scope 1 and scope 2 emissions. We are also well positioned to be part of the wider decarbonisation within the Milford Haven industrial cluster and as the UK’s leading energy port. We work closely with the port, other industries and the local community to ensure we maximise the benefit we bring to the local economy and the broader UK pathway to net zero. We’re looking forward to what we can achieve in the future with Shell and VTTI.”

Lee Mellor, Partner, Ancala, said:

“Dragon has been another successful investment for Ancala and evidences our proactive approach to create value whilst delivering downside protection for our investors. Our investment thesis was based upon the growing importance of LNG to the UK’s energy mix and in delivering further improvements to the site’s operations and to Dragon’s sustainability journey. We’re pleased to have helped the team deliver on this while providing a step-change in Dragon’s capabilities and developing exciting new opportunities for the business.

“We would like to thank the Dragon team and Shell for the excellent collaboration and partnership over the past five years and wish them, together with VTTI, every success on the exciting journey ahead.”

During Ancala’s ownership, Dragon has increased its support for local SMEs and, through the Darwin Experience charity, helped encourage students to pursue education and careers within STEM subjects through apprenticeships, work experience and energy transition education activities.

The transaction is subject to customary conditions and is expected to close in Q3 2024. Financial details of the transaction are undisclosed.

Ancala was advised by Travers Smith (legal) and Alvarez & Marsal (tax).

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