The San Diego County Water Authority announced on December 24 that project financing for the Carlsbad Seawater Desalination Project closed successfully. This gave $734 million in tax-exempt bond financing to construct the largest seawater desalination plant in the United States along with a 10-mile pipeline.
The closing financially was the last step that was needed before the construction could begin on the project. Grading will start within the next 10 days with an estimated completion and the beginning of operation in 2016.
Thomas V. Wornham, Chairman of the Water Authority’s Board of Directors and a retired banker stated, "This is a major milestone in the development of this historic project. Closing the financing on an approximately $1 billion project is no small feat, and to do so just three-and-a-half weeks after the Water Purchase Agreement was approved required a monumental effort by all involved."
"I congratulate the Water Authority management team and its advisers, project developer Poseidon Resources, our host city, Carlsbad, and the project site owner, NRG Energy, for coming together to make this project a reality for our community."
Carlos Riva, chief executive officer of Poseidon Resources, stated that closing on the finances is long 10-year effort to develop the project.
"We began developing this project in 1998," Riva explained. "Developing a project of this size, complexity and scope requires a great deal of risk-taking, resources and perseverance, and, for our project site owner, NRG, a good deal of patience. We appreciate the commitment NRG has shown for this vital water supply project."
Matt Hall, Carlsbad Mayor, stated the announcement was "a historic day, not only for the City of Carlsbad, but for our entire region."
"Our economy and quality of life simply do not exist without a reliable water supply," Hall stated. "That’s why the City of Carlsbad has been a tireless advocate for this project, and why we’re willing to host this regional project in our community.
"It’s one thing to say you want a project like this in your city, but it’s quite another thing to be willing to site a project on your private property, and NRG stepped up and made that commitment. ‘Corporate citizenship’ is often a vaguely defined term, but NRG shows what it means to be a good corporate citizen."
The Water Authority and Poseidon Resources a private developer sold bonds to finance the project with an interest rate of 4.78%. That rate was lower than estimates presented earlier which will save close to $200 million over the next 30 years. This will lower not only the cost of water from the project to around $125 per acre-foot but will decrease the price of the water from the plant to somewhere between $1,917 and $2,165 per acre-foot.
The 30-year purchase agreement was approved by the Water Authority’s Board of Directors with Poseidon on November 29 to purchase up to 56,000 acre-feet of water each year. The plant is permitted and is believed it will begin producing 50 million gallons of water a day in 2016. By 2020, it is estimated that the plant in Carlsbad will meet around 7% of the demand for water in the region.
A collaboration of Kiewit Infrastructure West Co. and J.F. Shea Construction will design and construct the Carlsbad plant along with the Water Authority’s pipeline. Israel-based IDE Technologies will design the highly developed water treatment system for desalination and run the facility for Poseidon, bringing several years of experience on similar projects around the world.
The desalination plant will be constructed next to NRG’s Encina Power Station in Carlsbad. The project will also include a 10-mile pipeline that will connect the new plant to the Water Authority’s aqueduct in San Marcos.
Desalination is just one piece of the Water Authority’s continuing strategy to reduce reliance on the Metropolitan Water District of Southern California. During the last 20 years, the Water Authority has devoted in water storage, conservation and new sources to expand its portfolio. That helps safeguard the region’s 3.1 million residents and $186 billion economy by providing a safe and reliable water supply.
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