Community Corner

$734 Million Carlsbad Desalination Project Financing Closes

Grading to commence on NRG Energy site within 10 days.

The following press release was issued by the San Diego County Water Authority on Monday:

The San Diego County Water Authority announced Monday that project financing for the Carlsbad Seawater Desalination Project has closed successfully, bringing with it $734 million in tax-exempt bond financing to build the nation’s largest seawater desalination plant and a related 10-mile pipeline.

Financial closing was the final step necessary before the start of construction on the project. Grading on the site will begin within the next 10 days, and the project is scheduled to be completed and operating in 2016.

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“This is a major milestone in the development of this historic project,” said Thomas V. Wornham, chairman of the Water Authority’s Board of Directors, and a retired banker. “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.”

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Carlos Riva, chief executive officer of Poseidon Resources, called Monday’s financial closing the “capstone” in a more than decade-long effort to develop the project.

“We began developing this project in 1998,” Riva said.  “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.”

Carlsbad Mayor Matt Hall called today’s event “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 said. “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.”

On Dec. 13, the Water Authority and private developer Poseidon Resources sold bonds to finance the landmark project at an interest rate of 4.78 percent.  That rate was lower than earlier estimates, and will save an estimated $200 million over three decades. That will lower the cost of water from the project by approximately $125 per acre-foot, reducing the price of water from the plant to between $1,917 and $2,165 per acre-foot.

The Water Authority’s Board of Directors approved a 30-year purchase agreement with Poseidon on Nov. 29 to buy up to 56,000 acre-feet of water annually from what will be the nation’s largest seawater desalination plant. It is fully permitted and expected to start producing 50 million gallons a day in 2016. By 2020, water from the Carlsbad plant will meet approximately 7 percent of the region’s demand.

A joint venture of Kiewit Infrastructure West Co. and J.F. Shea Construction will design and build the Carlsbad plant and the Water Authority’s pipeline. Israel-based IDE Technologies will design the advanced water treatment system for desalination and run the facility for Poseidon, bringing decades of experience on similar projects around the world.

The desalination plant will be built next to NRG’s Encina Power Station in Carlsbad. The project also includes a 10-mile pipeline that connects the new plant to the Water Authority’s aqueduct in San Marcos.

Desalination is just one piece of the Water Authority’s long-term strategy to reduce what was once near-total reliance on the Metropolitan Water District of Southern California. Over the past 20 years, the Water Authority has invested in water storage, conservation and new sources to diversify its portfolio. That approach 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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