Met Water OKs Desalination Subsidy

The Metropolitan Water District of Southern California this week approved a $350 million subsidy that backers said is crucial to financing the state’s first large-scale desalination plant, which will be located in Carlsbad.

Nine San Diego County water utilities sought incentive payments that equal the difference between the cost of desalinated water and Met Water’s full-service treated water rate, up to a maximum of $250 per acre-foot, to make the Carlsbad desalination project economically viable.

The subsidies would cost Met Water about $14 million a year, or $350 million over the next 25 years, but it would decrease Southern California’s dependence on imported water and could help establish desalination as a viable alternative for the parched region.

The Carlsbad project, which is being built by a private company named Poseidon Resources, would provide 50 million gallons of water a day, enough for 300,000 people. 

Poseidon says it needs the subsidy program to back $530 million of private activity bonds it hopes to sell for the project. Its request for a private activity bond allocation goes before the California Debt Limit Allocation Committee on Nov. 18.

Barclays Capital is serving as financial adviser on the project.

The project, which has been in the planning since 1998, has been moving ahead rapidly in recent weeks. The California Coastal Commission approved a final coastal development permit for the plant earlier this month.

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