MENLO PARK, Calif. — Honolulu Seawater Air Conditioning LLC is moving forward with public financing for a project that will suck cold water from ocean depths to cool Honolulu's downtown, providing energy savings from a renewable source.
The project reflects a growing niche in the renewable energy sector that may spread in dense areas that have access to cold water.
Bill Mahlum, president and chief executive officer, said his company will be looking to issue $145 million of tax-exempt private-activity bonds and $55 million of taxable bonds by May 2011 to fund the project.
He said the company is in negotiations with banks for letters of credit for the bonds, which will likely operate as lower floaters to take advantage of short-term variable rates. Bond counsel will be chosen by the Hawaii Department of Budget and Finance, which will be the conduit issuer.
Honolulu Seawater has raised $10.7 million from private investors and is close to closing another $4.6 million, while a last round of $33.8 million of equity will come in at the same time as the bonds are sold, according to Mahlum.
"We have a lot of people that want to give us money," he said.
Mahlum said the company will not seek a stand-alone rating but added that he expects the bonds will certainly be investment grade.
"The real money in these projects is in the distribution piping, which includes the piping out of the water, and those are specificity eligible for tax-exempt financing," he said. At District Energy St. Paul "we helped write that modification to the law back in 1980," Mahlum said, referring to a nonprofit heating utility in Minnesota.
"That is a big help to us and we have done a lot of tax-exempt financing," he said.
Construction on the project will begin when the bonds are sold and should last 18 months.
Honolulu Seawater Air Conditioning was founded by Ever-Green Energy of St. Paul, Minn. Ever-Green is a for-profit affiliate of District Energy St. Paul and District Cooling St. Paul, a nonprofit cooling utility. The affiliates run a similar energy system in the city, where they have operated for 28 years.
The Honolulu system will pump 45-degree seawater from a depth of 1,600 feet to a heat exchanger ashore that will cool fresh water to cycle through the high-rises of central Honolulu as air conditioning.
Pumping cool water from the sea is less energy-intensive than using electricity to run air-conditioning systems.
Deep-water cooling systems already operate in other cities, including Toronto, using Lake Ontario water, and Stockholm, Sweden.
Aside from using deep water for cooling, the remainder of the project is an energy system in which cooling or heating is produced at one location and pushed to buildings in a district, which is fairly common and similar to the system built in St. Paul.
Hawaiian Electric Industries Inc., which supplies power to 95% of the state, said it is encouraging customers to consider the option provided by the Honolulu Seawater project.
"The seawater air-conditioning project is really a great way to combine a reduction of energy use with the increasing use of a renewable resource," said Lynne Unemori, a spokeswoman for the company.
