First San Diego, Now Orange County for Poseidon

LOS ANGELES — The Orange County Water District, Calif. board of directors approved staff recommendations Thursday to study purchasing up to 50 million gallons of drinking water through the Huntington Beach Seawater Desalination Project.

The water district's decision to enter into "discussions with Poseidon provides the opportunity to explore a public-private partnership that ensures the most cost effective delivery of the project and the equitable distribution of its water reliability benefits," said Scott Maloni, Vice President of Poseidon Water. "We look forward to participating with the District in a robust and inclusive public process."

Poseidon Resources priced $734 million in bonds in December 2012 to construct a seawater desalination plant in Carlsbad, Calif. That project came to fruition after nearly a decade of delays after Poseidon was able to strike an agreement with the San Diego County Water Authority to purchase 54 million gallons of water from the reverse osmosis seawater desalination plant.

Poseidon hopes to structure a similar agreement in Orange County.

The bonds for the Carlsbad plant, issued through the California Pollution Control Authority, were split into two tranches. There were $203 million in tax-exempt governmental bonds issued on behalf of the water authority to construction a 10-mile pipeline, and $530 million in private-activity bonds for Poseidon to finance construction of the plan, which were subject to the alternative minimum tax.

The bonds rated BBB-minus by Fitch Ratings and Baa3 by Moody's Investors Service sold at average interest rates of 4.78% on maturities from 2027 to 2045. They were only marketed to sophisticated investors.

OCWD also approved a staff recommendation to create a citizens advisory committee to provide additional community input to the OCWD Board.

OCWD manages a large groundwater basin that provides reliable, high quality groundwater to 19 municipal and special water districts that serve 2.4 million customers in north and central Orange County. OCWD operates the Groundwater Replenishment System — the world's largest water purification system for potable reuse.  Operational since January 2008, the groundwater replenishment system can produce up to 70 million gallons of high-quality water every day.

In May, the water district board passed a resolution setting policy to consider and develop a variety of local water resources — including seawater desalination — to ensure sufficient water supplies are always available to the residents and businesses in the service territory.

Without the development of additional new local water resources, the district will be forced to significantly increase the amount of imported water, according to the resolution.

Poseidon Water specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants.  These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

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