WASHINGTON — The Orange County Water District's approval of a non-binding term sheet to purchase 56,000 acre-feet of water from Poseidon Water's proposed Huntington Beach, Calif. desalination plant is a credit positive for the district, Moody's Investors Service said.
Desalination, which transforms ocean saltwater into drinkable freshwater, is frequently controversial for both cost and environmental reasons but has been an inevitable topic of conversation as California continues to suffer a historically bad drought. Moody's said that the proposed deal with Poseidon would meet approximately 13% of the OCWD's current total water deliveries and 11% of projected water demand in 2035.
"The availability of additional water supply — from any source — is credit positive for OCWD," Moody's said. "The proposed deal with Poseidon would provide the district with greater water reliability, especially in dry periods. The district's current water supply is derived from its ground water basin and imported water, both of which are becoming increasingly pressured as the California drought enters its fourth year."
Under the deal, Poseidon would obtain permits, finance the project, and build and operate the plant while the district would be responsible for building adjacent capital infrastructure such as pipelines. OCWD estimates its expense in the area of $140 million, which Moody's called "a manageable cost given the district's operating budget and current liquidity position."
The water district is rated Aa1 with a stable outlook.
