DALLAS — The San Antonio Water System has agreed to buy water from a private supplier in a deal that could be worth $2.5 billion.
The agreement with Vista Ridge Consortium, a group of investors led by the Spanish engineering and infrastructure firm Abengoa, still requires city council approval.
Earlier this year, SAWS called off plans to buy water from a private supplier, saying the process created too much risk. But the board later reversed its decision and began reconsidering offers from private operators with rights to distant ground water.
Suffering prolonged drought, the state's second-most-populous city needs to import water to relieve pressure on the Edwards Aquifer that has supplied the city through most of its history.
Under terms of the proposal, Vista Ridge would be responsible for building a 150-mile pipeline from Burleson County east of Austin to the SAWS reservoir. SAWS estimates that the private company could provide up to 20% of the city's water.
Although the total cost of the project is still under negotiation, SAWS chairman Heriberto "Berto" Guerra Jr. said at a recent meeting that the 30-year agreement could cost $85 million per year. The city expects to increase water rates to pay for the project.
SAWS officials said that they were able to reduce Vista Ridge's original proposed cost by $700 million. Vista Ridge, one of nine companies that submitted proposals, agreed to assume complete delivery risk, including regulatory, technical and financial risk at a fixed price for the 30-year duration of the project, officials said.
"This project will be a game-changer for San Antonio's future, helping us meet a diverse and growing demand for water for decades to come," said Robert R. Puente, president and chief executive of SAWS, said in a prepared statement after the July 1 decision. "The next step is to negotiate a contract that is beneficial to our community."
In the name of transparency, the SAWS Board also approved the formation of a committee that will negotiate the contract in weekly posted meetings that will be open to the public. The first negotiation session took place on July 1, the very afternoon the project was selected.
"We are committed to an open and transparent public negotiation and education process," said Guerra. "Our community deserves to have all the information needed to make an informed decision on purchasing the largest non-Edwards Aquifer supply in our city's history."
San Antonio has more than 1.4 million residents and SAWS projects its customer base will grow at a rate of 20,000 people per year.
"Purchasing this quantity of water is one of the most significant decisions our community will ever make," said Puente. "It will require a 30-year commitment of annual payments, but it will provide the security of knowing our economic future and our quality of life will not suffer because of a lack of water."
The project will require rate support for payments that would be scheduled to begin upon delivery of water as early as 2019.
In order to support the Vista Ridge Consortium project and its integration to the SAWS system, current projections anticipate a rate increase of approximately 16% to the average monthly residential bill by 2020. The exact cost and rate impact will not be known, however, until the contract is negotiated. SAWS expects to have a contract negotiated and considered by city council by this fall.
Abengoa is a 70-year-old global infrastructure company that supplies drinking water to more than 6 million residents around the world. The company has completed more than 50 pipeline projects with total investments of more than $20 billion.
"We believe that this project is a critical solution in addition to other options the city is exploring to alleviate its water supply challenges," Abengoa chief executive Manuel Sánchez Ortega said in a prepared statement.
SAWS is owned by the city of San Antonio. It provides water to most of Bexar County, several suburban municipalities and adjacent parts of the county.
One of the largest public utilities in the nation, SAWS carries ratings of AA-plus from Standard & Poor's and Aa1 from Moody's Investors Service on its senior-lien revenue bonds. San Antonio's general obligation bonds are rated triple-A.
