LOS ANGELES — The San Diego County Water Authority’s board of directors approved a 30-year, $3 billion water purchase agreement with Stamford, Conn.-based Poseidon Resources that will allow a Carlsbad seawater desalination plant to move forward after a decade of delays.
The plant will produce 7% of the region’s water needs by 2020, reducing San Diego’s dependence on water from the Colorado River and Northern California that is vulnerable to droughts, disasters and regulatory restrictions, officials said.
“We are now putting another big piece of our diversification plan in place that will help protect our region’s $186 billion economy from the potential shortages and the uncertainty created by heavy reliance on imported water,” Thomas Wornham, chair of the water authority board, said in a statement after the agreement was approved Thursday. “Adding desalination to our portfolio is monumental in the same way that importing water from the Colorado River was in the 1940s.”
The water authority will purchase 56,000 acre-feet of water annually from the plant, which is expected to produce 50 million gallons a day by 2016.
The agreement clears the way for the sale of bonds in late December to finance the fully permitted project, Poseidon officials said.
The California Pollution Control Financing Authority approved on Friday morning a request to act as the conduit issuer for $840 million in bonds for the project.
The bonds are split into two series: $270 million in tax-exempt governmental bonds issued on behalf of the water authority to finance construction of the 10-mile pipeline, and $570 million in tax-exempt private-activity bonds for Poseidon to finance construction of the plant. Poseidon will be responsible for debt service payments on both sets of bonds.
The first set of bonds would be issued on the water authority’s behalf because of the likely savings from its AA-plus credit ratings and because the water authority will own and operate the pipeline. The water authority, as owner of the pipeline, will not have to pay taxes on it allowing for lower water costs for consumers.
JPMorgan is lead underwriter.
Under the agreement, the water authority also has the option to purchase the desalination plant for $1 after 30 years.
Construction on the plant and pipeline is scheduled to begin early next year and be completed by early 2016. Two of the water authority’s 24 member agencies, Vallecitos Water District and Carlsbad Municipal Water District, signed separate agreements with the water authority to purchase a combined total of 6,000 acre-feet of desalinated water.
“The Carlsbad Desalination Project has been more than a decade in the making and we’re grateful to the many supporters who helped shape the project and move it forward,” said Carlos Riva, chief executive officer for Poseidon.