SAN DIEGO - Poseidon Resources (Channelside) LP, a subsidiary of Poseidon Water LLC, has closed the $922 million financing and secured all funding needed to build the Carlsbad Desalination Project, capping a decade-long development effort to create the largest seawater-desalination plant in the Western Hemisphere.
Concurrent with the financial closing, Poseidon has given the notice to proceed to the joint-venture company that will design, construct and start up operations at the plant, as well as construct a 10-mile pipeline that will deliver the approximately 50 million gallons per day of treated water produced by the plant into San Diego County's water system.
Done in partnership with the San Diego County Water Authority, the project financing is one of the largest project-specific financings for new water assets in the United States.
Poseidon and the Water Authority brought together numerous qualified parties that worked collaboratively to drive the project to this historic moment. The project-specific structured deal assigns responsibility and accountability to the appropriate parties, which protects San Diego ratepayers while mitigating the risk to investors.
"I'd like to acknowledge the San Diego County Water Authority for its leadership and diligence throughout this enormously successful financing process," said Poseidon Resources CEO Carlos Riva. "I am grateful for the skill and support of Water Authority General Manger Maureen Stapleton and her staff, who brought this complex financing together on a compressed timeline. I also would like to thank our site host NRG for the important role it played in allowing this project to move forward."
Kiewit Shea Desalination, a joint venture between subsidiaries of Kiewit Corp. and J.F. Shea Construction Inc., will provide engineering, procurement and construction (EPC) services for the desalination plant and the pipeline under a fixed-price contract. IDE Americas Inc., a subsidiary of IDE Technologies LTD, will design the seawater process plant under the direction of Kiewit Shea Desalination. IDE will also be responsible for the operation and maintenance (O&M) under a 30-year contract.
The signing of the EPC and O&M contracts coincided with the close of the sale of $734 million in tax-exempt bonds issued by the California Pollution Control Financing Authority on behalf of Poseidon and the Water Authority, with underwriting led by JP Morgan. Private equity investor Stonepeak Infrastructure Partners provided the remainder of the project capital.
Under the terms of the Water Purchase Agreement between Poseidon and the San Diego County Water Authority, the agency pays only for delivered product that meets its stringent quality standards. This ensures Poseidon has significant incentive to avoid construction delays, plant downtime, labor disputes and inefficiencies -- costs that Poseidon would absorb if incurred.
In turn, Poseidon sought to minimize these risks by selecting highly qualified firms with vast experience in large-scale infrastructure and desalination projects, history of success and sufficient resources to support accountability measures in their contracts.
Construction is set to start immediately, with commercial operations commencing in 2016. The project will create 2,300 jobs during construction and will support more than 575 jobs for the life of its operations.
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