The largest water desalination facility in the US, the nearly $1 billion Claude “Bud” Lewis Carlsbad Desalination Plant, has commenced operations after 17 years of planning, permitting and construction.
Earlier this week, a crowd of more than 600 gathered to attend the dedication of the long-awaited facility, including California State Assembly Speaker Toni Atkins, who said at the time that the plant will provide the county with “a drought-proof water supply” and “demonstrates who California can meet the water needs of future generations.” The plant was named after the late Carlsbad mayor who was instrumental in making his municipality its home.
At the time of the dedication ceremony, part-owner of the plant Poseidon Water noted that already Carlsbad has provided San Diego County with more than 1.5 billion gallons of locally-controlled water.
Infrastructure Investor first learned that Stonepeak Infrastructure Partners had invested $170 million in equity out of its first fund to acquire majority ownership of the facility in December 2012 . The project is Stonepeak's first investment into the water sector.
The additional capital needed to finance the project was provided through a $734 million bond offering led by the California Pollution Control Financing Authority on behalf of the Water Authority. The 30-year bonds backing the project carry a 4.78 percent interest rate.
Along with Stonepeak and Poseidon, partners in project development included the Water Authority, private operator IDE, engineering and management consultancy Arcadis US, and joint venture Keiwit-Shea Desalination which includes engineering firm Keiwit Infrastructure West and builder JF Shea.
The plant was made possible through a 30-year water purchase agreement (WPA) between Poseidon Water and San Diego County, which reportedly imports roughly 90 percent of its water. Reverse osmosis, the process that is used to desalinate seawater at the Carlsbad plant, provides the other 10 percent.
Upon termination of the 30-year WPA, the Water Authority has the option – but not the obligation – to purchase the plant for $1. The authority also has the option to buy out the project after 10 years.
The main components of the desalination facility include the plant itself, located adjacent to the NRG Energy-owned Encina Power Station on Agua Hedionda Lagoon, a 10-mile pipeline connecting to the regional Water Authority distribution system, and upgrades to Water Authority facilities that allow for distribution of desalinated seawater throughout the region, according to a related release. NRG is the owner of the six-acre parcel of land on which the Carlsbad plant was constructed.
It costs about five cents per gallon to produce fresh water at the facility, and most homeowners are expected to pay roughly $5 per month for the water it produces.
According to Poseidon, construction of the plant brought $350 million worth of economic activity into the region and supported 2,500 jobs during construction.