Project Finance magazine on March 7, 2013, awarded “North American Water Deal of the Year 2012” honors to Poseidon Resource’s billion-dollar Carlsbad, Calif., desalination project to serve the San Diego County Water Authority. Drinker Biddle represented J.P. Morgan as the lead underwriter for the financing, which will fund construction of the largest seawater desalination plant in the United States.
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The deal team was led by partner, and head of the energy team, Baird Brown, along with core team members of counsel Chris Berendt, associate Emily Sysak and senior transaction analyst Molly Wood. The deal team also exemplified cross-practice group collaboration, with lawyers from almost every Drinker Biddle office lending a hand. Critical assistance along the way was provided by partner Tim Casey and associate Andrew Weissman from the firm’s Corporate Restructuring Practice Group, partner Stuart Law from the Construction Law Group, partners Charles Congdon and Doug Raymond from the Corporate & Securities Practice Group, partner Sara Hansen Wilson in the Real Estate Practice Group and partner Mark Costley from the Investment Management Practice Group.
The project includes the first desalination plant in the United States to be financed as a public/private partnership and a related 10-mile pipeline connecting the new facility to the San Diego County Water Authority’s existing distribution system. The financial close on Monday, December 24, involved the sale of $755 million worth of tax-exempt bonds by the California Pollution Control Financing Authority on behalf of a subsidiary of Poseidon Resources Corp. (which will own the Plant) and the San Diego County Water Authority (which will own the pipeline and purchase the entire output of the plant).
The proceeds of the bond issuance, along with $167 million in private equity from Stonepeak Infrastructure Partners, when combined with $80 million in improvements committed to be made by the Water Authority to its own system to accommodate the project, push the total capital investment over a billion dollars. The financial closing culminated more than decade-long effort to develop the Poseidon project.
The Poseidon project is expected to be completed in 2016, at which time it is projected to produce about 50 million gallons of potable water a day using reverse-osmosis technology. By 2020, the Poseidon project is expected to supply the region with about 7 per cent of its water. With rising demand for fresh water sources, and reductions in water availability from the Colorado River and Northern California, the locally controlled and drought-proof Poseidon plant will be a key component of San Diego County’s water supply.