Public Risk Considered For Costly Desalination Facility

Of the many mantras uttered by Poseidon Resources Inc. as it prepared to construct the Western Hemisphere's largest desalination facility near San Diego, one stood out: it would be built at no risk to tax payers. Though the concept was misleading in more ways than one, the company did indeed manage to finance construction of the nearly $1 billion facility, currently underway, by selling $734 million worth of tax-exempt bonds, and securing the rest from a private-equity firm.

But with Poseidon now hoping to build a facility on the shores of Huntington Beach, the mantra of no public risk may be facing a sea change.


During a committee meeting last week, the Orange County Water District (OCWD) issued a report on the Huntington Beach project and recommended a study to determine its feasability. The 50-plus page report suggested the possibility of the district personally issuing the debt for the plant's construction.

“With this option, the District would take advantage of its high credit rating and issue the necessary debt at a lower interest rate. However the District would likely need to accept the risk of the project not being successful,” read the report.

If this option becomes reality, it could prove unfortunate for those in the OCWD service area–seeing as how not being successful is a significant part of the Poseidon story.

In the late 1990's, the company made a clumsy attempt at building a desalination facility in Tampa. When some of Poseidon's private financiers went bankrupt, the Tampa Water Authority intervened and pumped tens of millions of dollars into the project. Since then, the facility has been plagued with technical hiccups and has struggled to meet its projected output of 25 million gallons per day.

According to OCWD General Manager Michael Markus, the possibility of issuing debt for Poseidon water is merely being considered at this point.

“I see this more as an exercise to go through to scrutinize the numbers to see if they make sense and then report those findings back to the board,” said Markus.

It remains unclear whether Poseidon is banking on the OCWD issuing the debt for the project–Markus couldn't say, and Poseidon has yet to return the Weekly's calls. However, during a May 7 meeting of the Municipal Water District of Orange County (MWDOC), Poseidon VP Scott Maloni told board members that the company would appreciate the opportunity to partner with the public agency.

Tomorrow the OCWD Board of Directors will vote on whether to enter into a confidentiality agreement with Poseidon in order to gain access to secret company information for use in the staff study.

With a final decision possibly months away, Poseidon's website still reflects a vision of no public risk.

“The facility, which will be built at no cost to the taxpayers, will use existing infrastructure, reducing construction costs,” the page reads.

Perhaps in confidential meetings, Poseidon execs will chant another mantra: talk is cheap.

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