Carlsbad Desalination Plant Aerial

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Carlsbad Desalination Project Aerial (Plant & Pipeline)

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Desal Conveyance Pipeline10-miles of new 54-inch

pipe

Pipeline 3 Relining

(27,100 feet)

TOVWTP Improvements

Desalination Plant

Aqueduct Connection

Facilities

Carlsbad Desalination Project Components

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Poseidon to Construct:

50 MGD desalination plant located on the site of the Encina Power Station

10 mile 54-inch diameter conveyance pipeline

Connection to Water Authority aqueduct Pipeline 3

Water Authority to Construct:

Relining of 5.5 mile reach of Pipeline 3

Improvements at the TOVWTP to accommodate desalinated water flows

General Responsibilities

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Poseidon:

Permit, Design and Build the Desal Plant Permit, Design and Build the Product Water Pipeline Own, Operate and Maintain the Desal Plant Supply Product Water

Water Authority:

“Take or Pay” for Product Water (minimum commitment of 48,000 AF/Yr) Timely Construction of TOVWTP Improvements and Pipeline 3

Rehabilitation Receive Product Water Own, Operate and Maintain the Product Water Pipeline, the TOVWTP

Improvements and Pipeline 3

Project Structure

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Developer/Owner of the Plant

Poseidon Resources (Channelside) LP

Plant financed through a combination of debt and equity• Debt provided through tax-exempt Private Activity Bonds (PAB’s)• Equity provided by Stonepeak

Construction/Operation of the Plant

Contractor – Joint venture of Kiewit Infrastructure West and J.F. Shea Construction

IDE Technologies is process technology provider

Plant Operations and Maintenance also provided by IDE

Project Risk Allocation

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Risk Description Poseidon Water Authority

Financing Risk– that the project can attract capital (debt & equity) and raise sufficient funds to finance the construction

X

Construction Risk – that facility is not completed on time, on cost and according to design standards

X

Permitting Risk – that current permit and environmental mitigation requirements increase

X

Debt Rate Risk – that market debt rates fluctuate from the currently assumed rates prior to financial closing

X

Change in Law Risk – that future unanticipated laws or regulations increase operating costs

X X

Technology Risk – that the plant technology does not perform as expected

X

Output Risk – that the plant produces less than the projected volume of water

X

Operating Margin Risk – that the price of water is not adequate to generate enough revenue to pay expenditures or may increase more than projected

X CPI

Pipeline Operating Risk – the Pipeline connecting the Plant to the regional aqueduct system and appurtenant facilities transport acceptable water to Water Authority wholesale customers

X

Electricity – the cost of electricity is accounted for in the water price

X (Electricity Consumption)

X(Electricity Price)

Financing

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Project Financing Structure:

82% funded through Bonds issued via the California Pollution Control Financing Authority (CPCFA)o Plant Bonds issued as Tax-Exempt Private Activity Bonds with Poseidon as

the sponsor• Subject to Alternative Minimum Tax (AMT)

o Pipeline Bonds issued as Tax-Exempt Governmental Purpose Bonds with the Water Authority as the sponsor

• Not subject to the AMT, but issued with a 5 year early call option• Water Authority exempt from repayment obligations if Poseidon does not perform

18% Cash Equity from Stonepeak Infrastructureo Equity invested after debt proceeds are spent; but equity commitment is

secured from closing by a letter of credit

Carlsbad Project Unit Costs (December 2012 $/AF)

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@ 48,000 AF/Yr @ 56,000 AF/Yr

Plant (Capital, O&M, & Electricity) $1,869 $1,682

Pipeline (Debt Service) $197 $169

Total Unit Cost * $2,066 $1,851

* This unit cost represents the direct costs that are accounted for in the Water Purchase Agreement between Poseidon and the Water Authority in December 2012 dollars. They exclude any indirect costs that the Water Authority may incur for the Pipeline 3 and the Twin Oaks Valley Water Treatment Plant improvements.

Impact of Desal Water on San Diego Retail Rates

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Estimated Retail Impact of Carlsbad Desalination if Applied to CY 2013 Rates (below analysis done in October 2012, prior to closing):

Estimated rate impact as Water Authority supplies:o Based on high range of Carlsbad seawater desalination costso Based on conservative 2013 sales of 466,000 AF

• First year of operation sales (2016) projected at 520,000 AFo 5 Retail Agency Average Composite Cost (CY 2012)

• Fixed Charge $19.83 + Commodity Charge $51.40 = Composite Monthly Bill: $71.23

Other Water Authority Notes:  

1. Analysis based on retail rates for the City of Carlsbad, Helix Water District, the City of San Diego, Sweetwater Authority, and Otay Water District.

2. Tier 1 and Tier 2 pricing blocks vary by member agency.

3. Historic total water demand used to calculate member agency specific weighting factors.

4. Individual member agency commodity charge calculated using its average single family residential water use (hcf).

5. Composite commodity charge is the sum of the  individual member agency's commodity charge times its weighting factor.

Estimated All-in Unit Cost(48,000 – 56,000 AF/yr)*

Estimated Rate ImpactMonthly Retail Cost Percent Retail Impact

$2,290 - $2,041 $7 - $5 10% - 7%* Includes both direct costs billed by Poseidon and indirect costs incurred by the Water Authority outside of the agreement with Poseidon. Actual rate impact will vary by member agency.

Huntington Beach Desalination Plant

Proposed Project

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Flow Schematic

Re-using existing industrial facilities

Intake/outfall

facilities

Partnering Cities / Water Agencies

Municipal Water District of OC City of Huntington Beach Irvine Ranch Water District City of Anaheim Moulton Niguel Water District City of Newport Beach South Coast Water District City of Santa AnaSanta Margarita Water District City of Garden GroveOrange County Water District City of Fountain ValleyEl Toro Water District City of OrangeEmerald Bay Water District City of FullertonLaguna Beach County Water District City of Westminster Mesa Consolidated Water District City of Seal Beach Trabuco Canyon Water District Golden State Water Company East Orange County Water District

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Water Reliability Agreement – Term Sheet

WRA term sheet developed over past year; Final draft provided to Working Group in January

Term Sheet to support non-binding Letters of Intent (“LOI”) to

purchase water

Term Sheet includes estimated unit costs for desalination plant

and distribution system

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WRA Draft Term Sheet – Key Terms

Roles and Responsibilities Poseidon:

– Own, design, permit, finance, construct, start-up, acceptance test, and operate the Project

– Design, permit, finance and construct any new pipelines for the Delivery System

Buyer(s): own and operate the new pipelines in the Delivery System; purchase Product Water as provided for under the Contract and accept delivery of the Product Water at the Delivery Point.

Delivery point defined as boundary line of the project site

30-year “take if delivered” contract

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WRA Term Sheet – Estimated Pricing

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Public Support (Partial List)

City of Huntington Beach

City of Buena Park

City of Dana Point

City of Laguna Hills

City of Laguna Niguel

City of Laguna Woods

City of La Palma

City of Mission Viejo

City of Orange

City of Placentia

City of Rancho Santa Margarita

City of San Juan Capistrano

City of Stanton

City of Tustin

City of Villa Park

City of Aliso Viejo

City of La Habra

Orange County Sacramento legislative delegation The Orange County League of Cities Metropolitan Water District of Southern California Municipal Water District of Orange County California Latino Water Coalition California Chamber of Commerce CA Hispanic Chamber of Commerce Huntington Beach Chamber of Commerce The Orange County Board of Supervisors The Orange County Business Council The Orange County Taxpayers Association The LA-OC Building & Construction Trades Council California Coastal Coalition

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Development Schedule

Permitting

– Coastal Commission hearing mid-2013

Water Purchase Agreements

– Non-binding Letters of Intent (“LOI”) approved by buyer(s) before end of April

– Executed agreements - end of 2013

Plant Construction

– 2014 Start

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