Desal plant buyout causes angst
By JEAN HELLER, Times Staff Writer
CLARIFICATION (3/19/02): Tampa Bay Desal, the principal contractor on the region's first desalination plant, is a wholly owned subsidiary of Poseidon Resources. Covanta Tampa Bay, which is building the plant, is a contractor with no equity interest in Tampa Bay Desal.
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Tampa Bay Water officials insist that taking ownership now of a half-built desalination plant will not jeopardize or delay the project.
The Southwest Florida Water Management District, which has a big financial stake in the plant, wants proof.
And the developer with the most to lose if the proposed buyout occurs wants Tampa Bay Water to defer the decision beyond its regular meeting Monday so other options can be explored.
"The swiftness of this decision and the extraordinary nature of the timing has spooked us," said Sonny Vergara, executive director of the water management district, known as Swiftmud.
"We haven't had the time we need to gather the information to get to a comfort level that this is the right thing to do," Vergara said Friday. "It might be the perfectly rational decision, but we don't know that yet."
At question is the ability of Tampa Bay Water, the region's principal water utility, to meet its legal obligation to dramatically reduce the amount of groundwater pumped from 11 regional well fields in Pasco, northern Pinellas and northern Hillsborough counties. Over the years, overpumping at these well fields has done extensive environmental damage.
Swiftmud, the region's water regulatory agency, enforces groundwater pumping restrictions.
Under an agreement that put $85-million in Swiftmud funds at Tampa Bay Water's disposal to help build the $110-million desalination plant, the utility will have to reduce pumping from the stressed well field system starting Dec. 31.
The current pumping cap of 158-million gallons a day will drop to 121-million. The prospect of a desalination plant with 25-million gallons of daily capacity going into operation early next year has been an integral part of that equation.
Jerry Maxwell, general manager of Tampa Bay Water, reiterated Friday that he does not expect a buyout of the private developer, Tampa Bay Desal, to have any impact on the completion of the desalination plant under construction near Apollo Beach in southern Hillsborough County.
But even if it were delayed, Maxwell said, Tampa Bay Water can keep the commitment of 121-million gallons a day (mgd). A new well field in Brandon is already in operation, producing 6-mgd. In October, the utility will be ready to start skimming water from the Tampa Bypass Canal and Hillsborough River. And in December it will be ready to do the same at the Alafia River.
"The surface water projects will produce an average of 42-mgd," Maxwell said. "With the new well field, we've got 48-mgd of new water. The pumping reduction is 37-mgd, so we even have a buffer."
Complicating the issue is the resistance of one of the two partners in Tampa Bay Desal, Poseidon Resources.
On Friday, the Connecticut-based developer sent a letter to Maxwell acknowledging the utility's legal right to acquire the desal project. But the letter requested a delay in the decision beyond Monday to provide time to explore other alternatives.
In Poseidon's view, its abrupt disappearance from the Tampa Bay project before completion not only hurts the company in the short-term but also jeopardizes its competitive position in bidding for future desalination projects.
Maxwell is recommending the buyout because the other partner in Tampa Bay Desal, Covanta Energy, has been saddled with a D rating in the bond market. If Tampa Bay Desal goes into the market for additional financing with that disadvantage, the bonds would carry a very high interest rate, if they could be sold at all, Maxwell said.
Tampa Bay Water, on the other hand, has a bond rating of AA and would qualify for favorable interest rates, but only if it were sole owner of the desal project.
But Scott Pearce, president and CEO of Poseidon, said in his letter to Maxwell:
"... It should be clearly understood that Poseidon Resources remains committed to this project, to doing all we reasonably can to maintain a healthy public-private partnership, and has every interest in keeping the project on track.... We continue to believe that the existing structure ... offers the best alternative for TBW and TBD both from a cost and risk perspective."
Although several Tampa Bay Water board members said this week that they favor the buyout, Chairwoman Ann Hildebrand, a Pasco County commissioner, said she wants to hear more.
"With Poseidon, there's a lot riding on it," Hildebrand said. "Their position is that they've been blindsided. They've done the hard stuff (proving the science and getting the permitting), and I can see both sides of the issue here.
"I just want to make sure we're protected and getting the best deal we can for our customers in the tri-county area."
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