Estrada Hinojosa is working with SAWS to develop a 142-mile, 50,000 acre-foot pipeline project to create a new source of water for the San Antonio area. Unique among large American cities, San Antonio largely relies on groundwater to meet its water needs, mainly from the Edwards Aquifer watershed, a prolific artesian aquifer located in Central and South Texas. As the State’s recent drought and increasing population demands (20,000 new residents are added to the San Antonio Metropolitan area each year) force more stress on existing water sources, SAWS began to look elsewhere for long-term and sustainable sources of water.
Through a deliberative process, SAWS identified a second source of water, the Carrizo Aquifer, located north and east of Austin. Using a competitive P3 procurement, SAWS selected a private developer, the Vista Ridge Consortium (originally led by a Spanish water company, now replaced by the Project construction firm and association of water owners), to develop the well field, construct a 142-mile pipeline, and bring new water sources to Bexar County and SAWS customers, as shown in the map to the right. This project is estimated to cost approximately $3 billion, with $100 million of SAWS-related expenses (for interconnection), and the balance financed privately by the developer. SAWS has agreed with Vista Ridge on a 30-year “take and pay” contract for 50,000 acre-feet, thereby adding 20% more water to current sources. This project will alleviate future concerns over climate change and possible return to drought, mitigate over-reliance on the sensitive Edwards Aquifer watershed, and provide sustainable water resources to the growing population and economic engine of San Antonio. SAWS is currently debating future water rate increases to pay for pre-construction activities of the project, and the developer intends to reach financial close in the next this year.
Estrada Hinojosa’s efforts with SAWS during this engagement have been varied. When the process started in 2011, we worked closely with the co-financial advisor on preliminary modeling on the cost of this project, whether to pursue it as a P3 or traditional design-build project, and its possible impact on current water rates. We later assisted SAWS on the development of a term sheet with Vista Ridge, an elaborate multi-party process that included significant public participation and an emphasis on transparency by the Department. We are now advising SAWS on modeling associated with rate increases and reviewing the developer’s plan of finance. The project is projected to go online in the latter part of the decade, and will ensure San Antonio’s water sources for the long-term. This project fully enlists Estrada Hinojosa’s expertise in planning and quantitative analysis and P3 procurements – it is these kinds of activities that separate Estrada Hinojosa from other financial advisors, and where we think we can add value to thee GBRA.