Milbank, Tweed, Hadley & McCloy LLP has advised the lenders, a group of banks led by Sumitomo Mitsui Banking Corp., in the financing of the roughly $923 million Vista Ridge Regional Water Supply Project, a well field and water pipeline that is expected to provide 20% more water to the City of San Antonio, Texas.
The water supply project, being built by Garney Construction, will consist of the production, treatment, delivery and sale to San Antonio Water System (SAWS), the city's public water utility, of up to 50,000 acre-feet of potable water each year for 30 years. Fresh water will be pumped from wells in the Carrizo-Wilcox aquifer to a collection pipeline system in Burleson County, Texas, where the collected water will be treated. From there, the water will be pumped through a new underground pipeline over 140 miles to north Bexar County, Texas, where it will connect to SAWS' municipal water utility system. All costs of construction and right-of-way acquisition are being covered by privately raised debt and equity capital. No public funds are needed from the City to build the project. SAWS will pay only for water that is actually delivered and for certain associated operating and maintenance expenses once the project has been built and is operating. The developer of the project, Vista Ridge LLC, takes the risk of water supplies and permits.
The Milbank team was led by Allan Marks, partner in the Global Project, Energy and Infrastructure Finance Group.
"Water has become the new oil," said Mr. Marks. "With climate change and increased urbanization globally, clean drinking water will become a more scarce commodity. It is critical that communities get ahead of this challenge by finding more environmentally sustainable water supplies, by conserving to reduce per capita water use, and by adapting to recycled water where possible. The Vista Ridge pipeline project offers a new, safe and dependable fresh water source for San Antonio – reducing the City's reliance on the environmentally sensitive Edwards Aquifer while maintaining the City's water conservation policies."
Mr. Marks added: "This innovative project represents one of the largest public-private partnerships in the water sector in the United States. The transaction is an example of how shifting risk from the public to the private sector in financing, building and operating critical infrastructure benefits both the community and investors."
In addition to Mr. Marks, Milbank attorneys involved in the Vista Ridge transaction include Project, Energy and Infrastructure Finance special counsel Jeff Cohen and associates Jeeseon Ahn, Francis Choi, Miguel Duran, Hao Huang, Eusebius Luk and Tom Quirxtner; Environmental Group partner Matthew Ahrens and associate Meghan Gabriel; Tax special counsel Drew Batkin; and Alternative Investments partner Eric Moser and associates Melissa Ferraro and Carl Ruggiero.
Engineering and design have already commenced, and major construction will start in January 2017. "Using a fixed price, design-build approach to construction allows for accelerated project delivery and budgetary certainty," added Allan Marks. The Vista Ridge Project is expected to begin operation in 2020. After the first 30 years of operation, ownership of the pipeline will be transferred to the San Antonio Water System.