Controversial hydro project claims backer
By: CHRIS BAGLEY - Staff Writer | ∞
LAKE ELSINORE ---- A prominent Wall Street investment bank has stepped forward to offer financing for a controversial hydroelectric plant near Lake Elsinore, the project's developers said Thursday.
Representatives of Nevada Hydro Co., the Vista-based company that first proposed the project more than 10 years ago, say they are nearing a deal to build facilities in the hills southwest of the lake, overcoming a large hurdle that opponents of the project had frequently emphasized.
The deal would call for Morgan Stanley, the Wall Street investment bank, to underwrite construction costs for both the generation facility and 30 miles of high-voltage cable connecting it to the rest of the state's electricity grid, said Chris Wysocki, a spokesman for Nevada Hydro.
It isn't clear how much of the $1 billion-plus construction costs Morgan Stanley would bear. Wysocki said Nevada Hydro and the investment bank expect to determine additional details in the next week.
A representative of Morgan Stanley confirmed that the two companies are negotiating, but declined to provide details. It also isn't clear how any deal between the two would fit with an earlier commitment by a North American subsidiary of Siemens, the German industrial conglomerate. That company had earlier agreed to finance the power lines, but not the generating facility itself.
Addressing the Elsinore Valley Municipal Water District board Wednesday, Nevada Hydro officials said Morgan Stanley would fund the project as part of a broader $3 billion investment in renewable energy sources, according to board members.
"It's encouraging to see," Phil Williams, a board member who has been supportive of the project, said Thursday. "They're bringing with them a whole lot of money. For years, people were saying, 'You're never going to get enough money.'"
The Lake Elsinore Advanced Pumped Storage project would pump lake water during the night into a reservoir that would be built in Decker Canyon. Water would flow back into the lake during the daytime when demand for ---- and the price of ---- power rises, using gravity to turn turbines and generate electricity.
The proposal has stirred controversy in the district, which stretches from northern Murrieta to Horsethief Canyon north of Lake Elsinore. Opponents protest, for example, that an associated 30-mile transmission line would pose a severe fire threat in swaths of the Cleveland National Forest, which it would transect.
Many have also argued against public subsidies, saying the reservoir would amount to a gigantic sinkhole for ratepayers when the long-term electricity savings fail to match the cost. The Federal Energy Regulatory Commission estimated early last year that construction of the reservoir, generator and power lines would cost as much as $1.3 billion. Water-district officials cited estimates closer to $1 billion. Plans submitted by Nevada Hydro call for the company and its investors to receive a guaranteed 14.5 percent annual return, or $145 million to $188 million a year.
Opponents claimed victory last month after the California Independent System Operator, which runs the state's power grid, urged the federal agency not to approve public financing for the project.
Even now, it isn't clear whether Morgan Stanley's backing would have a lasting impact on Nevada Hydro's plans, said John Lloyd, an opponent who represents Wildomar on the water district's board. Comments that Nevada Hydro representatives made Wednesday seemed to indicate that Morgan Stanley's commitment to the generation facility are less than firm, Lloyd said.
"It's a huge project that doesn't have the impact to pay for itself," Lloyd said.
Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.
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*gale wrote on Jun 22, 2007 1:08 AM:Mr. Loyd needs to fight for his constituents and tell the truth regarding LEAPS. The EVMWD board is deceitful and hides information from the public. The project is 150 million dollar loser. EVMWD has spent 3.5 mill of rate payers money on this boondoggle, while the city needs that money for 100 year old pipes and water quality improvements.
jack wrote on Jun 22, 2007 6:03 AM:Looks like it may be time to unload any Morgan Stanley stock in my portfolio. A company willing to dump resources into a plan as idiotic as LEAPS has a very dim future. Sell!
New Resident wrote on Jun 22, 2007 6:14 AM:Why? (I called a neighbor about this) Why not use the existing power grid blueprint that exists along Estelle Mountain? (Connects btwn Perris, N. of 15 to Tom's Farm area, then to Cleveland National Forest, towards OC.) Put the dam up on that area (that nobody uses) and tunnel the water back to the lake. (Like the Ca. Aquaduct) As long as only the "investors" pay for it. NOT US!
About Time wrote on Jun 22, 2007 7:50 AM:Well, it's about time that this project got the financial backing EVMWD and NV Hydro has been talking about for years. I really don't think Morgan Stanley would be involved in a losing project and throwing $$$ away if it was not something they could make happen.
Don't do it wrote on Jun 22, 2007 8:53 AM:It sounds like a big scam. It doesn't create NEW energy. It only replaces lower cost energy with higher cost energy. And there is now way the amount of energy used to pump the water up, will be the same as the amount of energy created when the water comes back down. It is a energy losing system. Doesn't make any sense at all. The only reason a Wall Street company would finance it is because they can make money off of suckers. The other company wants a guarantee of 14% return. If the thing doesn't make any money, that's gonna come out of the city and the residents pocket.
Sunshine wrote on Jun 22, 2007 9:25 AM:About time are --- you on the Board of Directors for EVMWD? You are floating on a cloud.
xenroner wrote on Jun 22, 2007 9:35 AM:If this happens, it seems to me that this sets aside the contention that the project is a boondogle. Morgan Stanley is likely not inclined to invest in anything that they believe will not be profitable.
For the People wrote on Jun 22, 2007 9:55 AM:This is indeed good news! Why? Morgan Stanley is a very conservative, high integrity bank with some allocation of investment money into renewable energy. What better way to improve our grid and overall power situation as well as providing a solid foundation finally do what is right and not what is political regarding energy projects. This project will be a start of energy efficiency for the rate payers. It's about time that the "big boys" learn to stop forcing thier ways on the people and look for alternate solutions that make economical sense. Maybe if the "big boys" didn't have a rate base insurance policy to fall back on every time a deal goes sour, then they would think twice about making bad decisions that get covered up with the rate payers money.
Dave wrote on Jun 22, 2007 10:34 AM:Here we go again! The "not in my back yard" crowd are all of a sudden experts on the cost and economics building a power plant.This project will povide "Green Power" to the area and is the best thing that could happen to the Lake.
This is dumb wrote on Jun 22, 2007 10:44 AM:They are trying to use lake water as a battery. All this will result in is more carbox dioxide in the air due to losses from pumping all that water.
To Dave, wrote on Jun 22, 2007 11:18 AM:Get educated...we the "nimbys" have been following this project for a decade and it's a no-brainer, Cal ISO even thinks so. The EVMWD is a water compnay - not an energy company. They really need to improve the quality of water and service to their rate-payers, instead of wasting OUR monies on LEAPS.
Junk Bonds wrote on Jun 22, 2007 11:36 AM:Investors will be guaranteed a 14.5 percent return! Bonds with that high of an interest rate used to be known as junk bonds. If the project fails, water district customers will be paying off those investors on top of skyrocketing utility bills. It's a shame to see a whole city get suckered.
Harry wrote on Jun 22, 2007 12:29 PM:Why haven't you printed my article - is to factual........in other words the truth.
Backup wrote on Jun 22, 2007 12:48 PM:For the people your comments are so exposing as a Director of EVMWD -- no one will have to guess who you are its obvious. Your the one that keeps pushing the project and tries to make the people in Horsethief that you are on their side but in the end you are not you will those lines without the rest of the project. ......
Bill at FVE wrote on Jun 22, 2007 1:19 PM:This is a bad idea - plain and simple. People think the quarry in Temecula is a bad idea; this is 10 times the bad idea over a way bigger area. Stop this now.
Charles wrote on Jun 22, 2007 2:44 PM:If Morgan Stanley sees some economic gain in this project, then why didn't Siemens see the same profit a long time ago? Is the new contract for JP Morgan different than the contract for Morgan Stanley? This is a dream, the fella at Morgan Stanley needs to do alot of background work before he goes into a meeting and states he has $3 billion dollars, I think he is going to get fired once Morgan Stanley sees that the fool they have pushing this investment hasn't done his homework, but then again he did get paid by EVMWD to show up at the meeting and state he had interest in the investment. Why did we pay for the 12 people who showed up at the meeting with Neveda Hydro? Rate payer dollars used to propr up an O.J. like justification for something that never will materialize and is the opposite of what Mr. Williams states. Phil Willaims is a real business tycoon, using rate payer dollars to prop up a project that is his and his alone, Phil the election is two short years away, you will lose, I promise you.
Wednesday??? wrote on Jun 22, 2007 3:54 PM:My question is: Why was Nevada Hydro addressing the EVMWD on Wednesday? The public EVMWD meetings are on Thursdays at 4pm. Was this a secret meeting?
Long Time Valley Resident wrote on Jun 22, 2007 4:24 PM:As from the beginning of this project, EVMWD (Phil Williams) thinks that the residents that live in this valley are uneducated, ignorant people and that they can take advantage of us at will. Well, we won't stand for it and we have proven that time and again. We the people will fight for our valley, our forest and our neighborhoods. We will protest Morgan Stanley if we have to. This project is a bad idea all around and its time to put a stop to if for good.
Joe wrote on Jun 22, 2007 8:38 PM:Has anyone of any real value looked at the cost vs return to see that these numbers are really true. Assume for just a moment that this plan will work. CAN IT MAKE a real profit, not a return from the rate payers. If you figure in the interest cost, maintence costs and other day to day costs, will this really make any money at the end of the day. I would say not a chance. And to top it off you will destroy an area which can not be replaced. Bad idea for everyone except the investors who will get their money back from SOMEONE, but not from the power generated by this system.
ROY wrote on Jun 22, 2007 11:21 PM:Recall the entire board before this thing goes through. Talk is cheap and will not stop this project. Get together and recall now before our bills go up more. EVMWD is poorly run and managed. Cut the head off the snake.
to Roy wrote on Jun 23, 2007 4:26 PM:We had a chance at the Nov 06 election to get three people elected that were against the project but Nevada Hydro backed Guglielmana and Wicke with big bucks and the voters didn't educate themselves.
Russ wrote on Jun 26, 2007 10:23 PM:EVMWD had better start addressing the current drought, and impacts to its rate payers. We are in the worst drought since 1887, water rates are going up and EVMWD board wants to spend Millions on an energy project? How about spending the money on something really needed, like a conservation plan.
to Wednesday??? wrote on Jun 26, 2007 10:27 PM:Its called a Brown Act Violation How is Nevada Hydro paying off the board?
Joe wrote on Aug 30, 2007 5:12 PM:Everyone affected by this project needs to stand up and make a point. We need to understand that this is a "business project" not an energy project. It does not matter to the people involved that this will make any money to pay off the debt, and show a profit, it only maters that the investors make a profit. If the money comes from the project, fine, if it does not the profit will still come to the investors, but from the rate payers and the City. And where does the City get their money? Yup that's right the people. The cost to pump the water and maintain the system and of course pay off the debt, will more than destory any "Real" profit the project will produce. Stand up to protect Your Lake, Your Forest, and YOUR MONEY.
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