CARLSBAD ---- Officials of Poseidon Resources Corp. said Wednesday that the state has allocated $530 million in federal tax-exempt bonds to finance its Carlsbad desalination plant.

The Private Activity Bonds were approved by the California Debt Limitation Allocation Committee. These bonds are used to finance private projects judged to benefit the public.

The Poseidon plant, which is under construction next to the Encina Power Station, will have a capacity of making 50 million gallons of fresh water a day from sea water, about 9 percent of water consumed in San Diego County.

Peter MacLaggan, Poseidon's senior vice president, said in a statement that the bonds' tax-exempt status means they can sell for a lower interest rate than taxable bonds, lowering the cost of the desalinated water to the buyers.