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.