Monday, November 17, 2014

Understanding the Risks of Large/Complex Water Projects

From The Bay Delta Conveyance Facility: Affordability and Financing Considerations report.

"Finally, there are a number of important risks that could pose significant obstacles to a successful financing of the proposed conveyance facility. Construction cost overruns and delays, which are not uncommon for large infrastructure projects of this type, could result in substantially higher debt service costs for the SWP and CVP contractors, which they may or may not be able to pass on to their water users. Regulatory uncertainty, whereby the efforts to restore the fragile Delta ecosystem are not as successful as planned, could lead to reductions in exports from the Delta such that the water deliveries are insufficient to generate the revenues necessary for the water contractors to meet their debt service obligations. If the BDCP’s anticipated state and federal funding for habitat conservation is not ultimately forthcoming, the ability to operate the tunnels could be jeopardized. Climate change also presents a financing risk, both by causing unforeseen changes to precipitation patterns such that deliveries from the Delta fall below the levels preliminarily anticipated based on current modeling of the impact of climate change and through greater than anticipated sea level rise leading to increased salinity in the west Delta, again reducing water deliveries to the extent that water contractors will be unable to raise the revenues needed to pay their debt service."

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