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AES power plant in Redondo Beach. (2015, Chuck Bennett/Daily Breeze/SCNG)

A deal to sell the AES Redondo Beach Power Plant to a private developer was finalized this week after more than a year in escrow, a crescendo of sorts in the long fight to shutter the natural-gas fired plant on the city’s waterfront, officials have announced.

The agreement to sell the 51-acre power plant site, just east of King Harbor, comes after the city and environmental activists have spent roughly 20 years trying to shutter it.  But the deal comes with some caveats. The buyer has said he plans to build a mixed-use development on at least a portion of the site.

The transaction, for example, comes with the option for the plant to operate until Dec. 31, 2023. Redondo Beach Mayor Bill Brand and others have opposed this in front of the State Water Resources Control Board, which is expected to make a decision on the matter later this year. The City Council was united in this position, Brand said.

“We will continue to oppose the extension,” Brand said in an interview Monday, March 30. “We need people to write the water board and explain to them why we don’t want the power plant to continue to operate.”

 

The power plant, which is currently only used for backup power generation, had an expiration date set for the end of the year because state regulations prohibit a technique of cooling the plant by running seawater through it one time and then sending the water back to the ocean; the process harms marine life. But the Public Utilities Commission in November recommended the Redondo plant, along with three other gas-fired power plants, remain open to satisfy future energy needs. The water board must now make the final decision.

“We are committed to balancing the needs of the local communities now and into the future,” Lisa Krueger, president of AES US Strategic Business Unit, said in a statement Monday morning. “This means being able to keep the lights on for the short-term, while committing to a predictable and responsible transition for this beautiful piece of California’s coastline.”

If the power plant stays open another three years, the buyer, Leo Pustilnikov — who declined to disclose the purchase price — would agree to preserve 25 acres of the site for parkland, including a portion designated as wetlands by the California Coastal Commission. If the plant stays open for two more years, the option goes to 15 acres and for one year, Pustilnikov said, he would reserve 4 acres.

If the water board approves operating the plant for three years and the city supports it, however, Redondo Beach would have the option to purchase 15 acres of that 25 acres, Pustilnikov said in a Monday morning, March 30, interview.

The voting public would still need to approve a new site plan once a development vision is put forward because the property is currently zoned for either industrial or parkland. Pustilnikov has said he wants to build offices, a hotel and retail.

 

The only difference in the various versions of the deal, Pustilnikov said, is how fast the site gets cleaned up. If the plant stays open for three years, AES would transfer $14 million to Pustilnikov, set aside in a separate account, for environmental cleanup, compared to $6.5 million for a two-year extension or $1.5 million after a single year.

Pustilnikov called the deal a win-win-win for himself, AES and the city. And it would actually speed the cleanup process, he said. But it’s the same deal he brought before city officials earlier this month that the City Council balked at.

“Rather than have a site fallow for three years and having to come up with additional funds to clean it up, which I wouldn’t do until it’s entitled, I would do a majority of the cleanup while the plant is still operating,” Pustilnikov said. “If the plant would be shut down, there would be no additional revenues for the cleanup and I wouldn’t put more money into that site until it’s entitled (with voter approval).”

Brand said AES and Pustilnikov have pandered to the water board, whose members have openly talked about extending operations for the plant. Brand also added that Pustilnikov had apparently reneged on a deal — detailed in a signed letter in February — to offer the city 25 acres of the site for $2 million per acre. Pustilnikov subsequently said the letter was not a binding agreement. But it did allow the city to secure $4.8 million in parkland funding from the California Natural Resources Agency.

“Somehow they are offering parkland if they extend the operation of the plant, when in reality the whole site is already zoned for parkland,” Brand said. “I don’t know what the hubbub is all about.”

Krueger, in an interview Monday, said that far from pandering to the water board, the deal as outlined would ensure that if the power plant continued operating, the community would receive the benefit of accelerating the redevelopment process. Without such a deal, there’s no time frame for when the new buyer would be required to cleanup the site, she said.

“What we were really striving for on this was listening to the community, trying to build in these transaction documents things that were important for them,” Krueger said. “We really thought about balancing what the community needs now and in the future.”

Krueger said the company has done its due diligence, including fraud and risk assessments and making sure the buyer has the necessary funds, all of which checked out in this case.

Pustilnikov on Monday disclosed for the first time that his partner in the power plant purchase is developer Ely Dromy. He said the pair owns roughly $500 million in real estate together.

“We’re really happy that we were able to reach this milestone of closing this transaction and making this sale,” Krueger said. “It’s a great milestone not only for us but the community.”

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