Cadiz Announces Northern Pipeline Now Contracted for 85% Capacity

Rhea-AI Summary

Cadiz, Inc. (NASDAQ: CDZI) has announced securing water purchase agreements for 85% of capacity of its Northern Pipeline, following the execution of the fifth agreement in 2024. The cumulative total under contract is now 21,275 acre-feet per year, with contracts spanning 40-50 years. The Northern Pipeline, stretching 220 miles, has a total capacity of 25,000 AFY. Cadiz expects to begin construction of the Project in 2025, with initial water delivery targeted for 2026.

The company anticipates net revenue of approximately $850 per AF in 2024 dollars, subject to annual adjustments. Cadiz is also planning to contract for water delivery via the Southern Pipeline later this year, which will enable an additional 25,000 acre-feet per year of water supply. The company is working on forming a Master Partnership to fund the Project's capital infrastructure costs.

Positive

• Secured water purchase agreements for 85% of Northern Pipeline capacity
• Cumulative total of 21,275 acre-feet per year under contract
• Long-term contracts spanning 40-50 years
• Expected net revenue of $850 per acre-foot in 2024 dollars
• On track to begin construction in 2025 with initial water delivery in 2026
• Planning to contract for additional 25,000 acre-feet per year via Southern Pipeline

Negative

• Project construction has not yet begun
• Remaining 15% of Northern Pipeline capacity still to be contracted
• Capital funding for the project not yet secured

Insights

Water Resource Management Expert

This announcement marks a significant milestone for Cadiz's Northern Pipeline project. Securing 85% capacity through water purchase agreements is a strong indicator of market demand and project viability. The long-term nature of these contracts (40-50 years) provides stable revenue streams, enhancing the project's financial outlook.

The projected net revenue of $850 per acre-foot (2024 dollars) is noteworthy, especially with CPI-linked adjustments. This pricing structure could provide robust returns if water scarcity in California continues to increase. However, investors should consider potential regulatory risks and environmental concerns that may impact project timelines or operations.

Financial Analyst

Cadiz's announcement is financially promising. The 85% capacity commitment significantly de-risks the project and improves its bankability. This milestone should facilitate third-party capital acquisition for construction, potentially reducing the company's direct capital requirements.

With a projected annual revenue of approximately $18 million ($850 * 21,275 acre-feet) from the Northern Pipeline alone, Cadiz is positioning itself for substantial long-term cash flows. The planned Southern Pipeline could double this revenue potential. However, investors should note that significant capital expenditure lies ahead and profitability timelines remain uncertain.

Environmental Policy Analyst

While Cadiz touts its project as a solution to water scarcity, it's important to consider the environmental implications. Groundwater extraction at this scale could potentially impact desert ecosystems. The project's sustainability will likely face ongoing scrutiny from environmental groups and regulators.

However, if executed responsibly, the project could provide critical water security to underserved communities in a climate change-impacted region. The planned storage of imported water could also offer valuable flexibility in managing regional water resources. Investors should monitor ongoing environmental assessments and regulatory approvals as key risk factors for project realization and long-term viability.

Achieves important milestone following execution of fifth water supply delivery agreement in 2024

LOS ANGELES, Aug. 15, 2024 /PRNewswire/ -- Cadiz, Inc. (NASDAQ: CDZI / CDZIP) ("Cadiz" or the "Company") announced today that it has secured water purchase agreements for 85% of capacity of the Company's "Northern Pipeline."  The announcement follows execution of the fifth agreement this year for water supply from the Company's Water Conservation, Supply, and Storage Project (the "Project"), bringing the cumulative total acre-feet per year under contract for delivery via the Northern Pipeline to 21,275 acre-feet per year.

Under the five water supply agreements signed so far this year, the Project is expected to deliver an annual supply of water under "take-or-pay" contracts over 40 – 50 years.  The Northern Pipeline, which stretches approximately 220-miles northwest from Cadiz, California through San Bernardino and Kern Counties, has a total capacity of 25,000 AFY and is capable of serving remote desert and Inland Empire communities that currently rely upon imported water from Northern California through the California State Water Project.

"Executing a critical mass of water purchase agreements to support construction on the Northern Pipeline has been our primary objective this year," said Cadiz Chairman and CEO Susan Kennedy. "These agreements, which cumulatively represent 85% of the Northern Pipeline capacity, will enable the Company to secure third-party capital to begin construction of the Project in 2025 as planned."

The Company is in final stages of contracting for the remaining capacity of the Northern Pipeline and anticipates construction of the Project to begin in 2025 as planned with initial water delivery targeted for as early as 2026.  Following construction of the Project, Cadiz expects to receive net revenue of approximately $850 per AF in 2024 dollars for water purchased under the agreements, subject to annual adjustments such as tied to the CPI water and sewer index.

The Company plans to begin contracting for water delivery via the Project's Southern Pipeline later this year.  When constructed, the Southern Pipeline, will extend 43-miles southeast from Cadiz to the Colorado River Aqueduct, enabling delivery of an additional 25,000 acre-feet per year of water supply and allowing use of the Cadiz aquifer for storage of an additional one-million acre-feet of imported water. The Company is currently working with several public entity partners on forming a Master Limited Partnership to fund the Project's capital infrastructure costs and secure the capital necessary to begin construction in 2025.

Once fully online, the Project is expected to be the largest new groundwater banking operation in the Southwestern U.S., providing new water supplies and water treatment technologies to underserved, disadvantaged and other communities in the Mojave River Basin, the Colorado River Basin and California's Inland Empire for decades to come.

To view copies of the 2024 Agreements, visit https://www.cadizinc.com/agreements.

About Cadiz, Inc.
Founded in 1983, Cadiz, Inc. (NASDAQ: CDZI) is a California water solutions company dedicated to providing access to clean, reliable and affordable water for people through a unique combination of water supply, storage, pipeline and treatment solutions. With 45,000 acres of land in California, 2.5 million acre-feet of water supply, 220 miles of pipeline assets and the most cost-effective water treatment filtration technology in the industry, Cadiz offers a full suite of solutions to address the impacts of climate change on clean water access. For more information, please visit https://www.cadizinc.com. 

Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the expected benefits to be derived from our water purchase agreements, the projected timeline for construction of the Project and operation of the Northern Pipeline, expectations of obtaining financing needed for construction to begin, the formation of a Master Limited Partnership with public entities to fund capital infrastructure costs, and expected revenue from the water purchase agreements, which are subject to risks and uncertainties, many of which are beyond the control of the Company, including the Company's ability to fulfill the conditions precedent in the water purchase agreements, obtain requisite financing for construction of the Project and complete the needed construction for water delivery to occur.  Although the Company believes that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.  Factors that could cause actual results or events to differ materially from those reflected in the Company's forward-looking statements include whether the parties to the water purchase agreements referenced in this release will be able to obtain the funding contemplated by the agreements, potential delays in the supply chain for materials or permitting, and other factors detailed in the Company's Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent quarterly and current reports. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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SOURCE Cadiz, Inc.

FAQ

What percentage of the Northern Pipeline capacity has Cadiz (CDZI) secured in water purchase agreements?

Cadiz (CDZI) has secured water purchase agreements for 85% of the capacity of its Northern Pipeline.

How much water is now under contract for delivery via Cadiz's (CDZI) Northern Pipeline?

The cumulative total under contract for delivery via Cadiz's (CDZI) Northern Pipeline is 21,275 acre-feet per year.

When does Cadiz (CDZI) expect to begin construction of its Water Conservation, Supply, and Storage Project?

Cadiz (CDZI) expects to begin construction of its Water Conservation, Supply, and Storage Project in 2025.

What is the expected net revenue per acre-foot for Cadiz (CDZI) from the water purchase agreements?

Cadiz (CDZI) expects to receive net revenue of approximately $850 per acre-foot in 2024 dollars, subject to annual adjustments.

When is the initial water delivery targeted for Cadiz's (CDZI) Northern Pipeline project?

The initial water delivery for Cadiz's (CDZI) Northern Pipeline project is targeted for as early as 2026.