LOS ANGELES, CA – Cadiz Inc. (NASDAQ:CDZI), a water resource development company, announced on Tuesday a significant water supply agreement with Cucamonga Valley Water District (CVWD). The contract, effective immediately, commits Cadiz to supply CVWD with 5,000 acre-feet of water annually from its Water Conservation, Supply and Storage project.
The agreement leverages Cadiz's Northern Pipeline, which has a 25,000 acre-feet per year capacity, and is now 85% allocated with this latest deal. The remaining capacity is under negotiation, with the company aiming to secure commitments for the full pipeline output.
CVWD, serving parts of San Bernardino County, will pay no more than $1,650 per acre-foot for the water, with the potential to reduce costs through grant funding and an agreed annual adjustment tied to a specified index. Cadiz anticipates a net revenue of $850 per acre-foot, totaling approximately $170 million over 40 years, adjusted for inflation.
The agreement also outlines a collaborative effort between Cadiz, CVWD, and other partners to secure federal, state, and local grants to defray capital costs for the necessary infrastructure. The financial terms are designed to make the project's water competitive with alternative sources, such as recycled water from the Inland Empire Utilities Agency, ensuring affordability for CVWD.
Cadiz's water delivery to CVWD is contingent upon meeting certain conditions and the completion of construction, with payments commencing once water deliveries start.
In other recent news, Cadiz Inc. has been actively expanding its water supply contracts and initiatives. The company's subsidiary, ATEC Water Systems, secured three contracts valued at $1.5 million for their iron and manganese filtration systems, expected to treat groundwater in Wisconsin, Nevada, and Washington. Cadiz also signed a Letter of Intent to supply the City of Hesperia with 75,000 acre-feet of water as part of the "One Water" Initiative.
Additionally, the water solutions company entered into agreements with Solstra Communities California LLC and Golden State Water Company. Cadiz will provide Solstra with 1,275 acre-feet of water annually, aiding in the development of over 4,000 homes near Vandenberg Space Force Base. Golden State Water Company will receive water for the City of Barstow, with Cadiz expecting a net revenue of about $850 per acre-foot after inflation adjustments.
Furthermore, Cadiz inked a 50-year agreement with Santa Margarita Water District (SMWD) to supply water through its Northern Pipeline, originating from the Cadiz Water Project in the Mojave Desert. The contract stipulates the delivery of 5,000 acre-feet per year at a capped price of $1,650 per acre-foot.
InvestingPro Insights
Cadiz Inc.'s recent agreement with Cucamonga Valley Water District represents a significant step in their strategic efforts to supply water in California. As investors consider the implications of this deal, InvestingPro data and tips provide a deeper financial context. The company's market capitalization stands at $202.33 million, reflecting its position in the market. Despite a remarkable annual revenue growth rate of over 100% in the last twelve months as of Q1 2024, the company's gross profit margin is negative at -29.75%, indicating that costs have exceeded revenues. This aligns with an InvestingPro Tip that points out Cadiz's struggle with weak gross profit margins.
Additionally, the stock has seen a 1-month price total return of -16.53%, which may reflect investor concerns about profitability, as analysts do not anticipate the company will be profitable this year. This performance is further highlighted by the fact that the company's price is currently at 69.3% of its 52-week high, and the stock has been trading at a high Price / Book multiple of 5.53. For those seeking to delve deeper into the financial nuances of Cadiz Inc., InvestingPro offers a variety of tips—11 additional insights are available to help investors make informed decisions, including analysis on profitability, stock performance, and industry positioning.
Investors intrigued by Cadiz Inc.'s potential in the water resource development sector can explore these insights and more on InvestingPro's comprehensive platform. The latest financial metrics and expert analysis may provide valuable guidance as the company navigates its growth trajectory and fulfills its contractual obligations.
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