LOS ANGELES - Cadiz Inc. (NASDAQ: NASDAQ:CDZI), a California-based water solutions company, has announced the signing of its fifth water supply agreement this year, marking a significant step towards the full capacity utilization of its Northern Pipeline. With this latest agreement, the company has now secured purchase commitments for 85% of the pipeline's capacity, totaling 21,275 acre-feet of water annually.
The agreements are part of Cadiz's Water Conservation, Supply, and Storage Project, designed to deliver water across a 220-mile stretch from Cadiz through San Bernardino and Kern Counties. The Northern Pipeline, with a total capacity of 25,000 acre-feet per year (AFY), aims to serve communities in remote desert areas and the Inland Empire, which currently depend on water imported from Northern California.
Cadiz CEO Susan Kennedy expressed that achieving a critical mass of purchase agreements was a primary goal for the year, as it paves the way for securing the necessary third-party capital to commence construction of the pipeline in 2025 as planned. The long-term "take-or-pay" contracts span 40 to 50 years, ensuring a steady revenue stream once the pipeline becomes operational.
The company anticipates beginning construction on schedule in 2025, with initial water deliveries expected as early as 2026. Upon completion, Cadiz estimates net revenue of approximately $850 per AF in 2024 dollars from the water purchased under these agreements, with provisions for annual adjustments tied to the CPI water and sewer index.
In addition to the Northern Pipeline, Cadiz is also planning to contract for water delivery via its Southern Pipeline later this year. This pipeline will extend 43 miles southeast from Cadiz to the Colorado River Aqueduct and will have the capacity to deliver an additional 25,000 AFY of water supply. It will also enable the use of the Cadiz aquifer for storing an extra one-million acre-feet of imported water.
Cadiz is currently working with public entities to form a Master Limited Partnership, aiming to fund capital infrastructure costs and secure the capital needed to begin construction in 2025. Once fully operational, the project is expected to become the largest new groundwater banking operation in the Southwestern U.S., offering new water supplies and treatment technologies to various communities for decades.
The information provided is based on a press release statement from Cadiz, Inc.
In other recent news, Cadiz Inc. has been making significant strides in securing water supply agreements. The company secured a deal with Cucamonga Valley Water District (CVWD) to supply 5,000 acre-feet of water annually, which is expected to generate approximately $170 million of net revenue over 40 years. Cadiz's subsidiary, ATEC Water Systems, also obtained three contracts worth $1.5 million for their iron and manganese filtration systems.
Cadiz inked a 50-year agreement with Santa Margarita Water District (SMWD) to supply water through its Northern Pipeline, delivering 5,000 acre-feet per year. The company 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.
Furthermore, Cadiz has entered into agreements with Solstra Communities California LLC and Golden State Water Company. Cadiz will supply Solstra with 1,275 acre-feet of water annually, supporting the development of over 4,000 homes, while Golden State Water Company will receive water for the City of Barstow. These are recent developments, and further announcements are expected soon.
InvestingPro Insights
As Cadiz Inc. (NASDAQ: CDZI) continues to secure water supply agreements for its Northern Pipeline, investors may be looking closely at the company's financial health and market performance. According to InvestingPro data, Cadiz has a market capitalization of approximately $197.58 million, reflecting the size of the company in the water solutions industry. Despite the company's recent progress in securing contracts, it's important to note that Cadiz has a negative P/E ratio of -5.8, indicating that it is not currently profitable.
One of the InvestingPro Tips suggests that Cadiz may face difficulties making interest payments on its debt, a critical aspect for investors to consider, especially as the company plans to commence construction of the pipeline in 2025. Additionally, while analysts anticipate sales growth in the current year, they do not expect the company to be profitable this year. This aligns with the company's reported negative gross profit margin of -47.17% over the last twelve months as of Q2 2024, underlining challenges in profitability.
Investors should also be aware that the stock has experienced significant price volatility, with a 9.35% decline over the last week and a 16.86% drop over the last month. Despite these setbacks, Cadiz's liquid assets exceed short-term obligations, providing some financial flexibility in the near term.
To gain a deeper understanding of Cadiz Inc.'s financial performance and market outlook, readers can explore additional InvestingPro Tips, which offer a comprehensive analysis of the company's position within the water solutions sector. There are 14 additional tips available on InvestingPro, which can be found at: https://www.investing.com/pro/CDZI.
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