LOS ANGELES - Cadiz Inc. (NASDAQ: NASDAQ:CDZI), a California-based water solutions company, has announced the acquisition of 180 miles of steel pipe from the defunct Keystone XL Pipeline to be repurposed for a water delivery project. The company plans to use this pipe for a new pipeline network that will connect its Mojave Desert groundwater bank to major water networks in the Southwestern United States, aiming to start construction in 2025.
The steel, originally intended for the Keystone XL crude oil pipeline, which was terminated in 2021, will now contribute to what Cadiz describes as the largest new groundwater bank in the Southwest. This initiative follows the company's 2021 acquisition of 220 miles of existing pipeline from El Paso Natural Gas.
Cadiz CEO Susan Kennedy highlighted the company's commitment to repurposing infrastructure for environmental benefits, stating that utilizing the steel will expedite the project's completion. Former Tribal Chairman of the Standing Rock Sioux Tribe, Dave Archambault II, praised the initiative for transforming a symbol of fossil fuel dependence into a conduit for delivering water.
The company has also secured a letter of intent with a non-profit investment fund and other investors for up to $401 million in equity capital to support the Mojave Groundwater Bank project, with total estimated construction costs at $800 million. Additional funding will be sought through available grants.
Cadiz's decision to repurpose the Keystone pipeline steel for water transport has been lauded by David Sickey, former Senior Advisor to the U.S. Department of Energy, as a definitive act of environmental justice.
Details of the steel pipe purchase are documented in Cadiz's Current Report on Form 8-K filed with the SEC on this date. The company, which owns 45,000 acres of land in California and has significant water supply and pipeline assets, positions itself as a provider of comprehensive water solutions in the face of climate change.
The information in this article is based on a press release statement from Cadiz, Inc.
In other recent news, Cadiz Inc. secured approximately $23.38 million from a direct stock offering, with the funds slated for business expansion and development of various water supply projects. The company has also partnered with an investment fund for a $150 million investment aimed at supporting the Mojave Groundwater Bank project. Analyst firm B. Riley Securities maintained a Buy rating on Cadiz shares, underscoring the potential for a positive shift if the company successfully establishes a Master Limited Partnership.
In other developments, Cadiz and RIC Energy are collaborating to establish California's largest green hydrogen production site, leveraging solar power for green hydrogen production. Furthermore, Cadiz's subsidiary, ATEC Water Systems, has won contracts worth $1.6 million, set to serve nearly 100,000 people across California, Washington, and Oregon by 2025.
Lastly, Cadiz has reached near full capacity deals for its Northern Pipeline, with purchase commitments for 85% of the pipeline's capacity. The company has also appointed Cathryn Rivera as its new Chief Operating Officer, who is expected to drive the execution of Cadiz's groundwater banking project. These are some of the recent developments from Cadiz Inc.
InvestingPro Insights
Cadiz Inc.'s (NASDAQ: CDZI) ambitious water delivery project aligns with recent financial data and analyst expectations. According to InvestingPro data, the company's revenue growth stands at 27.18% for the last twelve months as of Q2 2024, indicating a positive trend in line with its expansion plans. This growth is particularly noteworthy given the company's relatively small revenue base of $2.69 million over the same period.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, which could be driven by projects like the Mojave Groundwater Bank. However, it's important to note that the company is not expected to be profitable this year, reflecting the capital-intensive nature of its operations and ongoing investments.
The company's market capitalization of $266.88 million suggests that investors are pricing in significant future growth potential. This is further supported by the stock's strong performance, with InvestingPro data showing a 52.36% price return over the last six months and an 18.33% return in the past month.
Investors should be aware that Cadiz is trading at a high revenue valuation multiple, which may indicate high growth expectations. The company's Price to Book ratio of 9.68 also suggests that the market is placing a premium on its assets, which include the valuable water rights and land holdings mentioned in the article.
For those interested in a deeper analysis, InvestingPro offers 12 additional tips for Cadiz Inc., providing a more comprehensive view of the company's financial health and market position.
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