CEO & Chairman Discusses Goal to Pursue
Financing Structures, Move Project Development & Capital Costs
Off Balance Sheet
LOS
ANGELES, May 30, 2024 /PRNewswire/ -- Cadiz, Inc.
(NASDAQ: CDZI / CDZIP) ("Cadiz" or the "Company"), a California water solutions company, today
released a brief update from Chairman and CEO Susan Kennedy to address the Company's most
frequently asked questions following its participation in the B.
Riley Securities 24th Annual Institutional Investor
Conference. A copy of the Company's conference presentation is
available at this link.
---
Fellow Shareholders:
Last week, we attended the B. Riley Institutional Investor
Conference, which presented a distinct forum to meet with many of
you. I would like to thank our sell-side analyst Mike Crawford and the extended B. Riley team for
the opportunity to participate in a productive two days of meetings
and a well-attended roundtable discussion. There were a
handful of common questions from interested investors and I'd like
to recap a few questions below for those who were unable to attend
in person for a live discussion.
What are the best current indicators of long-term success to
gauge progress on the Company's plans for the development of its
water supply, storage and conveyance assets?
The real pivot point for Cadiz in terms of milestones occurred
in Q1 of this year when we announced the first firm contracts for
water supply.
These contracts include two investor-owned utilities, one public
water system and one housing developer and represent more than
16,000 acre-feet per year, or 65% of the capacity of our Northern
Pipeline (which has a total throughput capacity of 25,000 acre feet
per year.) The agreements, with 40-50 year contract terms,
represent expected cumulative payments in excess of $1.2 billion over the life of those contracts.
When the Northern Pipeline becomes operational, which is expected
in 2026, the estimated net annual revenue to the company from these
contracts alone is approximately $16
million per year. We are in advanced stages of negotiation
with other public water systems to purchase the remaining capacity
of the Northern Pipeline and we expect additional off-take
agreements to be finalized throughout the year.
Having firm contracts in place for water supply is key to
project financing which will enable the Company to finalize
development and move into the construction stage.
But remember, the Northern Pipeline is only half the water
supply story. We expect to begin contracting for the other
half of the annual supply for delivery from the Southern Pipeline
later this year. When both pipelines are fully subscribed and
operational, we expect annual recurring cash flow to the Company
from water supply contracts to be approximately $50 million per year based on an expected
$850 per AFY in 2024 dollars and adjusted annually based on the
BLS Water and Sewer Index. The cumulative total net revenue to the
Company from water supply over the 50-year life of those contracts
is expected to be approximately $2.5
billion.
How does the groundwater storage project work in terms of
cash flow?
We have one million acre-feet of storage capacity in the Cadiz
aquifer. Water banking at Cadiz would be offered to the market the
same way leasing an apartment unit in an apartment complex would
work. Agencies with water supply to store during wet years would
lease space in our aquifer and pay wheeling rates to use our
pipelines to move water in and out of storage during dry
years. The market comps for groundwater storage banks in
California today is approximately
$1,500 per acre foot of storage
space. So, cumulative total gross payments for water storage over
the 50-year life of our permit are expected to be approximately
$1.5 billion. A water bank as
large as ours will also be able to facilitate water exchanges and
trading among and between agencies, which opens up additional
possible revenue streams in addition to maintenance and wheeling
fees.
How much capital will be required to achieve full operation
of all pipelines, water supply and storage facilities for the Cadiz
groundwater bank by 2028?
Our engineers estimate total costs to operationalize the
Northern Pipeline and construct the Southern Pipeline at
approximately $800 million, which
includes $135 – $165 million for the Northern Pipeline
conversion.
How do you plan on funding the project's financing
needs?
Our strategic plan has always been to partner with public
agencies to fund infrastructure costs at the lowest available cost
of capital and with a combination of federal and state grant
funding.
There's more than $55 billion
available for clean water projects alone through the Infrastructure
Investment and Jobs Act. The availability of grant funding for
projects like ours has never been higher.
Our objective is to pursue financing structures that allow us to
move project development and capital costs off balance sheet and
reduce debt and interest costs on the Company's financial
statements.
We believe forming a Master Limited Partnership (MLP) entity
could be the most advantageous structure to allow for public agency
partners and investors to act as limited partners and commit
funding to the capital infrastructure costs and/or obtain grant
funding in exchange for an agreed-upon cash flow share from the
project. Under an MLP structure, traditionally used for
pipeline and real estate assets, Cadiz would act as General Partner
and contribute our infrastructure assets to the partnership in
exchange for a share of the long-term cash flows from the
groundwater bank. An MLP structure would be tax efficient and
reduce the cost of water to end-users – a win for investors, the
Company, and the communities benefiting from clean and secure water
supplies.
We are in advanced discussions with parties that would
participate in establishing an MLP and expect to provide further
updates on this throughout the summer.
What is your long-term vision for the Company?
I envision Cadiz operating the largest water trading bank in the
Southwestern United States. We are well positioned to be the
industry leader in repurposing fossil fuel pipelines for water
conveyance, and a model for improving access to reliable and
affordable water around the world.
Again, thank you to the B. Riley team for hosting us at the
conference. If you have additional questions, please submit
them to CDZI@mzgroup.us.
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
www.cadizinc.com.
Forward-Looking Statements
This release contains
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and such
forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
"Forward-looking statements" describe future expectations, plans,
results, or strategies and are generally preceded by words such as
"anticipates", "expect", "may", "plan", or "will". Forward-looking
statements include, without limitation, projections, predictions,
expectations, or beliefs about future events or results and are not
statements of historical fact, and such statements include, but are
not limited to, statements relating to the progress and plans for
the water supply and storage project, the expected pricing, value
and terms for water supply and storage, necessary permits required
to construct facilities, our ability to consummate additional
public partnerships for water supply and storage and related
project finance, projected financial performance and accounting,
and the anticipated partnership structure for our water projects.
You are cautioned that such statements are subject to a multitude
of risks and uncertainties that could cause future circumstances,
events, or results to differ materially from those projected in the
forward-looking statements. These and other risks are identified in
our filings with the Securities and Exchange Commission (the
"Commission"), including without limitation our Annual Report on
Form 10-K for the year ended December 31,
2023 and our Quarterly Reports on Form 10-Q and other
filings subsequently made by the Company with the Commission. All
forward-looking statements contained in this press release speak
only as of the date on which they were made and are based on
management's assumptions and estimates as of such date. We do not
undertake any obligation to publicly update any forward-looking
statements, whether as a result of the receipt of new information,
the occurrence of future events or otherwise.
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SOURCE Cadiz, Inc.