Cadiz Signs LOI with City of Hesperia for Water Supply

Rhea-AI Summary

Cadiz announced a new LOI to supply 75,000 acre-feet of water to Hesperia, part of the 'One Water' initiative in San Bernardino County's Mojave River Basin. The initiative aims to coordinate water resources and infrastructure among regional agencies. Cadiz, through its non-profit affiliate Fenner Gap Mutual Water Company, will supply water at cost. The Northern Pipeline, running 220 miles through various High Desert communities, will facilitate this. The project aims to reduce reliance on imported water and enhance water sustainability. The One Water initiative was launched by the Victor Valley Wastewater Reclamation Authority in 2024.

Positive

• Cadiz signed a LOI to provide 75,000 acre-feet of water to Hesperia.
• The project supports sustainable growth in the Mojave River Basin.
• Cadiz will supply water at cost, potentially appealing to regional agencies.
• The Northern Pipeline will facilitate water delivery, reducing the need for imported water.
• The initiative includes a coordinated strategy for water infrastructure in San Bernardino County.
• Earlier agreements cover 65% of the Northern Pipeline capacity.

Negative

• No specific financial benefits mentioned for Cadiz shareholders.
• Potentially high costs associated with pumping, delivery, and exchange not detailed.
• Dependence on successful collaboration with multiple regional agencies.
• No immediate revenue increase discussed.

Insights

Water Resource Management Expert

Cadiz's agreement to supply 75,000 acre-feet of water to the City of Hesperia is a significant step in addressing water scarcity issues in the Mojave River Basin. This initiative highlights the company's strategic move to leverage its vast water resources to support regional water needs. Water scarcity is an urgent issue, particularly in arid regions like the High Desert and the One Water initiative aims to meet this challenge by integrating various water sources such as groundwater, recycled water and imported water.

From a resource management perspective, this agreement is commendable for its focus on sustainability and efficient use of water resources. By providing water at cost, Cadiz ensures affordability, which is important for long-term water security. This move can also potentially reduce dependency on imported water, aligning with environmental best practices. However, the successful implementation will depend on the development of robust infrastructure and effective coordination among the participating agencies.

For retail investors, this agreement enhances Cadiz’s reputation and showcases its capability to address critical water issues, which could positively impact stock value in the long term.

Financial Analyst

From a financial standpoint, Cadiz's LOI with the City of Hesperia can be seen as a positive development. This agreement not only secures a substantial long-term contract but also demonstrates Cadiz's potential to generate consistent revenue streams through its water supply and storage projects. Additionally, the company's decision to offer water at cost could foster goodwill and increase adoption of its services, potentially leading to more such agreements in the future.

Moreover, having agreements in place for 65% of the Northern Pipeline capacity indicates strong demand and utilization of Cadiz's infrastructure. It suggests that the company is on a path to monetize its assets effectively. However, investors should be cautious about potential risks such as project delays, cost overruns and regulatory hurdles that could impact the expected financial benefits.

In the short term, the announcement may boost investor confidence and positively influence stock prices. Long-term benefits will depend on the successful execution of the project and the realization of the expected cost savings and revenue generation.

Environmental Impact Analyst

From an environmental perspective, the commitment to the One Water initiative and the focus on sustainable water management practices are crucial. The integration of groundwater recharge and the emphasis on diverse water sources like recycled water and wastewater align with contemporary environmental strategies aimed at reducing the environmental footprint. By participating in these initiatives, Cadiz is positioning itself as an environmentally conscious company, which can be beneficial for its brand and public perception.

However, the environmental benefits of the project will depend heavily on the actual implementation and efficiency of the infrastructure developed. Monitoring and managing the environmental impact during and after project execution will be vital to ensure that the goals of sustainability and conservation are met. Investors interested in the environmental, social and governance (ESG) factors of their investments might find this development particularly appealing.

75,000 acre-feet of water supply will support sustainable growth and groundwater recharge in the Mojave River Basin.

LOS ANGELES and HESPERIA, Calif., June 10, 2024 /PRNewswire/ -- Cadiz, Inc. (NASDAQ: CDZI / CDZIP) ("Cadiz" or the "Company"), announced that on June 5th the Company signed a Letter of Intent ("LOI") to provide 75,000 acre-feet of water supply to the City of Hesperia as part of the Company's commitment to the "One Water" Initiative in San Bernardino County's Mojave River Basin.

Cadiz' participation in the One Water initiative with Victor Valley water agencies was announced in January.  Under the "One Water" initiative, regional water agencies will develop a coordinated strategy for financing and building water infrastructure in San Bernardino County's Mojave River region.  As part of its commitment, Cadiz, through its non-profit affiliate Fenner Gap Mutual Water Company, will supply surplus water to participating agencies from the Cadiz water supply and storage project in the eastern Mojave on an "at cost" basis. Participating agencies will jointly develop an infrastructure plan to conserve and efficiently utilize all water resources in the Mojave River Basin – including groundwater, recycled water, wastewater and imported water resources from the State Water Project.

"Implementing the One Water initiative is crucial for High Desert communities," said Susan Kennedy, CEO of Cadiz. "Nowhere is water more precious.  Cadiz is incredibly proud to help communities like Hesperia plan for robust growth with a conservation focus that preserves desert groundwater and improves the quality of life for families who live, work and play here."

"As part of an adjudicated water basin, the City of Hesperia is committed to responsible water management strategies to address our replacement water obligations," said Hesperia Mayor Larry Bird. "To support our growing community, we are exploring opportunities like the Fenner Gap Water Project, which offers new avenues for water supply and sustainability. By participating in the Mojave-San Bernardino One Water Project, we aim to secure a sustainable water supply, ensuring water security and resilience for our City's future."

In accordance with the LOI, Hesperia and Fenner Gap will enter a definitive agreement reserving 75,000 AF of supplemental water supply from the Cadiz project through its Northern Pipeline. That pipeline runs 220 miles from Cadiz in the eastern Mojave through High Desert communities including Barstow, Yermo, Daggett, Newberry Springs and the Antelope Valley.  Cadiz water would recharge groundwater basins in the Mojave River Basin reducing the need for imported water from the State Water Project. The cost of the water will be limited to the actual incremental expense of pumping, delivery and exchange.

The Mojave-San Bernardino County One Water Project was launched by the Victor Valley Wastewater Reclamation Authority (VVWRA) in 2024 as a collaboration among public agencies and water providers in San Bernardino County's High Desert region. The goal is to develop a regional, integrated and sustainably managed water system that considers the current and future needs of all its users, meets human needs with environmental best practices, and makes cost-effective investments in infrastructure to preserve access and affordability for all. 

Earlier this year, Cadiz announced that the Company has agreements in place for 65% of the Northern Pipeline capacity. The majority of the water transported via the Northern Pipeline will benefit communities in San Bernardino County, including the Cities of Barstow, Adelanto and Fontana. Several additional agreements are expected to be announced in the near future.

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 of the water development project, the expected pricing, value and terms for water supply and storage, necessary permits required to construct facilities, and projected financial performance. 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.

FAQ

What is the recent LOI signed by Cadiz?

Cadiz signed a Letter of Intent to provide 75,000 acre-feet of water to the City of Hesperia.

What is the 'One Water' initiative mentioned in the Cadiz press release?

The 'One Water' initiative is a strategy for regional water agencies to coordinate water resources and infrastructure in the Mojave River Basin.

How will the water from Cadiz be delivered to Hesperia?

The water will be delivered through the Northern Pipeline, which runs 220 miles through High Desert communities.

What is the role of Fenner Gap Mutual Water Company?

Fenner Gap Mutual Water Company, a non-profit affiliate of Cadiz, will supply surplus water at cost to participating agencies.

What are the potential benefits of the Cadiz water supply project?

The project aims to support sustainable growth, reduce the need for imported water, and enhance water sustainability in High Desert communities.