LOS ANGELES - Cadiz Inc. (NASDAQ: NASDAQ:CDZI), a California-based water solutions company, has signed a water supply agreement with Solstra Communities California LLC to deliver 1,275 acre-feet of water annually. This supply will support the development of over 4,000 homes near Vandenberg Space Force Base, aimed at military and working families.
The agreement, announced today, marks the first instance of Cadiz providing water to a housing developer, leveraging its Northern Pipeline—a 220-mile pipeline originally constructed for oil transportation. The deal with Solstra is part of Cadiz's broader commitment, with 65% of the Northern Pipeline's capacity now under contract following this and three other agreements earlier this year.
Solstra's Solomon Hills project intends to create a sustainable community with up to 4,000 housing units, parks, and open spaces, primarily serving the aerospace industry's workforce and other sectors like education and healthcare. The initiative aligns with California's housing plan, which requires the construction of 2.5 million homes by 2030, with a focus on lower-income households. New developments in the state must demonstrate reliable water access before construction.
Cadiz expects to generate approximately $850 per acre-foot from the water purchased by Solstra, with net revenue calculated in 2024 dollars over the contract term. The Northern Pipeline, with a capacity of 25,000 acre-feet per year, is nearing full capacity reservation.
The final development of the Northern Pipeline conversion project is anticipated this year, with construction starting in 2025 and water delivery expected as early as 2026.
Solstra Communities California, backed by private investors, specializes in creating sustainable communities and acquired Pacific Coast Energy Company and its Solomon Hills property in 2019. Cadiz Inc. has been a key player in California's water industry since 1983, offering a range of water supply, storage, and treatment solutions.
This information is based on a press release statement.
InvestingPro Insights
As Cadiz Inc. (NASDAQ: CDZI) embarks on a new venture by providing water to housing developer Solstra Communities California, it's crucial to consider the company's financial health and market position. According to InvestingPro Tips, Cadiz may face challenges with its profitability. Analysts do not anticipate the company will be profitable this year, and Cadiz has not been profitable over the last twelve months. This insight is particularly relevant as the company invests in infrastructure projects such as the Northern Pipeline conversion, which requires significant capital expenditure and could impact short-term profitability.
Moreover, Cadiz's stock performance has been underwhelming, with the price having fallen significantly over the last three months and the stock trading near its 52-week low. This could indicate market skepticism about the company's future performance or broader sector trends. Despite these concerns, Cadiz's liquid assets exceed its short-term obligations, suggesting the company has the liquidity to meet its immediate financial commitments.
From a valuation perspective, Cadiz is trading at a high revenue valuation multiple, which could imply that the stock is overvalued relative to its sales. Investors considering Cadiz as part of their portfolio should be aware of these factors, which could influence the stock's performance and the company's ability to execute its strategic plans.
For those looking to dive deeper into Cadiz Inc.'s financials, InvestingPro offers additional insights and metrics. There are 15 more InvestingPro Tips available that could help investors make more informed decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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