LOS ANGELES - Cadiz Inc. (NASDAQ: NASDAQ:CDZI), a California-based water solutions company, has signed a Letter of Intent to supply the City of Hesperia with 75,000 acre-feet of water, bolstering the sustainability efforts in the Mojave River Basin. This agreement, announced today, is part of a broader "One Water" Initiative aimed at developing a coordinated water management strategy in San Bernardino County's Mojave River region.
The initiative, which involves regional water agencies, focuses on financing and constructing water infrastructure to conserve and efficiently use water resources, including groundwater, recycled water, and wastewater. Cadiz, through Fenner Gap Mutual Water Company, will provide the water at cost from its water supply and storage project in the eastern Mojave Desert to participating agencies.
Susan Kennedy, CEO of Cadiz, emphasized the importance of the initiative for desert communities, highlighting Cadiz's role in supporting sustainable growth and groundwater preservation. Hesperia Mayor Larry Bird also underlined the city's commitment to responsible water management and the benefits of the Fenner Gap Water Project for the community's future water security and resilience.
The water supply will be delivered through Cadiz's Northern Pipeline, which extends 220 miles through various communities and is intended to recharge groundwater basins, potentially reducing dependence on imported water from the State Water Project. The cost to Hesperia will cover only the incremental expense of pumping, delivery, and exchange.
Launched in 2024 by the Victor Valley Wastewater Reclamation Authority, the Mojave-San Bernardino County One Water Project aims to create a sustainable, integrated water system that balances human and environmental needs while maintaining affordability.
Cadiz, which controls 45,000 acres of land and 2.5 million acre-feet of water supply in California, has already secured agreements for 65% of the Northern Pipeline's capacity, with further announcements expected soon.
The information reported here is based on a press release statement from Cadiz, Inc.
In other recent news, Cadiz Inc. has entered into significant water supply agreements that are expected to bolster water accessibility in California. The company has signed a contract with Solstra Communities California LLC to deliver 1,275 acre-feet of water annually, supporting the development of more than 4,000 homes near Vandenberg Space Force Base.
This marks Cadiz's first instance of providing water to a housing developer, utilizing its Northern Pipeline, with 65% of the pipeline's capacity now under contract. 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.
In addition to the Solstra deal, Cadiz has also struck an agreement with Golden State Water Company to provide water to the City of Barstow. Under the new terms, Golden State will pay roughly $1,450 per acre-foot in 2024. Cadiz anticipates a net of about $850 per acre-foot after inflation adjustments for the water it conserves and delivers through the Northern Pipeline.
These recent developments are part of Cadiz's broader strategy to enhance water supply reliability in California by leveraging its existing infrastructure. The Northern Pipeline, with a capacity of 25,000 acre-feet per year, is nearing full capacity reservation. Both agreements are set to utilize a significant portion of this capacity, contributing to the company's commitment to water supply sustainability.
InvestingPro Insights
Cadiz Inc. (NASDAQ: CDZI) appears to be a company on the move with its recent Letter of Intent to supply water to the City of Hesperia. While the company is making strides in the water solutions sector, the financial metrics provide a mixed picture. According to InvestingPro Data, Cadiz is currently trading at a high Price / Book multiple of 5.48, suggesting that the market values the company's assets quite highly relative to its book value as of the last twelve months of Q1 2024.
Despite the positive news, the company's financial health has some concerning aspects. With a negative Gross Profit Margin of -29.75% during the same period, it indicates that Cadiz Inc. is spending more to produce its goods than it's making from sales, which aligns with the InvestingPro Tip that the company suffers from weak gross profit margins. Additionally, the company is not expected to turn a profit this year, as reflected in its P/E Ratio of -6.13, reinforcing the need for potential investors to consider both the opportunities and risks involved.
On a brighter note, the substantial Revenue Growth of 100.27% in the last twelve months as of Q1 2024 suggests that Cadiz's sales are expanding rapidly, which could be a positive sign for future profitability. Moreover, the company's liquid assets exceed its short-term obligations, providing some financial stability in the near term. For investors looking to delve deeper into the financials and future prospects of Cadiz Inc., there are more InvestingPro Tips available, including analysis on sales growth expectations and valuation multiples. To access these insights and more, visit https://www.investing.com/pro/CDZI and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Remember, there are 11 additional tips listed in InvestingPro that could further inform your investment decision.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.