Cadiz Inc. (NASDAQ: CDZI) Prepares for Major Pipeline Build Amid Rising Water Demand
Naples, Florida
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September 16, 2024 06:00 AM Eastern Daylight Time
As climate change and population growth exacerbate water scarcity, the need for innovative and reliable water solutions has never been more critical. Many regions face challenges with diminishing water supplies and groundwater contamination, impacting both health and daily life. Addressing these urgent issues requires advanced infrastructure and treatment technologies to ensure clean, accessible water for all.
Cadiz Inc. (NASDAQ: CDZI) is a California-based water solutions company focused on providing reliable, clean, and affordable water to underserved communities across the state and the Southwestern U.S. Cadiz has amassed a strong portfolio of water assets that includes 45,000 acres of land in California, 2.5 million acre-feet of water supply, and 220 miles of pipeline. The company’s infrastructure plays a critical role in addressing the region's chronic water shortages, driven by the growing impact of climate change and population growth.
California and the Southwest are among the areas most affected by persistent drought conditions. With rainfall increasingly unpredictable and demands for water rising, the state faces an uphill battle in ensuring long-term water security for its residents. Cadiz has emerged as a key player in offering both storage and delivery solutions to combat these challenges, positioning itself at the forefront of water management innovations.
CDZI’s latest milestone came in August 2024 when it announced that 85% of the capacity of its Northern Pipeline had been secured under water purchase agreements. This achievement follows the execution of five agreements in 2024, including Cadiz’s Water Conservation, Supply, and Storage Project, which is expected to deliver 21,275 acre-feet of water annually under these long-term contracts. Cadiz Chairman and CEO Susan Kennedy emphasized the importance of this accomplishment, stating, "Executing a critical mass of water purchase agreements to support construction on the Northern Pipeline has been our primary objective this year."
These contracts set the stage for the next phase of Cadiz’s ambitious project: the construction of the Northern Pipeline in 2025, with initial water deliveries projected as soon as 2026. Once fully operational, CDZI expects net revenues of approximately $850 per acre-foot in 2024 dollars, adjusted annually, which could significantly boost the company’s financial outlook.
Cadiz’s Northern Pipeline project spans 220 miles across California and has a total capacity of 25,000 acre-feet per year (AFY). It’s a vital infrastructure project serving communities in California's remote desert regions and the Inland Empire, which currently rely on imported water from Northern California’s State Water Project. The agreements in place now cover 85% of the pipeline’s capacity, enabling Cadiz to secure third-party capital to initiate construction on schedule.
As CDZI CEO Susan Kennedy pointed out, "These agreements... will enable the company to secure third-party capital to begin construction of the project in 2025 as planned." Furthermore, the company is in the final stages of contracting the remaining pipeline capacity and expects to begin construction as anticipated.
In addition to the Northern Pipeline, CDZI plans to begin contracting for water delivery via the project's Southern Pipeline later this year. This pipeline will extend 43 miles to the Colorado River Aqueduct, further expanding the company’s reach and adding an additional 25,000 AFY in water supply. Once both the Northern and Southern Pipelines are online, CDZI will operate the largest new groundwater banking operation in the Southwestern U.S., a much-needed solution for water-stressed regions like the Mojave River Basin, the Colorado River Basin, and California’s Inland Empire.
Earlier in the year, CDZI announced that the ATEC Water Systems division of Cadiz, a subsidiary, is also assisting in the expansion of the business. Earlier this year, ATEC secured three new sales contracts for iron and manganese filtration systems, adding $1.5 million in projected revenue for 2024. These systems will provide clean water to diverse communities, including rural Nevada and the University of Wisconsin, Madison. ATEC’s success in this area reflects the increasing demand for solutions that address groundwater contamination, particularly in underserved areas.
Kennedy praised ATEC's rapid expansion, stating, "The Board and I are extremely pleased by ATEC's rapid progress in delivering clean, affordable water to communities and cities across the nation." ATEC’s technology focuses on addressing contamination from iron and manganese, both of which pose health risks and affect the quality of drinking water in many regions.
For investors looking at the water sector, Cadiz, Inc. (NASDAQ: CDZI) is a company worth watching. Its comprehensive water supply and treatment solutions, coupled with strong prospects and an ever-increasing need for clean water, make it a key player in addressing one of the world’s most pressing challenges.
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