05 Jun Press Release: Cadiz Signs Letters of Intent with Five California Water Providers
June 5, 2009
LOS ANGELES – Today Cadiz Inc. (NASDAQ:CDZI) announced that it has executed Letters of Intent (LOI) with a broad collection of Southern California water providers to develop a cost-sharing agreement, finalize terms of pricing, design and capital allocation and work towards implementation of its water conservation and storage project. These providers together serve more than 3 million water customers across the region.
Signing the LOIs are four public municipal water agencies and Golden State Water Company, California’s second largest publicly-traded water utility. These providers serve customers in California’s San Bernardino, Riverside, Los Angeles, Orange and Ventura Counties. The Company expects to add additional participants for other aspects of the project.
Specifically, Cadiz and the interested water providers have agreed to undertake a mutual project evaluation and seek an agreement identifying and apportioning expected environmental review costs, including the preparation and submittal of a Project description for review under the California Environmental Quality Act (CEQA). The environmental review process is expected to begin shortly following the submittal of the Project description.
Under the LOIs, water purchase options will tentatively be made available to participants on a 50-year term based on the cost of comparable alternative sources of supply. Participants will be subject to fees for administration, management and maintenance of storage, puts and takes, and power costs. Discounts will be provided to participants meeting agreed-upon environmental stewardship objectives.
In a statement to the participating water providers, Governor Arnold Schwarzenegger applauded their decisions to join the project:
“I applaud the leadership of these Southern California water agencies who are helping address the state’s water supply challenges by exploring a path-breaking, new, sustainable groundwater conservation and storage project. This innovative project, utilizing sophisticated water conservation practices, will sustainably recover more than one million acre feet of water that would otherwise be lost to evaporation and make it available to help provide a reliable source of water for Southern California. All Californians who care about our state’s economic future and job creation should follow the lead of these water suppliers and examine smart and sustainable ways to conserve every last drop of water.”
With the State of California suffering the effects of a severe long-term water shortage, Governor Schwarzenegger declared a “state of emergency” in February, and deliveries to local agencies from the State Water Project have been cut to 40 percent of capacity. On June 1, the Los Angeles Department of Water and Power imposed mandatory rationing, cutting water allocations to its customers by 15 percent.
“Our state is facing a water crisis today and tomorrow unless we expand our water supply for a growing California,” said Congressman Jim Costa (D-CA). “We must use all the water tools in our water toolbox. In Southern California especially, all viable water projects that relieve pressure on the Delta and increase supply and storage opportunities are critical to provide water for growing cities, to maintain the viability of our farms, and to address long-term environmental concerns. The Cadiz project falls in this category.”
“We are excited to be a part of this critical water supply and conservation effort,” said Denise Kruger, Senior Vice President at Golden State Water Company. “This is an environmentally friendly proposal that will create jobs and serve thousands of families currently facing shortages and cutbacks.”
The $200 million project features the construction of a 44-mile underground conveyance pipeline and will create an estimated 1,200 construction jobs. Cadiz has pledged to hire Inland Empire companies for materials and services, wherever possible, and to reserve up to ten percent of conserved water and storage for beneficial uses in San Bernardino County.
“The Cadiz Project will bring an immediate infusion of economic stimulus and new jobs to the region,” said San Bernardino County Supervisor Brad Mitzelfelt. “Over the long haul, it will help us meet our needs by making responsible and sustainable use of local resources.”
“We see the project as a clear win-win for the local economy, offering good green jobs when we need them most,” said Mike Quevedo, International Vice-President at Laborers International Union of America, “We strongly support the project and look forward to its consideration and approval.”
“By offering new jobs and service opportunities, the Cadiz Project will help get the local economy back on track and put our people to work,” stated Bob Ereth, Vice President at Layne Christensen Company, an industry leader in water related construction services, “We look forward to participating in the project as it moves forward.”
One of the largest water conservation efforts of its kind, the Cadiz Project is designed to conserve and utilize billions of gallons of renewable native groundwater currently being lost annually to evaporation and to make available vast quantities of groundwater storage. The Company owns approximately 35,000 acres of land in the Cadiz and Fenner valleys of San Bernardino County, California. This landholding is underlain by an extensive aquifer system with storage capacity and natural recharge. By making use of groundwater that currently evaporates from the aquifer system at the nearby dry lakes, the project will yield a sustainable annual water supply for its subscribers. The aquifer system also offers approximately one million acre feet of storage capacity that can be used to conserve – or “bank” – imported water, virtually eliminating the high rates of evaporative loss suffered by local surface reservoirs.
“The interest in our project reflects an overwhelming public interest in developing long-term sustainable solutions to the water crisis,” said Cadiz General Counsel Scott Slater. “We are moving actively to bring our water supply and conservation project on line in an environmentally responsible manner.”
Cadiz has recently pledged to develop the water banking aspect of the project with the core goal of achieving environmental betterment. Last month, the Company signed a wide-ranging “Green Compact” with the Natural Heritage Institute (NHI), a leading global environmental organization, in which it committed to lead a series of model environmental initiatives, including the permanent preservation of surface lands, a set-aside for clean energy development, and stringent plans for groundwater management and habitat conservation. In addition, the Company has pledged to use its water bank to promote the restoration of endangered aquatic ecosystems.
Scott Slater added, “This conservation project can actually work to unlock the storage potential of the aquifer system for environmental benefit and is consistent with the Company’s pledge to manage the entire property in a holistic manner. We are optimistic that the right combination of conservation and storage partners will assist us in achieving our goals of water supply augmentation and environmental betterment.”
“The Green Compact is a potential model for how the private sector and the environmental community can work together,” said NHI President Greg Thomas. “This agreement will potentially yield a variety of significant environmental benefits, from wildland preservation to clean energy to the restoration of threatened water systems. Our mutual goal is not just to avoid environmental harm but to actually provide a net environmental improvement.”
Founded in 1983, Cadiz is a publicly held renewable resources company that owns 70 square miles of property with significant water resources and clean energy potential in eastern San Bernardino County, California. The Company is engaged in a combination of organic farming, solar energy and water supply projects. Further information can be obtained by visiting www.cadizinc.com.
This release contains forward-looking statements that are subject to significant risks and uncertainties, including statements related to the future operating and financial performance of the Company and the financing activities of the Company. Although the Company believes that the expectations reflected in our forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Factors that could cause actual results or events to differ materially from those reflected in the Company’s forward-looking statements include the Company’s ability to maximize value for Cadiz land and water resources, the Company’s ability to obtain new financing as needed, and other factors and considerations detailed in the Company’s Securities and Exchange Commission filings.
Investor Relations Manager