Transcript Cadiz Valley Water Conservation, Recovery & Storage Project

CADIZ INC.
Sustainable Land, Water & Agricultural Resources
B. Riley & Co. Conference
May 13, 2015
Safe Harbor Agreement
May 2015
This presentation 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. Although the Company believes
that the expectations reflected in its forward-looking statements
are reasonable, it can give no assurance that such expectations
will prove to be correct.
Cadiz Inc.
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Cadiz Inc.
o California renewable
resources company
with 45,000 acres of
land assets and
water rights.
o NASDAQ: CDZI
o Founded 1983
o Permits for
agriculture and
water supply
projects.
Fresno
Las Vegas
15
5
Kingman
Bakersfield
Barstow
Santa
Barbara
Laughlin
Needles
40
San Bernardino
Los Angeles
10
15
5
San Diego
El Centro
8
Yuma
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Current Operations
o Cadiz Valley Water Conservation, Recovery and Storage Project
• Approved for 2.5 million AF of water deliveries over 50 years;
maximum annual delivery of 75,000 AF.
• Current existing wellfield on property to pump 20,000 AF/year.
o Cadiz Valley Agricultural Development
• Agriculture is a permitted use on all 45,000 acres of Company.
• 9,600 under current CUP.
• Joint venture with Ag company to
plant up to 1,500 acres of lemons.
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Other Assets
o Land Conservation Bank
• 7,500 acres desert tortoise habitat land certified as mitigation
bank by State of CA.
• Bank credits would be sold to development projects with
mitigation requirements.
o Cadiz Northwest Pipeline
• 96-mile 30” steel pipeline, idle in ground, with water delivery
capacity 20 – 30,000 AF/year.
• Intersects major California water infrastructure.
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Market Conditions
o CA in 4th Year of Drought, Hit by Mandatory Rationing,
& Lake Mead at lowest level since 1930s.
o Need for New Water Supply Alternatives • Major Infrastructure Projects (reservoirs,
Delta tunnels) pursued by State.
• Variety of local supply projects (desalination, recycling, supply
augmentation, aquifer storage conservation) actively sought by all
water providers.
o Rising Price of Water in California • Rates have historically increased approx. 6% per year.
• Market prices for reliable water reaching $1,000AF; short-term spot
market $2,000/AF.
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Cadiz Water Project
Cadiz Water Resource
o 1,300 sq. mile watershed in
eastern San Bernardino
County
o Aquifer holds approx. 20
million AF, comparable to
Lake Mead w/ natural
recharge of 32,500 AF/year.
o Cadiz Inc. only significant
overlying land user.
o Prolific groundwater
resource provides irrigation
for agricultural operation.
New York Mountains
Providence
Mountains
Fenner Valley
Granite
Mountains
66
Orange
Blossom
Wash
Bristol Dry
Lake
Cadiz Dry
Lake
5 Miles
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Water Wasted to Evaporation
Desert Research Institute measured evaporation from the Dry Lakes at
approximately 32,000 AF/year. Billions of gallons of water lost every
year.
Dry Lake Crust
Beneath Dry Lake Surface
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Solution: Managed Water Project
o Intercept and
conserve
groundwater
before it reaches
dry lakes.
o Put conserved
water to
beneficial use in
So. California
water system.
o Without
intervention,
billions of gallons
of water lost.
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Cadiz Water Project
A new, innovative and sustainable water source for Southern
California
PHASE I: Conservation & Recovery Phase
• Construct wellfield on Cadiz Inc. property
to create “picket fence” to conserve water.
• Deliver 2.5 million AF over 50-years via a
43-mile buried pipeline to Colorado River
Aqueduct within Arizona & California Railroad right-of-way.
• NO adverse environmental impacts under permits.
• Creates reliable supply for 100,000 families.
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Phase 2 - Groundwater Storage Solution
Once hydraulic barrier established in Phase 1, Project would import
water in wet years to store in the aquifer system for return when
needed in dry years.
o Total storage capacity = 1 million acre-feet.
o Larger than local surface reservoirs,
including Diamond Valley Lake.
o Facilities:
o Convert Northern pipeline
o Spreading basins
o Pump station
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Innovative Connection between Major CA Water Transportation
Routes
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Peer Reviewers: Project Is Sound
After a complete review of all studies, a 13-member unpaid peer
review panel found project can be operated without significant
impacts.
o No impacts to desert springs
o No impacts to endangered/threatened species
o No impacts to air quality
o No impact on adjacent watersheds or aquifers
o Groundwater basin can be sustainably managed to conserve water.
“I find the project to be viable and capable of being implemented and administered
without deleterious effects on the environment. The monitoring plan will ensure that
any unanticipated effects are detected and dealt with.”
Dr. Charles Groat, GSC Member
Former Director of the U.S.G.S.
Professor of Geological Sciences, University of Texas at Austin
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Project Approvals
o Environmental Impact Report: Certified by Santa Margarita Water
District Board of Directors, July 2012
o Groundwater Management, Monitoring & Mitigation Plan:
Approval by San Bernardino County Board of Supervisors, October
2012
o CEQA Litigation: Litigation challenging Project EIR and GMMMP
denied by OC Superior Court, December 2014.
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Project Participants
o Signed contracts, options and LOIs
with AA-rates agencies serving water
users in 6 Southern California Counties
and large agricultural districts in the
Central Valley.
o Demand is in excess of Project capacity. Participation being
prioritized in final definitive purchase agreements.
o In addition, Arizona & California Railroad has reserved water and
power from the Project for critical railroad purposes.
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Supplemental Water Supply Alternatives
Project
Annual Yield
Unit Cost ($/AF)
50,000
70,000
22,000 to 112,000
16,500
48,000 to 56,000
$875 - 1270
$900
$1,366 to $1,835
$1,403
$ 2,014 to $2,257
Huntington Beach Seawater Desalination
56,000
$1,768 to $1,812
Camp Pendleton Seawater Desalination
56,000
$1,900 to $2,340
Elsinore Valley Repurified Water (Wildomar)
3,000
$1,312
Central Basin Repurified Water (Southeast)
15,000
$1,672
-
$735 - $1,032
12,000
$1,135
3,200
$2,190
600
$1,800
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Long-term Annual Supply
Cadiz Valley Water Conservation Project
OCWD Groundwater Replenishment System
West Basin Seawater Desalter
MWDOC - Dana Point Desalter
Carlsbad Seawater Desalination
MWD Untreated/Treated Tier 2 Rate
Short-term/Dry-year Supply
Buena Vista Water Storage District
Madera County Farmers
Riverdale Farmers
Source: 2014 public information
Phase 1 - Project Pricing Structure
1. Water Supply Component
o 2014 contract at $960/AF delivered to Aqueduct.
o 5% cap on average annual escalation.
2. Carry-over Storage Component
o Available at $1,500/AF of reserved storage in option
agreements. Capacity in Phase 1 = 150,000 AF.
o Annual storage administrative fee = $20/AF.
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Construction
o Primary activities:
•
Expand the existing agricultural well field by
approximately 12 new wells.
•
Construct 43-mile buried pipeline to
Colorado River Aqueduct within 200ft.
right-of-way.
•
Access natural gas power source for the
well field and ancillary facilities.
•
Water treatment infrastructure for naturally-occurring Cr6.
o Capital cost: Projected at $200 - 250 million.
o Timeline: Early stage pre- construction activity occurring in 2015
on Cadiz property. Pipeline expected to occur in 2016.
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Next Steps
 CEQA Appeals process (Q4 2015)
 BLM certification (Q3 2015)
 CRA tie-in and exchange terms with
Metropolitan Water District. (Q3 2015)
 Project financing and construction contracts
(Q4 2015)
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CEQA Appeals
o 4th Quarter 2012: Litigation filed by Project opponents
challenging environmental approvals and related permits.
 6 separate cases proceeded to trial in 2013. All cases
coordinated before one Judge.
o October 2014: Court denied all claims against Project and
upheld the environmental and permitting approvals. Court also
awarded legal costs to the defending parties.
o December 2014: All 6 cases on appeals in California Court of
Appeals, 4th District. Decision expected in Q4 2015.
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MWD Role
o MWD is So Cal’s regional water wholesaler, owner of transportation system.
o MWD must only approve space-available conveyance of water under its
Administrative Code and California law.
o Project participants and MWD will agree as to how to convey Cadiz water via
CRA to water users, considerations include wheeling costs, water quality and
capacity.
o All Project water delivered to CRA will meet all drinking water standards.
Colorado River Aqueduct Available Capacity
(million acre feet/year)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Design Capacity
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
1.250
Volume Carried (1)
0.684
0.760
0.875
0.632
0.713
0.904
1.105
1.099
0.699
0.736
1.013
1.176
0.900
Available Capacity
0.566
0.490
0.375
0.618
0.537
0.346
0.145
0.151
0.551
0.514
0.237
0.074
0.350
(2)
(Proposed average annual Cadiz water transfer of 50,000 AF = 0.050 MAF)
[1]
Source: “Diversions from Mainstream-Available Return Flow and Consumptive Use of Such Water,” pg. 13, U.S. Bureau of Reclamation
“Managing Water in the West: Colorado River Accounting and Water Use Report; Arizona, California, Nevada” for years 2006-2013.
Reports for all years can be found here: http://www.usbr.gov/lc/region/g4000/wtracct.html
[2] Estimated
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BLM Role
o Project’s use of RR ROW under review by US Bureau of Land Management.
o 1875 Act RR Grant gives RR right to convey and use RR ROW without federal
approval, if the use will, in part, further a railroad purpose.
o Solicitor’s M’s Opinion Confirms Scope of 1875 RR ROW Act Grants.
o Project pipeline and appurtenances will further a number of railroad
purposes providing:
• Fire Suppression
• Access Road
• Hydro Power
• Communications
• Water for railroad operations and
steam powered excursion train
o Farming operation unaffected. Application to use alternative public right of
way not precluded.
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Agricultural Opportunities
Agricultural Opportunities
o High demand for Ag land with access to water rights.
• Cadiz owns: 1,600 acres developed for agriculture; 8,000 acres
additional acres permitted with local County; Up to additional
35,000 acres could also be added to permits under current zoning.
o Potential crops include:
• fruits (dates, vineyards, citrus)
• field crops (alfalfa, wheat, sudan grass, Bermuda grass)
•
Biofuels (camellia, sweet sorghum and soybean).
o Property benefits:
• Hot desert climate with moderate chill period in winter.
• No other overlying land uses in surrounding area (good soil quality).
• Access to major highway and rail transportation to reach variety of
markets.
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Agricultural Land Value
Ag land with access to water has traded $8K - $11K per/acre; increasing steadily over the past decade.
Imperial Valley: Good Adaptability (Produce)
Imperial Valley: Average Adaptability (Alfalfa)
$ 14,000
$ 10,000
$ 8,000
$ 10,000
$ / Acre
$ / Acre
$ 12,000
$ 8,000
$ 6,000
$ 4,000
$ 6,000
$ 4,000
$ 2,000
$ 2,000
-
2007 2008 2009 2010 2011 2012 2013 2014
2007 2008 2009 2010 2011 2012 2013 2014
Palo Verde Valley: Irrigation Field Crops
$ 8,000
$ 14,000
$ 7,000
$ 12,000
$ 6,000
$ 10,000
$ 5,000
$ / Acre
$ / Acre
Imperial Valley: Limited Adaptability
$ 4,000
$ 3,000
$ 2,000
$ 8,000
$ 6,000
$ 4,000
$ 2,000
$ 1,000
-
2007 2008 2009 2010 2011 2012 2013 2014
2007 2008 2009 2010 2011 2012 2013 2014
2015 CalASFMRA Western Ag Professionals Trend Report
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Corporate Details
Financials (@3/31/15)
SHARES OUTSTANDING = 17.7 MILLION (Nasdaq: CDZI)
CASH
o $13.5 million cash on hand; working capital through Q2 2016.
o Full funding for current construction planning activity, litigation and final
certifications.
DEBT
A. Senior Secured Mortgage - $45M
o 8% Interest PIK, $35M Maturity March 2016, $11M Maturity March 2017
B. Convertible Notes - $ 60M
o Convert at $8.05/share, 7% Interest PIK, Maturity March 2018
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For more information, visit
www.cadizinc.com
[email protected]
Twitter: @Cadiz_Inc