Cadiz Enters into Letter of Intent with Lytton Rancheria of California

On November 21, 2024, Cadiz Inc. (NASDAQ: CDZI) announced that it has entered into a Letter of Intent (LOI) with Lytton Rancheria of California, a federally recognized Native American Tribe. The agreement outlines a potential investment by Lytton of up to $50 million in a new corporate entity to be established by Cadiz. This entity aims to support the construction, joint ownership, and operation of Cadiz’s groundwater banking project in the Mojave Desert, known as the Mojave Groundwater Bank.

The newly anticipated corporate entity, likely to be structured as a limited liability company named “Newco,” is expected to raise total equity capital of $401 million. This funding will aid in constructing the project and acquiring essential assets, including pipelines and a significant interest in groundwater banking operations. Moreover, Cadiz has previously entered into a similar LOI with a non-profit investment fund for a prospective investment amount of up to $150 million.

Under the terms of the LOI, Cadiz will lead project development activities, while Lytton, the non-profit fund, and other investors are expected to provide the necessary equity capital. The total estimated construction costs for the Mojave Groundwater Bank amount to $800 million. Cadiz and Newco investors will collaborate to pursue available grant funding for the remaining construction expenses.

Upon finalizing definitive agreements and establishing Newco with sufficient equity commitments, Cadiz is set to transfer certain assets to Newco, including ownership stakes in pipelines and water storage rights in the Mojave Groundwater Bank. In exchange for these assets, Newco will make payments to Cadiz, with Cadiz retaining a portion of water storage rights and all net revenue derived from water supply sales.

Cadiz will act as the managing member of Newco, intending to distribute 98% of net revenues to Newco investors like Lytton and the non-profit fund. This distribution prioritizes achieving an annual yield on invested capital of 7.5%. Any excess funds are slated for non-investing Tribes and community benefit programs.

The LOI sets the stage for a strategic partnership between Cadiz and Lytton, emphasizing the development of water and energy assets to support tribal sovereignty and climate resiliency. While the LOI is not binding, it signals collaborative intentions towards future agreements between the parties pending diligent processes and final definitive agreements.

Please note that this press release contains forward-looking statements, subject to risks and uncertainties. Readers are advised to refer to Cadiz’s SEC filings for comprehensive information on potential factors that may differ actual results from forward-looking statements.

The full text of the LOI is available as Exhibit 99.2 in Cadiz’s recent SEC 8-K filing.

This article was generated by an automated content engine and was reviewed by a human editor prior to publication. For additional information, read Cadiz’s 8K filing here.

About Cadiz

Cadiz Inc, together with its subsidiaries, provides water solutions in the United States. The company operates through Land and Water Resources; and Water Filtration Technology segments. It offers water supply, water storage, water conveyance, and water filtration services. In addition, the company is involved in the cultivation of grain crops and alfalfa, as well as provides water filtration solutions for impaired or contaminated groundwater sources.