United States
Securities and Exchange Commission
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FORM
CURRENT REPORT
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Item 8.01 Other Events.
On October 30, 2024, Cadiz Inc. (“Cadiz”) entered into a letter of intent (the “LOI”) with a non-profit investment fund dedicated to financing sustainable infrastructure projects (the “Fund”). The Fund is a beneficiary of a federal grant award. The LOI outlines a prospective investment by the Fund of up to $150 million to support the establishment of a new entity, which is anticipated to be a limited partnership or limited liability company (“Newco”). Newco is expected to be established and managed by Cadiz or a subsidiary of Cadiz, with the participation of the Fund and other potential investors, to mobilize capital for the construction, ownership, and operation of Cadiz’s groundwater banking project in the Mojave Desert (the “Mojave Groundwater Bank”) and related projects.
Under the terms of the LOI, Cadiz will be responsible for project development activities; with non-profit or public sector investors such as the Fund, federally recognized Native American Tribes (“Tribes”), and other qualified investors providing up to $401 million of equity capital to Newco in order for Newco to acquire assets and fund the construction of facilities for the Mojave Groundwater Bank, presently estimated in the amount of $800 million. The parties will coordinate to seek available grant funding for any remaining construction costs.
Under the terms of the LOI, Cadiz will transfer and contribute assets to Newco, including (i) 100% of its ownership of the Northern Pipeline, (ii) the Southern Pipeline right of way, and (iii) 51% of the water storage rights in the Mojave Groundwater Bank. In consideration of such transfer of assets, Newco will pay Cadiz approximately $51 million among other consideration and will retain 49% of the water storage rights. Water supply purchase contracts entered into among Cadiz and public water providers will not be contributed to Newco.
Cadiz will serve as the general partner or managing member of Newco. The distribution of profits from revenues anticipated to be received by Newco once the infrastructure is online will prioritize the Newco investors such as the Fund until they achieve an annual yield of 7.5%, with incremental distributions thereafter to low-income disadvantaged communities and Tribes participating in the advisory council described below, the investors and Cadiz as the general partner/managing member.
Cadiz has committed that its water supply, storage and conveyance projects aim to benefit low-income and disadvantaged communities, including the Tribes. Tribes will have the opportunity to acquire ownership interests in Newco and participate in an advisory council relating to the management of groundwater resources at Cadiz. Under the LOI, Cadiz will pursue all appropriate channels to advance and protect Native American water rights and assist participating Tribes in protecting and advancing their water rights and developing climate resilient water supplies and clean energy solutions that benefit tribal communities and advance tribal sovereignty.
The Mojave Groundwater Bank will comply with applicable laws. Furthermore, given that the Fund’s capital comes from a federal grant award, Newco will be structured to comply with all relevant grant requirements, including the Build America Buy America Act and Davis-Bacon Act labor standards, as applicable.
The LOI is not binding on the parties and does not create any binding obligations for the parties to close the contemplated transactions. Definitive agreements will be required to formalize any binding commitments by the parties.
INFORMATION RELATING TO FORWARD LOOKING STATEMENTS
This current report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding Cadiz’s expectation that the proposed transactions pursuant to the LOI will move forward and the parties thereto will enter into binding definitive agreements, and that Cadiz will realize the anticipated benefits from such agreements. Although Cadiz 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 Cadiz’s forward-looking statements include the risk that the parties do not enter into binding definitive agreements or that, if such definitive agreements are entered into, requisite funding in excess of the amount committed by the Fund necessary for construction of facilities for the Mojave Groundwater Bank may not be available on terms satisfactory to the parties or in sufficient amounts, or the progress of the project may not proceed as planned, or the definitive agreements entered into, if any, could be terminated prior to the completion of the project, and other factors and considerations detailed in Cadiz’s Securities and Exchange Commission filings including its annual report on Form 10-K for the year ended December 31, 2023 and subsequent filings. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CADIZ INC. | ||
| By: | /s/ Stanley E. Speer | |
| Stanley E. Speer | ||
| Chief Financial Officer | ||
Date: October 31, 2024