On December 19, 2014, Cadiz Inc. and the San Luis Water District (“San Luis”), a predominantly retail agricultural water agency in California’s Central Valley, executed a definitive Purchase and Sale Agreement (“PSA”) securing an annual supply of 10,000 acre-feet of water from the Cadiz Valley Water Conservation, Recovery and Storage Project (the “Project”) for San Luis’ customers. San Luis, which had signed a Letter of Intent (“LOI”) earlier this year to explore participation in the Project, is the second California water provider to execute a definitive agreement and the first following recent trial court decisions upholding the Project’s environmental review and independent approval by Santa Margarita Water District and the County of San Bernardino against six separate challenges.
Under the terms of the PSA, San Luis will pay an initial price of nine hundred and sixty dollars ($960) per acre-foot (“AF”) of water made available to it by the Project. The payment will be adjusted annually in accordance with the Bureau of Labor Statistics Water and Sewer Maintenance Index up to a maximum of five percent (5%) per year. San Luis also secured the right to acquire specified carry-over storage rights in the Project to achieve year to year flexibility in its use of water for $1,500 per AF and an annual management fee of $20 per AF of acquired storage capacity.
Any delivery of the water from the Project to San Luis will require an exchange with the Metropolitan Water District of Southern California (“MWD”) or another eligible State Water Project contractor. Terms of any exchange will be finalized prior to commencement of Project construction in compliance with MWD’s specifications.
Cadiz is also presently working collaboratively with the remaining water providers that have previously executed option agreements and LOI’s among others to complete additional definitive PSAs in early 2015. All final PSAs with project participants will be consistent with current governmental approvals limiting total average groundwater annual extractions to 50,000 AF per year over 50 years.
Cadiz CEO Scott Slater stated upon execution of the PSA: “We’ve seen first-hand the devastation caused in the Central Valley by California’s now systemic water shortages. While the Cadiz Project cannot solve the state’s water challenges, it can provide a reliable water life-line to parched communities. We are honored to be partners with San Luis and are committed to continuing the implementation the Project the right way, in a manner that is both innovative and environmentally benign.”