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Cadiz Announces Agreement With Kinder Morgan, Gains Ownership Of Pipeline Connecting Project To Additional California Water Markets

Stocks in this article: CDZI

Today Cadiz Inc. (NASDAQ: CDZI) (“Cadiz,” “the Company”) announced it has entered into a new agreement with Kinder Morgan, Inc. (NYSE: KMI) (“Kinder Morgan”) securing the Company’s ownership of a 96-mile natural gas pipeline linking its holdings in the Cadiz Valley to the northern and central California water delivery network. The exchange agreement divides 220 miles of pipeline currently under option to the Company, with the Company gaining ownership rights to the 96-mile eastern segment between Barstow and the Cadiz Valley and returning to Kinder Morgan rights to the 124-mile western segment.

In 2010, Cadiz procured an option to purchase the 220-mile pipeline for $40 million from El Paso Natural Gas (“EPNG”), which was subsequently acquired by Kinder Morgan. Kinder Morgan is currently exploring expansion of its oil and gas transportation network between Texas and California and desired to purchase back the rights to the western segment of this line. The consideration that Kinder Morgan has paid Cadiz for this agreement has been made by way of a reduction in the purchase price of the 96-mile eastern segment of the pipeline to a nominal amount of $1 (one dollar). In addition, Kinder Morgan will pay the Company a further $10 million cash payment at the time it seeks regulatory approval for use of the western line.

“The agreement promises a quantum improvement in our Water Project’s versatility. We now have a very real opportunity to interconnect the Colorado River and northern California sources through the Project. The conversion of the existing pipeline brings with it the ability to introduce new high quality surplus supplies for storage at Cadiz at a monumental savings,” said Company President Scott Slater. “This is pipe that’s already in the ground, can be used without disturbing the environment, and terminates near California’s central water delivery system giving us new access to additional water customers.”

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