Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 29, 1998
Cadiz Land Company, Inc.
(Exact name of issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-12114 77-0313235
(Commission File Number) (IRS Employer Identification No.)
100 Wilshire Boulevard, Suite 1600, Santa Monica, CA 90401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 899-4700
ITEM 5. OTHER EVENTS
On December 23, 1997, the Company entered into an interim agreement
with the Metropolitan Water District of Southern California
("Metropolitan") to verify feasibility of and develop principles
and terms for a groundwater storage and dry-year supply program at
its Cadiz, California property. Facing a rapidly increasing
population and reduced allocations of Colorado River water,
Metropolitan is seeking reliable, high-quality alternative water
supplies to assist with Southern California's projected shortages.
The Company owns approximately 27,000 acres in the Cadiz and Fenner
valleys of eastern San Bernardino County -- property that overlays
an underground aquifer system with significant water recharge and
storage capacities and which can yield substantial amounts of high-
quality, indigenous groundwater. During wet years or periods of
excess supply, the Company would store water from Metropolitan's
Colorado River Aqueduct ("CRA") in its aquifer system. During
periods of regional drought or reduced allocations from the Colorado
River, the previously imported water, together with additional
indigenous groundwater, would be extracted and delivered, via a
35-mile conveyance pipeline, back to the CRA.
On May 15, 1998, the Company announced that Metropolitan, assisted
by an accredited panel of independent industry experts, had
confirmed the program's technical feasibility and that proposed
principles for agreement ("Principles") had been developed. On
May 28, 1998, Metropolitan released the proposed Principles to
its Board of Directors for review at its forthcoming Board Meeting,
and will request action at a subsequent Board meeting.
A summary of the proposed Principles is as follows:
SCOPE OF PROGRAM - The program consists of two components:
storage and dry-year supply (transfer). Metropolitan would store a
minimum of 500,000 acre-feet of CRA water in the groundwater basin
in the first five years that the program is operational.
Metropolitan would also purchase a minimum of 1,100,000 acre-feet
of indigenous groundwater for transfer during the 50-year term of
the agreement. Metropolitan would further commit to purchase an
additional 400,000 acre-feet of indigenous groundwater or substitute
a like amount of CRA water for storage. In addition to these minimum
commitments totaling 2,000,000 acre-feet of program utilization,
Metropolitan would have the right to purchase any additional water
available for transfer during the agreement period and may store
more water if desired. The program facilities would have the
capacity to convey ("Put"), deliver ("Take") or "Transfer"
100,000 acre-feet of water per year.
STORAGE COMPONENT FEES - Metropolitan would pay the Company $90
per acre-foot for CRA water cycled through the basin ($50 for Put
and $40 for Take), and a $5 per acre-foot Storage fee every year
that water is stored in the groundwater basin. All of the fees
for cycling CRA water through the groundwater basin would be
adjusted for inflation.
DRY-YEAR SUPPLY (TRANSFER) COMPONENT FEES - Metropolitan would
pay the Company a base rate of $230 per acre-foot which would be
adjusted according to a water price index (discussed below), minus
a discount of approximately five percent. Payment for the committed
minimum of 1,100,000 acre-feet of dry-year supply would be as follows:
First 500,000 acre-feet - $55 million payable upon
environmental certification. The balance of $60 million,
subject to adjustment for the water price index, payable
concurrent with completion of construction.
Additional 600,000 acre-feet - Purchased at the earlier of
delivery or in three 10-year increments of 200,000 acre-
feet with the first increment payable 10 years from
completion of construction.
WATER PRICE INDEX - This index would measure the change in the
weighted average costs of new water supplies available to
Metropolitan and other Southern California water providers. This
index, on a periodic basis, would adjust the price of the dry-year
water supply being provided by the Company.
WATER QUALITY FEE - Both parties recognize that transfer of
the Company's high-quality, indigenous groundwater provides a
significant water quality benefit to Metropolitan. Accordingly,
Metropolitan would pay a fee to the Company in any year of
delivery to the CRA based upon the actual cost savings resulting
from the use of the Company's indigenous groundwater. This fee
would be additive to both the Take and Transfer fees discussed above.
PROGRAM CAPITAL FACILITIES - Spreading basins, extraction
wells, a 35-mile conveyance pipeline and a pumping plant would
be constructed to deliver water to and from the groundwater basin
to the CRA. These facilities would be dedicated to Metropolitan's
exclusive use during the term of the agreement and are estimated
to cost between $125 and $150 million. The Company would finance
half of the facilities through its corporate resources or long-term
borrowing. Metropolitan would fund half of the facilities through
public financing for Colorado River storage programs either through
a statewide bond measure or legislation. All operational costs of
the program (including annual operations, maintenance, and energy
costs) would be an obligation of Metropolitan.
GROUNDWATER MONITORING PLAN - Both parties would implement a
comprehensive, independent groundwater monitoring and management
plan to ensure long-term protection of the groundwater basin.
Pending action by Metropolitan's Board of Directors, a formal
agreement would be finalized and the environmental review process
would commence.
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 LAND COMPANY, INC.
(Registrant)
By: /s/ Stanley E. Speer
-----------------------------
Stanley E. Speer
Secretary
Dated: May 29,1998
