On May 1, Superior Court Judge Gail A. Andler ruled that all the parties challenging the validity of the environmental review of the Cadiz Valley Water Conservation, Recovery and Storage Project failed to meet their burden. In her decision, “the Court did express concerns over the designation of Santa Margarita Water District as the Lead Agency; nonetheless, the Court is not persuaded that those concerns constitute sufficient grounds under the existing law for granting” the relief requested by the challengers.
The Orange County Register reports that a coalition of environmental groups opposing the Cadiz project may appeal. The coalition includes the Center for Biological Diversity, National Parks Conservation Association, San Bernardino Valley Audubon Society and Sierra Club San Gorgonio Chapter. Delaware Tetra Technologies, Inc., a brine mining operator also filed suits against Cadiz.
If the legal challenges have indeed been put to rest, the company can formalize agreements with the water districts and water companies that have expressed interest in buying water. With these agreements in hand, Cadiz can complete financing for the $225 million project.
Cadiz issued a press release on Friday, May 2nd after markets were closed. The company’s stock price leaped to close at $8.00/share on Monday, up from the closing price of $6.18/share on the prior Friday. The company’s stock price had been declining since March when Business Week published a one-sided article about opposition to Cadiz’s Project. The Monday, May 5 increase in price significantly closed the gap between the company stock price, and the expected stock price based on the closing price in the last week of 2012 adjusted weekly by the expected return predicted by the Capital Asset Pricing Model (for more discussion and data, see Capital Markets).
Despite the favorable market response to the court ruling, Cadiz stock price still stands at 13.6% below its expected price. There remains a significant upside potential in the stock if the Cadiz project comes to fruition.
Written by Rodney T. Smith, Ph.D.