Cadiz Inc. Secures $273.8 Million in Guaranteed Maximum Price Agreements for Northern Pipeline Project

Construction Manager at Risk Structure Reduces Cost Uncertainty

Cadiz disclosed that the CMAR delivery structure provides Fenner Gap with contractually established guaranteed maximum prices for the project's principal construction packages while allowing the company to directly procure major long-lead equipment and materials. The filing states that this approach is intended to reduce construction cost uncertainty, preserve flexibility to competitively procure major equipment and materials, and establish a defined construction capital budget for use in connection with the company's project financing activities for the Mojave Groundwater Bank.

The two GMP Agreements entered into on July 27, 2026, represent the core of this strategy. By establishing fixed price ceilings for the primary construction packages, the agreements provide Cadiz with cost predictability for a substantial portion of the overall project budget. The filing indicates that absent Fenner Gap-directed changes, delays, or other adjustments permitted under the agreements, cost increases associated with the covered work will be borne by the respective contractors or absorbed within the contractual contingencies.

W.M. Lyles Co. Agreement Covers Pump-Station Construction

The disclosure states that Fenner Gap entered into a CMAR agreement with W.M. Lyles Co. establishing a guaranteed maximum price of approximately $218.9 million for the pump-station facilities required for operation of the Northern Pipeline. The Lyles Agreement includes 15% of project contingency and requires Lyles to complete the covered work within the GMP. This contingency allowance represents a substantial buffer for potential unforeseen costs within that work scope.

The filing notes that the Lyles Agreement contains provisions for customary adjustments, including changes in scope, owner-directed changes, delays, differing site conditions, and other specified events. Additionally, the agreement provides for 50/50 sharing of unused contingency between Fenner Gap and Lyles, return of unused allowances to Fenner Gap, and contract-specific early-completion incentive and delay-damages provisions. These terms indicate a balanced risk allocation intended to incentivize performance and cost management.

Mike Bubalo Construction Co. Agreement Addresses Pipeline Replacement

The announcement discloses that Fenner Gap also entered into a separate CMAR agreement with Mike Bubalo Construction Co., Inc., establishing a guaranteed maximum price of approximately $54.9 million for pipeline replacement and related facilities required to convert the Northern Pipeline to water conveyance. The Bubalo Agreement includes 10% of project contingency and similarly requires Bubalo to complete the covered work within the stated GMP.

Like the Lyles Agreement, the Bubalo Agreement contains provisions for customary adjustments and includes 50/50 sharing of unused contingency, return of unused allowances, and contract-specific incentive and delay-damages provisions. The filing indicates that together, the GMP Agreements establish aggregate guaranteed maximum prices of approximately $273.8 million for the primary pipeline replacement and pump-station construction packages required to place the Northern Pipeline into service.

Total Project Budget and Procurement Strategy

The filing discloses that based on the company's current capital budget, the construction capital expenditures required to place the Northern Pipeline into service are estimated at approximately $403.3 million. This capital budget consists of approximately $273.8 million covered by the GMP Agreements and approximately $129.5 million for owner-procured pumps, replacement pipe, power generation equipment, necessary additional wellfield facilities, and customary project contingency.

Cadiz disclosed that Fenner Gap has secured contractual pricing for replacement pipe and power generation equipment through existing purchase options and has received supplier quotations for the pumps. The wellfield facilities, representing approximately 5% of the current construction capital budget or $22 million, are being competitively procured under a separate GMP structure with contractors possessing previous experience at the Cadiz Ranch wellfield. The filing states that a final GMP for wellfield facilities is not expected to materially affect the current capital expenditure estimate.

Water Delivery Capacity and Supply Contracts

The announcement indicates that the Northern Pipeline is expected to deliver approximately 21,275 acre-feet per year under existing water supply contracts once placed into service. The filing states that the potential total capacity of the Northern Pipeline is estimated at 25,000 acre-feet per year, suggesting capacity for future growth beyond current contractual commitments.

This distinction between contracted delivery and total capacity is significant for investors, as it demonstrates that the infrastructure will initially serve established contracts while preserving the ability to accommodate additional water supply arrangements. The filing does not provide details regarding the specific contracts or their duration, but the existence of these agreements provides a foundation for project economics and financing discussions.

Construction Timeline and Permitting Conditions

The disclosure states that construction will commence following issuance of notices to proceed and satisfaction of applicable financing, permitting, and other customary preconstruction conditions, which is expected to occur during the current calendar year (2026). The agreements reflect pricing and scheduling assumptions based on a September 2026 notice to proceed, but do not automatically terminate or reset the GMPs solely if notice to proceed occurs at a later date, although later timing may support permitted schedule or price adjustments.

This language indicates that while the company expects to achieve construction commencement during 2026, some flexibility exists if preconditions extend the timeline. The GMP structure's resilience to minor timing delays reflects the contractors' understanding of the project's complex permitting and financing requirements.

Risk Allocation and Contingency Provisions

The filing discloses that the GMP Agreements are subject to customary adjustments for changes in scope, owner-directed changes, delays, differing site conditions, and other events specified in the agreements. The Lyles Agreement incorporates 15% project contingency, while the Bubalo Agreement includes 10% project contingency, creating pools of funds to address unanticipated costs within each scope of work.

The disclosure indicates that both agreements provide for 50/50 sharing of unused contingency between Fenner Gap and the applicable contractor, as well as return of unused allowances to Fenner Gap. These provisions create incentives for contractors to manage costs efficiently while protecting Fenner Gap's financial interests if contingencies prove unnecessary. The inclusion of contract-specific early-completion incentive and delay-damages provisions further aligns contractor interests with project schedule performance.

Strategic Importance for Project Financing

Cadiz disclosed that the CMAR delivery structure and the resulting guaranteed maximum prices are intended to establish a defined construction capital budget that can be used in connection with the company's project financing activities. This structured approach provides lenders and financing partners with greater visibility into construction costs and risk management, potentially facilitating access to project financing on acceptable terms.

The filing indicates that the company has already begun securing commitments for major equipment through purchase options and supplier quotations, further reducing uncertainty in the project budget. By combining fixed-price construction packages with owner-procured equipment featuring secured pricing or quotations, Cadiz has created a comprehensive budget foundation suitable for presentation to financing sources. The remaining contingency and flexibility provisions maintain project viability if market conditions or site conditions change modestly during construction.

Material Agreement Incorporation by Reference

The announcement states that the descriptions of the GMP Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the Lyles Agreement and the Bubalo Agreement. These full agreements are filed as Exhibits 10.1 and 10.2 to the current report and incorporated by reference, allowing investors and stakeholders to review the complete contractual terms, conditions, and provisions governing the construction packages.

Investors seeking detailed understanding of contractor performance obligations, adjustment mechanisms, dispute resolution procedures, and other contractual provisions are directed to these exhibits for comprehensive information beyond the summary disclosures provided in the announcement.