Let me try to summarize. The new pipeline does not solve any of Cadiz Inc.'s other immediate problems. Specifically, it can not serve as a replacement of the pipeline that connects the Cadiz Water site with the Colorado River Aqueduct, and can not eliminate the MWD from the project. Even if they could line up enough customers up in northern and central California, the converted gas pipeline only offers a capacity of 20,000 aft/year. The only way that this could be good news is if Cadiz solves all the other problems and fully implements the first phase of the project, overcoming all the legal/regulatory approval/etc. Then this would be good news by reducing the cost of a possible second phase of the project .
More to your point, the $ 10 million being thrown out there by Slater and Brackpool, is contingent on EPNG, now KMI, to choose to make certain FERC applications by Dec 31, 2015. KMI is not going to be in any hurry to make that $ 10 million payment - they have another three years to make that choice. Here is what the SEC 8-K says about this issue.
WHEREAS, Cadiz and EPNG desire to extend the Option Period through April 9, 2014, to revise the description of the pipeline facilities covered by the Option, to revise the Purchase Price, and to add provisions relating to the portion of the pipeline facilities that are no longer included in the original option, including provisions for a payment by EPNG to Cadiz of Ten Million Dollars if EPNG files to abandon certain natural gas pipeline facilities in California on or before December 31, 2015 or the issuance of a new option for Cadiz to purchase that portion of the pipeline facilities for a payment of TWENTY MILLION DOLLARS if EPNG has not filed to abandon the natural gas pipeline facilities by that date, all as described in more detail herein.
MCM is spot on - the only accomplishment here is that they will have another 3 quarters of cash burn. The water project is still on any closer to getting done. They still have not quantified how much more it will cost for the treatment of chrome 6 out of the water plus they have not done anything about getting electricity to the project site.
Regardless, there will be a $ 63 + million note due in November 2013 and construction will not have been started by then.
Slater's spin about getting the water to northern CA is truly funny as the real demand and flow is from the north to the south.
I think Slater was trying to spin it as additional storage flow - but even this release seems to tacitly suggest that there won't be any storage (phase 2) without success on phase 1. Although I'm sure that won't stop them from moving boldly on to phase 2 if phase one fails and they can find new investors.
i think it is more or less a non-event. kmi decided that they might want to use part of the pipeline that el paso had agreed to sell. it looks like if they do end up permitting this stretch then cadiz will get $10MM (not sure why KMI agreed to this). this would provide some more cash for cadiz to flush down the brownstein toilet, but not the end of the world. for those who had attributed option value to the el paso pipeline conversion, i think that value got whacked pretty good since kmi took the section that reaches populated areas. the spin slater tried to put on it was pretty ridiculous.