DripFund  

12/6/2012  

Our  Goal  

•  Solve  Global  Water  Scarcity  &  Food  Security  – Validate  model  in  California,  Texas,  and  Kansas  – Re-­‐apply  model  globally  

Problem  

Lake  Mead  (2010  Drought)  

Freshwater  use  in  California  

Source:  California  Department  of  Water  Resources  California  Water  Plan.  hSp://www.californiawater.org/docs/CIT_AWU_Report_v2.pdf    

33.2  Million  Acre  Feet  (10.8  Trillion  gallons)  

3.1  Million  Acre  Feet  (1  Trillion  gallons)    

Imperial  Valley:  500,000  Irrigated  Acres  

Flood  Irriga[on  (6  AF/Acre)  

Sub-­‐Surface  Drip  Irriga[on  (4  AF/Acre)  

SDI  reduces  water  consump[on  by  30%  and  increases  yields  by  20-­‐25%  due  to  reduced  water  logging  

Technology  Solu[on:  Convert  to  SDI  

Conver[ng  50%  of  Gravity  (flood)  irrigated  field  crop  acreage  to  drip  solves  CA  water  issues  

Problems  with  adop[on  

•  Heavy  resistance  to  adopt  new  irriga[on  technology  – 17  years  to  adopt  center  pivot  in  Nebraska  (even  with  a  <  3  year  payback)  

– Educa[on  problem:  Owners  with  5,000+  acre  farms  and  low  water  costs  don’t  know  that  drip’s  core  return  is  driven  by  increased  yields  and  product  quality  

– Financing  problem:  Some  farmers  find  it  difficult  to  get  financing  on  drip  irriga[on  equipment    

DripFund  Solu[on  

•  New  model  for  customer  acquisi[on  –  “Acquire”  the  customer  through  a  sales-­‐leaseback  model  •  Gives  farmer  liquidity  without  taking  away  their  job  

–  Install  drip  irriga[on  system  and  educate  grower  how  to  properly  use  and  maintain  the  system  

–  Re-­‐sell  property  at  higher  valua[on  in  2-­‐3  years  aler  higher  yield  has  been  established  for  the  farm  

Farmland  Values  Are  Driven  By  Cash  Rent  

Land  Rents  Are  Driven  By  Produc[on  Poten[al  

Increasing  Alfalfa  Yield  By  25%  Increases  Net  Income  by  90%  

Result  

•  Flood  irrigated  land  in  Imperial  Valley  is  undervalued  by  $3,000-­‐  $5,000/acre  – 400,000  Acres  of  flood  Irrigated  field  crops  are  undervalued  by  $1.2-­‐$2B  

•  Fund  can  sit  on  improved  land  at  a  7-­‐9%  cap  rate  for  2-­‐3  years  to  demonstrate  yield  increase