Ormat Technologies, Inc. (ORA) Earnings

Management highlights

### Overall Financial Performance - Q2 2026 total consolidated revenue was $258.8 million, up 10.6% year-over-year; gross profit increased 20.8% to $68.7 million; consolidated gross margin expanded 220 basis points to 26.5% driven by strong storage segment performance. - Net income attributable to shareholders was $27.1 million ($0.43 per diluted share), down from $28 million ($0.46 per diluted share) year-over-year, due to a $6.6 million write-off for an abandoned storage project, partially offset by stronger underlying operating performance. Adjusted EBITDA increased 6.9% year-over-year to $143.9 million. - First half 2026 total revenue increased 42.9% year-over-year to $662.7 million; adjusted EBITDA increased 18.9% to $338.8 million; adjusted diluted EPS increased 54.3% to $1.79 per share. ### Balance Sheet and Capital - As of June 30 2026, total cash, cash equivalents and restricted cash was ~$658 million, up from ~$281 million at the end of 2025, driven by convertible note offering proceeds, operating cash flow, tax credit monetization and asset sale proceeds, offset by capex, debt repayment, acquisitions and investments. - Total debt was ~$3.4 billion with a weighted average interest rate of 3.9%; total liquidity was ~$1.1 billion; net debt was ~$2.7 billion (4.3x net debt to adjusted EBITDA), representing ~50% of total capitalization. - The Board of Directors declared a quarterly dividend of 12 cents per share, payable September 2 2026, and expects to maintain the 12 cent per share quarterly dividend in the next quarter. - Management secured a $40 million exploration financing facility for the Wapsalit geothermal project in Indonesia via the World Bank's Geothermal Resource Risk Mitigation Program, which provides risk sharing for early-stage exploration. ### Portfolio and Development Milestones - Total operating portfolio reached ~1.85 GW; 155 MW was added to the generating portfolio in the first half of 2026, including the Hucos Solar and Storage acquisition, Shirk Storage Facility, and commercial operation of the 10 MW Dominica geothermal power plant. - The company has executed multiple blend-and-extend PPA renegotiations for existing assets; re-contracted PPAs are expected to increase annual revenues by ~$14 million as they take effect through 2030, with minimal incremental capital investment. Between 2031-2034, 190 MW of expiring contracts currently priced at a weighted average $86/MWh (below current market prices over $100/MWh) provide embedded future value creation opportunities. - There are 202 MW of electricity projects under construction/development through 2028 (87 MW geothermal, 115 MW solar), all supported by long-term PPAs. - There are 497 MW / 1,888 MWh of energy storage projects under construction/development, including the newly approved 100 MW / 400 MWh Denali facility in California, which will operate under a 20-year tolling agreement with Clean Power Alliance and come online by the end of 2028. The total U.S. energy storage pipeline is ~2.5 GW / ~10 GWh across 25 prospects. ### Enhanced Geothermal Systems (EGS) Progress - The company launched Omega 100, a new modular 100 MW binary ORC unit designed for large-scale conventional geothermal and EGS applications, which will serve both internal development and third-party projects. - The SLB Desert Peak pilot completed geophysical seismic analysis, updated the subsurface model, submitted drilling permits, and is on track to begin drilling in Q1 2027. - The SAGE pilot selected a project location, advanced permitting, finalized drilling procurement, and progressed engineering work to integrate the technology into an existing Ormat power plant. - The company expanded its EGS footprint in the Western U.S., secured a 10,642-acre federal lease in New Mexico, is negotiating additional acreage acquisitions in Oregon and Idaho, and identified two promising large-scale EGS prospects within its existing portfolio.

Guidance

- Based on strong first half 2026 performance, management raised full-year 2026 guidance. The new total revenue guidance range is $1.15 billion to $1.2 billion, representing ~18.7% year-over-year growth at the midpoint. - The new full-year 2026 adjusted EBITDA guidance range is $630 million to $650 million, representing ~10% year-over-year growth at the midpoint, with ~$17 million of adjusted EBITDA expected to be attributable to minority interest. - Full-year 2026 tax credit monetization proceeds are still expected to be ~$90 million, including ~$70 million from ITCs and ~$20 million from PTC transfers; full-year ITC benefits are expected to be ~$59.9 million, leading to an effective income tax benefit rate of ~15% in the second half of 2026 (excluding law changes and one-time items). - Remaining 2026 capital expenditure is expected to be $449 million: $281 million allocated to the electricity segment for construction, exploration, drilling and maintenance; $129 million to storage asset construction; ~$20 million to the SLB pilot and other EGS activities. - Management maintained its 2028 long-term target of a 2.6 to 2.8 GW total operating portfolio, representing a 15-18% compound annual growth rate from 2025.

Segment performance

1. Electricity segment: Q2 2026 revenue increased 5.8% year-over-year to $169.3 million, contributing 65.4% of total Q2 revenue. Growth was driven by a full quarter of Blue Mountain contribution, improved performance at Puna, stronger generation at Olkaria after well field optimization, and lower curtailments at U.S. facilities, partially offset by planned maintenance activities. Full-year 2026 revenue is guided to $710 million to $725 million. 2. Product segment: Q2 2026 revenue decreased 21.6% year-over-year to $46.7 million, contributing 18.0% of total Q2 revenue. Gross margin fell to 9.7% due to higher construction costs for a European project and unfavorable foreign exchange impacts on manufacturing costs. Management expects second-half 2026 gross margin of ~15% and full-year 2026 gross margin of ~18%. Full-year 2026 revenue is guided to $300 million to $320 million. As of August 5 2026, the product segment backlog was ~$203 million, geographically diversified with the majority tied to projects in Asia and Oceania. 3. Energy Storage segment: Q2 2026 revenue increased 195.1% year-over-year to $42.8 million, contributing 16.5% of total Q2 revenue. Gross margin reached 56.2%, driven by high asset availability and strong merchant pricing in the PJM market plus incremental revenue from new capacity additions completed over the prior 12 months. Management expects gross margin to normalize to 30-40% in the second half of 2026, resulting in a full-year 2026 gross margin of 40-50%. Full-year 2026 revenue is guided to $140 million to $155 million. The operating energy storage portfolio stood at 495 MW / 1,358 MWh at the end of Q2.

Risks & headwinds

- Forward-looking results are inherently uncertain, and actual outcomes may differ materially from projections due to unidentified and disclosed risk factors detailed in the company's SEC filings. - EGS technology is still in the pilot stage, and key technical challenges remain unsolved, including maintaining consistent water flow through connected fractures, and managing continuous cooling effects from injected cold water. - Merchant energy storage revenue and margins are heavily dependent on weather conditions and market pricing, which are volatile and unpredictable. - New U.S. FCC restrictions on inverter imports create supply chain uncertainty for solar and storage projects, requiring adjustments to vendor sourcing and product design. - Early-stage geothermal and EGS exploration carries inherent resource and technical risk, though the company uses risk-sharing financing structures and limits near-term investment to manage this exposure. - Project delivery timelines can face delays that push revenue recognition into future periods, as seen with the two Caribbean electricity projects that experienced 1-2 month commercial operation delays.

Analyst Q&A

• Q: The electricity segment's gross margin declined slightly year-over-year in Q2 despite improved operational performance, and management modestly lowered the full-year electricity revenue outlook. What factors drove these outcomes? /

  A: The full-year electricity outlook was lowered by $5 million, almost entirely due to 1-2 month commercial operation delays for two Caribbean projects; one of those projects (Dominica) already entered commercial operation in late July. The Q2 gross margin decline was primarily driven by scheduled planned maintenance during the quarter, and management expects margins to improve in the second half of 2026. Overall, the company still hit a new high revenue level near $1.2 billion and raised the lower bound of full-year adjusted EBITDA guidance. (281 characters)

• Q: What are the merchant pricing assumptions for the energy storage segment in the second half of 2026, and how has pricing trended in Q3 to date? /

  A: Merchant pricing in the first half of 2026 was exceptionally strong. Pricing has moderated to more normalized levels in recent weeks, though it remains slightly higher than pre-2026 averages. The guidance reflects this normalization, with stronger first-half results than second-half projections. Overall results are heavily driven by East Coast weather conditions, which created very positive net impacts for the segment in the first half. (309 characters)

• Q: What are the key technical risks for EGS pilots that are being integrated with existing operations, and how will integration impact existing assets? /

  A: The main technical challenges for EGS overall are maintaining consistent water flow through connected subsurface fractures and reducing the cooling effect created by continuous cold water injection. For the pilots, new wells will be drilled outside existing operating reservoirs, so they will not disrupt normal operations of existing facilities. Only a very short 1-2 day shutdown will be required for interconnection, expected no earlier than late 2027 or early 2028. (330 characters)

• Q: Have recent strong merchant pricing experiences changed the company's 50/50 contracted/merger energy storage strategy? /

  A: The company's balanced 50% contracted / 50% merchant strategy has not changed. In markets with persistently low merchant prices (Texas, California), the company pursues contracted tolling agreements, while in volatile markets like PJM, it maintains merchant exposure. The company continues to expand the energy storage pipeline, with ~2 GWh of capacity under development expected online by the end of 2028, aligned with the existing long-term strategy. (292 characters)

• Q: How is the company managing EGS investment risk before pilots deliver results, given the recent expansion of land positions? /

  A: Near-term land investments for EGS are immaterial for a company of Ormat's size. The company's joint venture with SLB, a global leader in drilling and subsurface engineering, de-risks technical development by leveraging SLB's deep expertise. Management is steadily advancing the pipeline and will share more detailed updates at the September Investor Day. (237 characters)