ORMAT TECHNOLOGIES, INC. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Operating Results: Second quarter saw 9.3% total revenue growth and 25% adjusted EBITDA growth YoY, driven by expanded capacity portfolio and improved operations.
• Segment Details: Electricity segment growth from acquired Enel assets and Heber 1, but Dixie Valley had an unplanned outage. Product segment growth due to backlog and revenue recognition. Energy storage segment stabilized with new projects (83 MW online) and tolling agreements (e.g., Pomona 2).
• Projects and Milestones: Olkaria power plant in Kenya achieved 148 MW capacity tests; Beowawe Repowering completed; Bottleneck storage facility nearing completion (expected end of Q3); Ijen project in Indonesia on track for 2024 completion; Zunil in Guatemala planned for 2025 completion.
• Dividend: Board declared $0.12 per share quarterly dividend payable September 3, 2024.

Segment Performance

• Electricity segment: Revenues increased by 7% to $166.2 million in Q2 2024. Gross margin was 33.5% in Q2 2024, up from 29.6% in Q2 2023. Contribution to adjusted EBITDA: 91%.
• Product segment: Revenues grew by 13.1% to $37.8 million in Q2 2024. Gross margin was 13.7% in Q2 2024, up from 10.4% in Q2 2023. Current backlog is ~$165 million.
• Energy storage segment: Revenues increased by 48.1% to $8.9 million in Q2 2024. Gross margin was 5.7% in Q2 2024, up from 1.9% in Q2 2023. Contribution to adjusted EBITDA: 4%.

Guidance

• 2024 total revenue expected to range $875M-$910M, with electricity segment $710M-$720M, product $130M-$145M, energy storage $35M-$45M. Adjusted EBITDA expected $520M-$550M.
• Growth target: Portfolio capacity to reach 2.6-2.8 GW by 2028 with 15%-17% annual growth, focused on US market.
• Permitting: US Senate introduced Energy Permitting Reform Act to ease environmental review for solar, wind, and geothermal projects, potentially accelerating project timelines.

Risks

• Kenya Curtailment: Olkaria power plant affected by force curtailment reducing revenues; interconnection and capacity issues with KPLC.
• Battery Delays: Bottleneck storage facility commissioning delayed, but offset by other portfolio performance.
• Technology Challenges: EGS technology faces challenges for commercialization and bankability.
• Permitting Uncertainty: Impact on timeline for geothermal and solar projects if Energy Permitting Reform Act not passed.

Q: Noah Kaye on storage timing and offset A: Doron Blachar stated Bottleneck facility is in final commissioning stages, expected online by end of September with a delay, but offset by better pricing across portfolio Q: Justin Clare on Kenya curtailment A: Assi Ginzburg mentioned curtailment due to interconnection issues and KPLC take-off pays, working to reduce impact with KPLC Q: Derek Podhaizer on product margins and EGS A: Assi Ginzburg discussed product margins affected by competitive market and project mix; Doron Blachar noted EGS technology has potential upside but faces commercialization challenges Q: Jon Windham on PJM capacity market A: Doron Blachar mentioned PJM market focuses on generating assets, higher pricing but not directly impacting assets, but seen as a nice upside Q: Ryan Levine on Reno data centers and Chinese suppliers A: Doron Blachar discussed negotiations with data centers in Nevada and battery sourcing from Chinese manufacturers Q: Julien Dumoulin Smith on scaling opportunities A: Doron Blachar mentioned increasing efforts to develop more projects and potential upside from permitting reforms Q: Jeff Osborne on ITC cash benefits A: Assi Ginzburg stated $75M from Heber and $35M from Bottleneck ITCs in Q4, with $25M PTCs sold September-October