ORMAT TECHNOLOGIES, INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Began 2025 with a 2.5% revenue increase, 4.6% net income attributable to stockholders increase, and 6.4% record quarterly adjusted EBITDA growth.
• Storage segment: Benefited from 50% market exposure, contracted revenues, and merchant prices. New facilities like East Leamington, Montague, and Bottleneck started commercial operation in 2024.
• Electricity segment: Slight year-over-year decline due to curtailments in Nevada and California, but geothermal operations solid. Acquired Blue Mountain geothermal power plant for $88 million, plan to upgrade (add 3.5 MW) and install 13 MW solar.
• Product segment: Strong backlog of $314 million, up 142% y-o-y, driven by large EPC contracts.
• Energy Storage segment: 120% revenue growth, PJM market strong due to cold weather. Two 15-year tolling agreements in Israel.
• Restructured electricity segment EVP role into two positions: one for power plant operation, one for drilling and exploration activities.

Segment Performance

• Electricity Segment: Revenues decreased by 5.8% to $180.2 million in Q1 2025. Gross margin was 33.5% in Q1 2025, down from 39% in the prior year. Contributed 83% of Ormat’s total consolidated adjusted EBITDA in Q1 2025. Decline due to curtailments in Nevada and California, partially offset by Bhiwadi power plant’s improved PPA prices.
• Product Segment: Revenues increased by 27.9% to $31.8 million in Q1 2025. Gross margin was 22.3%, up from 14.8% last year. Backlog stands at $314 million, up 142% compared to Q1 2024, driven by large EPC contracts in New Zealand and Dominica.
• Energy Storage Segment: Revenues increased nearly 120% in Q1 2025, mainly due to new energy storage facilities commencing commercial operation in 2024 and strong merchant prices in the PJM market. Gross margin was 30.6%, a significant improvement from 7.5% in Q1 2024. Contributed 10% of adjusted EBITDA compared to 3% last year.

Guidance

• Total revenues expected to increase 9% midpoint, ranging between $935 million and $975 million.
• Electricity segment revenues projected to be between $710 million and $725 million.
• Product segment revenues between $172 million and $187 million.
• Energy Storage revenues between $53 million and $63 million.
• Adjusted EBITDA expected to increase approximately 5% midpoint, ranging between $563 million and $593 million, with annual adjusted EBITDA attributable to minority interest at approximately $21 million.

Risks

• Tariffs on China affecting import of energy storage equipment components, posing interim headwinds for the energy storage segment.
• Uncertainty in IRA tax credits and regulatory environment, which could impact project development and growth.
• Interim headwinds in energy storage due to tariffs on Chinese components, requiring mitigation through supplier and off-taker engagement and alternative supply chain strategies.

Question and Answer

Q: Justin Clare inquired about storage project development and tariffs, asking if they were slowing down projects or waiting on supply chain.

A: Doron Blachar responded that they are exploring alternatives to Chinese batteries, developing projects in Israel, and continuing business development efforts despite tariffs.

Q: Michael Fairbanks asked about regulatory help for greenfield geothermal and storage margins.

A: Doron Blachar mentioned Ventura's executive order to expedite BLM land permitting, and Assi Ginzburg stated storage margin expected towards 20% and product segment margin in 19%-21% range.

Q: Andre Adams asked about Blue Mountain acquisition and PPA talks.

A: Assi Ginzburg discussed EBITDA impact of the acquisition and Doron Blachar noted high PPA pricing and ongoing PPA negotiations.

Q: David Anderson asked about greenfield geothermal, EGS, and Schlumberger partnership.

A: Doron Blachar talked about exploration efforts, Schlumberger collaboration for project development, and Ormat's proprietary technology.

Q: Ben Kallo asked about 2028 targets and electricity segment restructure.

A: Doron Blachar explained the detailed plan to reach 2028 targets and the reason for restructuring the electricity segment EVP role into two positions.