Ormat Technologies, Inc. Q2 FY2025 earnings call

• Ormat reported record second quarter revenue and adjusted EBITDA with a 9.9% revenue increase, 26.1% net income rise, and 6.7% adjusted EBITDA improvement. • Completed acquisition of Blue Mountain geothermal power plant and released 50 MW of new projects (28 MW geothermal, 22 MW solar) at Heber complex. • Advanced geothermal development pipeline with accelerated permit approvals. • Secured $300 million in funding for future development. • Extended PTC and ITC runway for geothermal and energy storage via U.S. bill. • Expanded management team for electricity segment and EGS initiatives. • Product segment backlog at $263 million, a 59% increase from last year. • Energy storage segment revenues up 62.7%, anticipating continued growth.

Electricity segment revenues decreased by 3.8% to $159.9 million in the second quarter, with a gross margin of 24.2% (down from 33.5% last year). Product segment revenues increased by 57.6% to $59.6 million, with a gross margin of 27.7% (up from 13.7% last year). Energy storage segment revenues increased by 62.7% to $14.5 million, with a gross margin of 11.9% (up from 5.7% last year).

• Maintain guidance with revenue midpoint up 9% year-over-year, ranging between $935 million and $975 million. • Electricity segment revenues projected between $710 million and $725 million, product segment between $172 million and $187 million, and energy storage between $53 million and $63 million. • Adjusted EBITDA midpoint up approximately 5%, ranging between $563 million and $593 million.

• FEOC provisions in the bill may impact energy storage if not sourced properly, though minimal impact on geothermal as product segments have minimal FEOC content. • Energy curtailment in the U.S. previously reduced EBITDA.

Q: A lot of good things going on. I think one place to start would be around the geothermal development environment. You called out a number of expedited permitting advancements for several projects, I think that was publicized by BLM perhaps mid-quarter, if I remember correctly. Can you talk about the opportunity for additional permitting fast track, what you're anticipating over the next couple of years and what this might actually mean for speeding up the development timetable?

A: Yes, Noah, it's Doron. Thank you. The changes in the administration and the tailwind, the support that we are getting is very impressive and pushed us forward with today, multiple projects that have advanced the exploration to get into a position where we can start full-sized drilling and plan to release new projects in the next couple of years. I'm in Ormat for over 12 years, and this is a situation that we haven't had in the past. We're actually drilling, getting a lot of responses from the BLM much faster than in the past, and we see quite a few of greenfield projects in the U.S. that we will be able to release for construction the next couple of years. You can also take an example, Dogwood, the expansion of Heber that we just released. I started permitting of this project, I don't know, 4, 5, 6 years ago. And only now we're able now with the push that we see today, to get the permitting and to move it forward.

Q: I just want to make sure I've got this right on the storage side. I think you mentioned safe harboring all of your projects expected to come online through 2028. But you also mentioned, I think, active evaluation around FEOC implications for sourcing. So can you just sort of help us clarify those 2 points? Have you effectively safe harbored the battery supply already and eliminate any FEOC concerns for those projects going on through 2028? Or is that an ongoing process?

A: So I will split it basically to 3 parts. All the projects that are in construction that will come online, obviously, safe harbor, the batteries are in the U.S. in construction, and that relates to all the projects that were leased before '24. At the beginning of '25, even before any of the new regulation came out with safe harbor, additional couple of projects over the last few months and ongoing, we are safe harboring additional projects in '25. All of them should come online by the end of '28 or '29 based on the current regulation. So I would say with safe harbor in '24 was 700-megawatt hour, in '25 already 600-megawatt hour, and we are in the process of safe harboring another 1.6 gigawatt hour of projects in '25.