August 7, 2018 - 5:00 PM EDT
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Ormat Technologies Reports Second Quarter 2018 Financial Results

TOTAL REVENUE OF $178.3 MILLION
ELECTRICITY REVENUE UP 10.2%, DESPITE VOLCANO-RELATED OUTAGE AT PUNA PLANT

RENO, Nev., Aug. 07, 2018 (GLOBE NEWSWIRE) -- Ormat Technologies, Inc. (NYSE: ORA) today announced financial results for the second quarter ended June 30, 2018. The financial results were impacted by two main events. First, the shutdown of the Puna Power Plant in Hawaii (the “Puna Plant”) on May 3, 2018 following the nearby Kilauea volcano eruption and second, the consolidation of U.S. Geothermal Inc. (“USG”), following the close of its acquisition on April 24, 2018.

($ millions, except per share amounts)Q2 2018Q2 2017Change (%)
Revenues   
Electricity 122.2  110.9 10.2%
Product 54.9  67.6 (18.7%)
Other 1.2  0.9 36.8%
Total Revenues 178.3  179.4 (0.6%)
Gross margin (%)   
Electricity 33.5  43.0  
Product 31.6  35.7  
Other (68.3) (154.6) 
Gross margin (%) 32.2  39.3  
Operating income 36.6  53.2 (31.2%)
Net income (loss) attributable to the Company’s shareholders (0.3) 8.6  
Diluted EPS$(0.01)$0.17  
    
Adjusted Net income attributable to the Company’s stockholders1 16.6  29.5  
Diluted Adjusted EPS 0.32  0.58  
Adjusted EBITDA 80.8  88.1 (8.3%)

1 A reconciliation of Adjusted Net income attributable to the Company’s stockholders is set forth below in this release

SECOND QUARTER FINANCIAL HIGHLIGHTS

  • Total revenues of $178.3 million, down 0.6% compared to the second quarter of 2017.
  • Electricity segment revenues of $122.2 million, up 10.2% compared to the second quarter of 2017 despite the outage of the Puna Plant since May 3, 2018 following the Kilauea volcano eruption.
  • Electricity generation increased 7.7%, compared to the second quarter of 2017, from 1.33 million MWh to 1.43 million MWh.
  • Electricity segment gross margin was 33.5% compared to 43.0% last year. The reduction is mainly related to the outage of the Puna Plant, resulting in a reduction of approximately $5.7 million in gross profit. Gross margin was also impacted by planned maintenance activity at USG power plants that required their shut down as part of the operational integration plan and took longer than planned.
  • Electricity segment gross margin for the second quarter of 2018 excluding Puna and USG plants:

  Q2 2018Q2 2017H1 2018H1 2017
Gross Margin (%) Excluding Puna and USG Plants     
Electricity segment 40.7%43.0%42.9%43.0%

  • Product segment revenues of $54.9 million, down 18.7% compared to the second quarter of 2017.
  • Product segment backlog amounts to $229.0 million as of August 1, 20182.
  • Other segment revenue was $1.2 million in the quarter compared to $0.9 million last year.
  • Total gross margin was 32.2% compared to 39.3% in the second quarter of 2017; excluding the impact of the Kilauea volcano eruption near the Puna Plant and the planned maintenance activity at the USG power plants, gross margin was 37.0%.
  • Net loss attributable to the Company's shareholders was $0.3 million, or $0.01 per diluted share, compared to a net income attributable to the Company's shareholders of $8.6 million, or $0.17 per diluted share, in the second quarter of 2017.
  • Adjusted EBITDA of $80.8 million, compared to $88.1 million in the second quarter of 2017. The reduction was due to an expected reduction in revenue and profitability of the Product segment and gross loss in the Puna Plant and in USG. This reduction was partially offset by an increase in the Electricity segment revenues from new projects and by an increase in Ormat’s proportionate share in the EBITDA of Sarulla Geothermal Power Plant (“Sarulla”).
  • In the second quarter 2018, we recorded a non-cash a tax expense of $16.9 million. This expense represents a partial reverse, as expected, of the tax benefit of $44.4 million that was recorded in the first quarter of 2018 for the reduction of the valuation allowance related to foreign tax credits and production tax credits.
  • Adjusted net income attributable to the Company's shareholders of $16.6 million, or $0.32 per diluted share for the three months ended June 30, 2018, compared to $29.5 million, or $0.58 per diluted share, in the second quarter of 2017.
  • Declared a quarterly dividend of $0.10 per share for the second quarter of 2018.

2 The Product segment backlog includes revenues for the period between July 1, 2018 and August 1, 2018. The increase in the backlog is compared with the Backlog of $281.0 million as of May 7, 2018.

RECENT DEVELOPMENTS

  • Completed testing and commenced commercial operation of the 11 MW Plant I expansion project in the Olkaria III complex in Kenya increasing the total generating capacity of the complex to 150 MW.
  • Closed a $33.4 million tax equity partnership transaction for Tungsten Mountain geothermal power plant whereby Ormat will continue to operate and maintain the power plant and will receive substantially all of the distributable cash flow generated by the power plant.
  • Commenced commercial operation of the third and final unit of Sarulla bringing the project to its full capacity of 330 MW.

“In the second quarter we delivered a 10.2% increase in Electricity segment revenue and a 7.7% increase in generation despite the significant impact of the Puna Plant outage following the Kilauea Volcano eruption,” commented Isaac Angel, Chief Executive Officer. “This speaks to the strength of our Electricity segment. The growth we delivered in the recent 12 months from organic growth and by acquisitions mitigated the impact of the shutdown in the Puna Plant and enabled us to increase the Electricity segment revenue and maintain a constant level of total revenues quarter over quarter by compensating for the expected reduction in the Product segment.

The outage we had this quarter in the Puna Plant and the planned maintenance activity in the USG plants impacted our profitability. However, despite this outage and planned maintenance and assuming we will receive the insurance payouts related to Puna Plant’s loss of profits by the end of the year, we expect that the profitability in the Electricity segment in the full year to be in line with profitability last year.”

Mr. Angel continued: “In Hawaii, lava continues to flow near our Puna Plant, and it is not yet possible to anticipate a timeline for the lava flow resolution. This impacts our financials, but we are in discussion with our insurers and expect to be reimbursed for loss of profits and property damages. Assuming the insurance reimbursement will be in line with our expectations we will meet our Adjusted EBITDA targets for the year. However, the timing of insurance commitment and payouts can impact this as we navigate the event.” 

Mr. Angel added, “We continued with our growth plans in the second quarter. From the beginning of the year we added approximately 70 MW to our portfolio including 11 MW that were added in the second quarter to our Olkaria III complex in Kenya, bringing our total portfolio to 862 MW. We are on track with our near-term growth target and plan to add between 115 and 125 MW by the end of 2020.”

GUIDANCE 

Mr. Angel added, “In light of the continued lava flow near the Puna Plant and the accounting treatment that does not allow to record insurance payouts in revenues, we are adjusting our full-year 2018 guidance for the Electricity segment revenues to be between $500 million and $510 million to reflect the Puna Plant shutdown. We are increasing our guidance for the Product segment revenues to be between $190 million and $200 million. There is no change to Revenues from energy storage and demand response activity which are expected to be between $8 million and $12 million. As such, guidance for the total revenues is between $698 million and $722 million. We increased our 2018 guidance for Adjusted EBITDA to be between $370 million and $380 million for the full year, assuming successful resolution by the end of 2018 of our insurance claim for loss of profits at the Puna Plant.

In the event we do not reach a resolution of our insurance claim by the end of 2018, the 2018 Adjusted EBITDA will be negatively impacted by approximately $20.0 million dollars.

We expect annual Adjusted EBITDA attributable to minority interest to be approximately $30.0 million. The minority interest includes our partners share in the insurance claim for the Puna Plant.

The Company provides a reconciliation of Adjusted EBITDA, a non-GAAP financial measure for the three and six months ended June 30, 2018. However, the Company is unable to provide a reconciliation for its Adjusted EBITDA guidance range due to high variability and complexity with respect to estimating forward looking amounts for impairments and disposition and acquisition of business interests, income taxes including the tax impact of the repatriation of proceeds from sales in foreign jurisdictions and tax benefit or expense related to effects of the recently-enacted tax law reform in the United States and other non-cash expenses and adjusting items which are excluded from the calculation of Adjusted EBITDA..

SECOND QUARTER 2018 FINANCIAL RESULTS

For the three months ended June 30, 2018, total revenues were $178.3 million, down 0.6% compared to the quarter ended June 30, 2017. Electricity segment revenues increased 10.2% to $122.2 million for the three months ended June 30, 2018, up from $110.9 million for the three months ended June 30, 2017. The increase was mainly attributable to the commencement of new power plants and the consolidation of USG and was offset by the outage at the Puna Plant. Product segment revenues decreased 18.7% to $54.9 million for the three months ended June 30, 2018, from $67.6 million for the three months ended June 30, 2017. Other segment revenue were $1.2 million in the second quarter of 2018 compared to $0.9 million in 2017.

General and administrative expenses for the three months ended June 30, 2018 were $15.9 million, or 8.9% of total revenues, compared to $12.2 million, or 6.8% of total revenues, for the three months ended June 30, 2017. The increase was primarily attributable to expenses of approximately $2.0 million related to USG consolidation that was acquired on April 24, 2018 and higher costs associated with the identified restatement of our second and third quarter of 2017 financial statements and our full-year 2017 financial statements and the associated work related to the restatement.  

Other non-operating income (expense), net for the three months ended June 30, 2018 were $7.4 million reflecting insurance proceeds that we received for the loss of a rig at the Puna Plant.

The Company reported net loss attributable to the Company’s shareholders of $0.3 million, or $0.01 per diluted share, compared to net income attributable to the Company’s shareholders of $8.6 million, or $0.17 per diluted share, for the second quarter last year. Adjusted net income attributable to the Company's shareholders of $16.6 million, or $0.32 per diluted share for the three months ended June 30, 2018, compared to $29.5 million, or $0.58 per diluted share, in the second quarter of 2017; Adjusted Net income attributable to the Company’s stockholders and diluted EPS for the second quarter of 2018 excludes an increase in the valuation allowance related to foreign tax credits and production tax credit, which is volatile between the periods in light of the evolving regulations in the tax code in the US following the new tax act and is not indicative to our long term operational results.

Adjusted EBITDA for the three months ended June 30, 2018 was $80.8 million, compared to $88.1 million for the three months ended June 30, 2017. The reduction in Adjusted EBITDA is mainly related to the outage and planned maintenance described above and higher general and administrative expenses. The reconciliation of GAAP net income to EBITDA and Adjusted EBITDA is set forth below in this release.

DIVIDEND

On August 7, 2018, the Company’s Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.10 per share pursuant to the Company’s dividend policy. The dividend will be paid on August 29, 2018 to shareholders of record as of the close of business on August 21, 2018. In addition, the Company expects to pay quarterly dividends of $0.10 per share in the next quarter.

CONFERENCE CALL DETAILS

Ormat will host a conference call to discuss its financial results and other matters discussed in this press release on Wednesday, August 8, at 9 a.m. ET. The call will be available as a live, listen-only webcast at investor.ormat.com. During the webcast, management will refer to slides that will be posted on the website. The slides and accompanying webcast can be accessed through the News & Events in the Investor Relations section of Ormat’s website.

An archive of the webcast will be available approximately 30 minutes after the conclusion of the live call.
Please ask to be joined into the Ormat Technologies, Inc. call.

Participant telephone numbers  
Participant dial in (toll free): 1-877-511-6790
Participant international dial in: 1-412-902-4141
Canada Toll Free: 1-855-669-9657
   
Conference replay  
US Toll Free: 1-877-344-7529
International Toll: 1-412-317-0088
Canada Toll Free: 1-855-669-9658
Replay Access Code: 10122171

ABOUT ORMAT TECHNOLOGIES

With over five decades of experience, Ormat Technologies, Inc. is a leading geothermal Company and the only vertically integrated Company engaged in geothermal and recovered energy generation (REG), with the objective of becoming a leading global provider of renewable energy. The Company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter – a power generation unit that converts low-, medium- and high-temperature heat into electricity. With 77 U.S. patents, Ormat’s power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 530 employees in the United States and 770 overseas. Ormat’s flexible, modular solutions for geothermal power and REG are ideal for vast range of resource characteristics. The Company has engineered, manufactured and constructed power plants, which it currently owns or has installed to utilities and developers worldwide, totaling over 2,600 MW of gross capacity. Ormat’s current 862 MW generating portfolio is spread globally in the U.S., Kenya, Guatemala, Indonesia, Honduras, and Guadeloupe. In March 2017, Ormat expanded its operations to provide energy storage and energy management solutions, by leveraging its core capabilities and global presence as well as through its Viridity Energy Solutions Inc. subsidiary, a Philadelphia-based Company with nearly a decade of expertise and leadership in energy storage, demand response and energy management.

ORMAT’S SAFE HARBOR STATEMENT

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to Ormat's plans, objectives and expectations for future operations and are based upon its management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, see "Risk Factors" as described in Ormat Technologies, Inc.'s Form 10-K/A and Form 10Q for the first quarter 2018, both filed with the SEC on June 19, 2018.
These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Ormat Technologies, Inc. and Subsidiaries

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
For the Periods Ended June 30, 2018 and December 31, 2017
(Unaudited)

        
   June 30,   December 31,  
  2018  2017  
        
    (In thousands)  
ASSETS  
Current assets:        
  Cash and cash equivalents  $   66,696   $   47,818  
  Restricted cash, cash equivalents and marketable securities    76,041     48,825  
  Receivables:        
  Trade    109,061     110,410  
  Other    20,731     13,828  
  Inventories    36,696     19,551  
  Costs and estimated earnings in excess of billings on uncompleted contracts    46,573     40,945  
  Prepaid expenses and other    39,836     40,269  
  Total current assets    395,634     321,646  
Investment in an unconsolidated company    66,551     34,084  
Deposits and other    20,532     21,599  
Deferred income taxes    102,162     57,337  
Deferred charges    —     49,834  
Property, plant and equipment, net   1,840,558    1,734,691  
Construction-in-process    316,447     293,542  
Deferred financing and lease costs, net    4,926     4,674  
Intangible assets, net    207,206     85,420  
Goodwill    40,133     21,037  
  Total assets $ 2,994,149  $ 2,623,864  
 LIABILITIES AND EQUITY  
 Current liabilities:        
  Accounts payable and accrued expenses  $   103,342   $   153,796  
  Short-term revolving credit lines with banks (full recourse)    158,600     51,500  
  Billings in excess of costs and estimated earnings on uncompleted contracts    16,136     20,241  
  Current portion of long-term debt:       
  Limited and non-recourse:       
  Senior secured notes    36,458     33,226  
  Other loans    21,495     21,495  
  Full recourse    5,000     3,087  
  Total current liabilities    341,031     283,345  
Long-term debt, net of current portion:       
  Limited and non-recourse:       
  Senior secured notes    391,047     311,668  
  Other loans    230,973     242,385  
  Full recourse:       
  Senior unsecured bonds    303,527     203,752  
  Other loans    44,030     46,489  
Liability associated with sale of tax benefits    70,574     44,634  
Deferred lease income    49,973     51,520  
Deferred income taxes    47,128     61,961  
Liability for unrecognized tax benefits    9,637     8,890  
Liabilities for severance pay    20,159     21,141  
Asset retirement obligation    37,188     27,110  
Other long-term liabilities    21,817     18,853  
  Total liabilities   1,567,084    1,321,748  
        
Redeemable non-controlling interest    8,268     6,416  
        
Equity:        
  The Company's stockholders' equity:        
  Common stock    51     51  
  Additional paid-in capital    892,601     888,778  
  Retained earnings (accumulated deficit)    405,353     327,255  
  Accumulated other comprehensive income (loss)    (2,297)    (4,706) 
    1,295,708    1,211,378  
  Noncontrolling interest    123,089     84,322  
  Total equity   1,418,797    1,295,700  
  Total liabilities and equity  $  2,994,149   $  2,623,864  
        

Ormat Technologies, Inc. and Subsidiaries

Ormat Technologies, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
For the Three and Six Months Periods Ended June 30, 2018 and 2017
(Unaudited)

             
   Three Months Ended June 30   Six Months Ended June 30 
  2018  2017  2018  2017 
             
   (In thousands, except per
share data)
 
  (In thousands, except per
share data)
 
  Revenues:            
   Electricity$122,179  $110,896  $254,668  $226,672 
   Product 54,915   67,587   103,587   141,709 
   Other 1,205   881   4,067   881 
   Total revenues 178,299   179,364   362,322   369,262 
  Cost of revenues:            
   Electricity 81,236   63,196   154,718   129,232 
   Product 37,573   43,432   71,299   92,884 
   Other 2,028   2,243   5,471   2,243 
   Total cost of revenues 120,837   108,871   231,488   224,359 
   Gross profit 57,462   70,493   130,834   144,903 
  Operating expenses:            
   Research and development expenses 1,251   1,050   2,359   1,652 
   Selling and marketing expenses 3,712   4,090   7,411   8,453 
   General and administrative expenses 15,866   12,201   29,719   22,150 
   Write-off of unsuccessful exploration activities       119    
   Operating income 36,633   53,152   91,226   112,648 
  Other income (expense):            
   Interest income 189   362   302   606 
   Interest expense, net (15,846)  (14,540)  (30,190)  (29,463)
   Derivatives and foreign currency transaction gains (losses)  (529)  1,703   (2,128)  3,041 
   Income attributable to sale of tax benefits 3,556   4,356   10,917   10,513 
   Other non-operating expense, net 7,373   6   7,353   (86)
   Income before income taxes and equity in            
   losses of investees 31,376   45,039   77,480   97,259 
 Income tax (provision) benefit (29,105)  (32,765)  (2,163)  (43,769)
  Equity in losses of investees, net 388   (428)  1,598   (2,027)
             
   Net income 2,659   11,846   76,915   51,463 
   Net income attributable to noncontrolling interest  (3,002)  (3,206)  (7,750)  (7,629)
   Net income attributable to the Company's stockholders $(343) $8,640  $69,165  $43,834 
             
  Earnings per share attributable to the Company's stockholders - Basic and diluted:       
  Basic:            
   Net Income $ (0.01)  $ 0.17   $ 1.37   $ 0.88 
             
  Diluted:            
   Net Income  $ (0.01)  $ 0.17   $ 1.36   $ 0.87 
             
  Weighted average number of shares used in computation of earnings per share
  attributable to the Company's stockholders: 
           
   Basic 50,623   49,771   50,618   49,726 
   Diluted 50,958   50,624   51,001   50,559 
             


ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA
For the Three and Six Months Periods Ended June 30, 2018 and 2017
(Unaudited)

We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for (i) termination fees, (ii) impairment of long-lived assets, (iii) write-off of unsuccessful exploration activities, (iv) any mark-to-market gains or losses from accounting for derivatives, (v) merger and acquisition transaction costs, (vi) stock-based compensation, (vii) gain from extinguishment of liability, and (viii) gain on sale of subsidiary and property, plant and equipment. EBITDA and Adjusted EBITDA are not a measurement of financial performance or liquidity under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of a Company’s ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the three and six-month periods ended June 30, 2018 and 2017.

               
    Three Months Ended June 30   Six Months Ended June 30  
   2018  2017  2018  2017  
               
    (in thousands)   (in thousands)  
 Net income  $   2,659   $   11,846   $   76,915   $   51,463  
 Adjusted for:             
 Interest expense, net (including amortization             
   of deferred financing costs)    15,657     14,178     29,888     28,857  
 Income tax provision    29,105     32,765     2,163     43,769  
 Adjustment to investment in unconsolidated company:           —      —   
 our proportionate share in interest, tax and depreciation and amortization     4,454     —      7,984     
 Depreciation and amortization    31,859     25,749     61,296     51,290  
 EBITDA $  83,734  $  84,538  $  178,246   $   175,379  
               
 Mark-to-market gains or losses from accounting for derivatives    537     (940)    1,499     (2,463) 
 Stock-based compensation    2,116     3,630     3,823     5,343  
 Gain on sale of subsidiary and property, plant and equipment    —      —      —      —   
 Insurance proceeds in excess of assets carrying value    (7,150)    —      (7,150)    —   
 Losse from extinguishment of liability    —      —      —      —   
 Settlement expenses    —      —      —      —   
 Impairment of long-lived assets    —      —      —      —   
 Merger and acquisition transaction cost    1,571     900     2,670     1,700  
 Write-off of unsuccessful exploration activities    —      —      119     —   
 Adjusted EBITDA $  80,808   $   88,128  $  179,207   $   179,959  
               

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
Reconciliation of Adjusted Net Income Attributable to the Company's Shareholders
For the Three and Six Months Periods Ended June 30, 2018 and 2017
(Unaudited)

        
    Three Months Ended June 30 
   2018  2017
        
    (in thousands) 
 Net income attributable to the Company's stockholders  $   (0.3)  $   8.6
        
 One-time settlement expenses      
        
 One-time prepayment fees      
        
 One-time tax Expense    16.9     20.9
        
 Adjusted net income attributable to the Company's stockholders $  16.6  $  29.5
        
 Weighted average number of shares diluted used in computation of earnings per share attributable to the Company's stockholders:  51.0     50.6
        
 Adjusted EPS    0.32     0.58
        


  
Ormat Technologies Contact:

Smadar Lavi

VP Corporate Finance and Head of Investor Relations

775-356-9029 (ext. 65726)

[email protected]
Investor Relations Agency Contact:

Rob Fink

Hayden - IR

646-415-8972

[email protected]

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Source: GlobeNewswire (August 7, 2018 - 5:00 PM EDT)

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