Q1 2021 Ormat Technologies Inc Earnings Call
[music].
Okay may contain forward looking statements relating to Kurt expectations estimates forecast and project you about future events that are forward looking at the five and the private security of Litigation Reform Act of 1995.
These forward looking statements general relate to the company's plans objectives and expectations for future operations that are based on management's current estimates and projections future the results or trends.
Actual future results may differ materially from that is projected as a result of certain risks and uncertainties.
For a discussion of such risks and uncertainties. Please the risk factors as described in Ormat technologies annual report on form 10-K, and quarterly report on form 10-Q that are filed with the SEC.
In addition, during the call the company will present non-GAAP financial measures such as adjusted EBITDA.
Reconciliation for the most directly comparable GAAP measures and management's reasons for presenting such information as set forth in the press release that was issued last night as well as in the slides that are posted on the company's web site.
Because these measures are not calculated in accordance looked at the station that would be considered in the isolation from the financial statements that are prepared in accordance with gap.
Before I turn the call over the management I would like to remind everyone that the slide presentation accompanying this call may be accessed on the company's website of format Dot com under the present pink presentation line that sound on the Investor Relations tab with all of that said I know like the turn the call over to the around blush are thrown the call is yours.
Thank you and good morning, everyone. Thank you for joining us to the.
And who indicated the fourth quarter called a few weeks ago. We view 2021 is the build a few which we lay additional groundwork to accelerate the growth of all of the <unk>.
The city and all of the rapidly growing energy still of cigarettes.
We made significant progress lumping the generation of the pool of plants in Hawaii.
We started the operation of the Villa fetal energy storage facility in California, and we recently completed the construction of the mcginnis expenses and the and the vet in Nevada, which is about in late stage will start on.
On the same time, we're making progress and all of efforts to read below deck, low which is still facing the building of the pandemic related headwinds.
The the revenues down the Crazy the segment revenues acreage one five per cent two $145 million.
Supported by contributions from you added capacity at our steamboat complex.
<unk> one of the.
Review of operation.
Cause of sent by lower generation, if you'll carrier complex continue the.
You to continue co pay per minute and lower performance of the rest of the day, one would discuss rock.
In the first segment revenue decline, 82% to eight $6 million, the representing 5.2% of the total of revenues in the first quarter.
The the cloud over here is expected to continue throughout 2021 is the continued global complaint is to limit the ability to sign you large contract.
Energy Star second revenue interest nearly 600% of your over here to 12 $7 billion on the fourth quarter.
Representing seven six per cent of our total revenue for the quarter.
Excluding the one time positive impact on $454 million revenue the related to the revenue we Craig in February power classes in Texas.
The income over here was approximately 300 per cent.
This growth was mainly driven by revenues from the required from one of the energy assets.
And the contribution of the rest of your text facility the.
The comments operation of April 2020.
Moving to slide six.
Gross margin for the electricity segment for the quarter, the fifth year over year, 245%.
This one of the results of the absence of business interruption of insurance proceeds of tuna and the fact that we're still ramping of the output of tuna.
Also with a reduction in revenue in the color Paul prison tenure.
And the product segment gross margin was $6, 60% of in the quarter compared to 22% of the same period last year the.
The product segment of gross margin in 2021 was impacted by a significant reduction in the revenue.
Energy storage segments reported the positive gross margin of 62.4% of the first quarter.
And $34, 7% adjusted gross margin, excluding the one time the impact of the February power prices in Texas.
This was compared to of negative gross margin of the first quarter the last year.
The approve it was kind of driven by the acquisition of the Corona storage efforts in California.
Adjusted EBITDA decreased six 4% of $99.2 million in the first quarter.
And the electricity segment generated 96% of the total adjusted EBITDA in the first quarter.
The product segment generate 1.3 per cent of the amount per per adjusted the.
The for the quarter and the second the reported adjusted EBITDA of 3 million zone.
Which one of the 10th at 3% of the token of adjusted EBITDA of the company.
Reconciliation of EBITDA and adjusted EBITDA of provided the appendix low.
Turning to five seven.
You can see the queue of 2021 results were negatively impacted by February power crisis of in Texas.
As we discussed in the last on the coast in February of 2021.
Extreme weather condition in Texas cause of normal reduction in a crucifix applied.
Along with the record demand for it.
The extreme weather conditions resulted in shortage of electricity supply, which book electricity and are are if prices to reach record of thousands of dollars to make of a tower.
Starting February 16th and until February of 19 or relative facility could not transform degrees.
Due to the energy emergency of large which resulted in the limited ability of derivative of storage facility.
To provide any of our is.
Services.
In order to reduce on merchandise.
And English our revenue 2021 for the census, the.
The company started and entered few months ago ego of hedge transaction 480 per cent of the revenue capacity.
Which is currently nothing effect.
Due to the inability to operate the facility. During this time, we recorded Q1 of 2021 and at the expense of nine $1 billion relates to the hedged transactions.
The addition, with the recorded as part of our G&A costs and expenses of $3 million related to in balance charges from the grid operator in respect to our demand response operation. The three estimates would probably may be unable to collect such receivables.
We are currently in the discussion with the airport we were two scripts of some of the imbalance charger.
And the revenue allocated to our customer.
Customer response.
That may be impacting is positively in the later date.
Turning now the slides.
Our net debt as of March 31, 2021 was $936 million.
Cash on his cricket cash as of March 31, 2021, with 460 $500 compared to $537 million as of the same as for the first 2020.
In addition, we had 2018 of dog of marketable securities.
Slightly of it breaks down the use of cash in the two months and illustrates the ability to reinventing the business.
Service fixed and return the care store shareholders in the form of kids dividend all of them cash generated from operation.
A lot of them in short term debt as of March 34 of 2021 $1.4 billion.
Net of the third pharmacy costs and.
And the payment schedule is presented on slide 28.
Yeah cause of the of the company is currently four 9%.
Macy's the company's board of directors of declared approved and otherwise the payment of quarterly dividend of 12 cents per share pursuant to the companies dividend policy.
The debate on the will be paid on June 2021 to shareholders off record and of of course of business day on May 18th 2021.
In addition, we expect to pay a dividend of 20% per share in the next two quarters.
That concludes my financial Dizzy.
Like now to turn the call over to the loan to discuss some of the recent development and our growth plan for the next three years.
The one.
Thank you of.
Turning to flight of 11, four look with all the operating for for Ya.
Power generation it all of the fireplace and freeper, approximately 2% of compared to last year.
And the first quarter will see the contribution of steamboat Hughes, which started operations in need of 2020, and a fuller the fees operating exceeded pops of progressive.
The new professor at the added was offset by low generation and continue fulfillment with over the phone call your fault of it.
We continue to extra cute on all gross bringing mcginnis field on line S. P M and it is not on final stages the stop.
Let me give it feels enhancements will provided of choices for approximately 6000 homes while offsetting.
Offsetting approximately 63000 tons of C O two emissions.
Providing the highest level of proficiency on safety in the geothermal industry.
If those are the strikes was full of of yoga Proration of November 43.
With the Romped pull the generation the approximately 20 megawatts on.
On the field site, we've connected one of your injection was doing extras and once we will complete the connection of another was during the second quarter of 2021.
Along with the pills for the ball.
My favorite unit to graduating from the generating capacity. So needful level by me 2021 of fuming connection of the worst of the policy will be successful.
Subsequent to the end of the pull up the we will notify the the new P. P. A which of course is suspended and we may be quiet completely environment. The study.
Addition to abuse the old of the policy is to review the P. P. A H.
And your environment the study <unk> one to two years.
Cool filed the most of to reconsider the big decision and you'll still considering the impact of the <unk> the older although gross but.
Settling Hawaii.
I would like to remind you that the current 58 is currently of significant higher prices any given place until the end of 2025th.
Turning to fly silky.
Out of revenue and they'll call you is the yoga is the zip.
Out of the combination of of the curtailment. The continue the for the first quarter and the reduction in the performance of some kind of resource that reduce the generation generating capacity approximately for the first missiles.
We're operating to install the carpet of January things of persecute capacity throughout the really complaining Kenya, and we're optimistic we'll see any interest in production of the second half of this year.
In Kenya with the also encouraged by the collection from Cape You'll see the continued to pay it's mostly the with it and as a result of interesting overview of mouth.
Turning the flight 44, an update on our bedroom.
Our product segments of the part of our business most impacted by the COVID-19 printed.
With the customers projects around the world being the late.
However, we believe this is the shorter phenomenon and we see many opportunities the tin material to assign construct before the end of this year.
As of May 5th of 2021 of productivity backlog was $37 million.
We anticipate continue the weakness you know of product revenues June 20th 21, and as a result of 2021 guidance for the cigarettes significantly lower the recent U.
As I discussed on all lost earnings are leaves the smaller is resilient and of keep out of it relates of vertically integrated structure, which enables us to better allocate hold on it.
Capacity and the resources, while focusing on each other the initiative to support of electricity segment cool.
If the segments revenue of interest disclose the approximately 200 per cent, but.
Quote of 2021.
Both of 2020.
We firmly believe that the the global pandemic of AIDS, we will see increasing demand for products around the world.
<unk>.
Partially of setting the weakness of the product segment to the vehicle system of improvement you know energy storage buildings.
End of the stores discuss the slides 15 continues to evolve to grow to become more profitable obviously presented in the financial the remarks.
This quarter with commission devoted fetal 10 megawatts 40 megawatts of our storage facility in California, which per.
Provide local resource adequacy to southern California, Edison under the 20th of your energy storage of Tuesday.
In addition, the facility provide the city services and energy optimization through participation emotions Marcus.
Cash from Kenya.
I know I'll.
I'll say, one and the Mcginness Hills enhancement came a bit earlier than what we originally anticipated.
And in a in Kenya, we believed that.
We wouldn't be able to bring it back to its capacity during the year and hopefully be able to get back some of the.
Lower revenue debt.
But we had.
And as we said it is similar to what we've expected so on.
And on balancing between honest things begin to fit on colleague on the two main items.
Okay.
That's very helpful and maybe not to get too technical but can you help us understand what.
Is causing the lower resource performance and how do you mitigate that.
Some of the potential ways that you are.
I can't can increase the output there given oh, I guess, that's a cooling impact.
The old carrier on box.
Yeah. So.
As you know over the course over the life of a power plant. We are every few years you know drill a makeup with and we had a plan that drilling campaign in Colorado.
And the world didn't came out as a stronger than we expected them.
Our and.
Analysis sees some.
<unk>.
Different temperatures within the resource.
And by changing the women and the weighted to drill bid on.
Assessing the difference.
This is while it would seem if we'd be able to bring it back from 250 megawatt capacity.
That's very helpful. A question on the storage side you know.
I think as you mentioned.
On hedges around Rabbit Hill.
Just in general as you develop.
Storage portfolio, what are you seeing it from the availability of hedges or other instruments to help.
Get more of a fixed revenue on on some of these projects what kind of visibility do you have on on.
On revenues for you know say.
First a three to five years of these projects coming on line.
So let me start by saying that with respect to revenue.
The goal was to fix the revenue on.
So on facility.
And recently, we had is that we love the money on that but we could not generate youre expecting revenue because the.
Storage facility would not be able to charge itself.
Now when we look at going forward.
The markets I'll say I've asked.
Based on the increasingly I would say in general our notice in advance of some other commodities that day.
One may be familiar but I do believe we will see.
Net.
And that there.
There will be some progress with debt.
With that being said we are looking in some cases on a balance portfolio.
That will enable us to for example, a tolling agreement.
Or capacity agreements.
Basically fixed on a revenue with our customers instead of fixing it through a financing. So that's something that we would like to build on when we look at the next few years.
The goal is to do a combination of fixed transaction with the customer on which can be a capacity payment.
Our tolling agreement.
And then on the other hand, we would be at.
From a merchant activity.
I don't have the percentage, but again large projects at this point, we are looking to them to reduce exposure to.
Guarantee a minimum return I will say that the next three years will be probably a big difference between where we are today I do think there will be more hedging opportunities.
I have already seen the ice market being developed but it will take time.
Okay. Thank you very much I'll turn it over.
Thank you Bill.
The next question comes from Jeff Osborne with Cowen <unk> Company.
Yeah. Good afternoon, a couple of questions on my end.
Back on Kenya, not the facility itself, but I was wondering.
The line. Unfortunately broke up when you were discussing the payments can you just talk about the relationship you have with the customer on the status of the accounts receivable would be helpful.
So our relationship with the customer hasn't changed.
Throughout Q1.
In line with what we've seen in the last few months <unk> has paid in full day.
Monthly charges without being said there is roughly a $45 billion of.
English centers that haven't been paid yet we are working with the customers, but we do understand that day.
The suggestion in Kenya with COVID-19 is not.
On the easy they are under.
Quarantine I believe until May 15, with that being said they are paying on a monthly basis, how does the sense of the monthly invoices, which is very encouraging.
Got it and then is it.
There's seems to be sort of weekly or biweekly news flow there around just the broader power company.
Being pressured by everybody from the top of the government on down about renegotiating power prices to try to improve the profitability. Obviously COVID-19 COVID-19 is exacerbating that but are there any ongoing negotiations about.
Newer prices are or no.
Well, Matt has a long term PPA and we have not been approached to discuss it we're all seeing and what you guys seeing in the newspapers and we're aware of it but.
Nobody approach.
I don't think that the geothermal is the one that is the most expensive.
We also know it is a baseline electricity and we have the support of the government operating debt.
And I think the best outcome for US is that this will continue and at this point. We don't have any reason to think that it will not continue the current engine.
Perfect I just had one more quick one on on Kenya. If you don't mind can you can you quantify the degree.
Curtailment of the 150 megawatts is it roughly 10%, 20% or more meaningful I just wasn't sure how to put in perspective.
The curtailment is different between the days and the weekends.
Some day, if you can get to 20% curtailment, others, who get to 10%.
But then it also usually overnight from a few hours is not for the entire day. So its very hostile averages.
Got it and then just two assets.
I just want to mention as you remember these curtailments doesn't impact the revenue the match because most of the dialogue that we are getting our capacity payments.
So I would say the curtailment.
Last year, probably for the whole year was three 4 million.
Not to beat them on vessels. The company is the revenue the key for US is to fix the resource. So we can go.
Go back to the 150 capacity that we can operating.
Got it makes sense and two other quick ones. So Pune with the suspension of the P. P. A how does that mechanically work quake or are you just paid the merchant price in.
On the facility is still operating or what are the mechanics of that facility.
Oh, the mechanics as debt, we have a PPA in 2020 end of 2027.
And if it's North America, it's actually relatively high PPA.
It will find many of the debt and base, that's really on the PUC request, we negotiated a new PPA.
It could come into effect only after the PUC approved it.
So that's at the delays of the PPA is actually on the short term it on <unk>.
On the revenue because the pricing index.
This interface higher.
And at this point, we still believe the PPA will be approved.
Telco is.
The one that the approach the POC to reconsider and reconsidering.
Okay.
They are they are reconsidering.
The decision.
So we are waiting on and again just as it relates only to the new Ppas. It comes into effect on the after deal approved. So currently we do have a peak Janssen Dan was 27.
Got it okay. Thank you for the clarification.
And then the last one I had is just if you add up what you did in Q1 for the product segment, coupled with I think it was $37 million in the product backlog you don't get to the low end of the range. So you must be assuming for.
For the year that Theres additional bookings can you just talk about the confidence on that and then be geographically where that would come from is that from New Zealand or some other country.
One you're correct obviously the numbers are not out through 50 to 70, but we are.
Over the last few.
Months negotiating.
Couple of contracts, which we expect to sign and assuming assuming we will be able to sign them in the next few weeks.
They will impact revenue recognition in Q4 of this year.
And based on these negotiations.
We believe that we will be within the guidance that we gave.
And these contracts.
On two or three.
From countries.
Zealand is currently not from one of them.
Okay. Thank you that's all I had.
Thank you.
As a reminder, if you do have a question. Please press Star then one on your Touchtone phone.
The next question comes from Mark Strouse with Jpmorgan.
Yes.
Good evening. Thank you very much for taking my questions.
A lot of focus on raw material pricing in the market right now.
Can you just can you just kind of give us an update on on how you're.
Potentially incorporating that into our and some of these growth projects that you're bidding on.
We have seen as you say an increase in raw materials and also I know, we've seen the transportation issues across the world and the largest impact.
The cost.
It is impacting the entire industry, it's not interesting specific deal a month.
So when we are responding to.
The projects we are.
Yeah.
And pricing them with the current costs that we know that the closeness, we expect to incur but at the same depth to our competitors.
On the same ground here.
Yeah, Yeah that makes sense.
Then you kind of touched on on this with competition.
Are you seeing any any change in the competitive dynamics in any kind.
A new startup companies or anybody else getting more aggressive in the market.
Well, let's see and on the product side, the same competition as in the past.
It's true, but then an extra day.
These are the two main inc.
Competitors that we see.
On the different places that we have obviously the responsible.
Okay. Thanks, Ron.
Thank you.
Yeah.
At this time there are no further questioners in the queue and this ends the question and answer session I would now like to turn the conference back over to Ormat management for any closing remarks.
That's like to thank you all that participated and thank you for your continued support.
And let's say 2021 is a very buildup here this will bring us and continue the growth.
Going forward.
Thank you very much.
The conference has now concluded thank you for attending today's presentation.
May now disconnect.
[music].