Q2 2021 Ormat Technologies Inc Earnings Call
Income taxes.
These issues reduced our electricity gross profit.
The approximately $8 million.
For the 6 months gross margin was 41% similar to the same period last year.
Okay.
We delivered net income attributes of the company's stockholders of $13 million.
Or 23 cents in the quarter.
Compared to $23 million or <unk> 45 per share for the same quarter last year.
Our effective tax rate for the second quarter of 2021 was 22, 6%.
Which is lower than the 33% effective tax rate from the second quarter of 2020.
Mainly due to the movement in the valuation allowances for each quarter.
We now expect the annual effective tax rate to standard by approximately 33 per cent for the full year 2021, assuming no material onetime impacts.
Adjusted EBITDA decreased 13, 6% to $84.5 million in the second quarter.
Impacted mainly by gross profit reduction.
And higher G&A expenses, driven by interest legal costs.
Moving to slide 6.
Breaking the revenue down electricity segment revenues increased 4% to $134 million.
Supported by contribution from new added capacity at our steamboat and Mcginness hills of complexes.
As well as puna resume operation.
It's the 1 mentioned in the opening remarks this new way the generation was offset by lower generation in low cardiac you do a combination of low risk of performing that caused the capacity reduction.
And continued curtailment of our local customer K P&C.
In addition of steamboat complex hit the mechanical issue. It was result of few days later.
And in broadly we experienced the surface leaks in 1 of the injection wells, which reduced generation.
In the product segment revenue declined 8.3% to $7.4 million representing.
Representing 5% of total revenue in the second quarter.
The decline year over the year is expected to continue throughout 'twenty 1 day.
Due to the lower backlog and the beginning from the beginning of the year.
Energy storage segments revenues increased nearly 124% even for the yield to $5.16 of dollars in the second quarter.
Representing 4% of our total revenue for the quarter.
The growth was mainly driven by revenues from the acquired Pomona energy storage assets and the contribution of over the stupid, but let's see the facility in California.
Which started commercial operation in April of 2021.
Let's move to slide 7.
Gross margin for the electricity segment for the quarter decreased year over year, the 37, 4%.
This was the result of the higher cost related to the repair of the recovery of the Colorado Steamboat embolic complexes.
In addition in the second quarter last year, what do you recall of the business interruption insurance recovery of $2.7 million the us related to pull the complex.
Compared to the zero this year.
In the product segment gross margin was 21% from the second quarter compared to 26% in the same time last year.
The energy storage segments reported again of positive gross margin compared to a negative gross margin in the second quarter last year.
The improvement was primarily driven by the acquisition of the Pomona energy still adjusted.
Turning to slide 8.
Adjusted EBITDA decreased 14% to $84.5 billion in the second quarter impacted mainly by gross profit reduction and higher G&A expenses driven by interest legal costs.
The electricity segment generated 94 per cent of the total adjusted EBITDA in the second quarter and the product segment generated 4%.
The storage segment reported adjusted EBITDA of $2 million, which represent 2% of the total adjusted EBITDA.
Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix slide.
On slide 9 on net debt as of June 30 of 2021 was the 1 billion at $40 million.
Cash and cash equivalent and end of restricted cash on cash equivalent as of June 30 was approximately $330 million.
Compared to $537 million as of year end.
In addition, we had $46 million of marketable securities.
Slide 9 breaks down the use of cash for the 6 months and illustrates our ability to reinvest in the business.
Service debt and return capital to our shareholders in form of cash dividends.
All from cash generated by operation and a strong liquidity position.
Our long term debt as of June 32021 was $1.4 billion.
Net of deferred financing cost and its payment schedule is presented on slide 30.
In the appendix of the average cost of debt was 4.9%.
During July we closed 2 new corporate loan raising approximately $175 million out of which $50 million of green bonds provided by the HSBC bags funds were used to finance the intelligent acquisition.
On July on August 4.2021, the company Board of Directors declared approved and authorized the payment of quarterly dividend of 12 sales per share pursuant to the company's dividend policy the DB.
And it will be paid on September 1.2021, 2 share holders of record as of the close of business day on August 18.2021.
In addition, we expect to pay dividends of <unk> <unk> per share in the next quarters.
That concludes my financial overview, I would like to turn the call over to Don to discuss some of the recent development in our gross spend for the next 3 years the on.
Thank you Oscar.
Turning to slide 4 we look at our operating portfolio.
Power generation of power plants increased by approximately $2.4 per cent compared to last year.
In the second quarter, we see the continued contribution of steamboat to the surface operation in mid 2020 the.
The incremental contribution of Mcginness hills for approximately 1 month.
And the generation from pulling out the pes operating students boss of the capacity.
These were partially offset by continued curtailment and low performance of the free of the Hilton Boston and other operational issues in the U S.
Will elaborate shortly.
The recently completed the expansion of our mcginnis at the facility and on <unk>.
Providing electricity for approximately 6000 holes, while offsetting approximately 63000 tons of steel to the.
Delivering the highest level of efficiency and safety in the geothermal industry.
With the addition of the acquired operating assets. We're running once you go out the twist the portfolio an increase of 83 megawatts in the second quarter.
As noted on slide 13 point of resumed operations in November 2012.
We've ramped will of generation to approximately 28 megawatt floating the repair of the 2.
All of it.
From 20 megawatts of Alaska.
Quarterly report.
We expect towards 30 megawatts of the year end with.
We have continued discussions with telco and the PUC and both on the PPA and continued selling of electricity under our existing PPA, which is in the fifth until the end of 2027.
Turning to slide 14.
Let me discuss some of the challenges we experienced this quarter and the few of our operating asset and I will start with the known 1 in Kenya.
Our revenue on the carrier complex was down year over year as the result of continued curtailment and the reduction of the performance of the reason the.
The combination of which has resulted in approximately the reduction of generating capacity of 25 day.
This reduction in capacity reduced our quarterly gross margin by approximately $2.7 million.
Yeah.
We are operating to flow the conflict generating capacity throw the continuous drilling companion, Kenya and the <unk>.
The mistake, we will see an interest in production.
Through and by the end of the year.
We expect the similar quarterly reduction in revenues until capacity is fully restored.
We also experienced the mechanical failure, the cold steamboat complex, resulting in revenue loss and interest expenses that reduced gross margin by approximately $2 million.
The steamboat complex is now back to full operation.
In the broader complex, we had the leak in 1 of the injections and the pump failure in 1 of the production was it caused the reduction of the generating capacity of 3 megawatts.
We are working to restore full production of drug.
The second half of 2021 will be impacted by the low performance of the calia and broadly about them and we have updated our annual guidance accordingly.
Yeah.
Turning to slide 15.
In July we closed the accretive acquisition of the intelligent asset.
This acquisition added a total net generating capacity of approximately 67.5 megawatts of our portfolio.
In addition, we bought the joint free development asset adjustment, the DC value with high resource potential and an underutilized transmission line.
Capable of handling between 3 to 400 megawatts on the 230 kilowatts.
Collecting the Dixie value to California.
With this acquisition, we now on 10 operating plant in Nevada, generating a total of 443 megawatts.
The proximity of these plants to population centers in both the Veda in California is simple.
California remains of the forefront of driving the adoption of renewable energy.
With supportive mandates and requirements already in place and more being considered.
Utility companies in California.
Recently, looking for affordable and reliable and <unk>.
This dynamic made of FY of transmission line increasingly important.
Turning to slide 16 for an update on our backlog.
While the result of all of our product segment continued to be impacted by the lower backlog at the beginning of the year.
We're starting to see encouraging signs of free covenant.
We are seeing clear signs of improvement in this business, including an expansion of our backlog reinforcing our confidence that this is a short term phenomenon.
As of August 4.2021 of product segment backlog increased 59% by $22 million.
To reach 59 million of who.
Compared to $37 million in early May of this year.
We signed a few contracts during the quarter, including a new contract with <unk> energy geothermal to supply products to the new 14 megawatts of luck geothermal power plant in Indonesia, and another contract of supply equipment for the product in Japan.
Despite the recent improvements in this segment, we anticipate continued weakness in our product revenue during 2021.
And have adjusted our annual guidance accordingly.
Partially offsetting the weakness of the product segment has been a consistent improvement.
Most of the.
As I mentioned earlier and as discussed on slide 17.
This business continues to become a more important part of our consolidated results.
This quarter of projects in both of the East Coast, and Texas enjoyed higher revenues due to higher market prices.
The store assortment again generating positive EBITDA and we released 2 new projects for construction.
In Ohio, and California.
Moving to slide 18.
Previously mentioned the supporters mandates being implemented in California.
And the increasing demand for affordable and reliable renewable energy in the state.
1 example is the recent ruling by the CPUC, requiring electric load serving entities lessees.
For Q11, 5 gigawatt of new clean electricity by 2026.
1 gigawatt of this procurement must deliver firm power with an 80% capacity factor produced zero onsite emission and B, where the independent.
No form of renewable energy generation is more poised to fill this need the geothermal.
With the 95% capacity factor and affirm and flexible generation.
Geothermal energy is not that is not only an excellent complement to intermittent resources, but the natural replacement for baseload fearful of oil fields and nuclear generation.
California efforts to achieve its goal of 100% carbon free electricity by 2045 through massive deployment of renewable energy and energy storage resources enable us to sign new contract for geothermal as we did this quarter with CPA for of 14 megawatts of South geothermal.
Power plant in the Imperial Valley, California.
We also issued our first ever request for bids for the 26 megawatt the capability to actively look for opportunities for store expansion.
Moving to slide 2020.1.
As we have communicated 2021 will be a significant buildup year comprised mainly of geothermal project.
This buildup support of robust growth plans, which is expected to increase our total portfolio by almost 50% by the end of 2023.
Our medium term goal in the electricity segment is to add an additional 240 to 260 megawatts by year end 2023.
Above the 80 megawatts added since the beginning of 2021.
And in a rapidly growing energy storage portfolio, we plan to enhance our growth and to increase of our portfolio.
The 2 to 300 megawatts by year end 2020.
Achieving these growth target is expected to help us reach an annual run rate of more than $500 million and adjusted EBITDA towards the end of 2022 that.
But we expect to continue to grow as we move forward with our plans in 2023 and all of them.
Slide 22 displays 13 projects underway the compromise that comprise the majority of our 2023 goldcorp.
While we are experiencing some delay in the permitting process, we're still on track to meet our gross target for the end of 2023.
Yeah.
Moving to slide 23 of 24.
The second layer of growth net of comps from the energy storage segments.
Slide 23 demonstrates the energy storage facilities, we have announced will start of construction, we released 2 new projects for construction bowling green and commodity.
The other projects, including the Gloucester are in different stages of development and the relief will require of site control and execution of an interconnection agreement.
Well, obviously subject to economic justification.
As you can see on slide 24.
Our energy storage pipeline stands at 2 gigawatt and currently includes 36 names potential projects, mainly in Texas, New Jersey and California.
Moving to slide 25, the significant growth in both our electricity and store segment, where the.
Required robust capital investment over the next couple of years.
The fund this growth we have over $750 million.
Of cash and available lines of credit.
Our total expected capital spend for the reminder of 2021 includes approximately $280 million.
For capital expenditures as detailed on slide 31 index.
Overall, ormat is well position with excellent liquidity and ample access to additional capital to fund future initiatives.
Please turn to slide 26 for a discussion of our 2021 guidance, which has been revised to account for our recent acquisition and other development previously discussed.
We expect total revenues of between $650 million.
$685 million with electricity segment revenues between 585 billion Inc.
$595 million.
We expect product segment revenues between 400 million of.
The $60 million.
The guidance for energy storage revenue are expected to be between $25 million to $30 million.
We expect adjusted EBITDA to be between 400 and $410 million.
We expect annual adjusted EBITDA attributable to minority interest to be approximately $31 million.
As noted in previous quarters adjusted EBITDA guidance for 2021 includes insurance proceeds of approximately $10 million.
This concludes our prepared remarks now I'd like to open the call for questions. Operator, if you. Please.
Thank you.
We'll now begin the question and answer session.
So you asked the question you May Press Star then 1 on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
From a strong a question. Please press Star then 2.
The storm, we will pause momentarily to assemble the roster.
The first question will come from Noah Kaye of Oppenheimer. Please go ahead.
Good morning, Thanks for taking the questions I guess I'll start it looks like you raised your 2023 geothermal portfolio target.
Size for the Terra Gen acquisitions, you just completed.
And please correct me if I'm wrong, so your organic growth.
Targets remain the same there.
Should we think about that roughly 250 megawatts of.
Further additions.
Just being an organic target.
In other words as M&A in any part of that or when the COVID-19.
Further M&A be upside.
On the I know I think for the question the the.
The gross targets are.
The organic so to adjourn was on top of that the similarly, if we have additional acquisitions that would be on top of that.
Okay.
Can you talk a little bit about plans for using that that underutilized transmission line of what.
In the initial planning agency is the most likely.
Hi, geothermal expansion of new.
Solar facility, what what would make the most sense and when might that transpire.
Good morning. Good morning line. This is assay. So basically we are the 2 options. The first option is to continue on develop more assets in the Nevada, like we're planning tool and to add them to our.
And moving.
The electricity to California with the line, although as we mentioned during our calls before the.
Or is the bottleneck in control in California that will need to be we have to take into consideration the.
The second option is to allow third parties.
To use this the line.
While keeping our capacity to our sales and that's something we're also looking into either of doing it by offering capacity to others or by joint venturing.
The access to third party and I will say this is a very good asset, especially knowing the fact that the PUC now easily requiring the utilities in California to increase the amount of.
Renewable baseload renewable in California, and Thats, why we think there'll be a lot of demand overtime. All of it of course is subject to permits and the ability to either of the.
The increase the capacity of the bottleneck in the control area or to bypass it by using third party dealers.
The length.
Okay. Thanks Thats helpful.
The next question is really around the operational okay.
I think.
Trying to understand.
Are there any common thread since some of the issues that you called out here.
You know the circuit breaker, probably the transformer issue at steamboat.
You talked about sort of core about all Korea.
You mentioned permitting delays for some of the new.
Project that looks like the timing has been pushed out a little bit for a couple of those.
Is there any kind of common thread.
Certainly we've seen a lot of companies struggle with everything from labor availability to logistics, Michigan and just wanted to understand.
If there's a common thread for you right now.
What's your pain points are and how youre working to overcome loans.
Hi.
The simple answer is no we don't see any similar.
From between the all of these in.
Look about the.
Different states different countries.
<unk> technologies somewhat so I think.
Each 1 has its own unique situation the geothermal asset is the <unk>.
Said that we've been operating for many years and it needs to be maintained and operated.
In this quarter.
The.
Some of the items happened together, but usually they don't happen in 1 of the there is no common thread to all of the different items in different locations.
And the only 1 that maybe does has some.
Related is the last 1 on the permitting that you said that is causing delays in.
The project and that is related to Covid, the fact that the.
The BLM and the other regulators not all of them are working from the office, so not working too much.
So thats the only common denominator across project is the termination.
Okay. Thanks, and I think last quarter, you touched briefly on the Independent Board Committee review.
And some of the dialogue, you're having with some of the regulators can.
Can you just give us an update there.
And the only thing you know.
Uptake and I think the common is that we continue to cooperate with the regulators.
We don't have any timeframe for the this investigation of these customer and we can't elaborate.
On it until the finish.
Theyre doing.
What day, you mean, the committee or what the regulators of doing apologize.
Both of them.
Okay.
Yeah.
The the 1 okay.
The 1 other thing I would say that.
As you probably none of this is quite common the.
On the fact that they cannot comment until the finish but you should not infer anything from this any way.
Okay.
Yes.
Okay. Thank you very much appreciate it.
Yeah.
And our next question will come from Julien Dumoulin Smith with Bank of America Securities Inc.
Hey, good morning, or good afternoon as maybe.
Thank you for the opportunity.
I wanted to start first off on on California here and just talk about <unk>.
1 of the repricing opportunity admittedly some of your peers of pointed to some of the sharpest revision.
And pricing in your geographies and frankly, a couple of decades.
I'm curious.
Perhaps not necessarily where the status of those negotiations on the extent of which that you have some repricing opportunity, but maybe speak to some of the the near dated.
Contract explorations <unk> any ability to blend and extend if you will to preemptively address some of these contract explorations in the future as well as if you don't mind some of the opportunities derived out of the latest transmission line acquisition.
Nevada, and assess the geothermal experiencing the opportunities there.
Okay. Thank you.
Well I can.
But definitely for the affirming of what you've said, we see an uplift in pricing.
We see a much greater demand for renewable energy in California on it obviously that links to other states surrounding California.
This is something that's happened over the last few weeks actually.
<unk> got much more.
Sales with the CPUC.
The decision and the requirements of the as I mentioned before.
We are in the various discussions on various ppas.
And we actually feel much of it.
The much stronger today than the in the discussion.
Also mentioned if you in the in the.
On the call the credit ratio the request for bid.
Basically we are offering our hubert too complex too.
The 2 utilities MCC as it to be true. It. So the market is definitely after quite a long time changing through our.
The benefit.
And regarding the transmission line of thing is as you mentioned.
It's a unique asset connecting the <unk>.
The 2 California. The current situation is that it gets to the control substation, which is jammed.
And we are discussing and we've been approached by various transmission.
Companies.
To see how we can combine forces in order to utilize the.
This line and transfer of electricity from Nevada to wherever is the required.
Got it and maybe on balance if you look at the pricing across your portfolio with the the Heber complex or steamboat of Brady I mean, do you see a net increase in pricing here based on where the current mark to market gave us. The every time I know that this may be somewhat transient and obviously you cant say it until the contract side.
But just understanding on the repricing of do you think about over time here and obviously, if not tomorrow, but.
And any comments Aaron.
Okay, it's very hard because of its size specific I would say from.
Thanks, Mike enjoy a higher pricing others low.
The price of the field as high as the way.
<unk> 2010, and 2012, we know when we sign Don Kimble 1 from $99.
And that that price is not coming back I think.
But it's very very much site specific and also it depends on the time that when it started negotiation on agreed on the terms of the PPA as well.
Got it excellent.
If I can pivot back to the.
The focus of broadened Kenya, and some of their cost cutting efforts here can you comment on the status of that and.
To what extent and if you are engaged in conversations directly with them.
Round curtailment relief and or any other potential of leisure.
And perhaps too.
Shall we say any other updates on on the investigation of more broadly, but I suppose specifically here on the Kenyan side of just the cost cutting efforts.
Oh, okay.
We can south of the basic the basically that we have the signed contract.
The the Kenyan K plc, which is the the government owned utility company. The product is financed by the Dfc previously <unk> of U S government the bank.
And that's the basis.
We have seen in the press and in other places discussion of boats ranked reduce prices the has been <unk>.
Is it.
In the.
In Kenya to look at this.
And the thing is you mentioned you know.
Our market very well.
Looking for all the ways to win win situation.
Customers will in Kenya for the long term, we'd be operating at the tenet for more than 20 years, and we expect to operate the.
The longer.
On the.
We have been.
The discussing with some of these.
The <unk>.
To meet these that will sit and whatever the refiners will be a win win situation for Walmart and for kind of because we do see us as the long term player of the.
Supporting the renewable energy in general of the energy in Kenya, and there's always room to make the agreement for both parties, although at this stage.
Some discussions the order, but it's very very early discussions.
Alright, do you mind clarifying that on the timeline I know that the Kenyan because of that I suppose it was supposed to be something of a 6 month process, but.
What did you say, it's early still and it's been ongoing for a bit.
Any broad sense of the timeline is as of this year kind of of resolution do you think.
No.
I don't have any sense of any timeline from them you know, obviously, whether or not we are in no rush.
And so there is no any sense of timeline.
As I said, we're the very very early the gender.
General discussion that day.
Started with us as well as with other <unk>.
Not targeted at the 1 month, but the.
The general.
Discussion of the last months.
Got it and sorry, just the last 1 here I apologize.
With respect to your storage efforts here Theres just been availability questions.
People have been scaling their effort.
Pricing impacts et cetera.
Any comments there in on on your specific efforts underway in terms of just being able to execute on time and on budget.
And the material deviation.
No all of plans that are on the on the.
Regimentation are on time, we have all of the required.
And especially with the required batteries with the long term agreement with battery suppliers.
With the commitments on delivery and pricing.
So as long as day stand with the contract we should be on time with all of the project is the we announced them.
Excellent alright, well I'll leave it there. Thank you all for your patience today.
<unk>.
Yeah.
And again, if you would like to ask a question. Please press Star then 1 of our next question comes from Jeff Osborne with Cowen and company. Please go ahead.
Yes. Good afternoon, just a couple of on my end I was wondering if you could give us a walk on the.
The old guidance to the new guidance and some of the moving part of it. So you've obviously had the acquisition and then you have the.
The under under performance of the 3 sites I was wondering if you could sort of bridge the gap of what the acquisition is adding relative to the deficiencies of the.
The 3 locations.
Okay.
Okay.
Basically the 2.
The items that the.
That worked through the guidance on 1 hand, the addition of <unk>.
The agenda.
The in the room.
The announcement of the <unk> Jim.
Closing, we said that in 2020 to.
$35 million of EBITDA.
Obviously, we don't have the full 6 months and the.
We need to upgrade the be the system.
That's the positive on the on the negative side, we have the issue that we mentioned in Kenya.
Mainly on broadly.
And also the Giulia and the legal.
<unk> had.
The significantly higher.
Both of them.
Yes.
So is it the same consumption without the acquisition, but with the legal expenses and the ROI in Ocala facility of the guidance would have been down or no.
If you don't take into consideration the changes in the broadly or carrier and steam on the projections, we would not have come down. Besides the fact that we lowered by 10 million on the guidance.
Of the product segment, but on the electricity segment. The all of the I will say what was offset the intelligence is the issues that we had.
And now as we said on the script.
The.
Steamboat is already back to full capacity and we do expect by the end of the year on carrier to grow that too.
2 normal.
Got it.
And just a couple of follow ups on Julians question. So on Kenya can you touch on the.
The payment capability or the terms are they becoming current on their past due payments.
As I said in the last few quarters the capital C has been very.
Good on making ongoing payments theyre actually making all of the ongoing payments, but they are not making a lot of progress in the paying the due payments as of the end of the.
And the U S, but I would say in general since the July of 2020, and they've been making all the all the payments.
Yeah.
That's good to hear.
And then can you touch on what the the M&A pipeline looks like do you anticipate any other sizable acquisition similar to Terra Gen in the coming quarter of 2 or not.
Obviously, we cannot comment on any specific M&A I can say that we all are.
And looking at various M&A opportunities.
Mainly in the energy storage influenced the solo.
The acquisition.
And that's the thing the most of the concern at this time.
Got it on the last question is just following up again on Julians question on pricing is there any contracts that are up for renewal in 2022 of existing facilities other than behavior to RFP that you have outstanding for the September responses.
I think the first 1 is in 'twenty 3 in 'twenty 2.
Got it. Thank you that's all I had.
Thank you.
And our next question comes from David Lewis with Atlas.
Hi, David here from map of <unk> partners.
Just a quick question if I may just on Hawaii and your comment about the from.
New <unk>.
Tpa being suspended.
Can you hear of sort of totally true what does that mean in terms of specific financial implications for you now and in 2022.
We are.
The new PPA.
The the PUC of suspended.
Excluded.
The.
The refurbishment of the existing facility the would've taken us about 2 years.
And following the death, and we would of had an interest of the PPA and the.
Generation to about 46 megawatts.
We have of PPA today for 38 megawatts.
He led the end of 'twenty 7 so it's the.
Basically for 2022 and 2023 this doesn't have the.
And the impact.
The the suspension of the.
Of the PPA might have a delay of the year or something.
Once it is approved.
But again the real impact is about the 8 megawatts of.
Additional PPA.
If I may add on the other side and David and the Covid crisis.
In Pune actually higher than the than the new PPA.
Oil prices are somewhere between 60% to 70 Bucks right now and therefore, what we actually see getting as the as.
As the revenue is.
More than what we would've made otherwise in 2021 and 2022. So at this point it has a positive impact on us and that's why we think that the there is a very a good the reason for our customer over there to try on.
The push this decision because it will lower the average price of the PPA and what we will get the the return is more capacity on 1 hand, and many many more years of the extension of the PPA.
I'm sorry could you just clarify again, what why was the.
What is the what is the problem of the PUC has without PPA.
The PSC.
It doesn't have a problem with the PPA, they've actually reached out to the.
And the local county.
Net asking them.
1 of them to see if we need to do in the environmental impact study or not.
On the power plant is operating from many years the PUC the pure.
<unk> raised the question.
We have been discussing with the deal and the county and the.
We do not seeing there is the need for such.
The study.
But we also don't think the study will change the the decision of the PUC because there is a part of geothermal power plant operating over there.
And the new power plant will be of newer power plant the smaller.
The facility less emission and more efficient so actually from the environment. The perspective is the positive but still the PUC.
The spend that he then asked the.
Whether or not we need to do on environmental impact study.
Okay got you.
Can I just.
Thank you that's clear can I just come back to the I guess, that's where the technical issues at steamboat broadly.
Would you charge.
The write these ads has sort of.
Thank you you are to some extent just unlucky that needs of both happened at the same time or is this something that we you think instead of which.
Think of it as sort of.
Recurring on a regular basis, how should we should think about that as investors because it's M&A.
The 8 million effectively means that you haven't yet you're offsetting that with with an acquisition.
But.
It is a bit of a hit on just trying to understand how do you how do you sort of think about.
As happened in the how should we sort of think about the potential frequency of that.
Now this is the fact that they were combined in 1 quarter is on Lucky I can tell.
The time here for 8 years.
And I think we had only 1 quarter of the phone, which hearings in 17 of something that we had the similar items within the few.
Mechanical issues, but this is very unlikely that the occurred in the same quarter.
The decade at all because we do try to maintain the power plans to avoid any issues like that that might happen, but the.
Having both of them in the same quarter of luck.
Yeah.
Yeah, Okay. Okay. Thank you.
Thank you David.
And on that.
And our next question comes from Alex the range with Bank level. Please go ahead.
Hello, and good afternoon, and while I have a couple of questions left and the first 1 is the broader EM.
The question or request to discuss the if you could and the more the more and.
Hello, there look at the geothermal energy and the.
The commercial aspect of the product segment.
As of the.
On the return on assets in the more mainstream.
In.
Sector of say like wind and solar.
It has decreased in many countries.
Do you see the return of the product.
Sector and on the pre pre Corona to have almost like a few years ago on saying it will be very slow.
Low end.
Increased.
Thank you.
If the if the de lever the debt.
And closer to the current levels or.
You'll see the demand coming actually from for the for the LNG in general and flow of product sector specifically.
Thank you Eli.
So we see it.
Move to more.
The renewable everywhere, we see the move to more geothermal the everywhere.
Over the last few.
Once we've seen the actually recovery on the product segment on the more project.
Being tendered and mall developers globally trying to develop.
The new geothermal power plants backlog went up this last quarter, but also this quarter.
And we hope that this trend will continue when we look at the pipeline that we have and the contracts that we are tendering in negotiating today.
And on the geothermal in general I think we see this is the.
The outcome of the basic demand for geothermal.
Any country outside of the of that has geothermal.
Tension wants to develop the geothermal this is the only baseload.
The renewable energy and in the U S. We see increased demand with the CPUC requirements of 11, 5 gigawatts of renewable energy.
And out of that the 1 gigawatt.
80% availability of which basically is the geothermal.
The only.
So we see this.
The demand increasing and we have been approached following I think of day. After this the CPUC ruling we've been approached by some of the CCA is looking to sign Ppas.
So we see a greater demand for geothermal we don't see a change in the it of the.
Globally or in the U S in the in geothermal.
And we are actually looking for the new.
By the administration the act that will.
Continue to support.
And the renewable energy.
Including the geothermal and the energy storage volume.
So if it's okay and day.
On the 11th so far or Honda 10 million of $120 million a year.
Is it physically possible in the next let's say 2.3 years.
All of you think it will be a slow era and demand.
Okay, I think you'll need to photo of the backlog of the backlog grows I would expect of the revenue of the product segment to grow.
Not to say now that it will reach the 2.
202, or anything like that you know we give guidance.
1 year ahead, but the backlog increase.
The good signs that the.
With the support revenue as we go into future years.
Okay. Thank you and the next question is regarding Japan.
If I'm not mistaken that's the first time actually you mentioned Japan.
And the I remember that you had historically agreement with the Orix.
The embolic I don't know if its still a M and the existence and about the.
Having coderre of them priority actually in May the Japanese the territory. So if you could do.
I'd say, a few words about assay Japanese day.
The project the convention.
The project in the in Japan, the is not connected to orix.
The company.
It's not the large project, Japan most of the project in Japan, It would feel of smaller ones. We've done the few in the past.
The agreements with all of this is still in the fit.
So we do it priority, but the.
At this stage of you don't have any.
Soon to go project.
If they will have a project the I certainly will.
The priority, but hopefully we'll be able to do it.
I see so it's a quite kind of standalone the discipline.
Okay and the financial question. The also quite the general, but if you if you could the.
I really like about the development of net that's true during <unk> you spoke about the the resources that the company has but and the net.
That day can't can we assume that the there will be an increase on.
The let's say an <unk>.
The 10% in the next 2 years all Inc.
Kind of Fame and in this day and.
Area of because because because on 1 when I just put the numbers together.
I expect to see.
I'm, what I'm wondering of the numbers together and the there seems to be.
Please see of about.
At least $210 per se.
If im not mistaken.
And so all of this is asking I will answer it.
The underlying quarter on so it was roughly a 1 billion dollar would do expenses.
We closed the transaction in July.
Of the 10 largest assets for a total of $380 million. So that will immediately increase on net debt of roughly a $1.4 billion.
And then if you look from now until the end of the year, we did give guidance of roughly $275 million of Capex net of our free cash flow. This should the results an additional increase in the net.
Net debt of roughly 70 to 100 million on.
When he took the total consideration on net debt towards the end of the year will be closer to 1 point the $5 billion I will say, though that the at that point, we already invested the majority of amounts.
2 if you look at the page of the assets that we are building and most of them will start during 2022 of them, but the majority of the amount of supposed to be before for Dixie made off of not value was already invested and that's why when you look at the net debt to EBITDA or EBITDAR. That's the 1 we'll be closer to the $500 million.
And that will put us back to roughly 3 times debt to EBITDA.
Okay.
I see and thank you very much for the clear.
I'm from and thank you for taking my questions.
Thank you. Thank you.
Okay.
On our next question is a follow up from Julien Dumoulin Smith of Bank of America Securities. Please go on.
Alright, guys have so many of the day, but I just wanted to go back to this because at the top of the call of perhaps you all talked about your organic targets here on the year end of 'twenty 2 run rate and you talked about Terra Gen being incremental to that target I just want to make sure. We're crystal clear about that right because you've had a number of puts and calls whether it's the Hawaii PPA the products.
When the et cetera, I, just want to be very clear that despite the use of your balance sheet that Terra Gen transaction is indeed incremental to that year end target you you all approved or of that run rate target you all of them put out there recently.
Look the.
The number that we said the last quarter, where the field with approximately 500 million 2 day, we believe will be more than $500 million with more than $500 million. Excluding terms in some of the delays in the permitting have the.
The impacted the.
The 2022.
The and potentially buildup of full planned EBITDA.
So we do expect to be above 500.
But at this time, we cannot say that the full impact of surgeon will be on top of the 500.
Okay, Alright excellent.
Just wanted to make sure I heard you right there and then starting to clarify the the transmission of the masks. When you talked about earlier is that you all have the transmission.
Interconnect already right you talked about hiring of it can the costs, but you all already on the transmission line as part of the transaction.
The valuable piece of it right I just wanted to clarify this in terms of putting that to work and time line here.
Yes, that's correct, we own the transmission line.
You said the this is an under utilized assets because of the control substation and today the only.
Generation that can be well over the transmission line is the D. C. Also the 60 megawatt PPA.
And we are working with other transmission companies that have approached us to see how we can fully utilize this line.
And either upgrading the control substation or bypassing the other substation and connecting the Nevada to California with in addition, the line and additional capacity. So this is an additional asset that is not utilized in the next few years will be used to it.
Yeah, just to clarify that if the transmission of interconnect into the case, though that's the incremental cost because you already have the transmission line itself.
Yes.
Yes.
The the added capacity all of the 6.
The added capacity above the 60 Meg on did we already connected 2 kinds of them.
We are.
Julia.
Hello.
Yeah.
Alright.
You hear me there.
We didn't hear you Julien.
Oh I apologize yeah. It was just with respect the once you resolve the transmission interconnect.
Upgrade costs and the California, not the fact that you own. The transmission line, then that will unlock your ability to scale up that the capacity on site.
I I I suppose just to summarize that the expectations that you will be participating in the upcoming California RFP.
I wouldn't say that there is also a way to bypass control to utilizing third party.
The line.
And that's why I will not say that for sure. We will go in the 2.
<unk>, Inc has the capacity of the of control system.
So I think this is the to be yet to be discussing the future calls.
Okay.
Excellent Okay, well best of luck. Thank you again for all the time.
Yeah.
This concludes our question on all of our session I would like to turn the conference back over to your door on bus bar for any closing remarks.
Thank you. So thank you everyone. This was as you've seen a very productive quarter will continually.
Focusing on increasing and investing in our portfolio on the geothermal and the energy storage.
The 2.
Grow the business and to meet the enhanced demand that we see today.
California and outside of the U S.
<unk>.
The conference has now concluded thank.
Thank you for attending today's presentation you may now disconnect.