Q3 2021 Ormat Technologies Inc Earnings Call
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Hello, and welcome to the Ormat technologies key three 2021 earnings call. My name is Robin and I'll be coordinating your coach day, if you would like to ask a question. During the presentation. You may do so by pressing star one on your telephone keypad I will now hand, you over to your host Jeff Stein.
Less from F N K I Oh, Jeff. Please go ahead.
Thank you Robyn hosting the call today are to Rone Bush, our chief Executive Officer, How's It Ginsburg, Chief Financial Officer instrument, our Levine, Vice President of corporate Finance and Investor Relations before beginning we would like to remind you that the information provided during this call may contain forward looking statements relating to current expectations estimates forecasts and <unk>.
<unk> is about future events that are forward looking as defined in the private Securities Litigation Reform Act of 1995.
These forward looking statements generally generally relate to the company's plans objectives and expectations for future operations and are based on management's current estimates and projections future results or trends actual results may differ from materially from those projected as a result of certain risks and uncertainties for a discussion of such risks.
And uncertainties. Please see 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 Rec.
Reconciliations to the most directly comparable GAAP measures and management reasoning for presenting such information is set forth in the press release that was issued last night as well as the slides posted on the website. Because these measures are not calculated in accordance with GAAP. They should not be considered in isolation from the financial statements prepared in accordance with GAAP.
Before I turn the call over to management I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at Ormat com under the presentation link that's found on the Investor Relations tab with that said I would now like to turn the call over to Jerome Jerome Blush are there on the call is yours.
Thank you, Jeff and good morning, everyone.
Thank you for joining us today.
During the third quarter, we completed several strategic initiatives that support our long term position, including a sizeable geothermal acquisition in Nevada, New resource adequacy contract for energy storage Sigman joined.
Joint venture Flex fruition in Indonesia, and several new product wins, providing further evidence that the COVID-19 related disruption in our product segment is abating.
These developments support our long term goals and further our efforts to expand our generation of capabilities towards our goal to achieve a run rate well $500 million in annual EBITDA towards the end of 2022.
Looking at the third quarter, our results were negatively impacted by operational challenges at three plans were.
We're making progress to resolve these challenges and expect it to gradually recover by the first half of 2022.
Even with these challenges and the ongoing slowness in our product segment.
Reported continued growth of more than 15, 4% in the electricity segment, leading to revenue that was essentially flat year over year.
This enabled us to deliver over 100 million bottles in adjusted EBITDA for the quarter.
We continue to view 2021 is a buildup here.
The strategic acquisition of two operating plants and an under utilized transmission lately, Nevada is an example of this buildup.
The new long term resource adequacy agreement with P. Ginnie fall from one or two project is another example, as other product segments women's in Nicaragua, and Indonesia, which boosted the product segments that.
With a portfolio of over one one gigawatts of generation.
Both of these products segment and a growing energy storage offering we are well positioned to maintain our industry leadership and deliver consistent profitable growth.
As we look into 2022 we anticipate increased growth as we put the show them challenges behind us and reap the benefits of the hard work of the last year.
I will turn the call over to US to review the financial results before I provide further updates on our operations and future plans.
Thank you Ron.
Let me start my review of our financial highlights on slide five.
Total revenues for the third quarter, when $158 $8 million essentially flat year over year.
Reflecting the contribution of the diligent acquisition.
The lower year over year product sales.
Third quarter 2021, consolidated gross profit was 63 $1 million.
That didn't get a gross margin of 39, 8%.
From the gross margin of 34% in the third quarter of 2020.
Gross margin, including $15 $5 million of income compared to $2 $6 million in the third quarter last year.
We delivered net income attributed to the company's stockholders of $14 $9 million or 26 cents per diluted share in.
In the quarter compared to $15 $7 million or 31 cents per share in the same quarter last year, representing a decrease of 5% and 16, 1% respectively.
The results are below operating income driven mainly by a $9 million increase in the G&A expenses.
Adjusted net income attributed to the company's stockholder was $17 $8 million or 32 cents per diluted share in the quarter compared to 31 cents per share in the same quarter last year.
Net income and to me to the company stockholder was adjusted to exclude the transaction cost of $3 $7 million pre tax.
And $2 $9 million after tax related to the theme of Ginger terminal acquisition.
Our effective tax rate for the third quarter was nine 2%, which is lower than the 38, 8% effective tax rate from the third quarter of 2020.
Mainly due to the movement in the valuation allowances for each quarter.
We still expect the annual effective tax rate to spend approximately between 30% to 34% for the full year 2021.
That's assuming no material onetime impact or no impact.
Some changing of laws.
Is that in an overall higher tax rate in the fourth quarter of 2021.
Adjusted EBITDA decreased five 1% to $101 $6 million in the third quarter compared to $107 $1 million in the third quarter last year.
I'd note that.
Compared to second quarter of 2021.
Adjusted EBITDA increased 22%.
The lawyers.
Adjusted EBITDA was due to a combination of approximately $4 $6 million lower business interruption income and approximately $4 $7 million of higher G&A costs, mainly related to the special committee legal cost.
I'd like to note that we do not expect to incur significant cost on these issues in the remainder of 'twenty or 'twenty one.
Moving to slide six.
Breaking the revenue down electricity segment revenues increased 15, 4% to $142 $7 million supported by contribution from new added capacity at our Mcginness Hills complex.
Qunar has resumed operation.
And the contribution of the recently acquired plants in Nevada.
This new way to generation was partially offset by lower generation in oncology and beyond power plant due to a lower retail performance.
Of course, the capacity reduction.
And surface leak in one of the brothers injection wells, which also reduced generation.
We made progress in resolving these challenges and expect to gradually recover from them by the first half of 2022.
In the product segment revenue declined 64, 5% to 101 point to $10 $5 million.
Representing six 6% of total revenues in the third quarter.
The decline year over year is expected to continue throughout 2021 due to the lower backlog at the beginning of a deal.
Energy storage segment revenues remained flat year over year at $5 $7 million in the third quarter.
This quarter, we had an increase in the revenue from our storage operating facility of 26%.
Was overstated by approximately 67% reduction in demand response revenue as we expect to diminish over the next few quarters.
Yeah.
Let's move to slide seven.
Gross margin for the electricity segment for the quarter increased year over year to 42, 8%.
This was the result of a $15 $8 million in business interruption insurance of which $15 $5 million was included in the cost of revenues for the electricity segment.
Lastly, offset by higher costs related to the repair and the recovery of caveat Raleigh and do want we unbundling.
Excluding the impact of the business interruption in Q3, 2021, and Q3 2020 gross profit increased two 8% compared to the same time last year.
In the product segment gross margin was 12, 8% in the quarter compared to 18, 9% in the same quarter last year.
The energy storage segment reported a gross margin of 12, 2% compared to a gross margin of 25, 6% in the third quarter last year.
The decrease was probably due to the reduction in demand response and associated profit.
Turning to slide eight.
Electricity segment generate 96% of format total adjusted EBITDA in the third quarter.
The product segment generated 2% of this and the storage segment reported adjusted EBITDA of $2 million.
Which represents 2% of the total adjusted EBITDA.
Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix slides.
On slide nine.
Net debt as of September 30 was $1 $5 billion.
Cash cash equivalents marketable securities at fair value and restricted cash.
And cash equivalents as of September 32021 was approximately $402 million compared to $537 million as of December 31, 2020.
Marketable securities where at fair value of $46 million.
Slide nine breaks down the use of cash for the nine months and the illustrated our ability to reinvest in the business.
Service debt and return capital to our shareholders all from cash and cash dividends all from cash generated by operation and a strong liquidity profile.
Our total debt as of September 30 was $1 9 billion net of deferred financing costs and.
And its payment schedule is presented on slide 32 in the appendix.
The average cost of debt for the company reduced two 4% compared to four 9% last quarter.
During the third quarter, we raised $275 million of new corporate debt to support the diligent asset acquisition and Capex needs.
On November three 2021, the company Board of Directors declared approved and authorized payment of quarterly dividends of 12 cents per share.
And to the company's dividend policy.
The dividend will be paid on December three 2021 to shareholders of record as of close of business day on November 17 2021.
That concludes my financial overview, I would like now to turn the call to their own to discuss some of the recent development and our growth plan for the next three years.
Thank you.
Turning to slide four we look at our operating portfolio.
During Q3 of 2021 power generation power plants increased by approximately 13, 8% compared to last year.
We benefited from the incremental contribution of the recently expanded Mcginness Hills.
And the generation from Pune that is operating now at a stable level of 26 megawatts.
In addition, we had the contribution of the Dixie value and B, while we plants acquired from diligent with the total net annual generation generating capacity for approximately 67 five megawatt.
These contributions were partially offset by the lower performance of our calia and billions of dollars.
As noted on slide 13, Pune resumed operation in November 2020.
We stabilized Buena generation to approximately 26 megawatts as we continue with a well studied and improvements of existing wells to maximize the long term performance of the partner.
We have continued discussions with telco and the PUC about a new PPA and continue selling electricity, although existing PPA, which is in effect until 2027.
Turning to slide 14.
Let me discuss some of the challenges we experienced this quarter in fuel fault assets and I will start with the known one in Kenya, our revenue Indian carrier conflicts was down year over year as a result of a reduction in the performance of the results.
This resulted in an approximate reduction of 25 megawatts.
This reduction in capacity and associated with third cost reduced our quarterly gross margin by approximately $3 6 million.
Compared to last year.
We will take you through actions to restore the confidence of generating capacity. We read there is one of the wells that we plan to connect to the partnership by the end of the quarter. We are upgrading the equipment that will enable us to generate more capacity utilizing the same resource.
We continue with our planned drilling campaign, which includes drilling.
And with the legal fees.
We're very optimistic that following these actions we will see an increase in the production.
Through the first half of 2022.
In the <unk> power plant in Guadalupe, we experienced limited injection availability due to scaling that we expect to resolve the cleaning of the world.
With finished drilling the well and we are waiting to get the permit to install capacity in the coming days.
In the probably accomplish with it.
The leak in one of the injection wells and a pump failure in one of the production with that caused a reduction of the generating capacity to three megawatts. Since the second quarter. We are working to restore production and expect a full recovery by year end.
The lower of performance of the valuable Jonathan Brown power plants are reflected in our annual guidance.
We continue to monitor the recommendations of the task force created by the President of Kenya related to the review of all independent power producers Ppas.
Based on our review done by the Task Force in a report issued by the task force of the Presidents at September 29 or match rates in Kenya are significantly lower than many icp's as you can see in the chart that shows energy rates of other ICP compared to battery.
In the task Force report.
They indicate that Kim Jin geothermal average dollars, including steel cost is eight five per kilowatt hour.
Which is not significantly lower than outright.
Having said that we believe that our match rates.
Cannot be compared to contingent <unk> as it is a government owned company does receive financial benefits grants and preferred financing terms that we are not qualified for.
We remain committed to providing clean renewable baseload energy to Kenya, and continue to work with K plc for many years to come.
Turning to slide 16.
In July we closed the accretive acquisition of detergent assets. As a reminder, this acquisition added a total net generating capacity of approximately 67 five megawatts to our portfolio along with the Greenfield development asset adjacent to Dixie value and an underutilized transmission line.
Capable of handling between three to 400 megawatts on a 230 kv electricity connecting Dixie Valley in Nevada to California.
With this acquisition, we now own 10 operating plants in Nevada.
Generating a total of 443 megawatts, which is roughly equivalent to approximately 7% of Nevada's overall generated energy.
We're currently working to increase the capacity of the acquired Dixie value in 2022, but adding omotic, Switzerland.
Turning to slide 17 for an update on our backlog.
While results for the product segment continued to be impacted by the lower backlog at the beginning of the year, we continue to see an encouraging and calculate.
We have seen clear signs of improvement in this business.
Including an expansion of our backlog.
Reinforcing our confidence that this is.
As a short term phenomenon.
We signed a few new contracts during the quarter, including a new contract would start energy geothermal to supply products to a new 40 megawatt solar geothermal power plant in Indonesia.
And another contract to supply equipment to a project in Nicaragua.
As of November 2021, our product segment backlog increased for the third quarter in a row to approximately $67 million compared to $56 million.
In early August this year.
Giving us a good start for this in 2022.
Moving to slide 18.
The energy storage segment continues to become a more important part of our consolidated results.
This quarter, we see an increase in our storage facilities contribution.
As indicated there were up 26% the interest will offset by diminished contribution of the demand response activity inherited from the Viridity acquisition.
Yeah.
Moving to slide 19 for an update on legislation.
Global support for renewable energy by governments continues.
Can be seen in the Glasgow climate change conference.
In the U S. The negotiations between the White House and Congress.
We've made substantial progress over the past weeks.
Last Thursday, the house released a draft Bill.
That will serve as the basis for the final negotiation.
Although not final.
The newbuild suggest extending the PTC and ITC until the end of 2026 for geothermal.
Includes storage to be eligible for ITC.
The Bill Draft also allows taxpayers to elect the option to receive the tax credits in cash.
The commitment of the government to renewable energy is also reflected in the inclusion of credit plans beyond 2026.
We believe that assuming the bill will pass this enhanced flexibility and long term clarity will encourage and accelerate the use of renewable energy and we expect to be in the forefront of this growth in geothermal energy storage as well as in energy storage and solar.
Yeah.
Moving to slide 21, and 'twenty two.
As we have communicated 2021 would be a significant buildup year comprised mainly of geothermal projects.
The buildup support our robust growth plan, which is expected to increase our total portfolio by almost 50% by the end of 2023.
One of the main challenges in our efforts to achieve our goals is obtaining permits on the timeframe, we will use to before COVID-19.
The delays we experienced on obtaining the permits resulted in delays in the commissioning of our future projects.
Though we have delays within 2021 to 2023, we are still aiming to add an additional 240 to 260 megawatts by year end 2023.
In addition to the 83 megawatts, we added since the beginning of 2021.
You know we're rapidly energy storage portfolio, we plan to enhance our growth and to increase our portfolio by 200 megawatts to 300 megawatts.
By year end 2020.
Achieving these growth targets is expected to help us reach an annual run rate more.
More than $500 million and adjusted EBITDA towards the end of 2022 that we expect to continue to grow as we move forward with our plans in 2023 and beyond.
Slide 23 displays 14 projects underway that compromise comprise the majority of our 2023 growth goals.
What we are experiencing significant delays in the permitting process, we still expect to be on track to meet our growth targets for the end of 2023.
Moving to slide 24, and 25, the second leg of our growth plan come from the energy storage side.
Slide 24 demonstrates the energy storage facilities that have started construction.
The other projects included in our growth plans are in different stages of development.
And they are released we will require site control and execution of an interconnection agreement.
Obviously, all subject to economic justification.
The storage facility is listed in the slide are expected to generate in today's pricing approximately $15 million annually with EBITDA margins of 50%, 60% approximately.
Since the majority of the revenues our merchant base, we may see volatility in revenues once they will be in operation.
Yeah.
As you can see in slide 25 hour energy storage pipeline stands at two one gigawatt and currently include certain named potential projects, mainly in California, Texas and New Jersey.
Moving to slide 26.
This significant growth in both our electricity and storage segments will require robust capital investments over the next couple of years.
To fund this growth we have over $780 million.
Cash and available lines of credit.
Our total expected capital for the remainder of 2021 includes approximately $177 million for.
For capital expenditures as detailed in slide 33 in depth indexes.
Overall, ormat is well position with excellent liquidity and ample access to additional capital to fund future initiatives.
Before I move to the guidance I would like to update you on some ESG initiatives Slide 27, we are moving to strengthen our ESG commitments will build our approach and policy on four significant valuable issues.
As water management taxation.
Flyers in procurement policies and political communication.
The purpose of the move will flip in the most up to date and accurate way, our approach and vision and courses of action on decisions.
I'm also happy to update that we're planning to publish our corporate sustainability report in the next.
Two weeks.
Please turn to slide 28 for a discussion of our 2021 guidance.
We expect total revenues between $652 million and.
$675 million.
With electricity segment revenues between $585 million and $595 million.
We expect product segment revenues between $40 million and $50 million.
Guidance for energy storage revenues are expected to be between $27 million.
And $30 million.
We expect adjusted EBITDA to be between $400 million in <unk>.
$10 million.
We expect annual adjusted EBITDA attributable to minority interest to be approximately $31 million.
Adjusted EBITDA guidance for 2021 includes the $15 8 million of insurance proceeds received in the third quarter.
This concludes our prepared remarks, now I would like to open the call for questions.
Operator please.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind I would like to withdraw your question. Please press star followed by K when having to ask a question. Please ensure you will find is Amit.
Our first question comes from Noah Kaye from AP, Hi, Matt <unk>. Please go ahead.
Yes.
Good morning, and thank you for taking the questions maybe I could start with <unk>.
The portfolio growth plans I think you mentioned some challenge in getting permits are creating some delays in commissioning future projects, but.
You know looking at the timetables for projects.
It appears like it stayed fairly fairly stable.
So I was just wondering if you could put a finer point on it.
Your comments are you seeing permitting delays pushing projects out a quarter or two or you can can you help clarify that a little bit because again the tables don't really seem to have changed from last quarter. This quarter.
Thanks.
So those two kinds of.
Delayed some of the laser between the year. If you take the Heber complex I think originally we were hoping it will be the end of 'twenty one beginning with.
Now, let's move to the end of 'twenty tool Dixie Meadows that was planned to be in 'twenty, two and liquidated in the table to 2023.
And so with some of the delays, though between the year, but others like DC.
Between the between years.
Okay.
And I guess, if you could comment on expectations on the IRR for these projects and certainly we've seen.
Rising commodity costs steel inflation et cetera.
Yeah.
Labor availability issues and just higher logistics costs on the other hand, I know you did a lot of your manufacturing last year for some of these projects. So can you just kind of comment on.
Weather and increased cost environment.
Your expectations for profitability of these projects.
Obviously, our raw material and labor costs are increasing transportation.
<unk> used the word increasing but exploding basically on the cost side.
But we have.
Fractured as you mentioned.
A big part of it already last year with raw materials that were acquired even before the law.
<unk>.
Increases.
But obviously going forward the new projects.
We'll have to do the higher cost than what we see in parallel to that is increasing.
Demand for geothermal and increasing pricing.
So the coming project will enjoy the lower cost that we have but also the PPA environment of the past.
And now we see an increased demand for geothermal and we do expect to see in the coming.
In the short term increased pricing as well that will compensate us.
The fact that the PTC and ITC will be extended obviously will also support the.
The profitability.
So all in all we don't see a significant or hardly any change in the IRR when we expected IRR when we released the <unk>.
Projects.
Okay, it's great to hear that Youre actually seeing pricing on new ppas, increasing that's a big change from.
The trend of the past couple of years can you elaborate on that a little bit more what kind of upward pricing are you seeing in the U S.
Yeah. So.
The negotiations that are starting to the obviously the negotiations started before which the lower pricing, but since a few weeks ago. The CPUC.
Required.
It is to have one thousands of new.
1000 megawatts of new renewable.
<unk> energy within the availability of higher than 80%, we see an increased demand for.
For geothermal practically this is the only renewable that meets this requirement they need to make it by 2026.
So we have been approved and used.
Started negotiations with several.
Ccas and utilities.
And hopefully this will.
Developing two new ppas in the coming months that will have higher pricing.
Pricing back to normal.
Okay, Great and one last question I think you mentioned in the prepared remarks that you don't expect those elevated legal expenses to continue to for Q could you. Please help us understand why that might be the case.
Yes, we are.
As we said on the call with these cost even though we don't expect them to.
To continue on the same height.
Basically the independent Counsel council that will engage with the company.
Reported these findings and at this point, we don't seem to expect to incur additional cost or lower cost going forward than what we had in the last two quarters.
And so you said that the independent counsel has reported its findings already.
Yes, yes.
Yes, we can.
Okay.
But there is customer, though even though we cannot relate to any of these.
Comments and.
Deliveries things finished.
Okay. Okay. Thank you very much.
Thank you.
Thank you Noah our next question comes from Julien Dumoulin Smith from Bank of America Securities Julien. Please go ahead.
Yes.
Okay.
Okay.
Yes.
Hi. Thank you. Good morning. This is <unk> on behalf of Julian. Thank you. So much for taking the question just wanted to understand if it's more based on the comments that you made on the tenure PPA negotiation and how RMS PPA prices are amongst the lowest.
Apologies I didn't need an astronaut.
Yes.
Robin Robin Robin you will not on mute.
Yes.
Broadband yes.
Yes.
Regarding Kenya.
Sorry.
Yes.
Hello.
The question I had was you know a.
A couple of recent media reports indicated that the energy category Cyclically Peg indicated lower energy prices up with some good negotiation by a need ABB by December and I was curious whether any of those get pushed into 14 to all matters that consists of garden season.
Oh, it's.
I'll refer to the two points here first of all this was a broader statement mainly relating to Cape Youll see and require K plc to start negotiation as.
As of today, we haven't been approached to have any new negotiations on any on our ppas.
The task force the prudent task force issued this report.
End of September early October.
The task in the Task Force report basically there is.
Some analysis and comparison of PPA rates, including comparing ours to Tien tsin.
It shows that.
Tien tsin have.
<unk>.
10% to 12% lower PPA.
Fees, however, we need to take into account that Tien tsin.
State owned entity.
They are not bound by the same requirement that the public company in the U S has.
They have access to funding the two months.
Get the bump.
Public company, they've also access to brands in additional concessions that the government can give them.
We obviously don't know every detail in Tianjin operation, but as all of us are away.
Government owned entity.
Do get support from the government in different forms.
So we don't think the comparison is apples to apples, but even if you do this analysis still.
Still the difference is around 10% difference at all.
Got it that's very helpful.
You get to Kenya, too I think.
Would you still anticipate to keep E&P, how does its either been sort of trending and whether there was any change though.
A question for south kind of receivable payment or any of the older receivables, which they are being hit.
We actually seeing a big improvement from payments from our customers K P&C.
They actually reduced the overdue to $33 million in the end of the quarter and since then they pay additional $14 $2 million. So if you think about it right now.
Delayed roughly two.
Two months, which is something that we work with them and we appreciate their support.
Got it. Thank you and then lastly on Kenya.
With respect to all sorts of underperformance.
Just provide a bit more color on the <unk> knutsen from the end of 'twenty, one to ramp up to now of course cycle too.
Exactly what's causing that to me and you know that.
Second when you were talking to them.
In Kenya.
Yes.
Every time that you deal with the drilling and resource.
Potentially.
Complications.
So we had a few delays in the in the drilling.
We have now a very deep.
Our plan going forward, we expect generation two.
To increase gradually over time, it's not one one the solution.
<unk> preferred to go back to the normal journey.
Generation that we had so we do expect to see it in stages going going up.
Part of the issues that we encounter.
The transportation the global transportation issue.
Kenya like most countries don't have.
In the country all the requirements all the materials, it's all required to do the drilling and we need to bring it from outside of Kenya, and as you know.
Shipment cost today or <unk>.
<unk> timeframes are very much delayed today.
So we were impacted by these delays, but we do have today.
Plan exactly what to do and went to do it.
And we see that going over the next few months and it will be gradual as noted one day, we will go back to the full capacity we have a few policies we want to.
Elements of this project to bring that to full capacity by the middle of next year.
Got it. Thank you and one last question from me and then I'll pass it along with just sticking with Green community target of one five to one six gigawatts of capacity.
Can you just given that some of the projects that you have in the developing pipeline now.
<unk> 2020.
How much of a buffer.
Do you have with respect to that target now.
Yes.
This is the target that we believe we can achieve.
And obviously on.
The geothermal part it relates a lot to permitting and the delay that we've seen.
But this is the target that we think is achievable and that we plan to be them.
Thank you.
Thank you.
Mine that ask any further questions. Please press star followed by one on your telephone keypad now.
Our next question comes from Jeff Osborne from Cowen Okay. Jeff. Please go ahead.
Okay, great. Thank you good morning, a couple of questions on my end on the.
Increased activity our confidence of the demand in California, I was wondering if you could just update us on your land position in California or would you be needing to use your Nevada sites yourself developed and I think acquired from U S. Geothermal years ago and then.
Correlated to that could you give us an update on the power line that.
Do you have between Nevada, and California, and if Theres a way of Ballparkish, how many megawatts of capacity that can serve.
If you were to see set demand in California.
Okay.
And if we have.
Multiple land positions in California, but also in also in <unk>.
Rather that we are doing exploration.
In 2021 and in 2022.
And that we expect.
Great.
For them to mature into projects that will be able to supply.
Both to NV energy.
And to the various ccas and Scapa.
In California.
So we're working both leases as you said, we did acquire from your geothermal a few land positions that we are going to explore this year.
Also on the <unk> acquisition, we acquired Coyote Canyon, which is a very.
High potential.
The land position and.
B, why we and Dixie we're planning to expand the generations of the deal due to much better resource that we think can be utilized and generate more electricity.
Voting on we see the demand and we see it.
Developing the assets to support this demand.
And we're actually very happy to see the demand coming from California, but we also see demand in Nevada.
For geothermal.
Project.
That's great to hear and then maybe just.
Following up on the PPA pricing I think in response to Noah's question.
How would you characterize returning to normal I think the scope of the deal was done at 75, but that was with some older assets do you think somewhere in the 80 to 90 range is reasonable and more normalized for you I'm just trying to get a sense of where you think the market is today.
Well I would like to be able to tell you that 80 90 is the right pricing, but unfortunately, it's still not.
Okay.
All I can say that.
What we've seen in the last.
Couple of months the continued reduction of <unk>.
Of PPA pricing to the sixties in in that range and following the CPUC decision we.
We see that this.
Reduction basically stopped and turned and we do hope that we'll be able to get.
The new Ppas that will start negotiating.
These days.
The high <unk>, maybe low seventy's, but thats the range that.
We expect I would say that due to the fact that.
We were able to improve significantly our manufacturing.
Any PC capabilities.
And we're able to reduce the capex, obviously the increase in raw material has an impact but.
Yeah.
We were able to increase and to maintain the returns that we're looking for in.
And the fact that the.
The bill.
For the new build that will hopefully extend the PTC that's another $25.
And if it is a cash payment so effectively it's another $25 per megawatt hour for 10 years.
Got it that's helpful and just two quick ones here I think on past calls you've talked about the able to repowering.
Process can you talk about where that RFP stands for that additional power and then any comments on what youre seeing in Indonesia would be helpful. Just given the size of the resource there and some of the comments from the government.
Yeah.
And so we've.
We thought we should.
We've got quite a lot of demand following that.
The pricing.
Similar to what I mentioned before we are negotiating PPA hopefully, we'll be able to find one in the next few weeks and whenever we will find we will.
Obviously update the market.
Any quick thoughts on Indonesia.
Indonesia is a very very interesting.
If you look on the what we've been able to develop there although it takes a bit longer and covet, obviously delayed thing, but on top of the Sola 12, 75% ownership that we have.
We're drilling now within Aegean, which.
The joint venture with medical where we own 49% and they own 51% we are drilling and we.
We expect this to.
Become a project towards the end towards the end of 'twenty three.
Jim.
The other one is the announcement, we did where we have.
We have a joint venture with a large mining company in Indonesia, where we own 75% and they own 25%.
And that's it.
<unk>.
So we see quite a lot of.
Prospects.
We have additional insights that we have exploration rights in Indonesia.
And from the product segment, what we expect is that in 2022, we will see a few tenders coming up in Indonesia.
Hopefully, we'll be able to boost the product segment.
Towards 2023 and onwards.
That's great to hear I appreciate the answer.
For detailed thanks.
Thank you.
Thank you. Our next question comes from Julien Dumoulin Smith from Bank of America Securities. Thank you, Jamie Hey, guys, sorry to follow up I, just wanted to clarify a little bit on the unlike Tien tsin side of the equation here, just and I know you don't want to negotiate this live on the call I get that.
But when it comes to renegotiating down to the Tianjin tariff level versus what they term as being a capital structure refinance opportunities or are those two discrete opportunities for them or they were lady here as they see cost saving opportunities I just want to make sure we were clear about that because it sort of it seems like there's two parallel avenues.
Sure.
And Julian Good morning, we appreciate the question it's assay so.
The Task Force report is actually a publicly report and you can look at it online and it shows very specifically that the tariff of Walmart.
Basically 10% higher from the theory of Ken.
Tien Tsin, when you look at <unk>.
<unk> cost, including the steam costs.
I would also say that based on that report.
Is the lowest the IPP.
Kenya, when you exclude the some.
Some very small plans that are barely operating.
So when you talk about negotiation, we are providing the cheapest electricity in Kenya, and we are quite large IPP overdue. So just those are the effects.
With respect to the report as you said that the values in maybe potentially structuring of our debt is a way for us to reduce the tariff, but they are saying specifically.
That's the reason to reduce the tariff they are not suggesting that there is a double fold reduction in tariffs again this is dale.
Request for us, which we haven't seen yet everything we've seen through the report.
And as I told you before and we said before we always are ready to talk to our customers any customer that we will talk to us and request.
Any kind of change in the agreement we are ready to talk to them and I'm sure. There is a win win situation similar to what happened in Pune in the past when we lower the tariff and we got extension in more capacity. So this is something that I'm sure. It can be on the table, but overall right now and then.
There is no negotiation and we will continue to support it.
Plc.
Right and maybe actually if I can clarify that you talk about being 10% higher than kitchen, but.
What about royalties for instance, and other costs and your cost structure that may not exist for instance, with Canada. I mean, when you think about this negotiation, presumably some of those factors would presumably try it again tried to reconcile one versus the other there as well I take it.
Exactly as Doron mentioned during the script, our cost structure and Tianjin constructor is different including royalties. We don't have the detail of exactly what's in their numbers, we know that our numbers does include.
<unk> amount of royalties that we do pay its few million dollars a year.
But as I said, it's very clear in the report that they would like us to reduce the tariffs lightly and we will discuss with them and we'll do the negotiation in the you.
And.
Between us and them and not.
On Wall Street paper.
I very much respect that's excellent.
It just relative a few million dollars relative to the $12 million that was identified here in annual costs right. I mean again, it's a non trivial down to as a percent.
If I can just to clarify on the cadence of opportunities in California, as well I know you've been asked this a couple different ways. When you think about the next 24 months. When you think about your resources would you could put towards California, given how extreme the situation is with seemingly negative reserve margins in California, they need to move quickly.
How much resource can you bring to bear to.
To address the California <unk>.
Resource adequacy deficit here that that seems to lay in front of them, especially responding to the what seems like of upwards of a full gigawatt of resource asked from them at least in the current RFP. Notwithstanding further procurement again again I was wondering what you can bring to the table in terms of the resource in the very near term.
24 months 36 months.
Okay. I think if you look on the coming 24 months basically end of 'twenty three you'll see most of the assets that we leased in the in the.
The.
Presentation.
There's maybe one or two additional that we are in final stages of fluctuation that can come into this timeframe.
But looking into 2425, if I remember.
Correctly the requirement it until 26, so we are doing exploration in multiple sites today in Nevada and California.
So we'll be able to add too.
To the 24 five for much more.
And as and as you know in February when we announced our guidance for 2022, we also update and additional here basically 2020 full focus on growth and overdue be able to see the <unk>.
Exploration prospects that we expect to have.
Got it and then the one or two additional project you just alluded to do they have interconnect already or where are you in that process with transmission, they're just being able to get those done in the next couple of months or next couple of years, you seem to allude to to actually being able to get that prior to 'twenty four.
Look we hope we will be able to get them.
Jim.
And we said multiple times permitting in California, and Nevada is a big challenge today, and we need you know the legislation and the to push and to make sure that on one hand as they put targets for renewable energy on the other hand, they also allow renewable energy to develop and build.
So this is a challenge that we work all the time.
And that's where we.
That's what we believe will be able to do until 2023 and <unk>.
2024, we're working now to get you the best number in February.
Excellent I wish you guys best of luck and hopefully those permits come along alright. Thank you. Thank you I'll leave it there. Thank you for your patience.
Thank you.
Thank you. This now concludes our Q&A session I will hand back to Darren washer for any further comments.
Thank you and I would like to thank you all for joining us and.
We see the boost if renewable energy coming across the globe and specifically in the U S and we see the increased demand.
As the leading E G.
Geothermal company, we plan to supply a big part of this demand. Thank you very much.
Okay.
Thank you everyone. You may now disconnect your lines.
Yeah.
Yeah.
Okay.
Okay.
Yes.
Yeah.
Yeah.
Okay.
[music].
Yeah.