Q4 2022 Ormat Technologies Inc Earnings Call
Please standby were about to begin.
Good morning, everyone and welcome to the Ormat technologies fourth quarter and full year 2022 earnings conference call. All participants will be in a listen only mode. After today's presentation. There will be an opportunity to ask questions. If you would like to ask a question. During this time simply press star one on your telephone keypad. If you would like to withdraw your question.
Press Star one again and please note that this event is being recorded I would now like to turn the conference over to Mr. Sam calling with Alpha IR. Please go ahead Sir.
Thank you operator hosting the call today are deron Bush, our Chief Executive Officer, Oscar Ginsberg, Chief Financial Officer, and Sundar Levine, Vice President of Investor Relations, and ESG planning and reporting.
Before beginning we'd like to remind you that the information provided during this call may contain forward looking statements relating to current expectations estimates forecasts and projections about future events that are forward looking as defined in the private Securities Litigation Reform Act of 1995.
These forward looking statements 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 future results may differ materially from those projected as a result of certain risks and uncertainties for.
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 reports on Form 10-Q that are filed with the S E C and.
In addition, during the call the company will present non-GAAP financial measures such as adjusted EBITDA reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the website.
Because these measures are not calculated in accordance with GAAP. They should not be considered in isolation from our 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 <unk> Dot com under the presentation link that's found on the Investor Relations tab.
With all that said I would now like to turn the call over to John Bush, our Turan Call's yours.
Thank you Sam and good morning, everyone. Thank you for joining us today.
The fourth quarter marked a strong finish to 2022 with 10, 7% top line expansion, reflecting growth across all our operating segments.
2022, once a year in which we executed successfully our strategic plan by expanding our portfolio and improving our operational performance.
During 2022, we added 78 megawatts of new generating capacity to our electricity segment operating portfolio <unk>.
Including our C difficile and tungsten phase two geothermal power plants.
As well as our we still solo and two hybrid solar projects.
In addition, we added a five megawatt storage facility operating in the case of them.
Also in 2022, we signed long term power purchase agreements Ppas.
365 megawatts.
285 megawatts of those ppas, covering geothermal facilities and 80 megawatt energy storage.
These new agreements are expected to improve our economics in both segments.
You know product segment, we experienced a significant recovery delivering the highest quarterly revenue since the start of the COVID-19 pandemic.
We now have $148 1 million dollar backlog, demonstrating the growing global demand for justice for our geothermal products.
As we look towards 2023, we expect to benefit from our portfolio expansion strategy, which has resulted in new geothermal and solar power plants.
<unk>.
It started operation in the second half of 2022.
We also expect to bring 170 megawatts of new capacity online.
56 megawatts is in the electricity segment and 104 megawatt hour in the storage segment.
For 2023, we expect to deliver between $480 million to $510 million of adjusted EBITDA and.
An increase of approximately 14% at the midpoint over 2022 actual results, which is the highest growth we have seen in years and EBITDA.
This growth is supported by the new capacity added during 2022.
And the expected capacity, we plan to add in 2023.
Annualized.
Annualized basis, the new assets that will be added in 2023.
As well as the potential improvement in Pune, and Colorado are expected to add between $25 million to $30 million.
Additional adjusted EBITDA.
2012 to partial operation.
We continue to see strong globe tailwind globally for renewable energy.
Sorted by the inflation reduction benefit.
Including the PTC for geothermal and ITC for storage.
We expect these benefits will reduce our capital needs and boost our EPS in the coming years.
In addition, we are experiencing significant demand growth for geothermal energy and <unk>.
Toys, driven by the volatile fuel prices and global Decarbonization efforts.
We remain on track with our capacity expansion plans in both the electricity and the store segments with the potential to add approximately 700 megawatts by the end of 2025, which supports further top line EBITDA and net income expansion.
Now before I provide further updates.
Well in our operations and plans I will turn the call over to <unk> to review the financial results.
Okay.
Thank you Darren.
Let me start my review of our financial highlights on slide five.
The fourth quarter marked a strong finish to an overall excellent year in 2022.
Total revenue for 2022 was $734 1 million up 10, 7% year over year.
And revenue for the fourth quarter was $205 5 million.
Up seven 6% year over year.
<unk> growth across all three of our operating segments.
Across the full year 2022, our adjusted EBITDA results of $435 5 million.
Increased eight 5% compared to 401 $4 million in 2021.
Fourth quarter, adjusted EBITDA of $124 7 million.
Increased seven 5% compared to $116 million in.
In the fourth quarter of last year.
Yeah.
Year over year the increase in the adjusted EBITDA was largely driven by an increase in revenues in each of our three operating segments.
G&A expenses were lower in 2022 due to lower reduced legal costs.
In the full year 2022, net income attributed to the company shareholders was $65 8 million or <unk> 17 per diluted share.
This represents an increase of 6% and six 4% versus the same period last year respectively.
On an adjusted basis net income attributed to the company stockholder was $92 $2 million or <unk>.
<unk>.
<unk> 63 per diluted share.
An increase of seven 3% and seven 1% versus the same period last year respectively.
The year over year earnings growth was driven by better performance of our assets and lower effective tax rate.
In the fourth quarter of 2022 net income attributed to the company's stockholder was $18 million 32 per diluted share.
Comparison to the $18 $9 million 74 per diluted share in the same period last year.
Yeah.
The net income and earnings per share diluted share were negatively impacted by an after tax non cash write offs of <unk>.
To follow up on $1 million related to our Brawley power plant.
On an adjusted basis net income attributed to the company stockholders was $41 2 million.
Or 73 per diluted share.
With an adjusted net income attributable to the stockholders up 83%.
And diluted adjusted EPS was up 78% versus the same period last year.
The adjusted net income attributed to the company's stockholder was mainly adjusted for the write off of the body power plant.
The boy power plant has been generating electricity level, Lauren lower than its generating capacity of 13 megawatts due to continuous willfully issues.
This has historically resulted in higher than expected operating costs and lower than expected electricity revenue.
We believe that we can operate the <unk> plant economically at seven megawatts or six megawatt lower than the assets Cowen capacity.
In addition, we will get additional value from the assets to our plans to add solar plus storage facility adjacent to the geothermal project utilizing existing interconnection at the broader context.
Moving to slide six.
We break the revenue down at the segment level electricity segment level revenue increased seven 8% to $631 $7 million.
6% to $1 $65 2 million.
In the year and Fuller due to higher in the year end.
And the fourth quarter of 2022, respectively.
Increase was driven by increased revenue at four nine due to higher generation electricity rates for the full year inclusion of the <unk> power plants that we acquired in July 2021, the start of commercial operation of our CD four power plant facility in July 2022, and the start of commercial operation of tungsten Mountain two in April 2020.
Two.
Revenue growth in this segment was partially offset by the ongoing shutdown at our <unk> plant.
For which we expect to complete the Repowering during Q2 2023.
In the product segment revenue increased 62% to $71 4 million.
And 58% to $32 $2 million to full year 2022, and in the fourth quarter respectively.
In our product segment was primarily driven due to our recognition of revenue from newly signed contract in New Zealand, Indonesia and Nicaragua.
Energy storage segment revenue increased two 1% to $31 million and 27, 3% to $8 $1 million in the full year of 2022 and in the fourth quarter, respectively revenue growth in 2022 as well as in the quarter was driven by primarily by higher rates at PJM.
Moving to slide seven.
The gross margin for the electricity segment was 39, 8% and 45, 3% in 2022 and fourth quarter down to $70 60 basis point, respectively.
The decrease was driven by $15 million in insurance proceeds received in 2021 related to a point of operation compared to $1 7 million in 2022.
In the product segment gross margin was 15, 3% and 22, 8% in 2022 in the fourth quarter up 350 basis point and two out of 120 basis points respectively.
Margin increased significantly in the fourth quarter due to a better overall margin generated a newly signed contract.
The energy storage segment at full year 2022, gross margin of 21% compared to 33% in 2021.
The reduction was mainly driven by normalization of high revenue contributor in 2021 due to the Texas Winter Storm event, which we did not occur in 2022 and.
In the fourth quarter of 2022 margin was 11, 7% compared to 16, 4% looking.
Looking at slide eight the electricity segment generated 95% of format total consolidated adjusted EBITDA in 2022.
The progress product segment generate 2% at the energy storage reported an EBITDA of $11 $9 million representing.
Representing almost 3% of total adjusted EBITDA.
A reconciliation of EBITDA and adjusted EBITDA provided in the appendix slide.
Looking at slide nine our net debt as of December 31, 2022 was approximately $1 8 billion.
Cash and cash equivalents and restricted cash and cash equivalents as of December 31, 2022 was approximately $227 million compared to $387 million at the end of 2021.
The slide breakdown to use of cash for the 12 months illustrates our ability to reinvest in the business and service debt obligation, while returning capital to our shareholders.
Our total debt as of December 31, 2022 was approximately $2 billion.
Net of deferred financing cost and its payment schedule as represented on slide 30 in the appendix.
David cost of debt of the company stands at 4% we think it is.
Important to note that nearly all of our debt liability remain fixed in nature, which we believe will help continue positioning Walmart competitively in a rising global interest rate environment.
Moving to slide 10, we have approximately $619 million of total liquidity.
Our total expected capital for 2023 is approximately $589 million for capital expenditures.
Slide 31 in the appendix in 'twenty to 'twenty three we are planning to invest approximately $180 million in our storage assets compared to approximately $80 million in 2022.
Increase is mainly related to the 80 megawatt 320 megawatt hour bottlenecks storage assets the largest project under development in the energy storage segment.
Overall, ormat is very well positioned to execute our strategic growth plan from a capital resource perspective, with excellent liquidity and ample access to additional capital as well as cash we expect to receive from the IRS benefit we expect that each project that will reach commercial operation in the next few years.
In the U S will be entitled to between 30% to 50% of funding supported by the new IRS penetration.
On February 22, 2023, our board of directors declared approved and authorized payment of a quarterly dividend of 12 <unk> per share to all holders of the company's issued and outstanding shares of common stock as of March eight 2023.
On March 22023. In addition, we expect to pay a quarterly dividend of <unk> 12 per share in each of the next three quarters.
That concludes my financial overview I would like now to turn the call over to Ron to discuss some of our recent development.
Thank you Ashley.
Turning to slide 13 for we look at our operating portfolio.
Generation growth was positively supported by inclusion of CV for tungsten.
<unk> phase II, and we still solar as well as higher capacity.
The generation was partially offset by the shutdown at Heber one following the fire early in 2022 and by lower generation at our old facilities due to lower availability of the heaps.
As you can see our generating capacity was updated to.
One <unk> 1070 megawatts in the electricity segment compared to 1012 megawatts in 2021, we added 73 megawatts of new geothermal and solar power plants, which were slightly offset.
By adjustments to the generating capacity, reflecting changes in the Woodford before.
As noted on slide 14 in the fourth quarter, our Puna geothermal power plant operated at a level between 23 and 25 megawatts.
In 2022 will receive the higher energy rates of the plant as a result of the global elevated oil prices.
We are currently negotiating new amendments to the fixed price PPA, we signed with telco. This will allow us to continue with our plans to repower, the Pune conflicts and increase its capacity to a total of 46 megawatts.
At our <unk> power plant in Kenya, the lower performance of the Wolf with limited generation of the power plant that is currently generating 125 megawatts.
We're currently performing a drilling campaign and expect to increase its capacity during the year.
With respect to EBIT, one as you know.
EBIT one has experienced partial outage due to a fire in early 'twenty, two and its operating of 20 megawatts less than half of its capacity, we have decided not to rebuild the <unk> power plant and we settled insurance claim related to the fire them, including all business interruption and property damage claim.
We are currently optimizing the Heber complex through Repowering project, which is expected to be completed in the second quarter of 2023.
Turning to slide 15.
Our product backlog stands at 148 million and include the recently signed $32 million contract for the agent partners in Indonesia in which we hold a minority equity position of 49%.
Yes.
The backlog is improving and we see a pickup in demand and slowdown in raw material cost increases, which should result in better pricing and drive higher margins.
Moving to slide 16 for an update on our energy storage segment.
The segment delivered another strong quarter supported by high rates of PGM.
Our 2023 revenue guidance for the storage segment.
Assume that energy related PGM will not remain as elevated as 2022 lists.
Before I move to discuss our long term growth. Please turn to slide 17 to discuss the two main drivers for our growth in the U S. This will improve both the economics in the electricity in the storage segment and reduce our capital needs in the U S. Even further.
We see continued increase in the demand for geothermal energy, both California, and Nevada, which employ a massive amount of intermittent power recognized the importance of geothermal is a zero emission high capacity energy source.
The recognition was translated into the known CPUC decision to adopt the portfolio that resulted in an acceleration of new geothermal development and full month enabled us to sign during 2022, new long term Ppas in California, and in Nevada is improved economics.
Also the IRA which was signed on August 16, 2022 as discussed previously.
As a significant positive impact on our ability to develop geothermal and storage assets in the U S. It's higher economics due to lower capital needs.
We are planning to continue to claim the PTC for geothermal power plant and enter into new tax equity transaction, which can fund over 40% of our capital needs for new geothermal plant.
For a new storage assets for the first time, we'll have the ability to claim between 30% to 50% ITC and sell them to third parties, enabling us to capture potentially higher value of the tax benefits.
We expect that the ITC for storage will reduce our tax expense and boost our EPS for the coming years.
In 2023, we expect to receive approximately $150 million in cash related to the PTC and ITC benefit.
The source of cash enabled us to significantly reduce our overall capital.
Moving to slide 19 and 20.
As we have communicated 2020 was a significant buildup year comprised mainly of geothermal and hybrid productivity projects in development.
This buildup support our robust growth plan.
Despite some delays mainly from the permitting processes.
We expect to increase our total electricity portfolio generation approximately one three gigawatts by the end of 'twenty 'twenty five.
Adding between 230, and 260 megawatts of new capacity.
In 2022 hour energy storage portfolio was impacted by supply chain delays and limited accessibility of raw materials.
What is longer than expected process for collecting these assets to the grid.
This caused a delay to the commercial operation date for some of our facility.
Despite these headwinds we remain on track with our growth plan.
To bring online six new assets in 2023.
And reach between 500 to 520 megawatts and over one gigawatt hour by the end of 2025.
Yes.
Slide 21, and 'twenty two display the geothermal and the hybrid solar PV projects currently underway.
We are on track with the commercial operation of North Valley, <unk>, and Dixie value all of which we expect to bring online during the first half of 2023 as well as the lead in the second half of the year.
Moving to slide 23 and 24.
Third layer of our growth plan count from the energy storage side.
Slide 23 demonstrates the energy storage facility.
That has started construction.
With eight projects under development. This will add 110 four megawatts.
Which is 124 megawatts hours to our storage portfolio by the end of 2023, and an additional 100 megawatts, which are 340 megawatt hours in 2024.
Please turn to slide 25 for a discussion of our 2023.
We expect total revenues to increase by 14% year over year at the midpoint to be between 823 and $858 million.
With electricity segment revenues between <unk>, 17, and 685 million.
An increase of 7% compared to 2022.
We expect an approximately 70, 98% increase in the product segment with revenues between $120 and $135 million.
And energy storage revenues are expected to be between 33 and $38 million.
We expect adjusted EBITDA to increase by approximately 14% at the midpoint.
The highest growth we have experienced in the last few years and.
And to be between 480 and $510 million.
We expect annual adjusted EBITDA attributable to minority interest to be approximately $36 million.
On an annualized basis, the new assets that will be added in 2023.
What is the potential improvements in continental Collier I expect.
To add between $25 million to $30 million.
Additionally, adjusted EBITDA.
<unk> 2023 partial operations.
I will end our prepared remarks on slide 26.
This was a strong quarter demonstrated by continued financial and operating momentum with significant progress against our long term goals.
Looking ahead to 2023, we expect to add 170 megawatts combined new capacity at both our electricity and the store segments, which represent significant progress towards our target of over one eight gigawatts.
End of 2025.
As discussed earlier, the new capacity will benefit from the higher rate in claim benefits will reduce our capital needs in 2023.
We strongly believe that the regulatory tailwind and the increased PPA prices, we are seeing in the market combined with our strategy our assets and our advantages cost structure position a month for success and will result in meaningful shareholder value in 2023 and beyond.
This concludes our prepared remarks, now I would like to open the call for questions operator. Please.
Thank you ladies and gentlemen at this time PGM question simply press Star One and just a reminder, if you find your question has already been addressed you can't remove yourself from the queue by pressing star one again will.
We'll take our first question this morning, Noah Kaye Oppenheimer.
Good morning, and thanks for taking the questions.
Maybe we can start with the $150 million cash tax benefit you're expecting from from Iraq can we compare that to pre IRI obviously.
If you have a whole PTC had lapsed the beginning of 2022, but I assume you had some projects that already met commence construction. So so how much of the $150 million is really incremental post I R. A.
Then just on a housekeeping matter, how should we be modeling those benefits flowing through the P&L and cash flow statements that treated as a reduction in tax expense income from sales tax benefits any color you can provide there would be helpful.
And good morning.
There are a few elements to the rate is going to impact us.
As you rightfully say in the past and we.
<unk> also had.
I will say tax equity transaction as we have done in the June tumors.
We expect in 2023 and approximately $125 million of the 150 to come from to a new tax equity transaction that we plan to do in the U S.
One of them would be for the Hebron combine operations. So it will be a three when you combine the two harbors.
I will say that if you look before that that amount was probably lower by 10%.
Cause.
As you remember.
The ITC the Ptc's up from 25 to 27 and a half.
So instead of a 125 that number would have been probably closer to somewhere in 100 <unk>.
The other piece will be PTC is that we would be able to sell through the year to third party and those will be showing up either as other income.
As part of the tax equity income.
The last piece, which is on a 50.
$15 million should flow through the.
Tax line item. These are ITC related to new storage project now when you look at the Capex that we're spending in 2023 and you look at 224.
We will see a much bigger amount is coming from the ITC parked because as we see it.
2024, we have.
The COPD.
Bottleneck, which is around $105 million project.
In addition to Montagu, which is another large project. So we will receive anywhere from 30% to 40% on those.
In the form of a.
Tax return and those should flow through the tax line item. So we will see a boost in earnings per share, especially 2024 because of the bottleneck project and Montague project.
Very helpful.
And maybe just a follow up on that just to help us with the simple math on unexpected funding mix for 'twenty three capex.
You've got the $150 million benefit plus the cash from operations.
We assume you would need to raise additional project debt, maybe talk through that and where you would expect project debt to pencil out new projects.
So as you rightfully so say that the funding requirement next year. It will include a project debt.
Tax equity transaction and maybe other foremost.
Financing.
Now based on our best estimate.
Project that will fall in the around 6% debt.
Thats the last.
The quote that we got this will be a long term debt fully secured.
If you look at bank data format.
In the six plus I would say anywhere from 20 to 45 basis point depends on on the mood of the market and to date.
Okay, and if I could sneak one last one in just on the guide for 'twenty, three including some improvements at Puna and Al Carey.
With some rollover benefits just just what incremental improvement in capacity do you expect to get for those projects and what's the rough timing on on when you think they reach those capacity targets.
I know, it's the wrong. So thank you for the question.
Jim.
These are two.
For the items in Pune.
We are finished.
An important part of our campaign and we are in the process of connecting the world.
We.
Finished drilling production and injection, where we expect to connect them.
Towards the beginning of Q2, and we expect to see the benefits impacting starting in Q2 going forward.
And we following that plan another.
Another well over there and to see an additional increase somewhat towards the second half of the year.
So we do expect.
The larger impact start in Q2, and then another one towards the second half.
Calia.
Well in the middle of the drilling campaign over there.
And we.
We expect the gradual increase in capacity as we connect each well that we drilled over there.
We finished one world.
We plan to connect these days actually.
So we do see we do expect to see an increase over there.
And the other world since <unk>, there was a very deep.
The timing to drill takes a bit longer than in other places.
So we expect that to happen to increase mainly in the second half of <unk>.
Great. Thanks, so much I'll turn it over.
Okay.
Thank you we'll go next to Justin clear at Roth and Ken.
Yeah, Hi, thanks for taking our questions.
So I guess first off here just wanted to ask.
Also on the $150 million in tax credits are expected in 2023 or are there any assumptions for getting bonus adders within that 150, such as the energy community Adder and then is if not is that possible and do you need to see.
Treasury guidance.
<unk> you can.
Fully figure out exactly what the tax credit benefit will be.
For 2023, and the numbers do not include any either because we are not in this specific location that you mentioned.
With that being said there is a good potential for 2020 for some of our storage assets are in these areas and Thats why we expect to get almost in those cases, 40%.
And when we look at Stoneridge 2025, we are also looking for option to buy batteries in the U S.
In order to try to qualify to anywhere between 40% to 50% on the storage.
On the geothermal right now we are assuming the basic $27 $5 of PTC.
With that being said as you mentioned rightfully. So we are looking at the actual guidance to see.
If we can take that number higher by 10%.
There is not available equipment similar in the U S of geothermal. So the question is will we be able to claim local manufacturing because.
Drilling is in the U S. The construction is in the U S. So that's a question that we will ask ourselves going forward.
But we're still waiting for the guidance many of the guidance are still up in the air.
The things that we are claiming for a 2023 are the base.
And when I say database I mean, five time debase the basis is $5 50. For example, we're climbing 27, five because we're getting five time debates.
Got it Okay. That's really helpful. And then just on storage, we've heard that the supply chain could be improving in terms of the availability for batteries might be in part due to.
Some demand softening for electric vehicles, but could you just update us on what youre seeing in terms of the supply chain do you have all the batteries that you need and is there any potential pull projects forward.
If batteries are more freely flowing key states.
Thank you so.
I will say the projected date project.
We listed in the presentation all of them have secured the batteries from different.
Vendors.
So on them you know the supply chain issue is mainly no delivery issues Linda.
We have seen in the last couple of weeks a reduction in the battery prices small reduction.
Which photos, what you've said a bit of a bit of a weakening in that market due to the EV market.
I can say that we have.
When the three to six projects that are.
Looking for batteries and once we have the batteries at the right price. Its a question mainly of pricing timing, we will be able to release them going forward and these are part of our plans.
And the target for the over one gigawatt hour generation at the end of 2025 for the storage.
So we have projects in the storage we have the site control.
Very very very advanced.
Interconnection and permitting process and I think the last block is the batteries.
Happy that the market is softening a little bit.
And hopefully once we.
And are able to secure the better it will be able to lease the project.
Great. Okay, and then maybe just one more you know your guidance for the.
The product segment suggests that quarterly revenues could be $30 million or maybe a little bit above that in 2023.
At that level of revenue could you get back to gross margin range.
24% to 28% and as that.
<unk> in your guidance that that kind of level for margins.
So you know we had a very good Q4 with margins that are being better and there is no doubt that the contract that we signed in 2022 and the one that will impact 2023.
And it did improve margin.
We are still in the sub 20, I will say in our guidance somewhere between 18% to 20%.
We think that it might be better.
But at this point.
Our supply chain can still be an issue for 2023, so like always we are being I would say.
Making sure that we are going to meet the numbers. We think it is going to be somewhere around 20, maybe 18%.
Okay. Thank you I'll pass it on.
Yes.
Thank you we'll go next to Jeff Osborne with Cowen and company.
Yes. Good morning, a couple of quick ones from my side I was wondering if we could get an update on the bottleneck project I think in third quarter call you had talked about getting CPC CPC CPUC approval.
By the end of the year I don't think that happened and then I noticed in the Investor presentation that moved to Q1 of 24 versus the end of 'twenty. Three so can you give us an update on where that is.
Yes. Thanks.
It's.
Bottleneck.
Youll see we got the approval at the beginning of January .
So the contract is fully approved by the CPUC and were running on it.
Moving between Q4, 'twenty three to Q1 of 'twenty four.
Mainly.
Potentially.
Yes.
<unk> supply with batteries, but mainly the connection to the to the grid in the process. It takes from you.
Once we finish construction until you can actually generate revenue. So we do expect to finish construction in.
In 2023.
But then the.
Connection exists might take us into 2024.
Got it that's helpful. Two other quick ones just following up on Noah's question around taxes, and the ITC what tax rate should we assume for Ormat and 23% and 24 is that a number you have Andy.
When when you look at 2024, I will say there is definitely should be a much lower tax rate.
<unk> rates, because we expect the extremely large ITC benefit that will impact us.
Oh.
2023.
You can assume may I will say for our normal tax rate is around 32% you can assume it may be 10% less than that.
So 22% or takeoff for about 2%.
Somewhere between 25%.
25% to 30, okay.
Got it and then the last one I had is just on the north probably facility I might have missed that but I think going back to 2010 that originally it was a 50 megawatt resource then I went to 2017.
And then 13 are now at 7% is that all due to the sand and salinity issues at that site has had for years or is there something else going on there.
No there is nothing new.
Youre going on there it's mainly the same.
The issues.
Over the years various.
Point in time, we had the ideas of how to solve it and we've been with investor different.
In terms of different technologies and different structures in order to bring it back to generate higher generating capacity, but at this stage.
We don't think that we can do it.
But what I would say is that.
The North Valley facility has a larger interconnection.
It's not going to be utilized.
Through the geothermal and we are in advanced discussions with CCA, there to build a solar and storage facility.
But thats actually take the benefit of the interconnection business route it has.
And once the.
This will be finalized we will update you exactly on the.
The project.
Perfect I appreciate the details thanks, so much.
Thank you we take our next question now from kidney into Morgan Smith of Bank of America.
Sure.
Hey, good morning. Thank you so much for the time and the opportunity list and just with respect to some of the impacts here some of the operational issues on some of the geothermal assets can you elaborate a little bit I mean, how much of this is going to be made up if you will in 2000 and for I don't know if it's exactly a fair question to ask.
In totality, whether we're looking at Heber Brawley.
So there's been some specific issues, but in totality is there a good way to think about kind of the shift in value that you had previously contemplated in 'twenty three moving into kind of more of a run rate 24, as the way to think about it across each of the discrete issues that you described earlier.
Maybe any better terms.
Good morning Julien.
Great question. So as you know many of the storage segment assets.
<unk> moved from 2022 during the year 2023.
And also we decided to take a closer look at our drilling campaigns in Korea, and in Pune, and which are now look very I would say on track to perform this year. So.
These two items in addition to the macro backed on the geothermal which is like you mentioned rightfully. So Hebron North valley should rate on and run rate base additional $25 million to $30 million in EBITDA in the following year.
If everything would have gotten it right in 2022 and things would have been on time everything Youre right. Our guidance for 2023, it would have been $25 million to $30 million higher which would put us probably at a record EBITDA for the company growth I will say that we are a long term marathon runners and therefore.
If something will start operation in January or April .
It does make a difference and we wanted to as early as we can but we want it right. So when we look at 2024, not including assets that we will add in 2024, we are seeing a pickup in EBITDA those assets of $25 million to $30 million with almost all of it also coming from a topline growth of storage NGL terminations.
So I will say.
When you combine these I think theres a lot of value in what we have done over the last two years and then maybe there was a little bit more patient that is needed, but I think that $25 million to $30 million on top of what we gave guidance for 2023.
Very good numbers for the company.
Indeed, im sorry, just to clarify that if I can and hopefully this is a fair question that 25 to 30 incremental versus projects that were previously contemplated for in service.
In 'twenty four right I E.
The shift that you're announcing here timeline.
Yes.
Assets that were supposed to start online mostly in the end of 2022.
They will start operation in 2023.
They will contribute some amount in 2023, but on top of it on an annual basis. When you look at 2024, they will add additional $25 million to $30 million of adjusted EBITDA.
Right, it's the partial year catch up for some of the assets, reaching through the year in 2003 as well as some of the operational issues are really getting fully resolved here.
Yes.
Exactly sorry, I don't mean to.
Belabor that too much and then just on the product side Super quick.
Obviously pretty incredible developments Henry acceleration backlog largely contemplated be consumed seemingly this year, how do you think about adding more to that box backlog, it's been a pretty impressive recovery trajectory here. The last couple of years and obviously looking at 'twenty. Three can you talk a little bit about expectations on adding backlog here over the next few months.
The continuous momentum or is this the new run rate if you will.
No.
Yeah, Thanks, Julien so on the product backlog.
As I said, we see a change in the demand not only in the U S but globally.
We're competing today on multiple projects.
That we expect to win some of them and I would say the largest opportunities in New Zealand.
Which is a big part of our backlog today, but the potential is huge.
And we do hope that.
Turkey, and we've seen some indications from our customers the therapy might.
Take up again.
Assuming the economy will be a little bit better in Turkey.
The potential there is very very big.
So we do expect the backlog to continue and it's not something you can measure it by quarters, but with definitely.
The backlog overtime to increase.
Okay excellent.
Maybe related to that the product level here just in terms of this new level that you got for this year call. It 100, Thirtyish do you think that we're going to see that as being a new run rate or we're going to continue to accelerate it sounds like further acceleration as possible, but you are not ready to articulate it yet.
I Couldnt answer you better than the question.
Alright fair enough.
And leave it there. Thank you guys. Good luck alright.
Thank you Julien.
Yes.
Thank you and just a reminder, ladies and gentlemen star one fleet for any questions well go next to Brian Levine at Citi.
Good morning, Adam.
Hoping to start off the power market exposure you highlighted some of the deterioration in the PJM forwards in some other markets can you quantify the materiality of that movement sitting here in 'twenty three outlook and are you looking to change any of your hedging profiles on a go forward basis.
Yes.
Thanks.
I'll start with Dan we're not doing today any hedging within the us.
Storage market.
We have.
Most of our contracts are merchant apart from the OE contracts that we have in California in 2024 will have a bottleneck with the toilet agreement, but we're not hedging any in any contracts.
We're playing in the in the merchant market.
PGM prices in 2020.
Two.
Very very high.
They were above.
$50.
Today Theyre in the range of.
2025.
So thats a big declining in the PGM, but again it has.
It's a merchant market.
So.
Quite a lot of the.
The weather and the demand PJM is related a lot to the gas natural gas price influenced natural gas prices are going up.
The PGM prices will go up.
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So this is a mountain emergent play.
Okay and in terms of Brian Let me add one other thing we have roughly a 40 megawatt now operation in the east coast in the PJM if we.
We will see a pickup in prices towards what we saw in 2022, we expect revenue in the storage to be higher by $6 million to $8 million.
So we are already taking into consideration. The fact that prices are slightly lower and maybe there will be a pickup in prices back to the 40 50, then we should see roughly another $6 million to $8 million I will say that.
This thing is very volatile.
Remember started very slow for example, and then over one weekend, we generated $2 million of revenue.
So overall.
We like some of our assets to be in these areas and we believe that even at $25 $30 per megawatt we still have a very good returns on our investments overdose.
Okay, Great and then in terms of your dividend policy with the incremental $150 million of capital offsets from the federal policy and some of these moving pieces.
Timelines of implementation.
Movements in power curves how are you thinking about your dividend policy on a go forward basis and could that be something that gets reevaluated.
And in light of some of these moving pieces.
The dividend policy is reevaluated.
Between the management and the board every every quarter and every year when with Delaware plan. However, as we discussed such a large demand for geothermal assets and storage assets in the U S and globally.
The view of the companies to invest in capital.
As much as we can in order to grow and increase the dividend.
We see the big upside in growing the business we have in 2023.
A 14% increase in EBITDA, which is the highest we've had for many many years as growth in EBITDA with for many many years.
This is where the focus that we're putting on.
Okay and then last question for me in terms of the Capex outlook on a per megawatt basis, you're seeing any movement there given some of the components costs evolving.
Okay.
No.
The last year or so two years basically in oil prices did this raw materials did go up and drilling cost review to the boom in the oil industry.
The drilling cost went up a bit.
Now, they're going down a little bit.
More.
Shipment pricing with very high now theyre going to us all in all I think this is balances.
And the reality is that since we are a vertically integrated company and we do absolutely everything.
Required to build a facility we're able to manage.
Between these and cost to build the facility.
Might go up or down by 5%, but in general it's the same area.
Appreciate the time thank you thank.
Thank you.
Thank you and gentlemen, it appears we have no further questions. This morning, Mr. Beauchamp, yes, exactly for any closing comments.
Okay. Thank you. Thank you everyone for joining US 2022 was a very strong gear and we're looking at 2023.
A 14% increase in revenue and EBITDA adjusted EBITDA.
And continuing to invest and build out our portfolio.
And I'm confident that as the year passes we will be able to give you more and more insight on the growth plan that we have and making them. So thank you very much.
Okay.
Thank you again, ladies and gentlemen that will conclude Ormat technologies fourth quarter and full year 2022 earnings call. Thank you all so much for joining us and wish you all a great day Goodbye.
[music].
Yeah.
Yes.