Q3 2023 Ormat Technologies Inc Earnings Call
Good morning, and welcome to the Ormat technologies third quarter 2023 earnings Conference call all participants will be in a listen only mode.
Today's presentation, there will be an opportunity to ask questions if you'd like to ask a question during that time.
Simply press Star followed by the number one on your telephone keypad.
If you want to withdraw your question again, Chris Star one.
Please note this event is being recorded.
I'd now like to turn the conference over to Alex Steinberg with Alpha IR. Please go ahead.
Thank you hosting the call today are drawn Bush, our chief Executive Officer, Aussie Ginsberg, Chief Financial Officer, and Smith, <unk>, Vice President of Investor Relations, and ESG planning and reporting before beginning we'd like to remind you that would be 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 a discussion of such risks and.
Certainties tiers.
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 SEC.
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's 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 the financial statements prepared in accordance with GAAP.
Before I turn the call over to management I'd like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at or Matt 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 Ron Bouchard Theron Nicole is all yours.
Thank you Alan good morning, everyone and thank you for joining us today.
Well that's reported another quarter of strong financial results and achieved significant milestones that emphasize its commitment to growth and sustainability.
The strong results in the third quarter demonstrated by the Companys significant top line expansion.
18, 3%, which was successfully translated into 15, 8% growth in adjusted EBITDA.
And 84, 4% growth in earnings per share.
All three of those segments showed revenue growth in the quarter.
The product segment continues to impress as our backlog is consistently growing throughout the year with year to date revenues more than doubling versus 'twenty 'twenty.
In the storage segment, we overcame lower energy rates that PGM and Kaiser and delivered growth from the new facilities that came online in the second quarter. This year.
In the electricity segment this quarter revenues and margins were impacted by lower generation and lower energy rates compared to last year.
We are making progress in our ongoing drilling efforts at puna and those.
With Poland now generating over 30 megawatts.
Yes.
We think its capacity.
Both are expected to support our future performance in the electricity segment.
In October we announced the strategic acquisition of three geothermal and solar power plants in the U S.
We expect to close this acquisition by the first quarter 2020.
We are confident that this accretive acquisition will support both of them show and long term growth.
Also at the end of the quarter, we raised $166 million.
Through a combination of tax equity transaction to monetize BTC.
Commercial paper and the long term corporate law that strengthened our balance sheet and solidified our financial position.
We've achieved significant growth in 2023, adding 127 megawatts year to date.
Global demand for renewable diesel.
Stablish, our market position as one of the largest providers of geothermal energy.
We continue to be confident in our ability to achieve our long term capacity expansion.
And our financial targets for 2023 and beyond.
And expect to increase our capacity for approximately 1.92 gigawatt by year end 'twenty.
Now before I provide further apathy on operation and future plans I would turn the call over to Etsy to review the financial results.
Thank you Ron.
Let me start my review of our financial highlights on slide five.
Total revenue for the third quarter was $208 million 0.1 up 18, 3% year over year.
Reflecting strong growth demonstrated across each of our operating segments.
We had notable revenue growth product segment during this period.
Third quarter 2023, total gross profit was $60 million versus $61 $1 billion.
This resulted in a gross margin of 28, 8%.
Down approximately 600 basis points from the very strong gross margin was 34, 7% in the third quarter of 2022.
2022 gross margin included $4 million.
Business interruption income.
Related to <unk>.
And was impacted by better performance of our Puna power plant.
<unk> generated $5 6 million.
Higher revenue.
Then in Q3 2023.
In addition.
During the third quarter of 2023.
Our product segment deliver significantly higher revenue versus last year.
Which due to the lower overall margin of this segment is negatively impact our combined reported gross margin.
Since the end of the quarter, we improved performance at our Puna power plant.
The successful drilling campaign.
And in general with a higher backlog of the product segment, we expect to see improvement in margin going forward.
Net income attributed to the company stockholders.
$35 5 million.
<unk> 59 per diluted share in the quarter compared to $18 1 million.
32 cents per diluted share delivered in the third quarter of <unk>.
Prior year.
The increase was driven by higher contribution of our product segments.
As well as a higher benefit within the irate, including BTC benefits recorded on our income attributed to the sale of tax benefit.
ITC benefit recorded under income tax provision.
In addition, we recorded a nine 4 million.
Tax income related to a recent change in Kenya.
On an adjusted basis net income attributable to the company's stockholders was $28 2 million or <unk> 47 cents per diluted share.
With adjusted net income attributable to stockholders up.
4%.
Diluted adjusted EPS up 42, 4% versus the same period last year.
Net income attributable to the company's stockholders and diluted EPS.
Adjusted to exclude $9 4 million.
One time benefit associated with changes in the Kenya finance at <unk>.
<unk> 23.
One $8 million after tax write off.
Unsuccessful exploration activity.
Adjusted EBITDA was $18 3 million increased 15, 8% in the third quarter compared to $102 2 million in the third quarter of last year.
The double digit increase was largely driven by the products segment's recovery.
We had higher tax equity contribution.
PTC grade and lower G&A expense versus the prior year period.
Moving to slide six.
Breaking the revenue down at the segment level.
The revenues in our electricity segment increased two 9% to $167 2 million.
Compared to the prior year period.
The increase was driven by the <unk> at the North Valley facility.
And the resumption of operations at <unk>.
The increase in revenue was partially offset by lower electricity prices and generation at Cooley.
In the product segment.
Revenues increased 182% to $38 8 million.
Representing over 90% of our total consolidated revenue in the third quarter compared to only 8% in the.
Same period during 2022.
The growth in the product segment revenue was primarily due to new signed contract we successfully secured.
<unk> also increased our product vehicles.
Energy storage segment, driven your acreage by 24, 5% to $11 million.
This increase was driven primary by the startup operation of five new facilities since the beginning of the year, including Pomona to which came online this quarter.
Coupled with a very strong pricing credit deal and our new Optum facility in Texas.
This increase was partially offset by lower energy rates receive at our hydro and PJM facility.
Moving to slide seven the <unk>.
Gross margin of the <unk> segment was 31, 8%.
Electricity gross margin were impacted mainly by the lower revenue in Pune and the absence of business interruption at EBIT, one this quarter as discussed in.
In the product segment gross margin was 18, 7% this quarter compared to 18% in the same period last year.
The energy storage segment reported a gross margin of 22, 9% compared to a gross margin of 31, 5% in the same period last year.
The declining margin compared to the prior year period was mainly due to a significantly higher energy rates.
And on the East Coast last year. However, this year, we saw a more normalized rate environment with higher prices in there.
Looking at slide eight.
Electricity segment generated 90% of my total consolidated adjusted EBITDA in the third quarter.
The product segment generated 6%.
In the energy segment reported adjusted EBITDA of $5 million, representing almost 4%.
Total adjusted EBITDA.
Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix slide.
Moving to slide nine.
In the third quarter, we recorded $14 9 million in income related to tax benefits.
Of which $12 5 million was income related to five active tax equity transaction.
What are the remaining $2 4 million is related to two unfavorable PTC.
Which were recorded in 2023 under the provision of the inflation reduction.
Also in the third quarter.
Reported $6 6 million.
ITC benefit in the income tax line.
Mainly related to the Pomona to storage facility that came online in July and is eligible for 40% ITC.
We don't anticipate additional ITC benefits during Q4 2023.
But as we've said before in the next few years.
In line with our growth plan to increase our energy storage portfolio, we expect to continue reporting a lower tax rate.
Looking at slide 10 on.
Our net debt as of September 32023 was approximately $1 8 billion.
Cash and cash equivalents.
Restricted cash and cash equivalents.
September 32023 was approximately $186 million.
Compared to $227 million.
As of December 31, 2022.
This slide breakdown to use of cash for the nine months illustrating our ability to reinvest in the business.
And service our debt.
We note that these uses of cash have been funded from our equity offering change.
Cash generated by operation.
And a strong liquidity profile, we maintain.
Our total debt as of September 32023 was approximately $2 billion.
Net of deferred financing costs.
And its payment schedule is presented on slide 33 in the appendix.
The average cost of our debt portfolio stands at four point to one 5%.
With all of our debt liabilities carry fixed rate.
Which we believe will help continue positioned competitively in the rising global interest rate environment.
Moving to slide 11.
Ron mentioned in October we raised $166 million, which include.
$43 million.
Sale of tax benefit related to the north valleys.
Tax equity transaction.
$73 million short term commercial paper and $50 million long term Coca Cola.
The broad.
Losses from these sources will enable us to finance the newly announced acquisition.
Well support our Capex requirement to continue with our growth plan.
With respect to the new acquisition, we are planning to raise additional long term corporate debt.
By the closing of the transaction.
Year to date in 2023.
We invested $450 million in traffic.
Okay.
To advance our growth initiatives.
$673 million available of liquidity through our cash and available undrawn lines of credit.
Our total expected capital expenditure for the last quarter of 2023 is $110 million and detailed on slide 34 in the appendix.
Well, they're all into one that is well positioned from a capital <unk> perspective.
With access to capital liquid resources, and additional capital to Opportunistically fund accelerated growth.
On November eight 2023, our board of directors declared.
And authorized payment of a quarterly dividend of <unk> 12 per share to all holders of the company issued and outstanding shares of common stock on November 22023.
Payable on December six 2023.
That concludes my financial overview overview I would like now to turn the call over to their own to discuss some of our recent developments.
Thank you Ashley.
Turning to slide 13 for a look at our electricity segment operating portfolio.
Generation growth was positively supported by the inclusion of North Valley.
Io generation.
Power plant and the resumption of operations at <unk>.
This increased generation was partially offset by lower generation in the quarter.
We added 45 megawatts since the beginning of the year to the electricity segment portfolio, reflecting a 4% increase in total generation capacity.
Moving to slide 14 and 15.
In October we signed the accretive acquisition of <unk> assets in the U S.
Upon closing, we will acquire the Coface geothermal power plant in Utah.
The third well geothermal power plant in Nevada.
And the Stillwater Triple Hydro geothermal solar PV and solar thermal power plant in Nevada.
These three power plant set approximately 43 megawatts to degree.
In addition.
We will acquire two solar assets with a total nameplate capacity of 40 megawatts and two Greenfield development.
For all of these that we would pay approximately $271 million.
The acquisition is expected to close by the first quarter of 2024 subject to regulatory approvals and customary closing conditions.
These assets have collectively generated an annual revenue of approximately $35 million.
And then annual EBITDA of approximately 24 million for.
For the year 2020 to 22002.
Our immediate plan is to enhance and optimize the three geothermal asset by installing automatically.
We expect the plant all surface ugly, which will require approximately $55 million of coffee.
We will add approximately 17 megawatts and generate an additional 15 megawatts of EBITDA by the end of 'twenty 'twenty five.
In the long term our plans are to expand the global power plant by 20 megawatts.
Slow and potentially develop another greenfield project.
Yes.
Turning to slide 16 for an update on our product segment backlog.
It's currently standing at $192 million.
The backlog increased 60% compared to the second quarter, this year and 40% compared to the third quarter of 2020.
We were able to sign contracts and orders totaling approximately $150 million.
Since the beginning of the year, including a large contract for the Latin America project in New Zealand, New Zealand, bringing our backlog pre COVID-19 level.
A testament to the resilience and adaptability of our business.
Moving to slide 17, the energy storage segment delivered another strong quarter.
Posted by the new facilities that came online during the year.
This quarter, we commenced observational formula to in California.
We currently have six projects under construction that will contribute to.
275 megawatt both 740 megawatts hour.
This quarter, we also signed a multiyear battery supply agreement with <unk> with <unk>.
<unk> batteries for up to 750 megawatt hour.
This call threat solidifies, our supply chain and gives us confidence in our ability to successfully advance our projects, including the projects that are currently under construction and achieve our long term capacity growth.
Moving to slide 19 input.
The demand outlook for electricity and storage segments remains strong and we are well positioned to achieve our multi year growth.
We still expect to increase our total electricity portfolio generation by roughly 69% year over year.
Additionally, our approximately one nine to two gigawatt portfolio targets for the year end of 2025 is well on track.
Slide 21, and 'twenty two displays the geothermal and <unk> solar PV project currently underway.
We completed the Repowering of the EBIT uplift. This currently is running at 89 megawatts.
We are progressing would there be an agent this will come online next year.
In our solar PV portfolio, we expect steamboat in steamboat hills solar facilities to come online by the end of the year.
In the North Valley Solar is not expected in the first half of 'twenty 'twenty four.
Moving to slide 23 24.
Third leg of our growth plan accounts from the energy storage.
Slide 23 demonstrates the energy storage facilities that have started construction.
Yes.
Please turn to slide 25 for a discussion of our 2023 guidance.
In the first nine months of 2023, Walmart has delivered meaningful year over year growth across all our revenue and adjusted EBITDA.
Heading into the close of the year, we are narrowing our guidance ranges to reflect our performance through three quarters and expectations for the fourth quarter.
We now expect full year revenue to range between $825 million.
Two $838 million.
Electricity segment's revenue is expected to be between $670 million to $675 million.
Following Pune running at lower capacity and lower energy rates in Q2 and Q3 this year.
Product segment's revenues are expected to be between 125 to 130 million.
And storage revenues between $30 million to $33 million.
We are also slightly narrowed the adjusted EBITDA guidance with the previous communicated range anticipating results to be between $480 million.
Two $495 million.
We remain confident in our ability to manage our business and assets to deliver on our guidance and to drive further growth in 2024 and beyond.
As we execute our integrated business model.
Moving to slide 27 to $29.
We are proud to announce the release of this.
This quarter of our 2022 sustainability report.
In 2022, our renewable energy portfolio effectively prevented at two 2 million metric tons of <unk>.
This number of avoided emissions is expected to increase every year as we plan to add new clean power plan.
Notable is the impressive 19% reduction in our annual average scope, one and scope two greenhouse gas emissions when compared to our 2019 baseline.
We have also initiated a comprehensive climate risk analysis.
Tcf the task force on climate related financial disclosure gap analysis process.
Our aim is to identify and address material climate related risks, creating mitigation strategies for weeks.
Simultaneously, we are formalizing an action plan and expect to fully align with the Tcs vehicle mandate.
This strategic approach underscores our commitment to responsible climate management.
We invite you to explore our complete sustainability report that is readily available on our website.
Moving to slide 31, while the global markets are experiencing some economic challenges, we continued to benefit from the acceleration in demand for renewables in the U S and globally.
We are encouraged to see growth throughout all our businesses and we are confident in our ability to use EBITDA growth.
Strong returns and a healthy balance sheet to fund potential and highly accretive acquisition.
Now before I close I want to briefly touch upon the wall currently taking place.
As you all know was the.
40 of our revenues and EBITDA are outside useful we do have approximately 550 employees in Israel and our main product segment manufacturing facility and engineering Department system into it.
While the wall has had a profound impact on everyone living in the country, including our employees.
I want to assure you that we currently see no impact to the operations of our electricity is storage segment operating at.
We have agreed priorities.
Some of our projects to accommodate all fluids in Israel will be pulled up to military.
Primarily in our engineering Department.
But we believe any resulting delays will be made.
The situation in the region is uncertain and we will continue to monitor closely and adjust as necessary.
I do want to publicly acknowledge and thank our employees in Israel and all around the world for the tremendously hard work during this month in time.
In closing, we remain confident in our business and our growth our.
Our focus for the remainder of the year MBR.
To execute against our capacity target growth.
<unk> strong results to close out the year and further expand our geothermal energy storage portfolio we.
We are confident we will achieve each of these.
This concludes our prepared remarks, now I would like to open the call for questions.
At this time, if you would like to ask a question press star one on your telephone keypad.
Joining a question press star one again.
Please hold for your first question.
Your first question is from the line of Noah Kaye with Oppenheimer.
Great. Thanks for taking the questions.
And I should start by acknowledging that.
In a very challenging operating environment in many respects you guys have executed really well so congrats on the strong quarter.
The M&A and some of the other initiatives you have going.
I wanted to actually start with Pune and Hawaii, So good to see that.
Capacity is increasing there.
Can you remind us.
Where you think that can get to over coming quarters in terms of total output.
And what time frame and then it looks like there is an increasingly constructive environment for development of additional assets in Hawaii can you comment.
On the development environment there. Thank you.
Okay. Thanks.
Thank you Noah.
Why is it.
<unk> had a lower Q2 and Q3, we finished the drilling.
<unk> 22, and today, we are generating above.
<unk> 30 megawatts.
We have.
Finished the drilling campaign at this stage.
And we are monitoring the resource and the wells to see how this.
It is going forward.
These days, we are working on the work plan for next year, and obviously dealing with four late as part of that.
Kind of.
And work with the old dealing we need to do with the west at this stage, we're very happy that we passed the 30 megawatts.
Mark.
We hope that we'll be able to maintain it over time.
Other projects.
In Hawaii.
At this stage, we are mainly focusing on our facility.
Evan.
Sure.
Try to develop another one in Hawaii at this time.
Okay.
Okay. Thanks.
<unk>.
Which gears and talk a little bit about tax credit Transferability, you know you got a nice slide there on the benefits this quarter.
Can you talk a bit more about.
The benefits that tax credit transfer ability has brought to you in terms of.
Financing and capital recycling.
And what you might expect to see in coming quarters, and perhaps next year in terms of.
Additional proceeds from from the credit transfers. Thank you.
So no this is assay.
Yeah.
When we look at this quarter, we see the benefit on the tax towards stability in two places.
One is on the income attributed to tax equity transaction.
Well we generated.
<unk>.
But we are.
Later on we already signed and entered into a tax equity transaction.
But at this point, we can sell them and as I told you before we are recording them at a <unk> 90 per <unk> per dollar.
And this quarter it was slightly over $2 million.
The bigger benefit is coming through.
Impact on <unk>.
Tax rate.
This quarter, we recorded $6 $6 million of three ITC benefits.
All of those transferable ITC.
Right now we are in final negotiation to sell them and collected money before year end.
If we do so we will collect to somewhere around $25 million, you'll see ITC and PTC are transferable.
In addition to the tax equity proceeds that we already have in Q4.
When we look at Q4 through the P&L.
We expect not to have any ITC benefit.
Because there is no new storage facilities coming online.
We do expect to have additional PTC towards variable benefit.
Also approximately $2 million as a result of EBIT one operation.
When we look at the next year 2024.
The biggest project that is coming online is the bottleneck project.
Total cost of over $100 million.
We're still looking today to see what the better usage of the tax benefit under this the asset is a barrier to enter into the tax equity transaction.
Or is it better to.
Do an ITC towards variable it depends on the business would see.
Because we offer the two few places I think Dr. <unk> line in the past.
Tax benefit that <unk> had we could not utilize them unless it was a tax equity transaction.
In storage had no tax benefit at all.
And as we look at it now.
This year only the storage brought us close to $20 million next.
Next year, it should bring us ordinary a $40 million just the storage benefit.
So bottom line, the ITC benefits that bring us cash and improved net income.
And the PTC just allow us to continue and develop assets at much better return than otherwise so IRS wise, it's quite a big.
Okay.
Very helpful I'll leave it there thank you.
Thank you.
Your next question is from the line of Justin Clare with Roth km.
Hi, yes, thanks for taking our questions.
So just wanted to follow up on.
The improvement Youre seeing at Puna and as well as the capacity expansion at Heber and then it sounds like you're increasingly capacity at all carry as well could you give us a sense for how this could impact the margin profile.
In Q4, or just on a kind of run rate basis.
Kind of uplift as possible as a result of the improvements here.
Hi.
So I will touch.
Each one of them.
Perfectly so.
Yeah, we've been steadily increasing.
The capacity and the generation of the <unk>.
We've done a new capacity testing.
And they'll call yes.
The PPA the split between capacity and energy.
As time passes we're able to increase revenue.
As you can expect.
We increased revenues.
Costs associated with the marginal.
The revenue increase.
Very low so the impact to gross margin is very high.
And the same goes with Paula.
So the same amount of people in the.
It generates.
Plenty of megawatts or 30, plus megawatts and Thats what were seeing today were almost in the middle of the.
The quarter and poorly performing.
Very good.
EBIT 80.
Nine megawatts that we mentioned so the last part of the.
Yes.
Both structured and Hubert came online.
Beginning of September.
So we expect to enjoy a two fold.
Thank you Bill.
Got it okay.
Then just on <unk> I think earlier in the year.
At 127 megawatts can you share where the capacity stands today and then.
Based on your drilling campaign, where do you think the capacity could go for bulk carrier and over what timeframe.
Okay.
Well it has been.
Delivering over the last few weeks.
Between 130 to 135 36 megawatts depends on the ambient temperature and others. This is where it is moving along well.
We are drilling today.
Unlike others, we finished the drilling campaign in Ohio with build rates.
In other worlds that we plan to finish in the.
In Q1 of next year.
And then there needs to be heated up and connected.
<unk> come online sometime Q2, and we have with third world.
We're also in the process of drilling.
I believe that in the second half of next year, we'll see.
Another improvement on top of what we see already now.
Okay, Okay got it.
And then maybe one more just on the on the product segment, the backlog moved up meaningfully here to $192 million.
I was wondering if you could just give us a sense for what is the timeframe in which you could deliver that backlog and recognize the revenues and then is the margin profile there in a 15% to 20% range I think thats, what you've previously talked about but wanted to check in there.
In general I would say that the backlog should translate to revenue.
18 months, there might be some projects a little bit shorter related but in general it should be over 18 months.
And margins.
Can be a bit higher than the 15 to 20.
That you alluded to.
Okay. Thank you.
Your next question is from the line of Mark Strouse with Jpmorgan.
Yes. Thank you very much for taking my questions I just had one.
Kind of a clarification question.
The one nine to two gig 2025 portfolio of targets that that didn't increase from last quarter. Despite the acquisition.
I would assume that that's just a function of the acquisition not closing yet.
Wanted to make sure that's the case.
Something else hadn't slipped out maybe.
Obviously as you said until the acquisition doesn't close.
It's not counted in the any of our numbers.
We usually update unless something.
Changes in February the <unk>.
Guidance on the megawatts, we will have so in February we'll update.
I hope that by that time, we would already closed the <unk> acquisition. So the numbers will will give you attribute we will it will.
<unk>.
The impact of <unk>.
Okay, Yes that makes sense, okay I'll take the rest offline. Thank you.
Thank you.
Okay.
Okay.
Yeah.
Your next question is from the line of Julien Dumoulin Smith with Bank of America.
Hey, good morning team. Thank you guys very much for the opportunity just following up on a couple of different questions here first off.
<unk> got a chance for ability just to clarify that when you think about the opportunity created there are you rethinking how you think about leverage and appropriate leverage we've seen some of the folks in the renewable space kind of capitalizing on the credit rating agency latitude, but I'm not sure that's necessarily the same direction for you guys love to hear your thoughts on that in terms of.
Rethinking leverage.
And then B just as you think about the backdrop for the market on financing.
How do you think about financing the latest acquisition here, just obviously with the cash balance at quarter end the latest acquisition.
And the projections in the next few months or just how do you think about just the timing of capital raises here and how do you think about the leavers.
Well over the next six months.
Julian This is Ashley good morning, I'll start with the second part of the question.
Since the end of the quarter, we already raised the $166 million.
We achieved $73 million, which is the commercial paper.
It's a rate of around just over 6%.
We raised the $50 million of commercial a serial.
So you'll see corporate loan.
Rate of around 7% and we also closed the tax equity transaction for $43 million.
And basically we saw the ptc's of snow devalue facilities.
Basically out of the $270 million 166 was already financed.
The remaining and will be done in two way to corporate loan.
We plan to take before closing will be a natural infection.
And those will be at similar rate.
And I spoke before I think.
Because of the lower leverage.
Many of our U S peers that are currently at five and six times debt to EBITDA.
And the fact that our AE.
A future.
Cash flow.
The next 14 to 15 years is the already.
Already tied to a known PPA allow us to be very aggressive on the financing of the acquisition and do the financing even before.
Year end, if we close the deal before year end.
With respect to your first question.
When we sell and do tax equity transaction it does reduce our leverage.
As it was before.
The other hand, the ITC is that we sell to ITC.
It does.
Our basically reducing our overall debt.
They are not part of our EBITDA, we have seen some of our peers, adding itc's benefit to the EBITDA calculation, we did not do it so far.
We are looking into it but that's not part of what we're doing so far that's why we don't have any disagreement with the rating agencies because we never included.
ITC benefit.
As part of our EBITDA. So overall, we are lower leverage.
Financing for the acquisition is.
Most of it is already done and the remaining is on track.
And we will still be in the four times leverage is significantly below our U S peers.
Yeah.
Indeed, I get your lower leverage strategy, that's why I ask if any of this matters right you guys, maintaining maintaining leverage now with that said just to clarify on the.
On the acquisitions it sounds like Youre going to do this fully levered does not necessarily an expectation for kind of to rebuild the equity balance for the time being from from what I can from what I hear in your response rate.
Correct correct as you see our EBITDA. This year is up significantly over last year, which allow us to continue enduro under the core <unk> business.
And that's why the earlier equity raise that we did already this year allow us to do this transaction without any additional equity plan.
Excellent if I could just squeeze one more in on contracted storage just real quickly I mean, we're seeing some of your peers in the west really pushing forward on this strategy of co located geothermal and storage like.
Like kozo the other day, how do you think about.
Potential opportunities to expand interconnect and add storage at existing sites.
Obviously, very very robust contracting environment in the west and do you have any comments around that.
Thanks Julien.
They are also I will say this thing one there's definitely a very very strong demand for.
Renewable and specifically geothermal assets in the west.
Today, all of our assets are 100% contracted.
So is it two we're able to generalize promo geothermal facilities were able to sell under our existing tpa.
Secondly, there is no benefit to store to sell later.
Yeah.
So this is something that we haven't combined with something that is always some place on the table to look into but so far economic wise that.
We haven't seen the benefits if we can sell.
As it would generate.
Playing between the hours with storage.
It doesn't seem to us very economic.
I would say this is what we do see on the energy storage in the in the West are mainly I'll, let speeds for tolling agreement or PPA agreements for storage facilities like the bottleneck that we've signed the PPA.
And.
We all are.
Bidding these RSP than I'd hoped.
And we plan to win some of them once.
Once we will obviously update the market.
Yes.
Okay.
Thank you guys.
I get what Youre, saying.
Your next question is from the line of Jon Windham with UBS.
Perfect. Thanks for taking the questions and I Hope you and your team are.
Doing well.
Maybe a question would be I'd be really interested to just get your thoughts on.
How ongoing conversations are going with incremental ppas, both on the geothermal and storage.
Essentially I'm trying to get at the willingness of off takers to take on higher rates given.
Given the higher financing environment appreciate it would be well.
Cool.
But what we see.
Today is exactly what you said.
Those two factors.
Those operating in the same direction on one hand, the demand for renewable energy and the requirement by the CPUC in California too.
AD.
Geothermal energy and to bring energy storage that's on one end.
The other hand, the increased interest rates are pushing all developers to go retire to beat higher pricing and.
And Thats, what exactly what we see today, we see the tolling agreement of the PPA demand for storage.
We see higher numbers.
And to be the three competing in the business we are shortlisted.
This will not shortlisted, but we see the different numbers, which are higher.
And then what has been over the last year or so.
And in the geothermal.
There aren't any new facilities coming online.
It has a new facility and can actually.
Makes a reverse be then be the facility between the different utilities to get very high pricing.
We believe that <unk>.
A low number today, if you have the new geothermal facilities.
I appreciate it.
Sure.
Your next question is from the line of Jeff Osborne with TD Cowen.
Yes. Good afternoon, most of the questions have been addressed so far but two that I wanted to dig into was one on the Goshen supply arrangement I think theres certainly been some controversy around the Michigan factory for them.
The recent election this week the entire board at the town was removed I'm just curious.
Is the output that you will be receiving from that facility or is there other backup plans in the event that the controversy around that site in rural Michigan, where not to be built.
No.
As far as we know <unk> is planning to have its facility operating at the end of 'twenty four we're planning our site to be operating.
Earlier during the beginning of 'twenty five so both the project gets released for construction.
That are listed on our.
Presentation will be supplied from Goshen facility in Mexico.
I hope this.
Once.
They will get the relevant approval and finish building the facility in the U S. The future projects will be from the U S and will be entitled to an additional 10%.
The ICC.
But this is as you said it's.
In construction. So we don't have the facility itself, but the current ones the lots from them.
So for 24, and 25, you wouldn't get the 10% adder for domestic batteries, but you could get it for energy community is that the right way to think about the storage business.
Yes definitely.
Got it and then lastly.
Are you folks testing or have any thoughts on some of the new drilling techniques that are out there.
Might expand the addressable market for geothermal.
We follow very closely all of these new drilling techniques.
It is something that.
A few years come back.
Group into play if people are looking into investing money into it.
And at this stage.
We haven't seen the right technology.
Ken extend significantly the geothermal market without other limitations that they have.
But we're definitely looking closely we hope it will be one of them will be successful we are in discussions obviously and meeting with all of them in the different conferences.
And if any of them would be successful, we'll be very happy to utilize it in our products and our project future.
The development project as well as in our product segment.
Perfect I appreciate it that's all I had.
Thank you.
As a reminder to ask a question press star one on your telephone keypad.
Our next question is from the line of Ryan Levine with Citi.
Hi, everybody.
Couple of more specific questions in terms of the west coast generation in terms of the capacity or utilization factor enhancing any trends in terms of what that capacity factor is over time or what that will be on a go forward basis.
We are.
As we said we're operating our assets at 24 seven.
Many times a day.
As downtime is true.
The maintenance things that we have.
Yeah.
And these are you know.
Big power plant, though a lot of mechanical items.
Issue every year on our 10-K the specific availability.
Each.
The region.
EBIT came online.
On line you know it will increase obviously.
The generation that we have been.
We will show this year.
Almost all of last year.
This specific facility, we don't see anything different this year compared to previously.
Okay. That's it for me today. Thank you.
At this time there are no further questions I will now hand, the presentation back off the presenters for any closing remarks.
Okay. Thank you all for joining us today.
Q3 was a very strong quarter for us with significant growth in the revenue the adjusted EBITDA and earnings.
And we look forward to deliver on our growth targets as the fastest growing to 24 in Ottawa. Thank you.
Okay.
This concludes today's call. Thank you for joining you may now disconnect your lines.
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Yes.
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Okay.
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