Q2 2024 Ormat Technologies Inc Earnings Call

Speaker Change: 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.

Unknown Executive: for future operations and are based on management, 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 discussion of such risk and uncertainties, please see risk factors as described in Ormat Technologies and report on Form 10-K and core reports on Form 10-Q that are filed with the SEC.

Unknown Executive: Future Operations and are based on management's current estimates and projections, future results, or trends. However, actual future results may differ materially from those projected as a result of certain risk and uncertainty.

Speaker Change: Actual future results may differ materially from those projected as a result of certain risk and uncertainties. For discussion of such risk and uncertainties, please see risk factors as described in ORMAT Technology's annual report on Form 10-K and core reports on Form 10-Q that are filed with the FCC.

Unknown Executive: For a discussion of such risk and uncertainties, please see risk factors as described in Ormat Technologies' Annual Report on Form 10-K and co-reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAF financial measures such as adjusted EBITDA. Reconciliations to the Most Directly Comparable Gap Measures and Management Reasons for Presenting Such Information are set forth in the press release that was issued last night, as well as in the slides posted on the website. However, 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.

Unknown Executive: In addition, during the call, the company will present non-GAAP financial measures such as adjusted data, reconciliation to the most directly comparable GAAP measures, and management reasons for presenting such information to set forth in the press release as issued last night, follows in the slides posted on the website. Because these measures are not calculated according to GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Speaker Change: 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.

Speaker Change: 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.

Unknown Executive: Before I turn the call over to management, I'd like to remind everyone that you can fly a presentation accompanying this column may be accessed on the company's website at ormat.com, and there's a presentation link that stands on the Investor Relations tab.

Unknown Executive: 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 all that said, I would now like to turn the call over to Doron Blachar. Doron, the call is yours.

Speaker Change: 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 ORMAP.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 Daron Blachar. Daron, the call is yours.

Doron Blachar: With all that said, I would now like to turn the call over to Durambushar, Ron. The college is yours. Thank you, Josh, and good morning, everyone. Thank you for joining us today. During the second quarter, Ormat again delivered strong financial results driven by a consistent improvement across all our operating segments and our focus on continued profitable growth. The second quarter had a 9.3 increase in total revenues and 25% increase in adjusted EBDA when compared to the second quarter of last year. These improved performance and results were primarily led by the expansion of our capacity generating portfolio and improved operating performance, which has translated into solid returns.

Doron Blachar: Thank you, Josh, and good morning, everyone. Thank you for joining us today.

Daron Blachar: Thank you, Josh, and good morning, everyone. Thank you for joining us today.

Doron Blachar: During the second quarter, Ormat again delivered strong financial results, driven by our consistent improvement across all our operating segments and our focus on continued profitability. The second quarter had a 9.3% increase in total revenues and a 25% increase in adjusted EBITDA when compared to the second quarter of last year. This improved performance and results were primarily led by the expansion of our capacity generating portfolio and improved operating performance, which has translated into solid retail.

Doron Blachar: Within our electrically segment, we continued to drive consistent growth during the quarter, largely driven by the addition of the NL assets that were acquired at the beginning of the year. We have also benefited from the continued improvement at our point of facility and from the contribution of a full quarter of performance at our EBDA One facility, which resumed operations in last year's second quarter. The performance of our energy storage segments has continued to stabilize and deliver improved results in the period, with the segment exhibiting strong revenue growth versus the prior year as a result of the contribution from the 83 megawatts of new projects that came online in the last 12 months.

Doron Blachar: Within our electricity segment, we continue to drive consistent growth during the quarter, largely driven by the addition of the Enel assets that were acquired at the beginning of the year. We have also benefited from the continued improvements at our Apuna facility and from the contribution of a full quarter of performance at our HIBO-1 facility, which resumed operations in last year's second quarter.

Speaker Change: Within our electricity segment, we continue to drive consistent growth during the quarter, largely driven by the addition of the Enel assets that were acquired at the beginning of the year.

Doron Blachar: The performance of our energy storage segment has continued to stabilize and deliver improved results in the period, with the segment exhibiting strong revenue growth versus the prior year, as a result of the contribution from the 83 megawatts of new projects that came online in the last 12 months. Additionally, we continue to make progress on our goal of transitioning our energy storage business towards a more balanced portfolio through a mix of RA contracts, tolling agreements, and merchant projects, with a focus on stability, high returns, and improved margins.

Speaker Change: The performance of our energy storage segment has continued to stabilize and deliver improved results in the period, with the segment exhibiting strong revenue growth versus the prior year as a result of the contribution from the 83 MW of new projects that came online in the last 12 months.

Doron Blachar: Additionally, we continue to make progress on our goal of transitioning our energy storage business towards the more balanced portfolio through a mix of our contracts, stalling agreements, and merchant projects with the focus on stability, higher returns, and improved models. This effort is highlighted by recent 15-year RIA agreement with the city of Riverside for our shared storage facility, which we expect will be eligible for approximately 40% ITC benefits and the relief for construction of Luisa and new storage facilities. of 100 megawatts, 200 megawatts hour in Texas, which we also expect to be eligible for 40% ITC benefit.

Doron Blachar: This effort is highlighted by a recent 15-year R.A. agreement with the City of Riverside for our shared storage facility, which we expect will be eligible for approximately 40% ITC benefits, and the Relief for Construction of Louisa, a new storage facility with 100 MW, 200 MWh in Texas, which we also expect to be eligible for 40% ITC benefits. With the first half of the year now behind us, our generating capacity portfolio stands at 1,420 MW as the demand for renewable energy and the Zero Emission Power Generation Solution continues to increase.

Speaker Change: and the release for construction of Luisa, a new storage facility of 100 MW, 200 MWh in Texas, which we also expect to be eligible for 40% ITC benefits.

Doron Blachar: With the first half of the year now behind us, our generating capacity portfolio stands at 1,420 megawatts as the demand for renewable energy and zero emission power generation solutions continues to increase. The increase in growing demand we see transcends our confidence that we are progressing world towards our long-term goals, which directly align with the global trend of reducing carbon emission from power production. Additionally, our growing energy storage segment is showing a strong and improved trajectory, not only for revenue growth but for enhanced returns and earnings contribution.

Speaker Change: With the first half of the year now behind us, our generating capacity portfolio stands at 1,420 MW as the demand for renewable energy and zero-emission power generation solutions continues to increase.

Doron Blachar: The increased and growing demand we see strengthens our confidence that we are progressing well towards our long-term goals, which directly align with the global trend of reducing carbon emissions from power products. Additionally, our growing energy storage segment is showing a strong and improved trajectory, not only for revenue growth, but for enhanced returns and earnings contributions. Now, before I provide further updates on our operation and plans, I will turn the call over to Afi to review the financial results for the quarter. Atzi.

Speaker Change: Additionally, our growing energy storage segment is showing a strong and improved trajectory, not only for revenue growth, but for enhanced returns and earnings contributions.

Asi: Now, before I provide further updates on our operations and plans, I will turn the call over to Asi to review the financial results for the quarter.

Speaker Change: Now, before I provide further updates on our operation and plans, I will turn the call over to Asi to review the financial results for the quarter. Asi?

Asi: Asi?

Asi: Thank you, Doron. Let me start my review of our financial highlights on slide 5. Total revenue for the second quarter was $230 million, marking growth of more than 9% U of a U. Our consolidated top-line expansion was driven by growth across all of our format operating segments, which serves as a testament to our continued track record of executing profitable growth. Our second quarter of 2024 growth profit was $61.4 million, up 24% versus $49.5 million in the second quarter of 2023, resulting in a consolidated growth margin of 28.8%. Versus 25.4% last year. The increase was driven by solid margin expansion across all three operating segments.

Assaf Ginzburg: Let me start my review of our financial highlights on slide Total revenue for the second quarter was $213 million, marking growth of more than 9% year over year.

Assi: Thank you, Doron.

Assi: Let me start my review of our financial highlights on slide 5.

Assi: Total revenue for the second quarter was $213 million.

Assaf Ginzburg: Our consolidated top-line expansion was driven by growth across all of Ormat's operating sectors, which serves as a testament to our continued track record of executing profitable growth. Ormat's second quarter 2024 gross profit was $61.4 million, up 24% versus $49.5 million in the second quarter of 2022, resulting in a consolidated gross margin of 28.8%, versus 25.4% last year. Adjusted net income, a previous ability of the company's stockholders, increased by 0.3% to $24.3 million.

Asi: Our consolidated top-line expansion was driven by growth across all of Ormat's operating segments.

Asi: which serve as a testament to our continued track record of executing profitable growth.

Asi: Resulting in a consolidated growth margin of 28.8%.

Asi: Net income deteriorated to the company's stockholders was $22.2 million or 37 cents per diluted share in the quarter, compared to $24.2 million or 40 cents per diluted share in the second quarter of the prior year. Adjusted net income, a privilegeable to the company's stockholder, increased by 0.3% to $24.3 million. Adjusted deluded EPS was $0.40, similar to the second quarter of the last year. Net income was adjusted to exclude right off mainly related to the commissioning of ORIG-4, a four megawatt-reg facility, as well as unsuccessful exploration activities. Second quarter adjusted EBDA was $126.1 million, an increase of 25% in the second quarter compared to the $100.9 million generated in the prior year period.

Asi: Adjusted net income attributable to the company's stockholder increased by 0.3% to $24.3 million.

Asi: Adjusted diluted EPS was $0.40, similar to the second quarter last year.

Assaf Ginzburg: Net income was adjusted to exclude write-offs mainly related to the decommissioning of OREC IV, as well as unsuccessful exploration activities, an increase of 25% in the second quarter. Electricity segment revenues increased by 7% to $166.2 million. Second quarter revenue growth was driven by the factors that I previously mentioned in the product segment. Revenues mark a substantial increase, growing by 13.1%. The current product segment backlog stands at approximately $165 million, as of August 5th, 2024; with a state-owned utility, energy storage segment revenue increased by 48.1% to $8.9 million in the second quarter, up from 29.6% from the previous and Improved Merchant Prices at BGN.

Speaker Change: Net income was adjusted to exclude write-offs mainly related to the decommissioning of OREG4, a 4 MW REG facility.

Asi: as well as unsuccessful exploration activities.

Asi: compared to the $100.9 million generated in the prior year period.

Asi: The strong yield of the increase in adjusted EBDA was driven by higher revenues and improved growth margin across all three business segments, which in turn drove higher operating income. Our improved growth profit in the quarter was driven mainly by the newly acquired portfolio assets in early 2024, the improved operation at our Puna Power Plant, and the contribution from the Himber Complex Repowering.

Asi: The strong EROV increase in adjusted EBITDA was driven by higher revenues and improved gross margin across all three business segments.

Asi: Our improved gross profit in the quarter was driven mainly by the new acquired portfolio assets in early 2024, the improved operation at our Puna Power Plant, and the contribution from the Himbel Complex Repowering.

Asi: On slide six, we break down the revenue performance at the segment level. Electricity segment revenue increased by 7% to $166.2 million. Second quarter revenue growth was driven by the factor that I previously mentioned. This revenue growth was partially offset by weaker performance and Dixie value due to an unplanned outage, which Doron will touch on later in the call. In the product segment, revenue's market substantial increase growing by 13.1% to $37.8 million. The growth of product segment was supported by a stronger backlog and the timing of revenue recognition. The call on product segment backlog stands at approximately $165 million, and of August 5th to 2024, and includes the EPC of the Dominica B-O-T project with a stained owned utility.

Asi: Electricity segment revenues increased by 7% to $166.2 million.

Asi: Second quarter revenue growth was driven by the factors that I previously mentioned.

Asi: Energy storage segment revenue increased by 48.1% to $8.9 million in the second quarter. This strong growth was driven by the 83 megawatt that came online in the past 12 months, including the 20 megawatts. 20 megawatt hour is Fleming some project that started operation in the first quarter of this year, and the addition of the Pomona-2 toilet agreement energy storage revenues also benefited from improving pricing many APGM. Moving to slide 7, growth margin for the electricity segment was 33.5% in the second quarter, up from 29.6% from the previous year. The margin expansion was driven primarily by the improved Eurovere generation performance at Pomona and the Hebrew complex, as well as the reduction in our power plant O&M costs.

Asi: Energy storage segment revenue increased by 48.1% to $8.9 million in the second quarter.

Asi: Moving to slide 7. Gross margin for the electricity segment was 33.5% in the second quarter, up from 29.6% from the previous year.

Asi: In the product segment, growth margin was 13.7% in the second quarter, up from 10.4% in the second quarter of 2023. Margin increased due to profitability on our contracts. Within the energy storage segment, growth margin during the second quarter was 5.7% compared to 1.9% in the prior year. Energy storage growth margin benefited from higher post-ability from Pomona-2 new toilet agreement and improved merchant prices at BGM.

Asi: In the product segment, gross margin was 13.7% in the second quarter, up from 10.4% in the second quarter of 2023.

Asi: Margins increased due to improved portability on our contract.

Asi: Energy Storage Gross Margin Benefited from Higher Port Stability from our Pomona Tool New Tooling Agreement, and Improved Merchant Prices at BGM.

Asi: Breaking down adjusted EBDA in the segment level on slide 8, the electricity segment generated 91% of Ormat's total consolidated adjusted EBDA in the second quarter. The product segment contributed 5%, and the energy storage segment accounted for 4% of total adjusted EBDA. Reconciliation of EBDA and adjusted EBDA are provided in the appendix slide in the back of the presentation. Moving to slide 9, in the second quarter, we recorded $15.8 million in income related to tax benefit. Compared to $15 million last year, the increase is primarily related to the North Valley tax equity transaction entered in October 2023, and to higher transferable PTCs, offset by lower generation of PTCs by other tax equity transactions.

Assaf Ginzburg: The electricity segment generated 91% of Ormat's total consolidated adjusted EBITDA in the second... In the second quarter, we recorded $15.8 million in income related to tax. Also, and Keshe Equivalent, illustrating Ormat's ability to reinvest in a business. If they convert it into money, we will pay additional interest. Our total expended capital expenditure for the remainder of 2024 is approximately $292 million.

Asi: Reconciliation of EBITDA and Adjusted EBITDA are provided in the appendix slide in the back of the presentation.

Asi: compared to $50 million last year.

Asi: and to hire transferable PTCs offset by lower generation of PTCs by other tax equity transactions.

Asi: Also, in the second quarter, we recorded a $6.2 million ITC benefit in the income tax line. Related to the two storage facilities is Flemington that came online in the first quarter of the year and Bottleneck that is expected to come online towards the end of the third quarter this year. We anticipate that we will receive up to $125 million cash proceeds related to the PTC and ITC benefits in 2024. This process will effectively reduce our capital needs, expanding our ability to not only fund our growth, but to do so with strengths profitability across our base of generating assets and ultimately lowering the capital intensity of our growth efforts.

Asi: Related to the two storage facilities is Flemington that came online in the first quarter of the year and Bottleneck that is expected to come online towards the end of the third quarter this year.

Asi: Expanding our ability to not only fund our growth, but to do so with strength profitability across our base of generating assets, and ultimately, lowering the capital intensity of our growth efforts.

Asi: Looking at slide 10, our net debt as of June 30, 2024, was approximately $2.2 billion. Equivalent to 4.2 times net debt to adjusted EBITDA. Cash and cash equivalent and restricted cash and cash equivalent as of June 30, 2024, was approximately $164 million compared to $288 million at the end of 2022. Slide 10 breaks down our use of cash for the six months, illustrating our matability to reinvest in the business. Service our debt obligation while also consistently returning capital to our shareholders, all while growing our business. Our total debt as of June 30, 2024, was approximately $2.4 billion.

Asi: looking at slide 10.

Asi: Cash, and Cash Equivalent.

Asi: and Restricted Cash and Cash Equivalents, as of June 30, 2024, was approximately $164 million compared to $288 million at the end of 2023.

Asi: Slide 10 breaks down our use of cash for the six months.

Asi: Service our debt obligation while also consistently returning capital to our shareholders.

Asi: all while growing our business.

Asi: Our total debt as of June 30, 2024 was approximately $2.4 billion.

Asi: Net of the third financing cost is presented on slide 29 in the appendix, which outlined the payment schedule. The average cost of our debt for the company stands at 4.63%. We reiterate that the majority of our debt liabilities are at fixed interest. which we believe will help maintain Omar's competitive edge in the current elevated and volatile global interest rate environment. Moving to slide 11, we have approximately $654 million of total available liquidity. After the quarter ended, we issued $45.5 million under the 2022, 2.5% considerable bond to refinance debt. Please note that the bond itself cannot be converted to equity.

Asi: The average cost of our debt for the company stands at 4.63%.

Asi: We reiterate that the majority of our debt liabilities are at fixed interest rates.

Asi: which we believe will help maintain Ormat's competitive edge in the current elevated and volatile global interest rate environment.

Asi: Moving to slide 11, we have approximately $654 million of total available liquidity.

Asi: After the quarter ended, we issued $45.5 million under the 2022 2.5% convertible bond to refinance debt.

Asi: If the convert is in the money, we will pay additional interest only. We will be able to make the additional payment in either cash or shares based on our decision.

Asi: Please note that the bond itself cannot be converted to equity.

Asi: We will be able to make the additional payments in either cash or shares based on our decision.

Asi: Our total expected capital expenditure for the remainder of 2024 is approximately $292 million, as Zital in slide 30 in the appendix. We plan to invest approximately $138 million in the electricity segment for construction, exploration, drilling, and maintenance caps. We plan to spend $140 million for the construction of our storage assets in the remaining of 2024. Our financial and capital resource position is well for the continued execution of our growth plan and our executive capital deployment. As we continue to progress with executing on our growth plan, we are consistently increasing our cash generation, which, combined with the expected cash from utilizing the tax benefit, will fund our caps.

Asi: We plan to invest approximately $138 million in the electricity segment for construction, exploration, drilling, and maintenance CAPEX.

Asi: We also plan to spend $140 million for the construction of our storage assets in the remaining of 2024.

Asi: Ormat Banshees and Capital Resource Positions, as well for the continued execution of our growth plan.

Asi: As we continue to progress with executing on our growth plans.

Asi: We continue to maintain excellent liquidity and have ample access to additional capital if needed.

Asi: On August 6, our board of directors declared, approved, and authorized payment of quarterly dividend of $12 cents per share, payable on September 3, 2024, to shareholders of record as of August 20, 2024. We expect to maintain this dividend level for the next quarter as well.

Asi: On August 6th, our Board of Directors declared, approved, and authorized payment of quarterly dividend of $0.12 per share payable on September 3rd, 2024 to shareholders of record as of August 20, 2024.

Asi: We expect to maintain this dividend level for the next quarter as well.

Asi: That concludes my financial overview.

Doron Blachar: I would now like to turn the call over to the round to discuss some of our written development. Thank you, AC. Turning to slide 13 for a look at our Electricity segment operating portfolio. Portfolio growth during the quarter was positively supported by the recently completed COD for BYURIP powering. Actual generation in the quarter increased due to the positive contribution of our recently acquired an LASET and HIBIL-1. Our PUNA facility showed continued improvement during the second quarter, running at approximately 31 megabytes. Turning to slide 14 for an update on our operating footprint. At our old career power plant in Kenya, we achieved a significant milestone by successfully conducting capacity tests that reached approximately 148 megawatt.

Asi: That concludes my financial overview. I would now like to turn the call over to Doron to discuss some of our recent developments.

Unknown Executive: Thank you, Asi. Turning to slide 13 for a look at our electricity segment operating portfolio. The plant has resumed partial operation, and we expect to resume full operation in the fourth quarter after a 30-day shutdown in October. This reduction was taken into account in our revised guide.

Doron: Thank you Assi. Turning to slide 13 for a look at our electricity segment operating portfolio.

Doron Blachar: This achievement resulted in higher capacity revenues during the quarter. These higher capacity revenues were offset by force curtailment, which reduced our revenues and generation out.

Doron: These higher capacity revenues were offset by forced curtailment, which reduced our revenues and generation outputs.

Doron Blachar: On Ulkarja, I would also update that the tax preliminary investigation we reported in the first quarter, thank you, was closed and the initial demand for $79 million was reduced to zero. Our recently acquired the nail assets have continued to positively impact our results, with the asset generating revenue and EBDA of $8.6 million and $6.1 million, respectively. As discussed on our first quarter earnings course, we have started the enhancement of the three acquired your thermal assets that we expect will translate into expanded returns through improved performance. We are also evaluating options to build a new up to 35 megawatt power plant co-fort to Inyuta by the end of 2027, which was initially planned to be completed in 2029 at lower capacity.

Doron: Our recently acquired Enel assets have continued positively impact our results, with the assets generating revenue and EBITDA of $8.6 million and $6.1 million respectively.

Doron Blachar: And as we noted previously, we experienced an unplanned outage during the second quarter at our Dixie Valley facility, resulting in lower electricity generation, which negatively impacted revenues and EBDA by approximately $4.5 million. The plant has resumed partial operation, and we expect to resume full operation in the fourth quarter after a 30 days shut down in October. On an annual basis, we anticipate the impact from Dixie Valley will result in a reduction of $9.6 million in revenues and $8.2 million in EBDA. This reduction was taken into account in our revised guidance. Turning to slide 15, our product segment backlog stands at $165 million, which is up 38 percent when compared to the second quarter of 2023 and 27 percent compared to Q1 2020-24.

Doron: An unplanned outage during the second quarter at our Dixie Valley facility.

Doron: Resulting in lower electricity generation, which negatively impacted revenues and EBITDA by approximately $4.5 million.

Doron: The plant has resumed partial operation and we expect to resume full operation in the fourth quarter after a 30-day shutdown in October .

Doron: On an annual basis, we anticipate the impact from Dixie Valley will result in a reduction.

Unknown Executive: Our product segment backlog stands at $165 million, which is up 38% when compared to the second quarter of 2023 and 27% compared to Q1 2021. This increase is mainly related to the inclusion of the EPC of the Dominica DOT project. The storage segment continues to show signs of solid incremental growth on a sequential basis, which is highlighted by the strong second quarter and first half growth that the segment delivers. As such targets suggest, we currently expect we will see an annual growth rate between 15-17% with the majority of this growth focused in the U.S.

Doron: Turning to slide 15.

Doron: Our product segment backlog stands at $165 million, which is up 38% when compared to the second quarter of 2023, and 27% compared to Q1 2024.

Doron Blachar: This increase is mainly related to the inclusion of the EPC of the Dominica DOT project that we expect will be online by the end of 2025. We continue to remain encouraged by the growing demands for geothermal, which should allow us to maintain a strong battle. Moving to slide 16, the storage segment continues to show signs of solid incremental growth on a sequential basis, which is highlighted by the strong second quarter and first half growth that the segment delivers. The results during the quarter were largely supported by the new projects launched in 2023 and the East Flemington facility that came online during the first quarter.

Doron: that we expect will be online by the end of 2025.

Doron: The storage segment continues to show signs of solid incremental growth on a sequential basis, which is highlighted by the strong second quarter and first half growth that the segment delivered.

Doron: The results during the quarter were largely supported by the new projects launched in 2023 and the e-Flemington facility that came online during the first quarter.

Doron Blachar: Moving to slide 18, as we announced that our recent investor, they will now target our portfolio capacity. to reach between 2.6 to 2.8 gigawatts by year and 2028. As such targets suggest, we currently expect we will see an annual growth rate between 15 to 17 percent, with the majority of this growth focused in the U.S. While we see plenty of promising opportunities internationally, the U.S. has become a much larger focus for our growth efforts, given the rapidly increasing opportunity in the region for both our electricity and storage segments. As I noted at the beginning of the course, our consistently strong performance over the last year quarter has positioned us well in our efforts to achieve our long-term capacity targets and translate the strategic growth into returns.

Doron: As we announced at our recent Investor Day, we are now targeting our portfolio capacity to reach between 2.6 to 2.8 GW by year-end 2028.

Unknown Executive: The U.S. has become a much larger focus for our growth efforts, given the rapidly increasing opportunities in the region for both our electricity and storage sectors. Translate that strategic growth into... Due to our increased focus on the U.S. market, we have increased our business development efforts to secure long-term agreements for the electricity segment, both with traditional utilities and with tech companies. In addition, we are discussing portfolio PPAs with utilities in Nevada, California, and Oregon and with one of the tech companies driven by the increased demand for renewable energy as a result of AI energy. Moving now to slides 21 and 22, which are 435 megawatts.

Doron: As I noted at the beginning of the call, our consistently strong performance over the last year quarter has positioned us well in our efforts to achieve our long-term capacity target and translate that strategic growth into returns.

Doron Blachar: Due to our increased focus on the U.S. market, we increased our business development efforts to secure long-term agreements for the electricity segment, both with traditional utilities and with tech companies. As our heavy one facility, we have reconstructed the project with the same parties and are waiting final approvals for PPA that carry the trice level as discussed in our investor day. In addition, we are discussing portfolio PPAs with utilities in Nevada, California, and Oregon, and with one of the tech companies driven by the increased demand for renewable energy as a result of AI energy needs. All the PPAs are negotiated at the trice ranges, similar to what we presented at our recent Investor Day.

Doron: Due to our increased focus on the U.S. market, we increased our business development efforts to secure long-term agreements for the electricity segment, both with traditional utilities and with tech companies.

Doron: At our Heber One facility, we have recontracted the project with the same parties and are awaiting final approval for a PPA that carries a price level as discussed in our investor day.

Doron: All the PPAs are negotiated at the price ranges similar to what we presented at our recent investor days.

Doron Blachar: Turning now to slides 19 and 20, which display our geothermal and hybrid solar PV projects that we currently have underway. We are currently on track to complete the agent project in Indonesia by the end of 2024. Zoonil in Guatemala is planned to be completed in 2025. Additionally, in our solar PV portfolio, we anticipate that we will complete our CODs for the BYUA solar project by the end of this year. Moving now to slides 21 and 22 to discuss the third layer of our growth plans, our energy storage segment. As our bottlenecks facility in California were currently wrapping up the commissioning stage, and we now anticipate that the 80-megawatt, 320-megawatt-hour storage facility will begin operating by the end of the third quarter of this year.

Doron: Turning now to slides 19 and 20, which displays our geothermal and hybrid solar PV projects that we currently have underway.

Doron: We are currently on track to complete the agent project in Indonesia by the end of 2024.

Doron: Moving now to slide 21 and 22 to discuss the third layer of our growth plan, our energy storage segment.

Doron: At our bottleneck facility in California, we are currently wrapping up the commissioning stage, and we now anticipate that the 80 MW, 320 MW storage facility

Doron: will begin operating by the end of the third quarter of this year.

Doron Blachar: In total, we currently have seven different storage projects under development that we expect to achieve COD by the end of 20-26, which would add a total of 435 megawatt, 1,240 megawatt-hour, to our storage portfolio. As discussed during our Investor Day, our strategy calls for a balance split between turning the remain and merchant box.

Doron: In total, we currently have seven different storage projects under development that we expect to achieve COD by the end of 2026, which should add a total of

Doron: 435 megawatts, 1240 megawatt hour to our storage portfolio.

Doron: As discussed during our investor day, our strategy calls for a balanced split between tolling agreements and merchant market pricing.

Doron Blachar: Before I move on to discuss our guidance, I would like to mention the recent positive development in the Permitting Fund. A few weeks ago, the US Senate introduced the Energy Permitting Reform Act, which seeks to ease the environmental review for solar, wind, and geothermal projects in ways the oil and gas industry has long enjoyed. This is an exciting development forum. If this bill is passed, it will serve as a positive advancement in our strategic growth plan, as it should accelerate the timeline for the necessary permitting to advance our geothermal exploration and solar projects. In term, this development would put us in an even stronger position to reach and exceed our long-term operating capacity goals.

Doron: Before I move on to discuss our guidance, I would like to mention the recent positive development in the permitting fund.

Unknown Executive: 1240 megawatt hours to a storage portfolio. A few weeks ago, the U.S. Senate introduced the Energy Permitting Reform Act, which seeks to ease the environmental review for solar, wind, and geothermal projects in ways the oil and gas industry has long enjoyed. This is an exciting development for all. If this bill is passed, it will serve as a positive advancement in our strategic growth plan as it should accelerate the timeline for the necessary permits to advance our geothermal exploration and solar projects.

Doron: This is an exciting development for Ormat.

Unknown Executive: In turn, this development will put us in an even stronger position to reach and exceed our long-term operating capacity. Please turn to slide 23 for discussion about 2024. We narrowed and increased the midpoint of our expected total revenue, and we expect it to range between $875 and $910 million. As a result of increased profitability in all of our segments, we increased our expected adjusted EBITDA mid-term. I will end our prepared remarks on slide 28.

Doron Blachar: Please turn to slide 23 for discussion for 2024 guidance. We narrowed and increased the midpoint of our expected total revenue, and we expected to range between 875 and 910 million dollars. With the electricity segment revenues between 710 and 720 million dollars, product segment revenues between 130 and 145 million dollars, and energy storage revenues between 35 and 45 million dollars. As a result of increased profitability in all of our segments, we increased our expected adjusted EBITDA midpoint and expected the range to be between 520 and 515 million dollars. We expect annual adjusted EBITDA attributable to minority interest to be approximately 20 million dollars.

Doron: Please turn to slide 23 for a discussion of our 2024 guidance.

Doron: We narrowed and increased the midpoint of our expected total revenue, and we expect it to range between $875 and $910 million.

Doron: with electricity segment revenues between $710 and $720 million.

Doron: Product Segment Revenue between $130 and $145 million and Energy Storage Revenue between $35 and $45 million.

Doron: As a result of increased profitability in all of our segments, we increased our expected adjusted EBITDA midpoint and expect the range to be between $520 and $550 million.

Doron: We expect annual adjusted EBITDA attributable to minority interest to be approximately $20 million.

Doron Blachar: I will end our prepared remarks on Slide 24. To summarize, we are proud of what we have been able to accomplish during the first half of the year, as we continue to execute against our long-term growth targets while also delivering strong financial results. Encouragingly, these results have been driven. Our premium geothermal and energy storage solutions, our strong business development track record, and our ability to drive improved project to turn through higher PPA pricing and tolling and driven. Furthermore, with favorable PTC and IPC benefits and the cash reformal operations, we have the unique ability to which self-funding of our future growth, through casual generation, and so much continues to progress along its growth trajectories.

Doron: I will end our prepared remarks on slide 24.

Unknown Executive: To summarize, we are proud of what we have been able to accomplish during the first half of the year. Our strong business development track record and our ability to drive improved project returns through higher PPA pricing and tolling adjustments. With all this combined, we believe that we are on the right path forward to drive significant stakeholder value in 2024 and beyond. Operator, please.

Doron: To summarize, we are proud of what we have been able to accomplish during the first half of the year.

Doron: As we continue to execute against our long-term growth targets while also delivering strong financial results.

Doron: Encouragingly, these results have been driven by our premium geothermal and energy storage solutions, our strong business development track record, and our ability to drive improved project returns through higher PPA pricing and tolling agreements.

Doron: Furthermore, with favorable PTC and IPC benefits, and the cash flow from our operations, we have the unique ability to reach self-funding of our future growth through cash flow generation, and Ormat continues to progress along its growth trajectory.

Doron Blachar: As we look ahead, we continue to see strong industry tailwinds for both geothermal and energy storage that will help drive increased profitability for much, as the demand for electricity continues to grow with the rise of data centers. With all this combined, we believe that we are on the right path forward to drive significant stakeholders' value in 2024 and B.

Doron: As we look ahead, we continue to see strong industry tailwinds for both geothermal and energy storage that will help drive increased pop stability for ORMAT as the demand for electricity continues to grow with the rise of data centers.

Doron: With all this combined, we believe that we are on the right path forward to drive significant stakeholders value in 2024 and beyond.

Doron Blachar: This concludes our prepared remarks.

Operator: Now I would like to open the call for questions. Operator, please.

Speaker Change: This concludes our prepared remarks. Now I would like to open the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Noah Kaye: Thanks for taking the questions. First on storage. Just wanted to put a finer point on the expected timing for bottleneck to come online. I think you mentioned that would be this quarter. Just give us a sense of where you're at in the process. Any kind of puts and takes towards getting this the final completion. And then it seems like just better merchant prices and some of the better pricing under Pomona is helping offset any delay in contribution from bottleneck and the full year guide. Is that the right way to think about it?

Speaker Change: Thanks for taking the questions. First, on storage,

Speaker Change: Just wanted to put a finer point on the expected timing for bottlenecks to come online.

Speaker Change: That would be this quarter. Just give us a sense of where you're at in the process, any kind of puts and takes towards getting this to final completion.

Speaker Change: And then it seems like just better merchant prices and some of the better pricing under Pomona is helping offset any delay in contribution from bottleneck in the full year guide. Is that the right way to think about it?

Doron Blachar: Hi, Noah. Thank you. So regarding bottleneck, we are in the final stages of commissioning any commissioning the facility. Following that, we have some commission tests with SE and Kaiser and the off-dater. So we expect the project to come online by the end of September. We did expect it to come a few weeks earlier, so we're going to delay, but that's obviously included in our numbers that we've issued. Right. And as far as the potential offset in terms of just better economics and the rest of the portfolio, is that the right way to think about it?

Speaker Change: I know. Thank you. So, regarding Bottleneck, we are in the final stages of commissioning the facility. Following that, we have

Unknown Executive: some commissioning tests with SCE and Kaizo and the off-taker. So we expect the product to come online by the end of September. And we did expect it to come a few weeks earlier, so we do have a delay, but that's obviously included in our numbers that we...

Speaker Change: Some commissioning tests with SCE and Kaizo and the off-taker. So we expect the project to come online by the end of September .

Speaker Change: We did expect it to come a few weeks earlier, so we do have a delay, but that's obviously included in our numbers that we have issued.

Speaker Change: Right, and as far as the potential offset in terms of just better economics from the rest of the portfolio, is that the right way to think about it? Because obviously Bottleneck is a pretty substantial project.

Doron Blachar: Because obviously, bottleneck is a pretty substantial project. Yes, yes, definitely. We've seen a better pricing and believe across all of our fleet in more in PGM, but also Texas had better pricing, and California also had not bad pricing. So we had the larger fleet today, so we can cover up for this huge delay. Okay, very helpful.

Unknown Executive: Yes, yes, definitely. We've seen better pricing, I believe, across all of our fleets, more in PGM, but also Texas had better pricing, and California also had not bad pricing. So we had a larger fleet today, so we can cover up for this few weeks' delay.

Speaker Change: Yes, yes, definitely. We've seen a better pricing, I believe, across all of our fleet in the Moines PGM, but also Texas had better pricing and California also had better pricing.

Speaker Change: Thank you.

Doron Blachar: And then you know, you talked about Investor Day engagement specific numbers on, you know, where pricing has trended on the geothermal side and it's very encouraging. As we look at the development, the portfolio development that you've got listed on slide 19, all of these have PPAs. I guess, you know, can you help us think through where there may be outside to the current portfolio with respect to either, you know, re-contracting or additional capacity that can be contracted out more favorably? How should we dimension that? I would say that, as you know, we did sign two portfolio PPAs with CC Power and with NVNG. I would say that all the contracts that are going to be re-contracted with these two PPAs will have better pricing than what they are today.

Speaker Change: Very helpful. And then you talked at Investor Day and gave some specific numbers on

Speaker Change: You know, listed on slide 19, all of these have

Speaker Change: We give to PPAs, and we'll have better pricing than what they are today.

Doron Blachar: The pricing, the PPA that we are negotiating today relates to the following period after 2028, and over that we say that pricing in the area of 100 plus minus depends on the specific location. So, on these projects that you do, you see here on the list, most of them will come online before the end in the PPA.

Speaker Change: The PPA that we are negotiating today relates to the following period after 2028, and over that we say the pricing is in the area of 100 plus minus, depends on the specific location.

Speaker Change: So these projects that you see on the list, most of them will come online before the end.

Doron Blachar: The one thing that is very interesting is co-fort that we acquired from an earlier this year. We released the three expansions, and we are also looking at the co-fort two. We originally focused it to be in 2029 at the round 20 to 25 megawatts. Today we believe it can be in 2027 and maybe even at a higher capacity. We're finalizing it, but it might be up to 35 megawatts. And we are now negotiating with so-through the power of the PPA for the suspension. That's very encouraging.

Unknown Executive: and We are also looking at COFOR2.

Speaker Change: And we are also looking at COFOR2.

Speaker Change: We originally forecasted it to be in 2029 at around 20 to 25 megawatts. Today we believe it can be...

Unknown Executive: I'll turn it over.

Unknown Executive: Thank you.

Justin Clare: We'll move next to Justin Clare at Roth Capital.

Justin Clare: We'll move next to Justin Claire at Roth Capital.

Speaker Change: We'll move next to Justin Clare at Roth Capital.

Doron Blachar: Hi. Good morning. So wanted to start off on your Ocaria project in Kenya. So it sounds like you had a successful capacity test up to 148 megawatts here. Was wondering where that plant is operating on average, and then what the potential is to kind of move that capacity upward toward the 148 or potentially up to the 150 where your PPA is. Could we see that by the end of the year, or how do you see the average stable capacity trending ahead here? As we discussed in Q4 and also in Q1, we were able to have a very successful drilling company in Kenya.

Unknown Executive: I wanted to start off on your Eukarya project in Kenya. It sounds like you had a successful capacity test at 148 megawatts here. I was wondering where that plant is operating on average, and then what the potential is to kind of move that capacity upward toward the 148 or potentially up to the 150 where your PPA is. You know, could we see that by the end of the year, or how do you see the kind of average stable capacity trending ahead here?

Justin Clare: So it sounds like you had a successful capacity test up to 148 megawatts here. I was wondering where that plant is operating on average and then what the potential is to kind of move that capacity upward toward the 148 or potentially up to the 150 where your PPA is, you know, could we see that by the end of the year or how do you see the kind of average stable capacity?

Unknown Executive: We were able to have a very successful drilling campaign, and we don't see a reason why this number will come down. We should stay at that amount in the foreseeable future. We also have a plan in the next few months to recalibrate the way the wells are flowing into the facility in order to make sure we can keep it at a very high quality. I don't think there is a big difference between 148 and 150, but this is where we are today.

Doron Blachar: And right now the plant can generate 148 megawatts, and that's the capacity that we are charging our customer. We don't see a reason why this number will come down. We should stay at that amount in the foreseeable future. We also have a plan in the next few months to recalibrate and the way the whales are flowing into the facility in order to make sure we can keep it a very high capacity. I will say, though, that we are experiencing curtailment in Kenya. Here today, including July, we probably lost 7 to 8 million dollars as a result of the curtailment.

Speaker Change: In Kenya, and right now the plant is, can generate 148 megawatts, and that's the capacity that we are charging our customer.

Speaker Change: in the foreseeable future.

Speaker Change: I will say though that we are experiencing curtailment in Kenya.

Doron Blachar: So the plant is running at a lower capacity, but it's available to run close to capacity, which is 150. I don't think there is a big difference between 148 and 150, but this is where we are today. We may get 150, but we are very satisfied with the successful outcome of the drilling company. You asked about Kenya; we just said that we continue to see positive cash flow payments from KPLC on one hand. And in addition, as the one mentioned, we did have 80 million dollars almost tax investigation claim that we got from the KRA.

Unknown Executive: We may get to 150, but we're very satisfied with the successful outcome of the drilling campaign. As for Kenya, I will just add that we continue to see positive cash flow payments from KPLC on the one hand, and, in addition, as Doron mentioned, we did have $80 million, almost a tax investigation claim that we got from the KRA.

Doron Blachar: during late Q1, early Q2. And that was fully resolved with zero settlement. So we basically resolved all of it.

Speaker Change: during late Q1, early Q2.

Doron Blachar: So I will say, in general, most of the issues in Kenya are behind us. Now we are trying to work with KPLC to try and reduce the impact of the cut element. Okay, great. That's helpful. Maybe you could just elaborate on the reason that you are seeing the curtailment and what you anticipate ahead. Here is their potential for that to be reduced or where you want to see curtailment going forward. We do know that there is some interconnection issues and capacity on the lines. And there are other developers in Kenya that are developing projects. Maybe KPLC have some take-up ways that they are required to fill before they buy the geothermal.

Speaker Change: Okay, great. That's helpful. Maybe you could just elaborate on the reason that you are seeing the curtailment and what you anticipate ahead here. Is there, you know, potential for that to be reduced or where you won't see curtailment going forward?

Doron Blachar: With that being said, our energy price is pretty low. It's three and a half cents per kilowatt. And we believe that over time, it will be very attractive for KPLC to buy this amount more energy from us. In addition to that, we did pick up a production very quickly from 110, 115 to 148. So maybe they also need to adjust to the changes. Now the plant is much larger. So I don't have a direct knowledge of when this thing will be adjusted back. But we are planning to meet with KPLC over the next few months to try and reduce the curtailment impact.

Unknown Executive: amount of more energy from us. In addition to that, you know, we picked up production very quickly from 110, 115 to 148. So maybe they also need to adjust to try and reduce the curtailment impact.

Speaker Change: Also, in addition to that, we did pick up production very quickly from $110, $115, to $148. So maybe they also need to adjust.

Unknown Executive: Okay, got it.

Doron Blachar: And maybe just shifting over to your battery storage business. I was wondering if you could talk about your ability to secure the domestic content adder for your battery projects in 2025 or 2026. It sounds like there are suppliers that are offering different approaches to qualifying for domestic content. So just want to see if that was a possibility, you know, in the coming years here. We are discussing with all battery suppliers. We know that some of them claim that in 2024, they are able to meet the domestic content. We know that they are looking at ways how to get to domestic content in 2025.

Speaker Change: Okay, got it. And maybe just shifting over to your battery storage business.

Unknown Executive: We are discussing it, you know, with all the battery suppliers. We know that some of them claim that in 2024, they are able to meet domestic content requirements. So we are looking at it. We don't see today one of these projects that we released getting 50%, but future projects, every project before we release it, we discuss with foreign manufacturers and local manufacturers to see if we can get local content.

Speaker Change: We know that they are looking at ways how to get to domestic content in 2025 and obviously the IRS guidelines are becoming more and more strict as the years pass.

Doron Blachar: And obviously, the IRS guidelines are becoming more and more strict as the years pass. So we are looking at it. Our project is listed on our presentation. Most of them are 40%. We don't see today one of these projects that we released getting 50%, but future projects. Every project, before we release it, we discuss with foreign manufacturers and local manufacturers in order to see if we can get local content. And on top of that, you know, whether or not the higher pricing for the local content is getting basically paid back by the ITC, or you basically pay the same and the entire benefit goes to the domestic content or the local manufacturer.

Speaker Change: We don't see today one of these projects that we released getting a 50% but future projects every project before we release it, you know, we discuss with

Speaker Change: Foreign Manufacturers and Local Manufacturers in order to see if we can get local content. And on top of that, you know, whether or not the higher pricing for the local content...

Unknown Executive: And on top of that, you know whether or not the higher price for local content is getting basically paid back by the ITC, or you basically pay the same, and the entire benefit goes to the domestic content or the local manufacturer.

Speaker Change: It's getting basically paid back by the ITC or you basically pay the same and the entire benefit goes to the domestic content or the local manufacturer.

Unknown Executive: Joshua. Got it. Okay, appreciate it.

Justin Clare: Got it. Okay. I appreciate it. Thank you.

Speaker Change: Got it. Okay. Appreciate it. Thank you.

Derek Podhaizer: We'll move next to Derek Podhaizer at Barclays. Hey, good morning. Just wanted to ask about the margin outlook for both product and interview storage. I know product you previously guided us to 15-20 percent. We're still below that right now, so maybe can you help us bridge us to where you are today to get into that 15-20 percent range. And then on the energy storage, similar, I know bottle vaccines like it's got pushed out to the end of the third quarter and just thinking about a margin inflection there that you guys previously talked about. So just the overall margin outlook for a product that energy storage.

Speaker Change: We're still below that right now, so maybe can you help us, bridge us to where you are today to get into that 15 to 20 percent range. And then on the energy storage, similar, I know bottleneck seems like it's got pushed out to the end of the third quarter, and just thinking about a margin inflection there that you guys previously talked about, so just the overall margin outlook for a product at energy storage.

Doron Blachar: On the product segment, you know, 15-20 percent; this is our target. Although this quarter, you know, we were 13.7 percent, which is a bit below this target. We do see on the project that we're working on and signing margins within the range that we guided. And obviously, in specific quarter might be a bit lower, but this is the target that we have. On the storage front, when we look at QA4 with the expectation of the bottle neck, we do expect a double digits anywhere from 10 to 15 percent margin and that not assuming any weather events.

Unknown Executive: On the product segment, you know, 15 to 20%. This is our target. Although this quarter, you know, we were 13.7%, which is a bit below this target, we do see on the project that we're working on and achieving a margin within the range that we guided, and obviously, in specific... Quota, it might be a bit lower, but this is the target that we have.

Speaker Change: range that we guided. Um, and operations, the 53

Speaker Change: Quota might be a bit lower, but this is the target that we have.

Unknown Executive: On the storage front, when we look at QA4 with the expectation of the operation of the bottlenecks, we do expect a double digit, anywhere from 10 to 15% margin. Initially, I would say the bottleneck, a lot of the income is coming in Q3, and right now, it looks like Q3 will not include the bottleneck for most of the quarter. So the margin environment should be closer to what we've seen this quarter.

Speaker Change: On the storage front, when we look at QA4 with the expectation of the operation of bottlenecks, we do expect a double digit anywhere from 10 to 15% margin, and that not assuming any weather events.

Doron Blachar: Initially, I would say that bottle neck, a lot of the income is coming in Q3, and right now it looks like Q3 will not include the bottle neck for the most of the quarter. So the margin environment should be closer to what we've seen this quarter. Okay, I got it. That's helpful. Just back on product, primary drivers for margins that that 13.5 percent range. I think that the overall market is very competitive. Some of our projects that we signed are a big portion of the construction part, which is part of the EPC that we're doing for most of our New Zealand customers.

Speaker Change: Initially, I would say that bottleneck, a lot of the income is coming in Q3 and right now it looks like Q3 will not include a bottleneck for the most of the quarter. So the margin environment should be closer to what we've seen this quarter.

Unknown Executive: Okay, got it. That's helpful. And just back on product, any primary drivers for margins in that 13 and a half percent range?

Speaker Change: Okay, I got it. That's helpful. And just back on product, primary drivers for margins at that 13.5% range?

Unknown Executive: I think that the overall market is very competitive. Some of our projects that we've signed have a big portion of the construction part, which is part of the EPC that we're doing for mostly our New Zealand customers. Those projects that we do in New Zealand involve a big portion of that construction, and usually the margin on it is around 10%, which is different than the margin that we're getting by selling pure equipment.

Speaker Change: I think that the overall market is very competitive. Some of our projects that we signed have a big portion of construction part, which is part of the EPC that we are doing for mostly our New Zealand customers.

Doron Blachar: Those projects that we do in New Zealand has a big portion of that construction and usually the margin on it is around 10 percent, which is different than the margin that we are getting by selling a pure equipment. I will say that Dominica is a BOT project that we are now recording it as a third party project does carry close to 22 percent margin, and that should improve margin as we go towards the next year. Okay, that's helpful.

Speaker Change: Those projects that we do in New Zealand has a big portion of that construction and usually the margin on it is around 10% which is different than the margin that we are getting by selling pure equipment.

Unknown Executive: I will say that Dominica, that is a BOT project that we are now recording it as a third-party project, does carry close to 22% margin, and that should improve margin as we go towards the next year.

Unknown Executive: Okay, that's helpful. And then, I guess just following up on the selling of the pure equipment, this is more of a bigger picture question, but can you help frame for us just the dollar per megawatt exposure you have on the product side from the growing unconventional geothermal players, the startup communities, whether you want to call them EGS or AGS, just maybe how you think about how you could be a partner with those guys as they look to build and construct power plants using their new designs

Doron Blachar: And then just following up on the selling of the pure equipment, this is more of a bigger picture question, but could you help frame for us just the dollar per megawatt exposure you have on the product size from that growing, unconventional geothermal players, the startup communities, whether you want to call it EGS or EGS, just maybe how you think about how you could be a partner with those guys as they look to build and construct power plants using their new designs, just help us frame what kind of an opportunity that could be for you. If you can give it on a dollar per megawatt basis, I would assume it's going to be coming out of the product size.

Speaker Change: And then just following up on the selling of the pure equipment, this is more of a bigger picture question, but could you help frame for us just the dollar per megawatt exposure you have on the product side from...

Speaker Change: That growing, unconventional geothermal players, the startup communities, whether you want to call it EGS or AGS, just maybe how you think about how you could be a partner with those guys as they look to build and construct power plants using their new designs. Just help us frame what kind of an opportunity that could be for you.

Unknown Executive: Just help us frame what kind of an opportunity that could be for you. If you can give it on a dollar per megawatt basis, I would assume it's going to be coming out of the product side.

Speaker Change: If you can give it on a dollar per megawatt basis, I would assume it's going to be coming out of the product side.

Doron Blachar: I would say if the EGS technology will be successful and people will be able to use water fracking and generate hot water or steam, this could be for the product segment a very big upside because we will suddenly see many more potential geothermal projects coming online. So we definitely look forward to see it. I can tell you that internally in Omas we are also looking at EGS since we are also a developer of projects, and if this technology will be successful. I will tell you that Omas has a patent on this technology from 18 years ago already.

Unknown Executive: I would say if the EGS technology will be successful and people will be able to.., use water fracking and generate hot water or steam. This could be for the product segment a very big upside because we will suddenly see many more potential geothermal projects coming online. So we definitely look forward to see it. I can tell you that internally in Ormat, we're also looking at EGS since we're also a developer of project, technologies challenges that they still need to overcome in order for this technology to be a

Speaker Change: I would say if the EGS technology will be successful and people will be able to

Speaker Change: Use water fracking and generate hot water or steam.

Speaker Change: This could be for the product segment a very big upside because we will suddenly see many more potential geothermal projects coming online

Speaker Change: So we definitely look forward to see it. I can tell you that internally in Ormat we are also looking at EGS since we are also a developer of projects.

Speaker Change: And if this technology will be successful, and I will tell you that Ormat has a patent on this technology from 18 years ago already, we'll definitely be happy to use the same technology to develop new projects.

Doron Blachar: We will definitely be happy to use the same technology to develop new projects. So we are looking at these startups that are coming. We see this as a very nice and potential upside; however, it's not something that we believe would be in the short term, hopefully in the midterm, but quite a lot of technologies challenges that they still need to overcome in order for this technology to be economical and bankable.

Speaker Change: We are looking at these start-ups that are coming, we see this as a very nice and potential upside. However, it's not something that we believe will be in the short term, hopefully in the mid-term, but quite a lot of potential.

Speaker Change: technology challenges that they still need to overcome in order for this technology to be

Unknown Executive: All right, great. Appreciate all the color. I will turn it back.

Speaker Change: Economical and bankable.

Unknown Executive: All right, great. I appreciate all the color. I'll turn it back.

Unknown Executive: Thank you.

Speaker Change: All right. Great. Appreciate all the color.

John Windham: Next we will move to John Windham at UBS Financial.

Jon Windham: Next, we'll move to Jon Windham at UBS Finance. Hi, good morning, and thank you for joining us.

Speaker Change: Thank you.

Unknown Executive: Hi. Good morning, and thank you for taking the questions.

Speaker Change: Next we'll move to Jon Windham at UBS Financial.

Speaker Change: Hi.

Doron Blachar: I would be very interested in just getting your high-level thoughts about particularly the PGM capacity auction and how you maybe think about future battery storage projects in that region. I know you mostly have been focused on the development in California and Texas, but whether you think PGM is sort of an opportunity moving forward for the storage business. Thanks.

John Windham: Good morning, and thank you for taking the...

John Windham: Questions. I would be very interested in just getting your high-level thoughts.

Speaker Change: about particularly the PJM capacity auction and how you maybe think about future battery storage projects in that region. I know you've mostly been focused on the development in California and Texas, but whether you think PJMs is sort of an opportunity moving forward for the storage business. Thanks.

Doron Blachar: On the PGM capacity market, it was focusing mainly on generating assets and four hours of batteries, not the kind of batteries that we are operating. The actual dollar amount that was there, although it was 10 times better than the previous year, the capacity payment is not a very high capacity payment today. We have about 100 megawatts and 100 megawatt hour in PGM. This is basically the size of operations in PGM where one more project that is coming online, beginning of next year. We see this as a very nice market. We enjoyed it last year on the price, and we enjoyed this year on the higher pricing.

Unknown Executive: On the PGM capacity market, it was focusing mainly on generating assets and four-hour batteries, not the kind of batteries that we're operating. The actual dollar amount that was there, although it was 10 times better than the previous year, the capacity payment, was not a very high capacity payment. Today we have about 100 megawatts and 100 megawatt hours in PGM. This is basically the size of our operations in PGM.

Speaker Change: On the PGM capacity market, it was focusing mainly on generating assets and four-hour batteries, not the kind of batteries that we are operating.

Speaker Change: The actual dollar amount that was there, although it was ten times better than the previous year, the capacity payment is not a very high capacity payment. Today we have about 100 megawatts and 100 megawatt hour in PGM.

Unknown Executive: We have one more project that is coming online at the beginning of next year, so we see this as a very promising market. We enjoyed it last year because of the price, and we enjoyed this year because of the higher price. And we're looking very closely at this market. We hope that the prices will go up. And the PGA market usually has higher prices in the winter versus Texas, which has higher prices in the summer. And that's kind of the balance that we have. So we see this as a nice upside, although not directly impacting our assets.

Speaker Change: This is basically the size of our operations in PGM. We have one more project that is coming online at the beginning of next year.

Speaker Change: So we see this as a very nice market. We enjoyed it last year on the price and we enjoyed this year on the higher pricing.

Doron Blachar: We are looking very closely at this market. We hope that pricing will go up, and the PGM market usually has higher prices in the winter. There is a stake so that it has higher prices in the summer, and that is kind of the balance that we have. We see this as a nice upside, although not directly impacting our assets. We appreciate that.

Speaker Change: And we're looking very closely at this market. We hope that the pricing will go up and the PGA market usually has higher prices in the winter versus Texas that has higher prices in the summer. That's kind of the balance that we have.

Speaker Change: So we see this as a nice upside, although not directly impacting our assets.

Ryan Levine: We will go next to Ryan Levine at City. Good morning. Good afternoon.

Speaker Change: Appreciate that. Be well.

Speaker Change: We'll go next to Ryan Levine at Citi.

Unknown Executive: Good morning or afternoon, is there any update on the Reno, Nevada data center growth opportunity? And what are the current expectations or outlook for your business?

Ryan Levine: Good morning, or good afternoon. Is there any update to the Reno, Nevada data center growth opportunity and what are the current expectations or outlook for your business there?

Doron Blachar: Is there any update to the Reno and Nevada data center growth opportunity, and what are the current expectations or outlook for your business there? Yes, definitely there is a potential and upside. We are negotiating and actually exchanging terms with one of the data centers that is operating in the valley that is looking to buy from us geothermal energy. It is a bilateral discussion with them, and it is actually competing between them versus Envy Energy and other utility in California that we are negotiating. The end of the day, when we look at it, we will find to sell to the utility, and the utility you can sell to the data center as long as we get the right pricing for it.

Unknown Executive: Yes, definitely there is a potential and upside. We are negotiating actually exchanging term sheets with one of the data centers that is operating in Nevada, that is looking to be to buy from us geothermal energy, the end of the day when we look at it you know we're fine to sell to the utility and the utility you can sell to the data center as long as we get the right pricing for it it's not that we need a direct relationship or contract with the data center but today we are negotiating with all of them

Speaker Change: Yes, definitely there is a potential upside. We are negotiating, actually exchanging a term sheet with one of the...

Speaker Change: Data Center that is operating in Nevada, that is looking to buy from us geothermal energy.

Speaker Change: bilateral discussion with them and and it is actually competing between them versus NV Energy and other in another utility in California that we are negotiating

Speaker Change: At the end of the day, when we look at it, you know, we're fine to sell to the utility and the utility can sell to the data center as long as we get the right pricing for it. It's not that we need a direct relationship or contract with the data center, but today we are negotiating with all of them.

Doron Blachar: It is not that we need a direct relationship or contract with the data center, but today we are negotiating with all of them.

Unknown Executive: We will move forward with either one of them, and we will obviously update the both.

Speaker Change: And once we will move forward with either one of them, we will obviously update the barcodes.

Unknown Executive: Okay. And what's the company's current exposure to the Chinese battery suppliers? And has that exposure changed with some of your recent contracting activity with one of your counterparties?

Doron Blachar: What is the company's current exposure to the Chinese battery suppliers, and has that exposure changed with some of your recent contracting activity with one of your counter parties? I would say that most of the battery manufacturers are from China. Even if you go and buy from the US battery suppliers, they buy themselves from China. We are working with the Chinese battery manufacturers. They are delivering and supplying the batteries. This is something that we are working on. We already ordered the batteries for most of our projects that are listed on the slide. The last one that we just released, which is a new project that we just released, but we have already construct for the other projects.

Speaker Change: Okay, and what's the company's current exposure to the Chinese battery suppliers and has that exposure changed with some of your recent contracting activity with one of your counterparties?

Unknown Executive: I would say that most of the battery manufacturers, you know, are from China. Even if you go and buy from U.S. battery suppliers, they buy the cells from China. So we are working with Chinese battery manufacturers. They are delivering and supplying the batteries, so this is something that we are definitely working on. We have already ordered the batteries for most of our projects that are listed on slide 21, slide 21. Obviously, not for the last one that we just released, Luisa, which is a new project that we just released, but we have already a contract for the other projects.

Speaker Change: I would say that most of the battery manufacturers, you know, are from China, even if you go and buy from U.S. battery suppliers, they buy the cells from China.

Speaker Change: So, we are working with the Chinese battery manufacturers, they are delivering and supplying the batteries, so this is something that we are definitely working on.

Speaker Change: working on. We did already order the batteries for most of our projects that are listed on the slide, slide 21. Obviously not for the last one that we just released, Luisa, which is a new project that we just released, but

Speaker Change: We have already a contract for the other projects.

Doron Blachar: Then, in terms of your ERCOT battery opportunities, it will take you out of the project this quarter.

Speaker Change: Okay, and then in terms of your ERCOT battery opportunities, I still think you added a project this quarter. You know, given the forward curves and the dynamic nature of that market, are you seeing an acceleration of opportunity or an increase in opportunity versus...

Doron Blachar: Given the forward curves and the dynamic nature of that market, are you seeing an acceleration of opportunity or an increase in opportunities for previous quarters, or any color you could share around the development opportunities you are seeing in the ERCOT market? What we are seeing, basically, is better returns. We see the market pricing every higher than what it is. We see a PPA. So today we do see similar to California, PPAs, or 12-year agreement being signed in Texas and we are also negotiating some of our projects like in Beardog and Loerio, and on top of that we have the 40% IPC, so actually we see better returns than what we are originally anticipated.

Speaker Change: for his previous quarters or any color you could share around the development.

Unknown Executive: What we're seeing basically is better returns; we see the...

Speaker Change: Opportunities you're seeing in the aircraft market.

Speaker Change: What we're seeing, basically, is better returns. We see the...

Speaker Change: We see the market pricing a bit higher than what it is. We see PPAs.

Speaker Change: Today we do see, similar to California, PPAs or Toilet Agreement being signed in Texas. And we are also negotiating some of our projects, like in Bulldog and Lower Rio.

Speaker Change: And on top of that, we have the 40% IPC, so actually we see better returns than what we originally anticipated, thanks to the 40% and the PPAs that we are negotiating. And once they will be finalized, we'll update the market, of course.

Doron Blachar: Thanks to the 40% and the PPAs that we are negotiating. And once they will be finalized, we'll update the market, of course.

Unknown Executive: Thank you for the touch.

Speaker Change: Thank you for the time.

Julien Dumoulin: We'll go next to Julien Dumoulin Smith at Jefferies. Hey, good morning team. Thank you guys for appreciate it. Look, I just want to come back. Same van as some of the last questions in as much as you think about scaling up the opportunities. You guys obviously rolled forward the outlook from 2628 with more megawatts, but given the commentary across the West, given your commentary about evaluating a portfolio agreements, how do you think about scaling your opportunities further and investing in kind of early stage permitting to bring up those total megawatts targets further here? Just thinking about rising and having the ability and land positions to meet the growing demand of the West, especially as you say, you're specifically in conversations on some portfolio-wide arrangements with several utilities.

Julien Dumoulin-Smith: We'll go next to Julien Dumoulin-Smith at Jeffrey's.

Unknown Executive: Hey, good morning team. Thank you guys so much. I appreciate it.

Speaker Change: We'll go next to Julien Dumoulin-Smith at Jeffrey's.

Julien Dumoulin-Smith: Hey, good morning team. Thank you guys so much. I appreciate it. Look, I just want to come back, same vein as some of the last questions, in as much as you think about scaling up the opportunities, you guys obviously rolled forward the Outlook from 26 to 28.

Julien Dumoulin-Smith: with more megawatts. But given the commentary across the West, given your commentary about evaluating portfolio agreements, how do you think about scaling?

Speaker Change: your opportunities further and investing in kind of early stage permitting to bring up those total megawatt targets further here. Just thinking about rising and having the ability and land positions to meet the growing demand in the West.

Unknown Executive: Look, I just want to come back to some of the last questions in as much as you think about scaling up the opportunities. You guys obviously rolled forward the Outlook from 26 to 28 with more megawatts, but given the commentary across the West, given your commentary about evaluating portfolio agreements, how do you think about scaling your opportunities further and investing in kind of early stage permitting to bring up those total megawatt targets further here?

Speaker Change: Especially as you say, you're specifically in conversations on some of these portfolio-wide arrangements with several utilities.

Doron Blachar: Just thinking about how big that could be in terms of incremental megawatts, not just re-contracting existing assets. So we gave the 28 targets for the growth. And since you are and Julien following us for quite a long time, you know, when we give targets, usually we have a path how to reach them. We definitely, when we see this demand both in geothermal and in energy storage, we are increasing our efforts to develop more projects. I also mentioned the legislation on permitting that we hope will be finalized next year. So we do believe there's an option for upsides on both the geothermal and the storage area.

Unknown Executive: Just thinking about rising and having the ability and land positions to meet the growing demand in the West, especially as you say, you're specifically in conversations on some portfolio-wide arrangements with several utilities. Just thinking about how big that could be, in terms of incremental megawatts, not just recontracting existing.

Speaker Change: Just thinking about how big that could be.

Speaker Change: in terms of incremental megawatts, not just recontracting existing assets.

Unknown Executive: So we gave 28 targets for growth, and since you have been following us for quite a long time, you know when we give targets, usually we have a path to reach them. We definitely, when we see this demand, both in geothermal and in energy storage, we are increasing our efforts to develop more projects. I also mentioned the legislation on permitting that we hope will be finalized next year. All goes well for the 28th number.

Speaker Change: We do believe there's an option for upsides on both the geothermal and the storage area. And as we move forward, we will update it, you know, similar to the 26 numbers that we increased them.

Doron Blachar: And as we move forward, we will update it, you know, similar to the 26 numbers that we increase during the term. And that's hopefully what we will be able to do if all goes well for the 28 numbers.

Speaker Change: During the term, that's hopefully what we will be able to do, if all goes well for the 28 numbers as well.

Doron Blachar: And then related, how do you think about ERCOT here?

Unknown Executive: Yeah, and then related, how do you think about ERCOT here? I mean, I see, you know, further assets being announced there. How do you think about balancing the risks of ancillary pricing and there's some concerns about saturation out there and that market?

Doron Blachar: I mean, I see, you know, further assets being announced there.

Speaker Change: And then related, how do you think about ERCOT here? I mean, I see further assets being announced there. How do you think about balancing the risks on ancillary pricing and some concerns about saturation out there in that market at a certain point?

Doron Blachar: How do you think about balancing, you know, the risks on ancillary pricing and there's some concerns about saturation out there and then market at a certain point. Again, obviously, lots of opportunities in the West here. But again, as it stands today, pricing seems quite attractive in taxes in the here and now.

Speaker Change: Again, obviously lots of opportunities in the West here, but again, as it stands today, pricing seems quite attractive in Texas in the here and now.

Doron Blachar: Yeah, so that's an excellent question, Julian. That's why, you know, we are negotiating today for both Belldog and Lower Rio tolling agreements. And once we'll be able to sign them, we will have a much better balanced portfolio, be able to release more projects in Texas. At the end of the day, we are targeting roughly over all the portfolio, about 50-50% merchant versus contracted. And once we are able to contract projects in Texas, it will allow us, on one end, to reduce the risk of pricing going down in Texas. But, on the other hand, we do want merchant projects in Texas because we do see some potential upside on specific days in the year or specific months, so we are trying to balance between the two, and that's how we are releasing projects. All right, fair enough, guys, thank you very much.

Speaker Change: At the end of the day, we are targeting roughly, over all the portfolio, about 50-50% merchant versus contracted. And once we are able to contract projects in Texas...

Speaker Change: It will allow us on one hand to reduce the risk of pricing going down in Texas.

Speaker Change: But on the other hand, we do want merchant projects in Texas because we do see some potential upside on specific days in the year or specific months, so we are trying to balance between the two.

Unknown Executive: And that's how we are releasing products.

Unknown Executive: Good luck with all the efforts. Thank you.

Speaker Change: All right, fair enough, guys. Thank you very much. Good luck with all the efforts.

Jeffrey Osborne: Good luck, Jeffrey. And we'll take our final question from Jeff Osborne at TD Callin.

Unknown Executive: And we'll take our final question from Jeff Osborne at TD Calendars. Good morning. Just one question on my side. I was wondering about

Unknown Executive: Good morning. I have just one question on my side.

Doron Blachar: Good morning. Just one question on my side. As you are wondering on the ICC cash benefits, how we should think about that benefit in a third and a fourth quarter. I think you said 125 for the year. I assume third quarter is a big number just with bottle not coming online, but any thoughts on how we should be modeling that. From a cash flow perspective, at the fourth quarter, we expect to utilize and sell the ICC of Bata Lake, which is equivalent to 35 million dollars. In addition to utilizing the, to do basically a tax equity transaction for a Hebrew Plans, which is around 75 million, so that will be the majority of that.

Speaker Change: Good morning. Just one question on my side. Asi, I was wondering on the ITC cash benefits, how we should think about that benefit in the third and the fourth quarter. I think you said $125 for the year. I assume third quarter is a big number just with bottleneck coming online, but any thoughts on how we should be modeling that?

Unknown Executive: From a cash flow perspective, in the fourth quarter, we expect to utilize and sell the ITC for Battleneck, which is equivalent to $35 million.

Speaker Change: From a cash flow perspective, at the fourth quarter, we expect to utilize and sell the ITC of Battelleck, which is equivalent to $35 million.

Speaker Change: In addition to utilizing the, to do basically a tax equity transaction for a Hebrew plant, which is around 75 million. So that will be the majority of that.

Asi: The remaining dollars are PTC that we plan to sell between September and October. Roughly we have 25 million dollars of PTCs that are part of the PTC transfer program. And those will be sold between September and October. These are the 2023 PTCs and the 2024 PTCs. You know, under the new law, we can sell them to a third party, and right now we're negotiating final steps of that agreement.

Speaker Change: The remaining dollars are PTC that we plan to sell between September and October . Roughly, we have $25 million of PTCs that are part of the PTC transfer program.

Asi: Got it. And just to be clear, the 75 from Hebrew is also in 4Q. Yes. Perfect.

Speaker Change: Got it. And just to be clear, the 75 from Heber is also in 4Q?

Unknown Executive: That's all I had. Thank you. You're welcome. Thank you.

Speaker Change: Yes.

Doron Blachar: Thank you, Jess.

Speaker Change: Perfect. That's all I have. Thank you.

Doron Blachar: And that concludes our Q&A session. I want to turn the conference back over to Doran Blasher for closing remarks. Thank you. Thank you all for joining us today. This was a very good quarter for us. And we are continuing to work and be focused on growth and profitability.

Speaker Change: You're welcome. Thank you, Jeff.

Speaker Change: And that concludes our Q&A session. I want to now turn the conference back over to Doron Blachar for closing remarks.

Doron Blachar: Thank you. Thank you all for joining us today. This was a very good quarter for us.

Doron Blachar: and we are continuing to work and be focused on growth and profitability.

Operator: I would like to thank you for your support and look forward to speaking with you again next quarter. Thank you.

Doron Blachar: I would like to thank you for your support and look forward to speaking with you again next quarter. Thank you.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

And this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.

Speaker Change: And this concludes today's conference call. Thank you for your participation. You may now disconnect.