Ormat Technologies, Inc. (ORA) Q2 2011 Earnings Report, Transcript and Summary

Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ormat Technologies Second Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn conference over to Mr. Rob Fink of KCSA Strategic Communications. Mr. Fink, please go ahead.

Thank you, Julianne, and thank you, everybody, for joining us. Hosting the call today are Dita Bronicki, CEO; Yoram Bronicki, President and COO; Joseph Tenne, CFO; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and 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 plan, objective and expectations for future operation and are based on management's current estimates and projections of future results or trends. Actual future result may differ material from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors described in the annual report on Form 10-K filed with the SEC on February 28, 2011. In addition, during this call, statements may include financial measures such as -- defined as non-GAAP financial measures by the Securities and Exchange Commission, such as EBITDA and adjusted EBITDA. The presentation of financial information is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with GAAP. Management of Ormat Technology (sic) [Technologies] believes the adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement and that both management and investors benefit from referring to this non-GAAP financial measure in assessing Ormat Technologies' liquidity and when planning and forecasting future periods. This non-GAAP financial measure may also facilitate management's internal comparisons to the company's historical liquidity. Before I turn over 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 IR Events and Presentations link that's found on the Investor Relations tab. With all that said, I would now like to turn the call over to Dita. Dita, the call is yours.

Thank you, Rob. Good morning, everyone, and thank you for joining us today for the presentation of our second quarter 2011 results and outlook for the near future. The second quarter was highlighted by stronger results in the Electricity segment where revenue increased by 18% year-over-year and generation by 11%. Operationally, we continue to focus on an efficient operation of our existing power plants. Works were issued for each operational well in -- of North Brawley, and execute on the last Product segment orders were received while continuing the activity for long-term growth. Strategically, we are seeing increased interest and business activity from key markets outside of the United States. I will go into greater detail on how we view this international growth later in the call. But before I do, Joseph will provide the financial review and Yoram will update on our operational progress. As usual, following my remarks, we will open the call up for Q&A. Let me now turn the call over to Joseph.

Thank you, Dita, and good morning, everyone. Beginning on Slide 5. Total revenues for the quarter ended June 30, 2011, were $104.6 million, an 18 -- an 8.7% increase over revenues of $96.3 million in the second quarter of 2010. In our Electricity segment on Slide 6, revenues for the quarter were $81.2 million, an 18% increase over revenues of $68.8 million in the same quarter last year. The increase revenues is the result of an 11% increase in total output and increase in the average revenue rate from $78 per megawatt-hour in the second quarter of 2010 to $83 to a megawatt-hour in the second quarter of this year. In the Product segment, on the next slide, revenues for the quarter were $23.4 million, down from revenues of $27.5 million in the same quarter of 2010. In the second quarter, we recognized $7.9 million relating to an experimental energy plant in Spain, which represents the amount we received from the customer in July following their acceptance in the second quarter of 2011. Upon completion of final acceptance test, the amount -- the customer will pay the remaining balance of approximately $8 million, which will be recognized as revenues in the fourth quarter of 2011 or in 2012. Moving to Slide 8, which represents combined gross margin and gross margin for each segment for the quarter. The company's combined gross margin for this quarter was 31.7% compared to 19.4% for the second quarter of 2010. The Electricity segment's gross margin was 23.4% this quarter compared to 7.7% in the second quarter of last year and 15.8% in the first quarter of this year. Excluding North Brawley, the Electricity segment gross margin would have been 32.3%. In the Product segment, gross margin was 60.5% compared to 48.6% in the second quarter last year. This increase is attributable to the $7.9 million in revenues relating to the experimental energy plant with virtually no associated cost of revenues since the related costs have been included in research and development costs in previous periods. The increase is also attributable to a different product mix and different margins in the sales contracts. Moving now to Slide 9. Interest expense net for the quarter was $17.4 million compared to $9.4 million in the second quarter of 2010. The $8 million increase was principally due to an increase in the total amount of interest due to higher level of debt and a $4 million loss on interest rate lock transactions in the second quarter of 2011. This loss is related to the proposed DOE loan guarantee transactions -- transaction, which was not accounted for as a hedge transaction. We expect to incur an additional loss of $1.6 million from the interest rate lock for the second quarter and for the second part of the hedge in the third quarter of this year. Now moving on to Slide 10. Net income for the quarter was $8.2 million or $0.18 per share basic and diluted compared to net loss of $1.5 million or $0.03 per share for the same quarter in 2010. The increase is attributable to the increase in the gross margins of both Electricity and Product segments. As shown in the following slide, Slide 11, adjusted EBITDA for the second quarter of 2011 was $47.7 million compared to $24 million in the same quarter of 2010. Adjusted EBITDA in the second quarter of 2010 included the company's share in the interest and taxes, depreciation and amortization related to the -- to its unconsolidated interest in the Mammoth complex in California in the second quarter of 2010. That complex is now fully consolidated in the second quarter of 2011. A reconciliation of GAAP to net cash provided by operating activities to adjusted EBITDA and additional cash flows information is set forth in Slide 26. Moving on to the next slide. Cash and cash equivalents and marketing securities as of June 30, 2011 was $67.4 million, down from $82.8 million as of December 31, 2010. The company's slide break down the use of cash during the first half of 2011. Our liquidity came from the issuance of Senior Unsecured Bonds, this is obviously Class B membership units to JPMorgan, and cash derived from operating activities. Our long-term debt as of the end of the second quarter of 2011 and the payment schedule are presented in Slide 13 of this presentation. Slide 14 reflects our dividend policy and recent dividend declaration. On August 3, Ormat's Board of Directors approved payment of a quarterly dividend of $0.04 per share, the same for the company's dividend policy, which targets an annual payout ratio of at least 20% of the company's net income. The dividend will be paid on August 25 to shareholders of record as of the closing of business on August 16. The company expects to pay a dividend of $0.04 per share in the next quarter as well. That concludes my financial overview. I would like now to turn the call to Yoram for an operational update.

Thank you, Joseph, and good morning, everyone. Starting with Slide 16. As you have seen in Joseph's presentation, we had good results for our Electricity segment with total generation increasing to approximately 980,000 megawatt-hours in the quarter with good cost control. The Jersey Valley project is currently operating below its lowest design capacity. This is primarily due to the need to shut down one of the injection wells that was rendered unusable by old mining wells that we believe were not adequately plugged and abandoned. We plan to drill additional wells and add injection capacity for the project. We have applied for the necessary permits and expect to receive such permits and complete the additional drilling by year end. Due to the delay in reaching the design generation, we will need to get time extension from the PPA offtake. There were no major events in North Brawley since the previous call. We've been focusing on minimizing the operating expenses while we develop a plan to increase capacity of the plant. We did drill a production well that we expect to be successful and have increased revenues and reduced costs. For an update on our future growth, please turn to Slide 17 in -- where you can see the status and expected completion schedule for each project under construction. In McGinness Hills, we are progressing with the field development and power plant equipment is in transit to the site. We made progress in the acquisition of the required construction permits, and required environmental assessment is in process. In Tuscarora, we have completed the field development and physical construction of the power plant is in full swing. As for the CD4 project, we have been working on permitting and expect to resume field development in third quarter. As you can see in the slide, we changed the capacity to 30 megawatt. We still expect the total capacity from the re-powering of Mammoth and CD4 to be between 65 and 70 megawatt. The change reflects our expectation to divert more megawatts into the re-power facility. But this may change as we continue the development. In the Wild Rose prospect, which we'll formally refer to as DH Wells, we drilled 2 wells in the prolific low-temperature shallow reservoir and continue to explore the deep reservoir. We plan to release the power plant to construction upon completion of the resource evaluation. We have continued drilling for Phase 3 of our Olkaria plants in Kenya, and the power plant equipment manufacturing is in progress. We originally planned to resume the development activity in the Carson Lake project in Nevada upon the receipt of an environmental impact study for the project. The approval of the required study is still pending and, therefore, there is no certainty that we can complete the project by 2013. We have also started the process of terminating the old PPA for the project, then we'll work to develop one that fits the new characteristics and timeline of the project. On Slide 18, you can see the detailed list of projects under development. In Wister, the exploration progress still probably suggest that we may not be eligible for an ITC cash grant. In Indonesia, the Sarulla project, we have reached a critical point in the negotiation with the offtaker, PLN, and the resource owner, PGE. The consortium continues its effort to reach agreement for the contractual amendments required for bankability. We hope to reach an agreement at the near term. However, there is still no certainty on the outcome of the negotiation. We're on various stages of construction and development of 8 projects that are expected to be completed by the end of 2013 and will contribute approximately 175 megawatts to our portfolio. In addition, we have approximately 130 megawatts in various stages of development. Turning to Slide 19. In addition to projects under construction and development, we also have 32 sites in early exploration or where activity is yet to begin. This quarter, we started drilling in 2 sites in the United States and signed our first BOT agreement in New Zealand. Since the beginning of 2011, we have increased our land position by approximately 12,000 acres in Nevada, Oregon, California and New Zealand. In total, our land position for future development increased 355,000 acres and an additional 264,000 acres under geothermal lease option agreements. Let us now turn to Slide 20 for an update on the Product segment. We successfully secured new EPC and equipment supply contracts. This quarter, we were awarded one supply and one EPC contract, which represents the largest product order in our company's history. And as of the end of the quarter, we have a backlog of approximately $225 million, which will positively impact our Product segment revenues over the next 3 years. We were pleased with the increase in this segment. However, as described in the past, this segment is less predictable and tends to be cyclical. I'd like to turn the call back over to Dita to address this further.

Thank you, Yoram. And now I would now like to review our capital position for revenue guidance for 2011 and conclude with comments on the international business environment. You can see the -- our CapEx requirements for 2011 on Slide 23. In the remainder of 2011, we plan to invest approximately $141 million in projects currently under construction, as well as an additional $77 million for development, operation and other uses as detailed on the slide. The CapEx requirement has been by revised to reflect scheduled updates in projects under construction and development, as mentioned by Yoram. The original budget included CapEx for the solar projects under development in Israel and certain exploration activities, which are expected to be conducted beyond 2011 and, in fact, due to major delays, in 2010. The original budget for the year also included the acquisition of certain land prospects, but we decided to cancel it again due to the anticipated permitting delays at location. The funding of these programs will come from cash on hand at the end of the second quarter, cash from operations, annual corporate lines of credit, projects based under the DOE loan guarantee program and cash grants. Turning to Slide 23. You can see our revenue forecast for 2011. We continue to expect the Electricity segment revenues to be between $350 million and $325 million, and, as we recently updated, $90 million to $100 million for the Product segment. To date [ph], and as we look beyond 2013, let me take a few minutes to discuss the international markets, such as geothermal development, and our activities in this market. Opportunity in markets outside of the United States has provided Ormat exposure in orders which offer growth and diversification. At the recent inauguration of the Ormat-supplied Las Pailas power plant, Costa Rica's Minister of Energy, Mr. Teofilo de La Torre, explained the uniqueness of geothermal energy. And I quote a short translation of one passage from his speech. "The 35 megawatts of geothermal electricity supplied by Las Pailas to the nationwide grid is equivalent to 90 megawatts of hydro or 120 megawatts of wind. Last year, the 6% of installed geothermal capacity satisfied 12% of the area's energy needs." This is the advantage of geothermal energy technology compared to other renewable resources. The appetite for geothermal development is increasing internationally. We saw one key substantial new geothermal power plant construction in New Zealand, and Kenya's investment in geothermal development as well as Chile's geothermal activity. Japan, probably as a result of the Fukushima disaster, they renewed geothermal development in Japan. From our earliest project success until today, we had positioned Ormat with a diversified portfolio of geothermal assets and a responsible approach to managing our growth. On the macro level, the fundamentals of geothermal energy remain excellent, and we plan to continue to develop projects in [indiscernible] and the rest of our geography for 2013 and beyond as our commitment to the renewable industry and to geothermal is long term. We thank you for your support. And at this time, I would like to open the call for questions. Operator?

[Operator Instructions] Your first question is from the line of Ben Kallo with Baird. Benjamin Kallo - Robert W. Baird & Co. Incorporated: Could you guys update -- could you update us on what the production level of Brawley is? And then remind us what the treatment is if you have to write the asset down, how you make that decision?

I think that the average production for the second quarter was around 26 megawatt. With, I think, as we described in our last earning call, our plan for this quarter and the next few quarters is not to run the facility at the demonstrated 33 megawatts or close to that, which is what it was tested at, at the end of the first quarter, but basically run the better-running equipment or the better-running wells so that we can reduce the margin between our revenue and costs and reduce the drag on our ongoing EBITDA while we develop the plan that will allow us to have all of our wells to be good wells and bring the plant back to capacity. And at the current stage, there are no ramifications to running anywhere between the 33 megawatts and what we run today. And it's just an economical decision or a short-term economical decision not to lose money on marginal wells. Benjamin Kallo - Robert W. Baird & Co. Incorporated: Okay, good. As a rule -- I know that a lot of people have been reading some stories out there that the utility might take that project from the Medco consortium, although it seems like in your presentation, you guys don't take that view. Could you just talk about that for a second?

Not exactly, Ben. The utility is trying to take that project back if we are not going to reach acceptable solutions shortly. What is shortly? I don't know. So I can't tell you it should be a month or it should be -- what that will take. But the plant is there. That's the reality. We are still negotiating and hoping to get to a resolution. But there is no certainty. Benjamin Kallo - Robert W. Baird & Co. Incorporated: Okay. Then my last question is on your LNG rig. Could you just remind us how much you guys spent in R&D on that? And then have you -- what are you expecting for the future as far as rolling that product out into other -- if you could sell that into other applications?

The R&D, I don't have the best number, but it's in the order of $20 million. That may not be accurate, but just to give you an order of magnitude. We believe that the demonstration of the solution in this project may open up additional applications for -- in LNG gasification plant. It is true that the low share gas prices in the United States have delayed a plant for LNG gasification plants in the United States. But in other locations in the world, there are still potential for that application. I believe it's smaller than we saw before the discovery of shale gas, but still a substantial business opportunity, if not larger.

Your next question is from the line of Dan Mannes with Avondale.

A couple of follow-up questions. First on North Brawley. It did look like you were pretty effective at managing costs sequentially. How much of that is due to reduced costs on the pump replacement versus sort of other things? And any way to think through what it's going to take even at 26 megawatts to get to breakeven?

I think pump replacement is clearly a -- was a factor. We did a lot of work in the first quarter. It's not only true for Brawley, it's actually true across our fleet. So there was a lot of work that done in the first quarter when rates are typically lower and loss generation due to maintenance is not that important. And therefore, we're able to maximize generation across our fleet in the second quarter, and we hope that, that would be true for the third quarter as well. So this is a general comment, also true for Brawley. A lot of the well field work was already done. We see some improvement in pumps. We expect this improvement to continue. It's -- and I think that, that would bring us to -- and I'm not sure whether the breakeven would be at 26 megawatt or not, but I'm fairly confident that we will not see the same drag on EBITDA coming out of Brawley that we have had in 2010 or that were currently in the quarter, the first quarter of 2011. Where exactly would that be? It's hard to tell. But since we know how to operate 15-megawatt plants efficiently and 10-megawatt plant efficiently and we have our whole fleet of old [ph] units that are 4 to 5.5 megawatts and each of them is operated efficiently, there's really no reason nor to find a break-even point at any form of generation. Of course, this is not the outcome that we would like with a 50-megawatt facility and we would like to get there, but it has a balance point, so -- or it could -- or we could find the balance point, actually, at any generation level, if you'd like.

Got it. Real quick. Any update on the process of a loan guarantee? We've seen a lot of the environmental assessment documents are out there that look that was getting pretty close to completion on the 3 Nevada projects. I was wondering if you could just sort of walk us through what steps are left before you can potentially close that.

Well, very close. But the timing is short. We believe that we will close it. We are in the final documentation preparation. The process is that 30 days before funding can occur, final documents have to be submitted to the review of OMB and other government entities. We believe that we can achieve the 30-day period to -- in time for closing. But it is close.

Is the deadline September 1 or September 30?

30, September 30.

So the documents need to get to OMB by the end of September -- by the end of August?

By the end of August, right.

Got it. Well, we'll keep our fingers crossed.

You know, Dan, as you say -- and you say we keep our fingers crossed. I think it's important to mention that the market is available today for consultant financing the geothermal play with DOE loan guarantee program. But of course, it's not be substantially higher. We are not pursuing it because still, the DOE cover is more attractive. But the market is available. I think it's important to understand it.

Okay. So you have a solid backstop in case the DOE doesn't go through?

Yes.

Real quick. You guys put out a release earlier this week about some evaporative cooling that you've put in place at a Steamboat. I was wondering if you can quantify for us maybe what sort of opportunity that created there and how you see that playing out, i.e., where else could you put it in your system? And/or does this give you opportunities in terms of product sales?

So I think that in the press release we -- I think it would quantify that. Hopefully, I'm not off, but there's about 160 megawatt of existing capacity in our fleet that could benefit from that evaporative cooling or enhanced air cooling heat. And I think that around 60, actually probably 90 megawatt of additional construction that -- in our current plans that we know that is being built in areas where such enhanced air cooling would work well. The impact is -- could be very dramatic. But it's a little more complicated than that. It is very -- the advantage of this system is that it allows the air-cooled facilities not to disrupt the hot hours of the day end of summer where typical utilities have what they call the summer peak periods. So 6 -- I'm sorry, 12 to 6, 12 p.m. to 6 p.m. And in an air-cooled geothermal facility, the output can drop to 50% or 60% of the nominal capacity at that time, and we can recover between 50% and 70% of that loss. So very substantial. Now if the turret is a flat turret, then it's only additional megawatt-hours. It's very nice, but it's not dramatic. If you get a time-of-use type of adjustment, then these additional megawatt-hours are very cost effective. And it's really explained that we've added 25% to our output at that place. So we've added 4 megawatt Galena1's generation at that time. This is as if we have added a 4-megawatt area is what it will take really to the plant. This is the equivalent. So it's -- where time-of-use is applied or where the utility is open to open up the PPA's rate to reflect the fact that they get this boost during those hours, this is very substantial. The first step is, of course, to prove the technology, and we feel that we have done a lot in terms of proving the technology. And the second step would be to find commercial agreements that would allow both the offtaker and Ormat to benefit from these boosts during the hours where energy is the most sought after.

And I'm sorry, just the last piece on that is how meaningful is the incremental CapEx to put this place either as a retrofit or on a new build relative to traditional air cooling?

Not very expensive at all. There are design issues. There are a lot of design issues, but this is an easy retrofit and, in most cases, could go into an old facility just like it is implemented in their construction. And then much more attractive solution from a CapEx perspective and building water-cooled facility.

Got it.

Your next question is from the line of Paul Clegg with Mizuho.

Are you considering asset sales as part of your liquidity plans to fund growth? And if you are, can could you talk about how you would do your assets as which ones are core versus noncore?

We are not. We don't think we have liquidity issues. We think that the market is open for construction loans, and we don't see any need.

Okay, that's very clear. And then, there's obviously been a lot of press reports about your discussions with third parties to buy a 20% stake in Ormat Industries. Can you run through the potential options available to you given the debt maturity schedule that you face there and what sort implications it could have for board compositions, things like that?

Well, the potential is there to extend a loan, and there's even a possibility to extend a loan. I'm not sure we will pursue this, but the possibility exists. And then in the -- and the other problem [ph] Is how to sell stakes, some of these stakes in the company. Some of these stakes would be sold to a new control between 20% as was described in the press or a lower number, whichever. This would mean that certainly, placement of some of the direct shares, especially in the parent company, in Ormat Industries by representatives of the potential buyer. It's still too early to say what will happen, but these are the alternatives.

Okay. And then if I just made one follow-up on Jersey Valley. If you could talk about how much of a operational -- how much sequential pressure did you see in terms of operating profit in the second quarter as a result of the issues at Jersey Valley? And is that something that you expect to continue in 3Q? Would it be larger in 3Q?

No, we don't -- I mean, it's -- the impact of Jersey Valley is minimal on EBITDA. It's a very -- it's a modern facility, air-cooled facility. It was designed to run unattended. Simple well field operation. And therefore, no substantial cost. Of course, we would like to see profit out of it. And to get to profit, we need to bring our capacity up. But it's not an issue. It runs on its own.

Your next question is from the line of Peter Christiansen with Bank of America Merrill Lynch.

This is Peter in for Steve Milunovich. I was wondering if you can elaborate as to the situation -- what's in Nevada PUC? It looks like it denied or did not approve Dixie Meadow (sic) [Meadows] PPA. And whether that is something that's more structural or technical? And does that increase any risk for some of the projects or 16 other projects that you have in Nevada?

I think that it is true that the Dixie PPA was not approved at that time. But really, it's -- that the PUC did not approve any of the PPAs. So what happened there is not an Ormat NV Energy issue, it's more the mechanics of NV Energy and the PUC. And I think that this was -- that -- or we hope that everybody can identify Dixie Meadows is a good PPA that would work well for the state and all the parties involved. But really, at this point, it's only Dixie Meadow's PPA that is affected by that, and we don't see this affecting all of our other PPAs.

And as for the improvement in the fleet, across-the-board it looks like availability on a year-over-year basis, maybe 200 basis points. Should we expect that incremental improvement to be fairly consistent for the next 2 quarters on a year-over-year basis?

As far as we can tell today, we have high expectations for the third quarter and for the fourth quarter. The issues with availability is that it is -- it typically hurts you when a big piece of equipment unexpectedly breaks down. And that's a -- and therefore, it's hard to forecast. So our expectation is for good results through the rest of the year. But obviously, things can happen. What I can answer on a more global -- from a more perspective to our fleet, we didn't start off with a lot of older units and small units that are potential breakdown and are hard to compete. And over the years, we have modernized a lot of our fleet, a lot of the equipment that had been brought online, a lot of the additional megawatt-hours off on new equipment that has a much longer, much better availability, if you'd like. And so I think that part of this is doing the right maintenance at the right time. Part of this is having good equipment or better equipment installed that we have been doing. And part of this is just enjoying some good fortune, having no tropical storms or having the tropical storms hit somewhere else and not one of our facilities. And the same with, well, volcanic eruptions and so on. So a little bit of everything.

Great. And then finally, Dita, I was wondering if you could just elaborate a bit more on some of the -- characterize some of the of the issues with the amendments as they pertain to Sarulla that are holding up the process. Is it financing related, timing-related or possibly new questions about the actual rate?

They're all financing-related. The rate was -- a bank rate was agreed in April of last year. So the rate was -- I mean, it was -- during the year of Sarulla negotiation, the rate used to be an issue, but it was finalized last year. So no, it's not the rate. It is one what we call bankability. Financing issues, which result from the requirement of JBIC, the Japanese export bank, that is intended for the financing of the project to include its security package for the financing mainly because of the financial weakness of the resource owner. Initially when we signed this agreement, the resource owner was Pertamina, the Indonesian oil and gas company. During the process, Pertamina assigned the ownership of the counterparty to the [indiscernible] agreement to a subsidiary which is called PGE, and the creditworthiness of that subsidiary doesn't satisfy JBIC without additional enhanced security. And the issues are over this enhanced security that JBIC is requesting and until now we were not able to get.

Your next question is from the line of Dilip Warrier with Stifel, Nicolaus. Dilip Warrier - Stifel, Nicolaus & Co., Inc.: I was wondering if you could provide us with a sort of sense or outlook on GAAP income taxes. It looks like there's a pretty big swing factor in terms of you posting positive or negative EPS.

The consolation of the -- the taxes is according to APB 28. And I think these 2 quarters are not a very representative because the net impact of the 2 quarters is a small loss in the first half of the year. So any results of the effective tax rate on a small result is not material. We anticipated, and it's all in the first quarter 10-Q, that we anticipate a tax benefit during the year. And taking that into account and adding the discretionary item that we had in the first quarter resulting from new legislation, in tax legislation in foreign countries, brought out -- it up to a tax expense in Q1 and a tax benefit in Q2. I believe you should assume for the rest of the year a very low tax rate on our results. But it depends on the actual results that we'll have in the next 2 quarters. Now it's done based on projections which can change. Dilip Warrier - Stifel, Nicolaus & Co., Inc.: Okay. And you're still expecting full year EPS profitability, yes?

EPS? Yes, sure. Dilip Warrier - Stifel, Nicolaus & Co., Inc.: Okay. And just one more question here. So the product gross margin has again been kind of lumpy, and I was just wondering if the long-term guidance still is at low 20% kind of range?

Yes, yes, yes, you can assume it for the long run. You take you into account this year we had the energy projects which do not have any associated costs. So I believe that in the long run, you could still deal be with that number. I think it's reasonable.

Your next question is from the line of JinMing Liu with Ardour Capital.

Good morning. My first question is related to your -- the Spain LNG project. Before, you were expecting the year the full shipment of $30 million to be recognized in the first half this year. But somehow, this got pushed back. Can you clarify that?

Yes. The structure of the contract is one that we have on our scope, which is building the facility, but the facility is built in an existing terminal, which basically hurts some of the scope of work or substantial amount of the scope on the customer for the plant. And for various reasons, the customer has -- did not complete all of the items that he needed to complete. And therefore, the plant could not be started up. So the payment -- as Joseph described, the payment that we have received to date is the one that reflects the fact that we have done everything that was in our powers to do. But the plant is not running yet, fully constructed but not running. And the balance for the payment will be made once the customer is ready to complete or once the customer has completed all that he is supposed to do, which, of course, is not in our control.

Okay. My second question is really to the -- your Sarulla project. I noticed that recently, the World Bank awarded some loan to some of your partners over there for other geothermal projects. Whether that actually will have -- my question is whether that will have any implication on your projects over there.

Certainly not directly. The World Bank has awarded a credit to PLN, to the utility in Indonesia for different projects that the utility owns. But certainly, if the utility will encourage to threaten the -- they will take over the project because they have access to a capital like the World Bank capital. But not a direct relationship to our project.

Your next question is from the line of Elaine Kwei with Jefferies. Elaine Kwei - Jefferies & Company, Inc.: Just real quick on the product side. Excluding the LNG revenue there, it looks like margins would have still been around the 40% level, and I was just wondering how we should think about this going forward in relation to the $225 million of backlog that you have. Is this sort of a new run rate going forward? Or were there some other sort of one-time items in there?

A little before, there are fluctuations in the gross margin from quarter-to-quarter because of the mix of the orders and the -- for profitability of each of them. I think that in the long run -- and you shouldn't take a quarter as an example. On the long run, you should expect what I've said before, over 20% gross margin on the long run.

Your next question is from the line of Mark Barnett with MorningStar.

Just 2 quick questions. I don't think I heard clearly on the maturity value issue with the offtaker. You haven't mentioned something about the extension, but I just missed it. I was wondering if you could clarify that point.

Yes, we need to -- there was a contractual commercial operation date. Obviously, we can't meet that without resolving the injection well issue. And therefore, we need to agree with our offtaker on extending that date. And since the issues are really -- were not within our control, we're not responsible for all the money that they will spend there. We think that we can find a way with our offtaker to make this as light [ph] as possible.

Do you think that you'd be able to maybe finalize that extension in the next quarter or 2? Or is that going to be a longer process?

Moreonever, this can be a quick process, yes.

Okay. And one more quick question on your projects under construction for the Wide Rose, formally DH Wells. The capacity has -- the range has shrunk a little bit and now 15 to 20. And I was just wondering what was driving that, if you've just encountered sort of a different resource than you're expecting or...

Yes, the -- as we mentioned, we have identified a very prolific, shallow, low-temperature resource. And that could Phase 2 everything that -- all the studies that we have done so far, this can be a very nice project, economically viable and so on. However, if you produce low-temperature fluids, it's takes a much higher flow rate for any megawatt that you're trying to produce. And therefore, exceeding 15 or 20 megawatts would mean a very, very large well field development. And based on our experience in other places, we would like to stay away from developing such a large well field in one phase. And therefore, the first phase, if we do stick to the low-temperature resource, the first phase would be a smaller phase. As we mentioned, we are still continuing the exploration. We know that there is hotter temperature at depth. If we can identify a large enough reservoir at the higher temperature, then again we would develop a project that produces about the same amount of fluid at the first phase. But because it's a hotter fluid, we -- it could be -- the kick -- the range can go back up and it could be a bigger plant.

Your next question is from the line of Ben Kallo with Baird. Benjamin Kallo - Robert W. Baird & Co. Incorporated: I know that construction loans, like you said, Dita, are available. But have you guys had any -- have you guys had to curtail any development or exploration because of your liquidity situation? And how do you look at that going forward, where you place your money as you're doing your exploration and your initial drilling out there?

The answer, Ben, is no, we did not have to curtail development because of low liquidity. The delays that you are seeing in the CapEx numbers to the end of the year are mainly what is called the -- a sage-grouse permitting. This is the main reason that -- I don't know if you have heard it from other companies, that if you can't solve that in the recent years, the environmental agencies, whoever they are, are very sensitive to the large leaking valve [ph] and they involve a lot of difficulties in development in areas where -- that are the habitat of the sage-grouse, and most of projects have been sage-grouse habitat, and that's the reason for the delay. And we do -- we do not think that we will have any difficulty. Once we have the fundamentals of the projects for commencing the projects in place, which means thermics and resource, these are the 2 things that are delaying geothermal development in the case of Ormat, I don't think we'll have any difficulties to get a construction loan.

Your next question is from the line of Paul Clegg with Mizuho.

Again on North Brawley, should we expect to see any more spending on pumps or remediation during the year? What I'm trying to understand, I guess, is how you get the facility about 33 megawatts without spending more in the near term. And then if you could say how much you spent on pumps, if at all, this quarter.

The answer is that to get a facility above 33 megawatts, we would have to put in more CapEx. And I think we described in the previous quarter it's really drilling more production wells or drilling more injection wells depending on how we end up developing the balance of the field. So there will be an impact in the capital program, but you would not see this in the EBITDA. And of course, the impact in depreciation is spread over a longer period of time. So I think that this is the answer to your first question, that the -- the answer on pumps, there is a steady consumption of pumps in all of our pump -- geothermal projects. And so we should expect this and we should expect this to continue and affect Brawley just like it affects Steamboat or Mammoth or Heber. The challenge that we have in Brawley is that we really want to get our pumps closer to a 2-year lifespan, 1.5- to 2-year lifespan, which is what we've see in similar projects in the Imperial Valley. And this would have -- this would both increase availability of the well field and reduce costs. And we don't see why this cannot be accomplished. It's a matter of designing the pumps or the pump assembly a little better or in a more -- in a way that is more adapted to the conditions of the Brawley resource. And I think it will get there over time, and over time is not a very distant future but something that will happen in the next few quarters.

Okay. But that additional CapEx on Brawley is in your CapEx guidance as in the presentation?

Yes, correct.

Okay, great.

Our next question is from the line of Peter Christiansen with Bank of America, Merrill Lynch.

I was just wondering what capitalized interest was for the quarter and how you perceive that going for the remainder of the year.

It was $2.9 million in this quarter. And going forward, it depends on the CapEx. It will increase until we place in service and get it in the screw line and -- in terms of our CapEx for 2012. But it will increase during this year.

Your next question is from the line of Timothy Arcuri with Citi.

I just wanted to ask with regard to Jersey Valley if there is a -- I guess what is the process? Does it have to be a reapplication to the PUC for the PPA here? Or what's the process there? Maybe if you could give any flavor as to what the outlook is for PPA prices.

For the PPA of Jersey Valley?

Or just in general for PPA prices. Are they steady? Going lower? Going higher?

I don't see how this relates to Jersey Valley. I think that PPA price is really something that, if you'd like, it's very infrequent in the sense that I think that the current -- the RFP, the last RFP that was issued by NV Energy is probably a year old. So there's not a great data point or not too many data points around this. But this does not affect Jersey Valley.

Okay. And maybe if I could just ask one more question on -- follow-up on Dixie Meadows. If could you have any -- what was the -- if you could give any color on the reasoning why the PUC didn't approve the PPA?

The PUC did not approve any of that PPAs that were in NV Energy's program. It did not specifically address -- there's not a lot to learn about our PPA from that. And I think that it's really not our place to comment on what happened between NV Energy and the PUC. There are -- we're not really -- well, we're an affected party, but we're not a party to that discussion.

Ladies and gentlemen, this does conclude the Q&A portion of today's conference call. I'll turn the floor back over to management for any further comments.

No comments but just thank you for the useful and interesting questions. And we look forward to continue the dialogue with you all. Thank you.

Thank you all for your participating in today's conference call. You may now disconnect.