Good morning and welcome to the Ormat Technologies Q3 2019 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. I would now like to turn the conference over to Rob Fink, of FNK IR. Please go ahead.

Thank you, Operator. Hosting the call today are Isaac Angel, Chief Executive Officer; Doron Blachar, Chief Financial Officer; 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 Act of 1995 these forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based on management's current estimates and projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risk factors and uncertainties. For a discussion of such risk factors and uncertainties, please see risk factors, as described in Ormat Technologies' Annual Report on Form 10-K and quarterly report on 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures, such as adjusted EBITDA and adjusted net income attributable to the company's stockholders. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information is set forth in the press release that was issued last night, as well as in the slides on the company's website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab. With all that said, I'd now like to turn the call over to Isaac Angel. Isaac, the call is yours.

Thank you very much, Rob. And good morning, everyone. Thank you for joining us today. Starting with Slide 5. Third quarter was another quarter of growth, improving profitability. Total revenues increased 2.4%, driven by 5% growth in generation and strong growth of 6.1% in our core electricity revenues. The growth helped to offset both of lack of revenues from our full power plant in Hawaii, which is preparing to restart operation after the damage from the 2018 eruption of Kilauea volcano, as well as be expected quarterly decline in our product segment revenues. These results demonstrate the overall robustness of our electricity segment and the benefits of our diversified portfolio of operations. Our gross margins also expanded on a year-over-year basis, due to the positive impact of our initiatives to improve power plant level efficiencies increased the geographic diversification of our product segment into higher margin territory. We are raising our 2019 revenue guidance to the upper range and increasing our adjusted EBITDA guidance for 2019. I will turn the call over to Doron to review our financial results before I provide an update on our operations. Doron, please.

Thank you, Isaac. And good morning, everyone. Starting with revenues on Slide 7, total revenues for the quarter was $170.5 million, up 2.4% compared to the same quarter last year. Breaking this down, the electricity segment was 6.1% and product segment revenue decreased 11.2%. Moving to Slide 8. Revenues in our electricity segments were $124 million for the quarter compared to $116.9 million in the same quarter last year, resulting from our expanded operations at McGuinness Hills. Turning to Slide 9. Product segment revenues were $43 million, down from $48.4 million in the same quarter last year. The decrease in revenue was due to the timing of certain orders, which is not unusual in this part of it. On slide 10, other segment contributed $3.5 million of revenues compared to $1.2 million in the same quarter of 2018, as we have started benefiting from revenue of the battery energy storage project, which came online during the first quarter of this year. Moving to Slide 11 for a discussion of our total gross profit and loss. Third quarter consolidated gross margin was certainly 32.5% compared to 29.3% in the same quarter last year. On slide 12, gross margin for the electricity segment expanded year-over-year for 35.4%. The improvement was primarily due to increase in gross profit and margin from the commenced operation of McGuinness Hills Phase 3. Gross margin included $4.5 million of additional cost revenues related to pull up in Q3 2019 and $4.6 million in Q3 2018. Excluding the impact of Kilauea, gross margin were 38.7% in Q3 of 2019 compared to 35.3% in Q3 of 2018. In the product segment, gross margin was 27.8% in the third quarter compared to 26.4% for the third quarter last year. We continue to expect margin to normalize between 22% and 27%…

Thank you very much, Doran. Starting with Slide 24 is an update on operations. Year-over-year, we added approximately 4,000 megawatt hours and increased our generation by 4.9% to 1.4 million megawatt hours. This increase was due to the addition of McGuinness Hill Phase 3 in the 7 megawatt Southern unit that came online in July of this quarter. The increase from these two was partially offset by planned outages as a preparation of the repowering market [indiscernible]. We are still missing the generation of Puna power plant. This is offline since the volcano option in Hawaii in May last year. Turning to Slide 25 and 26, let me spend a few moments providing an update on the situation at Puna. The restart and reconstruction efforts of Puna are on schedule and we expect our refurbishment activities will be completed by the end of the year, enabling us to deliver energy from the plants on the temporary lines to help to support the power plants. We expect to be able to sell electricity produced at Puna as soon as the relevant permits required from local authorities for the operation of the substation and transmission network pathways being undertaken by our partners in Hawaii. These are expected by the end of Q1 2020. And we expect to be able to bring the power plant back to operation on to the roster. On the field side, we [Technical Difficulty] the production area and have already one production left available for the operational power plant. In addition, we have recovered several injection wells and we continue our [indiscernible] which include rig drilling of existing wells, clean outs and drilling of new wells. We expect to gradually increase the power plant generation capacity as we complete well drilling work in the target of a gainful…

[Operator Instructions]. The first question comes from Noah Kaye of Oppenheimer. Please go ahead.

Good morning, good afternoon. Thanks for taking the questions. I appreciate the update on Puna and I understand you may not want to get too much into specifics of ongoing PPA negotiations, but the regulatory filings seem to imply the PUC would like you and the utility to file an amended PTA application, before they approved the transmission upgrade. Also again just from the filing, it seems to us like an amended PPA could actually allow you to increase total capacity and potentially plant revenue. Can you confirm that's your understanding of the regulators intent? Two, how likely is it in your view that these developments will allow you to potentially increase total product revenues and profits over time from Puna?

Noah, as we mentioned before, it's a bit delicate to talk about this issue. We are in midst of the negotiation, as I just explained during the call I am very optimistic that this negotiation will end positively very soon. And I'm not aware of the fact that the PPA negotiations and HELCO to start the transmission line connected. I like to believe that it's not the case. But, if we disregard that we will -- as I said before I'm positive given also the fact that a wide [indiscernible] 00% RPS, this PPA will be signed soon. We should also increase time frame with another 25 years from 2027 and obviously, we'll illuminate the price differences connected to that and increase the capacity of the power plant as suggested before. I hope this answers your question?

Yes, thank you for that. You mentioned a number of geographies for growth opportunity in products. In addition to the ones you mentioned, I'd like to ask for Kenya KenGen, just published in our queue for an EPC contract for 140-megawatt project at Olkaria with a 20-year PPA with KPLC. I would assume it could be a significant EPC opportunity for your products pipeline, can you comment on this development in your appetite to do EPC work in Kenya?

Noah, alas we know each other for long time, you know that it is the doublet for us, which means that, in one hand, we are increasing the electricity revenue and then profitability not at the same rate, we are improving our product revenue and profit. But fortunately on upwards, let me there review the opportunity that you mentioned in Kenya, New Zealand, Philippines, and also in other countries. So, I'm expecting that the product revenues in the upcoming year will be at least at the rate that they were before. And as you mentioned, the opportunities are numerous and we shouldn't also forget the Turkish market, which is beyond that 1 gigawatt and their expectation is to increase. If we double it, the problem over there are, I like to believe, only temporary and eventually, also the open economy will somehow rewind. So, and the financial capabilities of the local invested will be in place.

Okay, that's helpful. I guess as a follow-up, you mentioned there was a curtailment at Olkaria. Can just explain what drove that? And then I get as a related, in the past quarters, you've disclosed receivables outstanding from some customers and international customers, so the receivables balance went up again sequentially. Can you just give us some color on, was that a continued headwind this quarter, can you help us make sense of this trend?

Okay. First we had a 150-megawatt facility operating in Kenya, which was gradually built in the last 10 years. The PPA calls for asset -- the energy; there is a trend in the last few months that we are beginning to tell on the energy part, especially as night. We understand that this is due to the fact that they are still missing transmission lines and which would be being built and when it gets to be operational, we expect that this curtailment will be finished. In any case, as I mentioned before, as the PPAs both for capacity and energy, with the larger part being capacity, at the end of the day it is a more, let's say, problem with the revenues. But it's not something severe and I believe it's only temporary. On the second part of your question, we mentioned that there are -- I don't recall that we talked about the payment issues. At the end of the day, we are operating in the [indiscernible] and we are -- even if we are not exactly due on all payments, we don't have a payment issue over there, so far. And now, I'd like to add, as you continue to the big part of the PPA capacity focus of [indiscernible] obviously only the energy part, and not the capacity.

[Operator Instructions]. The next question comes from Jeff Osborne of Cowen and Company. Please go ahead.

Yes, good afternoon. Maybe just following up on Noah's question. I think it was the 10-Q that actually flagged that there were some late payments from Kenya and Honduras. Can you just talk about those? I believe the outstanding balance was given for both those countries as of August, when it was last published. I'm just asking, are things getting better or worse in those two countries?

Let me relate first again on Kenya. I don't recall the exact due today, but in Kenya we are being paid even if it's late, it's okay. And they are covered, as Doron in telling me now, and on Honduras, we had a serious issue until 2019 because, I don't know if you know, that there is a very large in Honduras that they are putting together today, not only to us, but to others. But since April, we are being paid current, and we expect all the payment that is, I don't know if we have the number on the 10-Q, but it's a significant number that we're expecting to be based through financing [indiscernible].

Got it. That's helpful. I appreciate that. Two other quick ones on my end. Can you just talk about what the drivers were on the upward revision of guidance to the higher end of the prior range? What were the -- was there -- McGuinness Hills 3 for example or tungsten, do those come online faster than you originally planned? I'm just trying to understand what the moving pieces were.

Jeff, all of the above, which means that at the end -- you probably noticed that our gross margin [indiscernible] is growing faster than we expected. Due to timing issue, we are building much faster than before. Due to the fact that the efficiencies of the power plants are growing, we developed during the last year a much more efficient turbines and solutions which are increasing the biggest piece of the power plant by six megawatt and decreasing the O&M expenses in those power plants. Altogether, we feel confident to increase the guidance on the EBITDA, as I said before, which are coming mainly from the electricity.

Got it. That's good to hear. And the last question I had is, can you just touch on the M&A environment? I think you've been highlighting M&A as a strategy for the past two years, other than US Geothermal. There hasn't been much coming across the finish line. I didn't know, would you say that the activity there is higher than it was six months or nine months ago or about the same? I'm just trying to get a sense of your appetite for that.

Jeff, as we speak, we are negotiating with more than one party to stop M&A. Let's say these higher even, but unfortunately nothing has been concluded. As we said before, meaning management, we are not going to perform M&A for the sake of doing M&A, it should be a credit to Ormat. And you probably know that there are few opportunities, which are publicly released in the market. Unfortunately these one of them stalled because of the fire, then the PG&E issues in California. I think overall, I don't have any, let's say news, I won't say even good or bad at this stage, but we are working--

[Operator Instructions]. Okay, this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Isaac Angel for any closing remarks.

Thank you, operator. Thank you everybody for joining us this morning, or evening in other countries. And as usual, I'm remaining very optimistic that we are on the right path to take the company for the next step and I thank you all for your ongoing support. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.