Good morning and welcome to the Ormat Technologies Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to your host, Sam Cohen, with Alpha IR. Please go ahead.

Thank you, operator. Hosting the today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations and ESG Planning & Reporting. Before beginning, we would like to remind you that information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company’s plans, objectives and expectations for future operations and are based on management’s current estimates and projections, future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies’ Annual Report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I 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 like to now turn the call over to Doron Blachar. Doron, the call is yours.

Thank you, Sam and good morning everyone. Thank you for joining us today. In the second quarter, we continued the positive momentum from the beginning of the year, demonstrated by solid growth and advancement against our strategic initiatives and milestones that we laid out in the recent Investor Day. We are encouraged by the robust growth captured in both the company’s top line and adjusted EBITDA driven by strong performance from our Electricity segment and further supported by our growing Energy Storage segment. This quarter makes significant milestone achievements that validate our strong operational capabilities, our healthy financial position and the attractiveness of the markets we are operating in. Since the end of the first quarter, we commenced the commercial operation of 5 projects and added 73 megawatts to our portfolio with the addition of the Tungsten 2 and CD4 geothermal power plants, the Wister and Steamboat solar power plants and the Tierra Buena storage facility. With respect to CD4, we are optimizing the interconnection to allow additional megawatts to be sold through the grid. We are extremely pleased to deliver strong operational execution in the face of supply chain-related challenges and labor constraints. We successfully signed two large portfolio PPAs in Nevada and California and another PPA in Nevada for our North Valley plant, totaling up to 285 megawatts. These long-term PPAs reflect the majority of our new U.S.-based geothermal project over the next 6 years as well as most of the Nevada project renewals. This contract, which we signed and renewed at attractive rates, show the growing demand for geothermal in the U.S. market, consistent with our Analyst Day forecast. Finally, our healthy and strong financial position enabled us to raise capital at an attractive coupon rate of 2.5% via the issuance of $431 million of convertible green notes. Proceeds will be partially used to refinance higher-cost debt and further enhance our financial flexibility as we look to execute our long-term growth strategy. Now before I provide further updates on our operation and future plans, I will turn the call over to Assi to review the financial results. Assi?

Thank you, Doron. Let me start my review of our financial highlights on Slide 5. Total revenue for the second quarter was $169.1 million, up 15.1% year-over-year, reflecting substantial growth across Electricity, Product and Energy Storage segments. Second quarter 2022 consolidated gross profit was $57.6 million. This resulted in a gross margin of 34.1%, down slightly from a gross margin of 35.4% in the second quarter of 2021 mainly due to lower gross margin within our Product segment. Net income attributed to the company’s stockholders was $11.3 million or $0.20 per diluted share in the quarter. This compared to $13 million or $0.23 per diluted share in the same quarter last year. On an adjusted basis, net income attributed to the company’s stockholders was $12.2 million or $0.22 per diluted share, with net income attributed to the stockholder were down 6.7% and diluted EPS down 6.4% versus the same time last year. The decrease in net income and adjusted net income was mainly due to a $2.9 million after-tax loss from a currency-related loss attributed to a stronger U.S. dollar versus Israeli shekel. Excluding these currency-related issues, our EPS would have been $0.27 per share. Adjusted EBITDA of $100.7 million increased 19.1% in the second quarter compared to $84.5 million in the second quarter of last year. This figure represents a second quarter record format and our 12 months trailing adjusted EBITDA is now equal to $426.2 million. The increase was largely driven by stronger contribution within our Electricity segment and lower G&A costs as a result of reduction in legal expenses. Moving to Slide 6. Breaking the revenue down at the segment level, Electricity segment revenue increased 12.9% to $151.2 million, supported by contribution from new assets gained through the Terra-Gen acquisition, the expansion of our Tungsten 2 power…

Thank you, Assi. Turning to Slide 13 for a look at our operating portfolio, generation growth was positively supported by the inclusion of Beowawe and the generation of the Dixie Valley power plant. This was partially offset by the Heber 1 fire that we already mentioned. And as you can see on Slide 14, this quarter, we added 68 megawatts to the Electricity segment portfolio, which will contribute to generation going forward. As noted on Slide 15, our Puna geothermal power plant is running and operating at an approximate 25 to 26-megawatt level. And currently, PPA prices continue to be positively impacted by the higher global energy prices we experienced in the second quarter, and we expect this dynamic to continue in the third quarter. Over the longer term, our plans in Hawaii are still focused on repowering the power plant, and we are currently amending our agreement with HELCO to enable us to address current market conditions in the new long-term PPA. Turning to Slide 16, first, in our Olkaria plant in Kenya, we are on track to begin our drilling campaign during the third quarter, which will enable us to further increase capacity. Second, with respect to Heber 1, we are currently optimizing the contract through repowering work, which is expected to be completed in the second quarter of 2023. Next, while we experienced a shutdown at Dixie Valley due to a generator failure, it has not impacted our full year operations significantly. The plant was already scheduled for steam turbine maintenance in Q4. But due to the unplanned shutdown, we elected and were able to pull forward the scheduled maintenance, and thus the shutdown was completed earlier in Q2. The Dixie Valley power plant returned to service and is performing at a higher capacity than before. Turning…

[Operator Instructions] The first question comes from the line of Noah Kaye with Oppenheimer. You may proceed.

Yes. Thanks for taking the questions. You discussed this subject at Investor Day, but I want to build on it here a little bit. And it’s really around the return profile at this point for new geothermal projects. We have continued to see inflation in a lot of parts of the cost structure. So, can you comment to kind of what you are seeing in terms of inflation trends on average CapEx per megawatt and then, assuming that there is additional headroom for PPA increases, where you think IRRs are penciling out?

Hi, Noah. Thanks for the question. We see – on one hand, we see inflation rates going up and that has some impact on our operating expenses. Although if you look at the profile and the gross margin, obviously, EBITDA margin that we have in our Electricity segment, the impact of inflation on the O&M is not very material. And if you look on the capital invested in projects, so although inflation is going up, what we have seen in the last few months is a significant reduction in the raw material prices. Actually, over the previous 2 years, 2.5 years, we saw a continuous increase in raw material prices that have started to go down a few months ago. So, as we look forward, we see that the new projects’ CapEx would be similar or maybe even a bit lower than what we have seen in the last couple of years. And on top of that, we are a vertically integrated company. So, we are continuously improving our project – products and continuously seeing alternative way in order to reduce the cost of developing geothermal projects. And this is also something that supports our continued reduction in CapEx cost. And parallel to that, you alluded in the market, we see PPA pricing increases. The demand for geothermal is significant and growing, and the PPA pricing that we have – that we are signing are higher, every one that we signed. So, overall, we see a return similar and better for geothermal. Now with the new Inflation Reduction Act and the extension of the PTC for geothermal, we will see this continuing to support us. And at least on the draft, the mechanics of getting these production tax credits is much easier and less costly. No need – probably no need for tax equity transactions. They can be utilized annually. So, we see a very strong momentum.

Very helpful there. I wanted to ask about that Dixie Valley shutdown. And I guess just generally around operations. Can you give us a little bit of an indication of what caused the pull forward of the maintenance and the shutdown? And I guess the broader question is, we continue to see some pretty extreme weather events certainly in a lot of the areas where your operations are. Are you just generally at this point planning for increased OpEx costs related to basically climate resiliency?

Look, on Dixie Valley, this is, as you know, a project that we acquired last year from Terra-Gen, and the issue that we had there was a failed generator. We were planning to do the maintenance for this generator in Q4 of this year. Unfortunately, the failure happened just before we did the overall maintenance. And what we are able to do is actually to move backwards to the same period of time while fixing the generator to do the entire maintenance and shutdown of the plant that was due in Q4. So, actually, it’s an oil generator, I think a 30-years-old generator that we knew needed maintenance. But unfortunately, the failure happened just before we did the maintenance. And I said on O&M costs, these are things that we see some impact mainly on the labor market and the labor cost. But another part, this is part of the ongoing business to manage these expenses.

Yes. Maybe I will just sneak one more in. You highlighted the IRA. It looks like there is some incrementally positive policy support coming out of the Western Governors Association or that may be in development. Can you just comment to what that might look like and how you are engaged there?

The policy support that we got both in California and in Nevada pushed many utilities and CCA to look for geothermal projects. I think we are probably the – maybe the only or the most – the biggest developer of new geothermal because the support is for new geothermal projects not re-contracting existing ones. So, we see a lot of support. I can tell you also that we have seen in California from the Governor pushing permitting processes to expedite the project. So, we do hope that the last few decisions that he will make will allow us to have permitting faster than what we had in the past. And I think these extreme weather conditions highlight the fact that you need to have more renewable energy. And I can say personally also that managing a company that is actually part of the solution for the climate crisis is a very nice place to be in.

Great. Thank you for the color Doron.

Thank you.

Thank you, Mr. Kaye. The next question comes from the line of Mark Strouse with JPMorgan. You may proceed.

Yes. Thank you very much for taking our questions. Just had a few follow-ups on the Inflation Reduction Act, when you are talking about the PTC becoming kind of more efficient and kind of the – maybe not needing tax equity partnerships, should we think about that as kind of on a go-forward basis for new contracts that are being signed, or is there a potential to apply that to your existing portfolio as well?

Good morning. This is Assi. We are looking to see the final bill in order to assess the options to start enjoying almost a cash PTC versus a tax equity transaction. Of course, Mark, we still need to sell those PTCs, but they can be sold to, according to the new ruling, to a new – a company that actually makes money in the U.S., and there is plenty of those. So, the bottom line is, we will try and see if we can apply and enjoy also for the projects that’s under construction the new PTC loans.

Okay. Thanks Assi. And then just one follow-up, when I am looking at the geothermal pipeline and the storage pipeline and thinking about the IRA, is there a potential that some of the longer-dated opportunities that you are talking about kind of maybe in 2024 and beyond, that those could – that you could potentially pull those forward into 2023 maybe, or should we think about this as just kind of, as far as the ITC goes, benefiting more of the longer-term visibility?

It’s Doron. It’s very hard to pull projects earlier because the main constraints that we have on the projects are not related directly to Ormat. It’s the permitting process and the interconnection process that you are probably familiar that it takes time. We are ready to do them whenever we can, but we are usually waiting for permitting and point of connection. So, I don’t – we will not be able to push forward projects unless something change in the regulatory environment, the local regulatory environment in the permitting and interconnection parts.

I think Mark, it’s really worth mentioning that on the storage side, the ITC on storage is something quite unique that we haven’t seen, but we anticipated it. And that should provide more boost to our business. As you know, some of our revenues are related to natural gas, so they should not be lower as a result of the ITCs. In addition to that, we have RAs signed on all of our California assets that are operating. So, even we will see a lower CapEx for future developments, we should enjoy the ITC and the higher IRR. So, we do think that the IRA is something very supportive to Ormat and to the whole industry.

Okay. That makes sense. Very helpful. Thank you.

Thank you, Mr. Strouse. The next question is from the line of Julien Smith with Bank of America. Please go ahead.

Hi guys. It’s Anya stepping in for Julien here. So, my first question is I was wondering if you have an update on the supply chain issues, the supply chain situation across geothermal, solar and storage. It just seems like there were maybe changes here and there across the portfolio of growth projects. But battery storage, this seem for the most part, generally unchanged from last quarter. But yes, I was just wondering if could you provide any details on levels of procurement across types? For example, how much is [indiscernible] already versus what needs to be shipped? And then any other color you can provide on what you think mitigate those risks or shift to your supply chain? It would be helpful also.

Okay. Thank you. So, I will start. The supply chain issue is something that has been discussed for the last couple of years. And I think that when you look at Ormat and the fact that in this quarter alone we have added 73 megawatts of new operating power plants demonstrates in reality how we deal with supply chain issues and if I need to maybe drill down into the three segments that you related to, on the geothermal and storage and solar part, so I would say that on the geothermal part, we are the leading geothermal company. We are vertically integrated. We have experience and the knowledge with multiple suppliers globally. And if we do get into some kind of a supply chain issue with one, we move to the other. And we are able to manage them, and the geothermal projects, as you can see, come generally on time as we expect them to come. On the batteries and solar, this is a more challenging market, supply chain market, and we are seeing small delays of a few months. However, for the projects that we have already announced, we have already – all the relevant materials, all of the relevant batteries, and we are working with our suppliers in case there are issues. And the way basically that we are mitigating it is that we have strategic stock that we buy. We maintain a level that can support our growth needs in the near and medium-term. And by that, we are able to meet most of our timetables both on the geothermal and on the battery storage and solar projects.

Thank you. And as a follow-up, I was hoping to – maybe if you can give some color on geothermal growth opportunity. Specifically, at your Analyst Day, you mentioned Indonesian prospects as particularly strong. So, maybe provide an update there? And then secondly, is there additional upside that you could see for any targets at this point? Anything you’re hearing on that front [ph]?

Your line is not very good, so I will try to answer at least the part that I heard. And as you said and as we said on the Investor Day, Indonesia is a very important growing market for us. We have, on top of Sarulla and Ijen that we are developing already with Medco, our partner. We have two additional projects, Toka Tindung and [indiscernible], where we own 100% of the project. We expect to start drilling in Toka Tindung this quarter and in Wartsila to start drilling end of the year, beginning of next year. So, these are all the projects that are in development. And they are not in our near-term, but in the mid-term growth plan that we have. On top of that, we have multiple discussions with local developers and with PLN, the Indonesian utility, on doing projects, some of them on standalone where we own 100% and others with joint venture. The way PLN operates through joint ventures, and that’s required by the Indonesian law since it’s a state-owned entity. We are working very closely with them. We have a dedicated resource and a dedicated business development and sales team in Indonesia. And we see Indonesia in the mid-term to become an important part of our growth plans.

Okay, great. Thank you.

[Operator Instructions] There are no additional questions left at this time. I will pass it back to the management team for closing remarks.

Thank you everyone. As you have seen, this has been another very strong quarter for Ormat both on top line and on our adjusted EBITDA numbers. On the CapEx, we have invested almost 250 – more than $250 million in the first half, and we plan to do the same. And this demonstrates our confidence in the Geothermal and the Energy Storage segments going forward. This is a buildup here, and we expect to enjoy the fruits from these projects that we are investing today in the near and mid-term time. So, thank you all for your support and have a good day.

That concludes today’s conference call. Thank you. You may now disconnect your lines.