Ormat Technologies, Inc. (ORA) Q1 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to Ormat Technologies First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations and ESG Planning and Reporting. Before beginning, we'd 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 plans, objectives and expectations for future operations and are based on management's current estimates and projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and current reports on Form 10-Q filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management's reason 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 now like to turn the call to Ormat's CEO, Doron?

Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me start with a few key highlights from the first quarter, and then I'll touch on several recent developments beginning on Slide 4. We began 2026 with a record first quarter revenue, delivering 75.8% year-over-year growth alongside strong expansion in operating income and adjusted EBITDA. This performance reflects strong execution across our business with particularly strong contribution from our Energy Storage and Product segments, demonstrating the strength and resilience of our diversified portfolio. Our Energy Storage segment continues to emerge as a key growth engine with revenues increasing 153% year-over-year, driven by both capacity expansion and our ability to capture favorable merchant pricing. This performance reinforces our strategy of optimizing the balance between contracted revenues and merchant exposure to maximize return. Beyond financial performance, this quarter also reflects meaningful strategic progress within our Storage segment, including the COD of our Shirk Energy Storage facility, the acquisition of the Hoku hybrid solar plus storage facility in Hawaii and the signing of the PPA for Jersey Valley, 67-megawatt solar paired with a 67-megawatt 268-megawatt hour storage facility that we expect will come online in late 2027 or early 2028. Our product segment delivered significant growth, primarily driven by the top two projects, highlighting the strength of our integrated business model and ability to create value across the full life cycle of our assets. In the Electricity segment, we signed PPAs for approximately 200 megawatts at favorable pricing, including agreements with Google and Switch and two blend and extend contracts. These agreements, along with future contracts are creating incremental revenue opportunities for our electricity segment, improve visibility across our development pipeline and support the value of exploration and drilling investments we have made over the past few years. We also strengthened our balance sheet through recent strategic financing transactions, supported by strong investor demand and favorable market conditions, we completed a $1 billion upsized convertible note offering. This transaction reinforces our financial position, increases flexibility and expand our capital base to support our growth initiatives. We continue to make significant progress in our next-generation geothermal and EGS strategy and are advancing on multiple fronts. On subsurface technology, we are progressing with two pilots, including our pilots with SLB and our collaboration and investment in Sage Geosystems. On the commercial development side, we are expanding our resource base, mapping our existing land position, advancing land acquisition and initiating PPA framework discussions with hyperscalers. On system innovations, we are developing next-generation high-capacity Ormat Energy Converter solutions tailored for EGS deployment. Taken together, these efforts position Ormat at the forefront of scalable, dispatchable next-generation geothermal, including EGS solutions with the potential to significantly expand our addressable market over time. Before I provide some additional updates on our business, I would now like to turn the call over to Assi to discuss our financial results. Assi?

Thank you, Doron. Let me start my review of our financial highlights on Slide 6. First quarter revenue was $403.9 million, up 75.8% versus the prior year period. This very strong top line growth was largely driven by the continued strength in our Energy Storage and Product segment. First quarter gross profit was $120.4 million, up 65.1% from $72.9 million in the first quarter of 2025, driven by contribution from the sale of the top two assets and the performance of our storage assets in the PJM market. First quarter net income attributable to the company's stockholders was $44.1 million or $0.71 per diluted share compared to $40.4 million or $0.66 per diluted share in the prior year period. The increase is driven by improved business performance, partially offset by approximately $38 million of onetime pretax expenses, including $33.7 million related to induced conversion resulting from the repurchase of the 2027 convertible note, $10.2 million in write-offs and immaterial settlement expense, partially offset by $9.6 million gain related to the purchase transaction of the Hoku storage and solar facility in Hawaii. Adjusted net income attributable to the company's stockholders for the first quarter increased by 93.5% to $80.3 million or $1.30 per diluted share compared to $41.5 million or $0.68 per diluted share in the first quarter of the prior year. Adjusted EBITDA for the first quarter was $194.9 million, a 29.7% increase compared to last year. The year-over-year growth was primarily driven by higher contribution from the Energy Storage segment, reflecting favorable PJM pricing and new capacity additions, all further supported by improved performance in the product segment as a result of the two project sales. Slide 7 breaks down the key financial performance at the segment level. Electricity segment revenue for the first quarter increased by approximately 1% to $181.6 million, mainly due to the recent acquisition of Blue Mountain and the improved performance at Olkaria facility. The expansion to our operating portfolio helped to more than offset the reduction from lower rates at Puna and extremely high ambient temperature in Nevada, which reduced revenue by approximately $4.8 million. Product segment revenues increased by 458.4% to $177.4 million during the first quarter. The performance was driven by $105 million revenue recognition from the top two projects, which we have previously disclosed. Our Energy Storage segment revenue increased by 153.1% in the first quarter. As Doron highlight earlier, the strong performance was driven mainly by high asset availability, which allow us to capitalize on strong merchant prices in the PJM market as well as new capacity additions over the past 12 months. The gross margin for the Electricity segment decreased to 30.8% in the first quarter. This decline is driven by lower energy rates at Puna and high temperatures in Nevada that I just touched on. In the Product segment, gross margin for the quarter was 21.4%. For the full year 2026, we expect product segment gross margin to be between 18% and 20%, reflecting the segment sales mix. It's worth noting that due to the impact of the top two project sales, we recognized in the first quarter approximately 60% of the segment's expected annual revenue, gross profit and EBITDA. The Energy Storage segment reported gross margin of 59.1% during the first quarter, making a significant improvement versus the prior year. The increase was driven by the effectiveness of our strategic approach to balance between contracted pricing and merchant exposure. For the full year 2026, we expect the Storage segment gross margin to be approximately 35% to 40%, reflecting the fact that we currently do not forecast similar merchant prices conditions during the remainder of the year. Moving to Slide 8. We collected $48.6 million in cash from monetizing PTCs and ITC through tax equity transactions. For the full year 2026, we expect to collect approximately $90 million from ITC tax equity transaction and PTC transfers, including ITC tax equity proceeds from the recently signed Burdock tax equity transaction. As we discussed during our fourth quarter call, in 2026, we expect to record a tax benefit driven by higher ITC level that will result in a negative tax rate of 15% to 20%. Slide 9 detail our cash flow over the last three months, illustrating Ormat's ability to generate strong cash flow, which allow us to reinvest in our strategic growth while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of March 31, 2026, were approximately $763 million compared to approximately $281 million at the end of 2025. Our total debt as of March 31, 2026, was approximately $3.4 billion, net of deferred financing costs. And our cost of debt decreased significantly following the recent convertible notes offering to 3.9%. Moving to Slide 10. Our net debt as of March 31, 2026, was approximately $2.6 billion, equivalent to 4.2x net debt to EBITDA. As Doron noted, during the quarter, we successfully completed a $1 billion upsized convertible note offering. We elected to execute this capital raise in the convertible market because it provide us with the best combination of low and no cash coupon and reduced equity dilution through the repurchase of our shares at an attractive price of $108 per share. We now expect our total capital expenditure for the remainder of 2026 to be $587 million. Our detailed CapEx plans are presented in Slide 32 in the appendix. We plan to invest approximately $436 million in the electricity segment for the construction, exploration and drilling and maintenance in 2026. We also plan to invest $111 million in the construction of our storage assets and approximately $20 million in the pilot with SLB as well as in other EGS activities. On May 6, 2026, our Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.12 per share payable on June 3, 2026, to shareholders of record as of May 20, 2026. In addition, the company expects to pay a quarterly dividend of $0.12 per share in each of the next three quarters. I would like now to turn the call back to Doron to discuss some of our recent developments.

Thank you, Assi. On Slide 12, you can see that our current total portfolio stands at 1.8 gigawatts of Geothermal, Solar and Energy Storage facilities. Turning to Slide 13. Our Electricity portfolio now stands at approximately 1,340 megawatts globally. We added 30 megawatts in the first quarter of 2026 and currently have approximately 216 megawatts under construction and development through 2028. Earlier this year, we acquired Hoku, a recently built solar plus storage facility on the Big Island of Hawaii for approximately $80 million in cash. The acquired asset include a 30-megawatt solar PV facility paired with a 30 megawatt 120-megawatt hour battery Energy Storage system with a 25-year PPA. Moving to Slide 14. Our Electricity segment benefited mainly from improved generation at our Olkaria complex and contribution from our Blue Mountain facility, which was acquired during the second quarter of last year. We had also experienced lower curtailment during the quarter compared to the year ago period, especially in Nevada, and we expect this trend to continue throughout the remainder of the year. As Assi noted, performance within our Electricity segment was partially offset by lower energy rates at Puna and extremely high ambient temperature in Nevada that impacted our power plants generation. With respect to Puna, we anticipate energy rates in the next few months will improve following the impact of oil prices. Internationally, our Dominica plant is now operational. Full COD is expected in the second quarter of 2026 due to third-party transmission line delay. Moving to Slide 15. We have negotiated two blend and extend PPAs for existing plants. The first agreement is for our CD4 geothermal power plant, which is part of our Mammoth Geothermal Complex in California. The amended agreement extends the original PPA, which was signed in 2022 and scheduled to expire in 2032 by five additional years through 2037 and increases contract pricing by approximately 27%. The amended PPA terms will go into effect in October of this year. The second blend and extend PPA for another facility that we cannot disclose at this time due to our agreement with the utility provider. These new PPAs show our consistent strategic execution over the past several years and reinforces our ability to secure high-quality long-term contracts that drive sustainable growth. Turning now to Slide 16. Our product segment backlog stands at $239 million. The decline from the fourth quarter of 2025 was primarily driven by the recognition of $105 million in revenue from the top two project in the first quarter of 2026. Since the start of the year, we've also secured two supply contracts for projects in Asia totaling $56 million. Moving to Slide 17. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 153%. The COD of Shirk and the addition of the Hoku facility in Hawaii brings the total Energy Storage portfolio to approximately 1.4 gigawatt hours with the majority operating in California. On Slide 19, we continue to remain on track to achieve our portfolio capacity target of between 2.6 to 2.8 gigawatts by the end of 2028. Turning to Slide 20 and 21, which display our geothermal and hybrid solar PV projects currently underway. We anticipate adding 216 megawatts to our generating capacity from these projects by the end of 2028. In geothermal, we are planning a 30-megawatt greenfield project that will come online in 2028. We added the Jersey Valley solar plus storage facility following the PPA signing and the Blue Mountain solar facility for the plant auxiliaries. Moving to Slide 22 and 23. We currently have six projects under development in our Energy Storage segment, expected to more than double our portfolio and add approximately 1.5 gigawatt hour. As shown on the slide, the Jersey Valley project has been added and is expected to come online late 2027 or early 2028. The 100-megawatt 400-megawatt hour greenfield facility is now expected to reach COD in 2028 as permitting is still in progress. This timing update is reflected in our plan and does not impact our long-term target. Turning to Slide 24 for a discussion of our EGS efforts. We continue to advance our next-generation geothermal strategy and are making meaningful progress across both technology and commercial development. We are actively progressing subsurface pilot initiatives with SLB. We have completed initial geoscience groundwork and are advancing well planning appraisal, positioning the project for key milestones over the coming quarters. At the same time, our collaboration with Sage is moving through planning and early engineering stages, including permitting, drilling design and fracture testing activities. These efforts are designed to validate technical assumptions ahead of commercial scale deployment. We are also strengthening our internal capabilities to support long-term scale. This includes advancing our above-ground system design and optimizing our Ormat Energy Converter for EGS applications alongside evaluating manufacturing readiness and cost structure. We are investing in resource development, including geographic heat mapping, land acquisition and state-level resource assessment to build a robust pipeline of future opportunities. Our resource team has already identified two prospects in our existing prospect portfolio, including Dixie Valley that can potentially support large-scale EGS development. Finally, we are actively pursuing external funding opportunities to accelerate development and reduce upfront capital requirements. We have multiple applications underway under various U.S. DOE programs supporting both EGS field testing and next-generation resource development. Overall, these combined efforts position us to effectively bridge the gap from pilot project to commercial deployment while reinforcing our leadership in next-generation geothermal and integrated energy solutions. Please turn to Slide 25 for a discussion of our 2026 guidance. We are maintaining our guidance and expect revenue to increase by 14.6% year-over-year at the midpoint, ranging between $1,110 million and $1,160 million. Electricity segment revenues are projected to be between $715 million and $730 million. Product segment revenues are expected to range between $300 million and $320 million and Energy Storage revenues are expected to range between $95 million and $110 million. Adjusted EBITDA is expected to increase by approximately 8.2% at the midpoint, ranging between $615 million and $645 million. I will now conclude our prepared remarks with reference to Slide 26. The strong performance we delivered in the first quarter across our business segments highlights the strength of our diversified business and our ability to capitalize on the rising demand for reliable, low-carbon electricity. With improving contract pricing, new projects entering service and our pipeline continuing to grow, we have a clear line of sight towards achieving our long-term targets for 2028. Our focus remains on creating long-term value for our shareholders through disciplined execution, strategic investments and our proven ability to develop and operate world-class clean energy assets. This concludes our prepared remarks. Now I would like to open the call for questions. Operator, please.

[Operator Instructions] And your first question comes from the line of Derek Podhaizer with Piper Sandler.

I guess maybe let's start on EGS. Obviously, a lot of encouraging and very strong commentary around your developments there. Obviously, there's an IPO going on currently with the new entrants in more of the EGS market. So maybe just if you could expand on it further as far as the technology advancements you're making on the surface. You talked about a tailored solution for EGS. Maybe if you could help us understand the potential size and scale of some of the progress you're working on with SLB and Sage. You pointed out Dixie Valley as a potential area to scale up EGS. Just -- it's obviously a very exciting outlook, and this is about to be more under the spotlight as far as EGS and geothermal. So just hoping to get an understanding of how big this could potentially be for you for Ormat over the medium to long term here.

Thank you for the questions. So I'll touch it on the different levels that you asked. And maybe I'll start with our equipment and technology. We are developing a unique solution, a new OEC that will be able to work efficiently with EGS. EGS comes with special parameters on the resource that comes out of the ground. And this will allow us to standardize our OEC and develop a very -- a much simpler power plant than the power plant planned today, which will over time reduce significantly the cost to construct the power plant. On the SLB joint venture that we have as well as the work that Sage are doing, we are doing multiple phases of land analysis and well engineering. On both cases, with SLB, we are working to file the permit to drill the first well later this year. And Sage on their part are working similarly to design the well and do all the preparation to file for permitting. Both pilots will be adjacent to our facilities in order to reduce the time to market. So once the pilot is successful, the heat can be immediately transferred to our facility to generate electricity and basically allow us to confirm the pilot performance and success. And the third element you mentioned Dixie, obviously, Ormat has a unique and very large presence in California and Nevada with multiple sites -- that we have been looking for hydrothermal. But also over the last few BLM options, we were able to acquire some land that we believe are fit to an EGS project. One of them that we mentioned is Dixie, not far from our Dixie Valley asset. And we have additional places that we see that are potential for EGS. We are also, at this stage, part of our business development efforts spanning multiple states on locations to develop EGS project, and we'll obviously update you as we make progress.

Maybe just switching to the Electricity margins. I fully understand you had some elevated ambient temperatures. And if you add that back, it looks like you're flat year-over-year from a margin perspective. But just thinking about how should these margins really develop this year into next year might be able to take advantage of some of the elevated commodity price with Puna here in the short term. But as you bring on newer generation or maybe an increase in solar generation, just trying to think through the margin progression as we work through '26, '27 through 2028. So maybe some thoughts around that would be helpful.

Hi, Derek. It's Assi. Good morning, and thank you for joining us. And As you know, over the next few quarters, we have roughly 40 megawatts of new blend and extend that should add anywhere from $7 million to $10 million annually to the revenue of the company. So that should be able to give you another 1% margin. And then we have another 40 megawatts roughly that is being also already negotiated and already a new contract that will be adding in another around 2027 and that should add another $5 million, $6 million to the company. So between the two, we should see to the revenue improvement of 1% to 2%. In addition to that, we are looking also on the expense side, reviewing our expenses, trying to focus on reduction in expenses. We do not anticipate similar weather also as warm as what we've seen in Q1. We are very happy that the curtailment is behind us. It was much more favorable in Q1. And I would like to say also Ormat has a large portfolio which was very warm on the West Coast, and it was very cold in the East Coast. When you bundle those together, we lost roughly $5 billion on the West Coast, but we made approximately over $20 billion in the East Coast. So it's better weather overall does improve Ormat situation, but it does impact the margin of the electricity. So I do expect in the next two years to see 1% to 2% increase year-over-year, starting probably in the second half of this year when we don't expect the weather to impact us.

Your next question comes from the line of Justin Clare with ROTH Capital Partners.

I wanted to just follow up on the EGS here. Wondering if you could share just how large the pilot projects are expected to be in terms of megawatts? And then if you could just update us on the anticipated timing for initial production from those EGS wells. I think previously, you've talked about 2027. And then just what would you need to see from the pilots in terms of the data or just what would you need to see before expanding to larger-scale development of EGS projects? And then any sense for the timing of a first commercial plant?

Thank you for the question. I would say that both pilots are looking to generate somewhere between 2 to 4 megawatts each. And that should occur based on the drilling schedules and permitting in 2027. I don't know to say exactly who's going to be the first one, but both of them are connected to Ormat. Once the pilot will operate, we will need a period of a couple of months, maybe more to see the performance of these pilots. I think it is going to be a bit different between Sage pilot and ours and SLB pilot. It's a different technology than the two of them. And I think the duration of the pilot should be a bit different. But as the pilot starts and we are in the geothermal area for many, many years. We're doing flow test for hydrothermal. So we are testing the subsurface. And in reality, every day that we do a test, we get information. And there will be a point in time that we feel comfortable enough to release our first EGS project based on the pilot success.

Okay. I appreciate it. And then maybe just one on PPA pricing here. So you signed, I think, 270 megawatts so far in 2026. As you look through the balance of the year, could you speak to the opportunity you have to sign additional PPAs for either new projects or re-contracting existing assets? And then just any way to quantify the amount of megawatts in terms of capacity that could be eligible for the blend and extend strategy from here over the next several years here?

So new PPAs, a thing that we are discussing and it is basically based on the way we are able to do our exploration. The Jersey Valley Solar and Storage project that we just signed is basically us maximizing our interconnection that we already have in our assets. We have a couple of more assets with free interconnection that we are looking to see if we can duplicate the Jersey Valley Solar and Storage idea. Basically building a Solar and Storage facility not far from a Geothermal facility and utilizing the same interconnection is something that we are checking today, and I hope we'll have some more updates as the year progresses on these two options. Regarding blend and extend, between 2031 and 2034, we have about 190 megawatts that come off contract. Their average PPA rate is in the mid-80s today. And all of them are basically items that we are looking for blend and extend. I don't know to say that we will have it in the next quarter or two since there is some duration, but all of them, we are speaking with the relevant off takers to see whether a blend and extend concept works for them and for us and at what price.

Your next question comes from the line of Noah Kaye with Oppenheimer.

This is Andre Adams on for Noah. Just to go back to the OEC for EDS applications. Could you give us a bit more detail on the kind of capacity ranges you're able to produce efficiency gains from the larger size and how you see the TAM for the product evolving and when we might see initial orders for that product?

We are now in the final stages of design. I expect that in the next few weeks, we will come out to the market with information about the size of the turbine, which would be much bigger than what we have done so far. But the specific number, we will come up in a few weeks. We will also try in that announcement to explain how we see it being a much standardize the power plants and by that, allow us to have a lower cost. Regarding getting POs, we are in various negotiations with multiple EGS developers on potential projects. And the minute that we sign with one of them, we will obviously announce and update the market.

And then just as a follow-up, given the outperformance of storage and products in the first quarter, could you just give us a little bit of color on the cadence of those businesses for the balance of the year and why the company would be reiterating rather than raising guidance?

As you saw the margin achieving was around 59%. With that being said, the whole year we do expect anywhere from 35%-40%. We usually do not increase, decrease or change the guidance during the main call. We usually do it during the August and the November call, and we decided to stick with that. We need to see where the emerging market will be for the remaining of the year, and then we would make that decision.

Your next question comes from the line of Chris Dendrinos with RBC Capital Markets.

I guess maybe just to go back to EGS again, and you talked about the opportunity at Dixie. I guess what I'm wondering is, is there additional opportunities, call it, at your existing asset base to using EGS well to bring those back up to flush production if you've got extra transmission capacity or maybe capacity on the turbine. I'm just kind of wondering how amenable those -- that existing acreage position is with heat in place or something like that.

Okay. Thank you, and welcome to join us. Dixie Meadow is one site that we located. We have another site that we believe has potential for EGS projects. Existing interconnection facilities today that we have and free interconnection are not big enough for EGS. EGS project will be much, much bigger than what we see today. So we are looking to see places that we do have enough new interconnection available to build EGS projects. We have some interconnection requests that we've already filed, some that we are working on to file. But for EGS projects, we would need much larger interconnection agreements than what we have available today.

Maybe as a follow-up here, I think you mentioned additional conversations with potential PPA customers. I think you mentioned data centers. Are you seeing an increase in interest from, call it, the nonconventional utility customer outside of switching Google? Have they kind of come in to the conversation here more recently?

Definitely. We have discussions with other hyperscalers on top of the names that you mentioned that are looking for renewable energy. And as EGS will progress, I believe we'll get much, much more attention and ability to sign more PPAs and larger ones.

[Operator Instructions] And your next question comes from the line of Ben Kallo with Baird.

Congrats on the results. Just maybe on EGS, I think that's the theme. The JV structure with SLB, could you just talk to us about as we advance a couple of years to where you have a commercial project, how you expect or think ownership of the power plant would work is my first question.

So thanks, Ben. The pilot with SLB is designed to develop the EGS solution for the subsurface. The above surface is obviously utilizing the Ormat technology. Once the pilot is successful, we can develop new EGS projects either as part of Ormat, utilizing our knowledge and the expertise that we've gained from the joint venture or alternatively utilize the knowledge within the joint venture that will supply services to the new power plants that we will build. SLB, as you know, is a service provider. Ormat is a developer, owner and operator of power plants, and we will both have -- utilize our expertise. So once the JV is successful, we will be buying subsurface services from the JV that SLB will be able to provide, and we will continue to build the power plants and operate them and own them.

Great. My second question is just on -- you're in a unique position with both Geothermal and then developing Energy Storage as well. And I just wonder if that comes up or how much it comes up with hyperscalers and if there's an opportunity for adding storage with hyperscalers independently or with geothermal.

So with hyperscalers, -- we haven't had discussions about bundling Energy Storage with Geothermal since Geothermal is a 24/7 facility. But we have had discussions and there are RFPs coming out from hyperscalers that are looking for Energy Storage facilities. We are participating in these tenders and discussing with different hyperscalers about building for them Energy Storage facilities -- stand-alone Energy Storage facilities. And once there will be some kind of an agreement on any of these prospects, we will update the market.

There are no further questions at this time. I will now turn the conference back over to Doron for closing remarks. Thank you.

Thank you all for joining us today. It was a very, very good quarter for Ormat, and we are looking to continue this great year.

Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.