e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31, 2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number:
001-32347
ORMAT TECHNOLOGIES,
INC.
(Exact name of registrant as
specified in its charter)
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DELAWARE
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88-0326081
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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6225 Neil Road, Reno, Nevada
89511-1136
(Address of principal executive
offices)
Registrants telephone number, including area code:
(775) 356-9029
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). o Yes þ No
As of the date of this filing, the number of outstanding shares
of common stock of Ormat Technologies, Inc. is
45,430,886 par value of $0.001 per share.
ORMAT
TECHNOLOGIES, INC
FORM 10-Q
FOR THE
QUARTER ENDED MARCH 31, 2011
2
Certain
Definitions
Unless the context otherwise requires, all references in this
quarterly report to Ormat, the Company,
we, us, our company,
Ormat Technologies or our refer to Ormat
Technologies, Inc. and its consolidated subsidiaries.
3
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ITEM 1.
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CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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March 31,
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December 31,
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2011
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2010
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(In thousands)
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|
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ASSETS
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Current assets:
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|
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|
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|
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Cash and cash equivalents
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$
|
40,675
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$
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82,815
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Marketable securities
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24,149
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Restricted cash, cash equivalents and marketable securities (all
related to VIEs)
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54,828
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23,309
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Receivables:
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|
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Trade
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70,491
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54,495
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Related entity
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|
332
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303
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Other
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6,544
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8,173
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Due from Parent
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|
503
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|
272
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Inventories
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14,554
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12,538
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Costs and estimated earnings in excess of billings on
uncompleted contracts
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3,531
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|
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6,146
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Deferred income taxes
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1,582
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|
|
|
1,674
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Prepaid expenses and other
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|
|
13,791
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|
14,929
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|
|
|
|
|
|
|
|
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Total current assets
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230,980
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204,654
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Long-term marketable securities
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1,287
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Restricted cash, cash equivalents and marketable securities (all
related to VIEs)
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1,740
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Unconsolidated investments
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3,832
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4,244
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Deposits and other
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|
22,086
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21,353
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Deferred income taxes
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17,087
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17,087
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Deferred charges
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37,294
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37,571
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Property, plant and equipment, net ($1,367,571 and $1,371,400
related to VIEs, respectively)
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1,426,485
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1,425,467
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Construction-in-process
($166,836 and $149,851 related to VIEs, respectively)
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296,930
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270,634
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Deferred financing and lease costs, net
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19,774
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19,017
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Intangible assets, net
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39,479
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40,274
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|
|
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Total assets
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$
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2,093,947
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$
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2,043,328
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable and accrued expenses
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$
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76,743
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$
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85,549
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Billings in excess of costs and estimated earnings on
uncompleted contracts
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15,376
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|
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3,153
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Current portion of long-term debt:
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Limited and non-recourse (all related to VIEs)
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|
14,667
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|
15,020
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Full recourse
|
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14,775
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13,010
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Senior secured notes (non-recourse) (all related to VIEs)
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20,990
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20,990
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|
|
|
|
|
|
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Total current liabilities
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142,551
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|
|
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137,722
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Long-term debt, net of current portion:
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Limited and non-recourse (all related to VIEs)
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113,532
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114,132
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Full recourse:
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Senior unsecured bonds (plus unamortized premium based upon 7%
of $1,957,000)
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251,425
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142,003
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Other
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80,920
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84,166
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Revolving credit lines with banks (full recourse)
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118,500
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189,466
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Senior secured notes (non-recourse) (all related to VIEs)
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210,882
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210,882
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Liability associated with sale of tax benefits
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83,894
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|
66,587
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Deferred lease income
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|
70,324
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|
|
71,264
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Deferred income taxes
|
|
|
30,608
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|
|
|
30,878
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Liability for unrecognized tax benefits
|
|
|
4,294
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|
|
|
5,431
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|
Liabilities for severance pay
|
|
|
21,987
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|
|
|
20,706
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Asset retirement obligation
|
|
|
20,290
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|
|
|
19,903
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Other long-term liabilities
|
|
|
4,704
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|
|
|
4,961
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|
|
|
|
|
|
|
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Total liabilities
|
|
|
1,153,911
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|
|
|
1,098,101
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|
|
|
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|
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Commitments and contingencies
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Equity:
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The Companys stockholders equity:
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Common stock, par value $0.001 per share; 200,000,000 shares
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authorized; 45,430,886 shares issued and outstanding,
respectively
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46
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|
|
|
46
|
|
Additional paid-in capital
|
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|
720,801
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|
|
|
716,731
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Retained earnings
|
|
|
210,046
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|
|
|
221,311
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|
Accumulated other comprehensive income
|
|
|
968
|
|
|
|
1,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
931,861
|
|
|
|
939,132
|
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Noncontrolling interest
|
|
|
8,175
|
|
|
|
6,095
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|
|
|
|
|
|
|
|
|
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Total equity
|
|
|
940,036
|
|
|
|
945,227
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
2,093,947
|
|
|
$
|
2,043,328
|
|
|
|
|
|
|
|
|
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND
COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
$
|
78,268
|
|
|
$
|
66,105
|
|
Product
|
|
|
19,552
|
|
|
|
16,549
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
97,820
|
|
|
|
82,654
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
65,937
|
|
|
|
54,523
|
|
Product
|
|
|
16,890
|
|
|
|
12,437
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
82,827
|
|
|
|
66,960
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
14,993
|
|
|
|
15,694
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
2,207
|
|
|
|
3,267
|
|
Selling and marketing expenses
|
|
|
2,660
|
|
|
|
3,202
|
|
General and administrative expenses
|
|
|
7,007
|
|
|
|
7,020
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,119
|
|
|
|
2,205
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
135
|
|
|
|
197
|
|
Interest expense, net
|
|
|
(13,080
|
)
|
|
|
(9,714
|
)
|
Foreign currency translation and transaction gains
|
|
|
517
|
|
|
|
434
|
|
Income attributable to sale of tax benefits
|
|
|
2,139
|
|
|
|
2,139
|
|
Other non-operating expense, net
|
|
|
(797
|
)
|
|
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, before income taxes and equity
in income (losses) of investees
|
|
|
(7,967
|
)
|
|
|
(5,098
|
)
|
Income tax benefit (provision)
|
|
|
(586
|
)
|
|
|
2,557
|
|
Equity in income (losses) of investees, net
|
|
|
(412
|
)
|
|
|
546
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(8,965
|
)
|
|
|
(1,995
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of related tax of $0
and $6 , respectively
|
|
|
|
|
|
|
14
|
|
Gain on sale of a subsidiary in New Zealand, net of related tax
of $2,570
|
|
|
|
|
|
|
3,766
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(8,965
|
)
|
|
|
1,785
|
|
Net loss (income) attributable to noncontrolling interest
|
|
|
(10
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Companys stockholders
|
|
$
|
(8,975
|
)
|
|
$
|
1,838
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,965
|
)
|
|
$
|
1,785
|
|
Other comprehensive income (loss), net of related taxes:
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
|
|
|
|
43
|
|
Amortization of unrealized gains in respect of derivative
instruments designated for cash flow hedge
|
|
|
(53
|
)
|
|
|
(58
|
)
|
Change in unrealized gains or losses on marketable securities
available-for-sale
|
|
|
(23
|
)
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
(9,041
|
)
|
|
|
1,708
|
|
Comprehensive loss (income) attributable to noncontrolling
interest
|
|
|
(10
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to the Companys
stockholders
|
|
$
|
(9,051
|
)
|
|
$
|
1,761
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to the Companys
stockholders basic and diluted
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.20
|
)
|
|
$
|
(0.04
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(0.20
|
)
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computation of
earnings (loss) per share attributable to the Companys
stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,431
|
|
|
|
45,431
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
45,431
|
|
|
|
45,457
|
|
|
|
|
|
|
|
|
|
|
Dividend per share declared
|
|
$
|
0.05
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Total
|
|
|
Interest
|
|
|
Equity
|
|
|
|
(In thousands, except per share data)
|
|
|
Balance at December 31, 2009
|
|
|
45,431
|
|
|
$
|
46
|
|
|
$
|
709,354
|
|
|
$
|
196,950
|
|
|
$
|
622
|
|
|
$
|
906,972
|
|
|
$
|
4,723
|
|
|
$
|
911,695
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
1,416
|
|
|
|
|
|
|
|
1,416
|
|
Cash dividend declared, $0.12 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,455
|
)
|
|
|
|
|
|
|
(5,455
|
)
|
|
|
|
|
|
|
(5,455
|
)
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,838
|
|
|
|
|
|
|
|
1,838
|
|
|
|
(53
|
)
|
|
|
1,785
|
|
Other comprehensive income (loss), net of related taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
43
|
|
|
|
|
|
|
|
43
|
|
Amortization of unrealized gains in respect of derivative
instruments designated for cash flow hedge (net of related tax
of $36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
(58
|
)
|
|
|
|
|
|
|
(58
|
)
|
Change in unrealized gains or losses on marketable securities
available-for-sale
(net of related tax of $34)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
(62
|
)
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
|
45,431
|
|
|
$
|
46
|
|
|
$
|
710,770
|
|
|
$
|
193,333
|
|
|
$
|
545
|
|
|
$
|
904,694
|
|
|
$
|
4,670
|
|
|
$
|
909,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
45,431
|
|
|
$
|
46
|
|
|
$
|
716,731
|
|
|
$
|
221,311
|
|
|
$
|
1,044
|
|
|
$
|
939,132
|
|
|
$
|
6,095
|
|
|
$
|
945,227
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1,727
|
|
|
|
|
|
|
|
|
|
|
|
1,727
|
|
|
|
|
|
|
|
1,727
|
|
Increase in noncontrolling interest due to sale of equity
interest in OPC LLC
|
|
|
|
|
|
|
|
|
|
|
2,343
|
|
|
|
|
|
|
|
|
|
|
|
2,343
|
|
|
|
2,070
|
|
|
|
4,413
|
|
Cash dividend declared, $0.05 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,290
|
)
|
|
|
|
|
|
|
(2,290
|
)
|
|
|
|
|
|
|
(2,290
|
)
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,975
|
)
|
|
|
|
|
|
|
(8,975
|
)
|
|
|
10
|
|
|
|
(8,965
|
)
|
Other comprehensive income (loss), net of related taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains or losses on marketable securities
available-for-sale
(net of related tax of $14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
(23
|
)
|
Amortization of unrealized gains in respect of derivative
instruments designated for cash flow hedge (net of related tax
of $32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011
|
|
|
45,431
|
|
|
$
|
46
|
|
|
$
|
720,801
|
|
|
$
|
210,046
|
|
|
$
|
968
|
|
|
$
|
931,861
|
|
|
$
|
8,175
|
|
|
$
|
940,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,965
|
)
|
|
$
|
1,785
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
23,370
|
|
|
|
20,449
|
|
Accretion of asset retirement obligation
|
|
|
387
|
|
|
|
276
|
|
Stock-based compensation
|
|
|
1,727
|
|
|
|
1,416
|
|
Amortization of deferred lease income
|
|
|
(671
|
)
|
|
|
(671
|
)
|
Income attributable to sale of tax benefits, net of interest
expense
|
|
|
(542
|
)
|
|
|
(792
|
)
|
Equity in income (losses) of investees
|
|
|
412
|
|
|
|
(546
|
)
|
Impairment of auction rate securities
|
|
|
207
|
|
|
|
|
|
Return on investment in unconsolidated investments
|
|
|
|
|
|
|
3,734
|
|
Gain on severance pay fund asset
|
|
|
(614
|
)
|
|
|
(420
|
)
|
Premium from issuance Senior Unsecured Bonds
|
|
|
1,975
|
|
|
|
|
|
Gain on sale of a subsidiary
|
|
|
|
|
|
|
(6,336
|
)
|
Deferred income tax provision (benefit)
|
|
|
145
|
|
|
|
(856
|
)
|
Liability for unrecognized tax benefits
|
|
|
(1,137
|
)
|
|
|
253
|
|
Deferred lease revenues
|
|
|
(269
|
)
|
|
|
394
|
|
Changes in operating assets and liabilities, net of amounts
acquired:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(14,367
|
)
|
|
|
1,155
|
|
Costs and estimated earnings in excess of billings on
uncompleted contracts
|
|
|
2,615
|
|
|
|
11,528
|
|
Inventories
|
|
|
(2,016
|
)
|
|
|
(4,528
|
)
|
Prepaid expenses and other
|
|
|
1,138
|
|
|
|
2,166
|
|
Deposits and other
|
|
|
(132
|
)
|
|
|
(183
|
)
|
Accounts payable and accrued expenses
|
|
|
(3,184
|
)
|
|
|
15,315
|
|
Due from/to related entities, net
|
|
|
(29
|
)
|
|
|
(206
|
)
|
Billings in excess of costs and estimated earnings on
uncompleted contracts
|
|
|
12,223
|
|
|
|
4,330
|
|
Liabilities for severance pay
|
|
|
1,281
|
|
|
|
1,145
|
|
Other long-term liabilities
|
|
|
(257
|
)
|
|
|
(1,061
|
)
|
Due from/to Parent
|
|
|
(231
|
)
|
|
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
13,066
|
|
|
|
48,240
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Return of investment in unconsolidated investments
|
|
|
|
|
|
|
3,516
|
|
Purchases of marketable securities, net
|
|
|
(22,965
|
)
|
|
|
|
|
Net change in restricted cash, cash equivalents and marketable
securities
|
|
|
(29,920
|
)
|
|
|
(11,315
|
)
|
Cash received from sale of a subsidiary
|
|
|
|
|
|
|
19,594
|
|
Capital expenditures
|
|
|
(55,052
|
)
|
|
|
(76,492
|
)
|
Investment in unconsolidated companies
|
|
|
|
|
|
|
(281
|
)
|
Increase (decrease) in severance pay fund asset, net of payments
made to retired employees
|
|
|
13
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(107,924
|
)
|
|
|
(64,981
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of senior unsecured bonds
|
|
|
107,447
|
|
|
|
|
|
Proceeds from the sale of limited liability company interest in
OPC LLC, net of transaction costs
|
|
|
24,878
|
|
|
|
|
|
Proceeds from revolving credit lines with banks
|
|
|
79,334
|
|
|
|
47,200
|
|
Repayment of revolving credit lines with banks
|
|
|
(150,300
|
)
|
|
|
(22,700
|
)
|
Repayments of long-term debt
|
|
|
(2,434
|
)
|
|
|
(5,478
|
)
|
Cash paid to non-controlling interest
|
|
|
(2,616
|
)
|
|
|
|
|
Deferred debt issuance costs
|
|
|
(1,301
|
)
|
|
|
(22
|
)
|
Cash dividends paid
|
|
|
(2,290
|
)
|
|
|
(5,455
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
52,718
|
|
|
|
13,545
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(42,140
|
)
|
|
|
(3,196
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
82,815
|
|
|
|
46,307
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
40,675
|
|
|
$
|
43,111
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Decrease in accounts payable related to purchases of property,
plant and equipment
|
|
$
|
(5,947
|
)
|
|
$
|
(1,649
|
)
|
|
|
|
|
|
|
|
|
|
Accrued liabilities related to financing activities
|
|
$
|
325
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
NOTE 1
|
GENERAL
AND BASIS OF PRESENTATION
|
These unaudited condensed consolidated financial statements of
Ormat Technologies, Inc. and its subsidiaries (the
Company) have been prepared in accordance with
accounting principles generally accepted in the United States of
America (U.S. GAAP) and pursuant to the rules
and regulations of the Securities and Exchange Commission
(SEC) for interim financial statements. Accordingly,
they do not contain all information and notes required by
U.S. GAAP for annual financial statements. In the opinion
of management, the unaudited condensed consolidated interim
financial statements reflect all adjustments, which include
normal recurring adjustments, necessary for a fair statement of
the Companys consolidated financial position as of
March 31, 2011, the consolidated results of operations and
comprehensive income, and the consolidated cash flows for the
three-month periods ended March 31, 2011 and 2010.
The financial data and other information disclosed in the notes
to the condensed consolidated financial statements related to
these periods are unaudited. The results for the three-month
period ended March 31, 2011 are not necessarily indicative
of the results to be expected for the year ending
December 31, 2011.
These condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial
statements and notes thereto included in the Companys
annual report on
Form 10-K
for the year ended December 31, 2010. The condensed
consolidated balance sheet data as of December 31, 2010 was
derived from the audited consolidated financial statements for
the year ended December 31, 2010, but does not include all
disclosures required by U.S. GAAP.
Dollar amounts, except per share data, in the notes to these
financial statements are rounded to the closest $1,000.
Certain comparative figures have been reclassified to conform to
the current period presentation.
Concentration
of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of temporary
cash investments, marketable securities and accounts receivable.
The Company places its temporary cash investments with high
credit quality financial institutions located in the United
States (U.S.) and in foreign countries. At
March 31, 2011 and December 31, 2010, the Company had
deposits totaling $15,897,000 and $55,537,000, respectively, in
seven U.S. financial institutions that were federally
insured up to $250,000 per account. At March 31, 2011 and
December 31, 2010, the Companys deposits in foreign
countries amounted to approximately $31,752,000 and $37,929,000,
respectively.
At March 31, 2011 and December 31, 2010, accounts
receivable related to operations in foreign countries amounted
to approximately $43,556,000 and $26,128,000, respectively. At
March 31, 2011 and December 31, 2010, accounts
receivable from the Companys major customers that have
generated 10% or more of its revenues amounted to approximately
35% and 40% of the Companys accounts receivable,
respectively.
Southern California Edison Company (SCE) accounted
for 27.0% and 25.5% of the Companys total revenues for the
three months ended March 31, 2011 and 2010, respectively.
SCE is the power purchaser and revenue source for the Mammoth
complex, which was accounted for under the equity method through
August 1, 2010. Following the Companys acquisition of
the remaining 50% interest in the Mammoth complex, as described
in Note 3, the Company has included the results of the
Mammoth complex in its consolidated financial statements.
8
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Sierra Pacific Power Company and Nevada Power Company
(subsidiaries of NV Energy, Inc.) accounted for 16.2% and 19.2%
of the Companys total revenues for the three months ended
March 31, 2011 and 2010, respectively.
Hawaii Electric Light Company accounted for 10.6% and 7.1% of
the Companys total revenues for the three months ended
March 31, 2011 and 2010, respectively.
Kenya Power and Lighting Co. Ltd. accounted for 8.9% and 10.7%
of the Companys total revenues for the three months ended
March 31, 2011 and 2010, respectively.
The Company performs ongoing credit evaluations of its
customers financial condition. The Company has
historically been able to collect on all of its receivable
balances, and accordingly, no provision for doubtful accounts
has been made.
|
|
NOTE 2
|
NEW
ACCOUNTING PRONOUNCEMENTS
|
New
accounting pronouncements effective in the three-month period
ended March 31, 2011
Accounting
for Revenue Recognition
In October 2009, the Financial Accounting Standards Board
(FASB) issued amendments to the accounting and
disclosures for revenue recognition. These amendments modify the
criteria for recognizing revenue in multiple element
arrangements and require companies to develop a best estimate of
the selling price to separate deliverables and allocate
arrangement consideration using the relative selling price
method. Additionally, the amendments eliminate the residual
method for allocating arrangement considerations. The adoption
by the Company on January 1, 2011 did not have a material
impact on the Companys consolidated financial statements.
In April 2010, the FASB issued guidance for revenue
recognition milestone method, which provides
guidance on the criteria that should be met for determining
whether the milestone method of revenue recognition is
appropriate. A vendor can recognize consideration that is
contingent upon achievement of a milestone in its entirety as
revenue in the period in which the milestone is achieved only if
the milestone meets all criteria to be considered substantive. A
milestone should be considered substantive in its entirety. An
individual milestone may not be bifurcated. This guidance is
effective on a prospective basis for milestones achieved in
fiscal years, and interim periods within those years, beginning
on or after the effective date of the guidance. The adoption by
the Company on January 1, 2011 did not have a material
impact on the Companys consolidated financial statements.
Accounting
for Share-based Payments
In April 2010, the FASB issued an accounting standards update,
which addresses the classification of an employee share-based
payment award with an exercise price denominated in the currency
of a market in which the underlying equity securities trades.
This update clarifies that an employee share-based payment award
with an exercise price denominated in the currency of a market
in which a substantial portion of the entitys equity
securities trades should not be considered to contain a
condition that is not a market, performance, or service
condition. Therefore, an entity should not classify such an
award as a liability if it otherwise qualifies as equity. The
adoption by the Company on January 1, 2011 did not have a
material impact on the Companys consolidated financial
statements.
|
|
NOTE 3
|
MAMMOTH
COMPLEX ACQUISITION
|
On August 2, 2010, the Company acquired the remaining 50%
interest in Mammoth-Pacific, L.P. (Mammoth Pacific),
which owns the Mammoth complex located near the city of Mammoth,
California, for a
9
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
purchase price of $72.5 million in cash. The Company
acquired the remaining interest in Mammoth Pacific to increase
its geothermal power plant operations in the United States.
Prior to the acquisition, the Company had a 50% interest in
Mammoth Pacific that was accounted for under the equity method
of accounting. Following the acquisition, the Company became the
sole owner of the Mammoth complex, as well as the sole owner of
rights to over 10,000 acres of undeveloped federal lands.
As a result of the acquisition of the remaining 50% interest in
Mammoth Pacific, the financial statements of Mammoth Pacific
have been consolidated with the Companys financial
statements.
Revenues and net income of the Mammoth complex were $4,710,000
and $456,000, respectively, for the three months ended
March 31, 2011.
The following unaudited consolidated pro forma financial
information for the three months ended March 31, 2010
assumes the Mammoth Pacific acquisition occurred as of
January 1, 2010, after giving effect to certain
adjustments, including the depreciation based on the adjustments
to the fair market value of the property, plant and equipment
acquired, and related income tax effects. The pro forma results
have been prepared for comparative purposes only and are not
necessarily indicative of the results of operations that may
occur in the future or that would have occurred had the
acquisition of Mammoth Pacific been effected on the date
indicated.
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2010
|
|
|
|
(Dollars in thousands,
|
|
|
|
except per share data)
|
|
|
Revenues
|
|
$
|
87,719
|
|
Loss from continuing operations
|
|
|
(1,947
|
)
|
Net income
|
|
|
1,833
|
|
Net loss attributable to noncontrolling interest
|
|
|
53
|
|
|
|
|
|
|
Net income attributable to the Companys stockholders
|
|
$
|
1,886
|
|
|
|
|
|
|
Earnings per share attributable to the Companys
stockholders basic and diluted:
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.04
|
)
|
Income from discontinued operations
|
|
|
0.08
|
|
|
|
|
|
|
Net income
|
|
$
|
0.04
|
|
|
|
|
|
|
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Raw materials and purchased parts for assembly
|
|
$
|
3,188
|
|
|
$
|
7,030
|
|
Self-manufactured assembly parts and finished products
|
|
|
11,366
|
|
|
|
5,508
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,554
|
|
|
$
|
12,538
|
|
|
|
|
|
|
|
|
|
|
10
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 5
|
UNCONSOLIDATED
INVESTMENTS
|
Unconsolidated investments, mainly in power plants, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Sarulla
|
|
$
|
1,980
|
|
|
$
|
2,244
|
|
Watts & More Ltd.
|
|
|
1,852
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,832
|
|
|
$
|
4,244
|
|
|
|
|
|
|
|
|
|
|
The
Mammoth Complex
Prior to August 2, 2010, the Company had a 50% interest in
Mammoth Pacific, which owns the Mammoth complex. The
Companys 50% ownership interest in Mammoth Pacific was
accounted for under the equity method of accounting as the
Company had the ability to exercise significant influence, but
not control, over Mammoth Pacific. On August 2, 2010, the
Company acquired the remaining 50% interest in Mammoth Pacific
(see Note 3).
The condensed results of operations of Mammoth Pacific for the
three months ended March 31, 2010 are summarized below:
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2010
|
|
|
|
(Dollars in thousands)
|
|
|
Condensed statements of operations:
|
|
|
|
|
Revenues
|
|
$
|
5,065
|
|
Gross margin
|
|
|
1,533
|
|
Net income
|
|
|
1,466
|
|
Companys equity in income of Mammoth:
|
|
|
|
|
50% of Mammoth net income
|
|
$
|
733
|
|
Plus amortization of basis difference
|
|
|
148
|
|
|
|
|
|
|
|
|
|
881
|
|
Less income taxes
|
|
|
(335
|
)
|
|
|
|
|
|
Total
|
|
$
|
546
|
|
|
|
|
|
|
The
Sarulla Project
The Company is a 12.75% member of a consortium which is in the
process of developing a geothermal power project in Indonesia
with expected generating capacity of approximately 340 MW.
The project is located in Tapanuli Utara, North Sumatra,
Indonesia and will be owned and operated by the consortium
members under the framework of a Joint Operating Contract with
PT Pertamina Geothermal Energy (PGE). The project
will be constructed in three phases over five years, with each
phase utilizing the Companys 110 MW to 120 MW
combined cycle geothermal plants in which the steam first
produces power in a backpressure steam turbine and is
subsequently condensed in a vaporizer of a binary plant, which
produces additional power. The consortium is still negotiating
certain contractual amendments for facilitation of project
financing and for signing the resulting amended energy sales
contract, and intends to proceed with the project after those
amendments have become effective.
11
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The Companys share in the results of operations of the
Sarulla project was not significant for each of the periods
presented in these condensed consolidated financial statements.
Watts &
More Ltd.
In October 2010, the Company invested $2.0 million in
Watts & More Ltd. (W&M), an early
stage
start-up
company, engaged in the development of energy harvesting and
system balancing solutions for electrical sources and, in
particular, solar photovoltaic systems. The Company holds
approximately 28.6% of W&Ms shares.
The Companys share in the results of operations of
W&M was not significant for the three-month period ended
March 31, 2011.
|
|
NOTE 6
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The fair value measurement guidance clarifies that fair value is
an exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an
asset or liability. It establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy under the fair value
measurement guidance are described below:
Level 1 Unadjusted quoted prices in active
markets that are accessible at the measurement date for
identical assets or liabilities;
Level 2 Quoted prices in markets that are not
active, or inputs that are observable, either directly or
indirectly, for substantially the full term of the asset or
liability;
Level 3 Prices or valuation techniques that
require inputs that are both significant to the fair value
measurement and unobservable (supported by little or no market
activity).
12
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The following table sets forth certain fair value information at
March 31, 2011 and December 31, 2010 for financial
assets and liabilities measured at fair value by level within
the fair value hierarchy, as well as cost or amortized cost. As
required by the fair value measurement guidance, assets and
liabilities are classified in their entirety based on the lowest
level of inputs that is significant to the fair value
measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
Fair Value at March 31, 2011
|
|
|
|
2011
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (including restricted cash accounts)
|
|
$
|
51,169
|
|
|
$
|
51,169
|
|
|
$
|
51,169
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities
|
|
|
22,890
|
|
|
|
22,927
|
|
|
|
22,927
|
|
|
|
|
|
|
|
|
|
Derivatives(1)
|
|
|
|
|
|
|
1,068
|
|
|
|
|
|
|
|
1,068
|
|
|
|
|
|
Auction rate securities (including restricted cash accounts)
($4.5 million par value), see
below(2)
|
|
|
2,822
|
|
|
|
2,822
|
|
|
|
|
|
|
|
2,822
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(1)
|
|
|
|
|
|
|
(733
|
)
|
|
|
|
|
|
|
(733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,881
|
|
|
$
|
77,253
|
|
|
$
|
74,096
|
|
|
$
|
3,157
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Fair Value at December 31, 2010
|
|
|
|
2010
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (including restricted cash accounts)
|
|
$
|
14,370
|
|
|
$
|
14,370
|
|
|
$
|
14,370
|
|
|
$
|
|
|
|
$
|
|
|
Derivatives(1)
|
|
|
|
|
|
|
1,030
|
|
|
|
|
|
|
|
1,030
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illiquid auction rate securities (including restricted cash
accounts) ($4.5 million par value), see
below(2)
|
|
|
4,011
|
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,381
|
|
|
$
|
18,427
|
|
|
$
|
14,370
|
|
|
$
|
1,030
|
|
|
$
|
3,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Derivatives represent foreign currency forward contracts which
are valued primarily based on observable inputs including
forward and spot prices for currencies and interest swap
transactions which are based primarily on observable inputs
including
10-year U.S.
Treasury interest rates. |
13
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
|
(2) |
|
Included in the consolidated balance sheets as follows: |
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Marketable securities
|
|
$
|
1,222
|
|
|
$
|
|
|
Restricted cash, cash equivalents and marketable securities
|
|
|
1,600
|
|
|
|
|
|
Long-term marketable securities
|
|
|
|
|
|
|
1,287
|
|
Long-term restricted cash, cash equivalents and marketable
securities
|
|
|
|
|
|
|
1,740
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,822
|
|
|
$
|
3,027
|
|
|
|
|
|
|
|
|
|
|
The Companys financial assets measured at fair value
(including restricted cash accounts) at March 31, 2011 and
December 31, 2010 include investments in auction rate
securities and money market funds (which are included in cash
equivalents). Those securities, except for the auction rate
securities, are classified within Level 1 of the fair value
hierarchy because they are valued using quoted market prices in
an active market.
As of March 31, 2011 and December 31, 2010, all of the
Companys auction rate securities are associated with
failed auctions. Such securities have par values totaling
$4.5 million at March 31, 2011 and December 31,
2010, all of which have been in a loss position since the fourth
quarter of 2007. The Companys auction rate securities at
December 31, 2010 were valued using Level 3 inputs.
Historically, the carrying value of auction rate securities
approximated fair value due to the frequent resetting of the
interest rates. While the Company continued to earn interest on
these investments at the contractual rates, the estimated market
value of these auction rate securities no longer approximated
par value. Due to the lack of observable market quotes on the
Companys illiquid auction rate securities, the Company
utilizes valuation models that relied exclusively on
Level 3 inputs including, among other things: (i) the
underlying structure of each security; (ii) the present
value of future principal and interest payments discounted at
rates considered to reflect the uncertainty of current market
conditions; (iii) consideration of the probabilities of
default, auction failure, or repurchase at par for each period;
(iv) assessments of counterparty credit quality;
(v) estimates of the recovery rates in the event of default
for each security; and (vi) overall capital market
liquidity. These estimated fair values were subject to
uncertainties that were difficult to predict. Therefore, such
auction rate securities were classified as of December 31,
2010 as Level 3 in the fair value hierarchy. In the first
quarter of 2011, the Company identified a buyer outside of the
auction process and in April 2011, it sold the balance of the
auction rate securities for consideration of $2,822,000.
Therefore, such auction rate securities have been classified as
of March 31, 2011 as Level 2 in the fair value
hierarchy, based on the prices which were negotiated in March
2011.
The table below sets forth a summary of the changes in the fair
value of the Companys financial assets as Level 3
(i.e., illiquid auction rate securities) for the three-month
periods ended March 31, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Balance at beginning of period
|
|
$
|
3,027
|
|
|
$
|
3,164
|
|
Total unrealized losses:
|
|
|
|
|
|
|
|
|
Included in net income
|
|
|
(205
|
)
|
|
|
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
(96
|
)
|
Transfered to Level 2
|
|
|
(2,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
|
|
|
$
|
3,068
|
|
|
|
|
|
|
|
|
|
|
14
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Effective July 1, 2010, the Company adopted an accounting
standards update that amends and clarifies the guidance on how
entities should evaluate credit derivatives embedded in
beneficial interests in securitized financial assets. The
updated guidance eliminates the scope exception for bifurcation
of embedded credit derivatives in interests in securitized
financial assets unless they are created solely by subordination
of one beneficial interest to another. The auction rate
securities held by the Company are considered securitized
financial assets. Based on the abovementioned guidance, the
Company elected the fair value option for its auction rate
securities and reclassified $693,000 (net of income taxes of
$377,000) to retained earnings with an offset to other
comprehensive income. Effective with the adoption of this new
guidance, all changes in the fair value of auction rate
securities are recognized in earnings.
The funds invested in auction rate securities that have
experienced failed auctions are not accessible until a
successful auction occurs, a buyer is found outside of the
auction process or the underlying securities reach maturity. As
a result, the Company classified those securities with failed
auctions as long-term assets in the consolidated balance sheets
as of December 31, 2010. As mentioned above, in the first
quarter of 2011, the Company identified a buyer outside of the
auction process and in April 2011, it sold the balance of the
auction rate securities. Therefore the Company classified those
securities as short-term assets in the consolidated balance
sheets as of March 31, 2011.
There were no transfers of assets or liabilities between
Level 1 and Level 2 during the three months ended
March 31, 2011.
The fair value of the Companys long-term debt approximates
its carrying amount, except for the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Carrying Amount
|
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
December 31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
(Dollars in millions)
|
|
(Dollars in millions)
|
|
Olkaria III Loan
|
|
$
|
89.8
|
|
|
$
|
88.7
|
|
|
$
|
88.4
|
|
|
$
|
88.4
|
|
Amatitlan Loan
|
|
|
39.0
|
|
|
|
39.5
|
|
|
|
38.5
|
|
|
|
39.0
|
|
Senior Secured Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ormat Funding Corp. (OFC)
|
|
|
129.5
|
|
|
|
129.5
|
|
|
|
136.3
|
|
|
|
136.3
|
|
OrCal Geothermal Inc. (OrCal)
|
|
|
95.0
|
|
|
|
93.5
|
|
|
|
95.6
|
|
|
|
95.6
|
|
Senior Unsecured Bonds
|
|
|
254.2
|
|
|
|
144.8
|
|
|
|
249.5
|
|
|
|
142.0
|
|
Loan from institutional investors
|
|
|
35.6
|
|
|
|
37.1
|
|
|
|
37.2
|
|
|
|
37.2
|
|
The fair value of OFC Senior Secured Notes is determined using
observable market prices as these securities are traded. The
fair value of other long-term debt is determined by a valuation
model, which is based on a conventional discounted cash flow
methodology and utilizes assumptions of current market pricing
curves.
Issuance
of Senior Unsecured Bonds
On August 3, 2010, the Company entered into a trust
instrument governing the issuance of, and accepted subscriptions
for, an aggregate principal amount of approximately
$142.0 million of Senior Unsecured Bonds (the
Bonds). The Company issued the Bonds outside of the
United States to investors who are not
U.S. persons in an unregistered offering
pursuant to, and subject to the requirements of,
Regulation S under the Securities Act of 1933, as amended
(the Securities Act).
Subject to early redemption, the principal of the Bonds is
repayable in a single bullet payment upon the final maturity of
the Bonds on August 1, 2017. The Bonds bear interest at a
fixed rate of 7% per annum, payable semi-annually.
15
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
In February 2011, the Company accepted subscriptions for an
aggregate principal amount of approximately $108.0 million
of additional Senior Unsecured Bonds (the Additional
Bonds) under two addendums to the trust instrument. The
Company issued the Additional Bonds outside of the United States
to investors who are not U.S. persons in an
unregistered offering pursuant to, and subject to the
requirements of, Regulation S under the Securities Act. The
terms and conditions of the Additional Bonds are identical to
the Bonds. The Additional Bonds were issued at a premium which
reflects an effective fixed interest of 6.75% per annum.
In June 2007, Ormat Nevada entered into agreements with
affiliates of Morgan Stanley & Co. Incorporated and
Lehman Brothers Inc. (Morgan Stanley Geothermal LLC and
Lehman-OPC LLC (Lehman-OPC)), under which those
investors purchased, for cash, interests in a newly formed
subsidiary of Ormat Nevada, OPC LLC (OPC), entitling
the investors to certain tax benefits (such as production tax
credits and accelerated depreciation) and distributable cash
associated with four geothermal power plants.
The first closing under the agreements occurred in 2007 and
covered the Companys Desert Peak 2, Steamboat Hills, and
Galena 2 power plants. The investors paid $71.8 million at
the first closing. The second closing under the agreements
occurred in 2008 and covered the Galena 3 power plant. The
investors paid $63.0 million at the second closing.
Ormat Nevada continues to operate and maintain the power plants.
Under the agreements, Ormat Nevada initially received all of the
distributable cash flow generated by the power plants, while the
investors received substantially all of the production tax
credits (PTC) and taxable income or loss (together,
the Economic Benefits). Once it recovered the
capital that it has invested in the power plants, which occurred
in the fourth quarter of 2010, the investors receive both the
distributable cash flow and the Economic Benefits. The
investors return is limited by the term of the
transaction. Once the investors reach a target after-tax yield
on their investment in OPC (the Flip Date), Ormat
Nevada will receive 95% of both distributable cash and taxable
income, on a going forward basis. Following the Flip Date, Ormat
Nevada also has the option to buy out the investors
remaining interest in OPC at the then-current fair market value
or, if greater, the investors capital account balances in
OPC. Should Ormat Nevada exercise this purchase option, it would
thereupon revert to being sole owner of the power plants.
The Class B membership units are provided with a 5%
residual economic interest in OPC. The 5% residual interest
commences on achievement by the investors of a contractually
stipulated return that triggers the Flip Date. The actual Flip
Date is not known with certainty and is determined by the
operating results of OPC. This residual 5% interest represents a
noncontrolling interest and is not subject to mandatory
redemption or guaranteed payments. Cash is distributed each
period in accordance with the cash allocation percentages
stipulated in the agreements. Until the fourth quarter of 2010,
Ormat Nevada was allocated the cash earnings in OPC and
therefore, the amount allocated to the 5% residual interest
represented the noncash loss of OPC which principally
represented depreciation on the property, plant and equipment.
As from the fourth quarter of 2010, the distributable cash is
allocated to the Class B membership units.
The Companys voting rights in OPC are based on a capital
structure that is comprised of Class A and Class B
membership units. The Company owns, through its subsidiary,
Ormat Nevada, all of the Class A membership units, which
represent 75% of the voting rights in OPC. The investors own all
of the Class B membership units, which represent 25% of the
voting rights of OPC. Other than in respect of customary
protective rights, all operational decisions in OPC are decided
by the vote of a majority of the membership units. Following the
Flip Date, Ormat Nevadas voting rights will increase to
95% and the investors voting rights will decrease to 5%.
Ormat Nevada retains the controlling voting interest in OPC both
before and after the Flip Date and therefore continues to
consolidate OPC.
16
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
On October 30, 2009, Ormat Nevada acquired from Lehman-OPC
all of the Class B membership units of OPC held by
Lehman-OPC pursuant to a right of first offer for a price of
$18.5 million. A substantial portion of the initial sale of
the Class B membership units by Ormat Nevada was accounted
for as a financing transaction. As a result, the repurchase of
these interests at a discount resulted in a pre-tax gain of
$13.3 million in the year ended December 31, 2009. In
addition, an amount of approximately $1.1 million has been
reclassified from noncontrolling interest to additional paid-in
capital representing the 1.5% residual interest of
Lehman-OPCs Class B membership units.
On February 3, 2011, Ormat Nevada sold to JPM Capital
Corporation (JPM) all of the Class B membership
units of OPC that it had acquired on October 30, 2009 for a
sale price of $24.9 million in cash. The Company did not
record any gain from the sale of its Class B membership
interests in OPC to JPM. A substantial portion of the
Class B membership units are accounted for as a financing
transaction. As a result, the majority of these proceeds were
recorded as a liability. In addition, $2.3 million has been
reclassified from additional paid-in capital to noncontrolling
interest representing the 1.5% residual interest of JPMs
Class B membership units.
|
|
NOTE 9
|
STOCK-BASED
COMPENSATION
|
On March 31, 2011, the Company granted to employees 622,150
stock appreciation rights (SAR) under the
Companys 2004 Incentive Plan. The exercise price of each
SAR is $25.65, which represented the fair market value of the
Companys common stock on the date of grant. Such SARs will
expire seven years from the date of grant and will cliff vest
and are exercisable from the grant date as follows: 25% after
24 months, 25% after 36 months, and the remaining 50%
after 48 months. Upon exercise, SARs entitle the recipient
to receive shares of common stock equal to the increase in value
of the award between the grant date and the exercise date. The
fair value of each SAR on the date of grant was $9.82.
The Company calculated the fair value of each SAR on the date of
grant using the Black-Scholes valuation model based on the
following assumptions:
|
|
|
|
|
Risk-free interest rates
|
|
|
2.32
|
%
|
Expected term (in years)
|
|
|
5.125
|
|
Dividend yield
|
|
|
0.80
|
%
|
Expected volatility
|
|
|
46.29
|
%
|
Forfeiture rate
|
|
|
5.69
|
%
|
|
|
NOTE 10
|
DISCONTINUED
OPERATIONS
|
In January 2010, a former shareholder of Geothermal Development
Limited (GDL) exercised a call option to purchase
from the Company its shares in GDL for approximately
$2.8 million. In addition, the Company received
$17.7 million to repay the loan a subsidiary of the Company
provided to GDL to build the plant. The Company did not exercise
its right of first refusal and, therefore, the Company
transferred its shares in GDL to the former shareholder after
the former shareholder paid all of GDLs obligations to the
Company. As a result, the Company recorded a pre-tax gain of
approximately $6.3 million in the three months ended
March 31, 2010.
The operations and gain on sale of GDL have been included in
discontinued operations in the condensed consolidated statements
of operations and comprehensive income for all periods prior to
the sale of GDL in January 2010. Electricity revenues related to
GDL were $64,000 during the three months ended March 31,
2010. Basic and diluted earnings per share related to a
$3.8 million after-tax gain on sale of GDL was $0.08 during
the three months ended March 31, 2010.
17
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 11
|
ELECTRICITY
REVENUES AND COST OF REVENUES
|
The components of electricity revenues and cost of revenues are
as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Energy and capacity
|
|
$
|
31,155
|
|
|
$
|
24,718
|
|
Lease portion of energy and capacity
|
|
|
46,442
|
|
|
|
40,716
|
|
Lease income
|
|
|
671
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
78,268
|
|
|
$
|
66,105
|
|
|
|
|
|
|
|
|
|
|
Cost of evenues:
|
|
|
|
|
|
|
|
|
Energy and capacity
|
|
$
|
35,521
|
|
|
$
|
27,254
|
|
Lease portion of energy and capacity
|
|
|
29,105
|
|
|
|
25,958
|
|
Lease income
|
|
|
1,311
|
|
|
|
1,311
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,937
|
|
|
$
|
54,523
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 12
|
INTEREST
EXPENSE, NET
|
The components of interest expense, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Parent
|
|
$
|
|
|
|
$
|
180
|
|
Interest related to sale of tax benefits
|
|
|
1,710
|
|
|
|
1,375
|
|
Other
|
|
|
13,651
|
|
|
|
9,773
|
|
Less amount capitalized
|
|
|
(2,281
|
)
|
|
|
(1,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,080
|
|
|
$
|
9,714
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 13
|
EARNINGS
(LOSS) PER SHARE
|
Basic earnings (loss) per share attributable to the
Companys stockholders (earnings or loss per
share) is computed by dividing net income or loss
attributable to the Companys stockholders by the weighted
average number of shares of common stock outstanding for the
period. The Company does not have any equity instruments that
are dilutive, except for employee stock options.
18
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
The table below shows the reconciliation of the number of shares
used in the computation of basic and diluted earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Weighted average number of shares used in computation of basic
earnings per share
|
|
|
45,431
|
|
|
|
45,431
|
|
Add:
|
|
|
|
|
|
|
|
|
Additional shares from the assumed exercise of employee stock
options
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computation of diluted
earnings per share
|
|
|
45,431
|
|
|
|
45,457
|
|
|
|
|
|
|
|
|
|
|
The number of stock options that could potentially dilute future
earnings per share and were not included in the computation of
diluted earnings per share because to do so would have been
antidilutive was 3,025,249 and 2,048,750 for the three months
ended March 31, 2011 and 2010, respectively.
|
|
NOTE 14
|
BUSINESS
SEGMENTS
|
The Company has two reporting segments: Electricity and Product
Segments. These segments are managed and reported separately as
each offers different products and serves different markets. The
Electricity Segment is engaged in the sale of electricity from
the Companys power plants pursuant to power purchase
agreements (PPAs). The Product Segment is engaged in
the manufacture, including design and development, of turbines
and power units for the supply of electrical energy and in the
associated construction of power plants utilizing the power
units manufactured by the Company to supply energy from
geothermal fields and other alternative energy sources. Transfer
prices between the operating segments are determined based on
current market values or cost plus markup of the sellers
business segment.
Summarized financial information concerning the Companys
reportable segments is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity
|
|
Product
|
|
Consolidated
|
|
|
(Dollars in thousands)
|
|
Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
78,268
|
|
|
$
|
19,552
|
|
|
$
|
97,820
|
|
Intersegment revenues
|
|
|
|
|
|
|
13,362
|
|
|
|
13,362
|
|
Operating income (loss)
|
|
|
4,004
|
|
|
|
(885
|
)
|
|
|
3,119
|
|
Segment assets at period end*
|
|
|
2,005,182
|
|
|
|
88,765
|
|
|
|
2,093,947
|
|
* Including unconsolidated investments
|
|
|
1,980
|
|
|
|
1,852
|
|
|
|
3,832
|
|
Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
66,105
|
|
|
$
|
16,549
|
|
|
$
|
82,654
|
|
Intersegment revenues
|
|
|
|
|
|
|
7,194
|
|
|
|
7,194
|
|
Operating income (loss)
|
|
|
3,095
|
|
|
|
(890
|
)
|
|
|
2,205
|
|
Segment assets at period end*
|
|
|
1,816,648
|
|
|
|
80,052
|
|
|
|
1,896,700
|
|
* Including unconsolidated investments
|
|
|
29,104
|
|
|
|
|
|
|
|
29,104
|
|
19
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Reconciling information between reportable segments and the
Companys consolidated totals is shown in the following
table:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Operating income
|
|
$
|
3,119
|
|
|
$
|
2,205
|
|
Interest income
|
|
|
135
|
|
|
|
197
|
|
Interest expense, net
|
|
|
(13,080
|
)
|
|
|
(9,714
|
)
|
Foreign currency translation and transaction gains
|
|
|
517
|
|
|
|
434
|
|
Income attributable to sale of equity interest
|
|
|
2,139
|
|
|
|
2,139
|
|
Other non-operating expense, net
|
|
|
(797
|
)
|
|
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated loss before income taxes and equity in income
of investees
|
|
$
|
(7,967
|
)
|
|
$
|
(5,098
|
)
|
|
|
|
|
|
|
|
|
|
Securities
Class Actions
Following the Companys public announcement that it would
restate certain of its financial results due to a change in the
Companys accounting treatment for certain exploration and
development costs, three securities class action lawsuits were
filed in the United States District Court for the District of
Nevada on March 9, 2010, March 18, 2010 and
April 7, 2010. These complaints assert claims against the
Company and certain officers and directors for alleged violation
of Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 (the Exchange Act). One complaint also
asserts claims for alleged violations of Sections 11,
12(a)(2) and 15 of the Securities Act. All three complaints
allege claims on behalf of a putative class of purchasers of
Company common stock between May 6, 2008 or May 7,
2008 and February 23, 2010 or February 24, 2010. These
three lawsuits were consolidated by the court in an order issued
on June 3, 2010 and the court appointed three of the
Companys stockholders to serve as lead plaintiffs.
Lead plaintiffs filed a consolidated amended class action
complaint (CAC) on July 9, 2010 that asserts
claims under Sections 10(b) and 20(a) of the Exchange Act
on behalf of a putative class of purchasers of Company common
stock between May 7, 2008 and February 24, 2010. The
CAC alleges that certain of the Companys public statements
were false and misleading for failing to account properly for
the Companys exploration and development costs based on
the Companys announcement on February 24, 2010 that
it was going to restate its financial results to change its
method of accounting for exploration and development costs in
certain respects. The CAC also alleges that certain of the
Companys statements concerning the North Brawley project
were false and misleading. The CAC seeks compensatory damages,
expenses, and such further relief as the court may deem proper.
The Company cannot make an estimate of the possible loss or
range of loss.
Defendants filed a motion to dismiss the CAC on August 13,
2010. On March 3, 2011, the court granted in part and
denied in part Defendants motion to dismiss. The
court dismissed plaintiffs allegations that the
Companys statements regarding the North Brawley project
were false or misleading, but did not dismiss plaintiffs
allegations regarding the restatement. Defendants answered the
remaining allegations in the CAC regarding the restatement on
April 8, 2011.
The Company does not believe that these lawsuits have merit and
is defending the actions vigorously.
20
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
Stockholder
Derivative Cases
Four stockholder derivative lawsuits have also been filed in
connection with the Companys public announcement that it
would restate certain of its financial results due to a change
in the Companys accounting treatment for certain
exploration and development costs. Two cases were filed in the
Second Judicial District Court of the State of Nevada in and for
the County of Washoe on March 16, 2010 and April 21,
2010 and two cases were filed in the United States District
Court for the District of Nevada on March 29, 2010 and
June 7, 2010. All four lawsuits assert claims brought
derivatively on behalf of the Company against certain of its
officers and directors for alleged breach of fiduciary duty and
other claims, including waste of corporate assets and unjust
enrichment.
The two stockholder derivative cases filed in the Second
Judicial District Court of the State of Nevada in and for the
County of Washoe were consolidated by the Court in an order
dated May 27, 2010 and the plaintiffs filed a consolidated
derivative complaint on September 7, 2010. In accordance
with a stipulation between the parties, defendants filed a
motion to dismiss on November 16, 2010. On April 18,
2011, the court stayed the state derivative case pending the
resolution of the securities class action. The Company cannot
make an estimate of the possible loss or range of loss on the
state derivative case.
The two stockholder derivative cases filed in the United States
District Court for the District of Nevada were consolidated by
the Court in an order dated August 31, 2010 and plaintiffs
filed a consolidated derivative complaint on October 28,
2010. The Company filed a motion to dismiss on December 13,
2010. On March 7, 2011, the court transferred the federal
derivative case to the court presiding over the securities class
action.
The Company believes the allegations in these purported
derivative actions are without merit and is defending the
actions vigorously.
Other
From time to time, the Company is named as a party in various
lawsuits, claims and other legal and regulatory proceedings that
arise in the ordinary course of its business. These actions
typically seek, among other things, compensation for alleged
personal injury, breach of contract, property damage, punitive
damages, civil penalties or other losses, or injunctive or
declaratory relief. With respect to such lawsuits, claims and
proceedings, the Company accrues reserves when a loss is
probable and the amount of such loss can be reasonably
estimated. It is the opinion of the Companys management
that the outcome of these proceedings, individually and
collectively, will not materially affect its business, financial
condition, financial results or cash flow.
On February 22, 2011, the Companys Board of Directors
declared, approved and authorized payment of a quarterly
dividend of $2.3 million ($0.05 per share) to all holders
of the Companys issued and outstanding shares of common
stock on March 15, 2011. Such dividend was paid on
March 24, 2011.
The Companys effective tax rate for the three months ended
March 31, 2011 and 2010 was 7.4% and 50.2%, respectively.
The effective tax rate differs from the federal statutory rate
of 35% for the three months ended March 31, 2011 primarily
due to: (i) the benefit of production tax credits for
qualified power plants placed in service since 2005;
(ii) lower tax rates in Israel; (iii) a tax credit and
tax exemption related to the Companys subsidiaries in
Guatemala; and (iv) provision to return adjustments related
to foreign activities.
21
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
On an annual basis the Company expects a tax benefit as a result
of the impact of production tax credits (PTCs) on
the Companys annual forecasted pre-tax income. Therefore,
the 2011 forecasted effective tax rate is negative, resulting in
a tax provision in the three months ended March 31, 2011,
even though the Company had a
pre-tax loss
in that period.
The anticipated annual PTCs associated with the Class B
membership interest in OPC (see Note 8), an entity the
Company is consolidating, had a significant impact on the
Companys expected overall annual tax benefit in 2010.
During 2010, the Company was negotiating to sell such interest
to a third party, which sale occurred in February 2011. Upon the
sale of the Class B membership interest, the Company was no
longer eligible to receive PTCs associated with the Class B
membership interest. Due to uncertainties in the timing of
selling its Class B membership interest and the
significance of the production tax credits to the Companys
overall tax benefit in 2010, the Company recognized in 2010
production tax credits as they were earned rather than including
forecasted production tax credits in the annual effective tax
rate estimate from continuing operations.
The Companys subsidiary, Ormat Systems Ltd. (Ormat
Systems), received Benefited Enterprise status
under Israels Law for Encouragement of Capital
Investments, 1959 (the Investment Law), with respect
to two of its investment programs. As a Benefited Enterprise,
Ormat Systems was exempt from Israeli income taxes with respect
to income derived from the first benefited investment for a
period of two years beginning in 2004, and thereafter such
income is subject to reduced Israeli income tax rates, which
will not exceed 25% for an additional five years. Ormat Systems
is also exempt from Israeli income taxes with respect to income
derived from the second benefited investment for a period of two
years beginning in 2007, and thereafter such income is subject
to reduced Israeli income tax rates, which will not exceed 25%
for an additional five years. These benefits are subject to
certain conditions, including among other things, that all
transactions between Ormat Systems and its affiliates are at
arms length, and that the management and control of Ormat
Systems will be from Israel during the entire period of the tax
benefits. A change in control should be reported to the Israel
Tax Authority in order to maintain the tax benefits. In January
2011, new legislation amending the Investment Law was enacted.
Under the new legislation, a uniform rate of corporate tax would
apply to all qualified income of certain industrial companies,
as opposed to the current laws incentives that are limited
to income from a Benefited Enterprise during their
benefits period. According to the amendment, the uniform tax
rate applicable to the zone where the production facilities of
Ormat Systems are located would be 15% in 2011 and 2012, 12.5%
in 2013 and 2014, and 12% in 2015 and thereafter. Under the
transitory provisions of the new legislation, Ormat Systems may
opt to irrevocably comply with the new law while waiving
benefits provided under the current law or continue to comply
with the current law during the next years. Changing from the
current law to the new law is permissible at any stage. Ormat
Systems decided to irrevocably comply with the new law starting
in 2011. As a result the deferred taxes as of December 31,
2010 have been reduced by $0.5 million. This amount reduced
the tax provision for the three months ended March 31, 2011
by such amount.
A reconciliation of the beginning and ending amounts of
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Balance at beginning of period
|
|
$
|
5,431
|
|
|
$
|
4,931
|
|
Additions based on tax positions taken in prior years
|
|
|
239
|
|
|
|
253
|
|
Decrease for settlements with taxing authorities
|
|
|
(1,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,294
|
|
|
$
|
5,184
|
|
|
|
|
|
|
|
|
|
|
22
ORMAT
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Unaudited)
|
|
NOTE 18
|
SUBSEQUENT
EVENTS
|
Cash
Dividend
On May 4, 2011, the Companys Board of Directors
declared, approved and authorized payment of a quarterly
dividend of $1.8 million ($0.04 per share) to all holders
of the Companys issued and outstanding shares of common
stock on May 18, 2011, payable on May 25, 2011.
Sale of
Auction Rate Securities
In April 2011, the Company sold the balance of the auction rate
securities for consideration of $2,822,000 (see Note 6).
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ITEM 2.
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MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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This quarterly report on
Form 10-Q
includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts,
included in this quarterly report that address activities,
events or developments that we expect or anticipate will or may
occur in the future, including such matters as our projections
of annual revenues, expenses and debt service coverage with
respect to our debt securities, future capital expenditures,
business strategy, competitive strengths, goals, development or
operation of generation assets, market and industry developments
and the growth of our business and operations, are
forward-looking statements. When used in this quarterly report
on
Form 10-Q,
the words may, will, could,
should, expects, plans,
anticipates, believes,
estimates, predicts,
projects, potential, or
contemplate or the negative of these terms or other
comparable terminology are intended to identify forward-looking
statements, although not all forward-looking statements contain
such words or expressions. The forward-looking statements in
this quarterly report are primarily located in the material set
forth under the headings Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Risk Factors, and Notes to Condensed
Consolidated Financial Statements, but are found in other
locations as well. These forward-looking statements generally
relate to our plans, objectives and expectations for future
operations and are based upon managements current
estimates and projections of future results or trends. Although
we believe that our plans and objectives reflected in or
suggested by these forward-looking statements are reasonable, we
may not achieve these plans or objectives. You should read this
quarterly report on
Form 10-Q
completely and with the understanding that actual future results
and developments may be materially different from what we expect
due to a number of risks and uncertainties, many of which are
beyond our control. We will not update forward-looking
statements even though our situation may change in the future.
Specific factors that might cause actual results to differ from
our expectations include, but are not limited to:
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significant considerations, risks and uncertainties discussed in
this quarterly report;
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operating risks, including equipment failures and the amounts
and timing of revenues and expenses;
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geothermal resource risk (such as the heat content, useful life
and geological formation of the reservoir);
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financial market conditions and the results of financing efforts;
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environmental constraints on operations and environmental
liabilities arising out of past or present operations, including
the risk that we may not have, and in the future may be unable
to procure, any necessary permits or other environmental
authorization;
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construction or other project delays or cancellations;
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political, legal, regulatory, governmental, administrative and
economic conditions and developments in the United States and
other countries in which we operate;
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the enforceability of the long-term power purchase agreements
(PPAs) for our power plants;
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contract counterparty risk;
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weather and other natural phenomena;
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the impact of recent and future federal and state regulatory
proceedings and changes, including legislative and regulatory
initiatives regarding deregulation and restructuring of the
electric utility industry and incentives for the production of
renewable energy at the federal and state level in the United
States and elsewhere;
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changes in environmental and other laws and regulations to which
our company is subject, as well as changes in the application of
existing laws and regulations;
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current and future litigation;
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our ability to successfully identify, integrate and complete
acquisitions;
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competition from other existing geothermal energy projects and
new geothermal energy projects developed in the future, and from
alternative electricity producing technologies;
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the effect of and changes in economic conditions in the areas in
which we operate;
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market or business conditions and fluctuations in demand for
energy or capacity in the markets in which we operate;
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the direct or indirect impact on our companys business
resulting from terrorist incidents or responses to such
incidents, including the effect on the availability of and
premiums on insurance;
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the effect of and changes in current and future land use and
zoning regulations, residential, commercial and industrial
development and urbanization in the areas in which we operate;
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the risk factors set forth in our Annual Report on
Form 10-K
for the year ended December 31, 2010;
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other uncertainties which are difficult to predict or beyond our
control and the risk that we incorrectly analyze these risks and
forces or that the strategies we develop to address them could
be unsuccessful; and
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other risks and uncertainties detailed from time to time in our
filings with the Securities and Exchange Commission (SEC).
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Investors are cautioned that these forward-looking statements
are inherently uncertain. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions
prove incorrect, actual results or outcomes may vary materially
from those described herein. We undertake no obligation to
update forward-looking statements even though our situation may
change in the future. Given these risks and uncertainties,
readers are cautioned not to place undue reliance on such
forward-looking statements.
The following discussion and analysis of our financial condition
and results of operations should be read together with our
condensed consolidated financial statements and related notes
included elsewhere in this report and the Risk
Factors section of our Annual Report on
Form 10-K
for the year ended December 31, 2010 and any updates
contained herein as well as those set forth in our reports and
other filings made with the SEC.
General
Overview
We are a leading vertically integrated company engaged in the
geothermal and recovered energy power business. We design,
develop, build, sell, own and operate clean, environmentally
friendly geothermal and recovered energy-based power plants, in
most cases using equipment that we design and manufacture.
Our geothermal power plants include both power plants that we
have built and power plants that we have acquired, while all of
our recovered energy-based plants have been constructed by us.
We conduct our business activities in two business segments,
which we refer to as our Electricity Segment and Product
Segment. In our Electricity Segment, we develop, build, own and
operate geothermal and recovered energy-based power plants in
the United States and geothermal power plants in other countries
around the world, and sell the electricity they generate. We
have recently decided to expand our activities in the
Electricity Segment to include the ownership and operation of
power plants that produce electricity generated by solar
photovoltaic (Solar PV) systems that we do not manufacture. In
our Product Segment, we design, manufacture and sell equipment
for geothermal and recovered energy-based electricity
generation, remote power units and other power generating units
and provide services relating to the engineering, procurement,
construction, operation and maintenance of geothermal and
recovered energy-based power plants. Both our Electricity
Segment and Product Segment operations are conducted in the
United States and throughout the world. Our current generating
portfolio includes geothermal power plants in the United States,
Guatemala, Kenya, and Nicaragua, as well as recovered
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energy generation (REG) power plants in the United States.
During the three months ended March 31, 2011 and 2010, our
consolidated power plants generated 1,048,379 MWh and
917,882 MWh, respectively.
For the three months ended March 31, 2011, our Electricity
Segment revenues represented approximately 80.0% of our total
revenues, while our Product Segment revenues represented
approximately 20.0% of our total revenues during such period.
For the three months ended March 31, 2011, our total
revenues increased by 18.3% (from $82.7 million to
$97.8 million) over the same period last year. Revenues
from the Electricity Segment increased by 18.4% and revenues
from the Product Segment increased by 18.1% .
For the three months ended March 31, 2011, total
Electricity Segment revenues from the sale of electricity by our
consolidated power plants were $78.3 million, compared to
$66.1 million for the three months ended March 31,
2010. In addition, revenues from our 50% ownership of the
Mammoth complex in the three months ended March 31, 2010
were $2.5 million. This additional data is a Non-Generally
Accepted Accounting Principles (Non-GAAP) financial measure, as
defined by the SEC. There is no comparable GAAP measure. We
believe that such Non-GAAP data is useful to the readers as it
provides a more complete view of the scope of activities of the
power plants that we operate for comparing our Electricity
Segment revenues for the three month periods ended
March 31, 2010 and 2011. Our investment in the Mammoth
complex prior to our acquisition of the remaining 50% interest
in August 2010 was accounted for in our consolidated financial
statements under the equity method, and the revenues were not
included in our consolidated revenues for the three months ended
March 31, 2010.
For the three months ended March 31, 2011, revenues
attributable to our Product Segment were $19.6 million,
compared to $16.5 million for the three months ended
March 31, 2010, an increase of 18.1%.
Revenues from our Electricity Segment are relatively
predictable, as they are derived from sales of electricity
generated by our power plants pursuant to long-term PPAs. The
price for electricity under all but one of our PPAs is
effectively a fixed price at least through April 2012. The
exception is the PPA of the Puna power plant. It has a monthly
variable energy rate based on the local utilitys avoided
cost, which is the incremental cost that the power purchaser
avoids by not having to generate such electrical energy itself
or purchase it from others. In the three months ended
March 31, 2011, approximately 84.1% of our electricity
revenues were derived from contracts with fixed energy rates,
and therefore most of our electricity revenues were not affected
by the fluctuations in energy commodity prices. However,
electricity revenues are subject to seasonal variations and can
be affected by higher-than average ambient temperatures, as
described below under the heading Seasonality.
Revenues attributable to our Product Segment are based on the
sale of equipment and the provision of various services to our
customers. These revenues may vary significantly from period to
period because of the timing of our receipt of purchase orders
and the progress of our execution of each project.
Our management assesses the performance of our two segments of
operation differently. In the case of our Electricity Segment,
when making decisions about potential acquisitions or the
development of new projects, we typically focus on the internal
rate of return of the relevant investment, relevant technical
and geological matters and other relevant business
considerations. We evaluate our operating power plants based on
revenues and expenses, and our projects that are under
development based on costs attributable to each such project. We
evaluate the performance of our Product Segment based on the
timely delivery of our products, performance quality of our
products, and costs actually incurred to complete customer
orders compared to the costs originally budgeted for such orders.
Recent
Developments
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Since the beginning of 2011, we have entered into new lease
agreements covering approximately 8,000 acres of federal or
private land in Nevada, Oregon, and California.
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We have entered into an agreement with the Weyerhaeuser Company
granting us an option to enter into geothermal leases covering
approximately 264,000 acres of land in Oregon and
Washington. Under this
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Agreement we have the exclusive right to explore the land for
geothermal resources and may enter into one or more geothermal
leases within the optioned land.
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Since the beginning of 2011, we have entered into new contracts
for the supply of geothermal power plants and other power
generating units outside of the United States and have thereby
increased our backlog for the Product Segment as of
March 31, 2011 to approximately $84 million.
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In April 2011, we amended and restated the PPA with Kenya Power
and Lighting Co. Ltd. (KPLC), the off-taker of the
Olkaria III complex located in Naivasha, Kenya. The amended
and restated PPA governs our construction of, and KPLCs
purchase of electricity from, a new 36 MW power plant at
the Olkaria III complex. The new power plant is scheduled
to come online in 2013. The PPA amendment includes an option to
increase the combined 84 MW capacity from the new and
existing plants to a maximum of 100 MW, subject to
monitoring and assessment of the geothermal reservoir capacity.
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On March 31, 2011, Southern California Edison Company
(Southern California Edison) set the demonstrated capacity of
the North Brawley power plant at 33 MW. Southern California
Edison also agreed to modify the North Brawley PPA to allow us
the option of performing an additional capacity demonstration
within one year from the first capacity demonstration on
March 31, 2011, which would enable us to increase the
demonstrated capacity of the plant.
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In February 2011, we signed a
20-year PPA
with NV Energy, Inc. to sell 30 MW of clean, renewable
energy generated from the Dixie Meadows geothermal project
located in Churchill County, Nevada. We are currently in the
exploration phase of the Dixie Meadows development project. The
20-year PPA
is subject to approval by the Public Utilities Commission of
Nevada (PUCN). If the Dixie Meadows project reaches completion
by the end of 2013, it would be eligible for a cash grant under
the American Recovery and Reinvestment Act of 2009 (ARRA).
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In February 2011, we completed the sale of our part ownership
interest in OPC LLC (OPC) to JPM Capital Corporation for
$24.9 million in cash in a transaction to monetize
production tax credits (PTCs).
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In February 2011, we signed a PPA with Hawaii Electric Light
Company (HELCO) to sell to HELCO an additional 8 MW from
the Puna power plant, at a fixed price (subject to escalation)
independent of oil prices. The
20-year PPA
is subject to approval by the Public Utilities Commission of
Hawaii, with input from the Hawaii Division of Consumer
Advocacy. The construction of the power plant has been
substantially completed and the power plant is expected to reach
full commercial operation after HELCO completes interconnection
activities during the third quarter of 2011.
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In February 2011, we concluded the issuance of Senior Unsecured
Bonds in an aggregate amount of approximately $250 million
(Senior Unsecured Bonds). The Senior Unsecured Bonds were issued
in two tranches. On August 3, 2010, we entered into a trust
instrument governing the issuance of, and accepted subscriptions
for, an aggregate principal amount of approximately
$142 million of Senior Unsecured Bonds, and in February
2011, we entered into addendums to the trust instrument
governing the issuance of, and accepted subscriptions for, an
additional $108 million in aggregate principal amount of
Senior Unsecured Bonds (the Additional Bonds). Subject to early
redemption, the principal of the Senior Unsecured Bonds is
repayable in a single bullet payment upon the final maturity of
the Senior Unsecured Bonds on August 1, 2017. The Senior
Unsecured Bonds bear interest at a fixed rate of 7% per annum,
payable semi-annually. The Additional Bonds were issued at a
premium which reflects an effective fixed interest of 6.75% per
annum.
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Trends
and Uncertainties
The geothermal industry in the United States has historically
experienced significant growth followed by a consolidation of
owners and operators of geothermal power plants. During the
1990s, growth and development in the geothermal industry
occurred primarily in foreign markets and only minimal growth
and development occurred in the United States. Since 2001, there
has been increased demand for energy generated from geothermal
resources in the United States as costs for electricity
generated from geothermal resources
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have become more competitive relative to fossil fuel generation.
This has partly been due to increasing natural gas and oil
prices during much of this period and, equally important, to
newly enacted legislative and regulatory requirements and
incentives, such as state renewable portfolio standards and
federal tax credits. The ARRA further encourages the use of
geothermal energy through production or Investment Tax Credits
(ITCs) as well as cash grants (which are discussed in more
detail in the section entitled Government Grants and Tax
Benefits). We see the increasing demand for energy
generated from geothermal and other renewable resources in the
United States and the further introduction of renewable
portfolio standards as significant trends affecting our industry
today and in the immediate future. Our operations and the trends
that from time to time impact our operations are subject to
market cycles.
We expect to continue to generate the majority of our revenues
from our Electricity Segment through the sale of electricity
from our power plants. Substantially all of our current revenues
from the sale of electricity are derived from payments under
fully-contracted long-term PPAs. We also intend to continue to
pursue growth in our recovered energy business and in the solar
sector.
Although other trends, factors and uncertainties may impact our
operations and financial condition, including many that we do
not or cannot foresee, we believe that our results of operations
and financial condition for the foreseeable future will be
affected by the following trends, factors and uncertainties:
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Our primary focus continues to be the implementation of our
organic growth through exploration, development, the
construction of new projects and enhancements of existing
projects. We expect that this investment in organic growth will
increase our total generating capacity, consolidated revenues
and operating income attributable to our Electricity Segment
year over year. We also routinely look at acquisition
opportunities.
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We expect that the increased awareness of climate change may
result in significant changes in the business and regulatory
environments, which may create business opportunities for us. In
January 2011, the first phase of the U.S. Environmental
Protection Agencys (EPA) Tailoring Rule took
effect in almost all of the states, with the notable exception
of the State of Texas. The Tailoring Rule sets thresholds
addressing permitting requirements under the Clean Air
Acts Prevention of Significant Deterioration and
Title V programs apply to certain major sources of
greenhouse gas emissions. Federal legislation or additional
federal regulations addressing climate change are possible.
Several states and regions are already addressing climate
change. For example, Californias state climate change law,
AB 32, which was signed into law in September 2006, regulates
most sources of greenhouse gas emissions and aims to reduce
greenhouse gas emissions to 1990 levels by 2020. In 2008, the
California Air Resources Board (CARB) approved a Scoping Plan to
carry out regulations implementing AB 32. In December 2010, CARB
approved
cap-and-trade
regulations to reduce Californias greenhouse gas emissions
under AB 32. The
cap-and-trade
regulation, the first phase of which is contemplated to be
implemented in January of 2012, will set a statewide limit on
emissions from sources responsible for emitting 80% of
Californias greenhouse gases and, according to CARB, will
help establish a price signal needed to drive long-term
investment in cleaner fuels and more efficient use of energy.
However, the authority of CARB to implement this
cap-and-trade
program under AB 32 has been the subject of legal challenges
that may hinder
and/or
ultimately thwart its implementation. In September of 2006,
California also passed Senate Bill 1368, which prohibits the
states utilities from entering into long-term financial
commitments for base-load generation with power plants that fail
to meet a
CO2
emission performance standard established by the California
Energy Commission and the California Public Utilities
Commission. Californias long-term climate change goals are
reflected in Executive Order
S-3-05,
which requires a reduction in greenhouse gases to: (i) 2000
levels by 2010; (ii) 1990 levels by 2020; and
(iii) 80% of 1990 levels by 2050. In addition to
California, twenty-two other states have set greenhouse gas
emissions targets or goals (Arizona, Colorado, Connecticut,
Florida, Hawaii, Illinois, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Montana, New Hampshire, New Jersey, New
Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Virginia
and Washington). Regional initiatives, such as the Western
Climate Initiative (which includes seven U.S. states and
four Canadian provinces) and the Midwest Greenhouse Gas
Reduction Accord, are also being developed to reduce greenhouse
gas emissions and develop trading systems for renewable energy
credits. In September
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2008, the
first-in-the-nation
auction of
CO2
allowances was held under the RGGI, a regional
cap-and-trade
system, which includes ten Northeast and Mid-Atlantic States.
Under RGGI, the participating states plan to stabilize power
section carbon emissions at their capped level, and then reduce
the cap by 10% at a rate of 2.5% each year between 2015 and
2018. In addition, twenty-nine states and the District of
Columbia have all adopted renewable portfolio standards (RPS)
and seven other states have adopted renewable portfolio goals.
In California, on April 12, 2011, Governor Jerry Brown
signed Senate Bill 2X (SB 2X) to increase Californias RPS
to 33% by 2020, among the most aggressive renewable energy goals
in the United States. We expect that the additional demand for
renewable energy from utilities in states with RPS will outpace
a possible reduction in general demand for energy (if any) due
to the effect of economic conditions. We see this increased
demand and in particular the impact of the increase in
California RPS, as one of the most significant opportunities for
us to expand existing projects and build new power plants.
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Outside of the United States, we expect that a variety of
government initiatives will create new opportunities for the
development of new projects, as well as create additional
markets for our products. These initiatives include the award of
long-term contracts to independent power generators, the
creation of competitive wholesale markets for selling and
trading energy, capacity and related energy products, and the
adoption of programs designed to encourage clean
renewable and sustainable energy sources.
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We expect competition from the wind and solar power generation
industries to continue. The current demand for renewable energy
is large enough that this increased competition has not
materially impacted our ability to obtain new PPAs. However, the
increase in competition and the amount of renewable energy under
contract may contribute to a reduction in electricity prices.
Despite increased competition from the wind and solar power
generation industries, we believe that baseload electricity,
such as geothermal-based energy, will continue to be a leading
source of renewable energy in areas with commercially viable
geothermal resources.
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We expect increased competition from binary power plant
equipment suppliers. While we believe that we have a distinct
competitive advantage based on our accumulated experience and
current worldwide share of installed binary generation capacity,
which is in excess of 90%, an increase in competition may impact
our ability to secure new purchase orders from potential
customers. The increased competition may also lead to a
reduction in prices that we are able to charge for our binary
equipment, which in turn may impact our profitability.
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Our PPA for the Puna power plant has a monthly variable energy
rate based on the local utilitys avoided costs, which is
the incremental cost that the power purchaser avoids by not
having to generate such electrical energy itself or purchase it
from others. A decrease in the price of oil will result in a
decrease in the incremental cost that the power purchaser avoids
by not generating its electrical energy needs from oil, which
will result in a reduction of the energy rate that we may charge
under this PPA and any other variable energy rate in PPAs that
we may enter into in the future.
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While the current demand for renewable energy is large enough
that increased competition has not impacted our ability to
obtain new PPAs and new leases, increased competition in the
power generation industry may contribute to a reduction in
electricity prices, and increased competition in geothermal
leasing may contribute to an increase in lease costs.
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The viability of a geothermal resource depends on various
factors such as the resource temperature, the permeability of
the resource (i.e., the ability to get geothermal fluids to the
surface) and operational factors relating to the extraction and
injection of the geothermal fluids. Such factors, together with
the possibility that we may fail to find commercially viable
geothermal resources in the future, represent significant
uncertainties we face in connection with our growth expectations.
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As our power plants age, they may require increased maintenance
with a resulting decrease in their availability, potentially
leading to the imposition of penalties if we are not able to
meet the requirements under our PPAs as a result of any decrease
in availability.
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Our foreign operations are subject to significant political,
economic and financial risks, which vary by country. Those risks
include the partial privatization of the electricity sector in
Guatemala, labor unrest in Nicaragua and the political
uncertainty currently prevailing in some of the countries in
which we operate. Although we maintain political risk insurance
for most of our foreign power plants to mitigate these risks,
insurance does not provide complete coverage with respect to all
such risks.
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The Energy Policy Act of 2005 authorizes the Federal Energy
Regulatory Commission (FERC) to revise the Public Utility
Regulatory Policies Act (PURPA) so as to terminate the
obligation of electric utilities to purchase the output of a
Qualifying Facility if FERC finds that there is an accessible
competitive market for energy and capacity from the Qualifying
Facility. The legislation does not affect existing PPAs. We do
not expect this change in law to affect our U.S. power
plants significantly, as all except one of our current contracts
(our Steamboat 1 power plant, which sells its electricity to
Sierra Pacific Power Company on a
year-by-year
basis) are long-term. If the utilities in the regions in which
our domestic power plants operate were to be relieved of the
mandatory purchase obligation, they would not be required to
purchase energy from us upon termination of the existing PPA,
which could have an adverse effect on our revenues.
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In December 2010, a global settlement (Global Settlement)
relating primarily to the purchase and payment obligations of
investor-owned utilities to Qualifying Facilities
under PURPA was approved by the California Public Utilities
Commission (CPUC). The Global Settlement will become effective
upon the satisfaction of certain conditions precedent, including
(a) a final and non-appealable order from the FERC
approving the investor-owned utilities request for a
waiver of the Qualifying Facility must-take purchase obligation
for Qualifying Facilities above 20 MW; and (b) that
the CPUC order becomes final and non-appealable. As of
April 30, 2011, not all of the conditions precedent
(including the two noted above) have been satisfied. The Global
Settlement, once it becomes effective, will affect all of our
PPAs with Southern California Edison, which accounted for
approximately 27.0% and 25.5% of our revenues during the
three-month periods ended March 31, 2011 and 2010,
respectively. Under the Global Settlement, we have basically two
choices available to us:
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We can do nothing, in which case the payments related to our
existing PPAs will be automatically determined by a specific
short run avoided cost (SRAC) methodology beginning in May 2012.
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We can amend our existing PPAs, which must be done within
180 days of the effectiveness of the Global Settlement. If
we make this choice, our existing PPAs will reflect the selected
pricing option until December 2014 and thereafter convert to
SRAC methodology pricing as set forth in the Global Settelment.
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We plan to amend our existing PPAs, and are still evaluating
which of the pricing options to select, which may vary from one
PPA to another. Under all scenarios, we anticipate this will
expose our revenues from these PPAs to greater fluctuations and
may adversely affect our revenues under these PPAs. Because of
the uncertainties inherent in such pricing which will be based
in large part on future natural gas prices, it is not possible
at this time to reliably estimate the potential impact on our
revenues from these PPAs.
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In addition to increasing the California RPS target to 33% by
2020, Californias Senate Bill 2X (SB2X), signed into law
by Governor Jerry Brown on April 12, 2011, also instituted
a tradable renewable energy credit (REC) program. California
utilities can purchase three products to comply with SB2X:
(i) bundled electricity and RECs from electricity
generators that interconnect with a California balancing
authority, (ii) tradable RECs, which are purchased either
from
out-of-state
electricity generators or in-state electricity generators that
do not interconnect with a California balancing authority, and
(iii) firmed and shaped transactions with
out-of-state
electricity generators. Tradable RECs and firmed/shaped
transactions can account for up to 50% of the RPS obligation
until 2013, tapering off to 25% in 2020. By 2020, bundled
transactions must account for 75% of California utilities RPS
compliance. The CPUC must provide implementing regulations by
the end of 2011. SB2X is expected to foster a liquid tradable
REC market and lead to more creative off-take arrangements.
Although we cannot predict at this time whether the tradable REC
program under SB2X and its
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implementing regulations will have a significant impact on our
operations or revenue, it may facilitate additional options when
negotiating PPAs and in selling electricity from our projects.
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Revenues
We generate our revenues from the sale of electricity from our
geothermal and recovered energy-based power plants; the design,
manufacturing and sale of equipment for electricity generation;
and the construction, installation and engineering of power
plant equipment.
Revenues attributable to our Electricity Segment are relatively
predictable as they are derived from the sale of electricity
from our power plants pursuant to long-term PPAs. However, such
revenues are subject to seasonal variations, as more fully
described below in the section entitled Seasonality.
Electricity Segment revenues may also be affected by
higher-than-average
ambient temperatures, which could cause a decrease in the
generating capacity of our power plants, and by unplanned major
maintenance activities related to our power plants.
Our PPAs generally provide for the payment of energy payments
alone, or energy and capacity payments. Generally, capacity
payments are payments calculated based on the amount of time
that our power plants are available to generate electricity.
Some of our PPAs provide for bonus payments in the event that we
are able to exceed certain target levels and the potential
forfeiture of payments if we fail to meet minimum target levels.
Energy payments, on the other hand, are payments calculated
based on the amount of electrical energy delivered to the
relevant power purchaser at a designated delivery point. The
rates applicable to such payments are either fixed (subject, in
certain cases, to certain adjustments) or are based on the
relevant power purchasers short run avoided costs (the
incremental costs that the power purchaser avoids by not having
to generate such electrical energy itself or purchase it from
others). Our more recent PPAs generally provide for energy
payments along with an obligation to compensate the off-taker
for its incremental costs as a result of shortfalls in our
supply.
The prices paid for electricity pursuant to the PPA of the Puna
power plant are impacted by the price of oil. Accordingly, our
revenues for that power plant, which accounted for approximately
10.6% and 7.1% of our total revenues for the three-month periods
ended March 31, 2011 and 2010, respectively, may be
volatile.
Revenues attributable to our Product Segment are generally less
predictable than revenues from our Electricity Segment. This is
because larger customer orders for our products are typically
the result of our participating in, and winning, tenders or
requests for proposals issued by potential customers in
connection with projects they are developing. Such projects
often take a long time to design and develop and are often
subject to various contingencies such as the customers
ability to raise the necessary financing for a project. As a
result, we are generally unable to predict the timing of such
orders for our products and may not be able to replace orders
that we have completed with new ones. As a result, revenues from
our Product Segment fluctuate (and at times, extensively) from
period to period.
The following table sets forth a breakdown of our revenues for
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenues for
|
|
|
|
|
|
|
Period Indicated
|
|
|
|
Revenues in Thousands
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity
|
|
$
|
78,268
|
|
|
$
|
66,105
|
|
|
|
80.0
|
%
|
|
|
80.0
|
%
|
Product
|
|
|
19,552
|
|
|
|
16,549
|
|
|
|
20.0
|
|
|
|
20.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
97,820
|
|
|
$
|
82,654
|
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Geographical
Breakdown of Revenues
The following table sets forth the geographic breakdown of the
revenues attributable to our Electricity and Product Segments
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues in Thousands
|
|
|
% of Revenues for Period Indicated
|
|
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Electricity Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
59,491
|
|
|
$
|
47,589
|
|
|
|
76.0
|
%
|
|
|
72.0
|
%
|
Foreign
|
|
|
18,777
|
|
|
|
18,516
|
|
|
|
24.0
|
|
|
|
28.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
78,268
|
|
|
$
|
66,105
|
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
|
|
|
$
|
2,379
|
|
|
|
0.0
|
%
|
|
|
14.4
|
%
|
Foreign
|
|
|
19,552
|
|
|
|
14,170
|
|
|
|
100.0
|
|
|
|
85.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,552
|
|
|
$
|
16,549
|
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seasonality
The prices paid for the electricity generated by some of our
domestic power plants pursuant to our PPAs are subject to
seasonal variations. The prices paid for electricity under the
PPAs with Southern California Edison for the Heber 1 and 2
plants, the Mammoth complex, the Ormesa complex, and the North
Brawley plant are higher in the months of June through
September. As a result, we receive and will receive in the
future higher revenues during such months. The prices paid for
electricity pursuant to the PPAs of our power plants in Nevada
have no significant changes during the year. In the winter, due
principally to the lower ambient temperature, our power plants
produce more energy and as a result we receive higher energy
revenues. However, the higher capacity payments payable by
Southern California Edison in California in the summer months
have a more significant impact on our revenues than that of the
higher energy revenues generally generated in winter due to
increased efficiency. As a result, our electricity revenues are
generally higher in the summer than in the winter.
Breakdown
of Cost of Revenues
Electricity
Segment
The principal cost of revenues attributable to our operating
power plants includes operation and maintenance expenses such as
depreciation and amortization, salaries and related employee
benefits, equipment expenses, costs of parts and chemicals,
costs related to third-party services, lease expenses,
royalties, startup and auxiliary electricity purchases, property
taxes and insurance. In our California power plants our
principal cost of revenues also includes transmission charges,
scheduling charges and purchases of
make-up
water for use in our cooling towers. Some of these expenses,
such as parts, third-party services and major maintenance, are
not incurred on a regular basis. This results in fluctuations in
our expenses and our results of operations for individual
projects from quarter to quarter. Payments made to government
agencies and private entities relating to site leases where
plants are located, are included in cost of revenues. Royalty
payments, included in cost of revenues, are made as compensation
for the right to use certain geothermal resources and are paid
as a percentage of the revenues derived from the associated
geothermal rights. For the three months ended March 31,
2011 and 2010, royalty payments constituted approximately 3.0%
of the Electricity Segment revenues.
32
Product
Segment
The principal cost of revenues attributable to our Product
Segment includes materials, salaries and related employee
benefits, expenses related to subcontracting activities,
transportation expenses and sales commissions to sales
representatives. Some of the principal expenses attributable to
our Product Segment, such as a portion of the costs related to
labor, utilities and other support services are fixed, while
others, such as materials, construction, transportation and
sales commissions, are variable and may fluctuate significantly,
depending on market conditions. As a result, the cost of
revenues attributable to our Product Segment, expressed as a
percentage of total revenues, fluctuates. Another reason for
such fluctuation is that in responding to bids for our products,
we price our products and services in relation to existing
competition and other prevailing market conditions, which may
vary substantially from order to order.
Cash,
Cash Equivalents and Marketable Securities
Our cash, cash equivalents and marketable securities as of
March 31, 2011 decreased to $64.8 million from
$82.8 million as of December 31, 2010. This decrease
is principally due to: (i) our use of $55.1 million to
fund capital expenditures; (ii) repayment of
$2.4 million of long-term debt; (iii) a net repayment
of $71.0 million against our revolving credit lines with
commercial banks; and (iv) a net increase of
$29.9 million in restricted cash and cash equivalents. The
decrease in our cash resources was partially offset by:
(i) our issuance of an aggregate principal amount of
approximately $107.4 million of Senior Unsecured Bonds in
February 2011; (ii) $24.9 million proceeds from the
sale of Class B membership units of OPC to JPM Capital in
February 2011; and (iii) $13.1 million derived from
operating activities during the three months ended
March 31, 2011. Our corporate borrowing capacity under
committed lines of credit with different commercial banks as of
March 31, 2011 was $402.5 million, as described below
in the section entitled Liquidity and Capital
Resources, of which we utilized $178.8 million
(including $60.3 million of letters of credit) as of
March 31, 2011.
Critical
Accounting Policies
A comprehensive discussion of our critical accounting policies
is included in the Managements Discussion and
Analysis of Financial Condition and Results of Operations
section in our annual report on
Form 10-K
for the year ended December 31, 2010.
New
Accounting Pronouncements
See Note 2 to our condensed consolidated financial
statements set forth in Item 1 of this quarterly report for
information regarding new accounting pronouncements.
33
Results
of Operations
Our historical operating results in dollars and as a percentage
of total revenues are presented below. A comparison of the
different periods described below may be of limited utility as a
result of each of the following: (i) our recent
construction of new power plants and enhancement of acquired
power plants; and (ii) fluctuation in revenues from our
Product Segment.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
Statements of Operations Historical Data:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
$
|
78,268
|
|
|
$
|
66,105
|
|
Product
|
|
|
19,552
|
|
|
|
16,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,820
|
|
|
|
82,654
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
65,937
|
|
|
|
54,523
|
|
Product
|
|
|
16,890
|
|
|
|
12,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,827
|
|
|
|
66,960
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
12,331
|
|
|
|
11,582
|
|
Product
|
|
|
2,662
|
|
|
|
4,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,993
|
|
|
|
15,694
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
2,207
|
|
|
|
3,267
|
|
Selling and marketing expenses
|
|
|
2,660
|
|
|
|
3,202
|
|
General and administrative expenses
|
|
|
7,007
|
|
|
|
7,020
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,119
|
|
|
|
2,205
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
135
|
|
|
|
197
|
|
Interest expense, net
|
|
|
(13,080
|
)
|
|
|
(9,714
|
)
|
Foreign currency translation and
|
|
|
|
|
|
|
|
|
transaction gains
|
|
|
517
|
|
|
|
434
|
|
Income attributable to sale of tax benefits
|
|
|
2,139
|
|
|
|
2,139
|
|
Other non-operating expense, net
|
|
|
(797
|
)
|
|
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, before income taxes and equity
in income (losses) of investees
|
|
|
(7,967
|
)
|
|
|
(5,098
|
)
|
Income tax benefit (provision)
|
|
|
(586
|
)
|
|
|
2,557
|
|
Equity in income (losses) of investees, net
|
|
|
(412
|
)
|
|
|
546
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(8,965
|
)
|
|
|
(1,995
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of related tax
|
|
|
|
|
|
|
14
|
|
Gain on sale of of a subsidiary in New Zealand, net of related
tax
|
|
|
|
|
|
|
3,766
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(8,965
|
)
|
|
|
1,785
|
|
Net loss (income) attributable to noncontrolling interest
|
|
|
(10
|
)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Companys stockholders
|
|
$
|
(8,975
|
)
|
|
$
|
1,838
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to the Companys
stockholders basic and diluted
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.20
|
)
|
|
$
|
(0.04
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(0.20
|
)
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computation of
earnings (loss)
|
|
|
|
|
|
|
|
|
per share attributable to the Companys stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,431
|
|
|
|
45,431
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
45,431
|
|
|
|
45,457
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Statements of Operations Percentage Data:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
80.0
|
%
|
|
|
80.0
|
%
|
Product
|
|
|
20.0
|
|
|
|
20.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
84.2
|
|
|
|
82.5
|
|
Product
|
|
|
86.4
|
|
|
|
75.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84.7
|
|
|
|
81.0
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
Electricity
|
|
|
15.8
|
|
|
|
17.5
|
|
Product
|
|
|
13.6
|
|
|
|
24.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.3
|
|
|
|
19.0
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
2.3
|
|
|
|
4.0
|
|
Selling and marketing expenses
|
|
|
2.7
|
|
|
|
3.9
|
|
General and administrative expenses
|
|
|
7.2
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3.2
|
|
|
|
2.7
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
0.1
|
|
|
|
0.2
|
|
Interest expense, net
|
|
|
(13.4
|
)
|
|
|
(11.8
|
)
|
Foreign currency translation and
|
|
|
|
|
|
|
|
|
transaction gains
|
|
|
0.5
|
|
|
|
0.5
|
|
Income attributable to sale of tax benefits
|
|
|
2.2
|
|
|
|
2.6
|
|
Other non-operating expense, net
|
|
|
(0.8
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, before income taxes and equity
in income (losses) of investees
|
|
|
(8.1
|
)
|
|
|
(6.2
|
)
|
Income tax benefit (provision)
|
|
|
(0.6
|
)
|
|
|
3.1
|
|
Equity in income (losses) of investees, net
|
|
|
(0.4
|
)
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(9.2
|
)
|
|
|
(2.4
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of related tax
|
|
|
0.0
|
|
|
|
0.0
|
|
Gain on sale of of a subsidiary in New Zealand, net of related
tax
|
|
|
0.0
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(9.2
|
)
|
|
|
2.2
|
|
Net loss (income) attributable to noncontrolling interest
|
|
|
(0.0
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the Companys stockholders
|
|
|
(9.2
|
)%
|
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
|
35
Comparison
of the Three Months Ended March 31, 2011 and the Three
Months Ended March 31, 2010
Total
Revenues
Total revenues for the three months ended March 31, 2011
were $97.8 million, compared to $82.7 million for the
three months ended March 31, 2010, which represented an
18.3% increase in total revenues. This increase is attributable
to both our Electricity and Product Segments whose revenues
increased by 18.4% and 18.1%, respectively, over the same period
last year.
Electricity
Segment
Revenues attributable to our Electricity Segment for the three
months ended March 31, 2011 were $78.3 million,
compared to $66.1 million for the three months ended
March 31, 2010, which represented an 18.4% increase in such
revenues. This increase is a result of increased electricity
generation of our power plants from 917,882 MWh in the
three months ended March 31, 2010 to 1,048,379 MWh in
the three months ended March 31, 2011. The most significant
contributors to the increase in our electricity generation were:
(i) an increase in the generation of the Puna power plant
due to repair work that was completed in the second quarter of
2010; (ii) an increase in the generation of our North
Brawley power plant, with revenues of $4.0 million in the
three months ended March 31, 2011, compared to
$2.7 million in the three months ended March 31, 2010;
(iii) the consolidation of the Mammoth complex effective
August 2, 2010 with revenues of $4.7 million in the
three months ended March 31, 2011, resulting from the
acquisition of the remaining 50% interest in Mammoth Pacific in
August 2010; and (iv) an increase in generation of the REG
facilities due to the addition of one plant and a higher
availability of the pipeline. The increase in our Electricity
Segment revenues is also attributable to a slight increase in
the average revenue rate of our electricity portfolio from $72
per MWh in the first quarter of 2010 to $75 per MWh in the first
quarter of 2011, which was mainly due to higher rates under the
PPA of the Puna power plant.
Product
Segment
Revenues attributable to our Product Segment for the three
months ended March 31, 2011 were $19.6 million,
compared to $16.5 million for the three months ended
March 31, 2010, which represented an 18.1% increase in such
revenues. This increase in our product revenues is a result of
an increase in our Product Segment customer orders. As
previously disclosed, the Product Segment revenues are generally
less predictable than revenues from our Electricity Segment.
Total
Cost of Revenues
Total cost of revenues for the three months ended March 31,
2011 was $82.8 million, compared to $67.0 million for
the three months ended March 31, 2010, which represented a
23.7% increase in total cost of revenues. As discussed above,
the increase is attributable to increases in the cost of
revenues in both our Electricity and Product Segments. As a
percentage of total revenues, our total cost of revenues for the
three months ended March 31, 2011 was 84.7%, compared to
81.0% for the same period in 2010.
Electricity
Segment
Total cost of revenues attributable to our Electricity Segment
for the three months ended March 31, 2011 was
$65.9 million, compared to $54.5 million for the three
months ended March 31, 2010, which represented a 20.9%
increase in total cost of revenues for such segment while the
increase in revenues was only 18.4%. We incurred higher costs
associated with operating and maintaining the North Brawley
power plant in the first quarter of 2011 ($14.3 million),
compared to the first quarter of 2010 ($9.5 million),
including replacing pumps in the production wells. We expect a
higher level of operation expenses to continue at least through
the next few quarters. The cost per MWh in the current quarter
increased compared to the first quarter of 2010, as a result of:
(i) the higher costs in the North Brawley power plant, as
described above; and (ii) high depreciation in the Mammoth
complex, resulting from the plan to repower the complex by
replacing part of the old units with new Ormat-manufactured
equipment. As a percentage of total electricity revenues, the
total
36
cost of revenues attributable to our Electricity Segment for the
three months ended March 31, 2011 was 84.2%, compared to
82.5% for the three months ended March 31, 2010.
Product
Segment
Total cost of revenues attributable to our Product Segment for
the three months ended March 31, 2011 was
$16.9 million, compared to $12.4 million for the three
months ended March 31, 2010, which represented a 35.8%
increase in total cost of revenues related to such segment. As a
percentage of total Product Segment revenues, our total cost of
revenues attributable to this segment for the three months ended
March 31, 2011 was 86.4%, compared to 75.2% for the three
months ended March 31, 2010. Such increase in the
percentage of Product Segment cost of revenues from total
Product Segment revenues is attributable to a different product
mix and different margins in the sales contracts.
Research
and Development Expenses
Research and development expenses for the three months ended
March 31, 2011 were $2.2 million, compared to
$3.3 million for the three months ended March 31,
2010, which represented a 32.4% decrease and is primarily
attributable to the costs related to an experimental REG plant
specifically designed to use the residual energy from the
vaporization process at liquefied natural gas regasification
terminals, including developing and building a unit at a
customers premises in Spain, which costs decreased to
$0.6 million in the three months ended March 31, 2011,
from $2.6 million in the three months ended March 31,
2010. The large decrease is because the majority of the costs
related to the experimental REG plant were incurred through the
second quarter of 2010. Construction of the plant commenced in
the third quarter of 2010 and is expected to be completed in the
first half of 2011. If the development of the unit is not
successful we will have to remove the unit from the
customers site. If the unit operates successfully and
passes acceptance tests, we will be paid by the customer an
amount of approximately $15.0 million which will be
recognized as revenue upon acceptance by the customer. Our
research and development activities during the three months
ended March 31, 2011 also included: (i) continued
development of enhanced geothermal systems (EGS); and
(ii) development of a solar thermal system for the
production of electricity.
Selling
and Marketing Expenses
Selling and marketing expenses for the three months ended
March 31, 2011 were $2.7 million, compared to
$3.2 million for the three months ended March 31,
2010, which represented a 16.9% decrease. Selling and marketing
expenses for the three months ended March 31, 2011
constituted 2.7% of total revenues, compared to 3.9% for the
three months ended March 31, 2010.
General
and Administrative Expenses
General and administrative expenses for the three months ended
March 31, 2011 and 2010 were $7.0 million. General and
administrative expenses for the three months ended
March 31, 2011 constituted 7.2% of total revenues, compared
to 8.5% for the three months ended March 31, 2010.
Operating
Income
Operating income for the three months ended March 31, 2011
was $3.1 million, compared to $2.2 million for the
three months ended March 31, 2010. Such increase of
$0.9 million in operating income was principally
attributable to a decrease in operating expenses. This decrease
in operating expenses was partially offset by the decrease in
our Product Segment gross margin due to changes in the product
mix and different margins in the sales contracts, which affected
profitability. Operating income attributable to our Electricity
Segment for the three months ended March 31, 2011 was
$4.0 million, compared to $3.1 million for the three
months ended March 31, 2010. Operating loss attributable to
our Product Segment for the three months ended March 31,
2011 and 2010 was $0.9 million.
37
Interest
Expense, Net
Interest expense, net, for the three months ended March 31,
2011 was $13.1 million, compared to $9.7 million for
the three months ended March 31, 2010, which represented a
34.7% increase. The $3.4 million increase is primarily due
to issuance of Senior Unsecured Bonds in August 2010 and
February 2011, as discussed elsewhere in this report. The
increase was partially offset by: (i) an increase of
$0.7 million in interest capitalized to projects as a
result of increased aggregate investment in projects under
construction; and (ii) a decrease in interest expense as a
result of principal repayments.
Income
Attributable to Sale of Tax Benefits
Income attributable to the sale of tax benefits to institutional
equity investors (as described in OPC Transaction
below) for each of the three months ended March 31, 2011
and 2010 was $2.1 million. This income represents the value
of PTCs and taxable income or loss generated by OPC and
allocated to the investors.
Income
Taxes
Income tax provision for the three months ended March 31,
2011 was $0.6 million, compared to income tax benefit of
$2.6 million for the three months ended March 31,
2010. The effective tax rate for the three months ended
March 31, 2011 was 7.4%, compared to 50.2% for the three
months ended March 31, 2010. On an annual basis we expect a
tax benefit as a result of the impact of PTCs on our annual
forecasted pre-tax income. Therefore, the 2011 forecasted
effective tax rate is negative, resulting in a tax provision in
the three months ended March 31, 2011, even though we had a
pre-tax loss
in that period.
Loss
from Continuing Operations
Loss from continuing operations for the three months ended
March 31, 2011 was $9.0 million, compared to
$2.0 million for the three months ended March 31,
2010. Such increased loss of $7.0 million was principally
attributable to: (i) a $3.4 million increase in
interest expense; (ii) a $3.1 million increase in
income tax provision; and (iii) a $1.0 million
increase in equity losses of investees. The increase was
partially offset by a $0.9 million increase in operating
income.
Discontinued
Operations
In January 2010, a former shareholder of Geothermal Development
Limited (GDL) exercised a call option to purchase from us our
shares in GDL for approximately $2.8 million. In addition,
we received $17.7 million to repay the loan our subsidiary
provided to GDL to build the plant. We did not exercise our
right of first refusal and, therefore, we transferred our shares
in GDL to the former shareholder after the former shareholder
paid all of GDLs obligations to us. As a result, we
recorded an after-tax gain of $3.8 million in the three
months ended March 31, 2010. The operations of GDL have
been included in discontinued operations for all periods prior
to the sale of GDL. The operations and gain on sale of GDL have
been included in discontinued operations for all periods prior
to the sale of GDL in January 2010.
Net
Income (Loss)
Net loss for the three months ended March 31, 2011 was
$9.0 million, compared to net income of $1.8 million
for the three months ended March 31, 2010. The decrease in
net income was principally attributable to the increase in loss
from continuing operations in the amount of $7.0 million,
as discussed above.
Liquidity
and Capital Resources
Our principal sources of liquidity have been derived from cash
flows from operations, the issuance of our common stock in
public and private offerings, proceeds from third party debt in
the form of borrowings under credit facilities and private
offerings, issuance by Ormat Funding Corp. (OFC) and OrCal
Geothermal Inc.
38
(OrCal) of their respective Senior Secured Notes, project
financing (including the Puna lease and the OPC Transaction
described below), and a cash grant we received under the ARRA
relating to the North Brawley power plant. We have utilized this
cash to fund our acquisitions, develop and construct power
generation plants, and meet our other cash and liquidity needs.
As of March 31, 2011, we have access to the following
sources of funds: (i) $64.8 million in cash, cash
equivalents and marketable securities; and
(ii) $223.7 million of unused corporate borrowing
capacity under existing committed lines of credit with different
commercial banks.
Our estimated capital needs for the remainder of 2011 include
approximately $412.0 million for capital expenditures on
new projects in development or construction, exploration
activity, operating projects, and machinery and equipment, as
well as $46.6 million for debt repayment.
We expect to finance these requirements with: (i) the
sources of liquidity described above; (ii) cash flows from
our operations; (iii) additional borrowing capacity under
future lines of credit with commercial banks that are under
negotiations; (iv) future project financing and
refinancing; and (v) cash grants available to us under the
ARRA relating to new projects that will be placed in service
before the end of 2013. Management believes that these sources
will meet our anticipated liquidity, capital expenditures and
other investment requirements. Our shelf registration statement
on
Form S-3,
which was declared effective on October 2, 2008, provides
us with the ability to raise additional capital of up to
$1.5 billion through the issuance of securities, subject to
market conditions.
Third
Party Debt
Our third party debt is composed of two principal categories.
The first category consists of project finance debt or
acquisition financing that we or our subsidiaries have incurred
for the purpose of developing and constructing, refinancing or
acquiring our various projects, which are described under the
heading Non-Recourse and Limited-Recourse Third Party
Debt. The second category consists of debt incurred by us
or our subsidiaries for general corporate purposes, which are
described under the heading Full-Recourse Third Party
Debt.
Non-Recourse
and Limited-Recourse Third Party Debt
OFC
Senior Secured Notes Non Recourse
On February 13, 2004, OFC, one of our subsidiaries, issued
$190.0 million,
81/4% Senior
Secured Notes (OFC Senior Secured Notes) in an offering subject
to Rule 144A and Regulation S of the Securities Act of
1933, as amended (the Securities Act), for the purpose of
refinancing the acquisition cost of the Brady, Ormesa and
Steamboat 1/1A power plants, and the financing of the
acquisition cost of the Steamboat 2/3 power plants. The OFC
Senior Secured Notes have a final maturity date of
December 30, 2020. Principal and interest on the OFC Senior
Secured Notes are payable in semi-annual payments which
commenced on September 30, 2004. The OFC Senior Secured
Notes are collateralized by substantially all of the assets of
OFC and those of its wholly owned subsidiaries and are fully and
unconditionally guaranteed by all of the wholly owned
subsidiaries of OFC. There are various restrictive covenants
under the OFC Senior Secured Notes, which include limitations on
additional indebtedness and payment of dividends. As of
March 31, 2011, OFC was in compliance with the covenants
under the OFC Senior Secured Notes. As of March 31, 2011,
there were $136.3 million of OFC Senior Secured Notes
outstanding.
OrCal
Secured Notes Non-Recourse
On December 8, 2005, OrCal, one of our subsidiaries, issued
$165.0 million, 6.21% Senior Secured Notes (OrCal
Senior Secured Notes) in an offering subject to Rule 144A
and Regulation S of the Securities Act, for the purpose of
refinancing the acquisition cost of the Heber power plants. The
OrCal Senior Secured Notes have been rated BBB- by Fitch. The
OrCal Senior Secured Notes have a final maturity date of
December 30, 2020. Principal and interest on the OrCal
Senior Secured Notes are payable in semi-annual payments that
commenced on September 30, 2006. The OrCal Senior Secured
Notes are collateralized by substantially all of
39
the assets of OrCal and those of its wholly owned subsidiaries
and are fully and unconditionally guaranteed by all of the
wholly owned subsidiaries of OrCal. There are various
restrictive covenants under the OrCal Senior Secured Notes,
which include limitations on additional indebtedness and payment
of dividends. As of March 31, 2011, OrCal was in compliance
with the covenants under the OrCal Senior Secured Notes. As of
March 31, 2011, there were $95.6 million of OrCal
Senior Secured Notes outstanding.
Olkaria III
Loan Non-Recourse
OrPower 4, Inc. (OrPower 4), has a project financing loan of
$105.0 million which refinanced its investment in the
48 MW Olkaria III geothermal power plant located in
Kenya. The loan was provided by a group of European Development
Finance Institutions arranged by DEG Deutsche
Investitions-und Entwicklungsgesellschaft mbH (DEG). The loan
will mature on December 15, 2018, and is payable in 19
equal semi-annual installments. Interest on the loan is variable
based on
6-month
LIBOR plus 4.0%. We fixed the interest rate on
$77.0 million of the loan at 6.90% per annum. There are
various restrictive covenants under the loan, which include
limitations on OrPower 4s ability to make distributions to
its shareholders. As of March 31, 2011, OrPower 4 was in
compliance with the covenants under the loan. As of
March 31, 2011, $88.4 million of the Olkaria III
loan was outstanding.
Amatitlan
Loan Non-Recourse
Ortitlan Limitada (Ortitlan), entered into a note purchase
agreement in an aggregate principal amount of $42.0 million
which refinanced its investment in the 20 MW Amatitlan
geothermal power plant located in Amatitlan, Guatemala. The loan
was provided by TCW Global Project Fund II, Ltd. The loan
will mature on June 15, 2016, and is payable in 28
quarterly installments, that commenced on September 15,
2009. The annual interest rate on the loan is 9.83%, but the
effective cost for us is approximately 8%, due to the
elimination, following the refinancing, of the political risk
insurance premiums that we had been paying on our equity
investment in the project. There are various restrictive
covenants under the loan, which include limitations on
Ortitlans ability to make distributions to its
shareholders. As of March 31, 2011, Ortitlan was in
compliance with the covenants under the loan. As of
March 31, 2011, $38.5 million of the Amatitlan loan
was outstanding.
Senior
Loan from International Finance Corporation (IFC)
(The Zunil Power Plant) Non-Recourse
Orzunil I de Electricidad, Limitada (Orzunil), a wholly owned
subsidiary in Guatemala, has a senior loan agreement with IFC.
The loan, of which $1.3 million was outstanding as of
March 31, 2011, has a fixed annual interest rate of
11.775%, and matures on November 15, 2011. There are
various restrictive covenants under the senior loan, which
include limitations on Orzunils ability to make
distributions to its shareholders. As of March 31, 2011,
Orzunil was in compliance with the covenants under this senior
loan.
New
Financing of Our Projects
Financing
of the North Brawley Power Plant
We refinanced a portion of the equity invested in the North
Brawley power plant with the cash grant we received under the
ARRA in September 2010. We expect that once we bring the power
plant closer to its original design capacity, we will be able to
refinance a portion of the remainder of the equity invested with
long-term debt.
Financing
for Jersey Valley, McGinness Hills and Tuscarora Projects in
Nevada
Our subsidiary, Ormat Nevada, has engaged John Hancock to
arrange senior secured construction and term loan facilities
under a United States Department of Energy (DOE) loan guarantee
program of up to $350 million for three geothermal projects
currently under construction in Nevada. The three projects are
the McGinness Hills, Jersey Valley and Tuscarora geothermal
projects. Construction of all three projects has already
commenced with commercial operation of the first phase of each
project expected between 2011 and 2013.
40
The availability of the credit facilities is subject to various
conditions, including execution of mutually satisfactory
documentation and approval of the DOE.
John Hancock and the DOE are conducting a due diligence review
of the three projects. Upon the satisfactory completion of the
review, John Hancock and the DOE will consider issuing a
conditional commitment which may lead to a loan guarantee,
although we have no assurance this will occur.
Full-Recourse
Third Party Debt
In December 2008, our subsidiary, Ormat Nevada, entered into an
amendment of its credit agreement with Union Bank, N.A. (Union
Bank), extending the final maturity of the facility and
increasing its total amount to $37.5 million. Under the
credit agreement, Ormat Nevada can request extensions of credit
in the form of loans
and/or the
issuance of one or more letters of credit. Union Bank is
currently the sole lender and issuing bank under the credit
agreement, but is also designated as an administrative agent on
behalf of banks that may, from time to time in the future, join
the credit agreement as parties thereto. In connection with this
transaction, we have entered into a guarantee in favor of the
administrative agent for the benefit of the banks, pursuant to
which we agreed to guarantee Ormat Nevadas obligations
under the credit agreement. Ormat Nevadas obligations
under the credit agreement are otherwise unsecured by any of its
(or any of its subsidiaries) assets.
Loans and draws under the letters of credit (if any) under the
credit agreement will bear interest at a floating rate based on
the Eurodollar plus a margin. There are various restrictive
covenants under the credit agreement, which include maintaining
certain levels of tangible net worth, leverage ratio, minimum
coverage ratio, and a distribution coverage ratio. In addition,
there are restrictions on dividend distributions in the event of
a payment default or noncompliance with such ratios, and Ormat
Nevada is subject to a negative pledge in favor of Union Bank.
As of March 31, 2011, letters of credit in the aggregate
amount of $28.6 million remain issued and outstanding under
this credit agreement with Union Bank.
We also have credit agreements with five commercial banks for an
aggregate amount of $365.0 million. Under the terms of
these credit agreements, we, or our Israeli subsidiary, Ormat
Systems, can request: (i) extensions of credit in the form
of loans
and/or the
issuance of one or more letters of credit in the amount of up to
$315.0 million; and (ii) the issuance of one or more
letters of credit in the amount of up to $50.0. The credit
agreements mature between May 2011 and September 2013. Loans and
draws under the credit agreements or under any letters of credit
will bear interest at the respective banks cost of funds
plus a margin. Credit agreements in the amount of
$165.0 million are due to expire in 2011. We are currently
negotiating the extension of these credit agreements for up to
three years. We anticipate that these extensions will include an
increase in the annual average interest rates.
We have a $20.0 million term loan with a group of financial
institutions, which matures on July 16, 2015, is payable in
12 semi-annual installments that commenced January 16,
2010, and bears annual interest of 6.5%. As of March 31,
2011, $15.7 million was outstanding under this loan.
We have a $20.0 million term loan with a group of financial
institutions, which matures on August 1, 2017, is payable
in 12 semi-annual installments commencing February 1, 2012,
and bears annual interest at
6-month
LIBOR plus 5.0%. As of March 31, 2011, $20.0 million
was outstanding under this loan.
We have a $20.0 million term loan with a group of
institutional investors, which matures on November 16,
2016, is payable in ten semi-annual installments commencing
May 16, 2012, and bears annual interest of 5.75%. As of
March 31, 2011, $20.0 million was outstanding under
this loan.
We have a $50.0 million term loan with a commercial bank,
which matures on November 10, 2014, and is payable in 10
semi-annual installments that commenced May 10, 2010, and
bears annual interest at
6-month
LIBOR plus 3.25%. As of March 31, 2011, $40.0 million
was outstanding under this loan.
We have an aggregate principal amount of approximately
$250.0 million of Senior Unsecured Bonds issued and
outstanding. We issued approximately $142.0 million of
these bonds in August 2010 and an
41
additional $107.5 million in February 2011. Subject to
early redemption, the principal of the bonds is repayable in a
single bullet payment upon the final maturity of the bonds on
August 1, 2017. The bonds bear interest at a fixed rate of
7% per annum, payable semi-annually. The bonds that we issued in
February 2011 were issued at a premium which reflects an
effective fixed interest of 6.75% per annum. We issued the bonds
outside the United States to investors who are not
U.S. persons in an unregistered offering
pursuant to, and subject to the requirements of,
Regulation S under the Securities Act.
Our obligations under the credit agreements, the loan
agreements, and the trust instrument governing the bonds,
described above, are unsecured, but we are subject to a negative
pledge in favor of the banks and the other lenders and certain
other restrictive covenants. These include, among other things,
a prohibition on: (i) creating any floating charge or any
permanent pledge, charge or lien over our assets without
obtaining the prior written approval of the lender;
(ii) guaranteeing the liabilities of any third party
without obtaining the prior written approval of the lender; and
(iii) selling, assigning, transferring, conveying or
disposing of all or substantially all of our assets, or a change
of control in our ownership structure. Some of the credit
agreements, the loan agreements, and the trust instrument
contain cross-default provisions with respect to other material
indebtedness owed by us to any third party. In some cases, we
have agreed to maintain certain financial ratios such as a debt
service coverage ratio, a debt to equity ratio, and a debt to
adjusted EBITDA ratio. There are also certain restrictions on
distribution of dividends. The failure to perform or comply with
any of the covenants set forth in such agreements, subject to
various cure periods, would result in the occurrence of an event
of default and would enable the lenders to accelerate all
amounts due under each such agreement.
We are currently in compliance with our covenants with respect
to the credit agreements, the loan agreements and the trust
instrument, and believe that compliance with the restrictive
covenants, financial ratios and other terms of any of our (or
Ormat Systems) full-recourse bank credit agreements will
not materially impact our business plan or plan of operations.
Letters
of Credit
Some of our customers require our project subsidiaries to post
letters of credit in order to guarantee their respective
performance under relevant contracts. We are also required to
post letters of credit to secure our obligations under various
leases and licenses and may, from time to time, decide to post
letters of credit in lieu of cash deposits in reserve accounts
under certain financing arrangements. In addition, our
subsidiary, Ormat Systems, is required from time to time to post
performance letters of credit in favor of our customers with
respect to orders of products.
Four commercial banks have issued such performance letters of
credit in favor of our customers from time to time. As of
March 31, 2011, such banks have issued letters of credit
totaling $34.2 million. These letters of credit were not
issued under the credit agreements discussed under
Full-Recourse Third Party Debt above.
In addition, we and certain of our subsidiaries may request
letters of credit under the credit agreements with Union Bank
and five other commercial banks as described above under
Full-Recourse Third Party Debt. As of March 31,
2011, letters of credit in the aggregate amount of
$60.3 million remained issued and outstanding under the
Union Bank credit agreement and our other agreements with
commercial banks.
Puna
Project Lease Transactions
On May 19, 2005, our subsidiary in Hawaii, Puna Geothermal
Venture (PGV), entered into a transaction involving the Puna
geothermal power plant located on the Big Island of Hawaii. The
transaction was concluded with financing parties by means of a
leveraged lease transaction. A secondary stage of the lease
transaction relating to two new geothermal wells that PGV
drilled in the second half of 2005 (for production and
injection) was completed on December 30, 2005. Pursuant to
a 31-year
head lease, PGV leased its geothermal power plant to the
abovementioned financing parties in return for deferred lease
payments by such financing parties to PGV in the aggregate
amount of $83.0 million.
42
OPC
Transaction
In June 2007, our wholly owned subsidiary, Ormat Nevada, entered
into agreements with affiliates of Morgan Stanley &
Co. Incorporated and Lehman Brothers Inc. (Morgan Stanley
Geothermal LLC and Lehman-OPC LLC (Lehman-OPC)), under which
those investors purchased, for cash, interests in a newly formed
subsidiary of Ormat Nevada, OPC, entitling the investors to
certain tax benefits (such as PTCs and accelerated depreciation)
and distributable cash associated with four geothermal power
plants.
The first closing under the agreements occurred in 2007 and
covered our Desert Peak 2, Steamboat Hills, and Galena 2 power
plants. The investors paid $71.8 million at the first
closing. The second closing under the agreements occurred in
2008 and covered the Galena 3 power plant. The investors paid
$63.0 million at the second closing.
Ormat Nevada continues to operate and maintain the power plants.
Under the agreements, Ormat Nevada initially received all of the
distributable cash flow generated by the power plants, while the
investors received substantially all of the PTCs and the taxable
income or loss (together, the Economic Benefits). Once it
recovers the capital that it invested in the power plants, which
occurred in the fourth quarter of 2010, the investors receive
both the distributable cash flow and the Economic Benefits. The
investors return is limited by the term of the
transaction. Once the investors reach a target after-tax yield
on their investment in OPC (the Flip Date), Ormat Nevada will
receive 95% of both distributable cash and taxable income, on a
going forward basis. Following the Flip Date, Ormat Nevada also
has the option to buy out the investors remaining interest
in OPC at the then-current fair market value or, if greater, the
investors capital account balances in OPC. Should Ormat
Nevada exercise this purchase option, it would thereupon revert
to being sole owner of the power plants.
The Class B membership units are provided with a 5%
residual economic interest in OPC. The 5% residual interest
commences on achievement by the investors of a contractually
stipulated return that triggers the Flip Date. The actual Flip
Date is not known with certainty, and is determined by the
operating results of OPC. This residual 5% interest represents a
noncontrolling interest and is not subject to mandatory
redemption or guaranteed payments.
Our voting rights in OPC are based on a capital structure that
is comprised of Class A and Class B membership units.
We own, through our subsidiary, Ormat Nevada, all of the
Class A membership units, which represent 75% of the voting
rights in OPC. The investors own all of the Class B
membership units, which represent 25% of the voting rights of
OPC. Other than in respect of customary protective rights, all
operational decisions in OPC are decided by the vote of a
majority of the membership units. Following the Flip Date, Ormat
Nevadas voting rights will increase to 95% and the
investors voting rights will decrease to 5%. Ormat Nevada
retains the controlling voting interest in OPC both before and
after the Flip Date and therefore continues to consolidate OPC.
On October 30, 2009, Ormat Nevada acquired from Lehman-OPC
all of the Class B membership units of OPC held by
Lehman-OPC pursuant to a right of first offer for a purchase
price of $18.5 million.
On February 3, 2011, Ormat Nevada sold to JPM Capital
Corporation (JPM) all of the Class B membership units of
OPC that it had acquired on October 30, 2009 for a sale
price of $24.9 million in cash.
Liquidity
Impact of Uncertain Tax Positions
As discussed in Note 17 to our condensed consolidated
financial statements set forth in Item 1 of this quarterly
report, we have a liability associated with unrecognized tax
benefits and related interest and penalties in the amount of
approximately $4.3 million as of March 31, 2011. This
liability is included in long-term liabilities in our
consolidated balance sheet, because we generally do not
anticipate that settlement of the liability will require payment
of cash within the next twelve months. We are not able to
reasonably estimate when we will make any cash payments required
to settle this liability, but believe that the ultimate
settlement of our obligations will not materially affect our
liquidity.
43
Dividend
The following are the dividends declared by us during the past
two years:
|
|
|
|
|
|
|
|
|
|
|
Dividend Amount
|
|
|
|
|
Date Declared
|
|
per Share
|
|
Record Date
|
|
Payment Date
|
|
May 8, 2009
|
|
$
|
0.06
|
|
|
May 20, 2009
|
|
May 27, 2009
|
August 5, 2009
|
|
$
|
0.06
|
|
|
August 18, 2009
|
|
August 27, 2009
|
November 4, 2009
|
|
$
|
0.06
|
|
|
November 18, 2009
|
|
December 1, 2009
|
February 23, 2010
|
|
$
|
0.12
|
|
|
March 16, 2010
|
|
March 25, 2010
|
May 5, 2010
|
|
$
|
0.05
|
|
|
May 18, 2010
|
|
May 25, 2010
|
August 4, 2010
|
|
$
|
0.05
|
|
|
August 17, 2010
|
|
August 26, 2010
|
November 2, 2010
|
|
$
|
0.05
|
|
|
November 17, 2010
|
|
November 30, 2010
|
February 22, 2011
|
|
$
|
0.05
|
|
|
March 15, 2011
|
|
March 24, 2011
|
May 4, 2011
|
|
$
|
0.04
|
|
|
May 18, 2011
|
|
May 25, 2011
|
Historical
Cash Flows
The following table sets forth the components of our cash flows
for the relevant periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2011
|
|
2010
|
|
|
(In thousands)
|
|
Net cash provided by operating activities
|
|
$
|
13,066
|
|
|
$
|
48,240
|
|
Net cash used in investing activities
|
|
|
(107,924
|
)
|
|
|
(64,981
|
)
|
Net cash provided by financing activities
|
|
|
52,718
|
|
|
|
13,545
|
|
Net change in cash and cash equivalents
|
|
|
(42,140
|
)
|
|
|
(3,196
|
)
|
For the
Three Months Ended March 31, 2011
Net cash provided by operating activities for the three months
ended March 31, 2011 was $13.1 million, compared to
$48.2 million for the three months ended March 31,
2010. The net decrease of $35.1 million resulted primarily
from: (i) a decrease in net income to net loss of
$9.0 million in the three months ended March 31, 2011,
from net income of $1.8 million in the three months ended
March 31, 2010, mainly as a result of the increase in
interest expense, net and income tax provision, as described
above; (ii) an increase in receivables of
$14.4 million in the three months ended March 31,
2011, compared to a decrease of $1.2 million in the three
months ended March 31, 2010; and (iii) a decrease in
accounts payable and accrued expenses of $3.2 million in
the three months ended March 31, 2011, compared to an
increase of $15.3 million in the three months ended
March 31, 2010. Such decrease was partially offset by:
(i) an increase of $3.0 million in depreciation and
amortization mainly due to the placement in service of our
Jersey Valley power plant in January 2011, and high depreciation
in the Mammoth complex, resulting from the plan to repower the
complex by replacing part of the old units with new
Ormat-manufactured equipment, as described above; and
(ii) a gain on sale of GDL of $6.3 million in the
three months ended March 31, 2010.
Net cash used in investing activities for the three months ended
March 31, 2011 was $107.9 million, compared to
$65.0 million for the three months ended March 31,
2010. The principal factors that affected our net cash used in
investing activities during the three months ended
March 31, 2011 were: (i) capital expenditures of
$55.1 million, primarily for our facilities under
construction; (ii) net increase of $29.9 million in
restricted cash, cash equivalents and marketable securities; and
(iii) net increase of $23.0 million in marketable
securities. The principal factors that affected our net cash
used in investing activities during the three months ended
March 31, 2010 were capital expenditures of
$76.5 million, primarily for our power facilities under
construction, and a $11.3 million increase in restricted
cash, cash equivalents and marketable securities, offset by
$19.6 million received from the sale of GDL.
44
Net cash provided by financing activities for the three months
ended March 31, 2011 was $52.7 million, compared to
$13.5 million for the three months ended March 31,
2010. The principal factors that affected the net cash provided
by financing activities during the three months ended
March 31, 2011 were (i) the issuance of an aggregate
amount of approximately $107.4 million Senior Unsecured
Bonds in February 2011; and (ii) proceeds from the sale of
all of the Class B membership units of OPC acquired on
October 30, 2009 for a sale price of $24.9 million,
offset by: (i) the repayment of long-term debt in the
amount of $2.4 million; (ii) a net decrease of
$71.0 million against our revolving lines of credit with
commercial banks; and (iii) the payment of a dividend to
our shareholders in the amount of $2.3 million. The
principal factor that affected our net cash provided by
financing activities during the three months ended
March 31, 2010 was $24.5 million drawn under revolving
lines of credit from commercial banks, which was offset by:
(i) the repayment of long-term debt in the amount of
$5.5 million; and (ii) the payment of a dividend to
our shareholders in the amount of $5.5 million.
Adjusted
EBITDA
Adjusted EBITDA for the three months ended March 31, 2011
was $27.2 million, compared to $32.1 million for the
three months ended March 31, 2010. Adjusted EBITDA includes
consolidated EBITDA and our share in the interest, taxes,
depreciation and amortization related to our unconsolidated 50%
interest in the Mammoth complex in California in the three
months ended March 31, 2010.
We calculate EBITDA as net income before interest, taxes,
depreciation and amortization. We calculate adjusted EBITDA to
include depreciation and amortization, interest and taxes
attributable to our equity investments in the Mammoth complex.
EBITDA and adjusted EBITDA are not measurements of financial
performance or liquidity under GAAP and should not be considered
as an alternative to cash flow from operating activities or as a
measure of liquidity or an alternative to net earnings as
indicators of our operating performance or any other measures of
performance derived in accordance with GAAP. EBITDA and adjusted
EBITDA are presented because we believe they are frequently used
by securities analysts, investors and other interested parties
in the evaluation of a Companys ability to service
and/or incur
debt. However, other companies in our industry may calculate
EBITDA and adjusted EBITDA differently than we do. This
information should not be considered in isolation or as a
substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP or other non-GAAP
financial measures.
45
The following table reconciles net cash provided by operating
activities to EBITDA and adjusted EBITDA, for the three-month
periods ended March 31, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating activities
|
|
$
|
13,066
|
|
|
$
|
48,240
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
Interest expense, net (excluding amortization of deferred
financing costs)
|
|
|
12,296
|
|
|
|
9,021
|
|
Interest income
|
|
|
(135
|
)
|
|
|
(197
|
)
|
Income tax provision (benefit)
|
|
|
586
|
|
|
|
19
|
|
Adjustments to reconcile net income to net cash provided by
operating activities (excluding depreciation and amortization)
|
|
|
1,339
|
|
|
|
(26,006
|
)
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
27,152
|
|
|
|
31,077
|
|
Interest, taxes, depreciation and amortization attributable to
the Companys equity in Mammoth-Pacific L.P.
|
|
|
|
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
27,152
|
|
|
$
|
32,050
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(107,924
|
)
|
|
$
|
(64,981
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
52,718
|
|
|
$
|
13,545
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
Our capital expenditures primarily relate to two principal
components: (i) the enhancement of our existing power
plants and (ii) the development and construction of new
power plants. We expect that the following enhancements of our
existing power plants and the construction of new power plants
will be funded initially from internally generated cash or other
available corporate resources, which we expect to subsequently
refinance with limited or non-recourse debt at the project level.
McGinness Hills Project We are
currently developing the first phase of the 30 MW McGinness
Hills project on Bureau of Land Management leases located in
Lander County, Nevada. We have drilled six wells and the power
plant equipment is in an advanced stage of manufacturing. We
have submitted documents to obtain the required construction
permits and an environmental assessment is in process. We signed
a 20-year
PPA with Nevada Power Company, which was approved by the PUCN on
July 28, 2010. Commercial operation of the projects
first phase is expected in 2012. The National Environmental
Policy Act (NEPA) process is in progress in order to comply with
the requirements under the DOE 1705 loan guarantee program.
Tuscarora Project We are currently
developing the first phase (18 MW) of the Tuscarora project
on private land located in Elko County, Nevada. Field
development has been completed. Civil work started and
mechanical work will start towards the end of the second quarter
of 2011. We have obtained most of the required construction
permits. We signed a
20-year PPA
with Nevada Power Company, which was approved by the PUCN on
July 28, 2010. Commercial operation of the projects
first phase is expected in 2012. The NEPA process is in progress
in order to comply with the requirements under the DOE 1705 loan
guarantee program.
Carson Lake Project We are currently
developing the 20 MW Carson Lake project on Bureau of Land
Management leases located in Churchill County, Nevada. Our
initial joint venture with Nevada Power Company for this project
contemplated a larger project. We are in preliminary discussions
to address the implications of a smaller project.
Mammoth Complex We plan to repower the
Mammoth complex located in Mammoth Lakes, California, by
replacing part of the old units with new Ormat-manufactured
equipment. The replacement of the equipment will optimize
generation and add approximately 3 MW of generating
capacity to the complex. We have started
46
the equipment fabrication for the replacement of the old
generating equipment with modern units designed and manufactured
by us.
CD 4 Project We are currently
developing 32 to 38 MW of new capacity at the Mammoth
complex, on land which is comprised mainly of BLM leases. We
have commenced field development and have drilled a successful
production well, and the drilling of additional wells is
continuing. The project is expected to be completed in 2013.
Olkaria III Phase 3 We are
currently developing Phase 3 of the Olkaria III complex
located in Naivasha, Kenya. We amended and restated the PPA with
KPLC, the off-taker of the Olkaria III complex. The amended
and restated PPA governs our construction of, and KPLCs
purchase of electricity from, a new 36 MW power plant at
the Olkaria III complex. The new power plant is scheduled
to come online in 2013.
DH Wells Project We are currently
developing the 20 to 30 MW DH Wells project located in
Mineral County, Nevada. We completed the drilling of two
production wells and are continuing with the drilling activity.
The new power plant is scheduled to come online in 2013.
We have estimated approximately $711 million in capital
expenditures for construction of the abovementioned projects
that are still under construction and that are expected to be
completed by 2013. We have invested approximately
$169 million of such estimated amount as of March 31,
2011. We expect to invest an additional $226 million during
the remainder of 2011. The remaining $316 million will be
invested in 2012 and 2013.
In addition, we estimate approximately $186 million in
additional capital expenditures in the remainder of 2011 to be
allocated as follows: (i) $58 million in new projects
under development; (ii) $40 million for enhancement of
our operating power plants; (iii) $14 million in land
acquisitions; (iv) $34 million in exploration
activities pursuant to various leases for geothermal resources
in which we have started the exploration activity;
(v) $28 million in new project development, provided
that part or all of the aforementioned exploration activities
succeed; and (vi) $12 million in enhancement of our
production facilities. Therefore, the total capital expenditure
for the remainder of 2011 is estimated to be $412 million.
Exposure
to Market Risks
Based on current conditions, we believe that we have sufficient
financial resources to fund our activities and execute our
business plans. However, the cost of obtaining financing for our
project needs may increase significantly or such financing may
be difficult to obtain. A prolonged economic slowdown could
reduce worldwide demand for energy, including our geothermal
energy, REG and other products.
One market risk to which power plants are typically exposed is
the volatility of electricity prices. Our exposure to such
market risk is currently limited because our long-term PPAs
(except for Puna) have fixed or escalating rate provisions that
limit our exposure to changes in electricity prices. However,
beginning in May 2012, the energy payments under the PPAs of the
Heber 1 and 2 power plants, the Ormesa complex and the Mammoth
complex will be determined by reference to the relevant power
purchasers short run avoided costs. The Puna power plant
is currently benefiting from energy prices which are higher than
the floor under the Puna PPA as a result of the high fuel costs
that impact HELCOs avoided costs.
As of March 31, 2011, 75.5% of our consolidated long-term
debt was in the form of fixed rate securities, and therefore,
not subject to interest rate volatility risk. As of such date,
24.5% of our debt was in the form of a floating rate instrument,
exposing us to changes in interest rates. As of March 31,
2011, $201.9 million of our debt remained subject to some
floating rate risk.
We currently maintain our surplus cash in short-term,
interest-bearing bank deposits, money market securities and
commercial paper (with a minimum investment grade rating of AA
by Standard & Poors Ratings Services).
Our cash equivalents and our portfolio of marketable securities
are subject to market risk due to changes in interest rates.
Fixed rate securities may have their market value adversely
impacted due to a rise in interest rates, while floating rate
securities may produce less income than expected if interest
rates fall. Due in part to
47
these factors, our future investment income may fall short of
expectation due to changes in interest rates or we may suffer
losses in principal if we are forced to sell securities that
decline in market value due to changes in interest rates.
However, because we classify our debt securities as
available-for-sale,
no gains or losses are recognized due to changes in interest
rates unless such securities are sold prior to maturity or
declines in fair value are determined to be
other-than-temporary.
Auction rate securities are securities that are structured with
short-term interest rate reset dates of generally less than
ninety days but with contractual maturities that can be well in
excess of ten years. At the end of each reset period, which
depending on the security can occur on a daily, weekly, or
monthly basis, investors can sell or continue to hold the
securities at par. These securities are subject to fluctuations
in fair value depending on the supply and demand at each auction.
Another market risk to which we are exposed is primarily related
to potential adverse changes in foreign currency exchange rates,
in particular the fluctuation of the U.S. dollar versus the
New Israeli Shekel (NIS). Risks attributable to fluctuations in
currency exchange rates can arise when we or any of our foreign
subsidiaries borrows funds or incurs operating or other expenses
in one type of currency but receives revenues in another. In
such cases, an adverse change in exchange rates can reduce our
or such subsidiarys ability to meet its debt service
obligations, reduce the amount of cash and income we receive
from such foreign subsidiary, or increase such subsidiarys
overall expenses. Risks attributable to fluctuations in foreign
currency exchange rates can also arise when the currency
denomination of a particular contract is not the
U.S. dollar. Substantially all of our PPAs in the
international markets are either U.S. dollar-denominated or
linked to the U.S. dollar. Our construction contracts from
time to time contemplate costs which are incurred in local
currencies. The way we often mitigate such risk is to receive
part of the proceeds from the sale contract in the currency in
which the expenses are incurred. Currently, we have forward and
option contracts in place to reduce our foreign currency
exposure, and expect to continue to use currency exchange and
other derivative instruments to the extent we deem such
instruments to be the appropriate tool for managing such
exposure. We do not believe that our exchange rate exposure has
or will have a material adverse effect on our financial
condition, results of operations or cash flows.
Concentration
of Credit Risk
Our credit risk is currently concentrated with a limited number
of major customers: Southern California Edison, Hawaii Electric
Light Company, Sierra Pacific Power Company and Nevada Power
Company (subsidiaries of NV Energy, Inc.), and Kenya Power and
Lighting Co. Ltd. If any of these electric utilities fails to
make payments under its PPAs with us, such failure would have a
material adverse impact on our financial condition.
Southern California Edison accounted for 27.0% and 25.5% of our
total revenues for the three months ended March 31, 2011
and 2010, respectively. Southern California Edison is the power
purchaser and revenue source for our Mammoth complex, which was
accounted for under the equity method through August 1,
2010. Following our acquisition of the remaining 50% interest in
the Mammoth complex we have included the results of the Mammoth
complex in our consolidated financial statements.
Sierra Pacific Power Company and Nevada Power Company accounted
for 16.2% and 19.2% of our total revenues for the three months
ended March 31, 2011 and 2010, respectively.
Hawaii Electric Light Company accounted for 10.6% and 7.1% of
our total revenues for the three months ended March 31,
2011 and 2010, respectively.
Kenya Power and Lighting Co. Ltd. accounted for 8.9% and 10.7%
of the Companys total revenues for the three months ended
March 31, 2011 and 2010, respectively.
Government
Grants and Tax Benefits
The U.S. government encourages production of electricity
from geothermal resources through certain tax subsidies under
the recently enacted ARRA. We are permitted to claim 30% of the
eligible costs of each new geothermal power plant in the United
States as an ITC against our federal income taxes.
Alternatively, we are permitted to claim a PTC, which in 2011
was 2.2 cents per kWh and which is adjusted annually for
inflation.
48
The PTC may be claimed for ten years on the electricity output
of new geothermal power plants put into service by
December 31, 2013. The owner of the project must choose
between the PTC and the 30% ITC described above. In either case,
under current tax rules, any unused tax credit has a
1-year carry
back and a
20-year
carry forward. Whether we claim the PTC or the ITC, we are also
permitted to depreciate most of the plant for tax purposes over
five years on an accelerated basis, meaning that more of the
cost may be deducted in the first few years than during the
remainder of the depreciation period. If we claim the ITC, our
tax basis in the plant that we can recover through
depreciation must be reduced by half of the tax credit. If we
claim a PTC, there is no reduction in the tax basis for
depreciation. Companies that place qualifying renewable energy
facilities in service, during 2009, 2010 or 2011 or that begin
construction of qualifying renewable energy facilities during
2009, 2010 or 2011 and place them in service by
December 31, 2013, may choose to apply for a cash grant
from the U.S. Department of Treasury (U.S. Treasury)
in an amount equal to the ITC. Under the ARRA, the
U.S. Treasury is instructed to pay the cash grant within
60 days of the application or the date on which the
qualifying facility is placed in service.
Production of electricity from geothermal resources is also
supported under the new Temporary Program For Rapid
Deployment of Renewable Energy and Electric Power Transmission
Projects established with the DOE as part of the
DOEs existing Innovative Technology Loan Guarantee
Program. The new program: (i) extends the scope of the
existing federal loan guarantee program to cover renewable
energy projects, renewable energy component manufacturing
facilities, and electricity transmission projects that embody
established commercial, as well as innovative, technologies; and
(ii) provides an appropriation to cover the credit
subsidy costs of such projects (meaning the estimated
average costs to the federal government from issuing the loan
guarantee, equivalent to a lending banks loan loss
reserve).
To be eligible for a guarantee under the new program, a
supported project must break ground, and the guarantee must be
issued, by September 30, 2011.
Our subsidiary, Ormat Systems, received Benefited
Enterprise status under Israels Law for
Encouragement of Capital Investments, 1959 (the Investment Law),
with respect to two of its investment programs. As a Benefited
Enterprise, Ormat Systems was exempt from Israeli income taxes
with respect to income derived from the first benefited
investment for a period of two years beginning in 2004, and
thereafter such income is subject to reduced Israeli income tax
rates, which will not exceed 25% for an additional five years.
Ormat Systems is also exempt from Israeli income taxes with
respect to income derived from the second benefited investment
for a period of two years beginning in 2007, and thereafter such
income is subject to reduced Israeli income tax rates, which
will not exceed 25% for an additional five years. These benefits
are subject to certain conditions, including among other things,
that all transactions between Ormat Systems and our affiliates
are at arms length, and that the management and control of
Ormat Systems will be from Israel during the entire period of
the tax benefits. A change in control should be reported to the
Israel Tax Authority in order to maintain the tax benefits. In
January 2011, new legislation amending the Investment Law was
enacted. Under the new legislation, a uniform rate of corporate
tax would apply to all qualified income of certain industrial
companies, as opposed to the current laws incentives that
are limited to income from a Benefited Enterprise
during their benefits period. According to the amendment, the
uniform tax rate applicable to the zone where the production
facilities of Ormat Systems are located would be 15% in 2011 and
2012, 12.5% in 2013 and 2014, and 12% in 2015 and thereafter.
Under the transitory provisions of the new legislation, Ormat
Systems may opt to irrevocably comply with the new law while
waiving benefits provided under the current law or continue to
comply with the current law during the next years. Changing from
the current law to the new law is permissible at any stage.
Ormat Systems decided to irrevocably comply with the new law
starting in 2011.
|
|
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We incorporate by reference the information appearing under
Exposure to Market Risks and Concentration of
Credit Risk in Part I, Item 2 of this quarterly
report on
Form 10-Q.
49
|
|
ITEM 4.
|
CONTROLS
AND PROCEDURES
|
|
|
a.
|
Evaluation
of disclosure controls and procedures
|
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures to ensure that the
information required to be disclosed in our filings pursuant to
Rule 13a-15
under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms and to ensure that such
information is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding
required disclosure. Based on that evaluation, as of
March 31, 2011, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls
and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended) were
effective.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
|
|
b.
|
Changes
in internal controls over financial reporting
|
There were no changes in our internal controls over financial
reporting in the first quarter of 2011 that have materially
affected or are reasonably likely to materially affect our
internal controls over financial reporting.
PART II
OTHER INFORMATION
|
|
ITEM 1.
|
LEGAL
PROCEEDINGS
|
Securities
Class Actions
Following the Companys public announcement that it would
restate certain of its financial results due to a change in the
Companys accounting treatment for certain exploration and
development costs, three securities class action lawsuits were
filed in the United States District Court for the District of
Nevada on March 9, 2010, March 18, 2010 and
April 7, 2010. These complaints assert claims against the
Company and certain officers and directors for alleged violation
of Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934, (the Exchange Act). One complaint also asserts claims
for alleged violations of Sections 11, 12(a)(2) and 15 of
the Securities Act. All three complaints allege claims on behalf
of a putative class of purchasers of Company common stock
between May 6, 2008 or May 7, 2008 and
February 23, 2010 or February 24, 2010. These three
lawsuits were consolidated by the court in an order issued on
June 3, 2010 and the court appointed three of the
Companys stockholders to serve as lead plaintiffs.
Lead plaintiffs filed a consolidated amended class action
complaint (CAC) on July 9, 2010 that asserts claims under
Sections 10(b) and 20(a) of the Exchange Act on behalf of a
putative class of purchasers of Company common stock between
May 7, 2008 and February 24, 2010. The CAC alleges
that certain of the Companys public statements were false
and misleading for failing to account properly for the
Companys exploration and development costs based on the
Companys announcement on February 24, 2010 that it
was going to restate its financial results to change its method
of accounting for exploration and development costs in certain
respects. The CAC also alleges that certain of the
Companys statements concerning the North Brawley project
were false and misleading. The CAC seeks compensatory damages,
expenses, and such further relief as the court may deem proper.
The Company cannot make an estimate of the possible loss or
range of loss.
Defendants filed a motion to dismiss the CAC on August 13,
2010. On March 3, 2011, the court granted in part and
denied in part Defendants motion to dismiss. The
court dismissed plaintiffs allegations that on
50
the Companys statements regarding the North Brawley
project were false or misleading, but did not dismiss
plaintiffs allegations regarding the 2008 restatement.
Defendants answered the remaining allegations in the CAC
regarding the restatement on April 8, 2011.
The Company does not believe that these lawsuits have merit and
is defending the actions vigorously.
Stockholder
Derivative Cases
Four stockholder derivative lawsuits have also been filed in
connection with the Companys public announcement that it
would restate certain of its financial results due to a change
in the Companys accounting treatment for certain
exploration and development costs. Two cases were filed in the
Second Judicial District Court of the State of Nevada in and for
the County of Washoe on March 16, 2010 and April 21,
2010 and two cases were filed in the United States District
Court for the District of Nevada on March 29, 2010 and
June 7, 2010. All four lawsuits assert claims brought
derivatively on behalf of the Company against certain of its
officers and directors for alleged breach of fiduciary duty and
other claims, including waste of corporate assets and unjust
enrichment.
The two stockholder derivative cases filed in the Second
Judicial District Court of the State of Nevada in and for the
County of Washoe were consolidated by the court in an order
dated May 27, 2010 and the plaintiffs filed a consolidated
derivative complaint on September 7, 2010. In accordance
with a stipulation between the parties, defendants filed a
motion to dismiss on November 16, 2010. On April 18,
2011, the court stayed the state derivative case pending the
resolution of the securities class action. The Company cannot
make an estimate of the possible loss or range of loss on the
state derivative case.
The two stockholder derivative cases filed in the United States
District Court for the District of Nevada were consolidated by
the Court in an order dated August 31, 2010 and plaintiffs
filed a consolidated derivative complaint on October 28,
2010. The Company filed a motion to dismiss on December 13,
2010. On March 7, 2011, the court transferred the federal
derivative case to the court presiding over the securities class
action.
The Company believes the allegations in these purported
derivative actions are without merit and is defending the
actions vigorously.
Other
In addition, from time to time, the Company is named as a party
in various lawsuits, claims and other legal and regulatory
proceedings that arise in the ordinary course of its business.
These actions typically seek, among other things, compensation
for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses, or
injunctive or declaratory relief. With respect to such lawsuits,
claims and proceedings, the Company accrues reserves when a loss
is probable and the amount of such loss can be reasonably
estimated. It is the opinion of the Companys management
that the outcome of these proceedings, individually and
collectively, will not materially affect its business, financial
condition, financial results or cash flow.
A comprehensive discussion of our risk factors is included in
the Risk Factors section of our annual report on
Form 10-K
for the year ended December 31, 2010 filed with the SEC on
February 28, 2011.
|
|
ITEM 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
There were no unregistered sales of equity securities of the
Company during the first fiscal quarter of 2011.
|
|
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
Our management believes that we are currently in compliance with
our covenants with respect to our third-party debt.
51
|
|
ITEM 5.
|
OTHER
INFORMATION
|
None.
|
|
|
|
|
Exhibit No.
|
|
Document
|
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3.1 to Ormat Technologies,
Inc. Registration Statement on Form S-1 (File No. 333-117527) to
the Securities and Exchange Commission on July 20, 2004.
|
|
3
|
.2
|
|
Third Amended and Restated By-laws, incorporated by reference to
Exhibit 3.2 to Ormat Technologies, Inc. Current Report on Form
8-K to the Securities and Exchange Commission on February 26,
2009.
|
|
3
|
.3
|
|
Amended and Restated Limited Liability Company Agreement of OPC
LLC dated June 7, 2007, by and among Ormat Nevada Inc., Morgan
Stanley Geothermal LLC, and Lehman-OPC LLC, incorporated by
reference to Exhibit 3.1 to Ormat Technologies, Inc. Current
Report on Form 8-K to the Securities and Exchange Commission on
June 13, 2007.
|
|
4
|
.1
|
|
Form of Rights Agreement by and between Ormat Technologies, Inc.
and American Stock Transfer & Trust Company, incorporated
by reference to Exhibit 4.3 to Ormat Technologies, Inc.
Registration Statement Amendment No. 2 on Form S-1 (File No.
333-117527) to the Securities and Exchange Commission on October
22, 2004.
|
|
4
|
.2
|
|
Indenture for Senior Debt Securities, dated as of January 16,
2006, between Ormat Technologies, Inc. and Union Bank of
California, incorporated by reference to Exhibit 4.2 to Ormat
Technologies, Inc. Registration Statement Amendment No. 1 on
Form S-3 (File No. 333-131064) to the Securities and Exchange
Commission on January 26, 2006.
|
|
4
|
.3
|
|
Indenture for Subordinated Debt Securities, dated as of January
16, 2006, between Ormat Technologies, Inc. and Union Bank of
California, incorporated by reference to Exhibit 4.3 to Ormat
Technologies, Inc. Registration Statement Amendment No. 1 on
Form S-3 (File No. 333-131064) to the Securities and Exchange
Commission on January 26, 2006.
|
|
4
|
.4
|
|
Deed of Trust, dated as of August 3, 2010, between Ormat
Technologies, Inc. and Ziv Haft Trust Company Ltd., as trustee,
incorporated by reference to Exhibit 4.1 to Ormat Technologies,
Inc. Current Report on Form 8-K to the Securities and Exchange
Commission on February 2, 2011.
|
|
4
|
.5
|
|
Addendum, dated as of January 27, 2011, to the Deed of Trust,
dated as of August 3, 2010, between Ormat Technologies, Inc. and
Ziv Haft Trust Company Ltd., as trustee, incorporated by
reference to Exhibit 4.2 to Ormat Technologies, Inc. Current
Report on Form 8-K to the Securities and Exchange Commission on
February 2, 2011.
|
|
4
|
.6
|
|
Form of Bond issued pursuant to the Deed of Trust, dated as of
August 3, 2010 (as amended or supplemented), between Ormat
Technologies, Inc. and Ziv Haft Trust Company Ltd., as trustee,
incorporated by reference to Exhibit 4.3 to Ormat Technologies,
Inc. Current Report on Form 8-K to the Securities and Exchange
Commission on February 2, 2011.
|
|
4
|
.7
|
|
Second Addendum, dated as of February 11, 2011, to the Deed of
Trust, dated as of August 3, 2010 (as amended or supplemented),
between Ormat Technologies, Inc. and Ziv Haft Trust Company
Ltd., as trustee, filed herewith.
|
|
31
|
.1
|
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
31
|
.2
|
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32
|
.1
|
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32
|
.2
|
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
52
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ORMAT TECHNOLOGIES, INC.
Name: Joseph Tenne
|
|
|
|
Title:
|
Chief Financial Officer
|
Date: May 6, 2011
53
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Document
|
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3.1 to Ormat Technologies,
Inc. Registration Statement on Form S-1 (File No. 333-117527) to
the Securities and Exchange Commission on July 20, 2004.
|
|
3
|
.2
|
|
Third Amended and Restated By-laws, incorporated by reference to
Exhibit 3.2 to Ormat Technologies, Inc. Current Report on Form
8-K to the Securities and Exchange Commission on February 26,
2009.
|
|
3
|
.3
|
|
Amended and Restated Limited Liability Company Agreement of OPC
LLC dated June 7, 2007, by and among Ormat Nevada Inc., Morgan
Stanley Geothermal LLC, and Lehman-OPC LLC, incorporated by
reference to Exhibit 3.1 to Ormat Technologies, Inc. Current
Report on Form 8-K to the Securities and Exchange Commission on
June 13, 2007.
|
|
4
|
.1
|
|
Form of Rights Agreement by and between Ormat Technologies, Inc.
and American Stock Transfer & Trust Company, incorporated
by reference to Exhibit 4.3 to Ormat Technologies, Inc.
Registration Statement Amendment No. 2 on Form S-1 (File No.
333-117527) to the Securities and Exchange Commission on October
22, 2004.
|
|
4
|
.2
|
|
Indenture for Senior Debt Securities, dated as of January 16,
2006, between Ormat Technologies, Inc. and Union Bank of
California, incorporated by reference to Exhibit 4.2 to Ormat
Technologies, Inc. Registration Statement Amendment No. 1 on
Form S-3 (File No. 333-131064) to the Securities and Exchange
Commission on January 26, 2006.
|
|
4
|
.3
|
|
Indenture for Subordinated Debt Securities, dated as of January
16, 2006, between Ormat Technologies, Inc. and Union Bank of
California, incorporated by reference to Exhibit 4.3 to Ormat
Technologies, Inc. Registration Statement Amendment No. 1 on
Form S-3 (File No. 333-131064) to the Securities and Exchange
Commission on January 26, 2006.
|
|
4
|
.4
|
|
Deed of Trust, dated as of August 3, 2010, between Ormat
Technologies, Inc. and Ziv Haft Trust Company Ltd., as trustee,
incorporated by reference to Exhibit 4.1 to Ormat Technologies,
Inc. Current Report on Form 8-K to the Securities and Exchange
Commission on February 2, 2011.
|
|
4
|
.5
|
|
Addendum, dated as of January 27, 2011, to the Deed of Trust,
dated as of August 3, 2010, between Ormat Technologies, Inc. and
Ziv Haft Trust Company Ltd., as trustee, incorporated by
reference to Exhibit 4.2 to Ormat Technologies, Inc. Current
Report on Form 8-K to the Securities and Exchange Commission on
February 2, 2011.
|
|
4
|
.6
|
|
Form of Bond issued pursuant to the Deed of Trust, dated as of
August 3, 2010 (as amended or supplemented), between Ormat
Technologies, Inc. and Ziv Haft Trust Company Ltd., as trustee,
incorporated by reference to Exhibit 4.3 to Ormat Technologies,
Inc. Current Report on Form 8-K to the Securities and Exchange
Commission on February 2, 2011.
|
|
4
|
.7
|
|
Second Addendum, dated as of February 11, 2011, to the Deed of
Trust, dated as of August 3, 2010 (as amended or supplemented),
between Ormat Technologies, Inc. and Ziv Haft Trust Company
Ltd., as trustee, filed herewith.
|
|
31
|
.1
|
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
31
|
.2
|
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32
|
.1
|
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
|
|
32
|
.2
|
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, filed herewith.
|