Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ormat Technologies Inc (ORA, Financial) reported a 9.3% increase in total revenues and a 25% increase in adjusted EBITDA compared to the second quarter of last year.
- The electricity segment saw consistent growth, driven by the addition of Enel assets and improvements at the Kona and Heber 1 facilities.
- The energy storage segment exhibited strong revenue growth, with contributions from 83 megawatts of new projects that came online in the last 12 months.
- Ormat Technologies Inc (ORA) achieved a significant milestone at the Olkaria power plant in Kenya, successfully conducting capacity tests that reached approximately 148 megawatts.
- The company has a strong product segment backlog of $165 million, up 38% compared to the second quarter of 2023.
Negative Points
- Net income attributable to the company's stockholders decreased to $22.2 million, or $0.37 per diluted share, compared to $24.2 million, or $0.40 per diluted share, in the second quarter of the prior year.
- The Dixie Valley facility experienced an unplanned outage, negatively impacting revenues and EBITDA by approximately $4.5 million.
- The company faced curtailment issues at the Olkaria power plant in Kenya, resulting in a revenue loss of $7 million to $8 million year-to-date.
- Gross margin for the energy storage segment was relatively low at 5.7%, despite an improvement from 1.9% in the prior year.
- The average cost of debt for Ormat Technologies Inc (ORA) stands at 4.63%, which could be a concern in the current elevated and volatile global interest rate environment.
Q & A Highlights
Q: Can you provide an update on the expected timing for the Bottleneck storage project to come online?
A: We are in the final stages of commissioning the Bottleneck facility and expect it to come online by the end of September. Although there is a slight delay, this has been factored into our numbers. We have seen better pricing across our fleet, which helps offset this delay.
Q: Could you elaborate on the potential for increased capacity at the Olkaria project in Kenya?
A: The Olkaria plant can generate 148 megawatts, and we expect to maintain this capacity. We are working to recalibrate the wells to ensure sustained high capacity. However, we are experiencing curtailment issues, which we are addressing with KPLC to reduce the impact.
Q: What is the outlook for margins in the product and energy storage segments?
A: For the product segment, we target 15% to 20% margins, although this quarter was slightly below at 13.7%. In the energy storage segment, we expect margins to reach 10% to 15% in Q4 with the operation of Bottleneck. The current quarter's margins are closer to what we've seen previously due to the delay in Bottleneck's operation.
Q: How do you view the potential for PJM as a market for future battery storage projects?
A: PJM is a promising market, especially with higher capacity payments this year. We have about 100 megawatts in PJM and see it as a nice upside, although not directly impacting our assets. We are closely monitoring the market for future opportunities.
Q: Can you provide an update on the Reno, Nevada data center growth opportunity?
A: We are negotiating with a data center in Nevada for a bilateral agreement to supply geothermal energy. This is competing with NV Energy and another utility in California. We are open to selling to utilities who can then sell to data centers, as long as we get the right pricing.
Q: What is Ormat's exposure to Chinese battery suppliers, and has it changed with recent contracting activities?
A: Most battery manufacturers are from China, even those supplying to US companies. We have already ordered batteries for most of our listed projects, except for the newly released Luisa project.
Q: How do you view the potential for scaling up opportunities in ERCOT given the current market dynamics?
A: We see better returns in ERCOT due to higher market pricing and PPAs. We are negotiating tolling agreements for projects like Bird Dog and Lower Rio, which will help balance our portfolio and reduce risk while allowing for potential upside on specific days or months.
Q: How should we think about the ITC cash benefits for the third and fourth quarters?
A: We expect to utilize and sell the ITC for Bottleneck, equivalent to $35 million, and complete a tax equity transaction for Heber plants worth $75 million in Q4. Additionally, we plan to sell $25 million of PTCs between September and October.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
