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Ormat Technologies reports solid profitability for Q3 2018 despite Puna shutdown

Galena 2 plant, United States (source: Ormat)
Alexander Richter Alexander Richter 6 Nov 2018

Geothermal energy company and supplier Ormat Technologies reports solid profitability for the third quarter of 2018 compared to the same quarter last year, despite the ongoing shutdown of its Puna geothermal power plant on Hawaii.

Ormat Technologies, Inc. today announced the financial results for the third quarter ended September 30, 2018.

“Total revenues increased nearly 6% and electricity revenues increased more than 5%,” commented Isaac Angel, Chief Executive Officer. “This steady growth was achieved despite the recent shutdown of our operations at Puna and highlights the diversification we have built into the Ormat operating model and the strength of our overall portfolio of projects around the world.  Now that the lava flow near Puna has ceased, we are working to bring that plant back online, and are confident that Ormat is well positioned for continued growth.”

“The Puna shutdown, coupled with a larger than average number of production pump replacements required in this quarter, impacted our overall margins,” added Mr. Angel. “Nevertheless, Ormat delivered $75.6 million in Adjusted EBITDA. Our solid, continued profitability despite significant unforeseen events like the K?lauea volcano eruption, further demonstrates the strength and resilience of our business model. We have made significant efforts to expedite the commencement of the 48MW McGinness Hills 3 power plant now planned for early December 2018. The contribution of McGinness Hills 3, as well as high generation and margins expected in the fourth quarter, should result in strong financial performance of the Electricity segment that will support our full year 2018 guidance.”

Financial Highlights

  • Total revenues of $166.5 million in the quarter, up 5.9% compared to the third quarter of 2017;
  • Electricity segment revenues of $116.9 million in the quarter, up 5.4% compared to the third quarter of 2017;
  • Electricity generation in the quarter increased 7.1%, compared to the third quarter of 2017, from 1.24 million MWh to 1.32 million MWh;
  • Electricity segment gross margin in the quarter was 31.7% compared to 41.9% in the year ago quarter. The decrease is mainly due to the impact of the shutdown in the Puna power plant in Hawaii, higher maintenance expenses mainly due to above average production pump failures in some of our power plants, a decrease in generation related to higher than average ambient temperature and grid operator curtailments;
  • Excluding the Puna shutdown, the electricity segment gross margin in the third quarter of 2018 was 35.3% and the nine-month margin, excluding the Puna impact, was 39.3%;
  • Product segment revenues in the quarter of $48.4 million, up 7.9% compared to the third quarter of 2017;
  • Product segment backlog amounts to $226.4 million as of November 1, 2018;
  • Total gross margin in the quarter was 29.3% compared to 37.7% in the third quarter of 2017;
  • Net income in the quarter was $10.1 million compared to Net income of $27.6 million in the third quarter of 2017;
  • Net income attributable to the Company’s stockholders in the quarter was $10.6 million, or $0.21 per diluted share, compared to $24.0 million, or $0.47 per diluted share, in the third quarter of 2017; excluding the termination fee of $5 million or $0.10 per diluted share related to the Galena 2 PPA, Adjusted Net income attributable to the Company’s stockholders, was $15.6 million, or $0.31 per diluted share, compared to $25.9 million, or $0.51 per diluted share, in the third quarter of 20172 ;
  • Adjusted EBITDA in the quarter was $75.6 million, excluding the $5 million termination fee, compared to $76.4 million in the third quarter of 2017; and
  • Declared a quarterly dividend of $0.10 per share for the third quarter of 2018.

Recent development

Ormat completed the closing of the first tranche under the previously announced finance agreement totaling up to $124.7 million for the 35 MW Platanares geothermal power plant in Honduras, with the Overseas Private Investment Corporation (“OPIC”), United States government’s development finance institution, as the sole lender. Following the closing, Ormat received a disbursement of $114.7 million representing the full amount of Tranche I of the OPIC non-recourse project finance loan that carries a fixed interest rate of 7.02% per annum with a maturity of approximately 14 years. The closing of the second tranche of up to $10 million is expected during the first half of 2019. (we reported on it last week)

In Puna, Hawaii, before the lava recently stopped flowing, the lava covered the wellheads of three geothermal wells, the substation of the Puna complex and an adjacent warehouse that stored a drilling rig. The Company is currently assessing the damages to the Puna facilities and continues to coordinate with Hawaii Electric Light Company and local authorities to bring the power plant back to operation. The Company is in the process of building access roads to the site, removing the plugs from the production wells and rebuilding the electrical substation. Management is in ongoing discussions with its insurance companies, working to secure a business interruption claim for the income loss from the shutdown.

Ormat opted out of the Galena 2 PPA with NV Energy Inc., and reported a one-time $5 million termination fee, recorded in selling and marketing expenses, in the third quarter of 2018. In March 2019, Ormat will start selling power from Galena 2 under its existing Southern California Public Power Authority portfolio PPA at $75.5 per MWh replacing lower pricing under the Galena 2 PPA.

Third quarter financial results

For the three months ended September 30, 2018, total revenues were $166.5 million, up 5.9% compared to the quarter ended September 30, 2017.

Electricity segment revenues increased 5.4% to $116.9 million for the three months ended September 30, 2018, up from $110.9 million for the three months ended September 30, 2017. The increase was mainly attributable to the Platanares, Tungsten Mountain and Olkaria III expansion projects, which came online in the last twelve months, as well as the U.S. Geothermal acquisition, offset by the shutdown of the Puna plant as well as lower generation in other power plants due to maintenance issues and enhancements, high ambient temperature and grid operator curtailments.

Product segment revenues increased 7.9% to $48.4 million for the three months ended September 30, 2018, up from $44.9 million for the three months ended September 30, 2017. Other segment revenues were $1.1 million in the third quarter of 2018 compared to $1.4 million in the third quarter of 2017.

For the full release with details on financials etc see link below.

Source: Company release