Ormat Technologies, Inc.
Second Quarter 2007
Earnings Call
August 9, 2007
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Disclaimer
Information provided during this call may contain statements relating to current
expectations, estimates, forecasts and projections about future events that are forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally relate to the company’s plans, objectives and
expectations for future operations, and are based on management’s current estimates and
projections of future results or trends. Actual future results may differ materially from those
projected as a result of certain risks and uncertainties.
For a discussion of such risks and uncertainties, please see risk factors as described
in the annual report on Form 10-K, filed with the Securities and Exchange Commission on March
12, 2007.
In addition, during this call, statements may be made that include a financial measure
defined as non-GAAP financial measures by the Securities and Exchange Commission, such as
adjusted EBITDA. This measure may be different from non-GAAP financial measures used by
other companies. The presentation of this financial information is not intended to be considered
in isolation or as a substitute for the financial information prepared and presented in accordance
with GAAP.
Management of Ormat Technologies believes that adjusted EBITDA may provide
meaningful supplemental information regarding liquidity measurement that both management and
investors benefit from referring to this non-GAAP financial measure in assessing Ormat
Technologies’ liquidity, and when planning and forecasting future periods. This non-GAAP
financial measure may also facilitate management’s internal comparison to the company’s
historical liquidity.
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Agenda

Second Quarter 2007 Prepared Remarks
o
o
o

Business Overview; Dita Bronicki, President and CEO
Operations Overview; Yoram Bronicki, COO
Financial Overview; Joseph Tenne, CFO
Q&A
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Business Overview
Ms. Dita Bronicki, President and CEO
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Financial Highlights

Q2 2007 Revenues - $84.1 million
o

Electricity Segment Revenues - $55.4 million
o

13.5% year-over-year increase
Products Segment Revenues - $28.7 million
o

31.2% year-over-year increase
87.3% year-over-year increase
Net Income - $8.5 million
o
Q2 2006 Net Income - $8.4 million
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Portfolio Highlights


Added 24 MW to project portfolio for a total of 403-409**
MW in generating capacity at the end of Q2
o
Ormesa construction added 10MW
o
Steamboat Hills OEC installation added 4MW
o
Galena 2 commercial operation added 10MW
Desert Peak 2 declared 11MW commercial operation
**The 403 MW figure assumes the Brady project will continue to operate at 13 MW.
The 409 figure assumes successful resource drilling that will bring the project back to its original 19 MW capacity.
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Business Highlights – New PPAs

Highline Electric Association
o
o
o

Southern California Edison Corporation
o
o
o

50MW North Brawley project (Imperial County, CA)
ORMAT option to increase capacity to 100MW
Project on-line by end of 2008 (estimated)
Nevada Power Company
o
o

4MW REG facility in a compression station along a natural gas pipeline
(near Denver, CO.)
Commissioning Mid-2009 (estimated)
REG market building momentum
18 – 30 MW project
Project on line in late 2010
Sarulla, Indonesia
o
o
Progress continues at the 340 MW project
ORA to own 12.75% minority interest in special purpose company that
will own and operate the project and supply the equipment for the plant
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OPC Transaction

Concluded a transaction that raised cost-efficient capital
o
Desert Peak 2, Galena 2, Steamboat Hills, and Galena 3 projects
o
Transaction effectively reduce need for debt financing for these
projects
o
Allows Ormat to monetize its production tax credits and receive a
large cash payment upfront
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Strategic Improvements

Acquired 2 Drilling rigs in H1 ’07
o
o

Construction of North Brawley project
Exploration
Lease Agreements in California and Nevada
o
App. 7,200 Acres total
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Projects Updates
Project
Capacity
(MW)
Status
Expected
Completion
Amatitlan
20
In testing
Q3 2007
Heber South
10
OEC Unit delivered, construction in
progress
Q1 2008
Galena 3
17
Construction in progress
Q1 2008
Olikara III
35
Drilling Complete, construction in
progress
Q4 2008
North Brawley
50
Construction in progress
OREG 2
22
Started construction of 2 facilities
2008
2008/2009
(across 4 facilities)
Peetz
4
Engineering
2009
Carson Lake
18-30
Exploration
2009/2010
Buffalo Valley
18-30
Exploration
2009/2010
Puna
8
Negotiating PPA
Brawley Phase II
50
Exploration
GDL (New Zealand)
Grass Valley
4-5 (50%)
18-30
2009
2009/2010
Construction in progress
2009
Exploration
2010
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Capex Requirements

Approximately $400 million for
o
Construction activity*
o
Investment in machinery, building and equipment
o
Investment in operating projects
o
Exploration
* The CapEx amount for the construction activity excludes Buffalo Valley, Brawley Phase II,
Carson Lake and Grass Valley projects as their budget is not finalized yet
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Products Segment - New Order
 A $5.7 million supply contract with Italcementi
Group
o
Cement Plant in Martinsburg, West Virginia
o
Supply within 14 month
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Regulatory Support
 Legislative efforts in the U.S. House of
Representatives and the Senate have resulted in
different proposals regarding:
o
A national renewable portfolio standard
o
Extension of production tax credits beyond the placed-inservice date of December 31, 2008
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Second Quarter Operations
Updates
Mr. Yoram Bronicki
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Operational Highlights

Accumulation of issues impacting results in Q1 ’07 are
mostly behind us

High availability in Heber, Puna and Ormesa –
successful maintenance work in Q4 2006 and Q1 2007
o

Maintenance at Ormesa and Heber 1 completed before highdemand summer months
Consolidation of Ormesa PPAs
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Operational Highlights

Interim solution for Steamboat 2 / 3 turbines failure
succeeded

Brady project generating at 13 MW

Momotombo project - turbine failure
o

Project expected to be in full operation in Q4 ’07
Improvement in the OREG 1 pipeline’s gas flow
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Second Quarter 2007 Financial
Results
Mr. Joseph Tenne, CFO
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Revenues
(in millions of USD)
Total Revenues
$84.1
$64.1
Q206
Q207
Total
Cost of Revenues
$59.5
$40.5
Q206
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Q207
17
Electricity Segment
Revenues*
Increase of $6.6 million revenues resulted from:
Increase in generating capacity:
$55.4
$48.8
o
o
o
New projects came on line at the end of Q2 2006
Additional 24 MW in Q2 2007
Completion of Amatitlan project in Guatemala - not yet
declared commercial operation
Higher energy rates for the SO#4 contracts in California
Increase in revenues partially offset by $1.2
million due to:
Q206
Q207
Cost of Revenues*
$35.3
$30.9
Q206
o
o
Capacity shortage in few projects
Turbine failure in the Momotombo project
Increase in Cost of Revenues resulted from:
Increase costs of new and enhanced projects
placed in service
Inclusion of a full quarter of costs of revenues
generated from the Amatitlan project
Increase in labor and materials costs in existing
plants
Q207
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*In millions of USD
Products Segment
Revenues*
Increase of revenues resulted from
Timing of revenue recognition – geothermal and
recovered energy products
$28.7
$15.3
Q206
Q207
Cost of Revenues*
Increase in Cost of Revenues resulted from:
$24.2
$9.6
Q206
Increase in revenues over the same period in 2006
Different product mix
Increase in labor, materials, construction and
transportation costs, which affected our margins in
this segment
Q207
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Gross Margin
Combined Gross Margin
36.8%
29.2%
Q206
Q207
Gross Margin
Electricity Segment
36.6%
36.2%
Gross Margin
Products Segment
37.5%
15.6%
Q206
Q207
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Q206
Q207
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*In millions of USD
Net Income and EPS
Net Income*
$8.5
$8.4
Q206
Main reason for the small increase in Net
Income - decline in the Operating Income in
the Products Segment
Q207
EPS
Q2 2007 - 38.1 million shares
$0.24
$0.22
Q206
Q2 2006 - 35.1 million shares
Q207
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*In millions of USD
Adjusted EBITDA
*
$30.6
$29.1
Q206
Q207
We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate adjusted
EBITDA to include operating income, depreciation and amortization of our equity investments in the Mammoth and
Leyte Projects. EBITDA and adjusted EBITDA are not measurements of financial performance under accounting
principles generally accepted in the United States of America 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 accounting principles
generally accepted in the United States of America. EBITDA and adjusted EBITDA are presented because we
believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of a
Company’s ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA
and adjusted EBITDA differently than we do. A table that reconciles net income to EBITDA and adjusted EBITDA,
for the three month periods ended June 30, 2007 and 2006 is included in the earning release that we issued on
August 8, 2007
* For Adjusted EBITDA reconciliation see Appendix
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Cash
Cash, Cash Equivalents and Marketable Securities *
$116.7
$73.0
Dec 31, 2006

Funding of capital expenditures in the amount of
$69.4 million

Repayment of long-term debt to our parent and
third parties in the amount of $36.5 million

Payment of dividend - $4.6 million

$14.7 million of cash flow from operating activities

Net proceeds from OPC transaction - $69.5
million

Net increase of $17.9 million in restricted cash
June 30, 2007
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*In millions of USD
Cash Dividend
The company’s dividend policy targets an
annual payout of at least 20 percent of the
Company’s net income, subject to Board
approval.
$0.07
$0.04
$0.04
$0.04
$0.05
$0.03
$0.05
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$0.05
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OPC Transaction
Economic Interests consist of:

Allocation of Economic Benefits:
o
o

Production tax credits
Taxable income or loss
Cash distributions
Return Profile
Milestones
Until Ormat
Nevada’s Capital
Repaid
After Ormat Nevada’s Capital
Repaid & Until Flip Date**
Post Flip Date
Partners
The Equity
Investors
99.9% of all economic
benefits
Ormat Nevada
All cash distributions
0.1% of all economic
benefits*
and
99.9% of all economic benefits and
cash distributions
5% of tax benefits and
cash
distributions
0.1% of all economic benefits and
cash distributions
95% of economic
benefits and
cash distribution
* Economic Benefits - production tax credits and taxable income or loss
**Flip Date –occur once the institutional equity investors reach a target after-tax yield on their investment
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OPC Transaction-Accounting Treatment

Full consolidation of OPC

The payments received from the investors for the equity
interest are recorded as Minority Interest.

As the economic benefits flow to the investors they are
recognized by us as Minority Interest in the Statement of
Operation.

Interest expense, representing the Investors targeted yield,
charged to Minority Interest.

At the Flip Date, the Minority Interest is valued at 5% of the
net assets of OPC.
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Updated Guidance
 Revenues for the full year 2007
o
Electricity Segment - $214 million and additional $18 million for
the projects accounted for under the equity method*
o
Product Segment - between $70 million and $72 million
*Based on today’s oil prices
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Q&A
Any Questions?
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Appendix -Reconciliation of Adjusted EBITDA (Unaudited)
Thre e Months Ende d June 30,
2007
2006
2007
(in thousands)
Net income (loss)
Adjusted for:
Equity in income of investees
Minority interest in earnings of subsidiaries
Interest expense, net (including amortization
of deferred financing costs)
Other non-operating expense (income)
Income tax provision (benefit)
Depreciation and amortization
EBITDA
Equity in income of Mammoth-Pacific L.P. and Ormat Leyte
Depreciation, amortization, interest and taxes attributable
to the Company's equity in Mammoth-Pacific
L.P. and Ormat Leyte
Adjusted EBITDA
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8,547
Six Months Ende d June 30,
2006
(in thousands)
8,395
2,706
16,287
(1,181)
(305)
(931)
571
(2,412)
(305)
(2,210)
571
5,449
(37)
1,992
12,134
26,599
1,181
5,394
(135)
2,156
10,227
25,677
931
11,816
327
(3)
23,694
35,823
2,412
11,732
(230)
4,070
19,786
50,006
2,484
2,848
30,628
2,461
29,069
5,752
43,987
5,049
57,539
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