Ormat Technologies, Inc. (NYSE:ORA) Q2 2025 Earnings Call Transcript

Ormat Technologies, Inc. (NYSE:ORA) Q2 2025 Earnings Call Transcript August 9, 2025

Operator: Good morning, and welcome to the Ormat Technologies Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Joshua Carroll with Alpha IR. Please go ahead.

Joshua Carroll: Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assaf Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations and ESG Planning and Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements related to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company’s plans, objectives and expectations for future operations and are based on management’s current estimates and projections, future results or trends.

Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and quarter reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on our website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Before I turn the call over to management, I’d like to remind everyone that a slide presentation accompanying this call may be accessed on the company’s website at ormat.com under the presentation link that’s found on the Investor Relations tab. With all that said, I would now like to turn the call over to Ormat’s CEO, Doron Blachar. Doron?

Doron Blachar: Thank you, Josh. Good morning, everyone, and thank you for joining us today. Ormat reported record second quarter revenue and adjusted EBITDA results with a 9.9% increase in revenue, a 26.1% rise in net income and a 6.7% improvement in adjusted EBITDA. This outstanding performance was driven by the full recovery of our product segment revenue and margins, improved performance of our energy storage segment, which continues to benefit from new projects that reached commercial operation in 24, and higher merchant prices in the PGM market. During the quarter, we completed the acquisition of the Blue Mountain geothermal power plant and release for construction, 50 megawatts of new projects including 28 megawatts of geothermal and 22 megawatts of solar projects, primarily at our Heber complex.

We also continue to advance our geothermal development pipeline, benefiting from accelerated permit approvals due to recent federal permitting reforms. In July and August, we closed a significant tax equity transaction for the Heber 1 and 2 geothermal power plant, and secured project finance debt for our Bouillante power plant. Combined with the hybrid tax equity transaction, we signed for our storage assets and the project finance debt raised for the Dominica project during the quarter, we have secured $300 million of funding to support future development across the portfolio. Overall, we continue to see strong growth potential for geothermal in 2025 and beyond. This is supported by improved permitting time line due to recent federal permitting reform, an increasing number of BLM led options, our expanded exploration efforts and robust secular demand for base oil renewable, which has translated into elevated PPA pricing and stronger market economics.

Before I turn the call over to Assi. I would like to highlight the recently signed one big beautiful bill that for us is indeed very beautiful. The legislation has extended the PTC and ITC runway for both our geothermal and energy store segments, positioning us uniquely within the renewable energy sector. Assi will provide further details on the new policy and our efforts to maximize its benefit in his remarks. With that said, I will now turn the call over to Assi to discuss our financial results.

Assaf Ginzburg: Thank you, Doron. Let me start my review of our financial highlights on Slide 6. Total revenue for the second quarter was $234 million, a 9.9% increase compared to the last year’s second quarter. This top line expansion was driven by the recovery of our product segment and the improved performance of our energy storage segment, partially offset by a slight reduction in the electricity segment. Gross profit for the second quarter was $56.9 million, down 7.3% from $61.4 million in the second quarter of 2024, resulting in a consolidated gross margin of 24.3% versus 28.8% last year. The decline was largely due to a temporary electric segment gross margin compression that I will discuss shortly. Net income attributable to the company’s stockholders was $28 million or $0.46 per diluted share as compared to $22.2 million or $0.37 per diluted share in the second quarter of prior year.

Adjusted net income attributed to the company’s stockholders was $29.1 million or $0.48 per diluted share, reflecting an increase of 19.8% and 20%, respectively. This performance highlights the strength and resilience of our portfolio and business model as we continue to grow our earnings despite the temporary reduction in our electricity segment profitability. Adjusted EBITDA for the second quarter was $134.6 million, a 6.7% increase compared to last year. This strong year-over-year growth was driven by the higher revenue and better margins in the product segment, contribution from new assets and higher merchant pricing in the energy storage segment, a legal settlement with a battery supplier and better performance of the Dixie Valley and Beowawe power plants.

The increase was partially offset by an approximate $12 million reduction in EBITDA due to energy curtailment in the U.S. and previously reported well field work at the Puna power plant. Slide 7 breaks down the revenue performance at the segment level. Electricity segment revenues for the second quarter decreased by 3.8% to $159.9 million, primarily due to ongoing maintenance work at the Puna power plant and continued energy curtailment in the U.S, which reduced revenues versus the same period last year by approximately $13 million. At our Puna power plant, we finished the planned well field maintenance and resumed normal operation in July, and we continue to monitor our well performance. We anticipate the U.S. curtailment resulting from third-party [indiscernible] maintenance will significantly lessen in the second half of the year.

Product segment revenues increased by 57.6% to $59.6 million during the second quarter, driven by our strong backlog and the timing of progress made in manufacturing and construction. Energy storage segment revenue increased by 62.7% to $14.5 million in the second quarter, mainly due to the commencement of commercial operation of our new energy store facilities in 2024 and strong merchant prices in the PGM market. Also on Slide 7. The gross margin for the electricity segment was 24.2% in the second quarter, down from 33.5% last year. Excluding these temporary disposed events, the margin would have been approximately 30%. In the product segment, gross margin was 27.7%, up from 13.7% last year, driven by improved profitability on our contracts.

We now anticipate that gross margin for the year in our product segment, we increased our range of 21% to 23%. The energy storage segment reported gross margin of 11.9%, up from 5.7% in the second quarter of 2024. This improvement was driven by higher merchant prices in the PGM markets, where half weather along the East Coast contributed to elevated merchant pricing. With strong performance throughout the first half of the year and robust PGM prices in the month of July, we now anticipate full year gross profit for the storage segment to reach up to 20%. Slide 8 and 9 show the results of the first half 2025, highlighted by 6.1% and 6.5% increase in total revenue and adjusted EBITDA, respectively, with significant increase in both energy storage and product segment.

Moving to Slide 10. I would like to discuss further the recent spending budget bill that was passed in the U.S. on July 4. As Doron mentioned, we bill extend the PTC and ITC runway for our geothermal and energy storage segments. We now have the ability to receive full tax credit for geothermal and energy storage projects starting construction by December 31, 2032. After 2033, the credit phases down to 75% for the projects starting construction by 2024, 50% by 2025 and then 0% thereafter. As for solar and PV projects, projects starting within 12 months of the bill enactment can receive full credit if placed in service within 4 years. Otherwise, they must be in service by December 31, 2027. Regarding the foreign entity of concern, or FEOC, provision of the bill, the broader scope includes specified foreign entity and foreign influence entity.

The law aims to limit content from FEOCs used in energy-related projects starting construction after December 31, 2025. While we are currently assessing the impact of the FEOC rules on our growth, we expect minimal to no impact on our geothermal business since we manufacture all of our product segments with minimal FEOC content. However, at this time, the entire energy storage industry is still heavily dependent on battery sourced from China. And we are actively evaluating all project development options while continue to safe harbor additional projects. Ultimately, we will pursue the most economically viable option to advance our core storage pipeline and maintain flexibility in our procurement to stay on track with our expansion goals. Moving to Slide 11.

We recorded $16.3 million in income related to tax benefits in the second quarter compared to $15.8 million last year. In the second quarter and first half of 2025, we recorded ITC benefits of $10.3 million and $24.2 million, respectively, in the income tax side. These benefits related to 2 storage facilities that are expected to become operational in 2025. Recently, we entered into 2 tax equity transaction that secured $139 million of cash tax benefits. In July, we received $77 million from our hybrid tax equity PTC transaction. Of the remaining $62 million in ITC process related to our [indiscernible] enabler facility, we received $5 million in the second quarter, with the rest expected in the second half of the year. We expect Ormat tax rates will be positively impacted by the ITC benefits in 2025, with an annual tax benefit rate between 5% and 15% excluding changes in law or onetime events.

Slide 12 details our use of cash flow over the last 12 months, illustrating Ormat’s ability to generate strong cash flow for reinvestment and strategy growth, while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of June 30, 2025, are approximately $206 million, similar to the end of 2024. Our total debt as of June 30, 2025, was approximately $2.7 billion net of deferred financing costs, with the cost of debt at 4.95%. The majority of our debt liabilities are fixed interest rates, providing stability and protection for market fluctuations. Moving to Slide 13. Our net debt as of June 30, 2025, was approximately $2.5 billion, equivalent to 4.4x net debt to EBITDA.

During the second quarter and early third quarter, we secured $300 million in funding. This includes $139 million of tax equity partnerships and $161 million from project financing loans at attractive rates. These funds will support our new Bouillante power plant in Guadeloupe and our new project in Dominica. As shown on the slide, our total available liquidity is $551 million. Our total expected capital expenditure for the second half of 2025 is $295 million. We detailed CapEx presented in Slide 33 of the appendix. We plan to invest approximately $200 million in the electricity segment for construction, exploration, drilling and maintenance in the last 2 quarters of 2025. In addition, we plan to invest $85 million in the construction of our storage assets.

On August 6, 2025, our Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.12 per share payable on September 3, 2025 to shareholders of record as of August 20, 2025. The company expects to pay a quarterly dividend of $0.12 per share in each of the next 2 quarters. That concludes my financial overview. I would like now to turn the call over to Doron to discuss some of our recent developments.

Doron Blachar: Thank you, Assi. Turning to Slide 15 for a look at our electricity segment operating portfolio. Portfolio growth during the quarter was supported by the addition of the Blue Mountain geothermal power. Moving to Slide 16. The Blue Mountain acquisition has immediately enhanced our generating capacity and offer significant revenue growth potential through planned upgrades, which are already underway, and the possible addition of a solar facility. We are very excited about the opportunities that this addition presents, and we look forward to continuing our strong partnership with NV Energy to deliver reliable, clean energy to the people of Nevada. During the quarter, we also expanded our management team to support the growth of our electricity segment and our EGS initiatives.

This expansion included the hiring of Aron Willis as Executive Vice President, Electricity segment; and Daniel Moelk, as Senior Vice President, Resource Drilling and EGS. Aron will oversee the operations of the electricity segment, ensuring alignment with the company’s strategic goals and financial targets. Aron will also be responsible for optimizing TAT performance and expanding profitability, ensuring compliance with safety and environmental regulations and driving continuous improvement initiatives to foster future profitable growth. Daniel will lead our resource drilling and EGS teams, focusing on implementing sophisticated processes and innovative technologies to further enhance our operations. His work will include creating efficiencies, shortening development time, developing Ormat’s ongoing drilling and exploration global road map and expediting wellfield and EGS development.

We are thrilled to welcome both Aron and Daniel to the team, where their valuable background and experience will help drive the next phase of growth for our leading geothermal operations. Turning now to Slide 17. Our product segment backlog stands at $263 million, representing a 59% increase compared to the second quarter of 2024. This growth was primarily driven by significant contracts signed at the end of 2024. As highlighted in Assi’s presentation, the contribution of the product segment this quarter was significant, with higher revenues and notable improvements in margins. Moving to Slide 18. Our Energy storage segment demonstrated a robust year-over-year growth with total revenues increasing by 62.7%. As previously mentioned, we anticipate that this strong performance in our energy storage business will continue throughout the remainder of 2025, driven by the benefit of recently commissioned storage facility.

On Slide 20, we are on track to achieve our portfolio capacity target of between 2.6 gigawatts to 2.8 gigawatts by the end of 2028. This confidence is driven by strong momentum in geothermal development and our intensified exploration efforts. In parallel, we are making progress in the storage segment, having successfully secured both batteries and safe harbor for additional projects, further reinforcing our path toward meeting our capacity growth targets. While safe harbor is not required for geothermal project, the extended construction start deadline now set for 2033 has allowed us to make significant progress on the storage front, as shown on Slide 21. In 2024, 4 projects was successfully safe harbored, followed by 2 more in 2025, with additional projects expected to be safe harbored later this year.

These actions ensure ITC eligibility with no FEOC limitation for our entire storage portfolio through 2028 and in some cases, even beyond under current regulations. This milestone strengthens our confidence in meeting our growth targets. Importantly, despite the recent changes in tariffs, we do not anticipate a material impact on our financial performance due to the import tax. Turning to Slide 22 and 23, which display our geothermal and hybrid solar PV projects currently underway. We anticipate adding 148 megawatts towards generating capacity from these projects by the end of 2026. In addition, we have released for construction 25- megawatt geothermal and 22-megawatt solar PV capacity to our Heber complex in California and a 3.5 megawatt addition to the Blue Mountain power plant in Nevada.

Moving to Slide 24 and 25. We currently have 6 projects under development in our energy storage segment, which are expected to add 385 megawatts or 1.3 gigawatt hour to our portfolio. Please turn to Slide 26 for a discussion of our 2025 guidance. We maintain our guidance and expect revenue to increase by 9% year- over-year at the midpoint, ranging between $935 million and $975 million. Electricity segment revenues are projected to be between $710 million and $725 million, product segment revenues between $172 million and $187 million, and energy storage revenues between $53 million and $63 million. Adjusted EBITDA is expected to increase by approximately 5% at the midpoint, ranging between $563 million and $593 million, with annual adjusted EBITDA attributable to minority interest at approximately $21 million.

I will conclude our prepared remarks on Slide 27. This is an exciting and pivotal time for Ormat, fueled by supportive policies in both geothermal and energy storage and the growing demand for carbon-free baseload power, particularly to support AI data centers and the broader electrification trends that are significantly increasing electricity consumption. These developments, along with our financial results, not only validate our strategy, but also strengthens our confidence in our team’s ability to achieve both our near-term operating capacity milestones and long-term financial objectives. As we look ahead to the second half of the year and beyond, we expect to finalize contracts to support data center and hyperscalers with improved economics and to continue the development and construction of future projects as planned.

We are prioritizing innovation and exploration, the best way to develop and integrate EGS technology into operations and future growth. As we have previously communicated, we are actively pursuing strategic partnerships to develop new EGS projects and provide advanced solution to potential EGS customers in our product segment. We believe the new management structure will allow for greater focus on EGS and greenfield development. Our commitment to delivering reliable and sustainable energy solutions remain strong, and we are leveraging our unique capabilities to drive meaningful growth and create long-term value for our shareholders. This concludes our prepared remarks. Now I would like to open the call for questions. Operator, please.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Noah Kaye with Oppenheimer.

Noah Duke Kaye: A lot of good things going on. I think one place to start would be around the geothermal development environment. You called out a number of expedited permitting advancements for several projects, I think that was publicized by BLM perhaps mid-quarter, if I remember correctly. Can you talk about the opportunity for additional permitting fast track, what you’re anticipating over the next couple of years and what this might actually mean for speeding up the development timetable?

Doron Blachar: Yes, Noah, it’s Doron. Thank you. The changes in the administration and the tailwind, the support that we are getting is very impressive and pushed us forward with today, multiple projects that have advanced the exploration to get into a position where we can start full-sized drilling and plan to release new projects in the next couple of years. I’m in Ormat for over 12 years, and this is a situation that we haven’t had in the past. We’re actually drilling, getting a lot of responses from the BLM much faster than in the past, and we see quite a few of greenfield projects in the U.S. that we will be able to release for construction the next couple of years. You can also take an example, Dogwood, the expansion of Heber that we just released. We started permitting of this project, I don’t know, 4, 5, 6 years ago. And only now we’re able now with the push that we see today, to get the permitting and to move it forward.

Noah Duke Kaye: Very good. I just want to make sure I’ve got this right on the storage side. I think you mentioned safe harboring all of your projects expected to come online through 2028. But you also mentioned, I think, active evaluation around FEOC implications for sourcing. So can you just sort of help us clarify those 2 points? Have you effectively safe harbored the battery supply already and eliminate any FEOC concerns for those projects going on through 2028? Or is that an ongoing process?

Doron Blachar: So I will split it basically to 3 parts. All the projects that are in construction that will come online, obviously, safe harbor, the batteries are in the U.S. in construction, and that relates to all the projects that were leased before ’24. At the beginning of ’25, even before any of the new regulation came out with safe harbor, additional couple of projects over the last few months and ongoing, we are safe harboring additional projects in ’25. All of them should come online by the end of ’28 or ’29 based on the current regulation. So I would say with safe harbor in ’24 was 700-megawatt hour, in ’25 already 600-megawatt hour, and we are in the process of safe harboring another 1.6 gigawatt hour of projects in ’25.

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

Justin Lars Clare: I guess, first, I just wanted to follow up on the progress you’re making on enhanced geothermal. I was wondering if you could just provide a little bit more detail on the progress that you’ve made to date and speak to the potential opportunity, would you say it’s more likely to first enable you to increase production at existing wells or existing plants? Or are you looking at drilling in new locations? It would be great to get an update there.

Doron Blachar: Thanks, Justin. So on EGS, I would first start, you now we just appointed a Senior Vice President, Daniel Moelk, to lead our resource drilling and EGS. He comes from [ Evo ], has a lot of experience and knowledge in the EGS and this area. And we’re working on multiple approaches on EGS. We — since there is no 100% proven technology today, we will be focusing on a few technologies in parallel. I believe that the first stage, as you said, we will try to utilize EGS in some of our existing facilities that have interconnection that have permitting, that have already our plant operating and has the ability to generate more. But in the long term, once EGS is successful, I see EGS just expanding significantly the potential growth that we see in Ormat, both on the development part and also on the product side because once EGS will be a common technology and a proven technology, the demand for geothermal products and the EPC projects should increase significantly.

So we do hope and I do hope that the technology will be successful, and EGS will be proven a viable solution in the next couple of years. And if it does happen, it opens a totally new area for Ormat to grow, and it will have a significant impact once successful.

Justin Lars Clare: Got it. Okay. And then I guess curious, just following up on that, what kind of demand you might be seeing on the product side from others that are pursuing enhanced geothermal techniques. Or also, are you evolving your products in order for them to be potentially more adaptable to an enhanced geothermal well?

Doron Blachar: Look, at the end of the day, the main attribute to EGS is the subsurface impact, really getting the heat up. But once you get the heat up, it will operate like similarly to other geothermal projects. And Ormat is the largest developer and the large seller of binary technology. You need to remember that we are not Chinese. So I believe it will give us a significant benefit versus any other Chinese companies that are competing in this area to build geothermal projects.

Operator: Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Unidentified Analyst: This is Hannah Velasquez on for Julien. Congrats on the quarter. I wanted to first start out with a follow-up on the safe harbor around the batteries. So it sounds like you haven’t yet safe harbored fully the 2028, 2029 projects. I’m just wondering if the pause or hesitation there is to wait and see what happens with treasury in terms of guidance? Is there any concern that guidance ruling might limit your ability to safe harbor any sea of exposed batteries?

Assaf Ginzburg: Hannah, this is Assi. For the best of what we know today, the August 18 announcement on FEOC should be focused on wind and solar. And therefore, we don’t think there should be a problem with us to safe harbor more projects between now and year-end because we need to have the project start by December 31. This is just part of the evaluation of what projects we believe will have interconnection by 2028 and 2029, and that’s where we are doing those safe harbors. The good news is that — at least, we know that by 2033 — end of 2033, we do have confirmation that the ITC benefits will continue. And I also think that even if there will be no Chinese equipment allowed to use after that, there will be a U.S. manufacturer or non- FEOC manufacture batteries, I think it’s going that way. So overall, you can see these are big numbers that we are a safe harboring. And we just part of the work to decide what to safe harbor first.

Unidentified Analyst: Got it. And as a second question, could we get an update on the 250 megawatts under negotiation regarding data center opportunity? I know you said this in past quarters, but I wanted to see if there was anything incremental to touch on there? And if any of these potential projects, the 250 megawatts is contingent on you moving forward with pursuing EGS?

Doron Blachar: So I’ll start with the end — all the PPAs that we are negotiating today are of the existing technology, they are not connected to EGS. This is based on our existing technology. And the way that we are approaching it basically is to see that we cover any potential and greenfield that we will develop as well as any recontracting that we will have. Negotiations on the PPA are ongoing. Moving forward, unfortunately, I still don’t have the ability to tell you that we signed. But we are finalizing the terms with them, and I hope that we’ll be able to announce PPA that we signed in the next few months.

Operator: Your next question comes from the line of Ben Kallo with Baird.

Benjamin Joseph Kallo: Could you just talk a little bit about the certainty in tax credits and also the BLM permitting getting easier? How that has affected your early development strategy? Has that sped it up or slowed it down or is big changes at all on your development approach?

Doron Blachar: Thank you, Ben. So the tax equity or the tax benefits that we see with the new beautiful deal is definitely beautiful for us. At the geothermal cloud as a runway until the end of 2033, and then there is a slow gradual decline of the benefit, but still — it works on staff of construction. So effectively until COD that is 2037 and in some cases, until 2043 even will enjoy the PTC or ITC benefits that tied us. We have no — we don’t expect any limitation on the FEOC on the geothermal part manufacturing in different countries. The percentage that comes from China is minimal. It should not impact this. So the geothermal front, it’s very, very clear. On the energy storage, we know that all the sales and batteries are manufacturers in China.

And the market we need to adjust to the new regulations, either by increasing prices and basically having power plants without the benefits of the ITC or the developing manufacturing capabilities outside of China that will allow us to get the benefits of the ITC. And again, on the energy storage is until 2033 start of construction.

Benjamin Joseph Kallo: And then just on your ’28 targets, could you just talk about how any of these changes or what you see in power prices have been either positive or negative towards your 2028 targets you laid out because there’s been a lot that’s happened recently. So if you’re net positive or net negative, if you could walk through that.

Doron Blachar: The ’28 target that we set a couple of years ago are totally valid. We still see them. Actually, the fact that permitting is faster and easier makes the more achievable the extension of the ITC. The PTCs helps them in the same way, didn’t change the playground for 2028. And the PPA pricing and the extensive demand that we see for renewable energy basically supports totally these targets.

Operator: Your next question comes from the line of David Anderson with Barclays.

J. David Anderson: You were talking before about enhance to your thermal, but I was kind of a little bit more curious more specific on exploration. You talked about your exploration program and some talk on the BLM. I was wondering if you could talk about how much capital you’re putting aside for exploration? What does that look like for, say, 2026. I’m curious, are you drilling any wells yet? Are you still in the kind of geologics or reservoir analysis phase?

Doron Blachar: Thanks, David. So on the exploration, it’s a great place to be and great questions. We’ve been doing core wells between 10 to 12 core wells starting in ’23 and ’24, ’25 and drilling full size as wells actually, we are today really full-size exploration was in 2 sites in the U.S. actively drilling. We’re looking into next year, and I expect next year to be drilling on top of the corewood program, drilling between 2 to 3 full size exploration drilling in parallel. So all in all, the move that we’ve done brings us much closer to many more greenfield that we’ll be able to develop. CapEx wise, we have, in the exploration part, on an annual basis are somewhere between $125 million to $150 million of drilling exploration wells, obviously, can move up and down a bit, but the way that we see today is that we will be drilling 2 or 3 different location in parallel in the U.S. on exploration.

J. David Anderson: Great. And separate subject on your product segment. I was just wondering about the growth and kind of how you’re projecting that going forward. We saw some — the backlog decreased a bit this quarter. I was just kind of curious how that should impact or not impact growth going forward? Can you just kind of provide some maybe some longer-term views on where — how much that business can grow?

Doron Blachar: Yes. So backlog in Ormat has many times a tendency to go down enough because we do sign large contracts. And obviously, once you sign it, it will go up. And then once you start recognizing revenue, it starts to go down. So we do expect to see some ups and downs in the backlog. I think that’s especially relevant when most of the product that we signed today are EPC contracts, not supply projects, meaning a much larger projects. Today, we see New Zealand, which is a big part of the backlog today, continue being a significant part of the backlog even in the coming years. We know about potential projects that are expected to be released next year and after that in New Zealand. The other country that is very important for us on the product side is Indonesia.

They’ve just issued a few tenders, and we see multiple tenders coming over the next couple of years in Indonesia, both places preferred projects that are EPC, not supply, meaning relatively large order at the beginning that is spread over a period of around 2 years and a bit and sometimes a bit more. So we do see a very nice future for the product segment. And I would say that once we add that to our exploration efforts and the greenfield that we plan to develop, that will add on to the product segment, not in direct revenue, but definitely in workload and the potential.

Operator: Your next question comes from the line of Derek Podhaizer with Piper Sandler.

Derek John Podhaizer: I just wanted to go back to the accelerated permit approvals that you’ve been talking about. Maybe could you just sort of remind us or give us a refresher on the improvements that have been made? How long did it take before? How long is it taking now? And then help us understand how this all translate into being able to release that 25 megawatts at Heber.

Assaf Ginzburg: Derek, historically, the amount of time it took us to get environmental permits in Nevada could have been a year and sometimes even longer. I can tell you that in some cases, we have seen that now, it shortened to as short as 2 months. We got 3 permits during the quarter within 2 months. And Ormat is now trying to go and file as much as we can environmental permits in order to expedite additional projects that were not planned to be built over the next few years. I will say though that, for example, in California, they still need to have a specific environmental that is not a BLM permit but another permit. And therefore, over there, it’s only going to take some time until we see improvement. But as you know, many of our greenfields are in Nevada.

But if you think about permitting, it’s not just in nominal permits. It’s also the knowledge, the project will be approved. The knowledge that there will not be a new indigenous species waking up after we have done the exploration work. So for us, it gives us also a lot of runway of where we go and choose the work to drill. We are much more comfortable in our ability to progress those to the permitting. So it’s one, accelerating. But second, also give us confidence that we will get all the permits on time.

Derek John Podhaizer: Got it. That’s helpful. Maybe switching to Blue Mountain. Can you remind us how much this is expected to contribute to revenue and EBITDA? I think you said you’ll be getting contribution beginning next quarter, third quarter. And then once all the planned enhancements and additions are made, where could this run rate step up to as you start thinking about 2026?

Assaf Ginzburg: Sure. Right now, for the second half of the year, we expect to bring around $4 million of EBITDA for the plan. I will say that when we look at 2027, that number should go up by around 10%, 15%. As we’re increasing the capacity of the plant by 15%, we are going from 20 to 23.5. And that project was already released in our construction. The next phase of growth for this project is that by the year of 2029, the PPA of this plant is over. And therefore, we expect to achieve a much better pricing on the PPA. The PPA of the plant is in the low 70s right now. And as you know, the market is about 100. One more thing to mention. We do believe that Blue Mountain is a great place to do some EGS projects. There is already an active way of EGS on site.

So we know that the ground there is quite good. And the plant is running under capacity, which means it can grow significantly. So that’s definitely a place we will look over the next few months to see where we’re aiming some of our EGS efforts.

Operator: Your next question comes from the line of Jeff Osborne with TD Cowen.

Jeffrey David Osborne: Just 2 real quick ones. I was wondering, Assi, if you just could confirm the remediation work on the transmission line. Is that completed or is that still lingering in the third quarter? I know you said that curtailment would be meaningfully down, but I just wasn’t sure if it’s finished.

Assaf Ginzburg: Early in July, actually in the second week of July, the remediation of the well pad work and the permits. You’re talking about Puna or you’re talking about NV Energy? So you’re talking about the curtailment, right?

Jeffrey David Osborne: I’m talking about curtailment. I think it said a transmission line is 100 years old in Nevada?

Assaf Ginzburg: Okay. So we have slight — very small curtailment in July, and MBL told us that they completed the work for the year. And that’s why we get the guidance to much less than curtailment. As you know, we had a very big impact this quarter from curtailment and also in Q1. So we definitely assume — and based on what we’re told, that this will lessen in the second half.

Jeffrey David Osborne: Got it. That’s helpful. And then if I heard you right, I think you said there was a legal settlement as it related to a battery supplier. Was that around performance, availability? Can you just flesh out what the system completed and not working appropriately? Or any incremental detail would be helpful.

Assaf Ginzburg: Yes. This is already a settlement that we have done a year ago, where a battery supplier did not provide us batteries when we demanded them and when we issued the PO because the prices of battery at the time went up significantly, and our contract was at fixed cost. And that’s why he reimbursed. So this is something that we will see in the financials, I believe, but at the end of this year and into Q1 of next year. Every quarter, we should expect to see around $3.1 million of income from that.

Operator: That concludes our question-and-answer session. I will now turn the call back over to Doron for closing remarks.

Doron Blachar: Thank you. Thank you. I would like to thank you all for joining us today. This was a very good quarter for Ormat. We are continuing our exploration and development and EGS efforts. And with the tailwind that we see from the current administration, we see significant growth in the coming years and forward. So thank you all, and goodbye.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.