Ormat Technologies, Inc. (NYSE:ORA) Q3 2025 Earnings Call Transcript

Ormat Technologies, Inc. (NYSE:ORA) Q3 2025 Earnings Call Transcript November 4, 2025

Operator: “

Joshua Carroll: “

Doron Blachar: “

Assaf Ginzburg: “

Noah Kaye: ” Oppenheimer & Co. Inc., Research Division

Justin Clare: ” ROTH Capital Partners, LLC, Research Division

Mark W. Strouse: ” JPMorgan Chase & Co, Research Division

Julien Dumoulin-Smith: ” Jefferies LLC, Research Division

Jonathan Windham: ” UBS Investment Bank, Research Division

David Sutherland: “

John Anderson: ” Barclays Bank PLC, Research Division

Derek Podhaizer: ” Piper Sandler & Co., Research Division

Operator: Good morning, and welcome to the Ormat Technologies Third 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 Josh 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 relating 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 risk factors 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 quarterly 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 the 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 the slide presentation accompanying this call may be accessed on the company’s website at ormat.com under the Presentation link that is 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. Let me start with quarter highlights on Slide 4. Ormat delivered another quarter of strong results, demonstrating continued advancement and successful execution of our strategic growth initiatives. These achievements are reflected in a 17.9% increase in revenue, a 13.3% increase in operating income and a 9.3% growth in net income attributable to the company’s stockholders. Our strong results were primarily driven by sustained improvements in both our Energy Storage and Product segments, which contributed to higher revenues and enhanced profitability. These strong results enabled us to increase our revenues and adjusted EBITDA guidance for 2025.

During the quarter, Ormat achieved several significant strategic milestones, including securing a 25-year extension to the PPA for the 52MW Heber 1 facility with SCPPA and obtaining 2 Geothermal exploration licenses in Indonesia, totaling 40MW. These long-term PPAs in Indonesia were executed in partnership with PLN, the country’s national utility provider, reinforcing our strategic presence in the region. Within our Storage segment, we successfully commissioned the Lower Rio Energy Storage facility in Texas on schedule. And in our Product segment, we expanded our backlog to $295 million through the addition of new supply agreement. Our legacy at Ormat is that of an innovative technology company. And as part of our strategy, we are always exploring additional ways to utilize our capabilities, knowledge and technology for new avenues to capture growth.

To that end, we have achieved significant progress in advancing our Enhanced Geothermal System strategy, demonstrating our commitment to innovation and sustainable growth. We entered into a partnership with SLB to develop an EGS solution. And in addition, we signed a collaboration agreement with Sage to develop another EGS solution based on different technologies. I will elaborate on this later. Before I provide some additional updates on our business, I would now like to turn the call over to Assaf Ginzburg to discuss our financial results. Assaf?

Assaf Ginzburg: Thank you, Doron. Let me start my review of our financial highlights on Slide 6. Total revenue for the third quarter was $249.7 million, a 17.9% increase compared to last year’s third quarter. This top line expansion was driven by growth across all 3 operating segments. Notably, our growth continued to reflect the strong results from both our Energy Storage and Product segments. Gross profit for the third quarter was $64 million, up 8.8% from $58.9 million in the third quarter of 2024, resulting in a consolidated gross margin of 25.6% versus 27.8% last year. The increase in gross margin was a result of improvement in our Storage and Product segment, partially offset by lower performance of our Electricity segment.

Net income attributable to the company’s stockholders was $24.1 million or $0.39 per diluted share compared to $22.1 million or $0.36 per diluted share in the third quarter of the prior year. Adjusted net income attributable to the company’s stockholders was $24.9 million or $0.41 per diluted share compared to $26.3 million or $0.42 per diluted share in the third quarter prior year. Adjusted EBITDA for the third quarter was $138.4 million, a 0.6% increase compared to last year. This year-over-year growth was driven mostly by higher revenue and better margins in the Product segment as well as contribution from new assets in the Energy Storage segment. These contributions were offset by lower income attributable to sales of tax benefits and reduced benefits from a legal settlement with a battery supplier in our Storage Segment, which were both exceptionally high during the third quarter of 2024.

Slide 7 breaks down the revenue performance at the segment level. Electricity segment revenue for the third quarter increased by 1.5% to $167.1 million, primarily due to the recent acquisition of Blue Mountain and the improved performance at our Dixie Valley facility. This expansion to our operating portfolio helped to more than offset $3.2 million reduction at our Puna complex in Hawaii due to lower energy rates. Product segment revenues increased by 66.6% to $62.2 million during the third quarter, driven by our strong backlog and the timing of progress made in manufacturing and construction. Energy Storage segment revenues increased by 108% to $20.4 million in the third quarter, primarily driven by the successful commissioning of the Bottleneck and Montague facilities in late 2024 and the COD of our 60-megawatt 120-megawatt hour Lower Rio facility this quarter.

I would like to add that the Bottleneck storage facility in line with its contract contributed approximately 45% of its annual revenue during the third quarter, which generally significantly increased Storage revenue and profits in the third quarter compared to the rest of the year. Also on Slide 7, the gross margin for the Electricity segment was 25.4% in the third quarter, down from 30.2% from last year. The gross margin in the third quarter of 2025 was negatively impacted by $5.5 million due to temporary lower generation at Stillwater from ongoing enhancement work, reduced output at our Imperial Valley assets following a third-party grid failure caused by September storm and to a lesser extent, curtailment in the U.S. In addition, lower energy prices at our Puna complex in Hawaii reduced gross margin by approximately $3.2 million.

In the Product segment, gross margin was 21.7%, up 250 basis points from 19.2% last year, with this margin expansion driven by improved profitability on our contracts. We continue to anticipate that gross margin for this year in our Products segment will remain in the range of 21% to 23%. The Energy Storage segment reported gross margin of 39.4%, up meaningfully compared to 20.2% gross margin in the third quarter of 2024. This improvement was mainly driven by seasonally high margins at the Bottleneck Storage facility and higher merchant prices in the PJM region year-over-year. We believe that full year gross profit for the storage segment is likely to increase to about 25%. Slides 8 and 9 show the results of the last 9 months of 2025, highlighted by 10% increase in total revenue and 11.6% and 4.5% increase in net income and adjusted EBITDA, respectively, with significant increase in both Energy Storage and Product segment.

Moving to Slide 10. As discussed in the second quarter call on July 4, the U.S. budget bill extended the PTC and ITC runway for our Geothermal & Energy Storage segment. Regarding the foreign entity of concern or FEOC, provision of the bill, the broader scope includes Specified Foreign Entity (SFEs) and Foreign Influence Entity (FIEs). At this time, the entire Energy Storage industry is still heavily dependent on batteries sourced from China. And we are actively evaluating all project development options while continuing to safe harbor additional projects. Ultimately, we will pursue the most economically viable option to advance our current storage pipeline and maintain flexibility in our procurement to stay on track with our expansion plan.

Moving to Slide 11. We recorded $14.4 million in income related to tax benefits in the third quarter compared to $19.8 million last year. In the third quarter and 9 months of 2025, we recorded ITC benefits of $9.5 million and $33.8 million, respectively, in the income tax line. These benefits are related to 2 Storage facilities that commenced operation or expect to commence commercial operation by the end of 2025. Recently, we entered 2 tax equity transactions. And as of today, we collected approximately $109 million under these contracts. The balance of $32.4 million will be collected by the year-end. In addition, we sold transferable PTC and ITC and received mostly in October, $25.5 million. We now expect total cash from tax credit this year, will exceed our initial expectation of $160 million and will now reach approximately $167 million.

We expect our tax rate will be positively impacted by ITC benefits in 2025 with an annual benefit rate between 5% to 15%, excluding changes in law or onetime events. Slide 12 details our cash flow over the last 12 months, illustrating our ability to generate strong cash flow that allows us to fund reinvestment and strategic growth while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of September 30, 2025, were approximately $206 million, similar to the end of 2024. Our total debt as of September 30, 2025, was approximately $2.7 billion, net of deferred financing costs with the cost of debt at 4.8%. The majority of our debt liabilities are at fixed interest rates, providing stability and protection for market fluctuation.

Moving to Slide 13. Our net debt as of September 30, 2025, was approximately $2.5 billion, equivalent to 4.4x net debt to EBITDA. During the third quarter, we secured $254 million in funding. This includes $104 million from tax equity partnerships and transferable tax credits and $150 million from project finance loan at attractive rates. As shown on the slide, our total available liquidity is $667 million. We expect our total capital expenditure for the remaining of the year to be $140 million with our detailed CapEx plan presented in Slide 33 in the appendix. We plan to invest approximately $100 million in the Electricity segment for construction, exploration, drilling and maintenance in the fourth quarter of 2025. Additionally, we plan to invest $34 million in the construction of our Storage Assets.

On November 3, 2025, our Board of Directors declared, approved and authorized a payment of quarterly dividend of $0.12 per share payable on December 1, 2025, to shareholders of record as of November 17, 2025. Before I turn the call over to Doron, I would like you to know that depending on the average share price in Q4, we expect diluted share count will increase by approximately 800,000 shares due to the potential dilutive effect from our convertible senior notes. 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, Assaf. Moving to Slide 16. The Blue Mountain power plant that we acquired back in June has contributed to our results, and we’re continuing to make great progress in planned upgrades that will enhance the facility generation and revenue growth potential. Our DIXIE Valley facility exhibited improved performance during the quarter following an unplanned outage that took place during the prior year. Turning now to our international activities. In August, we were chosen to develop 2 greenfield projects, [ Songa and Ambalat ] for the local government in Indonesia, further expanding our footprint in the region. Notably, Ormat is the first company chosen under this competitive bid process. We are planning to commence drilling at one of these sites by the end of 2026 and contingent on successful results, expect the projects to be fully operational by 2030.

With respect to our TOPP 2 project in New Zealand that is currently in commissioning stage, we recently received a formal notice from the customer that they have decided to exercise their option to purchase the facility. And once the project is complete, we will be delivering the facility to the customer. As a result, revenue from the sale of this project will now fall under the Product segment. Once it is finalized and closed next year, the TOPP 2 facility will be removed from our pipeline. Turning now to Slide 17. Our Product segment backlog stands at $295 million, representing a 79% increase compared to the third quarter of 2024. This growth was primarily driven by a large contract we signed, which has added approximately $86 million to the backlog.

Moving to Slide 18. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 108%. As previously mentioned, we anticipate that the strong performance in our Energy Storage business will continue throughout the remainder of 2025, driven by the benefits of recently commissioned storage facilities. On Slide 20, we are on track to achieve our portfolio capacity targets of between 2.6 gigawatt 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 towards meeting our capacity growth targets.

Turning to Slide 21 and 22, which display our Geothermal & Hybrid Solar PV projects currently underway. We anticipate adding 98 megawatts of generating capacity from these projects by the end of 2026. Moving to Slide 23 and 24. We currently have 5 projects under development in our Energy Storage segment, which are expected to add 325 megawatts or 1,180-megawatt hour to our portfolio. Turning to Slide 25. Last week, Ormat and SLB announced a partnership aimed to accelerate the development and commercialization of EGS projects. Together with SLB, we intend to streamline project deployment from concept to power generation by combining Ormat’s expertise and market-leading capabilities in power plant design, development and operations with SLB’s well-established strength in subsurface reservoir engineering and construction.

Together, we intend to jointly develop a pilot at an Ormat facility with the goal of scaling EGS solution to enable widespread EGS adoption. If the pilot proves successful, Ormat expects to expand its development pipeline in alignment with our commitment to delivering reliable, sustainable and efficient Energy solutions to meet the demands of AI, data centers and the broader transition to renewable energy. In addition to the SLB agreement during the third quarter, we announced a strategic commercial agreement with Sage Geosystems, a pioneer in next-generation Geothermal and Energy Storage technology. As part of the agreement, once closed, Sage will pilot its advanced pressure Geothermal technology to extract Geothermal heat energy from hot dry rock at one of our existing power plants.

The goal of this collaboration is to significantly reduce the time and costs needed to bring EGS to market. Following a successful completion of the pilot project, Ormat will gain the right to develop, build, own and operate Geothermal power plants levering Sage’s proprietary pressure Geothermal technology. We also intend to advance long and short duration Energy storage projects, utilizing Sage cutting-edge pressure Geothermal Storage solution. We will provide additional updates on these agreements as the pilot program progresses. Our partnership with SLB, coupled with our agreement with Sage has created a significant step forward for the Geothermal industry. As the global leader in Geothermal development, we are proud to drive progress towards a more sustainable future by delivering reliable, efficient and renewable energy solutions to power the global energy needs.

Please turn to Slide 26 for a discussion of our 2025 guidance. The great results we saw in the Product and Storage segments enabled us to update our guidance and increase our revenue and adjusted EBITDA targets for the year. We expect revenue to increase by 10.2% year-over-year at the midpoint, ranging between $960 million and $980 million. Electricity segment revenues are projected to be between $700 million and $705 million. Product segment revenues are expected to range between $190 million and $200 million and Energy Storage revenues are now expected to range between $70 million and $75 million, As a result of improvements in full year revenue and strong adjusted EBITDA results generated to date, adjusted EBITDA is now expected to increase by approximately 6.2% at the midpoint, ranging between $575 million and $593 million, with annual adjusted EBITDA attributable to minority interest at approximately $17.5 million.

I will now conclude our prepared remarks with reference to Slide 27. This is a pivotal and transformative period for Ormat. We are experiencing strong momentum across our business, fueled by new strategic partnership and expanding portfolio, robust PPA pricing, supportive regulatory developments and increasing demand for renewable energy solutions. As the global energy transition gains pace and AI-driven requirements for Power & Energy infrastructure expand the market for our core competence, we are exceptionally well positioned to deliver scalable and sustainable Energy Solutions. We are also proud of the progress that we have made in advancing EGS technology. This initiative complements our established leadership in Geothermal development and positions us to drive future growth.

Looking ahead to the fourth quarter and beyond, we remain committed to expanding our industry leadership and advancing innovative sustainable energy solution that will allow us to drive growth and 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 is from the line of Noah Kaye with Oppenheimer. Yes, your line is coming through.

Noah Kaye: Okay. All right. So maybe to start with, it was in the slide deck on Page 15, just referencing the 250 megawatts of PPAs under negotiation with hyperscalers and data centers. I don’t believe I heard an update in the prepared remarks. Can you maybe just update on sorry, I’m getting a lot of feedback Yes, I’m sorry. [Technical Difficulty] Can you hear me?

Doron Blachar: Yes.

Noah Kaye: Okay. I’m sorry, I’m getting a lot of feedback, but I was just hoping for an update on the PPA discussions with hyperscalers.

Doron Blachar: So hopefully, you can hear me well. We are actually in very final negotiations on a couple of PPAs with hyperscalers and in the same magnitude that we have been discussing. We hope to be able to finalize them, sign them and announce them in the next couple of months. Hopefully even before that. But we have quite a significant development in the negotiations and drafting, and we’re very close to finishing them in the next couple of months.

Noah Kaye: Great. We look forward to that. Second question, I think you mentioned TOPP 2 will likely convert over to a Products revenue since you’ll be doing the EPC work there. Just how to think about how that might translate into additional products backlog and the revenue opportunity associated with that?

Doron Blachar: Yes. I would say it’s an EPC project, roughly $100 million in that range. So, they have exercised the option. We need to close the transaction that will probably occur in Q1 of ’26. And at that point, once the transaction closes, it’s accounting-wise, the time we can actually account it as part of the project.

Noah Kaye: Very helpful. And then you mentioned a couple of these key collaborations on EGS. I was hoping you could give us a little bit more color on some of the pilots that are associated with that. Can you give us a little bit more detail on the scope of the pilot? What steps exactly you’ll kind of be taking here in the early days to kind of assess commercial viability and what you’ll be looking for to go ahead with a larger project?

Doron Blachar: Sure. So, 2 different transactions. So, with SLB, we’ve started a joint venture. And we have chosen the site, the pilot for the SLB will be next to our facility in Desert Peak in Nevada. Actually, it’s the same location that 20 years ago Mart started an EGS project there. So, this, the project, the pilot starts with SLB looking into the right technology and developing the right technology for an EGS project; once they are complete or actually in parallel to that, we will be looking for permitting and all the business development-related issues that we’ll be working on. Once these are aligned, we will drill the pilot wells. We expect that will happen towards the second half or the end of ’26. And then we will run the pilot, and we will utilize our Desert Peak site.

And by that, save a lot of time for the need to build a facility to generate electricity. So, this is on the, on the Sage, so the Sage pilot is a pilot that they are managing. We are discussing with them what is the right location for an EGS project next to one of our facilities, similar again to Sage time. But on this case, be it the permitting and everything is done by Sage, not by us. We are just allowing them to utilize one of our facilities, which we haven’t finalized with them yet which one.

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

Justin Clare: So I wanted to start out with the Electricity segment. Wondering if you could just discuss within the Electricity segment, how you anticipate the gross margins trending in Q4. There was a number of different factors that affected the margins in Q3. Wondering if those are being resolved or if they could affect Q4. And then just looking into 2026, it’d be great if you could just talk about the puts and takes you see for the Electricity segment in regard to kind of operational issues that you, that impacted 2025 and the curtailments and how you see things evolving for that segment next year?

Doron Blachar: So, I would start maybe with FY’ 26. What we’ve seen we are not aware today of any material curtailments that are planned by Energy or from California near the control substation. So, the big impact that we had this year is not something that we expect to see next year. But this is usually up to the utilities and operators not us. This is regarding 2026. Regarding Q4 ’26, I can tell you that we had some curtailment in October by NV Energy, which wasn’t a planned one. an unplanned curtailment that they’ve done. Q4 is usually much stronger than Q3 and Q2. So, we do expect a higher gross margin in Q4 versus Q3.

Justin Clare: Got it. And then I guess just some of the factors that affected Q3, the Stillwater enhancement, the Imperial Valley grid failure, have those been resolved at this point? Or could there be an effect in Q4? Wondering for Q4, could we see directionally an improvement versus the year ago period? Or could those factors result in a year-over-year decline?

Doron Blachar: Storm in the Imperial Valley impacted IID. They had, I think, a few hundred poles that fell down, and it took them a while to bring them up. So, this event is over and behind us. The Stillwater upgrade continued into October. So, it will have some impact, but not as big of an impact as in Q3.

Assaf Ginzburg: I would just add from a season perspective, Q4 is usually one of the strongest quarters for the year, and we expect this to be probably the strongest for 2025. We see lessening the curtailment, which is very positive. If you look at 2024, our margin was 36%. We are running in general this year 200 to 300 basis points below that. So that’s the expectation for Q4. So overall, again, it should be much improved versus what we saw this quarter. It should be probably the highest for the year, but slightly below 2024 because there is, as Doron mentioned, some curtailment in Q4 on one hand and also Stillwater is still not at its full capacity.

Justin Clare: Got it. Okay. That’s really helpful. And then just one more on PPAs. It seems like PPAs are continuing to trend higher. You mentioned pricing above $100 a megawatt hour. Wondering if you’re seeing pricing at $105 or $110 or if you could provide any more granularity on the pricing that you’re seeing? And then just related to that, it sounds like off takers may be looking to recontract earlier in order to lock in pricing before potential future increases in PPAs. Are you seeing any of that? Could you look to recontract assets earlier than what you typically would be expecting? So, it’s very hard to comment on the PPA price, if it’s 105 or 110. It’s in a similar vicinity and both of them are good numbers depending on the specific location and the offtaker.

We are looking for recontracting today our 2029 and 2030 projects coming off contract. It’s important we would like to recontract them to get the stability and the ability to focus and for longer term. Also, when you recontract a project, it doesn’t come up with a lot of CapEx or some CapEx associated with enhancement, but it doesn’t come with the full CapEx. So, in today’s environment and PPA pricing, it is very attractive.

Operator: Your next question is from the line of Mark Strouse with JPMorgan.

Mark W. Strouse: Just a follow-up to Noah’s earlier question. I know it’s early, but can you talk about how, it’s kind of a reasonable expectation of how long these pilots on the EGS side might last? And I appreciate kind of the longer-term opportunity here. But just specific to your 2028 targets, do you think that there’s potential upside to that from these EGS deals? Or is it a bit more longer dated?

Doron Blachar: Thank you. 2028 targets, it’s a bit aggressive to assume that EGS will have an impact. One of the main challenges with EGS is the water loss once you circulate the water, inject water and then bring it up again. This is something that will be verified or learned over time. So, if we see the pilot operating in FY ‘27 sometime, I think it’s likely that we’ll be able to, after a few months, be able to get the input on the viability of this technology. I can tell you that once we are starting the pilot development, we will be looking to sign PPAs, obviously, for a later period based on this technology to be successful. So, this is also something that we, together with SLB are planning to do.

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

Julien Dumoulin-Smith: This is Hanna Velasquez on for Julian. So, another follow-up question on the EGS part. Can you just give us a sense of the scale of EGS-type projects that you would be looking to target in terms of megawatts?

Doron Blachar: Yes. The nice thing about EGS project is that it is based on the amount of wells that you drill and the water that you use. So, the megawatts that can be developed are significant. It can be in the hundreds of megawatts similar to other companies PPAs. It’s not like today that when we release a project, it’s 25, 30, 35 megawatts. I believe the EGS projects will be in a few hundred megawatts. But again, it’s very, very early to say before we have the pilot operation.

Julien Dumoulin-Smith: Okay. And as a follow-up, can you give us an update? I know a while back; we had talked about an executive order on the permitting side that came out of the Trump administration that was trying to accelerate the permitting process for Geothermal. I think it was like down to 28 days or something like that. Have you seen any updates or progress on that front?

Assaf Ginzburg: In general, we do see getting permits become much less of an issue when it’s federal permits. Although over the last few weeks, as we all know, the government is in a shutdown mode. So, we don’t see a lot happening there. But I can tell you that we were able to get within weeks permits. And you will see in 2026 that will lead, as Doron mentioned on the call last time, to accelerating drilling program. Doron mentioned that we’re adding a second rig for the second half of 2025. We may even add a third rig at one point next year. We may have, so that’s going to be a different situation for us. And what it gives us is the ability to develop more assets to meet both our 2028 and of course, our longer-term goals. So very positive. Last few weeks, nothing is being done. It’s all on a shutdown mode. We hope it will change shortly.

Operator: Your next question is from the line of Jon Windham with UBS Financial.

Jonathan Windham: I’d be really interested if you could just provide some more color about how you’re managing risk around the storage business. There’s obviously a lot of uncertainty in the market around FEOC around that. Just how the contracts or how your development pipeline risk mitigates or potential outcomes for that would be very interested to hear your thoughts.

Doron Blachar: So, thank you, John. So, you saw the Storage margins this quarter, and we also increased guidance for the year for the Storage. So, all in all, our operation between PGM, Texas and California working very well. All the projects that we are developing have secured safe harbor and a few additional ones that we haven’t already released for construction have safe harbor. Apart from that, the FEOC and the entire storage market is still trying to align itself to the new world that the administration has put. And we are looking also on the impact longer term. But at this stage, all the projects and the plan that we have are in line, and we are working on them, and we did safe harbor, whatever we could and had good enough view going forward.

Operator: Your next question is from the line of David Sutherland with Baird.

David Sutherland: Most of my questions on EGS have already been answered. So maybe if I could just pivot. Assaf, I wonder if you could talk to us a little bit more about financing needs for next year and really maybe even for next year or ’27, just looking at the 200 megawatts of Geothermal and solar roughly that you guys plan on bringing online and any needs or any things we should consider for tax partnerships between now and then?

Assaf Ginzburg: So, I’ll start by saying that if you look at this year, our expected EBITDA, the middle range plus the over $160 million, close to $167 million of cash cover basically completely all of our CapEx needs. And the only additional borrowing that we did this year is to basically for the acquisition that we made. We haven’t finalized our plan yet for CapEx for next year. But also, next year, we expect to have at least $70 million of tax equity or ITC that we will get from 2 projects. In addition to that, next year, towards the end of the year, the Puna plant is expected to come on. And if we close the transaction of the Puna plant already in December, which is unlikely, but it’s possible, then this year and next year, tax credits will be quite similar, maybe even higher next year.

So overall, the start for us is very, very good. It’s around can be as much as $170 million next year. In addition to that, next year, as we mentioned at the beginning of the call, we expect to sell for around $100 million, a project that we already fully financed in New Zealand. So basically, we will start the year next year with above $250 million of non-proceeds. Together with ongoing EBITDA, that should cover the majority of our CapEx needs. And if we will need slightly more, we can borrow. So, at this point, we don’t see a need for equity for the company. Of course, the 2 pilots of the EGS at this point, they are not meaningful for the company or at least the one that we are spending the money with the SLB. It’s not meaningful spend for the company, maybe $10 million to $20 million a year for the next year or 2.

But once EGS will be something big, and we will need to start build instead of 100 megawatts a year, 3x or 4x that amount, Ormat will have to look into our capital structure. And I believe that there is plenty of cash available for great projects. So, as I mentioned, right now, we will focus with great cash from operation plus tax credit, including a large onetime income next year coming from the sale of the project in New Zealand. So, we should be quite covered next year.

David Sutherland: That’s super helpful. And maybe, I guess, just building on that last question and to your point about EGS and the excitement there. Is there any opportunity that you guys see to maybe accelerate this development through M&A or any other actions you guys could take to build more or bigger partnerships in the near term?

Doron Blachar: We’ve just started these initiatives. I don’t see an M&A transaction in the EGS field that can push it forward. I don’t believe there’s any targets today for M&A transaction. We believe that developing with SLB and the commercial agreement with Sage, which is a different technology than SLB actually will allow us to have 2 paths to reach EGS. And if either one or both of them are successful, as we said, the number of megawatts that can be developed that will impact Ormat own project as well as the Product segment are significant.

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

John Anderson: On the Schlumberger agreement, they’re providing the technology they do the permitting and the drilling. If this is successful, does Schlumberger participate in this project in the longer term in terms of CapEx or other means on this? How does that work longer term if this all works out?

Doron Blachar: I cannot answer for Schlumberger themselves. But the way the partnership works is that we’re developing together, and after that, we can build project together or each one can build by themselves projects. Schlumberger is a service company. That’s what they have done all the years. And we are developers. So once the pilot is successful, we will be able to utilize all the technology that was developed in the pilot and build Geothermal EGS projects that will be owned by Ormat.

John Anderson: Can you talk about the differences in the technologies that are being applied that what Sage is doing versus what Schlumberger is doing?

Doron Blachar: It’s, these are 2 different technologies. These are very proprietary technology for Sage and SLB are still developing them. I think over time, as the pilot progresses and technology is developed, we will be able to share more information on how we are developing it and how do we see both of them operating over time.

Operator: Your next question is from Noah Kaye with Oppenheimer.

Noah Kaye: Really 2 ones. The first one is around the electricity performance kind of following up on the margin question before. I think maybe another way to get at it is, there have been a number of events all year. There were wildfires in California in 1Q, the Puna maintenance in 2Q and now Imperial Valley in 3Q and obviously, the Nevada curtailment all year. And I guess outside of Puna, these were really kind of exogenous factors, right? So, I guess if we add up all of these nonrecurring factors, is it possible to kind of quantify the total impact to revenue and EBITDA this year? I think that will help us re-baseline for next year.

Assaf Ginzburg: Sure. So, when we look at the curtailment, it’s probably around $14 million to $15 million this year. If you add to it some of the Puna impact plus the Ivy storms, you’re probably going to be somewhere between $20 million to $25 million. But let’s remember, every year, there is a few events. So, I would say it’s probably a $20 million impact for the year. And when you look at our forecast for the year, you can see that we reduced our higher end part of the guidance by exactly those $20 million. That’s why we went from $725 million to $705 million. So, if you want to make it easy on you, this is the high-level impact.

Noah Kaye: That’s perfect. And the second one is really to think about land position and interconnection position. We noticed that NV Energy’s interconnection queue, just to pick one utility for Geothermal increased by roughly 10x over the last couple of months. It does look like there is obviously a lot of project development. Can you talk about your interconnection position and your ability to bring online the Geothermal projects you have in development?

Doron Blachar: Our projects and prospects that we have that we are developing today have most of them already interconnection agreements and date. The others are in various stages of negotiations on finalizing the megawatts and the cost of the interconnection, the date. So, when we look at the near to midterm future, we feel confident that we will have interconnection for the projects that should be coming online in the next few years. Obviously, as you go down to later years, interconnection is something that needs to be worked on. But we are in this, in Nevada and California for many, many years in the Geothermal, and we are continuously filing for interconnection. And we have, as I said, for most of our projects going forward interconnection.

Operator: Our final question comes from the line of Derek Podhaizer with Piper Sandler.

Derek Podhaizer: I just want to ask about Product. Maybe just your outlook there on the backlog seems to be growing nicely, just upped your top line revenue guidance. Your implied 2028 guidance was, I think, in the $140 million range. You just guided up to $180 million to $190 million. Margins are sitting above 20%. Is this just a new run rate we should think about? Maybe just some comments around Product and how you see that progressing over the next couple of years, given that you’re trending above your 2028 implied guidance?

Assaf Ginzburg: Our long-term target for margin is anywhere from 17% to 20%. This year, we have an exceptional year with our ability to negotiate much better procurement on some of our contracts, in addition to the fact that some of the projects that are being finished right now in New Zealand, we were able to complete the EPC at a much lower cost than anticipated. So, I will say from a margin perspective, this year is definitely, I would say, outstanding and probably on the higher end. And when I look forward, probably between, I would say, 17% to 20% is making more sense. On the revenue line item, there is no doubt that we continue to stay elevated. And also, next year, we expect to stay elevated. Historically, Ormat, in the years of COVID and the few years, others, we sold around $100 million.

I will say right now, we are moving probably to the $200 million level. And next year maybe going to be slightly higher, but that’s the idea at this point. We signed a large contract in Asia a few weeks ago, and we’re negotiating a few more as we speak. I think that what’s more important when you look at the Product segment is to show to the world that Geothermal is light kicking, not just in the U.S. with all the AI, but it’s a viable solution in many, many countries and the cheapest option to get electricity. One more thing that will boost our revenues, but that’s towards 2028, 2029 and 2030 is the fact that we did win 2 new PPAs in Indonesia. These are BOT projects with PLN. During the BOT project, we recognize revenue already at the time of the construction in the Product segment.

So, I will say that over the next few years, we should see a very nice support coming from the project in Indonesia, from the New Zealand projects and also what we just signed in Asia. So overall, good timing. As I said, margin this year is exceptionally high. We’re not anticipating that to be at this level.

Derek Podhaizer: Got it. That’s helpful. And then just back to the partnership with SLB, maybe looking at it from a different angle. We already talked about EGS. But what about on the traditional side of things, your traditional Geothermal development, are you exploring projects with SLB to develop that type of power plants? Just trying to think of the cross synergies that can be utilized with SLB applying some of their technologies into the traditional space, fully acknowledging that EGS is where the interest is, but just thinking about traditional asset development as well.

Doron Blachar: Definitely. Traditional Geothermal is the core of what we are doing today, EGS needs to be developed. So, we are looking also with SLB on potential customers that are looking for Geothermal Energy and have the relevant locations or land that we can develop traditional Geothermal. So definitely, it’s part of the discussion with them. It’s something that both companies can enjoy if we get additional customer for them for the services they provide for drilling and as for the power plant. So, it definitely exists in the partnership.

Operator: This concludes the question-and-answer session of today’s call. I will now hand the call over to Doron for closing remarks. Thank you.

Doron Blachar: So thank you, everyone. This was a strong quarter on our operations with strategic developments in the EGS technology. Our partnership with SLB and the commercial agreement we signed with Sage will impact our growth in the future and will allow us together with SLB to respond to the significant demand we see today in the market by data centers and AI for Electricity. We will obviously continuously update you on any progress we have in these pilots and how we plan to see them materializing into real projects. So, thank you all.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.