Ormat's Q3 2025: Contradictions Emerge on Permitting Progress, Exogenous Factors, EGS Pilots, and PPA Contracts

Date of Call: November 04, 2025

Financials Results

• Revenue: $249.7M, up 17.9% YOY
• EPS: $0.39 per diluted share, up from $0.36 in Q3 2024 (adjusted $0.41 vs $0.42 prior year)
• Gross Margin: 25.6%, versus 27.8% in Q3 2024
• Operating Margin: Operating income up 13.3% YOY (no operating margin percentage provided)

Guidance:

• Revenue for 2025: $960M–$980M (midpoint ≈ +10.2% YOY)
• Electricity revenue: $700M–$705M
• Product revenue: $190M–$200M; Product gross margin expected 21%–23%
• Energy Storage revenue: $70M–$75M
• Adjusted EBITDA: $575M–$593M (≈ +6.2% at midpoint); adjusted EBITDA attributable to minority interest ≈ $17.5M
• Remaining 2025 CapEx: ~$140M (Electricity ~$100M; Storage ~$34M)

Business Commentary:

• Revenue and Segment Growth:
• Ormat Technologies reported a 17.9% increase in revenue for Q3 2025, reaching $249.7 million.
• This growth was driven by improvements in both the Energy Storage and Product segments, with increases in revenue and profitability.

• Energy Storage Segment Expansion:
• The Energy Storage segment saw a 108% increase in revenue to $20.4 million in Q3 2025.

• This was largely due to the successful commissioning of the Lower Rio Energy Storage facility.

• Geothermal and Product Segment Backlog:

• Ormat's Product segment backlog increased by 79% to $295 million, primarily driven by a large contract that added approximately $86 million to the backlog.
• This growth is attributed to increased demand for Ormat's technology and expertise in the geothermal sector.

• Strategic Partnerships and EGS Development:
• Ormat entered into strategic partnerships with SLB and Sage Geosystems to advance the development of Enhanced Geothermal System (EGS) solutions.
• These partnerships aim to accelerate the deployment of EGS projects and expand Ormat's commitment to sustainable and innovative energy solutions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management described the quarter as "strong results," highlighted a 17.9% revenue increase and raised 2025 revenue and adjusted EBITDA guidance; CEO emphasized strategic milestones (PPAs extension, Indonesia licenses, SLB and Sage EGS partnerships) and storage/Product segment momentum supporting growth.

Q&A:

• Question from Noah Kaye (Oppenheimer & Co. Inc.): Update on the ~250 MW of PPAs under negotiation with hyperscalers?
  Response: Management: Negotiations are in final stages on multiple hyperscaler PPAs and expects to sign and announce them within the next couple of months.

• Question from Noah Kaye (Oppenheimer & Co. Inc.): How should we think about TOPP 2 translating into Products backlog and revenue?
  Response: Management: TOPP 2 is an EPC sale ~ $100M, expected to close and be recognized in Products in Q1 2026.

• Question from Noah Kaye (Oppenheimer & Co. Inc.): Details on EGS pilots — scope and steps to assess commercial viability?
  Response: Management: Two pilots — an SLB JV at Desert Peak with pilot wells expected to be drilled late 2026, and a Sage-managed pilot at an Ormat site; both will test technology, permitting and reservoir performance before scale decisions.

• Question from Justin Clare (ROTH Capital Partners, LLC): How do you anticipate Electricity segment gross margins trending in Q4 and into 2026 given Q3 headwinds?
  Response: Management: Q4 should be the strongest quarter with improved margins vs Q3 but likely slightly below 2024 levels due to residual curtailment and Stillwater not at full capacity; no material curtailments are currently planned for 2026.

• Question from Justin Clare (ROTH Capital Partners, LLC): Have Stillwater enhancements and the Imperial Valley grid failure been resolved and will Q4 show year-over-year improvement?
  Response: Management: Imperial Valley storm impacts are behind us; Stillwater work continued into October so some residual impact remains, but overall Q4 should show directional improvement versus Q3 and be the strongest quarter of 2025.

• Question from Justin Clare (ROTH Capital Partners, LLC): Can you provide granularity on current PPA pricing and recontracting activity?
  Response: Management: PPA pricing is in the ~$100+/MWh vicinity (roughly $105–$110 depending on location/offtaker) and the company is pursuing recontracting of assets (2029–2030 expiries) to lock in attractive pricing and stability.

• Question from Mark W. Strouse (JPMorgan Chase & Co): How long might EGS pilots last and could EGS materially impact 2028 targets?
  Response: Management: EGS impact on 2028 is unlikely; if pilots operate in FY27, a few months of operation could provide viability inputs but large-scale contribution to 2028 targets is not anticipated.

• Question from Julien Dumoulin-Smith (Jefferies LLC) (Hanna Velasquez): What scale (MW) are you targeting for EGS projects?
  Response: Management: EGS projects could be in the hundreds of megawatts — substantially larger than traditional 25–35 MW geothermal projects — though it's early and depends on pilot results.

• Question from Julien Dumoulin-Smith (Jefferies LLC) (Hanna Velasquez): Any update on permitting acceleration (executive order) for geothermal?
  Response: Management: Federal permitting can be fast and has enabled quicker permits historically, but recent government shutdown has slowed progress; company expects permitting momentum and increased drilling capacity to accelerate in 2026.

• Question from Jonathan Windham (UBS Investment Bank): How are you managing storage risk given FEOC uncertainty?
  Response: Management: Storage projects have secured safe harbor where possible, operations and margins are strong this quarter, and the company is monitoring FEOC impacts while maintaining pipeline flexibility and procurement options.

• Question from David Sutherland (Baird): What are financing expectations for next year and 2027, including tax partnerships?
  Response: Management: Operating cash flow plus expected tax credits (~$70M) and a planned ~$100M project sale in NZ should cover most CapEx needs; no equity raise anticipated and limited incremental borrowing possible if needed.

• Question from David Sutherland (Baird): Could you accelerate EGS via M&A or larger partnerships?
  Response: Management: No imminent M&A targets identified; strategy is to advance EGS via partnerships with SLB and Sage and develop organically rather than pursue M&A at this time.

• Question from John Anderson (Barclays Bank PLC): Will Schlumberger participate longer term in project CapEx or ownership if pilots succeed?
  Response: Management: SLB is a service/technology partner; post-pilot projects would be owned and developed by Ormat, while SLB provides technology and services rather than taking ownership stakes (no specific SLB equity commitments given).

• Question from John Anderson (Barclays Bank PLC): How do the technologies from Sage and SLB differ?
  Response: Management: The two technologies are distinct and proprietary; detailed differences will be disclosed as pilots progress and technology is validated.

• Question from Noah Kaye (Oppenheimer & Co. Inc.): Can you quantify the total impact of nonrecurring events (wildfires, Puna maintenance, Imperial Valley, NV curtailments) on 2025 revenue/EBITDA?
  Response: Management: Nonrecurring operational impacts totaled roughly $20M–$25M (management used ~$20M as the high-level figure), and guidance was reduced by about $20M accordingly (from $725M to $705M).

• Question from Noah Kaye (Oppenheimer & Co. Inc.): Can you discuss your land/interconnection position and ability to bring geothermal projects online?
  Response: Management: Most near- to mid-term projects already have interconnection agreements or are in late-stage negotiations; company is confident in being able to bring the pipeline online in the next few years.

• Question from Derek Podhaizer (Piper Sandler & Co.): Outlook for Product segment — is the new revenue/margin run rate sustainable over coming years?
  Response: Management: This year is exceptional on margins due to favorable procurement and contract timing; long-term Product margin target is ~17%–20% and revenues are expected to remain elevated (~$180M–$200M+), supported by Indonesia BOTs and other contracts.

• Question from Derek Podhaizer (Piper Sandler & Co.): Will the SLB partnership also be used for traditional geothermal development and cross-synergies?
  Response: Management: Yes — discussions include traditional geothermal opportunities and potential customer work where SLB's drilling and services can support Ormat's power-plant development.

Contradiction Point 1

Permitting Process Improvement

It directly impacts the company's ability to develop and expand its geothermal and energy storage projects, affecting potential project timelines and revenue streams.

What is the scale of EGS projects Ormat targets? - [Julien Dumoulin-Smith](Jefferies LLC, Research Division)

2025Q3: Permitting has become less of an issue due to more efficient federal processes. Current government shutdowns have paused activity, but progress is expected soon. - [Assaf Ginzburg](CFO)

Can you discuss the potential for additional permitting fast track opportunities, the anticipated timeline for the next few years, and their impact on accelerating the development schedule? - [Noah Kaye](Oppenheimer)

2025Q2: 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. - [Doron Blachar](CEO)

Contradiction Point 2

Impact of Exogenous Factors on Financial Performance

It involves the company's assessment of the financial impact of exogenous factors, which can influence investor expectations and financial forecasting.

How will exogenous factors affect revenue and EBITDA in 2025? - [Noah Kaye](Oppenheimer & Co. Inc., Research Division)

2025Q3: Exogenous factors, such as curtailment, storms, and maintenance, had a $20-25 million impact on 2025 revenue. We adjusted guidance accordingly. - [Assaf Ginzburg](CFO)

For the Energy Storage business, what are your plans to address FEOC and opportunities for continued deployment under the current regulatory environment? - [David Anderson](Barclays)

2025Q2: Just for this year, 2025, the impact of these elements compared to our guidance on June 7th is about $25 million on revenue and $10 million on EBITDA. - [Assaf Ginzburg](CFO)

Contradiction Point 3

EGS Pilot Program Progress

It highlights a discrepancy in the expected timeline for the EGS pilot programs, which could impact strategic planning and investor expectations.

Can you provide more detail on the scope and steps of the EGS pilot programs? - [Noah Kaye](Oppenheimer & Co. Inc., Research Division)

2025Q3: With SLB, we are developing EGS solutions, planning to drill the pilot wells by the end of 2026, with results expected in 2027. - [Doron Blachar](CEO)

When might EGS technology be applied and how? - [Justin Clare](ROTH Capital)

2025Q1: EGS technology can increase output of existing facilities and expand geothermal opportunities. We are working on technological challenges like water use and rock cooling. Future progress will be detailed as it advances. - [Doron Blachar](CEO)

Contradiction Point 4

Potential PPA Contracts with Hyperscalers post-2028

It involves the company's strategy for securing long-term contracts with hyperscalers, which is crucial for revenue projections and growth plans.

Are there any updates on the PPA discussions with hyperscalers? - [Noah Kaye](Oppenheimer & Co. Inc., Research Division)

2025Q3: We are in very final negotiations with a couple of PPAs with hyperscalers and expect to finalize them within the next couple of months. We have made significant progress in drafting these agreements. - [Doron Blachar](CEO)

Can you clarify the 250 MW of potential PPA capacity with hyperscalers after 2028 and their contract terms? - [Noah Kaye](Oppenheimer)

2024Q4: These contracts follow the duration of the existing NV Energy portfolio contracts ending in 2028. New projects are expected by then, and these contracts will likely be with local utilities for direct negotiation, potentially combining utility and soft form. - [Doron Blachar](CEO)

Contradiction Point 5

Impact of Exogenous Factors on Revenue and EBITDA

It highlights the company's assessment of the impact of external factors on financial performance, which affects investor expectations and strategic planning.

Can you quantify the impact of exogenous factors on 2025 revenue and EBITDA? - [Noah Kaye](Oppenheimer & Co. Inc., Research Division)

2025Q3: Exogenous factors, such as curtailment, storms, and maintenance, had a $20-25 million impact on 2025 revenue. We adjusted guidance accordingly. - [Assaf Ginzburg](CFO)

How might the timing of 2025 asset ramp-ups affect USR's revenue reaching the upper end of guidance? - [Hannah Velásquez](Jefferies)

2024Q4: The specific financials for 2025 are impacted by specific factors that we cannot control, mostly curtailment, which has a negative impact of $25 million. - [Assaf Ginzburg](CFO)