Ormat Technologies' 25-Year PPA: A Cornerstone in the U.S. Geothermal Sector

Ormat Technologies, Inc. (NYSE: ORA) has secured a landmark 25-year power purchase agreement (PPA) with the Southern California Public Power Authority (SCPPA), extending its partnership to supply 52 megawatts (MW) of geothermal energy from its Heber 1 facility. This agreement, effective February 2026 and extending through 2052, not only cements Ormat's role as a leader in the U.S. geothermal sector but also underscores the company's ability to deliver long-term revenue stability amid the global energy transition.

Strategic Positioning in a Shifting Energy Landscape

The Heber 1 facility, part of Ormat's flagship Heber complex, now operates with advanced air-cooled technology following a repowering project. This upgrade enhances efficiency while reducing water consumption—a critical advantage in California's arid regions. The plant's 91MW total output (including the Heber complex) provides baseload power to the Los Angeles Department of Water and Power (LADWP) and the Imperial Irrigation District (IID), serving over 77,000 households in Los Angeles alone. By locking in a 25-year contract, Ormat secures a predictable revenue stream, shielding itself from the volatility of short-term energy markets.

This PPA aligns with California's aggressive climate targets, including 80% renewable energy by 2030 and near-total carbon-free electricity by 2045. Geothermal energy, with its 24/7 availability, is uniquely positioned to complement intermittent renewables like solar and wind. Ormat's expertise in this niche—its 1,268MW geothermal/solar portfolio dwarfs competitors—positions it as a critical player in decarbonizing the grid.

Financial Implications and Market Confidence

The extended PPA adds a stable, inflation-protected revenue source to Ormat's books. With a total generating portfolio of 1,558MW, including 290MW in energy storage, the company is diversifying beyond geothermal while leveraging its core strengths. Analysts have taken notice: four major firms, including Barclays and UBS, have issued “Buy” or “Overweight” ratings, with a median price target of $89.5.

Institutional investors, however, show mixed signals. The Canada Pension Plan Investment Board increased its stake by 62.6% in Q2 2025, while UBS Group AG and Norges Bank reduced holdings by 38.2% and 27.4%, respectively. Insider trading activity has also been notable, with 20 open-market sales by executives in the past six months. Yet, these actions should be viewed in context: insider sales often reflect personal financial planning rather than a bearish outlook. The broader institutional and analyst consensus remains bullish, reflecting confidence in Ormat's long-term strategy.

A Model for Renewable Energy Partnerships

The SCPPA agreement highlights the growing importance of long-term PPAs in de-risking renewable energy investments. For utilities like LADWP and IID, the contract ensures reliable, affordable clean power while meeting regulatory mandates. For Ormat, it provides capital discipline, enabling reinvestment in innovation. The company's recent foray into energy storage and solar PV further diversifies its revenue streams, creating a hybrid model that could become the industry standard.

Investment Considerations

While Ormat's stock has faced short-term volatility, the 25-year PPA offers a compelling catalyst for long-term growth. Investors should consider the following:
1. Geothermal's Undervalued Potential: Geothermal energy remains underrepresented in U.S. renewables, yet its reliability and low marginal costs make it a strategic asset. Ormat's technical expertise and operational scale give it a first-mover advantage.
2. Regulatory Tailwinds: California's climate policies are among the most aggressive in the U.S., creating a favorable environment for companies like Ormat. Similar trends in other states (e.g., Nevada, Oregon) could drive further demand.
3. Diversification Risks: While energy storage and solar projects add resilience, they also require upfront capital. Ormat's balance sheet, however, appears robust, with the PPA providing cash flow to fund expansion.

Conclusion

Ormat's 25-year PPA with SCPPA is more than a contract—it's a blueprint for sustainable energy infrastructure. By securing long-term revenue, advancing geothermal technology, and aligning with decarbonization goals, Ormat positions itself as a cornerstone of the clean energy transition. For investors seeking exposure to a sector poised for growth, Ormat offers a compelling mix of stability and innovation. As the world pivots toward renewables, companies that can deliver both scalability and reliability—like Ormat—will be the ones to watch.