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Ormat Technologies' Q4 2024: Discrepancies in Generation Expectations, PPA Pricing, and Project Timelines
Earnings DecryptThursday, Feb 27, 2025 5:29 pm ET
1min readContradiction Point 1
Electricity Segment Generation Expectations
It directly impacts expectations regarding electricity generation for the Electricity segment, which is crucial for financial forecasting and investor expectations.
What are the electricity generation expectations for the Electricity segment in the '25 guide? - Noah Kaye (Oppenheimer)
2024Q4: We see on the enhancement, the drag rate for the Enel project coming on for the end of the year and we do see some more curtailments in the U.S. than what we've seen in the past. So, all in all, this year as presented in the guidance, we see similar generation maybe uptick. And '26, the impact will be basically following the power plants coming online towards the end of the year '26. - Doron Blachar(CEO)
What does the BLM land auction imply for next year's electricity CapEx? - Noah Kaye (Oppenheimer)
2024Q3: We're expecting in 2025, close to 200 megawatts of geothermal and in '26, another 80 megawatts of geothermal coming online at the end of the year. - Doron Blachar(CEO)
Contradiction Point 2
Geothermal Segment PPA Prices
It involves changes in pricing expectations for Geothermal segment PPAs, which are critical for revenue forecasting and negotiations with potential customers.
What is the status of the 250 megawatts of potential PPA contracts regarding timing and duration? - Justin Clare (ROTH Capital Partners)
2024Q4: The reason we're talking about following '28 is if you remember three years ago, we signed a portfolio PPA with NV Energy and with the power that covers the period until '28. So we are actually looking for the duration after that. The one that we are talking, some of them are looking for us to sign contracts with them with the local utility. - Doron Blachar(CEO)
What is the trend in PPAs for geothermal projects, and when will you re-contract them? - Justin Clare (ROTH Capital)
2024Q3: PPA prices continue to trend upward, with current talks in the range of over $100. Ormat has signed a new PPA for Heber and is in final negotiations for Mammoth G2, both at similar prices. - Doron Blachar(CEO)
Contradiction Point 3
Geothermal Project Timing and Capacity
It directly impacts expectations regarding the timing and capacity of geothermal projects, which are crucial for the company's energy production and revenue.
How many megawatts are covered by the safe harbor for geothermal projects through 2028? - Justin Clare (ROTH Capital Partners)
2024Q4: Between now and 2028, we need to add close to 400 megawatts of solar and geothermal. - Doron Blachar(CEO)
What is the expected timing for Bottleneck to come online, and how are pricing trends offsetting delays in its contribution to the full-year guidance? - Noah Kaye (Oppenheimer)
2024Q2: We expect to bring online approximately 40 megawatts of new geothermal capacity during 2022, mainly through expansions at Olkaria and the Don A. Campbell projects. This will bring our total geothermal capacity to approximately 920 megawatts. - Doron Blachar(CEO)
Contradiction Point 4
Energy Storage Margin Outlook
It involves changes in financial forecasts, specifically regarding energy storage margin expectations, which are critical indicators for investors.
What are your expectations for margins in the Energy Storage segment in 2025? - Derek Podhaizer (Piper Sandler)
2024Q4: In general, during Q3, the contract gives us a higher rate versus the remaining of the year. This is a new tolling agreement that we have in place already in December 2024. We think about the year, we expect Q1 and Q3 to lead the margin and for the full year, 15% to 20% margin. - Assi Ginzburg(CFO)
What is the margin outlook for Product and Energy Storage? - Derek Podhaizer (Barclays)
2024Q2: Storage margins expected to improve in Q4 with double-digit margins. - Assaf Ginzburg(CFO)
Contradiction Point 5
Ppa Contract Renewal Strategy
It involves differing strategies and timelines for PPA contract renewals, which are crucial for revenue stability and growth.
Can you update us on contract renewals with Calpine and the need for new exploration for $100+ pricing? - Jeff Osborne (TD Cowen)
2024Q4: We currently have no new renewals between now and 2028. There are contracts that will go through the NV Energy portfolio. These are contracts that have been signed with NV Energy three years ago, the smaller, lower number around $70. - Doron Blachar(CEO)
Are there any upcoming renewals or new PPAs in the next 2-3 years? - Jeffrey Osborne (TD Cowen)
2024Q1: There are several renewals and new PPAs in negotiation, including ones for LADWP and NV Energy. The company is working on optimizing existing PPAs for a win-win situation. - Doron Blachar(CEO)
These are the key contradictions discussed in Ormat Technologies' latest 2024Q4 earnings call, specifically including: Electricity Segment Generation Expectations, Geothermal Segment PPA Prices, Geothermal Project Timing and Capacity, Energy Storage Margin Outlook, and PPA Contract Renewal Strategy:
Revenue and Segment Performance:
- Ormat Technologies reported total revenues of $879.7 million for 2024, marking a 6.1% year-over-year increase.
- Revenue growth was driven by growth in all three business segments, particularly due to the strategic expansion in the Electricity segment from the acquisition of Enel assets.
Adjusted EBITDA and Profitability:
- Ormat's adjusted EBITDA for 2024 was $550.5 million, an impressive 14.3% improvement compared to 2023.
- This increase was primarily due to the contributions of new projects in both the Electricity and Storage segments, improved performance at the Olkaria complex, and improved pricing at the Puna power plant.
Product Segment Recovery and Backlog:
- Ormat's Product segment backlog reached a record of $340 million, up 124% compared to Q4 2023.
- This significant growth was largely driven by the signing of a large EPC contract in New Zealand and the Dominica BOT project, which will contribute to revenues over the next two years.
Energy Storage Segment Expansion:
- Energy Storage segment revenues increased by 56.7% in Q4 2024 and by 30.6% for the full year to $37.7 million.
- This growth was driven by the commencement of operations of new energy storage facilities and the signing of tolling agreements in Texas and California, which transitioned the segment towards more consistent profitability.
Revenue and Segment Performance:
- Ormat Technologies reported total revenues of $879.7 million for 2024, marking a 6.1% year-over-year increase.
- Revenue growth was driven by growth in all three business segments, particularly due to the strategic expansion in the Electricity segment from the acquisition of Enel assets.
Adjusted EBITDA and Profitability:
- Ormat's adjusted EBITDA for 2024 was $550.5 million, an impressive 14.3% improvement compared to 2023.
- This increase was primarily due to the contributions of new projects in both the Electricity and Storage segments, improved performance at the Olkaria complex, and improved pricing at the Puna power plant.
Product Segment Recovery and Backlog:
- Ormat's Product segment backlog reached a record of $340 million, up 124% compared to Q4 2023.
- This significant growth was largely driven by the signing of a large EPC contract in New Zealand and the Dominica BOT project, which will contribute to revenues over the next two years.
Energy Storage Segment Expansion:
- Energy Storage segment revenues increased by 56.7% in Q4 2024 and by 30.6% for the full year to $37.7 million.
- This growth was driven by the commencement of operations of new energy storage facilities and the signing of tolling agreements in Texas and California, which transitioned the segment towards more consistent profitability.
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