Ormat Technologies, Inc. (ORA) is a leading vertically integrated company primarily engaged in the geothermal energy power business. The company has a diverse portfolio of geothermal, solar PV, and energy storage solutions, positioning it well to capitalize on the growing global demand for renewable energy.
Financials
In the fiscal year 2023, Ormat reported annual revenue of $829.4 million and net income of $124.4 million. The company's annual operating cash flow was $309.4 million, while its annual free cash flow was -$309.0 million. These strong financial results demonstrated Ormat's ability to generate substantial revenue and cash flow from its diverse operations.
During the first quarter of 2024, Ormat delivered impressive financial performance, with a 21% increase in total revenues to $224.2 million and a 25.5% rise in earnings per diluted share to $0.64 compared to the same period in the prior year. The company's adjusted EBITDA also increased by 14.4% to $141.2 million in the first quarter of 2024.
Business Overview
The Electricity segment, which accounts for the majority of Ormat's revenue, saw a 12.3% increase in revenues to $191.3 million in the first quarter of 2024. This growth was driven by the contribution from the new Enel acquired assets, improved generation at the Puna power plant, and the addition of the North Valley power plant. The Product segment also experienced a substantial 147.3% increase in revenues to $24.8 million, supported by a higher backlog and the timing of revenue recognition. The Energy Storage segment reported a 66% increase in revenues to $8.1 million, driven by the impact of new projects that came online in the second half of 2023.
Ormat's geographic diversification is a key strength, with 32% of its total revenues derived from foreign locations in the first quarter of 2024 and 2023. The company's international operations, particularly in Kenya, Guatemala, Honduras, Guadeloupe, and Indonesia, have higher gross margins and contribute a significant portion of the company's net income and EBITDA.
The company's Electricity segment is subject to seasonal variations, with higher generation and revenues typically in the winter months due to lower ambient temperatures. This seasonal pattern is partially offset by higher payments in the summer months under certain power purchase agreements (PPAs).
Strategic Initiatives
Ormat's strategic plan focuses on several key initiatives to expand its business, including the development and construction of new power plants, the enhancement of existing power plants, and investment in energy storage activities. The company has a robust pipeline of projects, including geothermal, solar PV, and energy storage, which are expected to contribute to its long-term growth.
Recent Developments
In January 2024, Ormat completed the acquisition of a portfolio of geothermal and solar assets from Enel Green Power North America. The acquired assets, which include two contracted geothermal power plants, one triple hybrid power plant, and two standalone solar power plants, have contributed to Ormat's first-quarter 2024 results and are expected to continue to enhance the company's performance going forward.
Ormat's drilling campaign in Kenya has been successful, with the company able to access a deeper reservoir and increase generation at its Olkaria power plant. The company is currently operating at close to 130 megawatts at Olkaria and believes there is potential for further capacity expansion, subject to negotiating an additional power purchase agreement.
In Guadeloupe, Ormat has signed a 30-year PPA with EDF for the development of a new 10-megawatt geothermal power plant, which will be added to the company's existing 50-megawatt Bouillante power plant. This project, along with the expected 10-megawatt Dominica power plant, will expand Ormat's presence in the attractive Caribbean region.
Ormat's Product segment backlog stands at $130 million as of May 8, 2024, reflecting the strong worldwide demand for geothermal products. The company's Energy Storage segment has also delivered a strong performance, supported by new projects and improved merchant rates in the PJM region.
Outlook
Looking ahead, Ormat has maintained its guidance for 2024, expecting total revenues to increase by 7% year-over-year to a range of $860 million to $910 million. The company also expects adjusted EBITDA to increase by approximately 10% to a range of $515 million to $545 million. Ormat remains on track to achieve its long-term growth targets, aiming to reach between 2.1 to 2.3 gigawatts of portfolio capacity by the end of 2026.
Liquidity
Ormat's strong financial position, with $299 million in cash and cash equivalents and restricted cash as of March 31, 2024, and $766 million in total liquidity, provides the company with the resources to execute its strategic growth plans. The company's debt profile is also favorable, with nearly all of its debt liabilities at fixed interest rates, which should help position Ormat competitively in a higher and more volatile global interest rate environment.
Conclusion
In conclusion, Ormat Technologies is a well-positioned renewable energy leader with a diverse portfolio of geothermal, solar PV, and energy storage solutions. The company's strong financial performance, strategic initiatives, and favorable market conditions position it for continued growth and value creation for its shareholders.