Executive Summary / Key Takeaways

• Ormat Technologies is a vertically integrated leader in geothermal energy, strategically expanding its footprint in energy storage and solar PV to capitalize on growing renewable energy demand and mitigate climate change.
• The company delivered a strong Q1 2025, with record quarterly Adjusted EBITDA driven by robust performance and significant expansion in the Energy Storage and Product segments, offsetting a temporary decline in the Electricity segment due to U.S. curtailments.
• Strategic initiatives, including the acquisition of the Blue Mountain geothermal plant, winning significant energy storage tenders in Israel, increasing exploration activities, and securing high-price PPAs with utilities and hyperscalers, underpin confidence in achieving long-term growth targets.
• Ormat's differentiated binary cycle technology provides quantifiable advantages in efficiency and operational reliability, contributing to its competitive moat and supporting profitability, although the company faces competitive pressures from larger, more diversified players and challenges in emerging technologies like EGS.
• Despite near-term headwinds from U.S. curtailments, potential tariff impacts on energy storage components, and IRA tax credit uncertainty, proactive measures like safe harboring projects and supply chain diversification, combined with strong market demand and a solid project pipeline, support the reiterated 2025 guidance and the target of 2.6-2.8 GW capacity by 2028.

Ormat Technologies: Geothermal Prowess and Storage Momentum Powering Growth

Ormat Technologies, Inc. stands as a seasoned player in the renewable energy landscape, boasting over five decades of experience rooted in geothermal power. As a vertically integrated company, Ormat not only develops, builds, owns, and operates geothermal and recovered energy generation (REG) power plants globally but also designs, manufactures, and sells the core equipment for these facilities. This foundational strength, centered around its proprietary Ormat Energy Converter (OEC) technology, has provided a stable base from which the company is strategically expanding into energy storage services and solar PV, including hybrid systems. The overarching goal is clear: to become a leading global provider of renewable energy, directly contributing to climate change mitigation by offering reliable alternatives to carbon-intensive sources.

Ormat's journey has been marked by a deliberate expansion of its operational footprint across diverse geographies, including key markets in the United States, Kenya, Guatemala, Honduras, Guadeloupe, and Indonesia. This global presence, coupled with its integrated business model, positions Ormat uniquely in the competitive arena. While facing intense competition from large, diversified utilities and power producers like NextEra Energy (NEE), Siemens Energy (ENR), General Electric (GE) (via GE Vernova (GEV)), and AES Corporation (AES), Ormat carves out its niche through specialized expertise and technological differentiation.

The heart of Ormat's competitive advantage lies in its binary cycle geothermal technology, particularly the Ormat Energy Converter. This technology allows for the efficient conversion of low-, medium-, and high-temperature heat into electricity. Specific comparative quantitative figures for OEC's efficiency versus all alternatives were not detailed, the company's consistent emphasis on its proprietary technology and its ability to operate across a range of resource temperatures suggests a tangible benefit in resource utilization and potentially higher energy yield from less conventional geothermal sites. This technological edge contributes to the company's operational reliability and can translate into lower operating costs over the long term compared to less specialized systems. Ormat's R&D efforts are focused on enhancing existing technologies and exploring new frontiers like Enhanced Geothermal Systems (EGS). While EGS technology still faces significant technological challenges related to water usage, loss, and rock cooling, Ormat is actively pursuing strategic partnerships and leveraging its own historical patents in the field, viewing successful EGS development as a significant potential upside that could unlock development opportunities in a wider range of locations and potentially enhance the output of existing facilities. This targeted innovation supports its competitive moat, particularly in the specialized geothermal market.

Ormat's business is segmented into three key areas: Electricity, Product, and Energy Storage. The Electricity segment, the largest contributor, involves owning and operating power plants and selling the generated electricity. In Q1 2025, this segment generated $180.2 million in revenue, a 5.8% decrease from $191.3 million in Q1 2024. This decline was primarily attributable to curtailments in U.S. projects (62,602 MWh in Q1 2025), notably impacting facilities in California (Dixie Valley, affected by wildfires and grid issues) and Nevada (McGinness Hills, due to transmission maintenance and mild winter temperatures), as well as maintenance at Neal Hot Springs and Stillwater. Despite the overall decrease, foreign operations, particularly in lower-cost regions like Kenya, continued to contribute disproportionately to gross profit (34.8% of segment total) and net income (53.8%), benefiting from lower operating costs and newer plant profiles compared to the domestic fleet. The segment's gross margin decreased to 33.5% from 39.0% year-over-year, reflecting the impact of lower revenues from curtailments.

The Product segment, focused on equipment sales and EPC services, demonstrated robust growth, with revenues increasing by 27.9% to $31.8 million in Q1 2025 from $24.8 million in Q1 2024. This growth was driven by the progress and timing of revenue recognition on projects, with significant contributions from Dominica and New Zealand. The segment's gross margin improved notably to 22.3% from 14.8%, reflecting improved profitability on contracts. The backlog for the Product segment stood at a strong $314 million as of March 31, 2025, a 142% increase from Q1 2024, fueled by a large EPC contract in New Zealand and the Dominica BOT project. The company expects to recognize approximately 100% of this backlog as revenue over the next 24 months and anticipates a gross margin for the segment in the range of 19% to 21% for the full year 2025.

The Energy Storage segment emerged as a significant growth engine in Q1 2025, with revenues soaring by 119.7% to $17.8 million from $8.1 million in Q1 2024. This impressive growth was primarily driven by the contribution of new facilities that commenced commercial operation during or after Q1 2024, including Bottleneck, Montague, and East Flemington, coupled with favorable higher energy rates in the PJM merchant market due to colder winter weather. The segment's gross margin saw a dramatic improvement to 30.6% from 7.5%, reflecting the strong performance in PJM. Ormat's strategy in this segment focuses on balancing contracted revenues (tolling agreements, RA contracts) with merchant market exposure to enhance stability and profitability. The company anticipates full-year gross profits for the Energy Storage segment to be as high as 20%.

Overall, consolidated gross profit in Q1 2025 decreased slightly by 7.5% to $72.9 million, primarily due to the Electricity segment's performance, but was partially offset by the strong improvements in Energy Storage and Product margins. Adjusted EBITDA saw a healthy 6.4% increase to $150.3 million, a quarterly record for Ormat, underscoring the positive impact of the Energy Storage and Product segment growth and improved profitability. Net income attributable to the company's stockholders increased to $40.4 million, or $0.66 per diluted share, compared to $38.6 million, or $0.64 per diluted share, in Q1 2024. The effective tax rate was 10.1% in Q1 2025, influenced by the generation of investment tax credits ($13.9 million related to transferable ITCs) and the jurisdictional mix of earnings.

Ormat's strategic growth initiatives are actively expanding its portfolio. In May 2025, the company signed an agreement to acquire the Blue Mountain geothermal power plant in Nevada for $88 million. This 20MW facility, built with Ormat technology, presents opportunities for enhancement, with plans to add 3-3.5MW of capacity and potentially a 13MW solar facility. Management views the plant's PPA, expiring at the end of 2029, as having significant upside given current market prices materially exceeding the existing contract rate. The company is also increasing its exploration activities, planning approximately $150 million in capital expenditures for exploration and drilling in 2025, focusing on greenfields to support future growth beyond 2028. In the Energy Storage segment, Ormat secured two 15-year tolling agreements in Israel (50/50 JV, Ormat's share 150MW/600MWh) expected online in 2028, marking a significant entry into the Israeli utility-scale market and adding stability to the segment's revenue profile. The successful COD of the Ijen geothermal plant in Indonesia (Ormat's share 17MW) and the signing of a 10-year PPA for Mammoth 2 in California at a higher price point further demonstrate the company's ability to execute on its development pipeline and secure favorable long-term contracts.

Financially, Ormat maintains a solid liquidity position to fund its growth. As of March 31, 2025, it held $112.7 million in cash and cash equivalents and had $364.8 million in unused corporate borrowing capacity. The company's net debt stood at approximately $2.3 billion, resulting in a net debt to Adjusted EBITDA ratio of 4.2x. While the company incurred new variable rate loans totaling $200 million in early 2025, 90% of its consolidated long-term debt remains at fixed interest rates, providing stability against interest rate volatility. Management expects to fund estimated capital needs of $419 million for the remainder of 2025 and $189.9 million in debt repayments through operating cash flows, existing liquidity, and future project financings. Expected cash proceeds of approximately $160 million in 2025 from PTC and ITC benefits will also contribute significantly to funding capital needs.

Despite the positive momentum, Ormat faces several risks. Operational risks include continued curtailments in the U.S., which management expects to negatively impact 2025 revenue by $10 million to $15 million, and potential maintenance issues like the planned Puna well maintenance in Q2 2025. Market risks include uncertainty surrounding U.S. import tariffs, particularly on energy storage components from China, which could pose interim headwinds and potentially slow U.S. storage growth if cost increases cannot be passed on. Uncertainty regarding IRA tax credits also remains a factor. Customer concentration risk persists with major customers like SCPPA, NV Energy, and KPLC (KPLC), although management expresses confidence in collecting overdue amounts from KPLC and ENEE, citing government support letters. Geopolitical risks related to the war in Israel are being monitored, though no significant impact on facilities or supply chains has occurred as of the filing date. Ongoing discussions in Kenya regarding PPA reviews also present potential uncertainty.

Looking ahead, Ormat reiterated its 2025 guidance, projecting total revenues between $935 million and $975 million (9% increase at midpoint) and Adjusted EBITDA between $563 million and $593 million (5% increase at midpoint). This outlook is supported by the expected contribution from new projects, acquired assets, and improved profitability in the Energy Storage and Product segments, partially offset by anticipated U.S. curtailments. The company remains committed to its long-term target of reaching 2.6 GW to 2.8 GW of generating capacity by year-end 2028, driven by its robust project pipeline, increased exploration efforts, strategic acquisitions, and proactive measures to secure tax credit eligibility through safe harboring projects.

Conclusion

Ormat Technologies is leveraging its deep expertise and vertically integrated model in geothermal energy to navigate the dynamic renewable energy market. The company's strong Q1 2025 performance, particularly the significant growth and improved profitability in its Energy Storage and Product segments, underscores the success of its strategic diversification efforts. While facing operational headwinds from U.S. curtailments and market uncertainties related to tariffs and tax credits, Ormat's proactive approach to securing its project pipeline through safe harbor measures, coupled with strategic acquisitions like Blue Mountain and securing high-value PPAs, positions it for continued growth. The company's differentiated technology provides a foundational competitive advantage, supporting its operational efficiency and profitability. With a clear long-term capacity target and a robust development pipeline, Ormat appears well-positioned to capitalize on the increasing global demand for reliable, clean energy solutions, driving value for investors as it expands its footprint in the energy transition.