Ormat Technologies(ORA) - 2025 Q1 - Quarterly Report

Cover Page Ormat Technologies, Inc. (ORA) filed its Form 10-Q for the quarter ended March 31, 2025, as a Large Accelerated Filer[2][3] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common Stock | ORA | NYSE | As of May 1, 2025, 60,662,626 shares of common stock were outstanding[3] Table of Contents The report is structured into Part I (Financial Information) and Part II (Other Information), encompassing financial statements, MD&A, market risk, controls, legal proceedings, and risk factors[5] Certain Definitions The terms 'Ormat', 'the Company', 'we', 'us', 'our company', 'Ormat Technologies', or 'our' refer to Ormat Technologies, Inc. and its consolidated subsidiaries[7] PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, statements of operations, equity, and cash flow, with detailed notes on accounting policies and financial instruments Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $5,838,947 | $5,666,224 | $172,723 | 3.05% | | Total Liabilities | $3,243,601 | $3,105,844 | $137,757 | 4.44% | | Total Equity | $2,585,773 | $2,550,932 | $34,841 | 1.37% | | Cash and cash equivalents | $112,704 | $94,395 | $18,309 | 19.40% | | Restricted cash and cash equivalents | $112,001 | $111,377 | $624 | 0.56% | | Property, plant and equipment, net | $3,497,915 | $3,501,886 | $(3,971) | -0.11% | | Construction-in-process | $844,873 | $755,589 | $89,284 | 11.82% | | Total current assets | $600,854 | $547,122 | $53,732 | 9.82% | | Total current liabilities | $619,223 | $598,078 | $21,145 | 3.54% | Condensed Consolidated Statements of Operations and Comprehensive Income Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2025 vs. 2024) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $229,762 | $224,166 | $5,596 | 2.50% | | Cost of Revenues | $156,835 | $145,356 | $11,479 | 7.89% | | Gross Profit | $72,927 | $78,810 | $(5,883) | -7.46% | | Operating Income | $50,913 | $52,583 | $(1,670) | -3.17% | | Net Income | $41,034 | $40,350 | $684 | 1.70% | | Net Income Attributable to Company's Stockholders | $40,362 | $38,587 | $1,775 | 4.60% | | Basic EPS | $0.67 | $0.64 | $0.03 | 4.69% | | Diluted EPS | $0.66 | $0.64 | $0.02 | 3.13% | Revenue Breakdown by Segment (Three Months Ended March 31, 2025 vs. 2024) | Segment | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Electricity | $180,241 | $191,253 | $(11,012) | -5.76% | | Product | $31,769 | $24,832 | $6,937 | 27.94% | | Energy Storage | $17,752 | $8,081 | $9,671 | 119.68% | Condensed Consolidated Statements of Equity Changes in Equity (Three Months Ended March 31, 2025 vs. 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity attributable to Company's Stockholders | $2,461,204 | $2,425,129 | $36,075 | | Total Equity | $2,585,773 | $2,550,932 | $34,841 | | Retained Earnings | $847,607 | $814,518 | $33,089 | | Additional Paid-in Capital | $1,640,910 | $1,635,245 | $5,665 | Stock-based compensation contributed $4.9 million to additional paid-in capital in Q1 2025, an increase from $4.8 million in Q1 2024[16] Cash dividends declared were $0.12 per share, totaling $7.273 million in Q1 2025[16] Condensed Consolidated Statements of Cash Flow Condensed Consolidated Statements of Cash Flow (Three Months Ended March 31, 2025 vs. 2024) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $88,010 | $115,209 | $(27,199) | -23.61% | | Net cash used in investing activities | $(207,948) | $(377,834) | $169,886 | -44.96% | | Net cash provided by financing activities | $138,853 | $273,944 | $(135,091) | -49.31% | | Net change in cash and cash equivalents and restricted cash | $18,933 | $11,191 | $7,742 | 69.18% | Capital expenditures increased significantly to $192.6 million in Q1 2025 from $103.4 million in Q1 2024, primarily for facilities under construction[20] Cash used in investing activities decreased due to the absence of a large business acquisition ($274.6 million in Q1 2024) in Q1 2025[20] NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — GENERAL AND BASIS OF PRESENTATION This note outlines the basis of presentation for interim financial statements, details new loan agreements, a battery supplier settlement, war impact, exploration write-offs, and information on cash and credit risk concentration - The Company secured three new 8-year loan agreements in Q1 2025: Mizrahi 2025 Loan ($50.0 million), Discount 2025 Loan ($50.0 million), and Hapoalim 2025 Loan ($100.0 million), all with SOFR-based interest rates and covenants[27][28][29] - A settlement with a battery supplier resulted in a $35.0 million recovery of damages, with $3.1 million recognized as 'Other operating income' in Q1 2025 upon meeting contingency conditions[30] - Write-offs for unsuccessful exploration and storage activities totaled $0.5 million in Q1 2025, related to abandoned storage projects[32] Reconciliation of Cash and Cash Equivalents and Restricted Cash (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $112,704 | $94,395 | | Restricted cash and cash equivalents | $112,001 | $111,377 | | Total | $224,705 | $205,772 | - Revenues from primary customers (SCPPA, Sierra Pacific Power Company/Nevada Power Company, KPLC) accounted for 50.2% of total revenues in Q1 2025, with overdue amounts from KPLC ($44.7 million) and ENEE ($17.3 million) partially collected post-period[37][38][39] - Income from transferable Production Tax Credits (PTCs) was $7.3 million in Q1 2025, and Investment Tax Credits (ITCs) generated a $13.9 million tax benefit, both net of discount[47] NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS This note details new accounting pronouncements, including ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation), aiming for enhanced transparency, while ASU 2024-04 (Convertible Debt) is not expected to have a material impact - ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective after December 15, 2024, will require enhanced disclosures on rate reconciliation and income taxes paid, disaggregated by jurisdiction[49][51] - ASU 2024-03, 'Expense Disaggregation Disclosures,' effective after December 15, 2026, will require public entities to disclose detailed expense categories in financial statement notes[52] - ASU 2024-04, 'Induced Conversions of Convertible Debt Instruments,' effective after December 15, 2025, is not anticipated to materially impact the Company's consolidated financial statements[53] NOTE 3 — INVENTORIES This note breaks down the Company's inventory, primarily raw materials, purchased parts, self-manufactured parts, and finished products, showing an increase from December 31, 2024, to March 31, 2025 Inventories (in thousands) | Item | March 31, 2025 | December 31, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Raw materials and purchased parts for assembly | $17,264 | $20,575 | $(3,311) | -16.1% | | Self-manufactured assembly parts and finished products | $24,843 | $17,517 | $7,326 | 41.8% | | Total inventories | $42,107 | $38,092 | $4,015 | 10.5% | NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS This note details fair value measurements of financial instruments by level, presents gains and losses on derivative instruments (currency forwards, cross-currency swaps, interest rate swaps), and provides fair value information for long-term debt - The Company's financial instruments measured at fair value primarily consist of Level 1 cash equivalents and Level 2 derivatives (interest rate swaps, cross-currency swaps, currency forward contracts)[59][61] Gain (Loss) Recognized on Derivative Instruments (in thousands) | Derivative Type | Location of Recognized Gain (Loss) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | :--- | | Currency forward contracts (not designated as hedging) | Derivative and foreign currency transaction gains (losses) | $(347) | $1,078 | | Cross currency swap (cash flow hedging) | Derivative and foreign currency transaction gains (losses) | $(3,665) | $(3,236) | | Interest rate swap (cash flow hedging) | Interest expense, net | $101 | $457 | | Total | | $(3,564) | $(2,779) | - As of March 31, 2025, 90.0% of consolidated long-term debt was at fixed interest rates, limiting exposure to interest rate volatility, though new variable-rate loans increased variable-rate exposure[192] Fair Value of Long-Term Debt (in millions) | Loan Type | Fair Value (March 31, 2025) | Fair Value (December 31, 2024) | Carrying Amount (March 31, 2025) | Carrying Amount (December 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Limited and non-recourse loans: fixed rate | $621.8 | $636.5 | $639.8 | $657.3 | | Full recourse loans: Fixed-rate | $883.6 | $920.4 | $897.4 | $940.4 | | Full recourse loans: Variable-rate | $252.9 | $48.5 | $248.4 | $48.4 | | Financing liability: fixed-rate | $220.2 | $223.4 | $219.7 | $220.6 | | Convertible senior note | $492.3 | $471.2 | $476.4 | $476.4 | NOTE 5 — STOCK-BASED COMPENSATION This note describes the Company's stock-based compensation, including the grant of 210,961 RSUs and 45,190 PSUs in March 2025 under the 2018 Incentive Compensation Plan, with 1 to 3-year vesting periods - In March 2025, Ormat granted 210,961 RSUs and 45,190 PSUs with 1 to 3-year vesting periods, with fair values of $68.9 per RSU and $70.9 per PSU[69][70] NOTE 6 — INTEREST EXPENSE, NET This note details the components of net interest expense, which increased to $34.5 million in Q1 2025 from $31.0 million in Q1 2024, primarily due to new loan agreements Components of Interest Expense, Net (in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest related to sale of tax benefits | $3,799 | $4,896 | $(1,097) | -22.4% | | Interest expense | $34,436 | $29,124 | $5,312 | 18.2% | | Less — amount capitalized | $(3,762) | $(3,052) | $(710) | 23.3% | | Total interest expense, net | $34,473 | $30,968 | $3,505 | 11.3% | - The increase in net interest expense was primarily driven by new loan agreements, including Mammoth Senior Secured Notes, DEG 4 Loan, Discount 2024/2024 II loans, Bottleneck Loan, and Mizrahi 2025 Loan[147] NOTE 7 — EARNINGS PER SHARE This note provides the computation of basic and diluted earnings per share, showing an increase for Q1 2025 compared to Q1 2024, and clarifies that convertible senior notes had no dilutive effect as conversion conditions were not met Earnings Per Share (EPS) and Weighted Average Shares (in thousands, except EPS) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.67 | $0.64 | $0.03 | 4.69% | | Diluted EPS | $0.66 | $0.64 | $0.02 | 3.13% | | Weighted average basic shares | 60,559 | 60,386 | 173 | 0.29% | | Weighted average diluted shares | 60,840 | 60,536 | 304 | 0.50% | - Convertible senior notes had no dilutive effect on EPS for Q1 2025, as the common stock price ($90.27) did not exceed the conversion price and other conditions were not met[75] NOTE 8 — BUSINESS SEGMENTS This note disaggregates financial information into Electricity, Product, and Energy Storage segments, providing detailed revenue, gross profit, and operating income data, highlighting distinct operations and cost allocation - Ormat operates in three segments: Electricity (geothermal, solar PV, REG power plants), Product (equipment design, manufacturing, EPC services), and Energy Storage (grid-connected BESS)[76][77] Segment Performance (Three Months Ended March 31, 2025 vs. 2024, in thousands) | Segment | Net Revenue (2025) | Net Revenue (2024) | Gross Profit (2025) | Gross Profit (2024) | Operating Income (2025) | Operating Income (2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Electricity | $180,241 | $191,253 | $60,408 | $74,523 | $40,843 | $52,681 | | Product | $31,769 | $24,832 | $7,085 | $3,678 | $3,636 | $842 | | Energy Storage | $17,752 | $8,081 | $5,434 | $609 | $6,434 | $(940) | | Consolidated Total | $229,762 | $224,166 | $72,927 | $78,810 | $50,913 | $52,583 | - Foreign operations in the Electricity segment, primarily Kenya, Guatemala, Honduras, and Guadeloupe, contributed disproportionately to gross profit (34.8% in Q1 2025) and net income (53.8% in Q1 2025) due to lower costs and newer plants[121] NOTE 9 — COMMITMENTS AND CONTINGENCIES This note discloses legal proceedings and commitments, including a class action settlement and a $47.5 million breach of contract claim, along with PPA renegotiations in Kenya, neither expected to be material to financial statements - A class action lawsuit by a former employee in California alleging Labor Code violations has reached a settlement in principle for an immaterial amount, pending court approval[88] - Engie Resources, LLC filed a $47.5 million breach of contract claim against a subsidiary related to the February 2021 Texas power crisis; the Company intends to vigorously defend and has not accrued for potential losses[89][91] - Discussions are ongoing in Kenya regarding the review and potential renegotiation of Power Purchase Agreements (PPAs) between KPLC and independent power producers, including Ormat's Olkaria complex PPA[93] NOTE 10 — INCOME TAXES This note reports an income tax benefit of $3.8 million for Q1 2025, with an effective tax rate benefit of (10.1)%, primarily due to investment tax credits and jurisdictional mix of earnings, with an immaterial Pillar 2 impact Income Tax Provision (Benefit) and Effective Tax Rate | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Income tax (provision) benefit | $3,795 | $147 | | Effective tax rate benefit | (10.1)% | (0.4)% | - The effective tax rate benefit is primarily driven by the generation of investment tax credits ($13.9 million in Q1 2025) and the jurisdictional mix of earnings[151] - The Company became subject to OECD Pillar 2 global minimum corporate tax rules effective January 1, 2025, but the impact was immaterial in Q1 2025[95] NOTE 11 — SUBSEQUENT EVENTS This note discloses significant subsequent events, including a $0.12 per share quarterly dividend and the $88.0 million acquisition of the Blue Mountain geothermal plant, with planned capacity upgrades and solar integration, expected to close in Q2 2025 - On May 7, 2025, the Board declared a quarterly dividend of $0.12 per share ($7.3 million total), payable on June 4, 2025[96] - On May 5, 2025, Ormat agreed to acquire the 20MW Blue Mountain geothermal power plant for $88.0 million, with plans to upgrade capacity by 3.5MW and add a 13MW solar facility, expected to close in Q2 2025[97] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Q1 2025 financial condition and results, discussing business segments, recent developments, trends, uncertainties, and analyzing revenues, costs, operating expenses, liquidity, capital resources, and market risk exposure Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements regarding future operations, financial performance, and business strategy, identified by words like 'expects,' 'plans,' 'anticipates,' and 'believes'[99] - Readers are cautioned that actual future results may vary materially from expectations due to numerous risks and uncertainties beyond the Company's control, and the Company does not commit to updating these statements[99][100] Risks Related to the Company's Business and Operation - Financial performance is highly dependent on the successful operation of geothermal, REG, solar PV, and energy storage facilities, which are subject to various operational risks[101] - Geothermal exploration and development face geological risks and uncertainties, potentially leading to insufficient growth prospects or increased costs[101] - Changes in U.S. and foreign government policy, including tariffs and trade agreements, could materially adversely affect global economic conditions and the Company's business[101] - Investments in BESS technology involve new technologies with limited reliability history, exposing the Company to risks like increased storage costs, trade restrictions, fire risks, and merchant price volatility[101] - Concentration of customers, specific projects, and regions, along with international operations and conditions in Israel, expose the Company to heightened financial and political risks[101] Risks Related to Governmental Regulations, Laws and Taxation - Responses to Israel's ongoing military conflicts may adversely affect operations and limit product production and sales[103] - Leases may terminate if geothermal resources are not extracted in 'commercial quantities' or if lease terms are not met, requiring new, potentially less favorable, agreements[103] - The reduction, elimination, or inability to monetize government incentives (e.g., ITCs, PTCs) could adversely affect business, financial condition, and cash flows[103] - Compliance with environmental laws and obtaining permits may result in liabilities, costs, and construction delays[103] Risks Related to Economic and Financial Conditions - The Company may struggle to obtain necessary financing on favorable terms, and substantial existing indebtedness could decrease business flexibility and increase borrowing costs[108] - Foreign power plants and manufacturing operations expose the Company to risks related to currency rate fluctuations, potentially reducing profits[108] - Defaults on limited or non-recourse project finance debt by subsidiaries could require the Company to make payments or lose power plants through foreclosure[108] - Future equity issuances, including through compensation plans or convertible note conversions, could result in dilution and adversely affect common stock price[108] Risks Related to Force Majeure - A prolonged force majeure event or forced outage affecting a power plant or transmission system could reduce net income[108] - Threats of terrorism may impact operations in unpredictable ways, adversely affecting business, financial condition, and cash flow[108] General Overview - Ormat is a leading vertically integrated company primarily engaged in geothermal energy, expanding into recovered energy generation, energy storage, and solar PV[109] - The Company's objective is to become a leading global provider of renewable energy, with a current generating portfolio of approximately 1.4 GW across geothermal, energy storage, REG, and Solar PV[109][110] - Business activities are conducted through three segments: Electricity (develops, builds, owns, operates power plants), Product (designs, manufactures, sells equipment, provides EPC services), and Energy Storage (owns, operates grid-connected BESS)[113] Recent Developments - In May 2025, Ormat agreed to acquire the 20MW Blue Mountain geothermal power plant for $88 million, with plans for a 3.5MW capacity upgrade and a 13MW solar facility addition[113] - In February 2025, Ormat won a tender for two 15-year tolling agreements for energy storage facilities in Israel, totaling approximately 300MW/1200MWh, as a 50/50 joint venture[113] - The Ijen geothermal power plant (35 MW, Ormat's share 17MW) achieved successful commercial operation in February 2025[113] - A 10-year PPA was signed with Calpine Energy Solutions in January 2025 to purchase up to 15MW from the Mammoth 2 geothermal plant, replacing an existing PPA with increased capacity and price[113] Trends and Uncertainties - Increased U.S. import tariffs, especially on products from China, pose significant uncertainty, potentially slowing Energy Storage segment growth (reliant on imported batteries) and increasing capital expenditures for Electricity segment projects[114][215] - The Company is working to accelerate imports during tariff pauses but cannot assure avoidance of increased operating costs, cost of revenues, or capital expenditures due to tariffs[114][215] - Uncertainty around the continuation of Investment Tax Credits (ITC) combined with tariff increases could affect long-term growth, particularly in the Energy Storage segment in the U.S.[114] Revenues Total Revenues by Segment (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Electricity | $180,241 | $191,253 | $(11,012) | -5.8% | | Product | $31,769 | $24,832 | $6,937 | 27.9% | | Energy Storage | $17,752 | $8,081 | $9,671 | 119.7% | | Total | $229,762 | $224,166 | $5,596 | 2.5% | - Electricity segment revenues decreased by $11.0 million, mainly due to curtailments at Dixie Valley and McGinness Hills, and maintenance at Neal Hot Springs and Stillwater power plants[131] - Energy Storage segment revenues increased by $9.7 million, primarily from new facilities (Bottleneck, Montague, East Flemington) and higher energy rates at PJM Interconnect facilities[134] - Product segment revenues increased by $6.9 million (27.9%), driven by project progress and revenue recognition timing, with projects primarily in Dominica and New Zealand[133] - Foreign operations contributed 32.4% of total revenues in Q1 2025, with higher Electricity gross margins than U.S. operations due to lower costs and newer plants in regions like Kenya, Guatemala, Honduras, and Guadeloupe[120][121] Seasonality - Geothermal power plants produce more energy in winter due to lower ambient temperatures, leading to higher revenues and gross profit in Q1 and Q4[123] - Some PPAs (e.g., Mammoth Complex, North Brawley, Raft River, Neal Hot Springs, Dixie Valley) have higher electricity prices in summer months (June-September) to partially offset reduced generation from higher ambient temperatures[123] - The Bottleneck tolling agreement in the Energy Storage segment generates approximately 45% of its revenues in the third quarter[123] Results of Operations Key Financial Highlights (Three Months Ended March 31, 2025 vs. 2024, in thousands, except EPS) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $229,762 | $224,166 | $5,596 | 2.5% | | Total Cost of Revenues | $156,835 | $145,356 | $11,479 | 7.9% | | Total Gross Profit | $72,927 | $78,810 | $(5,883) | -7.5% | | Operating Income | $50,913 | $52,583 | $(1,670) | -3.2% | | Net Income Attributable to Company's Stockholders | $40,362 | $38,587 | $1,775 | 4.6% | | Basic EPS | $0.67 | $0.64 | $0.03 | 4.7% | | Diluted EPS | $0.66 | $0.64 | $0.02 | 3.1% | - Electricity segment gross profit decreased by $14.1 million, while Product and Energy Storage segments saw increases of $3.4 million and $4.8 million, respectively[127] - Research and development expenses increased by $0.9 million (57.7%), while selling and marketing expenses decreased by $0.9 million (18.6%), and general and administrative expenses decreased by $1.6 million (8.3%)[127][141][142][143] - Other operating income of $3.1 million was recognized in Q1 2025 from a battery supplier settlement, with no comparable amount in Q1 2024[144] - Interest expense, net, increased by $3.5 million to $34.5 million, primarily due to new loan agreements[147] - Derivatives and foreign currency transactions shifted from a $1.6 million loss in Q1 2024 to a $2.1 million gain in Q1 2025[148] - Income attributable to sale of tax benefits remained stable at $17.6 million in Q1 2025[149] - Equity in earnings of investees shifted from a $0.8 million gain in Q1 2024 to a $0.4 million loss in Q1 2025, partly due to Sarulla Consortium's remediation efforts[152] Liquidity and Capital Resources - As of March 31, 2025, the Company had $112.7 million in cash and cash equivalents ($41.1 million held by foreign subsidiaries) and $364.8 million in unused corporate borrowing capacity[155] - Estimated capital needs for the remainder of 2025 include $419.0 million for capital expenditures on new projects, enhancements, and exploration, and $189.9 million for long-term debt repayment[156][188] - The Company expects to finance these needs through existing liquidity, positive operating cash flows, and future project financings, including construction loans and tax equity transactions[157] - New loan agreements totaling $200.0 million were entered into with Mizrahi, Discount, and Hapoalim banks in Q1 2025[159] - The Company is in compliance with financial covenants (e.g., net debt to adjusted EBITDA ratio of 4.18 vs. max 6.0, equity to total assets ratio of 44.3% vs. min 25%), except for a $0.9 million equity distribution restriction from the DAC 1 Senior Secured Notes subsidiary[162][164] Non-GAAP Measures: EBITDA and Adjusted EBITDA - EBITDA is defined as net income before interest, taxes, depreciation, amortization, and accretion[177] - Adjusted EBITDA further adjusts EBITDA for mark-to-market gains/losses, stock-based compensation, M&A costs, extinguishment gains/losses, settlement costs, impairment charges, and write-offs of unsuccessful exploration/storage activities[177] EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income | $41,034 | $40,350 | $684 | 1.7% | | EBITDA | $142,977 | $134,360 | $8,617 | 6.4% | | Adjusted EBITDA | $150,269 | $141,241 | $9,028 | 6.4% | Capital Expenditures - Capital expenditures are focused on developing new power plants, enhancing existing ones, and investing in strategic plan activities[180] - Major projects under construction include Zunil Upgrade (Guatemala, 5MW), Bouillante Repowering (Guadeloupe, 10MW), Topp 2 (New Zealand, 50MW), Dominica geothermal (10MW), and U.S. plant upgrades (Cove Fort 7MW, Stillwater 5MW, Salt Wells 5MW)[180][181][182][183][184] Energy Storage Projects Under Construction | Project Name | Size | Location | Customer | Expected COD | | :--- | :--- | :--- | :--- | :--- | | Lower Rio | 60MW/120MWh | TX | ERCOT | Q3 2025 | | Arrowleaf | 35MW/140MWh | CA | SDCP | Q4 2025 | | Bird Dog | 60MW/120MWh | CA | SDCP | Q2 2026 | | Shirk | 80MW/320MWh | CA | CAISO | Q1 2026 | | Israel High Voltage (*) | 150MW/600MWh | Israel | Israeli Electricity Authority | 2028 | - Total estimated capital expenditures for the last three quarters of 2025 are approximately $419 million, allocated to new projects, exploration, maintenance, and energy storage development[187][188] Exposure to Market Risks - Electricity price volatility risk is limited by fixed or escalating rate PPAs for most power plants, but energy storage projects and the Puna complex (until new PPA) are exposed to merchant market price changes[190][191] - As of March 31, 2025, 90.0% of consolidated long-term debt was at fixed interest rates, but new variable-rate loans and $100.0 million in commercial paper increase exposure to interest rate volatility[192] - Foreign currency exchange risk primarily involves fluctuations of the U.S. dollar against the New Israeli Shekel (NIS), Euro, and Kenyan Shilling (KES), impacting foreign subsidiary revenues and expenses, mitigated by cross-currency swap and forward contracts[194][195] Sensitivity Analysis of Fair Values (March 31, 2025, in thousands) | Risk | Change in the Fair Value of: | Assuming a 10% Increase in Rates | Assuming a 10% Decrease in Rates | | :--- | :--- | :--- | :--- | | Foreign currency | Foreign currency forward contracts | $(738) | $876 | | Interest rate | Mizrahi 2025 Loan | $(1,093) | $1,130 | | Interest rate | Discount 2025 Loan | $(1,123) | $1,161 | | Interest rate | Hapoalim 2025 Loan | $(2,149) | $2,221 | | Interest rate | Financing Liability | $(9,060) | $9,639 | Effect of Inflation - Increased inflation rates from early 2022 to early 2024 led to higher overall operating and other costs, particularly in the U.S.[200] - Inflation impacts Electricity segment operating costs, partially mitigated by PPA price adjustments, and Product segment profit margins, which can be offset by project pricing[201] - Rising interest rates, despite mostly fixed-rate debt, could increase interest expense upon refinancing or new borrowings[201] Contractual Obligations and Commercial Commitments - No material changes to contractual obligations have occurred since the 2024 Annual Report, outside the ordinary course of business[202] Concentration of Credit Risk - Credit risk is concentrated with major customers: Sierra Pacific Power Company/Nevada Power Company (16.1% of revenues), SCPPA (22.0%), and KPLC (12.1%)[203][204] - As of March 31, 2025, KPLC had $44.7 million overdue ($15.2 million paid in April/May 2025), and ENEE had $17.3 million overdue ($1.3 million paid in April/May 2025)[204][205] - The Company expects to collect all past due amounts from KPLC, supported by a government of Kenya support letter[204] Government Grants and Tax Benefits - Detailed information on government grants and tax benefits is available in the 2024 Annual Report[206] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section incorporates by reference the detailed discussion on market risk exposures, including electricity price volatility, interest rate risk, and foreign currency exchange risk, from Item 2's 'Exposure to Market Risks' and 'Concentration of Credit Risk' sections - Information on quantitative and qualitative disclosures about market risk is incorporated by reference from the 'Exposure to Market Risks' and 'Concentration of Credit Risk' sections in Item 2[207] ITEM 4. CONTROLS AND PROCEDURES The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, ensuring timely and accurate reporting, with no material changes in internal control over financial reporting during Q1 2025 - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, ensuring timely and accurate reporting of material information[209] - No material changes in internal control over financial reporting occurred during the first quarter of 2025[210] PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section refers to Note 9, 'Commitments and Contingencies,' for legal proceedings, including a class action settlement and a $47.5 million breach of contract claim, neither expected to be material to financial statements - Information on legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the financial statements[212] ITEM 1A. RISK FACTORS This section incorporates by reference risk factors from the 2024 Annual Report, noting no material changes, but highlights ongoing uncertainty and potential negative impacts of increased U.S. import tariffs on Energy Storage and Electricity segments - No material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K occurred during the period[213] - Increased U.S. import tariffs, particularly on products from China, create significant uncertainty and could negatively impact the Energy Storage segment (reliant on imported batteries) and Electricity segment (raw materials/equipment costs), potentially requiring investment reductions or debt restructuring[214][215] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[216] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section indicates that there were no defaults upon senior securities to report - No defaults upon senior securities to report[217] ITEM 4. MINE SAFETY DISCLOSURES This section states that there are no mine safety disclosures required for the period - No mine safety disclosures to report[218] ITEM 5. OTHER INFORMATION This section confirms that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025[219] ITEM 6. EXHIBITS This section lists the exhibits filed with the quarterly report, including certifications, XBRL taxonomy documents, and a separation agreement - The exhibit index includes certifications (31.1, 31.2, 32.1, 32.2), XBRL taxonomy extension documents (101.SC, 101.CA, 101.DE, 101.LA, 101.PR), and a separation agreement (10.1+)[221][222] SIGNATURES The report was signed by Assaf Ginzburg, Chief Financial Officer and Authorized Signatory, on May 8, 2025[225] CERTIFICATIONS Certifications from the CEO (Doron Blachar) and CFO (Assaf Ginzburg) affirm the accuracy of the report's financial statements and the effectiveness of disclosure controls and internal control over financial reporting[226][229][232][235]