Ormat Technologies(ORA) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended June 30, 2025 ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements of Ormat Technologies, Inc. and its subsidiaries for the period ended June 30, 2025, including balance sheets, statements of operations and comprehensive income, statements of equity, and statements of cash flow, along with detailed notes explaining significant accounting policies, recent transactions, and financial instrument fair values Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of the Company's financial position as of June 30, 2025, compared to December 31, 2024, showing an increase in total assets and liabilities, primarily driven by growth in property, plant and equipment, and construction-in-process, alongside an increase in long-term debt | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $6,015,612 | $5,666,224 | $349,388 | 6.17% | | Total liabilities | $3,385,839 | $3,105,844 | $279,995 | 9.01% | | Total equity | $2,618,788 | $2,550,932 | $67,856 | 2.66% | | Cash and cash equivalents | $88,492 | $94,395 | $(5,903) | -6.25% | | Construction-in-process | $1,024,241 | $755,589 | $268,652 | 35.56% | Condensed Consolidated Statements of Operations and Comprehensive Income The condensed consolidated statements of operations show an increase in total revenues and net income for both the three and six months ended June 30, 2025, compared to the same periods in 2024, driven by strong performance in the Product and Energy Storage segments, despite a decrease in Electricity segment revenues | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Total revenues | $234,018 | $212,963 | $21,055 | 9.89% | | Gross profit | $56,895 | $61,386 | $(4,491) | -7.32% | | Operating income | $35,318 | $35,127 | $191 | 0.54% | | Net income attributable to the Company's stockholders | $28,046 | $22,243 | $5,803 | 26.09% | | Basic EPS | $0.46 | $0.37 | $0.09 | 24.32% | | Diluted EPS | $0.46 | $0.37 | $0.09 | 24.32% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Total revenues | $463,780 | $437,129 | $26,651 | 6.10% | | Gross profit | $129,822 | $140,196 | $(10,374) | -7.40% | | Operating income | $86,231 | $87,710 | $(1,479) | -1.69% | | Net income attributable to the Company's stockholders | $68,408 | $60,830 | $7,578 | 12.46% | | Basic EPS | $1.13 | $1.01 | $0.12 | 11.88% | | Diluted EPS | $1.12 | $1.00 | $0.12 | 12.00% | Condensed Consolidated Statements of Equity The condensed consolidated statements of equity detail changes in stockholders' equity for various periods, highlighting contributions from stock-based compensation, net income, and other comprehensive income/loss, alongside cash dividends declared | Metric | Balance at Dec 31, 2024 (in thousands) | Balance at June 30, 2025 (in thousands) | Change (in thousands) | | :----------------------------------- | :----------------------------------- | :-------------------------------- | :-------------------- | | Total stockholders' equity attributable to Company's stockholders | $2,425,129 | $2,492,948 | $67,819 | | Noncontrolling interest | $125,803 | $125,840 | $37 | | Total equity | $2,550,932 | $2,618,788 | $67,856 | | Retained earnings | $814,518 | $868,371 | $53,853 | | Accumulated other comprehensive income (loss) | $(6,731) | $(2,297) | $4,434 | - The Company declared cash dividends of $0.12 per share for both the three and six months ended June 30, 2025, totaling $7.282 million and $14.555 million respectively[10] Condensed Consolidated Statements of Cash Flow The condensed consolidated statements of cash flow show an increase in net cash provided by operating activities and a decrease in net cash used in investing activities for the six months ended June 30, 2025, compared to the prior year, while net cash provided by financing activities remained relatively stable | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $184,907 | $145,904 | $39,003 | 26.73% | | Net cash used in investing activities | $(432,426) | $(524,962) | $92,536 | -17.63% | | Net cash provided by financing activities | $246,930 | $255,193 | $(8,263) | -3.24% | | Net change in cash and cash equivalents and restricted cash and cash equivalents | $292 | $(124,028) | $124,320 | -100.24% | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, recent business developments, financial instrument valuations, and other material financial information NOTE 1 — GENERAL AND BASIS OF PRESENTATION This note outlines the basis of presentation for the unaudited condensed consolidated interim financial statements, confirming adherence to U.S. GAAP and SEC rules, and details significant recent events including loan agreements, acquisitions, tax equity partnerships, and the impact of the war in Israel - On June 23, 2025, a subsidiary entered into loan agreements for up to $49.8 million at 2.4% interest for the 10MW Geothermal Project in Dominica, secured by project assets[25][27] - On June 18, 2025, the Company acquired 100% ownership of the 20MW Blue Mountain geothermal power plant for $88.7 million, expecting improved profitability through cost reduction, synergies, and upgrades[28][29] - On May 20, 2025, the Company formed a Hybrid Tax Equity Partnership for $62.0 million, involving the Lower Rio and Arrowleaf storage facilities, with an initial contribution of $5.2 million[33] - The Company secured several new loans in 2025: $50.0 million from Discount Bank (May 14, 2025), $150.0 million from Bank Hapoalim B.M. (March 31, 2025, amended June 30, 2025), $50.0 million from Discount Bank (March 27, 2025), and $50.0 million from Mizrahi Bank (February 2, 2025)[38][39][40][41] - The Company recognized $3.1 million and $6.3 million in 'Other operating income' for the three and six months ended June 30, 2025, respectively, from a settlement agreement with a battery systems supplier[43] - Write-offs of unsuccessful exploration and storage activities were $0.3 million and $0.8 million for the three and six months ended June 30, 2025, respectively, related to abandoned storage projects[45] | Customer | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Southern California Public Power Authority ("SCPPA") | 17.0 % | 19.7 % | | Sierra Pacific Power Company and Nevada Power Company | 12.9 % | 14.7 % | | Kenya Power and Lighting Co. Ltd. ("KPLC") | 12.5 % | 13.1 % | | Customer | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Southern California Public Power Authority ("SCPPA") | 19.5 % | 22.3 % | | Sierra Pacific Power Company and Nevada Power Company | 14.5 % | 15.8 % | | Kenya Power and Lighting Co. Ltd. ("KPLC") | 12.3 % | 12.7 % | - Income recognized from transferable Production Tax Credits (PTCs) was $6.0 million (3 months) and $13.3 million (6 months) in 2025, and $3.6 million (3 months) and $8.0 million (6 months) in 2024. Tax benefits from transferable Investment Tax Credits (ITCs) were $10.3 million (3 months) and $24.2 million (6 months) in 2025, and $6.2 million (3 months) and $17.7 million (6 months) in 2024[60] NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS This note discusses new accounting pronouncements, including ASU 2025-03 on business combinations involving VIEs, ASU 2023-09 on income tax disclosures, and ASU 2024-03 on disaggregation of income statement expenses, and ASU 2024-04 on induced conversions of convertible debt instruments. The Company is currently evaluating the impact of these future pronouncements - ASU 2025-03 (effective after Dec 15, 2026) modifies guidance for identifying the accounting acquirer in business combinations involving Variable Interest Entities (VIEs). The Company anticipates no material impact[62][64] - ASU 2023-09 (effective after Dec 15, 2024) enhances income tax disclosures, requiring specific categories in rate reconciliation and disaggregation of income taxes paid. The Company plans to implement this in its 2025 annual financial statements[65] - ASU 2024-03 (effective after Dec 15, 2026) improves expense disaggregation disclosures in the income statement, requiring details on inventory purchases, employee compensation, depreciation, and amortization. The Company is evaluating its impact[66][68] - ASU 2024-04 (effective after Dec 15, 2025) clarifies induced conversion guidance for convertible debt instruments. The Company anticipates no material impact[67] NOTE 3 — INVENTORIES This note details the composition of inventories, which primarily consist of raw materials, purchased parts for assembly, and self-manufactured assembly parts and finished products, showing an increase from December 31, 2024, to June 30, 2025 | Inventory Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Raw materials and purchased parts for assembly | $20,860 | $20,575 | $285 | 1.38% | | Self-manufactured assembly parts and finished products | $24,047 | $17,517 | $6,530 | 37.28% | | Total inventories | $44,907 | $38,092 | $6,815 | 17.90% | NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS This note provides fair value measurements for financial assets and liabilities, categorized by a three-level hierarchy, and details the recognized gains and losses on derivative instruments, including currency forward contracts, cross-currency swaps, and interest rate swaps | Derivative Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Currency forward contracts (not hedging) | $4,040 (gain) | $(185) (loss) | | Cross currency swap (cash flow hedge) | $18,648 (gain) | $(2,127) (loss) | | Interest rate swap (cash flow hedge) | $101 (gain) | $433 (gain) | | Total recognized gain (loss) | $18,749 (gain) | $(1,694) (loss) | | Derivative Type | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Currency forward contracts (not hedging) | $3,693 (gain) | $(513) (loss) | | Cross currency swap (cash flow hedge) | $14,983 (gain) | $(5,363) (loss) | | Interest rate swap (cash flow hedge) | $202 (gain) | $890 (gain) | | Total recognized gain (loss) | $15,185 (gain) | $(4,473) (loss) | | Debt Type | Fair Value (June 30, 2025, in millions) | Carrying Amount (June 30, 2025, in millions) | | :----------------------------------- | :------------------------------------ | :----------------------------------- | | Limited and non-recourse loans: fixed rate | $604.0 | $622.6 | | Full recourse loans: Fixed-rate | $849.8 | $862.3 | | Full recourse loans: Variable-rate | $348.3 | $340.6 | | Financing liability: fixed-rate | $222.9 | $219.7 | | Convertible senior note | $525.2 | $476.4 | NOTE 5 — STOCK-BASED COMPENSATION This note details the stock-based compensation granted in March 2025, including Restricted Stock Units (RSUs) and Performance Stock Units (PSUs), and the assumptions used to calculate their fair value - In March 2025, the Company granted 210,961 RSUs and 45,190 PSUs with vesting periods of 1 to 3 years[82] | Assumption | Range | | :----------------------------------- | :------ | | Risk-free interest rates | 3.95% - 4.08% | | Expected life (in years) | 1 - 3 | | Dividend yield | 0.69% | | Expected volatility (weighted average) | 27.0% - 31.0% | NOTE 6 — INTEREST EXPENSE, NET This note breaks down the components of net interest expense, showing an increase for both the three and six months ended June 30, 2025, compared to the prior year, primarily due to new loan agreements | Component | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Interest related to sale of tax benefits | $3,698 | $4,343 | | Interest expense | $37,281 | $33,621 | | Less — amount capitalized | $(4,297) | $(4,248) | | Total interest expense, net | $36,682 | $33,716 | | Component | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Interest related to sale of tax benefits | $7,498 | $9,239 | | Interest expense | $71,717 | $62,745 | | Less — amount capitalized | $(8,060) | $(7,300) | | Total interest expense, net | $71,155 | $64,684 | NOTE 7 — EARNINGS PER SHARE This note provides the reconciliation of shares used in the computation of basic and diluted earnings per share, indicating an increase in weighted average shares outstanding for both basic and diluted EPS | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Basic weighted average shares | 60,689 | 60,451 | | Diluted weighted average shares | 61,019 | 60,755 | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Basic weighted average shares | 60,624 | 60,419 | | Diluted weighted average shares | 60,973 | 60,655 | - The Company's common stock price did not exceed the convertible senior notes' conversion price of $90.27, resulting in no dilutive effect from the notes for the periods presented[87] NOTE 8 — BUSINESS SEGMENTS This note disaggregates the Company's financial information into its three reporting segments: Electricity, Product, and Energy Storage, providing detailed revenues, gross profit, operating income, and asset allocation for each segment, highlighting their distinct operations and market focus - The Company operates in three segments: Electricity (geothermal, solar PV, REG power plants), Product (equipment design, manufacturing, EPC services), and Energy Storage (grid-connected BESS)[89][93] | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Electricity Revenues | $159,912 | $166,226 | | Product Revenues | $59,612 | $37,829 | | Energy Storage Revenues | $14,494 | $8,908 | | Electricity Gross Profit | $38,676 | $55,711 | | Product Gross Profit | $16,494 | $5,167 | | Energy Storage Gross Profit | $1,725 | $508 | | Electricity Operating Income | $21,971 | $35,414 | | Product Operating Income | $10,200 | $1,026 | | Energy Storage Operating Income | $3,147 | $(1,313) | | Segment | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Electricity Revenues | $340,153 | $357,479 | | Product Revenues | $91,381 | $62,661 | | Energy Storage Revenues | $32,246 | $16,989 | | Electricity Gross Profit | $99,084 | $130,234 | | Product Gross Profit | $23,579 | $8,845 | | Energy Storage Gross Profit | $7,159 | $1,117 | | Electricity Operating Income | $62,814 | $88,095 | | Product Operating Income | $13,836 | $1,868 | | Energy Storage Operating Income | $9,581 | $(2,253) | - Electricity segment assets include goodwill of $165.8 million (June 30, 2025) and $146.4 million (June 30, 2024). Energy Storage segment assets include goodwill of $4.6 million for both periods. No goodwill is included in the Product segment assets[99] NOTE 9 — COMMITMENTS AND CONTINGENCIES This note discloses ongoing legal proceedings, including a class action settlement and a breach of contract lawsuit, and other matters such as PPA renegotiations in Kenya, assessing their potential financial impact - A class action lawsuit filed in July 2024 by a former employee alleging California Labor Code violations has reached a settlement in principle for an immaterial amount, pending court approval[102] - A lawsuit filed in February 2025 by Engie Resources, LLC alleges breach of contractual obligations during the February 2021 Texas power crisis, seeking $47.5 million in damages. The Company intends to vigorously defend itself, believing the probability of a material award to the claimant is low[103][105] - In Kenya, the Company is engaged in ongoing discussions with government task forces regarding potential renegotiation of Power Purchase Agreements (PPAs) to reduce tariffs[107] NOTE 10 — INCOME TAXES This note details the Company's effective tax rates, which were a benefit for the periods presented, primarily influenced by investment tax credits and the jurisdictional mix of earnings. It also addresses the impact of the OECD's Pillar 2 global minimum corporate tax and the recently enacted One Big Beautiful Bill Act (OBBB) in the U.S | Period | Effective Tax Rate Benefit | | :----------------------------------- | :------------------------- | | Three Months Ended June 30, 2025 | (24.9)% | | Three Months Ended June 30, 2024 | (16.3)% | | Six Months Ended June 30, 2025 | (15.5)% | | Six Months Ended June 30, 2024 | (5.6)% | - The effective tax rate differs from the federal statutory rate of 21% mainly due to investment tax credits and the jurisdictional mix of earnings[108] - The Company became subject to OECD's Pillar 2 global minimum corporate tax (15%) effective January 1, 2025, but the impact is not material for the six months ended June 30, 2025[109] - The One Big Beautiful Bill Act (OBBB), enacted July 4, 2025, permanently extends certain tax provisions and modifies energy tax credits, allowing geothermal and battery storage to qualify for 100% PTC or ITC for projects starting construction by end of 2033. The Company is evaluating its impact[110] NOTE 11 — SUBSEQUENT EVENTS This note details significant events that occurred after the reporting period, including a cash dividend declaration, a tax monetization transaction for Heber 1 and 2 geothermal power plants, and a new loan agreement for the Geothermie Bouillante project - On August 6, 2025, a quarterly dividend of $0.12 per share ($7.3 million total) was declared, payable on September 3, 2025[111] - On July 10, 2025, the Company entered a tax partnership agreement for Heber 1 and 2 geothermal power plants, with a private investor acquiring tax benefits for an initial $77.1 million and additional installments of approximately $25.7 million[112][114] - On July 31, 2025, Geothermie Bouillante S.A. secured loan agreements for approximately €99.8 million for its geothermal project in Guadeloupe, with tranches for refinancing (4.1% interest, 5-year maturity) and expansion (4.8% interest, 21-year maturity)[116] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition and results of operations, including an overview of business segments, recent developments, trends, and detailed comparisons of financial performance for the three and six months ended June 30, 2025, versus 2024. It also covers liquidity, capital resources, market risks, and critical accounting estimates Cautionary Note Regarding Forward-Looking Statements This section advises readers that the report contains forward-looking statements about future activities, financial projections, and business strategies, which are subject to risks and uncertainties and may differ materially from actual results. The Company undertakes no obligation to update these statements - Forward-looking statements are identified by words like "may," "will," "expects," "plans," and relate to future operations, objectives, and expectations[118] - Actual future results may vary materially due to numerous risks and uncertainties beyond the Company's control[118] Risks Related to the Company's Business and Operation This section outlines key risks associated with the Company's business, including operational challenges in power plants, geological uncertainties in geothermal exploration, potential failures in strategic plan implementation, impacts of trade policies, and risks related to new energy storage technologies - Financial performance depends on successful operation of geothermal, REG, solar PV power plants and energy storage facilities, which are subject to operational risks[120] - Geothermal exploration and operation face geological risks, potentially leading to insufficient growth prospects or increased costs[120] - Investments in BESS technology involve new technologies with limited reliability history, and profitability may be affected by storage costs, trade restrictions, fire risks, and price volatility[120] - International operations expose the Company to foreign laws, political/economic conditions in emerging economies (e.g., Israel), and potential impacts from military conflicts[120][122] Risks Related to Governmental Regulations, Laws and Taxation This section highlights risks stemming from governmental regulations, laws, and taxation, such as the impact of military conflicts on operations, lease termination conditions, delays in business development, reliance on power transmission facilities, and the potential adverse effects of changes in government incentives and tax reforms - Responses to Israel's military conflicts in countries of operation may adversely affect business[122] - Leases may terminate if geothermal resources are not extracted in "commercial quantities" or if lease terms are not met[122] - Reduction, elimination, or inability to monetize government incentives could adversely affect business, financial condition, and cash flows[122] - U.S. federal, state, and foreign country income tax reform could adversely affect the Company[122] Risks Related to Economic and Financial Conditions This section addresses financial risks including challenges in obtaining favorable financing, substantial indebtedness impacting business flexibility, currency rate fluctuations affecting foreign operations, and potential defaults on project finance debt - Inability to obtain favorable financing for growth strategy or less favorable future financing arrangements[127] - Substantial indebtedness may decrease business flexibility, access to capital, and increase borrowing costs[127] - Foreign power plants and manufacturing operations expose the Company to risks from currency rate fluctuations, potentially reducing profits[127] - Defaults on limited or non-recourse project finance debt by project subsidiaries could require the Company to make payments or lose power plants[127] Risks Related to Force Majeure This section highlights the risk of prolonged force majeure events or forced outages impacting power plants or transmission systems, which could lead to reduced net income - A prolonged force majeure event or forced outage affecting a power plant or transmission system could reduce net income[127] Risks Related to Ownership of our Common Stock This section discusses risks pertinent to common stock ownership, including potential dilution from future equity issuances, stock price volatility, and the impact of fundamental change provisions of convertible notes on takeover attempts - Future equity issuances, including through compensation plans, could result in dilution and a decline in common stock price[127] - The price of common stock has fluctuated and may continue to do so, potentially leading to a decline in investment value[127] General Overview Ormat Technologies, Inc. is a vertically integrated company focused on geothermal energy, expanding into recovered energy generation, energy storage, and solar PV. Its strategic objective is to be a leading global renewable energy provider, mitigating climate change. The Company operates through three segments: Electricity, Product, and Energy Storage, with a current generating portfolio of approximately 1.6 GW - Ormat is a leading vertically integrated company primarily engaged in geothermal energy, expanding into recovered energy generation, energy storage, and solar PV[128] - The Company's objective is to become a leading global provider of renewable energy and mitigate climate change[128] - Current generating portfolio is approximately 1.6 GW, including geothermal, energy storage, REG, and solar PV power plants across multiple countries[129] Recent Developments Since January 1, 2025, Ormat has made significant strides, including securing new loan agreements for projects in Guadeloupe and Dominica, closing the acquisition of the Blue Mountain geothermal power plant, forming a hybrid tax equity partnership, winning energy storage tenders in Israel, and achieving commercial operation for the Ijen geothermal power plant - In July 2025, secured €99.8 million in loan agreements for the new Bouillante geothermal power plant in Guadeloupe[131] - In July 2025, entered a tax partnership agreement for Heber 1&2 Geothermal power plants, receiving $77.1 million for tax benefits, with additional installments of $25.7 million expected[131] - In June 2025, secured $49.8 million in loan agreements for the 10MW Geothermal Project in Dominica[131] - In June 2025, acquired the 20MW Blue Mountain geothermal power plant for $88.7 million, with plans to upgrade capacity by 3.5MW and add a 13MW solar facility[131] - In May 2025, signed a $62.0 million Hybrid Tax Equity partnership for Lower Rio (60MW/120MWh) and Arrowleaf (35MW/140MWh storage + 42MW solar) storage projects, expected COD by end of 2025[131] - In February 2025, won a tender for two 15-year tolling agreements for energy storage facilities in Israel, with a combined capacity of approximately 300MW/1200MWh, in a 50/50 joint venture[131] - In February 2025, the Ijen geothermal power plant (Ormat's share 17MW) successfully achieved Commercial Operation Date (COD), delivering 35 MW to the Java grid[136] - In January 2025, signed a 10-year PPA with Calpine Energy Solutions to purchase up to 15MW from the Mammoth 2 geothermal power plant, replacing an existing PPA with increased capacity and a higher price[136] Trends and Uncertainties This section discusses key trends and uncertainties impacting operations, including increased import tariffs on products from countries like China, which could slow growth in the Energy Storage segment and increase capital expenditures for Electricity segment projects. It also notes the potential impact of the recently enacted One Big Beautiful Bill Act (OBBB) on consolidated financial statements - Increased import tariffs, particularly on Chinese products, may slow growth in the Energy Storage segment in the U.S. if price increases cannot be passed to customers[132] - Tariffs could also increase capital expenditures for Electricity segment projects in the U.S. due to higher raw material and equipment costs[132] - The Company is evaluating the impact of the One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, on its consolidated financial statements[132] Revenues This section analyzes revenue performance across the Electricity, Product, and Energy Storage segments, highlighting a decrease in Electricity revenues due to wellfield issues and curtailments, a significant increase in Product revenues from project progress, and substantial growth in Energy Storage revenues from new facilities and higher energy rates. It also provides a geographic breakdown of revenues | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Electricity | $159,912 | $166,226 | $(6,314) | -3.8% | | Product | $59,612 | $37,829 | $21,783 | 57.6% | | Energy storage | $14,494 | $8,908 | $5,586 | 62.7% | | Total | $234,018 | $212,963 | $21,055 | 9.9% | | Segment | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Electricity | $340,153 | $357,479 | $(17,326) | -4.8% | | Product | $91,381 | $62,661 | $28,720 | 45.8% | | Energy storage | $32,246 | $16,989 | $15,257 | 89.8% | | Total | $463,780 | $437,129 | $26,651 | 6.1% | - Electricity segment revenues are 94.0% from PPAs with fixed energy rates, limiting exposure to commodity price fluctuations, except for a variable price PPA in Hawaii[133] - Foreign operations in the Electricity segment, particularly in Kenya, Guatemala, and Honduras, contributed disproportionately to gross profit and net income due to lower costs and newer power plants[141] Seasonality Electricity generation from geothermal power plants is subject to seasonal variations, with higher production in winter due to lower ambient temperatures. This typically results in higher revenues and gross profit in the first and fourth quarters compared to the second and third quarters. Energy Storage segment revenues from the Bottleneck tolling agreement are concentrated in the third quarter - Geothermal power plants produce more energy in winter due to lower ambient temperatures, favorably impacting Electricity segment revenues[143] - Revenues and gross profit are generally higher in the first and fourth quarters than in the second and third quarters[143] - Approximately 45% of Bottleneck tolling agreement revenues in the Energy Storage segment are generated in the third quarter[143] Breakdown of Cost of Revenues The principal cost of revenues for each segment includes manpower, utilities, and maintenance for Electricity and Energy Storage, and raw materials, manufacturing, and subcontractors for Products - Electricity segment costs primarily include manpower, utilities, repair and maintenance, royalties, and property taxes[98] - Product segment costs primarily include raw materials, finished goods, manpower, transportation, and third-party subcontractors[98] - Energy Storage segment costs primarily include manpower, utilities, and insurance[98] Critical Accounting Estimates and Assumptions This section refers to the comprehensive discussion of critical accounting estimates and assumptions provided in the Company's 2024 Annual Report on Form 10-K New Accounting Pronouncements This section directs readers to Note 2 of the condensed consolidated financial statements for information regarding new accounting pronouncements Results of Operations This section provides a detailed analysis of the Company's operating results, comparing the three and six months ended June 30, 2025, to the corresponding periods in 2024, across all revenue and expense categories | Metric | Three Months Ended June 30, 2025 (%) | Three Months Ended June 30, 2024 (%) | | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Electricity Revenues | 68.3% | 78.1% | | Product Revenues | 25.5% | 17.8% | | Energy Storage Revenues | 6.2% | 4.2% | | Total Revenues | 100.0% | 100.0% | | Total Gross Profit | 24.3% | 28.8% | | Operating Income | 15.1% | 16.5% | | Net Income Attributable to Stockholders | 12.0% | 10.4% | | Metric | Six Months Ended June 30, 2025 (%) | Six Months Ended June 30, 2024 (%) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Electricity Revenues | 73.3% | 81.8% | | Product Revenues | 19.7% | 14.3% | | Energy Storage Revenues | 7.0% | 3.9% | | Total Revenues | 100.0% | 100.0% | | Total Gross Profit | 28.0% | 32.1% | | Operating Income | 18.6% | 20.1% | | Net Income Attributable to Stockholders | 14.8% | 13.9% | Comparison of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024 This section provides a detailed comparison of the Company's financial performance for the three months ended June 30, 2025, against the same period in 2024, analyzing changes in revenues, costs, and various income and expense items Total Revenues Total revenues increased by 9.9% for the three months ended June 30, 2025, primarily driven by significant growth in the Product and Energy Storage segments, partially offset by a decrease in the Electricity segment | Segment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | Change (%) | | :-------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Electricity | $159.9 | $166.2 | -3.8% | | Product | $59.6 | $37.8 | 57.6% | | Energy Storage | $14.5 | $8.9 | 62.7% | | Total Revenues | $234.0 | $213.0 | 9.9% | Electricity Segment Revenues Electricity segment revenues decreased by $6.3 million (3.8%) due to a temporary reduction in power generation at the Puna plant and curtailments at McGinness Hills and Tungsten, partially offset by increased revenues from the Dixie Valley and Beowawe power plants - Electricity revenues decreased by $6.3 million (3.8%) YoY[151] - Decrease mainly due to $6.9 million reduction at Puna power plant (wellfield issues) and $5.5 million from McGinness Hills and Tungsten (curtailments)[151] - Partially offset by $3.4 million increase at Dixie Valley (recovery from unscheduled outage) and $2.1 million increase at Beowawe (repower project commencement)[151] - Power generation increased by 0.9% from 1,731,282 MWh to 1,747,022 MWh[152] Product Segment Revenues Product segment revenues increased significantly by $21.8 million (57.6%), primarily due to project progress and revenue recognition timing, with projects in New Zealand and Dominica being key contributors - Product revenues increased by $21.8 million (57.6%) YoY[153] - Increase primarily related to project progress and timing of revenue recognition, with projects in New Zealand and Dominica contributing[153] Energy Storage Segment Revenues Energy Storage segment revenues grew by $5.6 million (62.7%), mainly from new facilities like Bottleneck and Montague that commenced operations in Q4 2024, and higher energy rates at PJM interconnect facilities - Energy Storage revenues increased by $5.6 million (62.7%) YoY[154] - Increase primarily from new facilities (Bottleneck, Montague) with COD in Q4 2024 and higher energy rates at PJM interconnect facilities[154] Total Cost of Revenues Total cost of revenues increased by 16.9% for the three months ended June 30, 2025, driven by increases across all segments, particularly in Electricity due to depreciation and property taxes, and in Product and Energy Storage due to higher revenues and new facility operations | Segment | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | Change (%) | | :-------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Electricity | $121.2 | $110.5 | 9.7% | | Product | $43.1 | $32.7 | 32.0% | | Energy Storage | $12.8 | $8.4 | 52.0% | | Total Cost of Revenues | $177.1 | $151.6 | 16.9% | Electricity Segment Cost of Revenues Electricity segment cost of revenues increased by $10.7 million (9.7%), mainly due to higher depreciation from power plant investments, increased costs at Dixie Valley, and a property tax charge at Heber. The cost of revenues as a percentage of Electricity revenues rose to 75.8% from 66.5% - Electricity cost of revenues increased by $10.7 million (9.7%) YoY[157] - Primary drivers: $5.2 million increase in depreciation, $1.4 million increase at Dixie Valley, and $1.3 million property tax charge at Heber[157] - Cost of revenues as a percentage of Electricity revenues increased from 66.5% to 75.8%[158] Product Segment Cost of Revenues Product segment cost of revenues increased by 32.0% to $43.1 million, in line with the increase in Product revenues. As a percentage of Product revenues, it decreased from 86.3% to 72.3%, reflecting varying project profitability - Product cost of revenues increased by 32.0% YoY to $43.1 million, driven by higher revenues[159] - Cost of revenues as a percentage of Product revenues decreased from 86.3% to 72.3%, indicating improved profitability of projects[159] Energy Storage Segment Cost of Revenues Energy Storage segment cost of revenues increased to $12.8 million, primarily due to new facilities like Bottleneck and Montague commencing commercial operations in Q4 2024 - Energy Storage cost of revenues increased to $12.8 million, primarily due to new facilities (Bottleneck, Montague) commencing commercial operations in Q4 2024[160] Research and Development Expenses, Net Research and development expenses decreased to $1.4 million, primarily due to the timing of resource allocation to R&D projects - R&D expenses decreased from $1.7 million to $1.4 million YoY, mainly due to timing of resource allocation[161] Selling and Marketing Expenses Selling and marketing expenses remained relatively stable at $4.4 million, representing 1.9% of total revenues - Selling and marketing expenses were $4.4 million (1.9% of total revenues) in Q2 2025, compared to $4.2 million (2.0% of total revenues) in Q2 2024[162] General and Administrative Expenses General and administrative expenses increased to $19.8 million, primarily due to merger and acquisition expenses, including $0.6 million related to the Blue Mountain acquisition, and timing of vendor services - G&A expenses increased by $1.8 million to $19.8 million YoY, primarily due to M&A expenses ($0.6 million for Blue Mountain acquisition) and timing of vendor services[163] - G&A expenses remained at 8.5% of total revenues for both periods[163] Other Operating Income Other operating income was $4.3 million, representing the non-refundable portion of recovery of damages from a battery systems supplier settlement - Other operating income was $4.3 million in Q2 2025, compared to none in Q2 2024[164] - This income is from the non-refundable portion of damages recovered from a battery systems supplier settlement[164] Impairment of Long-Lived Assets No impairment of long-lived assets was recorded in Q2 2025, compared to $1.0 million in Q2 2024 related to a waste heat agreement termination - No impairment of long-lived assets in Q2 2025, compared to $1.0 million in Q2 2024 due to termination of a waste heat agreement[165] Write-off of Unsuccessful Exploration and Storage Activities Write-offs decreased to $0.3 million, primarily related to abandoned storage projects, compared to $1.4 million in Q2 2024 for geothermal exploration projects - Write-offs decreased from $1.4 million to $0.3 million YoY, related to abandoned storage projects[166] Interest Income Interest income decreased to $1.9 million, primarily due to lower average balances of cash and cash equivalents - Interest income decreased from $2.6 million to $1.9 million YoY, primarily due to lower average cash and cash equivalents balances[167] Interest Expense, Net Net interest expense increased by $3.0 million to $36.7 million, mainly due to new loan agreements entered into since Q2 2024, partially offset by scheduled payments on existing loans - Net interest expense increased by $3.0 million to $36.7 million YoY[168] - Increase primarily attributable to new loan agreements from May 2024 to May 2025[168] Derivatives and Foreign Currency Transaction Gains (Losses) The Company recorded a gain of $5.1 million from derivatives and foreign currency transactions, a significant improvement from a $0.3 million loss in the prior year, mainly due to foreign currency forward contracts and exchange rate changes - Recorded a gain of $5.1 million in Q2 2025, compared to a loss of $0.3 million in Q2 2024[169] - Gains primarily from foreign currency forward contracts not designated as hedges and foreign currency exchange rate changes against the U.S. Dollar[169] Income Attributable to Sale of Tax Benefits Income from the sale of tax benefits increased slightly to $16.3 million, primarily representing the value of Production Tax Credits (PTCs) and taxable income/loss allocated to investors under tax equity transactions, and transferable PTCs under IRA regulations - Income from sale of tax benefits increased from $15.8 million to $16.3 million YoY[170] - Primarily represents value of PTCs and taxable income/loss allocated to investors under tax equity transactions and transferable PTCs under IRA[170] Other Non-Operating Income (Expense), Net Other non-operating income remained stable at $0.1 million for both periods - Other non-operating income was $0.1 million for both Q2 2025 and Q2 2024[171] Income Taxes Income tax benefit increased to $5.5 million, with an effective tax rate benefit of (24.9)%, primarily due to additional investment tax credits and the jurisdictional mix of earnings - Income tax benefit increased from $3.2 million to $5.5 million YoY[172] - Effective tax rate benefit was (24.9)% in Q2 2025, compared to (16.3)% in Q2 2024[172] - Rate difference from 21% federal statutory rate due to investment tax credits and jurisdictional mix of earnings[172] Equity in Earnings (Losses) of Investees, Net Equity in earnings of investees decreased to $0.8 million, primarily from the Company's share in Sarulla and Ijen projects - Equity in earnings of investees decreased from $1.2 million to $0.8 million YoY[173] - Derived from 12.75% share in Sarulla Consortium and 49% share in Ijen geothermal project[173] Net Income Attributable to the Company's Stockholders Net income attributable to stockholders increased by $5.8 million to $28.0 million, driven by a $4.2 million increase in net income and a $1.6 million decrease in net income attributable to noncontrolling interest - Net income attributable to stockholders increased by $5.8 million to $28.0 million YoY[174] - Increase due to $4.2 million rise in net income and $1.6 million decrease in noncontrolling interest[174] Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024 This section provides a detailed comparison of the Company's financial performance for the six months ended June 30, 2025, against the same period in 2024, analyzing changes in revenues, costs, and various income and expense items Total Revenues Total revenues increased by 6.1% for the six months ended June 30, 2025, primarily due to strong growth in the Product and Energy Storage segments, partially offset by a decrease in the Electricity segment | Segment | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | Change (%) | | :-------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Electricity | $340.2 | $357.5 | -4.8% | | Product | $91.4 | $62.7 | 45.8% | | Energy Storage | $32.2 | $17.0 | 89.8% | | Total Revenues | $463.8 | $437.1 | 6.1% | Electricity Segment Revenues Electricity segment revenues decreased by $17.3 million (4.8%) due to temporary generation reductions at Puna, curtailments at several plants, and planned repowering at Stillwater, partially offset by full-year operation at Beowawe. Power generation remained relatively stable - Electricity revenues decreased by $17.3 million (4.8%) YoY[177] - Decrease mainly due to $6.4 million reduction at Puna (wellfield issues), $6.5 million from curtailments (McGinness Hills, Tungsten, Dixie Valley), and $2.6 million at Stillwater (repowering)[177] - Partially offset by $3.6 million increase at Beowawe (full year of operation)[177] - Power generation decreased slightly by 0.1% from 3,761,131 MWh to 3,756,619 MWh[178] Product Segment Revenues Product segment revenues increased by $28.7 million (45.8%), primarily due to project progress and revenue recognition timing, with projects in New Zealand and Dominica being key contributors - Product revenues increased by $28.7 million (45.8%) YoY[179] - Increase primarily related to project progress and timing of revenue recognition, with projects in New Zealand and Dominica contributing[179][180] Energy Storage Segment Revenues Energy Storage segment revenues grew by $15.3 million (89.8%), mainly from new facilities like Montague, Bottleneck, and East Flemington that commenced commercial operations after the first half of 2024, and higher energy rates at PJM interconnect facilities - Energy Storage revenues increased by $15.3 million (89.8%) YoY[181] - Increase primarily from new facilities (Montague, Bottleneck, East Flemington) commencing commercial operations after H1 2024 and higher energy rates at PJM interconnect facilities[181] Total Cost of Revenues Total cost of revenues increased by 12.5% for the six months ended June 30, 2025, driven by increases across all segments, particularly in Electricity due to depreciation and property taxes, and in Product and Energy Storage due to higher revenues and new facility operations | Segment | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | Change (%) | | :-------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Electricity | $241.1 | $227.2 | 6.1% | | Product | $67.8 | $53.8 | 26.0% | | Energy Storage | $25.1 | $15.9 | 58.1% | | Total Cost of Revenues | $334.0 | $296.9 | 12.5% | Electricity Segment Cost of Revenues Electricity segment cost of revenues increased by $13.8 million (6.1%), mainly due to higher depreciation from power plant investments and increased property tax expenses at CD4 and Heber. The cost of revenues as a percentage of Electricity revenues rose to 70.9% from 63.6% - Electricity cost of revenues increased by $13.8 million (6.1%) YoY[184] - Primary drivers: $10.0 million increase in depreciation, $1.5 million at CD4, and $1.3 million at Heber (property tax expenses)[184] - Cost of revenues as a percentage of Electricity revenues increased from 63.6% to 70.9%[185] Product Segment Cost of Revenues Product segment cost of revenues increased by 26.0% to $67.8 million, in line with the increase in Product revenues. As a percentage of Product revenues, it decreased from 85.9% to 74.2%, reflecting varying project profitability - Product cost of revenues increased by 26.0% YoY to $67.8 million, driven by higher revenues[186] - Cost of revenues as a percentage of Product revenues decreased from 85.9% to 74.2%, indicating improved profitability of projects[186] Energy Storage Segment Cost of Revenues Energy Storage segment cost of revenues increased to $25.1 million, primarily due to new facilities like Bottleneck and Montague commencing commercial operations in Q4 2024 - Energy Storage cost of revenues increased to $25.1 million, primarily due to new facilities (Bottleneck, Montague) commencing commercial operations in Q4 2024[187] Research and Development Expenses, Net Research and development expenses increased to $4.0 million, mainly due to the timing of R&D projects - R&D expenses increased from $3.3 million to $4.0 million YoY, mainly due to timing of R&D projects[188] Selling and Marketing Expenses Selling and marketing expenses decreased to $8.5 million, representing 1.8% of total revenues - Selling and marketing expenses decreased from $9.3 million to $8.5 million YoY[189] - As a percentage of total revenues, it decreased from 2.1% to 1.8%[189] General and Administrative Expenses General and administrative expenses remained relatively stable at $37.7 million, with a slight increase primarily due to the timing of vendor services - G&A expenses remained stable at $37.7 million, with a slight increase of $0.1 million YoY due to timing of vendor services[190] Other Operating Income Other operating income was $7.4 million, representing the non-refundable portion of recovery of damages from a battery systems supplier settlement - Other operating income was $7.4 million in H1 2025, compared to none in H1 2024[191] - This income is from the non-refundable portion of damages recovered from a battery systems supplier settlement[191] Impairment of Long-Lived Assets No impairment of long-lived assets was recorded in H1 2025, compared to $1.0 million in H1 2024 related to a waste heat agreement termination - No impairment of long-lived assets in H1 2025, compared to $1.0 million in H1 2024 due to termination of a waste heat agreement[192] Write-off of Unsuccessful Exploration and Storage Activities Write-offs decreased to $0.8 million, related to abandoned geothermal exploration and storage projects, compared to $1.4 million in H1 2024 - Write-offs decreased from $1.4 million to $0.8 million YoY, related to abandoned geothermal exploration and storage projects[193] Interest Income Interest income decreased to $3.2 million, primarily due to lower average balances of cash and cash equivalents - Interest income decreased from $4.4 million to $3.2 million YoY, primarily due to lower average cash and cash equivalents balances[194] Interest Expense, Net Net interest expense increased by $6.5 million to $71.2 million, mainly due to new loan agreements entered into since H1 2024, partially offset by scheduled payments on existing loans - Net interest expense increased by $6.5 million to $71.2 million YoY[195] - Increase primarily attributable to new loan agreements from March 2024 to May 2025[195] Derivatives and Foreign Currency Transaction Gains (Losses) The Company recorded a gain of $7.1 million from derivatives and foreign currency transactions, a significant improvement from a $1.9 million loss in the prior year, mainly due to foreign currency forward contracts and exchange rate changes - Recorded a gain of $7.1 million in H1 2025, compared to a loss of $1.9 million in H1 2024[196] - Gains primarily from foreign currency forward contracts not designated as hedges and foreign currency exchange rate changes against the U.S. Dollar[196] Income Attributable to Sale of Tax Benefits Income from the sale of tax benefits increased slightly to $33.8 million, primarily representing the value of Production Tax Credits (PTCs) and taxable income/loss allocated to investors under tax equity transactions, and transferable PTCs under IRA regulations - Income from sale of tax benefits increased from $33.3 million to $33.8 million YoY[197] - Primarily represents value of PTCs and taxable income/loss allocated to investors under tax equity transactions and transferable PTCs under IRA[197] Other Non-Operating Income (Expense), Net Other non-operating income increased to $0.3 million from $0.1 million in the prior year - Other non-operating income increased from $0.1 million to $0.3 million YoY[198] Income Taxes Income tax benefit increased to $9.3 million, with an effective tax rate benefit of (15.5)%, primarily due to additional investment tax credits and the jurisdictional mix of earnings - Income tax benefit increased from $3.3 million to $9.3 million YoY[199] - Effective tax rate benefit was (15.5)% in H1 2025, compared to (5.6)% in H1 2024[199] - Rate difference from 21% federal statutory rate due to investment tax credits and jurisdictional mix of earnings[199] Equity in Earnings (losses) of Investees, Net Equity in earnings of investees decreased to $0.4 million, primarily from the Company's share in Sarulla and Ijen projects, with an increase in net income generated by the Ijen project - Equity in earnings of investees decreased from $2.1 million to $0.4 million YoY[200] - Derived from 12.75% share in Sarulla consortium and 49% share in Ijen geothermal project, with Ijen project's net income increasing[200] Net Income Attributable to the Company's Stockholders Net income attributable to stockholders increased by $7.6 million to $68.4 million, driven by a $4.9 million increase in net income and a $2.7 million decrease in net income attributable to noncontrolling interest - Net income attributable to stockholders increased by $7.6 million to $68.4 million YoY[201] - Increase due to $4.9 million rise in net income and $2.7 million decrease in noncontrolling interest[201] Liquidity and Capital Resources This section details the Company's liquidity sources, including cash flows from operations, debt, equity offerings, and project financing, and outlines capital needs for the remainder of 2025. It also discusses credit agreements, restrictive covenants, future minimum payments, and historical cash flows - Principal liquidity sources: cash flows from operations, third-party debt, equity offerings, project financing, tax monetization, and short-term borrowing[202] - As of June 30, 2025, the Company had $88.5 million in cash and cash equivalents ($35.4 million held by foreign subsidiaries) and $358.6 million in unuse