ORMAT TECHNOLOGIES Q1 FY26 earnings call ORA

Ormat is making significant progress in its next-generation geothermal and EGS strategy, advancing subsurface technology pilots with SLB and Sage Geosystems. These pilots, expected to generate 2-4 MW each and come online in 2027, are adjacent to existing facilities to accelerate validation. Commercial development includes expanding the resource base, land acquisition, and PPA framework discussions with hyperscalers. System innovations focus on developing next-generation high-capacity Ormat Energy Converters tailored for EGS applications, aiming to standardize power plants and reduce construction costs. The company is also pursuing external funding opportunities through U.S. DOE programs.

The Energy Storage segment emerged as a key growth engine, with revenues increasing 153% year-over-year. This strong performance was driven by both capacity expansion and the company's ability to capitalize on favorable merchant pricing, particularly in the PJM market. Strategic progress included the commercial operation date (COD) of the Shirk Energy Storage facility and the acquisition of the Hoku hybrid solar-plus-storage facility in Hawaii. The segment's gross margin reached 59.1% in Q1 FY26, significantly improving over the prior year.

Ormat secured PPAs for approximately 200 megawatts at favorable pricing, including agreements with Google and Switch. The company also executed two blend-and-extend contracts, notably for its CD4 geothermal power plant in California. This amended agreement extends the PPA by five additional years through 2037 and increases contract pricing by approximately 27%, effective October 2026. These agreements enhance revenue visibility and support the value of exploration and drilling investments.

The company strengthened its balance sheet through a $1 billion upsized convertible note offering, which reduced its cost of debt to 3.9%. This transaction also involved a share repurchase at $108 per share to mitigate equity dilution. For the remainder of 2026, total capital expenditure is projected at $587 million, with $436 million allocated to the Electricity segment, $111 million to Storage assets, and $20 million to EGS activities. Ormat also declared a quarterly dividend of $0.12 per share, payable on June 3, 2026.

Electricity segment revenue increased by approximately 1% to $181.6 million, primarily due to the acquisition of Blue Mountain and improved performance at the Olkaria facility. However, this was partially offset by lower energy rates at Puna and extremely high ambient temperatures in Nevada, which reduced revenue by approximately $4.8 million. The Dominica plant is now operational, with full commercial operation expected in Q2 2026 due to third-party transmission line delays. Management anticipates improved Puna rates in the coming months^⏳ following oil price impacts.