Ormat Technologies (ORA) Q1 FY26 earnings call: guidance and Q&A

Can you elaborate on the technology advancements for EGS, the potential size and scale of SLB and Sage pilots, and the long-term potential of EGS for Ormat, particularly at sites like Dixie Valley?

Ormat is developing a new, standardized OEC for EGS to reduce power plant construction costs. Both SLB and Sage pilots are progressing with well planning and permitting, aiming for 2-4 MW each by 2027, adjacent to existing facilities for quick integration. Ormat has identified Dixie Valley and other sites in California/Nevada as potential large-scale EGS development areas and is actively seeking new land and interconnection agreements for larger projects.

“Both pilots will be adjacent to our facilities in order to reduce the time to market. So once the pilot is successful, the heat can be immediately transferred to our facility to generate electricity and basically allow us to confirm the pilot performance and success.”

asked by Derek Podhaizer · answered by Doron Blachar

How do you foresee Electricity segment margins developing this year and next, considering new generation, solar, and the impact of weather and Puna rates?

New blend and extend PPAs (40 MW this year, another 40 MW by 2027) are expected to add $7M-$10M and $5M-$6M annually to revenue, respectively, contributing 1-2% margin improvement over the next two years. The company also expects more favorable weather and reduced curtailment, which should improve margins, offsetting Q1's $5M loss on the West Coast despite a $20M gain on the East Coast.

“So between the two, we should see to the revenue improvement of 1% to 2%. In addition to that, we are looking also on the expense side, reviewing our expenses, trying to focus on reduction in expenses.”

asked by Derek Podhaizer · answered by Assaf Ginzburg

What are the opportunities for additional PPAs this year, and can you quantify the capacity eligible for the blend and extend strategy over the next few years?

Ormat is exploring duplicating the Jersey Valley solar-plus-storage model at other assets with free interconnection. Between 2031 and 2034, approximately 190 MW of existing contracts with an average PPA rate in the mid-80s will come off contract, all of which are targets for blend and extend discussions with off-takers.

“Regarding blend and extend, between 2031 and 2034, we have about 190 megawatts that come off contract. Their average PPA rate is in the mid-80s today. And all of them are basically items that we are looking for blend and extend.”

asked by Justin Clare · answered by Doron Blachar

Given the strong Q1 outperformance in storage and products, why is the company reiterating rather than raising full-year guidance?

The Q1 Energy Storage gross margin was exceptionally high at 59%, but the full-year expectation is 35-40% as similar merchant pricing conditions are not forecast for the rest of the year. The company typically updates guidance during the August and November calls, preferring to wait to assess market conditions for the remainder of the year.

“We usually do not increase, decrease or change the guidance during the main call. We usually do it during the August and the November call, and we decided to stick with that. We need to see where the emerging market will be for the remaining of the year, and then we would make that decision.”

asked by Andre Stillman Adams · answered by Assaf Ginzburg

How would the ownership of a commercial EGS power plant work with the SLB joint venture, considering SLB is a service provider and Ormat is an owner/operator?

The pilot with SLB focuses on subsurface EGS solution development. If successful, Ormat would develop new EGS projects, either independently leveraging the JV's knowledge or with the JV supplying services. Ormat, as an owner/operator, would continue to build, operate, and own the power plants, buying subsurface services from the JV where SLB would be the provider.

“SLB, as you know, is a service provider. Ormat is a developer, owner and operator of power plants, and we will both have -- utilize our expertise. So once the JV is successful, we will be buying subsurface services from the JV that SLB will be able to provide, and we will continue to build the power plants and operate them and own them.”

asked by Ben Kallo · answered by Doron Blachar