Ormat (ORA) Q4 FY25 earnings call: guidance and Q&A

What is the additional opportunity for proactive blend and extend PPAs, and what capacity is coming up for renewal in 2026-2028?

Ormat has 40 MW of blend and extend PPAs in the approval phase, with a few more assets in the 3-5 year timeframe. The next significant wave of contracts for recontracting is mainly in 2032 and 2033. Recent PPA wins with hyperscalers are driving utilities' willingness to secure baseload geothermal energy through blend and extend agreements.

“The contracts that are being blend and extend are contracts that end, as you said, in the next 3 to 5 years. We have one more contract in this time frame that we are looking to blend and extend. The next wave of contracts actually that are looking for recontracting are mainly in 2032 and 2033, that is Jersey Valley, Don Campbell, McGuinness 1, Tungsten.”

asked by Justin Clare · answered by Doron Blachar

Could you quantify the Q4 curtailment impact and provide expectations for 2026 curtailment levels?

Q4 curtailment was around $3.5 million. For the full year 2026, Ormat expects curtailment to be $4 million to $5 million, possibly slightly higher, a significant reduction from the $18.6 million in 2025. This improvement is mainly due to reduced expectations from NVE and no significant Q1 curtailments like the California fires in 2025.

“I'll start by saying that the curtailment in Q4 did lessen. We saw around [ $3.5 billion ] of curtailment in Q4. I will say that for the full year 2026, we are not expecting more than $4 million to $5 million, maybe slightly higher than that.”

asked by Justin Clare · answered by Assaf Ginzburg

What are the expectations for Electricity segment gross margin in 2026 compared to 2025, considering the discussed factors?

Ormat expects a 1% to 2% increase in Electricity segment gross margin for 2026, which translates to approximately $14 million to $15 million. This is in line with the expected reduction in curtailments. However, Puna prices are currently slightly lower, which is factored into the cautious guidance.

“Yes, we do expect anywhere from 1% to 2% increase in gross margin. It's around $14 million, $15 million in total, which is in line with the difference in the curtailment.”

asked by Justin Clare · answered by Assaf Ginzburg

How does the Google PPA portfolio structure serve as a model for future activity, and what optionality does it provide for development?

The Google PPA, which is for up to 150 MW, provides Ormat with the confidence to continue investing in exploration and greenfield development, knowing there's a strong and profitable PPA if successful. This structure aligns with Google's need for clean energy and allows Ormat to grow significantly in the coming years, potentially leading to additional PPAs beyond the current 2030 timeframe.

“And the structure of the PPA basically, which is up to allows us, on one hand, to know that we have a PPA, a very strong and profitable PPA if we are successful on the exploration. And it basically give us the confidence to continue with this investment and exploration effort that we are doing that will grow significantly the company in the coming years.”

asked by Noah Kaye · answered by Doron Blachar

Could you explain the mechanics behind the $675 million CapEx guide becoming $575 million net, and the timing of the Topp 2 conversion?

The $675 million CapEx guide is reduced to $575 million net due to the sale of the Topp 2 plant for approximately $100 million. This sale, which closed in Q1, will generate about $100 million in product segment revenue with a 20% gross margin, boosting Q1 results. In the cash flow statement, this will appear as a sale of assets offsetting CapEx, alongside the $80.5 million M&A for Hoku.

“So in Q1, we closed the sale of the Topp 2 transaction to our customer after he basically exercised his option to buy the asset. As a result, you will see through the P&L around $100 million of revenue with approximately 20% margin that will boost Q1 results. And what you will see in the financials in addition in the cash flow section, you will see a line item that will be a sale of assets that will offset the CapEx.”

asked by Noah Kaye · answered by Assaf Ginzburg

Given the variance in EGS technologies, would Ormat consider additional partnerships beyond Sage Geosystems and SLB to spread risk and increase the probability of success?

Ormat is actively pursuing a strategy of spreading risk by engaging with multiple EGS approaches. The partnerships with SLB and Sage Geosystems are part of this, and the company is discussing cooperation agreements with other EGS developers. Ormat believes EGS has the potential to significantly expand the geothermal industry and is focused on capturing this opportunity by exploring various technological ideas and building internal capabilities.

“That's exactly the way that we are operating, the reason that we have started the joint venture with SLB and also signed a commercial agreement with Sage and invested in Sage, is exactly, as you say, multiple approaches to EGS.”

asked by Hannah Velásquez · answered by Doron Blachar

What is Ormat's take on the recent guidelines for energy storage, particularly regarding safe harbor before the July deadline and the impact of FEOC?

Ormat has safe harbored over 1 GW of projects, including the 100 MW Griffith facility, over the last year, covering the majority of its interconnection for 2028-2029. The company expects the FEOC (Foreign Entity of Concern) rules will not significantly impact them due to increasing battery capacity from outside China and growing U.S. production. Ormat's strong position in the California queue should enable the release of additional projects.

“Ormat, over the last year, have safe harbored over 1 giga of project, and we plan to install and use it over the next few years. I will start by saying that Griffith, which is a 100-megawatt, 400-megawatt hour, which is our largest project was also safe harbor.”

asked by Mark W. Strouse · answered by Doron Blachar

When will Ormat update longer-term targets beyond 2028, and how is the company preparing its infrastructure (employees, financing) for the potential scale of EGS development?

Ormat plans to provide longer-term megawatt targets at an Analyst Day in September. The company is actively preparing for the potential transformation from EGS by increasing exploration efforts, seeking larger land positions in new states, and adapting its binary technology for large-scale power plants. They are also working on how to manufacture more turbines and heat exchangers to scale Ormat's efforts, ensuring readiness if EGS technology proves successful.

“We are planning an Analyst Day in the September time frame. And at that time, we will give longer-term targets for megawatt.”

asked by Ben Kallo · answered by Doron Blachar