Ormat Technologies, Inc. (ORA)
Q2 2010 Earnings Conference Call
August 5, 2010 10:00 AM ET
Robert Fink – KCSA Strategic Communications
Dita Bronicki – CEO
Joseph Tenne – CFO
Yoram Bronicki – President and COO
Steve Milunovich – Merrill Lynch
Elaine Kwei – Piper Jaffray and Company
Lasan Johong – RBC Capital Markets
Dilip Warrier – Stifel Nicolaus
Brian Shore – Avondale Partners
Angie Storozynski – Macquarie Research Equities
Brian Yerger – Aerca Advisors
Carter Driscoll – CapStone Investments
Adam Weitzman – Luminus
Good morning, and welcome to the Ormat Technologies Second Quarter Earnings Conference Call. (Operator instructions) Thank you.
I’ll now turn the conference over to Robert Fink of KCSA Strategic Communications. Please go ahead, sir.
Previous Statements by ORA
» Ormat Technologies Inc. Q1 2010 Earnings Call Transcript
» Ormat Technologies Inc. Q4 2009 Earnings Call Transcript
» ORMAT Technologies Inc. Q3 2009 Earnings Conference Call Transcript
Thank you, Carrie. Hosting the call today are Dita Bronicki, Chief Executive Officer; Yoram Bronicki, President and Chief Operating Officer; and Joseph Tenne, Chief Financial Officer.
Before beginning, we would like to remind you that information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company’s plans, objectives, and expectations for future operations and are based on management’s current estimates and projections of future results or trends.
Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2010.
In addition, during this call statements that may be made that include financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission such as EBITDA. These measure maybe difference from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the other financial information prepared and presented in accordance with GAAP.
Management of Ormat Technologies believes that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from in assessing Ormat Technologies’ liquidity, and when planning and forecasting future periods. This non-GAAP financial measure may also facilitate management’s internal comparison to the company’s historical liquidity.
Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanies this call and can be accessed on Ormat’s website at www.ormat.com under the webcast and presentation link as found in the Investor Relations tab.
With that said, I would now like to turn over the call to Dita for her opening remarks.
Thank you, Rob. Good morning to everyone and thank you for joining us. As we review the results of the second quarter, let me emphasis a few points. The results of the quarter are primarily impacted by North Brawley, which is operating a partial load. This has lead to low revenue of $2.5 million and high operating cost of $11.9 million. Second element of the exploration expenses to Gabbs Valley, and third R&D cost related to a rig project at an LNG terminal in Spain, which when completed will be recognized as revenue.
We will discuss later on these call achievements of the important business goals, which will further advance our work claims.
I will turn the call over to Joseph for the review of the quarter financials. Yoram will then update the status of operations and following my remarks, we will open the call to questions.
Joseph, the floor is yours.
Thank you, Dita and good morning, everybody. We’ve included certain financial highlights from our company’s statements of operations and balance sheets in our earnings release and in accompanying slides. I would like now to review the main issues that affected our financial results this quarter, starting with slide four.
For the second quarter of 2010, total revenues were $96.3 million compared to a $99.5 million in the second quarter of 2009.
As you can see on slide five, this quarter the Electricity segment had revenues of $68.8 million, a $9 million increased from the second quarter of 2009. The 15% increase is the result of some additional capacity with North Brawley contributing $3.5 million in this quarter along with increase generation from most of plants in particular the Puna power plant, which is back in full capacity.
Electricity segment revenue increase resulted in slight increase in the average revenue rate of our electricity portfolio from $75 per megawatt hour in the second of 2009 to $78 per megawatt hour in the second quarter of 2010.
In the Product segment on next slide, this quarter, revenues were $27.5 million compared to $39.7 million in the same quarter last year. Revenues and corresponding margins are down from record high in 2009 and we expect that this will continue throughout the year due to a decline in the product backlog from last year’s high levels.
Moving to slide seven, the company’s total gross margin was 19.4% compared to 27.7% in the same period last year. Gross margin for the Electricity segment was 17.7% compared to 25.3% in the same quarter last year. As Dita mentioned, the main contributor to the decrease in the gross margin is related to the North Brawley power plant.
In the Product segment, gross margin was 48.6%, compared to 31.3% for the same quarter last year. The increase is attributable to removal of a contingency thereby enabling us to record revenues for projects that was substantially completed in the second quarter of 2010.