Ormat Technologies Inc. ( ORA)

Q3 2010 Earnings Call

November 3, 2010 09:00 am ET


Marybeth Csaby - KCSA Strategic Communications

Dita Bronicki - CEO

Joseph Tenne - CFO

Yoram Bronicki - President & COO


Ben Kallo - Robert W. Baird

Gregg Orrill - Barclays Capital

Elaine Kwei - Jefferies

Michael Lapides - Goldman Sachs

Lasan Johong - RBC Capital Markets

Steve Milunovich - Band of America Merrill Lynch

Brain Shore - Avondale Partners, LLC



Good morning. My name is Wes, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ormat Technologies third quarter conference call. All lines have been placed on mute, to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator instructions.) Thank you. I'll now turn the conference over to Marybeth Csaby with KCSA strategic communication.

Marybeth Csaby

Yes good morning and thank you Wes. Hosting the call today are Dita Bronicki, Chief Executive Officer; Yoram Bronicki, and Chief Operating Officer; Joseph Tenne, Chief Financial Officer; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations.

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 include financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission such as adjusted EBITDA. This measure may be different 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 financial information prepared and presented in accordance with GAAP.

Management of Ormat Technologies believes that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurements that both management and investors benefit from and accesing Ormat technologies liquidity and we are planning and forecasting future period. This non-GAAP financial measure may also facilitate management's internal comparison to the company's historical liquidity.

Before I open the call over to management, I would like to remind everyone that a slide presentation accompanies this call and can be access on company’s website at www.ormat.com under the web cast and presentation link as found in the Investor Relations tab. With that said, I would like to turn the call over to Dita. Dita the call is yours.

Dita Bronicki

Thank you, Marybeth and good morning everyone and Thank you for joining us. The highlight of the quarter is the electricity segment. Revenue were up 23%, production is up 20% and more importantly (inaudible) in public which move to start of constructions and there will be ITC cash grant is substantial.

We are planning to placing service approximately 120 MW by the end of 2013 in the United States. We will elaborate on these another developments during the call. I return the call over to Joseph for review of the quarter financial. I'll then update the (inaudible) of operation and following my remarks we will open the call to questions. Joseph, the floor is yours.

Joseph Tenne

Thank you, Dita and good morning everybody. We have included seven financial highlights from our company statements of operations and balance sheets in our earnings release and in the accompanying slides.

Please note, that some of the comparative figures have been revised to get effect to get effect to a rite of cost associated with project which we determined in the third quarter of 2009 would not support commercial operations. I would like now to review the main issues which effected of our financial results this quarter starting with slide 4.

This quarter that electricity segment have revenues of $83.4 million, $15.5 million increase from the first quarter of 2009. The 22.7% increase in the results is a result of additional generation and capacity with Puna, North Brawley and the Mammoth complex being the major contributors.

The increase in electricity segment revenues is also positively reflected by an increasing average revenue rate of our (inaudible) portfolio from $87 per megawatt hour in the third quarter of 2009 to $89 per megawatt hours in the third quarter of 2010.

In the product segment on the next slide this quarter revenues were $18.1 compared to $51.1 in the same quarter last year. We expect revenues and corresponding margins to get down from last years high and expect this which continues throughout the year due to a decline in product for the backlog from last years record levels.

For the third quarter of 2010, total revenues were $101.5 million compared to $119 million in the third quarter of 2009 as shown in slide six.

Depreciation in the quarter amounted to $23.4 million.

Moving to slide seven, the companies total gross margin was 24.8% compared to 32.9% in the same period last year. Gross margin for this electricity segment was 26.2% compared to 35.1% in the same quarter last year.

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