Ormat Technologies' CEO Discusses Q1 2011 Results - Earnings Call Transcript

Ormat Technologies (ORA)

Q1 2011 Earnings Call

May 05, 2011 9:00 am ET


Rob Fink - IR, KCSA Strategic Communications

Smadar Lavi - VP of Corporate Finance and IR

Yehudit Bronicki - Chief Executive Officer, Director, Chairman of Compensation Committee, Chief Executive Officer of Ormat Industries, President of Ormat Systems, General Manager of Ormat Industries and Director of Ormat Industries

Joseph Tenne - Chief Financial Officer, Principal Accounting Officer and Chief Financial Officer of Ormat Industries Ltd

Yoram Bronicki - President, Chief Operating Officer, Director and Director of Ormat Industries


Benjamin Kallo - Robert W. Baird & Co. Incorporated

Elaine Kwei - Jefferies & Company, Inc.

Carter Driscoll - Capstone Investments

Paul Clegg - Mizuho Securities USA Inc.

Mark Bennett

Matthew Farwell - Imperial Capital, LLC

Timothy Arcuri - Citigroup Inc

Thomas Daniels - Stifel, Nicolaus & Co., Inc.

Daniel Mannes - Avondale Partners, LLC

Unknown Analyst -



Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn conference over to Rob Fink, with KCSA to begin.

Rob Fink

Thank you. Hosting the call today are Dita Bornicki, Chief Executive Officer; Yoram Bronicki, President and Chief Operating Officer; Joseph Tenne, Chief Financial Officer; and Smadar Lavi, Vice President in Corporate Finance and Investor Relations.

Before beginning, we would like to remind you the information provided during this call may contain forward-looking statements related 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, projections of future results or trends. Actual future results may differ materially from those projected as the result of certain risks and uncertainties.

For a discussion of such risks and uncertainties, please see risk factors as described in the annual report on Form 10-K filed with the SEC on February 28, 2011. In addition, during this call, statements may include financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission, such as EBITDA and adjusted EBITDA.

The presentation of financial information is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with GAAP.

Management of the Ormat Technologies believe that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from referring to this non-GAAP financial measure 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 over the call over to management, I would like to remind everyone that the slide presentation accompanying this call may be accessed on the company's website, www.ormat.com. Under the events calendar (sic) [IR and Presentations] link, as found in the Investor Relations tab.

With that, I would now like to turn the call over to Yoram.

Yoram Bronicki

Good morning, everyone, and thank you for joining us today for the presentation of our first quarter 2011 results and outlook for the near future. Before reviewing the results of the quarter, I would like first to address North Brawley. As has been the case for the past several quarters, operating expenses at North Brawley have overshadowed the strong performance of most of all clients'. The unique operational challenges in North Brawley limit our ability to forecast operational progress and expected timeline. We plan to continue to update on a quarterly basis on our efforts and plans to reach operational balance. However, we will not guide on the expected timeline as long as uncertainty remains high. With that, I would like to begin with a review of the first quarter operational updates. Joseph will continue and provide financial review and Dita will conclude with business and regulatory updates.

Starting with Slide 5. The highlights of the quarter was an 18% increase in total revenue. The growth was driven by strong electricity generation across most of our portfolio as well as an increase in the Product segment. The total generation from our U.S. and international power plants increased 14% from approximately 918,000-megawatt hours in the first quarter of 2010 to over 1 million-megawatt hours in the first quarter of 2011.

Noteworthy contributors compared to last year were the OREG facilities, Puna operating at normal capacity and the full benefit of the Mammoth complex. We're continuing to work through the issues of North Brawley. The East Brawley injection fields has provided a relief but it's not sufficient to solve our injection needs. We spent substantial efforts in an improvement to our production pump and has applied this in most of the operating pumps. Further modifications will be needed over time but we think that this will allow a significant movement in the service life of the production pumps which are now the highest operating costs of the complex.

As we've been operating new wells, sand production has been fairly high but associated costs has been under control and we have been working on ways to further reduce sand separation costs. The injection in the eastern field is not as good as we had expected and we are drilling 1 more producer on the eastern side and hope for a better balance between east and west.

A capacity demonstration test was conducted with production at 33 megawatts and we have the ability to retest before April 2012. We plan to connect our new East Brawley well and rebalance cost. We will continue to target deeper injection and look for deeper production.

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