Others that are here today from the company are Ami Boehm, a newly appointed Director; Hila Ganz [ph], Assistant to the IR Manager; Eyal Hen, Director of Finance; Eram Karim [ph] and the KCSA team to whom we thank very much for organizing or assisting us in organizing this event.As we were preparing for our meeting today, we try to compare the company we were at the IPO less than 8 years ago, and some of you are with us since that time, and the company that we are today. And I must admit, that even we were surprised by the differences. Market cap increased from $0.5 billion to close to $1 billion. Installed capacity nearly doubled. Annual revenue increased to almost $0.5 billion, which is the guidance for this year. We have built an impressive exploration team, very important for future growth. Our land position for future growth increased substantially. Our Product segment is stronger than ever. Our vertical integration was expanded by our drilling capabilities with 9 rigs that we now own and, more importantly or as important, from the technology side, we increased our power generation module to a 20-megawatt in a single module. The business environment became much more supportive for renewable energy. In 2004, the LPAs program in the United States was at its infancy. Today, we rely not only on the 33% LPAs in California for our growth, but very aggressive renewable energy policies throughout the world. During the last few years, we benefited in the U.S. from the ARRA legislation, which is about to expire shortly, or at least, this is our working assumption. But unlike wind, geothermal, we continue to be developed and grow even upon expiration of those incentives. A word about the low natural gas environment. Natural gas prices today in the United States are in the order of $2.5 million BTU. By the way, we have hedged, for this year, our capacity to expected capacity to $3.08 million BTU, a little better than what it is today. But the point I wanted to make is the difference between the $2.5 and $15 million BTU, which are the prices in Japan. We don't believe that this difference is going to remain for a long time. But what we will share with you is what we are planning to do in the interim and we do have paved some plans in the interim, and this is going to be part of the agenda today.
Other items on the agenda, should have rehearsed it before, I'm sorry. Other items on the agenda today would include the presentation of our operations by Yoram, Gillon will make a short presentation on FIMI; Nadav and Rahm will discuss PPAs and standard offer number 4, the contracts that are impacted by natural gas prices; Bob will describe the history of the McGinness project, one of the announcements of the day. And Joseph will provide some useful modeling information on interest expenses and on tax aspects of our activity.We'll conclude the day, after Q&A, with a -- in closing remarks with lunch, and you're all invited. What I would ask you is to note your questions during the presentation and save them for the end when we will all come up and be available to answer questions. Yoram, your turn. Yoram Bronicki I need to do anything? So good morning, everybody, and thanks for coming. Really, what I would like to, as you've seen in the agenda, there is a -- we're trying to provide sort of a continuum of updates, especially on the business development side and how projects are coming together. But what I would like to do is take a chance, to take the time today to review what happened in operations. A lot of this is really since our last Analyst Day, which was in April 2010, but I will make reference to how we really evolved our operations from 2007 onwards, and I think that we're very pleased and I think that you'll be impressed actually taking this -- looking back and seeing how far we have progressed. I think that when we look at our operations, of course, we have currently about 580 megawatts of capacity. This generates a steady cash flow for the most part. And a lot of the results are really hidden in all the good things that we have done there. And it's -- sometimes, when you look at specific ratios like our cost to operate on $1 to megawatt hour produced and so on, this is when you can actually see all the work and all of the learning that went into the product. As most of you have heard time and again, Brawley has been a big impact and somewhat a mask on all the good things that we have done in operation. We've made steady progress in Brawley and I'd like to really address that. Talk to you a little bit about projects under construction and give some news in that area. And then, give you an update on exploration. What we have done in exploration? How things have changed in exploration? And why when you analyze Ormat, maybe a little bit in the industry, but especially Ormat, you should look at our recent accomplishments as a measure of what we have changed, both in the way that we do exploration and also in the way that we do field development. And then I would like to touch a little bit about our Product segment, which has been very strong or we expect to be very strong in the next 2 years. But really, as much as it is fluctuating, if you look -- if you take a 5-year look, then you can see that this is really a very impressive segment by itself.
So really, just 2 numbers, looking at our actual generation, not nameplate capacity but actual generation from 2007 through 2011, you can see the substantial growth. It does come a little bit in steps. If you look at 2011 and 2012, during those 2 years, we're working on 3 very important projects. Some of them have been completed already. Some of them will be completed later on. And so, you can expect the jump from a certain capacity to another capacity. But if you look at the trend, we have made a lot of progress. And the interesting thing about choosing 2007 as the beginning of this chart is that we haven't done any substantial acquisitions since 2007. Actually, we lost a little bit of capacity with the end of our BOT contracts in the Philippines. So all of this is being accomplished by improving plants, expanding fields and by greenfields.But as you know, operations, in general, the operating plants cannot control their contract rates. Their way to increase revenue from an existing facility, an existing contract is typically by making sure that we maximize the use of the field and maximize capacity or generating capacity, capacity factor. What we do have control over, to some extent, are costs. And the slide on the right is also an interesting view of how in nominal dollars, our cost to generate the megawatt hour have changed over the years. If we focus first on the gray bars, which is really the full picture, then you can see that the cost to generate a megawatt hour in 2011 has been less than that in 2007, and this is without any corrections for inflation and general cost, which have escalated. So basically, we were able, with all challenges that we had in different projects, we're able to control cost and, actually, reduce cost in real numbers.
If you look at the 2 white columns, they are our cost without the impact of Brawley. If we actually take the impact of North Brawley away then you can see that the reduction in cost has been very steady, and again, very impressive. How have we done that? It's really 3 major elements. The first one is the strategy of developing scale both on a company level, on a corporate level, but especially on a regional level. Expanding operating plants by creating satellite facilities. Sometimes, if you expand an existing field, that's of course, it's a no-brainer in many ways. But even our development in Nevada, development in California and even the development of the heat recovery system, all of this has been done by creating centers of operations. Sometimes, people have to travel 30, 40, 50 miles from that center of operation, but using technology, we can actually leverage existing manpower into expanding generating capacity.So this is the first element. It's development strategy of how we expanded our facilities. The other one is really leveraging technology, whether it's a technology that allows us to use less people for the same or to make more megawatts from the same number of people. But the other elements of technology are how to leverage things that we have learned on the performance of equipment, where do we need to improve equipment so that an issue that came up in one plant in Kenya is not only repaired in Kenya with upgraded Equipment, but is also, we're also taking care of anywhere else in the fleet to prevent it from occurring and causing us downtime and costs. And then, the third element is really leverage -- leverage the scale of the company either on the supply chain, buy smarter, buy cheaper. Or what has been more important is to find out areas where, yes, it's a small company or it's a standalone facility, it makes no sense to get those resources in place. You cannot control the resources and you have to buy them from somebody else. And to move into creating operating facilities or operating groups that provide shared services in areas that standalone facility or a small geothermal player just cannot afford to have.
So 2 examples, the first one is really a chart that shows that the 2 lines are pretty much the same. One is based on generation, the other is based on installed capacity. But just to show the transmission -- I'm sorry, the transition in terms of how many megawatts or how many megawatt hours with a single operator in our fleet responsible for generating in 2005 where the number is about 10-megawatt hour by employee. There's probably a factor of 1,000 there. It's probably somewhere around 10,000-megawatt hours, but just forget it for now. So 10,000-megawatt hours per employee to move into around 20,000-megawatt hours per employee, if I haven't skipped in order of magnitude. And with employees or people being our single most expensive cost in operating plants, this has been a very dramatic change.The other area which shows what we can do today when we have the scale and also the expertise is what we have done on oil field maintenance. As Dita mentioned, we currently own about 9 rigs. They're used across the fleet for different activities, but among the 9 rigs, we have 4 rigs that are used for oil field maintenance, Whether it's pump replacement or for the repair of existing wells. And back in 2005 or 2006, all of this work was contracted, all of this work was third-party work. And as of 2011, all of this work is done in-house. Why is it important? First, there's an element of price. As the oil field, oil and gas business was booming, prices went up, although just because the supply and demand, not because the work became more complicated and we were paying a lot more money for the same service in 2009. And this is one element, which sometimes you can address with your suppliers. It doesn't have to be like this, but this is one element. But probably, a more important element is the fact that there are not too many geothermal rigs, and they tend to be -- their owners tend to try and keep them busy. And so when the well fails or if the well requires work, somewhere in one of our operating facilities, often, we had to wait for a rig to become available somewhere and be moved by road for 1,500 miles or more than that. And this is all money that is lost. And so, when you do the analysis, actually, owning equipment and keeping it idle in many cases made more sense than waiting for 3 or 4 or 5 weeks for a vendor to come in and do the job. So many, many examples, but this is how we have leveraged both scale and technology to drive our cost of operation down.
I'd like to move into a little bit of an update on North Brawley, and for those of you who don't remember, in Brawley, we had really 2 separate issues. The first was very high cost to operate, which resulted in a negative EBITDA out of the plant. Where every -- or not every, but many of the line items, many of the activities that had to be done were more expensive in Brawley than anywhere else across our fleet. So this has been the first element that made Brawley challenging. The other element was just the ability to bring generation up. Brawley is supposed to make about 100,000-megawatt hours per quarter. As you see can see in this slide, it has been operating at somewhere between 50% and 35% of that in terms of capacity.What were the issues that drove cost up? The first issue has been sand production, and I think that you heard that substantially. But the other part was premature failure of our production pumps. When the production pumps fail, 2 things happen. First of all, we cannot generate power, and that's a negative impact by itself. The other part is that the cost of replacing the pump itself was very high, both the cost of the pump, but also the work that is required in pulling the pump from around 1,600 feet deep in the ground, pulling it back to surface and putting a new pump in. And our focus, if we look 5 quarters back, our focus has been to try and to reduce sand production or find ways to deal with sand production, so that it doesn't become so costly or prevents us from operating. And as we moved away from dealing with the sand, the issue has been how to increase the run life of our production pumps.
And what you can see is and if you look at -- I'm sorry, if you look at the bottom line, at the EBITDA, you can see the improvement that we have made that was done through, first, only choosing the right wells to operate, only the wells, because not all the wells are equal in North Brawley, I'm talking a little bit about it further. But only operate the wells that seem to be making money. And as we find solutions to the pump issues and as we got more confidence that the pumps that we were using were the pump assemblies that we're putting in the ground were good enough, basically we added additional pumps and drove generation up.Read the rest of this transcript for free on seekingalpha.com