Ormat Technologies Management Discusses Q2 2012 Results - Earnings Call Transcript

Ormat Technologies (ORA)

Q2 2012 Earnings Call

August 02, 2012 10:00 am ET

Executives

Brad Nelson

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

Analysts

Daniel J. Mannes - Avondale Partners, LLC, Research Division

Jesse Pichel - Jefferies & Company, Inc., Research Division

Carter W. Driscoll - Capstone Investments, Research Division

Mark Barnett - Morningstar Inc., Research Division

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

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ormat Technologies Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Brad Nelson of KCSA Strategic Communications. Sir, you may begin your conference.

Brad Nelson

Thank you. Hosting the call today are Dita Bronicki, Chief Executive Officer; Yoram Bronicki, President 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 the 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 operation 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 prescribed in the company's annual report on Form 10-K, filed with the SEC on February 29, 2012.

In addition, during this call, statements may include financial measures as defined as non-GAAP financial measures by the SEC, such as 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 Ormat Technologies believes that EBITDA may provide meaningful supplemental information regarding liquidity measurements that both management and investors benefit from referring to these non-GAAP financial measures 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 the slide presentation accompanying this call may be accessed on the company's website at ormat.com under the IR Events & Presentations link that's found in the Investor Relations tab.

With that all said, I would now like to turn the call over to Dita. Dita, the call is yours.

Yehudit Bronicki

Thank you, Brad, and good morning, everyone. Thank you for joining us today for the presentation of our second quarter 2012 results and outlook for the near future.

The second quarter this year was another strong quarter, both in the financial result of operation and in the progress of our construction activity. Compared to the second quarter last year, total revenue increased 24%, with the Electricity and Product segment revenue increasing 5% and 91%, respectively.

Operating income increased significantly as a result of organic growth and improved operations. Both had helped to offset the impacts of low gas prices on our energy rates under the Ormesa, Heber and Mammoth SO#4 PPA in California.

In June, the McGinness Hills geothermal plant reached full power and met the requirements under the Summit Holdings agreement. And together with the commercial operation of Tuscarora plant, both would present an increase of approximately 9% to our portfolio. With the completion of McGinness and Tuscarora, we have been demonstrated the strength of our vertical integrated structure in moving forth from greenfield development to operation.

In the Product segment, with the recently signed $61.4 million EPC contract with Enel, we were able to maintain an impressive backlog, ensuring high level of revenues for 2013.

Let me turn the call over to Joseph for a review of the financials. Yoram will review operation. And following my remarks, we will open the call for Q&A. Joseph?

Joseph Tenne

Thank you, Dita, and good morning, everyone.

Beginning on Slide 5, total revenues for the second quarter were $129.8 million, a 24.1% increase over revenues of $104.6 million in the second quarter of 2011.

In our Electricity segment, as you can see on Slide 6, revenues increased 4.7% from $81.2 million in the second quarter of 2011, to $85 million in the second quarter of 2012. The increase in electricity revenues is due to $4.1 million in revenues from our Tuscarora power plant which commenced commercial operations in January 2012, and which included a $1.3 million retroactive payment for the first quarter of 2012. Revenue in the second quarter of 2012 also include a $3.8 million net gain from 2 swap contracts with respect to our Puna complex, and a put option transaction with respect to our Standard Offer #4 PPA in California that we entered into in the second quarter of 2012. And $3.5 million net increase in revenues from other power plants. The increase was offset by a reduction of $7.6 million in revenue from our Standard Offer #4 PPA in California, that their energy rate was converted in the beginning of May to viable rate driven by natural gas rates.

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