Ormat Technologies, Inc. · NYSE:ORA

Ormat Technologies — Q4 2018 Earnings Presentation

44 slides from Ormat Technologies's earnings presentation, Feb 27, 2019

  1. Slide 1: Fourth Quarter and Year-End 2018 Earnings Call

    ORMAT TECHNOLOGIES, INC. FOURTH QUARTER AND YEAR-END 2018 EARNINGS CALL FEBRUARY 27, 2019 Copyright © 2019 Ormat Technologies, Inc.

  2. Slide 2: Safe Harbor Statement

    SAFE HARBOR STATEMENT This presentation includes Forward-Looking Statements and the disclaimer should be read carefully Forward-Looking Statements This presentation, and information provided during any discussion accompanying this amounts for 2020 growth (MW) or 2022 operational performance metrics

  3. Slide 3: Non-GAAP Metrics

    NON-GAAP METRICS Reconciliation to US GAAP Financial Information This presentation includes certain “non-GAAP financial measures” within the meaning of Regulation G under the Securities Exchange Act of 1934, as amended, including EBITDA and Adjusted EBITDA. The presentation of these non-GAAP financi

  4. Slide 4: Fourth Quarter and Full Year 2018 Prepared Remarks

    FOURTH QUARTER AND FULL YEAR 2018 PREPARED REMARKS • Q4 and FY 2018 highlights: Isaac Angel, CEO • Financial overview: Doron Blachar, CFO • Operations & business updates: Isaac Angel, CEO • Q&A Copyright © 2019 Ormat Technologies, Inc. 4

  5. Slide 5: Q4 and YE 2018 Highlights

    Q4 AND YE 2018 HIGHLIGHTS % FY FY % Q4 2018 Q4 2017 ($ millions, except per share amounts) Change 2018 2017 Change Revenues Electricity 138.3 128.0 8.0% 509.9 465.6 9.5% Product 49.7 37.9 31.3% 201.7 224.5 (10.1%) Other 2.4 0.5 7.6 2.7 179.4% Total Revenues 190.5 166.4 14.5% 719.3 692.8 3.8% Gross m

  6. Slide 6: Financial Results

    FINANCIAL RESULTS DORON BLACHAR, CFO Copyright © 2019 Ormat Technologies, Inc. 6

  7. Slide 7: FY 2018 - Total Revenues

    FY 2018 - TOTAL REVENUES Total revenues Total cost of revenues Segment contribution +$26.5M (3.8%) +24.5M (5.8%) 1.1% 28.0% $719.3 $692.8 2018 70.9% $448.8 $424.4 0.4% 32.4% 2017 67.2% 2017 2018 2017 2018 Electricity Product Other Copyright © 2019 Ormat Technologies, Inc. 7

  8. Slide 8: FY 2018 - Electricity Segment

    FY 2018 - ELECTRICITY SEGMENT Revenues Cost of revenues +$44.3M (9.5%) +$31.4M (11.8%) $509.9 $465.6 $298.3 $266.8 2017 2018 2017 2018 The increase in revenues was primarily attributable to: • $34.4M - commencement of Platanares power plant in Sept. 2017 • $21.4M - consolidation of USG which was acq

  9. Slide 9: FY 2018 - Product Segment

    FY 2018 - PRODUCT SEGMENT Revenues Cost of revenues -$22.7M (-10.1%) -$11.4M (-7.5%) $224.5 $201.7 $152.1 $140.7 2017 2018 2,017 2018 Copyright © 2019 Ormat Technologies, Inc. 9

  10. Slide 10: FY 2018 - Other Segment

    FY 2018 - OTHER SEGMENT Revenues Cost of revenues +$4.9M (179.4%) +$4.5M (82.1%) $9.9 $7.6 $5.4 $2.7 2017 2018 2017 2018 The Other segment includes revenues from the provision of energy storage demand response and energy management services by our Viridity business following the acquisition of subst

  11. Slide 11: YE 2018 - Total Gross Profit and Margin

    YE 2018 - TOTAL GROSS PROFIT AND MARGIN Gross profit Gross margin $268.5 $270.4 38.7% 37.6% 2017 2018 2017 2018 Copyright © 2019 Ormat Technologies, Inc. 11

  12. Slide 12: YE 2018 - Gross Margin by Segment

    YE 2018 –GROSS MARGIN BY SEGMENT Electricity gross margin Product gross margin Other gross margin 42.7% 41.5% 32.2% 30.3% 2017 2018 2017 2018 2017 2018 -29.2% -98.3% Copyright © 2019 Ormat Technologies, Inc. 12

  13. Slide 13: YE 2018 - Selling and Marketing, and G&A Expenses

    YE 2018 - SELLING AND MARKETING, AND GENERAL AND ADMINISTRATIVE EXPENSES Selling and marketing expenses General and administrative expenses +$4.2M (26.9%) +$4.9M (11.4%) $47.8 $42.9 $19.8 $15.6 2017 2018 2017 2018 • This increase was primarily due to $5.0M • The increase was primarily attributable t

  14. Slide 14: YE 2018 - Operating Income

    YE 2018 - OPERATING INCOME Total operating income -$19.9M (-9.7%) $205.0 $185.1 2017 2018 The decrease was primarily attributable to: • Decrease in our Product segments gross margin • $5.0M termination fee of Galena 2 PPA • Increase in general and administrative expenses • Goodwill impairment charge

  15. Slide 15: YE 2018 - Operating Income (Loss) by Segment

    YE 2018 - OPERATING INCOME (LOSS) BY SEGMENT Electricity segment Product segment Other segment -$2.1M (-1.3%) -$12.4M (-24.6%) -$5.4M (-171.5%) $157.6 $155.5 $50.5 $38.1 2017 2018 2017 2018 2017 2018 (3.1) (8.5) Copyright © 2019 Ormat Technologies, Inc. 15

  16. Slide 16: YE 2018 - Interest Expense, Net

    YE 2018 - INTEREST EXPENSE, NET Interest expense, net +$16.8 (31.0%) $70.9 $54.1 2017 2018 This increase was primarily attributable to • Acquisition of USG - interest expense associated with approx. $100M loans of USG • $4.5M increase in interest expense related to the sale of tax benefits • Higher

  17. Slide 17: YE 2018 - Income Tax Provision

    YE 2018 - INCOME TAX PROVISION $34.7 $21.7 2017 2018 Our annual effective tax rate, excluding mainly the impact of the valuation allowance release in 2018 is approximately 42%. Copyright © 2019 Ormat Technologies, Inc. 17

  18. Slide 18: YE 2018 - Net Income Attributable to Stockholders & EPS

    YE 2018 - NET INCOME ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS & EPS Net Income attributable to the EPS2 Company's Stockholders ($M) $155.2 $3.06 $132.4 $2.61 $106.1 $2.08 $98.0 $1.92 2017 2018 2017 2018 2017 2018 2017 2018 Adjusted1 Adjusted1 (1) Adjusted net income attributable to the company's s

  19. Slide 19: Fourth Quarter 2018 Revenues

    FOURTH QUARTER 2018 REVENUES Total Electricity Product Other $190.5 $166.4 $138.3 $128.0 $49.7 $37.9 $0.5 $2.4 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Copyright © 2019 Ormat Technologies, Inc. 19

  20. Slide 20: Fourth Quarter 2018 Gross Margin

    FOURTH QUARTER 2018 GROSS MARGIN Total Electricity Product Other 54.0% 47.7% 42.8% 38.7% 32.2% 28.7% 7.9% Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 -304.6% Copyright © 2019 Ormat Technologies, Inc. 20

  21. Slide 21: Fourth Quarter 2018 Operating Income

    FOURTH QUARTER 2018 OPERATING INCOME $19.6M (40.5%) $68.0 $48.4 Q4 2017 Q4 2018 Copyright © 2019 Ormat Technologies, Inc. 21

  22. Slide 22: Fourth Quarter 2018 Income Before Income Taxes

    FOURTH QUARTER 2018 INCOME BEFORE INCOME TAXES AND EQUITY IN LOSSES OF INVESTEES ($M) +$8.3M (20.7%) $48.3 $40.0 Q4 2017 Q4 2018 Copyright © 2019 Ormat Technologies, Inc. 22

  23. Slide 23: Fourth Quarter 2018 Net Income and EPS

    FOURTH QUARTER 2018 NET INCOME ATTRIBUTABLE TO THE COMPANY’S SHAREHOLDERS AND EPS Net income attributable to the Company’s shareholders Earnings per share -$46.4M (71.8%) $64.6 $64.6 $1.27 $1.27 $21.3 $0.42 $0.36 $18.2 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2017 2018 2017 2018 2017 2018 2017 2018 Adjusted(1) Adjus

  24. Slide 24: Fourth Quarter 2018 Adjusted EBITDA

    FOURTH QUARTER 2018 ADJUSTED EBITDA1 ($M) Total adjusted EBITDA Electricity segment Product segment Other segment $25.7M (29.4%) +$21.8M (27.3%) $6.1M (68.8%) $113.2 $101.7 $87.4 $79.9 $15.0 $8.9 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 ($1.4) ($3.6) Q4 17 Q4 18 Q4 17 Q4 18 Q4

  25. Slide 25: FY 2018 - Adjusted EBITDA

    FY 2018 - ADJUSTED EBITDA1 ($M) Total adjusted EBITDA Electricity segment Product segment Other segment $24.1M (7%) +$43.9M (15.5%) -$14.3M (-23.3%) $343.8 $368.0 $327.6 $283.7 89% of total adjusted EBITDA 83% of total adjusted EBITDA $61.5 $47.2 2017 2018 2017 2018 2017 2018 2017 2018 ($1.4) ($6.8)

  26. Slide 26: YE 2018 - Cash and Cash Equivalents and Restricted Cash

    YE 2018 - CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ($M) $145.8 $258.5 $114.7 $107.5 $95.1 $62.8 $100.0 $26.8 $13.1 $3.8 $32.4 $177.5 $27.0 $96.6 $3.2 $10.4 Cash USG Mountain Proceeds Revolving OPIC Cash USG Paid Investment December December Other Dec.31, Other Insurance CapEx Long Dividen 31, 2

  27. Slide 27: Payment of Principal Due by Period

    PAYMENT OF PRINCIPAL DUE BY PERIOD ($M) AVERAGE INTEREST RATE: 5.0% Q1-2019 Q2-2019 Q3-2019 Q4-2019 Year 2019 Long-term non-recourse debt & limited recourse debt 7.4 7.4 7.4 7.4 29.7 Senior Secured Notes (non-recourse) due 2033 7.8 9.6 4.8 11.3 33.5 Long-term loans (full recourse) 0.0 2.5 0.0 2.5 5.

  28. Slide 28: 2018 Financing Activity

    2018 FINANCING ACTIVITY • Successfully raised $260M • $114.7M for the 35 MW Platanares geothermal power plant in Honduras with OPIC • Additional $10M is expected during the first half of 2019 • Raised $33.4M as part of Tungsten Mountain tax equity partnership. Additional $13M is expected to be recei

  29. Slide 29: Operations & Business Updates

    OPERATIONS & BUSINESS UPDATES ISAAC ANGEL, CEO Copyright © 2019 Ormat Technologies, Inc. 29

  30. Slide 30: Delivering Growth and Expanding Geographical Footprint

    DELIVERING GROWTH AND EXPANDING GEOGRAPHICAL FOOTPRINT 2018 portfolio growth summary: December 2018, McGinness Hils Phase 3, Nevada, U.S. 115 MW 6 2 of new capacity new power plants new states - U.S. April 2018, acquired Raft River, U.S. Idaho, U.S. Kenya Indonesia May 2018, NIL 2, Sarulla, June 201

  31. Slide 31: Global Portfolio (910 MW)

    GLOBAL PORTFOLIO (910 MW) U.S. 622 MW Guadeloupe Guatemala 15 MW 43 MW Honduras Kenya Indonesia 38 MW 150 MW 42 MW(1) • Main generating capacity adjustments taking advantage of a higher performing resource at: • McGinness Hills - adjusted to 140 MW from 138 MW • Brady – adjusted to 26 MW from 22 MW

  32. Slide 32: Generation – 6.9% Increase Year over Year

    GENERATION – 6.9% INCREASE YEAR OVER YEAR • 6.9% increase year over year • 2018 generation was positively affected by Platanares, Tungsten Mountain, Olkaria III plant 1 expansion, and USG power plants; • Partially offset by a decrease in generation due to :the outage related to Puna shutdown Generat

  33. Slide 33: Update on Puna Plant in Hawaii

    UPDATE ON PUNA PLANT IN HAWAII • Working rapidly to resume operation of our Puna power plant following the Kilauea volcano erupted • Access road to the site - completed • Mobilizing of a workover rigs from the mainland to Hawaii - completed • Drilling of new fresh water well - completed • Removing t

  34. Slide 34: Update on Puna Plant in Hawaii - Insurance

    UPDATE ON PUNA PLANT IN HAWAII • Insurance Update • Property Insurance • All insurers accepted our claim and started to pay the costs to rebuild the destroyed items including the substation • Business Interruption • Some insurers accepted that coverage starts at May 2018 and paid so far approximatel

  35. Slide 35: Growth Plan

    GROWTH PLAN • Added 115 MW YTD from organic growth and acquisition • Expect adding between 127 MW and 142 MW by the end of 2021(1) • Continue to look for M&A opportunities Projected Project Expected COD PPA Capacity U.S - Tungsten Solar 7 AC MW Q1 2019 v U.S - Steamboat Hills Enhancement 19 MW 2020

  36. Slide 36: Development and Exploration Pipeline to Support Future Growth

    DEVELOPMENT AND EXPLORATION PIPELINE TO SUPPORT FUTURE GROWTH 38 prospects under exploration and development to support our growth targets U.S. Central America & Caribbean Africa Asia Pacific Nevada 18 sites Guatemala 2 sites Ethiopia 4 sites New Zealand 1 site California 4 sites Honduras 1 site Ind

  37. Slide 37: Product Segment

    PRODUCT SEGMENT • Backlog of $ 216.8M as of February 26, 2019 • The backlog includes revenues for the period between January 1, 2019 and February 26, 2019 • 96% Geothermal contracts • Signed new contract in Turkey for approx. $28 million • Backlog excludes contract that was agreed but not yet signed

  38. Slide 38: Energy Storage

    ENERGY STORAGE • Two 20MW/20MWh utility scale energy storage systems in New Jersey • One system is in operation • Second system is expected be operational during Q1 2019 • New 10MW/12.5MWH system under construction in Georgetown, Texas • provide frequency regulation and load shifting services to ERC

  39. Slide 39: Capital Needs for the Remainder 2018

    CAPITAL NEEDS FOR THE REMAINDER 2018 Capital needs ($M) Construction & enhancements $159 Maintenance CapEx (including drilling in Puna) $57 Storage activity $14 Exploration $11 Manufacturing facility $9 Total CapEx $250.0 Long-term debt repayment $68 Copyright © 2019 Ormat Technologies, Inc. 39

  40. Slide 40: 2019 Guidance

    2019 GUIDANCE 2019 Revenue Guidance ($M) Electricity revenues 530-540 Products revenues 180 – 190 Other revenues(1) 10-12 Total expected revenues 720-742 2018 Adjusted EBITDA Guidance ($M) Adjusted EBITDA(2) 370-380 2019 guidance excludes any impact from Puna. operation or expected business interrup

  41. Slide 41: Summary – Continuing Execution

    SUMMARY – CONTINUING EXECUTION Improve Organic Strategic New efficiencies growth M&A activities Three new power plants under electricity segment gross Added approximately the US Geothermal acquisition margin: 42% 77 MW 38 MW of organic growth and future prospects Commission in the last 12 Increased

  42. Slide 42: Thank You!

    THANK YOU! Contact IR: Smadar Lavi VP Corporate Finance and Head of Investor Relations 775-356-9029 (ext. 65726) [email protected] 42 Copyright © 2019 Ormat Technologies, Inc.

  43. Slide 43: Reconciliation of EBITDA and Adjusted EBITDA

    RECONCILIATION OF EBITDA AND ADJUSTED EBITDA FOR THE THREE AND TWELVE MONTHS PERIODS ENDED DECEMBER 31, 2018 AND 2017 (UNAUDITED) We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA as net income before interest, taxes, depreciation a

  44. Slide 44: Reconciliation of Adjusted Net Income

    RECONCILIATION OF ADJUSTED NET INCOME FOR THE THREE AND TWELVE MONTHS PERIODS ENDED DECEMBER 31, 2018 AND 2017 (UNAUDITED) Adjusted net income attributable to the Company's stockholders and Adjusted EPS are adjusted for one-time expense items that are not representative of our ongoing business and o

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