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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| ☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the quarterly period ended March 31, 2023 |
or
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission file number: 001-32347
ORMAT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
88-0326081 |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| 6140 Plumas Street, Reno, Nevada |
89519-6075 |
| (Address of principal executive offices) |
(Zip Code) |
(775) 356-9029
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☑ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
As of May 1, 2023, the number of outstanding shares of common stock, par value $0.001 per share, was 59,705,941.
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
| Common Stock |
ORA |
NYSE |
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2023
| 4 | ||
| ITEM 1. |
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| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| ITEM 3. |
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| ITEM 4. |
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| ITEM 1. |
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| ITEM 1A. |
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| ITEM 2. |
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| ITEM 3. |
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| ITEM 4. |
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| ITEM 5. |
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| ITEM 6. |
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Certain Definitions
Unless the context otherwise requires, all references in this quarterly report to “Ormat”, “the Company”, “we”, “us”, “our company”, “Ormat Technologies” or “our” refer to Ormat Technologies, Inc. and its consolidated subsidiaries.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2023 |
December 31, 2022 |
|||||||
| (Dollars in thousands) |
||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 414,856 | $ | 95,872 | ||||
| Restricted cash and cash equivalents (primarily related to VIEs) |
107,466 | 130,804 | ||||||
| Receivables: |
||||||||
| Trade less allowance for credit losses of $90 and $90, respectively (primarily related to VIEs) |
144,199 | 128,818 | ||||||
| Other |
36,409 | 32,415 | ||||||
| Inventories |
45,447 | 22,832 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
17,136 | 16,405 | ||||||
| Prepaid expenses and other |
45,474 | 29,571 | ||||||
| Total current assets |
810,987 | 456,717 | ||||||
| Investment in unconsolidated companies |
119,185 | 115,693 | ||||||
| Deposits and other |
36,920 | 39,762 | ||||||
| Deferred income taxes |
155,966 | 161,365 | ||||||
| Property, plant and equipment, net ($2,424,774 and $2,326,491 related to VIEs, respectively) |
2,541,677 | 2,493,457 | ||||||
| Construction-in-process ($366,928 and $360,508 related to VIEs, respectively) |
905,505 | 893,198 | ||||||
| Operating leases right of use ($9,494 and $9,662 related to VIEs, respectively) |
22,770 | 23,411 | ||||||
| Finance leases right of use ($52 and $75 related to VIEs, respectively) |
4,277 | 3,806 | ||||||
| Intangible assets, net |
327,537 | 333,845 | ||||||
| Goodwill |
90,446 | 90,325 | ||||||
| Total assets |
$ | 5,015,270 | $ | 4,611,579 | ||||
| LIABILITIES AND EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ | 172,751 | $ | 149,423 | ||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
24,651 | 8,785 | ||||||
| Current portion of long-term debt: |
||||||||
| Limited and non-recourse (primarily related to VIEs) |
63,465 | 64,044 | ||||||
| Full recourse |
110,706 | 101,460 | ||||||
| Financing liability |
15,454 | 16,270 | ||||||
| Operating lease liabilities |
2,381 | 2,347 | ||||||
| Finance lease liabilities |
1,552 | 1,581 | ||||||
| Total current liabilities |
390,960 | 343,910 | ||||||
| Long-term debt, net of current portion: |
||||||||
| Limited and non-recourse (primarily related to VIEs and less deferred financing costs of $9,447 and $10,272, respectively) |
504,460 | 521,885 | ||||||
| Full recourse (less deferred financing costs of $3,436 and $2,995, respectively) |
742,222 | 676,512 | ||||||
| Convertible senior notes (less deferred financing costs of $9,874 and $10,445, respectively) |
421,376 | 420,805 | ||||||
| Financing liability |
220,603 | 225,759 | ||||||
| Operating lease liabilities |
19,421 | 19,788 | ||||||
| Finance lease liabilities |
2,732 | 2,262 | ||||||
| Liability associated with sale of tax benefits |
159,305 | 166,259 | ||||||
| Deferred income taxes |
78,613 | 83,465 | ||||||
| Liability for unrecognized tax benefits |
6,581 | 6,559 | ||||||
| Liabilities for severance pay |
12,394 | 12,833 | ||||||
| Asset retirement obligation |
99,192 | 97,660 | ||||||
| Other long-term liabilities |
11,021 | 3,317 | ||||||
| Total liabilities |
2,668,880 | 2,581,014 | ||||||
| Commitments and contingencies (Note 9) |
||||||||
| Redeemable noncontrolling interest |
9,361 | 9,590 | ||||||
| Equity: |
||||||||
| The Company's stockholders' equity: |
||||||||
| Common stock, par value $0.001 per share; 200,000,000 shares authorized; 59,705,941 and 56,095,918 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively |
60 | 56 | ||||||
| Additional paid-in capital |
1,560,445 | 1,259,072 | ||||||
| Treasury stock, at cost (258,667 shares held as of March 31, 2023 and December 31, 2022, respectively) |
(17,964 | ) | (17,964 | ) | ||||
| Retained earnings |
646,204 | 623,907 | ||||||
| Accumulated other comprehensive income (loss) |
(4,209 | ) | 2,500 | |||||
| Total stockholders' equity attributable to Company's stockholders |
2,184,536 | 1,867,571 | ||||||
| Noncontrolling interest |
152,493 | 153,404 | ||||||
| Total equity |
2,337,029 | 2,020,975 | ||||||
| Total liabilities, redeemable noncontrolling interest and equity |
$ | 5,015,270 | $ | 4,611,579 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands, except per share data) |
||||||||
| Revenues: |
||||||||
| Electricity |
$ | 170,310 | $ | 162,525 | ||||
| Product |
10,042 | 14,628 | ||||||
| Energy storage |
4,880 | 6,557 | ||||||
| Total revenues |
185,232 | 183,710 | ||||||
| Cost of revenues: |
||||||||
| Electricity |
94,758 | 94,521 | ||||||
| Product |
9,351 | 13,613 | ||||||
| Energy storage |
5,054 | 5,671 | ||||||
| Total cost of revenues |
109,163 | 113,805 | ||||||
| Gross profit |
76,069 | 69,905 | ||||||
| Operating expenses: |
||||||||
| Research and development expenses |
1,288 | 1,064 | ||||||
| Selling and marketing expenses |
3,948 | 4,365 | ||||||
| General and administrative expenses |
17,667 | 17,572 | ||||||
| Write-off of Energy Storage projects and assets |
— | 1,826 | ||||||
| Operating income |
53,166 | 45,078 | ||||||
| Other income (expense): |
||||||||
| Interest income |
1,851 | 342 | ||||||
| Interest expense, net |
(23,631 | ) | (21,081 | ) | ||||
| Derivatives and foreign currency transaction gains (losses) |
(1,937 | ) | 260 | |||||
| Income attributable to sale of tax benefits |
12,566 | 7,705 | ||||||
| Other non-operating income, net |
60 | 75 | ||||||
| Income from operations before income tax and equity in earnings of investees |
42,075 | 32,379 | ||||||
| Income tax provision |
(8,885 | ) | (10,163 | ) | ||||
| Equity in earnings of investees |
271 | 577 | ||||||
| Net income |
33,461 | 22,793 | ||||||
| Net income attributable to noncontrolling interest |
(4,432 | ) | (4,363 | ) | ||||
| Net income attributable to the Company's stockholders |
$ | 29,029 | $ | 18,430 | ||||
| Comprehensive income: |
||||||||
| Net income |
33,461 | 22,793 | ||||||
| Other comprehensive income (loss), net of related taxes: |
||||||||
| Change in foreign currency translation adjustments |
(696 | ) | (1,156 | ) | ||||
| Change in unrealized gains or losses in respect of the Company's share in derivatives instruments of unconsolidated investment that qualifies as a cash flow hedge |
(1,014 | ) | 3,902 | |||||
| Change in unrealized gains or losses in respect of a cross currency swap derivative instrument that qualifies as a cash flow hedge |
(5,403 | ) | (1,905 | ) | ||||
| Change in unrealized gains or losses on marketable securities available-for-sale (net of related tax of $0) |
— | (101 | ) | |||||
| Other changes in comprehensive income |
14 | 15 | ||||||
| Total other comprehensive income (loss), net of related taxes: |
(7,099 | ) | 755 | |||||
| Comprehensive income |
26,362 | 23,548 | ||||||
| Comprehensive income attributable to noncontrolling interest |
(4,042 | ) | (4,064 | ) | ||||
| Comprehensive income attributable to the Company's stockholders |
$ | 22,320 | $ | 19,484 | ||||
| Earnings per share attributable to the Company's stockholders: |
||||||||
| Basic: |
$ | 0.51 | $ | 0.33 | ||||
| Diluted: |
$ | 0.51 | $ | 0.33 | ||||
| Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders: |
||||||||
| Basic |
56,710 | 56,063 | ||||||
| Diluted |
57,104 | 56,366 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
| The Company's Stockholders' Equity |
|||||||||||||||||||||||||||
| Accumulated |
|||||||||||||||||||||||||||
| Additional |
Other |
||||||||||||||||||||||||||
| Common Stock |
Paid-in |
Treasury |
Retained |
Comprehensive |
Noncontrolling |
Total |
|||||||||||||||||||||
| Shares |
Amount |
Capital |
Stock |
Earnings |
Income (Loss) |
Total |
Interest |
Equity |
|||||||||||||||||||
| (Dollars in thousands, except per share data) |
|||||||||||||||||||||||||||
| Balance at December 31, 2021 |
56,056 | $ | 56 | $ | 1,271,925 | $ | — | $ | 585,209 | $ | (2,191 | ) | $ | 1,854,999 | $ | 143,462 | $ | 1,998,461 | |||||||||
| Stock-based compensation |
— | — | 2,814 | — | — | — | 2,814 | — | 2,814 | ||||||||||||||||||
| Exercise of stock-based awards by employees and directors (*) |
16 | — | 99 | — | — | — | 99 | — | 99 | ||||||||||||||||||
| Cash paid to noncontrolling interest |
— | — | — | — | — | — | — | (3,088 | ) | (3,088 | ) | ||||||||||||||||
| Cash dividend declared, $0.12 per share |
— | — | — | — | (6,727 | ) | — | (6,727 | ) | — | (6,727 | ) | |||||||||||||||
| Net income |
— | — | — | — | 18,430 | — | 18,430 | 4,105 | 22,535 | ||||||||||||||||||
| Other comprehensive income (loss), net of related taxes: |
|||||||||||||||||||||||||||
| Change in foreign currency translation adjustments |
— | — | — | — | — | (857 | ) | (857 | ) | (299 | ) | (1,156 | ) | ||||||||||||||
| Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment that qualifies as a cash flow hedge |
— | — | — | — | — | 3,902 | 3,902 | — | 3,902 | ||||||||||||||||||
| Change in unrealized gains or losses in respect of a cross currency swap derivative instrument that qualifies as a cash flow hedge |
— | — | — | — | — | (1,905 | ) | (1,905 | ) | — | (1,905 | ) | |||||||||||||||
| Other |
— | — | — | — | — | 15 | 15 | — | 15 | ||||||||||||||||||
| Change in unrealized gains (losses) in respect of investment in marketable securities (net of related tax of $0) |
— | — | — | — | — | (101 | ) | (101 | ) | — | (101 | ) | |||||||||||||||
| Balance at March 31, 2022 |
56,072 | $ | 56 | $ | 1,274,838 | $ | — | $ | 596,912 | $ | (1,137 | ) | $ | 1,870,669 | $ | 144,180 | $ | 2,014,849 | |||||||||
| Balance at December 31, 2022 |
56,096 | $ | 56 | $ | 1,259,072 | $ | (17,964 | ) | $ | 623,907 | $ | 2,500 | $ | 1,867,571 | $ | 153,404 | $ | 2,020,975 | |||||||||
| Stock-based compensation |
— | — | 2,990 | — | — | — | 2,990 | — | 2,990 | ||||||||||||||||||
| Exercise of stock-based awards by employees and directors (*) |
— | — | 27 | — | — | — | 27 | — | 27 | ||||||||||||||||||
| Issuance of common stock |
3,600 | 4 | 297,117 | — | — | — | 297,121 | — | 297,121 | ||||||||||||||||||
| Cash paid to noncontrolling interest |
— | — | — | — | — | — | — | (2,360 | ) | (2,360 | ) | ||||||||||||||||
| Cash dividend declared, $0.12 per share |
— | — | — | — | (6,732 | ) | — | (6,732 | ) | — | (6,732 | ) | |||||||||||||||
| Change in noncontrolling interest rights |
— | — | 1,239 | — | — | — | 1,239 | (2,396 | ) | (1,157 | ) | ||||||||||||||||
| Net income |
— | — | — | — | 29,029 | — | 29,029 | 4,235 | 33,264 | ||||||||||||||||||
| Other comprehensive income (loss), net of related taxes: |
|||||||||||||||||||||||||||
| Change in foreign currency translation adjustments |
— | — | — | — | — | (306 | ) | (306 | ) | (390 | ) | (696 | ) | ||||||||||||||
| Change in unrealized gains or losses in respect of the Company's share in derivative instruments of unconsolidated investment that qualifies as a cash flow hedge |
— | — | — | — | — | (1,014 | ) | (1,014 | ) | — | (1,014 | ) | |||||||||||||||
| Change in unrealized gains or losses in respect of a cross currency swap derivative instrument that qualifies as a cash flow hedge |
— | — | — | — | — | (5,403 | ) | (5,403 | ) | — | (5,403 | ) | |||||||||||||||
| Other |
— | — | — | — | — | 14 | 14 | — | 14 | ||||||||||||||||||
| Balance at March 31, 2023 |
59,696 | $ | 60 | $ | 1,560,445 | $ | (17,964 | ) | $ | 646,204 | $ | (4,209 | ) | $ | 2,184,536 | $ | 152,493 | $ | 2,337,029 | ||||||||
(*) Resulted in an amount lower than $1 thousand.
The accompanying notes are an integral part of the condensed consolidated financial statements.
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 33,461 | $ | 22,793 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
53,161 | 48,108 | ||||||
| Accretion of asset retirement obligation |
1,532 | 1,230 | ||||||
| Stock-based compensation |
2,990 | 2,814 | ||||||
| Income attributable to sale of tax benefits, net of interest expense |
(7,645 | ) | (4,603 | ) | ||||
| Equity in earnings of investees |
(271 | ) | (577 | ) | ||||
| Mark-to-market of derivative instruments |
993 | 277 | ||||||
| Disposal of property, plant and equipment |
(123 | ) | (109 | ) | ||||
| Write-off of Storage projects and assets |
— | 1,826 | ||||||
| Loss (gain) on severance pay fund asset |
(116 | ) | 161 | |||||
| Deferred income tax provision |
501 | 2,805 | ||||||
| Liability for unrecognized tax benefits |
22 | 304 | ||||||
| Other |
— | 328 | ||||||
| Changes in operating assets and liabilities, net of businesses acquired: |
||||||||
| Receivables |
(26,626 | ) | 5,127 | |||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
(731 | ) | (1,830 | ) | ||||
| Inventories |
(22,615 | ) | (4,443 | ) | ||||
| Prepaid expenses and other |
(15,903 | ) | (7,179 | ) | ||||
| Change in operating lease right of use asset |
720 | 692 | ||||||
| Deposits and other |
(22 | ) | 839 | |||||
| Accounts payable and accrued expenses |
22,226 | 13,082 | ||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
15,866 | 1,716 | ||||||
| Liabilities for severance pay |
(439 | ) | (142 | ) | ||||
| Change in operating lease liabilities |
(289 | ) | (547 | ) | ||||
| Other long-term liabilities |
(236 | ) | (896 | ) | ||||
| Net cash provided by operating activities |
56,456 | 81,776 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of marketable securities |
— | (19,192 | ) | |||||
| Maturities of marketable securities |
— | 19,290 | ||||||
| Capital expenditures |
(106,877 | ) | (137,246 | ) | ||||
| Investment in unconsolidated companies |
(4,235 | ) | (2,157 | ) | ||||
| Decrease (increase) in severance pay fund asset, net of payments made to retired employees |
(65 | ) | (27 | ) | ||||
| Net cash used in investing activities |
(111,177 | ) | (139,332 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from long-term loans, net of transaction costs |
99,850 | — | ||||||
| Proceeds from exercise of options by employees |
27 | 99 | ||||||
| Cash received from noncontrolling interest |
7,341 | 5,443 | ||||||
| Repayments of long-term debt |
(42,814 | ) | (39,058 | ) | ||||
| Proceeds from issuance of common stock, net of related costs |
297,121 | — | ||||||
| Cash paid to noncontrolling interest |
(2,985 | ) | (3,374 | ) | ||||
| Payments under finance lease obligations |
(570 | ) | (828 | ) | ||||
| Deferred debt issuance costs |
(857 | ) | (276 | ) | ||||
| Cash dividends paid |
(6,732 | ) | (6,727 | ) | ||||
| Net cash provided by (used in) financing activities |
350,381 | (44,721 | ) | |||||
| Effect of exchange rate changes |
(14 | ) | (34 | ) | ||||
| Net change in cash and cash equivalents and restricted cash and cash equivalents |
295,646 | (102,311 | ) | |||||
| Cash and cash equivalents and restricted cash and cash equivalents at beginning of period |
226,676 | 343,444 | ||||||
| Cash and cash equivalents and restricted cash and cash equivalents at end of period |
$ | 522,322 | $ | 241,133 | ||||
| Supplemental non-cash investing and financing activities: |
||||||||
| Increase (decrease) in accounts payable related to purchases of property, plant and equipment |
$ | (1,221 | ) | $ | 8,448 | |||
| Right of use assets obtained in exchange for new lease liabilities |
$ | 1,028 | $ | 1,313 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — GENERAL AND BASIS OF PRESENTATION
These unaudited condensed consolidated interim financial statements of Ormat Technologies, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2023, the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2023 and 2022 and the condensed consolidated statements of cash flows and the condensed consolidated statements of equity for the three months ended March 31, 2023 and 2022.
The financial data and other information disclosed in the notes to the condensed consolidated financial statements related to these periods are unaudited. The results for the periods presented are not necessarily indicative of the results to be expected for the year.
These condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The condensed consolidated balance sheet data as of December 31, 2022 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2022 but does not include all disclosures required by U.S. GAAP.
Dollar amounts, except per share data, in the notes to these financial statements are rounded to the closest $1,000.
Hapoalim Bank Loan
On February 27, 2023, the Company entered into a definitive loan agreement (the "BHI Loan Agreement") with Bank Hapoalim B.M. (“Hapoalim Bank”). The BHI Loan Agreement provides for a loan by Hapoalim Bank to the Company in an aggregate principal amount of $100 million (the “BHI Loan” or “Hapoalim Loan 2023”). The outstanding principal amount of the BHI Loan will be repaid in 20 semi-annual payments of $5.0 million each, commencing on August 27, 2023. The duration of the BHI Loan is 10 years. The BHI Loan bears interest at a fixed rate of 6.45% per annum, payable semi-annually. The BHI Loan Agreement includes various affirmative and negative covenants, including a requirement that the Company maintain (i) a financial debt to adjusted EBITDA ratio not to exceed 6.0, (ii) a minimum equity capital amount (as shown on its consolidated financial statements) of not less than $750 million, and (iii) an equity capital to total assets ratio of not less than 25%. The BHI Loan Agreement includes other customary affirmative and negative covenants, including payment and covenant events of default.
Stockholders' equity offering
On March 14, 2023, the Company entered into an underwriting agreement with Goldman Sachs & Co. LLC, as the sole underwriter (the “Underwriter”), in connection with a public offering, pursuant to which the Company agreed to issue and sell 3,600,000 shares of common stock, par value $0.001 per share, and the Underwriter agreed to purchase these shares at a price of $82.60 per share. In addition, the Company granted the Underwriter a 30-day option to purchase up to an additional 540,000 shares of common stock at the same price per share, which was fully exercised by the Underwriters on April 3, 2023. The total net proceeds from the offering, including the option, were approximately $341.7 million, after deducting offering expenses.
Write-offs of unsuccessful exploration activities
During the three months ended March 31, 2023 and 2022, there were no write-offs of unsuccessful exploration activities.
Reconciliation of cash and cash equivalents and restricted cash and cash equivalents
The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents as reported on the balance sheet to the total of the same amounts shown on the statement of cash flows:
| March 31, |
December 31, |
|||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Cash and cash equivalents |
$ | 414,856 | $ | 95,872 | ||||
| Restricted cash and cash equivalents |
107,466 | 130,804 | ||||||
| Total Cash and cash equivalents and restricted cash and cash equivalents |
$ | 522,322 | $ | 226,676 | ||||
Concentration of credit risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash investments and accounts receivable.
The Company places its cash investments with high credit quality financial institutions located in the United States (“U.S.”) and in foreign countries. At March 31, 2023 and December 31, 2022, the Company had deposits totaling $171.3 million and $10.0 million, respectively, in ten U.S. financial institutions that were federally insured up to $250,000 per account. At March 31, 2023 and December 31, 2022, the Company’s deposits in foreign countries amounted to approximately $128.7 million and $64.3 million, respectively.
At March 31, 2023 and December 31, 2022, accounts receivable related to operations in foreign countries amounted to approximately $102.9 million and $78.9 million, respectively. At March 31, 2023 and December 31, 2022, accounts receivable from the Company’s primary customers, which each accounted for revenues in excess of 10% of total consolidated revenues for the related period, amounted to approximately 59% and 60% of the Company’s trade receivables, respectively. The aggregate amount of notes receivable exceeding 10% of total receivables as of March 31, 2023 and December 31, 2022 is $100.0 million and $89.8 million, respectively.
The Company's revenues from its primary customers as a percentage of total revenues are as follows:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Southern California Public Power Authority (“SCPPA”) |
26.7 | % | 21.9 | % | ||||
| Sierra Pacific Power Company and Nevada Power Company |
18.9 | 19.5 | ||||||
| Kenya Power and Lighting Co. Ltd. ("KPLC") |
14.5 | 14.1 | ||||||
The Company has historically been able to collect on substantially all of its receivable balances. As of March 31, 2023, the amount overdue from KPLC in Kenya was $36.9 million of which $9.8 million was paid in April 2023. The Company believes it will be able to collect all past due amounts in Kenya. This belief is supported by the fact that in addition to KPLC's obligations under its power purchase agreement, the Company holds a support letter from the Government of Kenya that covers certain cases of KPLC non-payment (such as were caused by government actions and/or political events).
In Honduras, as of March 31, 2023, the total amount overdue from Empresa Nacional de Energía Eléctrica ("ENEE") was $16.6 million of which $5.9 million was paid in April 2023. In addition, due to the financial situation in Honduras, the Company may experience further delays in collection. The Company believes it will be able to collect all past due amounts in Honduras.
Allowance for credit losses
The Company performs an analysis of potential credit losses related to its financial instruments that are within the scope of ASU 2018-19, Codification Improvements to Topic 325, Financial Instruments – Credit Losses, primarily cash and cash equivalents, restricted cash and cash equivalents, investment in marketable securities, receivables (excluding those accounted under lease accounting) and costs and estimated earnings in excess of billings on uncompleted contracts, based on classes of financing receivables which share the same or similar risk characteristics such as customer type and geographic location, among others. The Company estimates the expected credit losses for each class of financing receivables by applying the related corporate default rate which corresponds to the credit rating of the specific customer or class of financing receivables. For trade receivables, the Company applied this methodology using aging schedules reflecting how long the receivables have been outstanding. The Company has also considered the existence of credit enhancement arrangements that may mitigate the credit risk of its financial receivables in estimating the applicable corporate default rate.
The following table describes the changes in the allowance for expected credit losses for the three months ended March 31, 2023 and 2022 (all related to trade receivables):
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Beginning balance of the allowance for expected credit losses |
$ | 90 | $ | 90 | ||||
| Change in the provision for expected credit losses for the period |
— | — | ||||||
| Ending balance of the allowance for expected credit losses |
$ | 90 | $ | 90 | ||||
Revenues from contracts with customers
Contract assets related to our Product segment reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities related to the Company's Product segment reflect payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in the contracts. Total contract assets and contract liabilities as of March 31, 2023 and December 31, 2022 are as follows:
| March 31, |
December 31, |
|||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Contract assets (*) |
$ | 17,136 | $ | 16,405 | ||||
| Contract liabilities (*) |
$ | (24,651 | ) | $ | (8,785 | ) | ||
(*) Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts" and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the condensed consolidated balance sheets. The contract liabilities balance at the beginning of the year was not yet fully recognized as product revenues during the three months ended March 31, 2023 as a result of performance obligations having not been fully satisfied yet.
On March 31, 2023, the Company had approximately $146.4 million of remaining performance obligations not yet satisfied or partly satisfied related to our Product segment. The Company expects to recognize approximately 100% of this amount as Product revenues during the next 24 months.
Disaggregated revenues from contracts with customers for the three months ended March 31, 2023 and 2022 are disclosed under Note 8 - Business Segments, to the condensed consolidated financial statements.
Leases in which the Company is a lessor
The table below presents lease income recognized as a lessor:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Lease income relating to lease payments from operating leases |
$ | 137,621 | $ | 139,681 | ||||
Marketable securities
The Company’s investments in marketable securities consisted of debt securities with maturity of up to one year and a high credit rating. The investments in marketable securities were classified as available-for-sale ("AFS") and thus measured at fair value based on quoted market prices. Unrealized gains and losses from AFS debt securities were excluded from earnings and reported net of the related tax effect in "Accumulated other comprehensive income (loss)". Realized gains and losses from sale of marketable securities, as determined on a specific identification basis, as well as interest income earned, were included in earnings. The Company considers available evidence in evaluating potential impairments of its investments, including credit market conditions, credit ratings of the security as well as the extent to which fair value is less than amortized cost. The Company estimates the lifetime expected credit losses for all AFS debt securities in an unrealized loss position under its allowance for credit losses model. The Company assesses the security’s credit indicators, including credit ratings when estimating a security’s probability of default. If the assessment indicates that an expected credit loss exists, the Company determines the portion of the unrealized loss attributable to credit deterioration and records an allowance for the expected credit loss in earnings. Unrealized gains and losses attributable to non-credit factors were recorded in "Accumulated other comprehensive income (loss)", net of tax. Marketable debt securities with original maturities of three months or less that are readily convertible into a known amount of cash are presented under "Cash and cash equivalents" in the condensed consolidated balance sheets.
Derivative instruments
Derivative instruments (including certain derivative instruments embedded in other contracts) are measured at their fair value and recorded as either assets or liabilities unless exempted from derivative treatment as a normal purchase and sale. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in "Other comprehensive income (loss)" and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to earnings to offset the remeasurement of the underlying hedge transaction which also impacts the same line item in the consolidated statements of operations and comprehensive income.
The Company maintains a risk management strategy that may incorporate the use of swap contracts, put options, forward exchange contracts, interest rate swaps, and cross-currency swaps to minimize significant fluctuation in cash flows and/or earnings that are caused by oil and natural gas prices, exchange rate or interest rate volatility.
Transferable production and investment tax credits
The Inflation Reduction Act (“IRA”) was signed into law in August 2022 and introduces a transferability provision for certain tax credits related to the clean production of energy. Under this provision, a reporting entity can monetize such credits through sale to a third party. The option for transferability of credits applies to taxable years beginning after December 31, 2022. Several of the Company’s projects that are not currently part of a tax monetization transaction generate eligible tax credits, such as investment tax credits (“ITCs”) and production tax credits (“PTCs”), that are eligible to be transferred to a third-party under the provisions of the IRA. The Company accounts for ITCs under ASC 740 through the “Income tax (provision) benefit” line in the consolidated statement of operations and comprehensive income. PTC’s are accounted similarly to refundable or direct-pay credits outside of the tax line with income recognized in the “Income attributable to sale of tax benefits” line in the consolidated statement of operations and comprehensive income. Income recognized related to such transferable PTC’s during the three months ended March 31, 2023 was $1.8 million, net of discount.
NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements effective in the three months ended March 31, 2023
Revenue Contracts Acquired in a Business Combination
In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU 2021-08"). ASU 2021-08 is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing the following topics: (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity that is the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 at the acquisition date as if it had originated the contracts. The amendments in ASU 2021-08 are effective for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company adopted this guidance as prescribed and does not anticipate the adoption of this update to have a material impact on its consolidated financial statements.
New accounting pronouncements effective in future periods
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
In March 2023, the FASB issued ASU 2023-02 “Investments - Equity Method and Joint Ventures (Topic 323),” which permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The amendments in ASU 2023-02 are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments in this update should be applied on either a modified retrospective or a retrospective basis. The Company is still evaluating the potential impact of this guidance on its consolidated financial statements, however, it anticipates that the adoption of ASU 2023-02 will not have an impact on its condensed consolidated financial statements.
NOTE 3 — INVENTORIES
Inventories consist of the following:
| March 31, |
December 31, |
|||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Raw materials and purchased parts for assembly |
$ | 25,422 | $ | 10,629 | ||||
| Self-manufactured assembly parts and finished products |
20,025 | 12,203 | ||||||
| Total inventories |
$ | 45,447 | $ | 22,832 | ||||
NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received upon selling an asset or paid upon transferring a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table sets forth certain fair value information at March 31, 2023 and December 31, 2022 for financial assets and liabilities measured at fair value by level within the fair value hierarchy, as well as cost or amortized cost. As required by the fair value measurement guidance, assets and liabilities are classified in their entirety based on the lowest level of inputs that is significant to the fair value measurement.
| March 31, 2023 |
||||||||||||||||||||
| Fair Value |
||||||||||||||||||||
| Carrying Value at March 31, 2023 |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Assets: |
||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash equivalents (including restricted cash accounts) |
$ | 40,401 | $ | 40,401 | $ | 40,401 | $ | — | $ | — | ||||||||||
| Marketable securities (3) |
138 | 138 | 138 | — | — | |||||||||||||||
| Long-term Assets: |
||||||||||||||||||||
| Cross currency swap (2) |
9 | 9 | — | 9 | — | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Derivatives: |
||||||||||||||||||||
| Cross currency swap (2) |
(4,043 | ) | (4,043 | ) | — | (4,043 | ) | — | ||||||||||||
| Currency forward contracts (1) |
(1,793 | ) | (1,793 | ) | — | (1,793 | ) | — | ||||||||||||
| Long term liabilities: |
||||||||||||||||||||
| Cross currency swap (2) |
(8,067 | ) | (8,067 | ) | — | (8,067 | ) | — | ||||||||||||
| $ | 26,644 | $ | 26,644 | $ | 40,539 | $ | (13,894 | ) | $ | — | ||||||||||
| December 31, 2022 |
||||||||||||||||||||
| Fair Value |
||||||||||||||||||||
| Carrying Value at December 31, 2022 |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Assets |
||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash equivalents (including restricted cash accounts) |
$ | 34,832 | $ | 34,832 | $ | 34,832 | $ | — | $ | — | ||||||||||
| Marketable securities (3) |
136 | 136 | 136 | — | — | |||||||||||||||
| Derivatives: |
||||||||||||||||||||
| Long-term assets: |
||||||||||||||||||||
| Cross currency swap (2) |
3,029 | 3,029 | — | 3,029 | — | |||||||||||||||
| Liabilities: |
||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Derivatives: |
||||||||||||||||||||
| Currency forward contracts (1) |
(800 | ) | (800 | ) | — | (800 | ) | — | ||||||||||||
| Cross currency swap (2) |
(2,777 | ) | (2,777 | ) | — | (2,777 | ) | — | ||||||||||||
| $ | 34,420 | $ | 34,420 | $ | 34,968 | $ | (548 | ) | $ | — | ||||||||||
| 1. |
These amounts relate to currency forward contracts valued primarily based on observable inputs, including forward and spot prices for currencies, net of contracted rates and then multiplied by notional amounts, and are included within “Receivables, other” or “Accounts payable and accrued expenses”, as applicable, in the condensed consolidated balance sheets on March 31, 2023 and December 31, 2022, with the corresponding gain or loss being recognized within “Derivatives and foreign currency transaction gains (losses)” in the condensed consolidated statements of operations and comprehensive income. |
| 2. |
These amounts relate to cross currency swap contracts valued primarily based on the present value of the cross currency swap future settlement prices for U.S. Dollar (“USD”) and New Israeli Shekel (“NIS”) zero yield curves and the applicable exchange rate as of March 31, 2023 and December 31, 2022, as applicable. These amounts are included within “Prepaid expenses and other”, “Deposits and other”, "Accounts payable and accrued expenses", or “Other long-term liabilities”, as applicable, in the condensed consolidated balance sheets on March 31, 2023 and December 31, 2022. There are no cash collateral deposits on March 31, 2023 and December 31, 2022. |
| 3. |
Presented under “Cash and cash equivalents” in the condensed consolidated balance sheets. |
The following table presents the amounts of gain (loss) recognized in the consolidated statements of operations and comprehensive income on derivative instruments (in thousands):
| Amount of recognized | ||||||||||
| gain (loss) |
||||||||||
| Derivatives not designated as | Location of recognized gain | Three Months Ended | ||||||||
| hedging instruments |
(loss) |
March 31, |
||||||||
| 2023 |
2022 |
|||||||||
| (Dollars in thousands) |
||||||||||
| Currency forward contracts (1) |
Derivative and foreign currency transaction gains (losses) |
$ | (1,656 | ) | $ | (208 | ) | |||
| Derivatives designated as cash flow hedging instruments |
||||||||||
| Cross currency swap (2) |
Derivative and foreign currency transaction gains (losses) |
$ | (6,792 | ) | $ | (6,682 | ) | |||
(1) The foregoing currency forward transactions were not designated as hedge transactions and were marked to market with the corresponding gains or losses recognized within “Derivatives and foreign currency transaction gains (losses)” in the condensed consolidated statements of operations and comprehensive income.
(2) The foregoing cross currency swap transactions were designated as a cash flow hedge as further described under Note 1 to the condensed consolidated financial statements. The changes in the cross currency swap fair value are initially recorded in “Other comprehensive income (loss)” and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to “Derivatives and foreign currency transaction gains (losses)” to offset the remeasurement of the underlying hedged transaction which also impacts the same line item in the condensed consolidated statements of operations and comprehensive income.
There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the three months ended March 31, 2023 and 2022.
The following table presents the effect of derivative instruments designated as cash flow hedges on the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2023 and 2022:
| Three Months Ended March 31, | ||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Cross currency swap cash flow hedge: |
||||||||
| Balance in Accumulated other comprehensive income (loss) beginning of period |
$ | 3,920 | $ | 5,745 | ||||
| Gain or (loss) recognized in Other comprehensive income (loss) |
1,389 | (8,587 | ) | |||||
| Amount reclassified from Other comprehensive income (loss) into earnings |
(6,792 | ) | 6,682 | |||||
| Balance in Accumulated other comprehensive income (loss) end of period |
$ | (1,483 | ) | $ | 3,840 | |||
The estimated net amount of existing gain (loss) that is reported in "Accumulated other comprehensive income (loss)" as of March 31, 2023 that is expected to be reclassified into earnings within the next 12 months is immaterial. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flow is from the transaction commencement date through June 2031.
The fair value of the Company’s long-term debt approximates its carrying amount, except for the following:
| Fair Value |
Carrying Amount (*) |
|||||||||||||||
| March 31, | December 31, | March 31, | December 31, | |||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| (Dollars in millions) |
(Dollars in millions) |
|||||||||||||||
| Mizrahi Loan |
$ | 71.4 | $ | 71.4 | $ | 70.3 | $ | 70.3 | ||||||||
| Convertible Senior Notes |
485.4 | 505.3 | 431.3 | 431.3 | ||||||||||||
| HSBC Loan |
36.6 | 40.3 | 39.3 | 42.9 | ||||||||||||
| Hapoalim Loan |
92.4 | 91.1 | 98.2 | 98.2 | ||||||||||||
| Hapoalim Loan 2023 |
100.0 | — | 100.0 | — | ||||||||||||
| Discount Loan |
74.5 | 81.1 | 81.3 | 87.5 | ||||||||||||
| Finance liability - Dixie Valley |
213.3 | 219.8 | 236.1 | 242.0 | ||||||||||||
| Olkaria III Loan - DFC |
129.7 | 134.2 | 134.2 | 138.7 | ||||||||||||
| Olkaria III plant 4 Loan - DEG 2 |
26.9 | 26.5 | 27.5 | 27.5 | ||||||||||||
| Olkaria III plant 1 Loan - DEG 3 |
23.7 | 23.3 | 24.0 | 24.0 | ||||||||||||
| Platanares Loan - DFC |
78.0 | 80.2 | 77.8 | 79.9 | ||||||||||||
| Amatitlan Loan |
13.8 | 14.7 | 14.9 | 15.8 | ||||||||||||
| OFC 2 LLC ("OFC 2") |
145.0 | 149.8 | 153.3 | 158.0 | ||||||||||||
| Don A. Campbell 1 ("DAC 1") |
55.8 | 57.4 | 61.1 | 62.7 | ||||||||||||
| USG Prudential - NV |
23.5 | 23.7 | 24.8 | 25.0 | ||||||||||||
| USG Prudential - ID |
54.6 | 56.8 | 59.8 | 61.6 | ||||||||||||
| USG DOE |
31.1 | 32.8 | 31.4 | 32.8 | ||||||||||||
| Senior Unsecured Bonds |
232.1 | 235.1 | 249.0 | 255.8 | ||||||||||||
| Senior Unsecured Loan |
156.1 | 166.4 | 166.4 | 174.8 | ||||||||||||
| Plumstriker |
10.9 | 11.2 | 11.1 | 11.4 | ||||||||||||
| Other long-term debt |
8.8 | 9.2 | 9.4 | 10.4 | ||||||||||||
(*) Carrying amount value excludes the related deferred financing costs.
The fair value of the long-term debt is determined by a valuation model, which is based on a conventional discounted cash flow methodology and utilizes assumptions of current borrowing rates, except for the fair value of the Convertible Senior Notes for which the fair value was estimated based on a quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. A hypothetical change in the quoted bid price will result in a corresponding change in the estimated fair value of the Notes.
The carrying value of cash and cash equivalents, receivables, deposits and accounts payable (included in the condensed consolidated balance sheets) approximates their fair value.
The following table presents the fair value of financial instruments as of March 31, 2023:
| Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
| (Dollars in millions) |
||||||||||||||||
| Mizrahi Loan |
$ | — | $ | — | $ | 71.4 | $ | 71.4 | ||||||||
| Convertible Senior Notes |
— | 485.4 | — | 485.4 | ||||||||||||
| HSBC Loan |
— | — | 36.6 | 36.6 | ||||||||||||
| Hapoalim Loan |
— | — | 92.4 | 92.4 | ||||||||||||
| Hapoalim Loan 2023 |
— | — | 100.0 | 100.0 | ||||||||||||
| Discount Loan |
— | — | 74.5 | 74.5 | ||||||||||||
| Finance liability - Dixie Valley |
— | — | 213.3 | 213.3 | ||||||||||||
| Olkaria III Loan - DFC |
— | — | 129.7 | 129.7 | ||||||||||||
| Olkaria III plant 4 Loan - DEG 2 |
— | — | 26.9 | 26.9 | ||||||||||||
| Olkaria III plant 1 Loan - DEG 3 |
— | — | 23.7 | 23.7 | ||||||||||||
| Platanares Loan - DFC |
— | — | 78.0 | 78.0 | ||||||||||||
| Amatitlan Loan |
— | 13.8 | — | 13.8 | ||||||||||||
| OFC 2 Senior Secured Notes |
— | — | 145.0 | 145.0 | ||||||||||||
| DAC 1 Senior Secured Notes |
— | — | 55.8 | 55.8 | ||||||||||||
| USG Prudential - NV |
— | — | 23.5 | 23.5 | ||||||||||||
| USG Prudential - ID |
— | — | 54.6 | 54.6 | ||||||||||||
| USG DOE |
— | — | 31.1 | 31.1 | ||||||||||||
| Senior Unsecured Bonds |
— | — | 232.1 | 232.1 | ||||||||||||
| Senior Unsecured Loan |
— | — | 156.1 | 156.1 | ||||||||||||
| Plumstriker |
— | 10.9 | — | 10.9 | ||||||||||||
| Other long-term debt |
— | — | 8.8 | 8.8 | ||||||||||||
| Deposits |
13.9 | — | — | 13.9 | ||||||||||||
The following table presents the fair value of financial instruments as of December 31, 2022:
| Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
| (Dollars in millions) |
||||||||||||||||
| Mizrahi Loan | $ | — | $ | — | $ | 71.4 | $ | 71.4 | ||||||||
| Convertible Senior Notes | — | 505.3 | — | 505.3 | ||||||||||||
| HSBC Loan |
— | — | 40.3 | 40.3 | ||||||||||||
| Hapoalim Loan |
— | — | 91.1 | 91.1 | ||||||||||||
| Discount Loan |
— | — | 81.1 | 81.1 | ||||||||||||
| Financing Liability - Dixie Valley |
— | — | 219.8 | 219.8 | ||||||||||||
| Olkaria III Loan - DFC |
— | — | 134.2 | 134.2 | ||||||||||||
| Olkaria IV - DEG 2 |
— | — | 26.5 | 26.5 | ||||||||||||
| Olkaria IV - DEG 3 |
— | — | 23.3 | 23.3 | ||||||||||||
| Platanares Loan - DFC |
— | — | 80.2 | 80.2 | ||||||||||||
| Amatitlan Loan |
— | 14.7 | — | 14.7 | ||||||||||||
| OFC 2 Senior Secured Notes |
— | — | 149.8 | 149.8 | ||||||||||||
| DAC 1 Senior Secured Notes |
— | — | 57.4 | 57.4 | ||||||||||||
| USG Prudential - NV |
— | — | 23.7 | 23.7 | ||||||||||||
| USG Prudential - ID |
— | — | 56.8 | 56.8 | ||||||||||||
| USG DOE |
— | — | 32.8 | 32.8 | ||||||||||||
| Senior Unsecured Bonds |
— | — | 235.1 | 235.1 | ||||||||||||
| Senior Unsecured Loan |
— | — | 166.4 | 166.4 | ||||||||||||
| Plumstriker |
— | 11.2 | — | 11.2 | ||||||||||||
| Other long-term debt |
— | — | 9.2 | 9.2 | ||||||||||||
| Deposits |
13.9 | — | — | 13.9 | ||||||||||||
NOTE 5 — STOCK-BASED COMPENSATION
In March 2023, the Company granted certain members of its management and employees an aggregate of 174,422 restricted stock units ("RSUs") and 35,081 performance stock units ("PSUs") under the Company’s 2018 Incentive Compensation Plan. The RSUs and PSUs have vesting periods of between 1 to 4 years from the grant date.
The fair value of each RSU and PSU on the grant date was $79.9 and $79.6, respectively. The Company calculated the fair value of each RSU and PSU on the grant date using the complex lattice, tree-based option-pricing model based on the following assumptions:
| Risk-free interest rates |
3.86% | - | 4.68% | ||
| Expected life (in years) |
2 | - | 5.75 | ||
| Dividend yield |
0.59 | ||||
| Expected volatility (weighted average) |
36.0% | - | 42.2% |
There were no other significant grants that were made by the Company during the three months ended March 31, 2023.
NOTE 6 — INTEREST EXPENSE, NET
The components of interest expense are as follows:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Interest related to sale of tax benefits |
$ | 3,342 | $ | 3,431 | ||||
| Interest expense |
24,620 | 22,486 | ||||||
| Less — amount capitalized |
(4,330 | ) | (4,836 | ) | ||||
| Total interest expense, net |
$ | 23,631 | $ | 21,081 | ||||
NOTE 7 — EARNINGS PER SHARE
Basic earnings per share attributable to the Company’s stockholders is computed by dividing net income or loss attributable to the Company’s stockholders by the weighted average number of shares of common stock outstanding for the period. The Company does not have any equity instruments that are dilutive, except for employee stock-based awards and convertible senior notes ("Notes").
The table below shows the reconciliation of the number of shares used in the computation of basic and diluted earnings per share (in thousands):
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Weighted average number of shares used in computation of basic earnings per share: |
56,710 | 56,063 | ||||||
| Additional shares from the assumed exercise of employee stock awards |
394 | 303 | ||||||
| Weighted average number of shares used in computation of diluted earnings per share |
57,104 | 56,366 | ||||||
The number of stock-based awards that could potentially dilute future earnings per share and that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive was 106.3 thousand and 207.4 thousand for the three months ended March 31, 2023 and 2022, respectively.
As per ASU 2020-06, the if-converted method is required for calculating any potential dilutive effect from convertible instruments. For the three months ended March 31, 2023, the average price of the Company's common stock did not exceed the per share conversion price of the Notes of $90.27, and other requirements for the Notes to be convertible were not met and as such, there was no dilutive effect from the Notes in respect with the aforementioned periods.
NOTE 8 — BUSINESS SEGMENTS
The Company has three reporting segments: the Electricity segment, the Product segment and the Energy Storage segment. These segments are managed and reported separately as each offers different products and serves different markets.
| • |
Under the Electricity segment, the Company builds, owns and operates geothermal, solar PV and recovered energy-based power plants ("REG") in the United States and geothermal power plants in foreign countries, and sell the electricity generated by those power plants. |
| • |
Under the Product segment, the Company designs, manufactures and sells equipment for geothermal and recovered energy-based electricity generation and provide services relating to the engineering, procurement and construction ("EPC") of geothermal and recovered energy-based power plants. |
| • |
Under the Energy Storage segment, the Company provides energy storage and related services as well as services relating to the engineering, procurement, construction, operation and maintenance of energy storage units. |
Transfer prices between the operating segments are determined based on current market values or cost-plus markup of the seller’s business segment.
Summarized financial information concerning the Company’s reportable segments is shown in the following tables, including the Company's disaggregated revenues from contracts with customers:
| Electricity |
Product |
Energy Storage |
Consolidated |
|||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Three Months Ended March 31, 2023: |
||||||||||||||||
| Revenues from external customers: |
||||||||||||||||
| United States (1) |
$ | 122,411 | $ | 1,441 | $ | 4,880 | $ | 128,732 | ||||||||
| Foreign (2) |
47,899 | 8,601 | — | 56,500 | ||||||||||||
| Net revenue from external customers |
170,310 | 10,042 | 4,880 | 185,232 | ||||||||||||
| Intersegment revenues (4) |
— | 7,772 | — | — | ||||||||||||
| Operating income (loss) |
57,008 | (1,505 | ) | (2,337 | ) | 53,166 | ||||||||||
| Segment assets at period end (3) (*) |
4,648,303 | 161,428 | 205,539 | 5,015,270 | ||||||||||||
| * Including unconsolidated investments |
119,185 | — | — | 119,185 | ||||||||||||
| Three Months Ended March 31, 2022: |
||||||||||||||||
| Revenues from external customers: |
||||||||||||||||
| United States (1) |
$ | 116,109 | $ | 535 | $ | 6,557 | $ | 123,201 | ||||||||
| Foreign (2) |
46,416 | 14,093 | — | 60,509 | ||||||||||||
| Net revenue from external customers |
162,525 | 14,628 | 6,557 | 183,710 | ||||||||||||
| Intersegment revenues (4) |
— | 20,903 | — | — | ||||||||||||
| Operating income (loss) |
47,575 | (1,575 | ) | (922 | ) | 45,078 | ||||||||||
| Segment assets at period end (3) (*) |
4,093,759 | 140,957 | 179,473 | 4,414,189 | ||||||||||||
| * Including unconsolidated investments |
112,522 | — | — | 112,522 | ||||||||||||
| (1) |
Electricity segment revenues in the United States are all accounted under lease accounting except for $32.7 million for the three months ended March 31, 2023, and $22.8 million for the three months ended March 31, 2022, respectively, that are accounted under ASC 606. Product and Energy Storage segment revenues in the United States are accounted under ASC 606. |
| (2) |
Electricity segment revenues in foreign countries are all accounted under lease accounting. Product segment revenues in foreign countries are accounted under ASC 606. |
| (3) |
Electricity segment assets include goodwill in the amount of $85.8 million and $86.0 million as of March 31, 2023 and 2022, respectively. Energy Storage segment assets include goodwill in the amount of $4.6 million and $4.6 million as of March 31, 2023 and 2022, respectively. No goodwill is included in the Product segment assets as of March 31, 2023 and 2022. |
| (4) |
Intersegment revenues are fully eliminated in consolidation. |
Reconciling information between reportable segments and the Company’s consolidated totals is shown in the following table:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Revenues: |
||||||||
| Total segment revenues |
$ | 185,232 | $ | 183,710 | ||||
| Intersegment revenues |
7,772 | 20,903 | ||||||
| Elimination of intersegment revenues |
(7,772 | ) | (20,903 | ) | ||||
| Total consolidated revenues |
$ | 185,232 | $ | 183,710 | ||||
| Operating income: |
||||||||
| Operating income |
$ | 53,166 | $ | 45,078 | ||||
| Interest income |
1,851 | 342 | ||||||
| Interest expense, net |
(23,631 | ) | (21,081 | ) | ||||
| Derivatives and foreign currency transaction gains (losses) |
(1,937 | ) | 260 | |||||
| Income attributable to sale of tax benefits |
12,566 | 7,705 | ||||||
| Other non-operating income, net |
60 | 75 | ||||||
| Total consolidated income before income taxes and equity in income of investees |
$ | 42,075 | $ | 32,379 | ||||
NOTE 9 — COMMITMENTS AND CONTINGENCIES
| • |
On December 15, 2021, the Center for Biological Diversity and the Fallon Paiute-Shoshone Tribe (the “Plaintiffs”) filed a lawsuit in the U.S. District Court for the State of Nevada against the U.S. Department of the Interior, the Bureau of Land Management (“the BLM”) and Jake Vialpando, in his official capacity as a field manager of the BLM, alleging that the defendants violated the National Environmental Protection Act and other federal laws by approving the Company’s Dixie Meadows project and the associated environmental assessment and Finding of No Significant Impact (“FONSI”). Plaintiffs additionally alleged that the project threatens the Dixie Valley Toad and infringes on the tribe’s enjoyment of a religious sacred site. Plaintiffs sought for the court to vacate and set aside the environmental assessment, FONSI and the BLM’s authorizations for the project and to enjoin project construction. The Company intervened in the action on January 4, 2022. On January 14, 2022, the court granted a temporary, 90-day injunction pausing construction of the project while it ruled on the merits of the case. The Ninth Circuit subsequently set aside the temporary injunction, pending a hearing on June 15, 2022, and construction began in February 2022. On August 1, 2022 the Ninth Circuit issued an order in The Company’s favor, affirming the District Court’s ruling that an injunction after 90-days was not warranted. On April 4, 2022, the U.S. Fish and Wildlife Services (“FWS”) emergency listed the Dixie Valley Toad under the Endangered Species Act of 1973 (the “ESA”). On July 6, 2022, Plaintiffs amended their complaint to add causes of action related to the ESA listing against the Company. The Company is currently working with the BLM and FWS in the Section 7 Consultation process including discussion and identification of potential additional mitigation measures, and has agreed to temporarily pause construction of the facility. The Company requested that the BLM amend the Decision Record to limit the scope of the project to the first planned phase of development, a single power plant of approximately 12 MW and the BLM granted that request. The Company further requested that the Court stay the litigation until the Section 7 Consultation process was complete, and the Court granted the motion to stay on February 14, 2023. The Company believes it has strong legal defenses against the present claims, however, there can be no assurances regarding the resolution of these proceedings. Any additional construction delays imposed by the court, any mitigation or other measures arising from the Dixie Valley Toad’s emergency listing or any combination thereof could cause the Company to incur additional project costs, delay or impede the completion of the project and thus the eventual generation of revenues from the project and/or result in the renegotiation of the PPA for the project on less favorable terms. As a result, at this time, the Company cannot reasonably predict the ultimate outcome of this litigation or regulatory process or estimate the possible loss or range of loss it may bear, if any. As of March 31, 2023, the aggregated net book value of the Dixie Meadows project was approximately $84.3 million, which was included under "construction-in-process" in the consolidated balance sheets. |
In addition, from time to time, the Company is named as a party to various other lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of the Company's business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, claims and proceedings, the Company accrues reserves when a loss is probable, and the amount of such loss can be reasonably estimated. It is the opinion of the Company’s management that the outcome of these proceedings, individually and collectively, will not be material to the Company’s consolidated financial statements as a whole.
Other matters
On March 2, 2021, the Company's board of directors established a special committee of independent directors (the "Special Committee") to investigate, among other things, certain claims made in a report published by a short seller regarding the Company’s compliance with anti-corruption laws. The Special Committee is working with outside legal counsel to investigate the claims made. All members of the Special Committee are “independent” in accordance with the Company's Corporate Governance Guidelines, the NYSE listing standards and SEC rules applicable to boards of directors in general. The Company is also providing information as requested by the SEC and Department of Justice ("DOJ") related to the claims.
In Kenya, a task force was appointed by the President to review and analyze PPAs entered into between various independent power producers and KPLC, including the Company's long term PPA for the Olkaria complex. In September 2021 the task force recommended to the President that KPLC review its contracts and attempt renegotiation with Independent Power Producers to secure reductions in PPA tariffs within existing contractual arrangements. The Company was approached by the task force following release of the report. Discussions are continuing.
NOTE 10 — INCOME TAXES
The Company’s effective tax rate provision for the three months ended March 31, 2023 and 2022 was 21.1% and 31.4%, respectively. The effective rate differs from the federal statutory rate of 21% primarily due to the jurisdictional mix of earnings at differing tax rates and generation of investment tax credits.
On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law in the United States. The Company believes that the construction and operations of its geothermal power plants, recovered energy-based power plants, battery energy storage systems and solar PV will benefit in the future from the IRA and enhance the economic feasibility of projects in the United States. PTC’s can be generated from 2.75 cents per kWh, once the Wages & Apprenticeship rules are met, and if bonus credit requirements are met the credit could rise up to 3.30 cents per kWh. ITC’s can be earned on investments from 30.0%, once the Wages & Apprenticeship rules are met, and if bonus credit requirements are met the credit could rise up to 50.0%. Battery Energy Storage Systems are eligible for ITC for projects placed-in-service after December 31, 2022. In addition, the Company can now monetize PTC’s and ITC’s earned by transferring the credits to a third party without having to enter into a tax equity transaction. The Company views the enactment of the IRA as favorable for the overall business climate for its sector.
NOTE 11 — SUBSEQUENT EVENTS
Cash Dividend
On May 9, 2023, the Board of Directors of the Company declared, approved and authorized payment of a quarterly dividend of $6.7 million ($0.12 per share) to all holders of the Company’s issued and outstanding shares of common stock on May 23, 2023, payable on June 6, 2023.
Stockholders' equity offering
As described under Note 1 to the condensed consolidated financial statements, on April 3, 2023, Goldman Sachs & Co. LLC, the Underwriter of the stockholders' equity offering, fully exercised its option to purchase up to an additional 540,000 shares of common stock at a price of $82.60 per share.
Plumstriker Loan
On April 4, 2023, the Company had voluntarily fully prepaid the Plumstriker Loan in the amount of $11.1 million.
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Cautionary Note Regarding Forward-Looking Statements
This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this quarterly report that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections of annual revenues, expenses and debt service coverage with respect to our debt securities, future capital expenditures, business strategy, competitive strengths, goals, development or operation of generation assets, market and industry developments and the growth of our business and operations, are forward-looking statements. When used in this quarterly report on Form 10-Q, the words “may”, “will”, “could”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “projects”, “potential”, or “contemplate” or the negative of these terms or other comparable terminology are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this quarterly report are primarily located in the material set forth under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Risk Factors”, and “Notes to Condensed Consolidated Financial Statements”, but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this quarterly report on Form 10-Q completely and with the understanding that actual future results and developments may be materially different from what we expect attributable to a number of risks and uncertainties, many of which are beyond our control.
These forward-looking statements are made only as of the date hereof, and, except as legally required, we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
A summary of the risks that may cause actual results to differ from our expectations include, but are not limited to the following:
Risks Related to the Company’s Business and Operation
| • |
Our financial performance depends on the successful operation of our geothermal, REG, Solar PV power plants under the Electricity segment as well as, our energy storage facilities, which are subject to various operational risks. |
| • |
Our exploration, development, and operation of geothermal energy resources are subject to geological risks and uncertainties, which may result in decreased performance or increased costs for our power plants. |
| • |
We may decide not to implement, or may not be successful in implementing, one or more elements of our multi-year strategic plan, and the plan may not achieve its goal of enhancing shareholder value. |
| • |
Our investments in battery energy storage system (BESS) technology involves new technologies with relatively limited history with respect to reliability and performance and may not perform as expected. In addition, our investments may be negatively affected by a number of factors, including increases in storage costs, risk of fire and volatility in electricity pricing. |
| • |
Concentration of customers, specific projects and regions may expose us to heightened financial exposure. |
| • |
Our international operations expose us to risks related to the application of foreign laws and regulations. |
| • |
Political, economic and other conditions in the emerging economies where we operate, including Israel, may subject us to greater risk than in the developed U.S. economy. |
| • |
Conditions in and around Israel, where the majority of our senior management and our main production and manufacturing facilities are located, may adversely affect our operations and may limit our ability to produce and sell our products or manage our power plants. |
| • |
Reduction in our Products backlog may affect our ability to fully utilize our main production and manufacturing facilities. |
| • |
Some of our leases will terminate if we do not extract geothermal resources in “commercial quantities” or if we fail to comply with the terms or stipulations of such leases or any of the provisions of the Geothermal Steam Act or if the lessor under any such lease defaults on any debt secured by the relevant property, thus requiring us to enter into new leases or secure rights to alternate geothermal resources, none of which may be available on terms as favorable to us as any such terminated lease, if at all. |
| • |
Reduced levels of recovered energy required for the operation of our REG power plants may result in decreased performance of such power plants. |
| • |
Our business development activities may not be successful and our projects under construction or facilities undergoing enhancement and repowering may encounter delays. |
| • |
Our future growth depends, in part, on the successful enhancement of a number of our existing facilities. |
| • |
We rely on power transmission facilities that we do not own or control. |
| • |
Our use of joint ventures may limit our flexibility with jointly owned investments. |
| • |
Our operations could be adversely impacted by climate change. |
| • |
We could be negatively impacted by regulatory and other responses to climate change. |
| • |
Geothermal projects that we plan to develop in the future may operate as "merchant" facilities without long-term PPAs and therefore such projects will be exposed to market fluctuations. |
| • |
We may not be able to successfully complete acquisitions, and we may not be able to successfully integrate, or realize anticipated synergies from, companies that we have acquired and may acquire in the future. |
| • |
We may not be able to successfully conclude transactions and integrate companies, which we acquired and may acquire in the future. |
| • |
We encounter intense competition from electric utilities, other power producers, power marketers, developers and third-party investors. |
| • |
Changes in costs and technology may significantly impact our business by making our power plants and products less competitive, resulting in our inability to sign new or recontracted PPAs for our Electricity segment and new supply and EPC contracts for our Products segment. |
| • |
Our intellectual property rights may not be adequate to protect our business. |
| • |
We may experience difficulties implementing and maintaining our new enterprise resource planning system. |
| • |
We may experience a cyber-incident, cyber security breach, severe natural event or physical attack on our operational networks and information technology systems. |
Risks Related to Governmental Regulations, Laws and Taxation
| • |
Our financial performance could be adversely affected by changes in the legal and regulatory environment affecting our operations. |
| • |
Pursuant to the terms of some of our PPAs with investor-owned electric utilities and publicly-owned electric utilities in states that have renewable portfolio standards, the failure to supply the contracted capacity and energy thereunder may result in the imposition of penalties. |
| • |
If any of our domestic power plants loses its current Qualifying Facility status under PURPA, or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded to Qualifying Facilities, our domestic operations could be adversely affected. |
| • |
We may experience a reduction or elimination of government incentives. |
| • |
We are a holding company and our cash depends substantially on the performance of our subsidiaries and the power plants they operate, most of which are subject to restrictions and taxation on dividends and distributions. |
| • |
The costs of compliance with federal, state, local and foreign environmental laws and our ability to obtain and maintain environmental permits and governmental approvals required for development, construction and/or operation may result in liabilities, costs and delays in construction (as well as any fines or penalties that may be imposed upon us in the event of any non-compliance or delays with such laws or regulations). |
| • |
We could be exposed to significant liability for violations of hazardous substances laws because of the use or presence of such substances at our power plants. |
| • |
U.S. federal, state and foreign country income tax reform could adversely affect us. |
Risks Related to Economic and Financial Conditions
| • |
We may be unable to obtain the financing we need on favorable terms to pursue our growth strategy and any future financing we receive may be less favorable to us than our current financing arrangements. |
| • |
We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results. |
| • |
Our debt obligations may adversely affect our ability to raise additional capital and will be a burden on our future cash resources, particularly if we elect to settle these obligations in cash upon conversion or upon maturity or required repurchase. |
| • |
The Capped Call Transactions may affect the value of the Notes and our common stock and we are subject to counterparty risk with respect to the Capped Call Transactions. |
| • |
Our foreign power plants and foreign manufacturing operations expose us to risks related to fluctuations in currency rates, which may reduce our profits from such power plants and operations. |
| • |
Our power plants have generally been financed through a combination of our corporate funds and limited or non-recourse project finance debt and lease financing. If our project subsidiaries default on their obligations under such limited or non-recourse debt or lease financing, we may be required to make certain payments to the relevant debt holders, and if the collateral supporting such leveraged financing structures is foreclosed upon, we may lose certain of our power plants. |
| • |
We may experience fluctuations in the cost of construction, raw materials, commodities and drilling. |
| • |
Our commodity derivative activity may limit potential gains, increase potential losses, result in earnings volatility and involve other risks. |
| • |
Recent events affecting the financial services industry could have an adverse impact on our business and financial condition. |
| • |
We are exposed to swap counterparty credit risk. |
| • |
We may not be able to obtain sufficient insurance coverage to cover damages resulting from any damages to our assets and profitability including, but not limited to, natural disasters such as volcanic eruptions, lava flows, wind and earthquakes. |
Risks Related to Force Majeure
| • |
The global spread of a public health crisis, including the COVID-19 pandemic may have an adverse impact on our business. |
| • |
The existence of a prolonged force majeure event or a forced outage affecting a power plant, or the transmission systems could reduce our net income. |
| • |
Threats of terrorism may impact our operations in unpredictable ways and could adversely affect our business, financial condition, future results and cash flow. |
Risks Related to Our Stock
| • |
Future equity issuances, including through our current or any future equity compensation plans, could result in dilution, which could cause the price of our shares of common stock to decline. |
| • |
A substantial percentage of our common stock is held by stockholders whose interests may conflict with the interests of our other stockholders. |
| • |
The price of our common stock may fluctuate substantially, and your investment may decline in value. |
| • |
We may issue additional shares of our common stock in connection with conversions of the Notes, and thereby dilute our existing stockholders and potentially adversely affect the market price of our common stock. |
| • |
The fundamental change provisions of the Notes may delay or prevent an otherwise beneficial takeover attempt of us. |
Investors are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. Other than as required by law, we undertake no obligation to update forward-looking statements even though our situation may change in the future. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”) and any updates contained herein as well as those set forth in our reports and other filings made with the Securities and Exchange Commission (the “SEC”).
Company Contact and Sources of Information
Our website is www.ormat.com. Information contained on our website is not part of this quarterly report. Information that we furnish to or file with the U.S. Securities and Exchange Commission (the “SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to, or exhibits included in, these reports are made available for download, free of charge, through our website as soon as reasonably practicable. Our SEC filings, including exhibits filed therewith, are also available directly on the SEC’s website at www.sec.gov.
We may use our website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through our website at www.ormat.com. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts.
General
Overview
We are a leading vertically integrated company that is primarily engaged in the geothermal energy power business. We leverage our core capabilities and global presence to expand our activity in recovered energy generation and into different energy storage services and solar PV (including hybrid geothermal and solar PV as well as Solar plus Energy Storage). Our objective is to become a leading global provider of renewable energy and help to mitigate climate change by providing replacement to carbon-intensive energy sources. We have adopted a strategic plan to focus on several key initiatives to expand our business.
We currently conduct our business activities in three business segments:
| • |
Electricity Segment. In the Electricity segment, we develop, build, own and operate geothermal, solar PV and recovered energy-based power plants in the United States and geothermal power plants in other countries around the world and sell the electricity they generate. In the three months ended March 31, 2023, we derived 71.9% of our Electricity segment revenues from our operations in the United States and 28.1% from the rest of the world. |
| • |
Product Segment. In the Product segment, we design, manufacture and sell equipment for geothermal and recovered energy-based electricity generation and provide services relating to the engineering, procurement and construction of geothermal and recovered energy-based power plants. In the three months ended March 31, 2023, we derived 14.3% of our Product segment revenues from our operations in the United States and 85.7% from the rest of the world. |
| • |
Energy Storage Segment. In the Energy Storage segment, we own and operate grid connected In Front of the Meter Battery Energy Storage Systems ("BESS"), which provide capacity, energy and/or ancillary services directly to the electric grid. In the three months ended March 31, 2023, we derived all of our Energy Storage segment revenues from our operations in the United States. |
Our current generating portfolio of approximately 1.16 GW includes geothermal power plants in the United States, Kenya, Guatemala, Honduras, Guadeloupe and Indonesia, as well as energy storage facilities, recovered energy generation and Solar PV power plants in the United States.
Recent Developments
The most significant developments in our Company and business since January 1, 2023 are described below.
| • |
In April, 2023, we commenced commercial operation of the North Valley geothermal power plant. The North Valley power plant provides 25 MW of geothermal power to NV Energy under a 25-year agreement to help meet NV Energy’s renewable targets and support increased customer demand for around-the-clock clean energy. |
| • | In April and May we commenced the commercial operation of two energy storage facilities, Howell and Bowling Green. The Howell BESS projects, located in New Jersey, and the Bowling Green BESS project located in Ohio will add 7MW and 12MW of capacity respectively, and will be providing ancillary services to PJM. |
| • |
In March 2023, we announced that we closed a public offering of 3,600,000 shares of our common stock at a price of $82.6 per share. In addition, the underwriters' exercised its option to purchase an additional 540,000 shares of common stock at the same price. We intend to use the net proceeds from the offering for general corporate purposes, including working capital and capital expenditures, and for potential acquisitions, including complementary businesses, technologies or assets. |
| • |
In January 2023, we, together with PT Medco Power Indonesia (“Medco Power”), signed a Financing Agreement with PT Sarana Multi Infrastruktur (Persero) (“SMI”) for development of the Ijen Geothermal Power Plant. The Ijen power plant will be developed in stages and the first phase of development is expected to generate 34 MW in 2025. MCG, a jointly owned company between Medco Power (51% equity share) and Ormat Technologies (49% equity share), will develop and operate the first geothermal power plant in East Java. The Company also signed a contract as a key contractor on Ormat Energy Converter (“OEC") supply for this project and secured $32.1 million to our backlog. |
Trends and Uncertainties
Different trends, factors and uncertainties may impact our operations and financial condition, including many that we do not or cannot foresee. However, we believe that our results of operations and financial condition for the foreseeable future will be primarily affected by the following trends, factors and uncertainties that are, from time to time, also subject to market cycles:
| • |
There has been increased demand for energy generated from geothermal and other renewable resources in the United States as costs for electricity generated from renewable resources have become more competitive. Much of this is attributable to legislative and regulatory requirements and incentives, such as state RPS and federal tax credits such as PTCs or ITCs (which are discussed in more detail in the section entitled “Government Grants and Tax Benefits” below). We believe that future demand for energy generated from geothermal and other renewable resources in the United States will be driven primarily by further commitment to, and implementation of, state RPS and greenhouse gas reduction initiatives. |
| • |
The U.S. federal government has taken certain actions which are supportive of the industry for climate solutions. In August 2022, the President of the United States signed into law the IRA of 2022. The IRA includes several tax incentives to promote climate change mitigation and clean energy, electric vehicles, battery and energy storage manufacture or purchase. The U.S. presidential administration has taken immediate steps at the federal level which we believe signify support for climate solutions, including, but not limited to, rejoining the Paris Climate Accords and re-establishing a social price on carbon used in cost/benefit analysis for policy making. We expect this current administration, combined with a closely divided Congress, will usher in additional regulations supportive of the markets in which we invest. |
| • |
We expect that a variety of local governmental initiatives will create new opportunities for the development of new projects with the potential to realize higher returns on our equity as well as to create additional markets for our products. These initiatives include the award of long-term contracts to independent power generators, the creation of competitive wholesale markets for selling and trading energy, capacity and related energy products and the adoption of programs designed to encourage “clean” renewable and sustainable energy sources. |
| • |
In the Product segment, we see new opportunities for business in New Zealand, the U.S., Asia Pacific and Central and South America. In addition a new tariff structure was recently introduce in Turkey, which we expect should increase demand for new development. The new tariff includes incentives for local manufacturing and we are currently evaluating the tariff and implication on us. We have experienced increased competition from binary power plant equipment suppliers including the major steam turbine manufacturers. While we believe that we have a distinct competitive advantage based on our technology, accumulated experience and current worldwide share of installed binary generation capacity, an increase in competition may impact our ability to secure new purchase orders from potential customers. The increased competition may also lead to further reductions in the prices that we are able to charge for our binary equipment. |
| • |
Russia’s invasion of and military attacks on Ukraine, including indirect impacts as a result of sanctions and economic disruption, has complicated and may continue to further complicate existing supply chain constraints. Supply chain constraints may cause cost increases of raw materials, commodities and equipment that could adversely affect our profit margins. |
| • |
In the markets in which we operate, particularly in the U.S, there have been higher rates of inflation over the last year. While our U.S. contracts are not indexed to inflation most of our international-based contracts are indexed to inflation. If inflation continues to increase in our markets, it may increase our expenses such that our profit margins could be adversely impacted. It may also increase the costs of some of our development projects that could negatively impact their competitiveness. |
| • |
Interest rate increases for both short-term and long-term debt have increased sharply. Although our outstanding debt mostly bears fixed interest rates, as we refinance it, or borrow additional amounts, we may incur additional interest expense versus expiring loans. |
Revenues
For the three months ended March 31, 2023, 92.5% of our Electricity segment revenues were from PPAs with fixed energy rates, which are not affected by fluctuations in energy commodity prices. We have variable price PPAs in California and Hawaii, which provide for payments based on the local utilities’ avoided cost, which is the incremental cost that the power purchaser avoids by not having to generate such electrical energy itself or purchase it from others. In Hawaii, the prices paid for electricity pursuant to the 25 MW PPA for the Puna Complex in Hawaii change primarily as a result of variations in the price of oil as well as other commodities. In 2019, we signed a new PPA related to Puna with fixed prices, increased capacity and extended the term until 2052. We are currently negotiating economic amendments to the PPA which are subject to PUC approval.
To comply with obligations under their respective PPAs, certain of our project subsidiaries are structured as special purpose, bankruptcy remote entities and their assets and liabilities are ring-fenced. Such assets are not generally available to pay our debt, other than debt at the respective project subsidiary level. However, these project subsidiaries are allowed to pay dividends and make distributions of cash flows generated by their assets to us, subject in some cases to restrictions in debt instruments, as described below.
Electricity segment revenues are also subject to seasonal variations and are affected by higher-than-average ambient temperatures, as described below under “Seasonality”.
Revenues attributable to our Product segment are based on the sale of equipment, engineering, procurement and construction contracts and the provision of various services to our customers. Product segment revenues vary from period to period because of the timing of our receipt of purchase orders and the progress of our equipment manufacturing and execution of the relevant project.
Revenues attributable to our Energy Storage segment are generated by several grid-connected BESS facilities that we own and operate that sell energy, capacity and/or ancillary services in merchant markets like PJM Interconnect, ISO New England, ERCOT and CAISO. The revenues fluctuate over time since a large portion of such revenues are generated in the merchant markets, where price volatility is inherent.
The following table sets forth a breakdown of our revenues for the periods indicated:
| Revenue |
Increase (decrease) |
|||||||||||||||
| Three Months Ended March 31, |
Three Months Ended March 31, |
|||||||||||||||
| 2023 |
2022 |
2023 |
||||||||||||||
| Revenues: |
||||||||||||||||
| Electricity |
$ | 170,310 | $ | 162,525 | $ | 7,785 | 4.8 | % | ||||||||
| Product |
10,042 | 14,628 | (4,586 | ) | (31.4 | )% | ||||||||||
| Energy storage |
4,880 | 6,557 | (1,677 | ) | (25.6 | )% | ||||||||||
| Total |
$ | 185,232 | $ | 183,710 | $ | 1,522 | 0.8 | % | ||||||||
| % of Revenues for Period Indicated |
||||||||
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Revenues: |
||||||||
| Electricity |
91.9 | % | 88.5 | % | ||||
| Product |
5.4 | 8.0 | ||||||
| Energy storage |
2.6 | 3.6 | ||||||
| Total |
100.0 | % | 100.0 | % | ||||
The following table sets forth the geographic breakdown of the revenues attributable to our Electricity, Product and Energy Storage segments for the periods indicated:
| Revenue |
Increase (decrease) |
|||||||||||||||
| Three Months Ended March 31, |
Three Months Ended March 31, |
|||||||||||||||
| 2023 |
2022 |
2023 |
||||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Electricity Segment: |
||||||||||||||||
| United States |
$ | 122,411 | $ | 116,109 | $ | 6,302 | 5.4 | % | ||||||||
| Foreign |
47,899 | 46,416 | 1,483 | 3.2 | ||||||||||||
| Total |
$ | 170,310 | $ | 162,525 | $ | 7,785 | 4.8 | % | ||||||||
| Product Segment: |
||||||||||||||||
| United States |
$ | 1,441 | $ | 535 | $ | 906 | 169.3 | % | ||||||||
| Foreign |
8,601 | 14,093 | (5,492 | ) | (39.0 | ) | ||||||||||
| Total |
$ | 10,042 | $ | 14,628 | $ | (4,586 | ) | (31.4 | )% | |||||||
| Energy Storage Segment: |
||||||||||||||||
| United States |
$ | 4,880 | $ | 6,557 | $ | (1,677 | ) | (25.6 | )% | |||||||
| Total |
$ | 4,880 | $ | 6,557 | $ | (1,677 | ) | (25.6 | )% | |||||||
| % of Revenues for Period Indicated |
||||||||
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Electricity Segment: |
||||||||
| United States |
71.9 | % | 71.4 | % | ||||
| Foreign |
28.1 | 28.6 | ||||||
| Total |
100.0 | % | 100.0 | % | ||||
| Product Segment: |
||||||||
| United States |
14.3 | % | 3.7 | % | ||||
| Foreign |
85.7 | 96.3 | ||||||
| Total |
100.0 | % | 100.0 | % | ||||
| Energy Storage: |
||||||||
| United States |
100.0 | % | 100.0 | % | ||||
| Total |
100.0 | % | 100.0 | % | ||||
In the three months ended March 31, 2023 and 2022, 31% and 33% of our total revenues, respectively, were derived from foreign locations, and our foreign operations had higher gross margins than our U.S. operations in each of those periods. A substantial portion of international revenues came from Kenya and, to a lesser extent, from Honduras, Guadeloupe, Guatemala and other countries. Our operations in Kenya contributed disproportionately to gross profit and net income. The contribution to combined pre-tax income of our domestic and foreign operations within our Electricity segment and Product segment differ in a number of ways.
Electricity Segment. Our Electricity segment domestic revenues were approximately 72% and 71% of our total Electricity segment for the three months ended March 31, 2023 and 2022, respectively. However, domestic operations have higher costs of revenues and expenses than our foreign operations. Our foreign power plants are located in lower-cost regions, like Kenya, Guatemala, Honduras and Guadeloupe, which favorably impact payroll, and maintenance expenses among other items. Our power plants in foreign locations are also newer than most of our domestic power plants and therefore tend to have lower maintenance costs and higher availability factors than our domestic power plants. Consequently, in the three months ended March 31, 2023 and 2022, the international operations of the segment accounted for 40% and 45% of our total gross profits, 54% and 72% of our net income (assuming the majority of corporate operating expenses and financing are recorded under our domestic jurisdiction) and 35% and 38% of our EBITDA, respectively.
Product Segment. Our Product segment foreign revenues were approximately 86% and 96% of our total Product segment revenues for the three months ended March 31, 2023 and 2022, respectively.
Energy Storage Segment. Our Energy Storage segment domestic revenues were 100% of our total Energy storage segment revenues for each of the three months ended March 31, 2023 and 2022.
Seasonality
Electricity generation from some of our geothermal power plants is subject to seasonal variations. In the winter, our power plants produce more energy primarily attributable to the lower ambient temperature, which has a favorable impact on the energy component of our Electricity segment revenues and the prices under many of our contracts are fixed throughout the year with no time-of-use impact. The prices paid for electricity under the PPAs for the Mammoth Complex and the North Brawley power plant in California, the Raft River power plant in Idaho, the Neal Hot Springs power plant in Oregon and Dixie Valley power plant in Nevada are higher in the months of June through September. The higher payments payable under these PPAs in the summer months partially offset the negative impact on our revenues from lower generation in the summer attributable to a higher ambient temperature. As a result, we expect the revenues and gross profit in the winter months to be higher than the revenues and gross profit in the summer months and in general we expect the first and fourth quarters to generate higher revenues than the second and third quarters.
Breakdown of Cost of Revenues
The principal cost of revenues attributable to our three segments are discussed in our 2022 Annual Report under “Part II - Item 7 – Management Discussion and Analysis of Financial Condition and Results of Operation”.
Critical Accounting Estimates and Assumptions
A comprehensive discussion of our critical accounting estimates and assumptions is included in our 2022 Annual Report under “Part II — Item 7 — Management Discussion and Analysis of Financial Condition and Results of Operation.”
New Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements set forth in Item 1 of this quarterly report for information regarding new accounting pronouncements.
Results of Operations
Our historical operating results in U.S. dollars and as a percentage of total revenues are presented below. A comparison of the different years described below may be of limited utility due to (i) our recent construction of power plants or enhancement of power plants; and (ii) fluctuation in revenues related to our Product segment.
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands, except per share data) |
||||||||
| Statements of Operations Historical Data: |
||||||||
| Revenues: |
||||||||
| Electricity |
$ | 170,310 | $ | 162,525 | ||||
| Product |
10,042 | 14,628 | ||||||
| Energy storage |
4,880 | 6,557 | ||||||
| Total Revenues |
185,232 | 183,710 | ||||||
| Cost of revenues: |
||||||||
| Electricity |
94,758 | 94,521 | ||||||
| Product |
9,351 | 13,613 | ||||||
| Energy storage |
5,054 | 5,671 | ||||||
| Total cost of revenues |
109,163 | 113,805 | ||||||
| Gross profit |
||||||||
| Electricity |
75,552 | 68,004 | ||||||
| Product |
691 | 1,015 | ||||||
| Energy storage |
(174 | ) | 886 | |||||
| Total gross profit |
76,069 | 69,905 | ||||||
| Operating expenses: |
||||||||
| Research and development expenses |
1,288 | 1,064 | ||||||
| Selling and marketing expenses |
3,948 | 4,365 | ||||||
| General and administrative expenses |
17,667 | 17,572 | ||||||
| Write-off of Energy Storage projects and assets |
— | 1,826 | ||||||
| Operating income |
53,166 | 45,078 | ||||||
| Other income (expense): |
||||||||
| Interest income |
1,851 | 342 | ||||||
| Interest expense, net |
(23,631 | ) | (21,081 | ) | ||||
| Derivatives and foreign currency transaction gains (losses) |
(1,937 | ) | 260 | |||||
| Income attributable to sale of tax benefits |
12,566 | 7,705 | ||||||
| Other non-operating income, net |
60 | 75 | ||||||
| Income from operations before income tax and equity in earnings (losses) of investees |
42,075 | 32,379 | ||||||
| Income tax provision |
(8,885 | ) | (10,163 | ) | ||||
| Equity in earnings of investees |
271 | 577 | ||||||
| Net income |
33,461 | 22,793 | ||||||
| Net income attributable to noncontrolling interest |
(4,432 | ) | (4,363 | ) | ||||
| Net income attributable to the Company's stockholders |
$ | 29,029 | $ | 18,430 | ||||
| Earnings per share attributable to the Company's stockholders: |
||||||||
| Basic: |
$ | 0.51 | $ | 0.33 | ||||
| Diluted: |
$ | 0.51 | $ | 0.33 | ||||
| Weighted average number of shares used in computation of earnings per share attributable to the Company's stockholders: |
||||||||
| Basic |
56,710 | 56,063 | ||||||
| Diluted |
57,104 | 56,366 | ||||||
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Statements of Operations Data: |
||||||||
| Revenues: |
||||||||
| Electricity |
91.9 | % | 88.5 | % | ||||
| Product |
5.4 | 8.0 | ||||||
| Energy storage |
2.6 | 3.6 | ||||||
| Total Revenues |
100.0 | 100.0 | ||||||
| Cost of revenues: |
||||||||
| Electricity |
55.6 | 58.2 | ||||||
| Product |
93.1 | 93.1 | ||||||
| Energy storage |
103.6 | 86.5 | ||||||
| Total cost of revenues |
58.9 | 61.9 | ||||||
| Gross profit |
||||||||
| Electricity |
44.4 | 41.8 | ||||||
| Product |
6.9 | 6.9 | ||||||
| Energy storage |
(3.6 | ) | 13.5 | |||||
| Total gross profit |
41.1 | 38.1 | ||||||
| Operating expenses: |
||||||||
| Research and development expenses |
0.7 | 0.6 | ||||||
| Selling and marketing expenses |
2.1 | 2.4 | ||||||
| General and administrative expenses |
9.5 | 9.6 | ||||||
| Write-off of Energy Storage projects and assets |
— | 1.0 | ||||||
| Operating income |
28.7 | 24.5 | ||||||
| Other income (expense): |
||||||||
| Interest income |
1.0 | 0.2 | ||||||
| Interest expense, net |
(12.8 | ) | (11.5 | ) | ||||
| Derivatives and foreign currency transaction gains (losses) |
(1.0 | ) | 0.1 | |||||
| Income attributable to sale of tax benefits |
6.8 | 4.2 | ||||||
| Other non-operating income, net |
— | — | ||||||
| Income from operations before income tax and equity in earnings (losses) of investees |
22.7 | 17.6 | ||||||
| Income tax provision |
(4.8 | ) | (5.5 | ) | ||||
| Equity in earnings of investees |
0.1 | 0.3 | ||||||
| Net income |
18.1 | 12.4 | ||||||
| Net income attributable to noncontrolling interest |
(2.4 | ) | (2.4 | ) | ||||
| Net income attributable to the Company's stockholders |
15.7 | % | 10.0 | % | ||||
Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022
Total Revenues
The table below compares revenues for the three months ended March 31, 2023 to the three months ended March 31, 2022.
| Three Months Ended March 31, |
||||||||||||
| 2023 |
2022 |
Change |
||||||||||
| (Dollars in millions) |
||||||||||||
| Electricity segment |
$ | 170.3 | $ | 162.5 | 4.8 | % | ||||||
| Product segment |
10.0 | 14.6 | (31.4 | ) | ||||||||
| Energy Storage segment |
4.9 | 6.6 | (25.6 | ) | ||||||||
| Total revenues |
$ | 185.2 | $ | 183.7 | 0.8 | % | ||||||
Electricity Segment
Revenues attributable to our Electricity segment for the three months ended March 31, 2023 were $170.3 million, compared to $162.5 million for the three months ended March 31, 2022. This increase was mainly due to: (i) $5.4 million related to the CD4 facility which started commercial operation in July 2022; and (ii) $3.9 million related to Tungsten Mountain 2 which started commercial operations in April 2022, partially offset by the lower revenues at the Puna power plant due to lower electricity prices.
Power generation in our power plants increased by 3.4% from 1,820,606 MWh in the three months ended March 31, 2022 to 1,881,942 MWh in the three months ended March 31, 2023.
Product Segment
Revenues attributable to our Product segment for the three months ended March 31, 2023 were $10.0 million, compared to $14.6 million for the three months ended March 31, 2022, which represented a 31.4% decrease. The decrease in our Product segment revenues is primarily related to the progress in our projects and timing of when revenues are recognized during the period. During the three months ended March 31, 2022, Product revenues included projects in Indonesia and Nicaragua compared to other certain projects in New Zealand, Philippines and Japan for which revenues were recognized during the three months ended March 31, 2023.
Energy Storage Segment
Revenues attributable to our Energy Storage segment for the three months ended March 31, 2023 were $4.9 million compared to $6.6 million for the three months ended March 31, 2022. The decrease is mainly due to lower energy rates at PJM Interconnection, LLC (“PJM”) and California Independent System Operator “(CAISO”) facilities in the three months ended March 31, 2023 compared to the same period in the previous year.
Total Cost of Revenues
The table below compares cost of revenues for the three months ended March 31, 2023 to the three months ended March 31, 2022.
| Three Months Ended March 31, |
||||||||||||
| 2023 |
2022 |
Change |
||||||||||
| (Dollars in millions) |
||||||||||||
| Electricity segment |
$ | 94.8 | $ | 94.5 | 0.3 | % | ||||||
| Product segment |
9.4 | 13.6 | (31.3 | ) | ||||||||
| Energy Storage segment |
5.1 | 5.7 | (10.9 | ) | ||||||||
| Total cost of revenues |
$ | 109.2 | $ | 113.8 | (4.1 | )% | ||||||
Electricity Segment
Total cost of revenues attributable to our Electricity segment for the three months ended March 31, 2023 was $94.8 million, compared to $94.5 million for the three months ended March 31, 2022. This increase was primarily attributable to: (i) $2.6 million related to the CD4 facility which started commercial operation in July 2022; and (ii) $0.5 million related to Tungsten Mountain 2 which started commercial operations in April 2022. This increase was offset by higher business interruption insurance proceeds of $4.5 million, which were recognized in the first quarter of 2023 compared to the same period in the previous year. Such business interruption insurance proceeds are related to the damage caused to our Puna power plant as a result of the Kilauea volcano eruption in May 2018.
Our total Electricity segment cost of revenues for the three months ended March 31, 2023 was 55.6% of Electricity revenues, compared to 58.2% for the three months ended March 31, 2022, including the impact from business interruption insurance proceeds as described above. The cost of revenues attributable to our international power plants for the three months ended March 31, 2023 was 18.3% of our total Electricity segment cost of revenues for this period compared to 17.9% for the same period in the prior year .
Product Segment
Total cost of revenues attributable to our Product segment for the three months ended March 31, 2023 was $9.4 million, compared to $13.6 million for the three months ended March 31, 2022, which represented a 31.3% decrease. This decrease was primarily attributable to the decrease in Product segment revenues, as discussed above. As a percentage of total Product segment revenues, our total cost of revenues attributable to our Product segment for the three months ended March 31, 2023 and 2022, was 93.1% and 93.1%, respectively.
Energy Storage Segment
Cost of revenues attributable to our Energy Storage segment for the three months ended March 31, 2023 were $5.1 million compared to $5.7 million for the three months ended March 31, 2022. The Energy Storage segment includes cost of revenues related to the delivery of energy storage and energy management services.
Research and Development Expenses, Net
Research and development expenses for the three months ended March 31, 2023 were $1.3 million, compared to $1.1 million for the three months ended March 31, 2022.
Selling and Marketing Expenses
Selling and marketing expenses for the three months ended March 31, 2023 were $3.9 million compared to $4.4 million for the three months ended March 31, 2022. Selling and marketing expenses for the three months ended March 31, 2023 constituted 2.1% of total revenues for such period, compared to 2.4% for the three months ended March 31, 2022.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2023 were $17.7 million compared to $17.6 million for the three months ended March 31, 2022. General and administrative expenses for the three months ended March 31, 2023 constituted 9.5% of total revenues for such period, compared to 9.6% for the three months ended March 31, 2022.
Write-off of Energy Storage Projects and Assets
Write-off of Energy Storage projects and assets for the three months ended March 31, 2022 is related to accumulated costs of energy storage projects that the Company was no longer pursuing as well as specific certain customer related assets. There were no write-offs of Energy Storage projects and assets for the three months ended March 31, 2023.
Interest Income
Interest Income for the three months ended March 31, 2023 was $1.9 million, compared to $0.3 million for the three months ended March 31, 2022. This increase was primarily related to higher cash balances as well as higher interest rates on cash and cash equivalents.
Interest Expense, Net
Interest expense, net for the three months ended March 31, 2023 was $23.6 million, compared to $21.1 million for the three months ended March 31, 2022. This increase of $2.6 million was primarily attributable to: (i) $0.6 million related to the BHI Loan entered into in February 2023; (ii) $0.7 million related to the Bank Mizrahi Loan entered into in April 2022; (iii) $1.0 million of interest expenses related to the CD 4 tax equity transaction entered into in December 2022; and higher interest expenses capitalized in the first quarter of 2022 compared to the same quarter in 2023. This increase was partially offset by lower interest expenses on other long-term loans as a result of regular principal payments.
Derivatives and Foreign Currency Transaction Gains (Losses)
Derivatives and foreign currency transaction gains and losses for the three months ended March 31, 2023 was a loss of $1.9 million, compared to a gain of $0.3 million for the three months ended March 31, 2022. Derivatives and foreign currency transaction gains (losses) for the three months ended March 31, 2023 primarily includes losses from foreign currency forward contracts which were not accounted for as hedge transactions.
Income Attributable to Sale of Tax Benefits
Income attributable to the sale of tax benefits for the three months ended March 31, 2023 was $12.6 million, compared to $7.7 million for the three months ended March 31, 2022. This income primarily represents the value of production tax credits (“PTCs”) and taxable income or loss generated by certain of our power plants allocated to investors under tax equity transactions. This increase of $4.9 million is primarily related to the CD 4 tax equity transaction entered into in December 2022 and income related to the expected sale of transferable production tax credits of $1.8 million, which was recorded in the first quarter of 2023 under the new IRA regulations.
Other Non-Operating Income (Expense), Net
Other non-operating income (expense), net for the three months ended March 31, 2023 was an expense of $0.1 million, compared to an expense of $0.1 million for the three months ended March 31, 2022.
Income Taxes
Income tax provision for the three months ended March 31, 2023 was $8.9 million compared to income tax provision of $10.2 million for the three months ended March 31, 2022. Our effective tax rate for the three months ended March 31, 2023 and 2022, was 21.1% and 31.4%, respectively. The effective rate differs from the federal statutory rate of 21% primarily due to the jurisdictional mix of earnings at differing tax rates and generation of investment tax credits of $1.6 million.
Equity in Earnings (losses) of Investees, Net
Equity in earnings of investees, net for the three months ended March 31, 2023 was $0.3 million, compared to $0.6 million for the three months ended March 31, 2022. Equity in earnings (losses) of investees, net is mainly derived from our 12.75% share in the earnings or losses in the Sarulla Consortium ("Sarulla"). During the second quarter of 2022, Sarulla agreed with its banks on a framework that will enable it to perform remediation work that is aimed to restore the plant’s performance. The recovery plan is ongoing; however, uncertainty remains regarding Sarulla’s ability to meet the plan and we are evaluating the impact of the plan on future performance. As we determined that the current situation and circumstances related to our equity method investment in Sarulla are temporary, no impairment testing was required for the period.
Net Income Attributable to the Company’s Stockholders
Net income attributable to the Company’s stockholders for the three months ended March 31, 2023 was $29.0 million, compared to net income attributable to the Company’s stockholders of $18.4 million for the three months ended March 31, 2022, which represents an increase of $10.6 million. This increase was attributable to an increase of $10.7 million in net income which was affected by the explanations described above, and an increase of $0.1 million in net income attributable to noncontrolling interest in the three months ended March 31, 2023, compared to the three months ended March 31, 2022.
Liquidity and Capital Resources
Our principal sources of liquidity have been derived from cash flows from operations, proceeds from third party debt such as borrowings under our credit facilities, private or public offerings and issuances of debt or equity securities, project financing and tax monetization transactions, short term borrowing under our lines of credit, and proceeds from the sale of equity interests in one or more of our projects. We have utilized this cash to develop and construct power plants, fund our acquisitions, pay down existing outstanding indebtedness, and meet our other cash and liquidity needs.
As of March 31, 2023, we had access to (i) $414.9 million in cash and cash equivalents, of which $100.3 million is held by our foreign subsidiaries; and (ii) $391.0 million of unused corporate borrowing capacity under existing committed lines of credit with different commercial banks.
Our estimated capital needs for the remainder of 2023 include $494.0 million for capital expenditures on new projects under development or construction including energy storage projects, exploration activity and maintenance capital expenditures for our existing projects. In addition, $143.1 million will be needed for long-term debt repayment.
We expect to finance these requirements with: (i) the sources of liquidity described above; (ii) positive cash flows from our operations; and (iii) future project financings and re-financings (including construction loans and tax equity). Management believes that, based on the current stage of implementation of our strategic plan, the sources of liquidity and capital resources described above will address our anticipated liquidity, capital expenditures, and other investment requirements.
As of March 31, 2023, we continue to maintain our assertion to no longer indefinitely reinvest foreign funds held by our foreign subsidiaries, with the exception of a certain balance held in Israel, and have accrued the incremental foreign withholding taxes. Accordingly, during the three months ended March 31, 2023, we included a foreign income tax expense of $0.4 million related to foreign withholding taxes on accumulated earnings of all of our foreign subsidiaries.
As described under Note 1 to the condensed consolidated financial statements, on February 27, 2023, the Company entered into a definitive loan agreement with Hapoalim Bank under which it provided for a loan in an aggregate principal amount of $100 million.
Letters of Credits Under Credit Agreements
Some of our customers require our project subsidiaries to post letters of credit in order to guarantee their respective performance under relevant contracts. We are also required to post letters of credit to secure our obligations under various leases and licenses and may, from time to time, decide to post letters of credit in lieu of cash deposits in reserve accounts under certain financing arrangements. In addition, our subsidiary, Ormat Systems, is required from time to time to post performance letters of credit in favor of our customers with respect to orders of products.
| Credit Agreements |
Amount Issued |
Issued and Outstanding as of March 31, 2023 |
Termination Date |
||||||
| (Dollars in millions) |
|||||||||
| Committed lines for credit and letters of credit |
$ | 468.0 | $ | 77.0 | April 2023-July 2025 |
||||
| Committed lines for letters of credit |
155.0 | 103.0 | April 2023-December 2023 |
||||||
| Non-committed lines |
— | 59.9 | October 2022 |
||||||
| Total |
$ | 623.0 | $ | 239.9 | |||||
Restrictive Covenants
Our obligations under the credit agreements, the loan agreements, and the trust instrument governing the bonds described above, are unsecured, but we are subject to a negative pledge in favor of the banks and the other lenders and certain other restrictive covenants. These include, among other things, restraints on: (i) creating any floating charge or any permanent pledge, charge or lien over our assets without obtaining the prior written approval of the lender; (ii) guaranteeing the liabilities of any third party without obtaining the prior written approval of the lender; and (iii) selling, assigning, transferring, conveying or disposing of all or substantially all of our assets, or a change of control in our ownership structure. Some of the credit agreements, the term loan agreements, and the trust instrument contain cross-default provisions with respect to other material indebtedness owed by us to any third party. In some cases, we have agreed to maintain certain financial ratios, which are measured quarterly, such as: (i) equity of at least $750 million and in no event less than 25% of total assets; and (ii) 12-month debt, net of cash, cash equivalents, and short-term bank deposits to Adjusted EBITDA ratio not to exceed 6.0. As of March 31, 2023: (i) total equity was $2,337.0 million and the actual equity to total assets ratio was 46.6% and (ii) the 12-month debt, net of cash, cash equivalents, to Adjusted EBITDA ratio was 3.45. During the three months ended March 31, 2023, we distributed interim dividends in an aggregate amount of $6.7 million. The failure to perform or observe any of the covenants set forth in such agreements, subject to various cure periods, would result in the occurrence of an event of default and would enable the lenders to accelerate all amounts due under each such agreement.
As described above, we are currently in compliance with our covenants with respect to the credit agreements, the loan agreements and the trust instrument, (except as described below), and believe that the restrictive covenants, financial ratios and other terms of any of our full-recourse bank credit agreements will not materially impact our business plan or operations.
As of March 31, 2023, we did not meet the dividend distribution criteria related to the DAC 1 Senior Secured Notes and USG Prudential - NV, which resulted in certain equity distribution restrictions from these related subsidiaries.
Future minimum payments
Future minimum cash payments under long-term obligations (including long-term debt, lease obligations and financing liability), as of March 31, 2023, are as follows:
| (Dollars in thousands) |
||||
| Year ending December 31: |
||||
| 2023 |
$ | 149,867 | ||
| 2024 |
280,390 | |||
| 2025 |
192,152 | |||
| 2026 |
192,597 | |||
| 2027 |
618,873 | |||
| Thereafter |
731,803 | |||
| Total |
$ | 2,165,682 | ||
Third-Party Debt
Our third-party debt consists of (i) non-recourse and limited-recourse project finance debt or acquisition financing debt that we or our subsidiaries have obtained for the purpose of developing and constructing, refinancing or acquiring our various projects; (ii) full-recourse debt incurred by us or our subsidiaries for general corporate purposes; (iii) financing liability related to the business combination purchase transaction of the Terra-Gen geothermal assets and (iv) convertible senior notes issued in the second quarter of 2022.
Non-Recourse and Limited-Recourse Third-Party Debt
| Loan |
Amount Issued |
Amount Outstanding as of March 31, 2023 |
Interest Rate |
Maturity Date |
Related Project |
Location |
||||||||||||
| (Dollars in millions) |
||||||||||||||||||
| OFC 2 Senior Secured Notes – Series A |
$ | 151.7 | $ | 69.3 | 4.67 | % | 2032 | McGinness Hills phase 1 and Tuscarora |
U.S. |
|||||||||
| OFC 2 Senior Secured Notes – Series B |
140.0 | 83.9 | 4.61 | % | 2032 | McGinness Hills phase 2 |
U.S. |
|||||||||||
| Olkaria III Financing Agreement with DFC – Tranche 1 |
85.0 | 36.6 | 6.34 | % | 2030 | Olkaria III Complex |
Kenya |
|||||||||||
| Olkaria III Financing Agreement with DFC – Tranche 2 |
180.0 | 76.8 | 6.29 | % | 2030 | Olkaria III Complex |
Kenya |
|||||||||||
| Olkaria III Financing Agreement with DFC – Tranche 3 |
45.0 | 20.8 | 6.12 | % | 2030 | Olkaria III Complex |
Kenya |
|||||||||||
| Amatitlan Financing(1) |
42.0 | 14.9 | LIBOR+4.35 |
% | 2027 | Amatitlan |
Guatemala |
|||||||||||
| Don A. Campbell Senior Secured Notes |
92.5 | 61.1 | 4.03 | % | 2033 | Don A. Campbell Complex |
U.S. |
|||||||||||
| Idaho Refinancing Note(2) |
61.6 | 59.8 | 6.26 | % | 2038 | Neal Hot Springs and Raft River |
U.S. |
|||||||||||
| U.S. Department of Energy Loan(3) |
96.8 | 34.6 | 2.60 | % | 2035 | Neal Hot Springs |
U.S. |
|||||||||||
| Prudential Capital Group Nevada Loan |
30.7 | 23.7 | 6.75 | % | 2037 | San Emidio |
U.S. |
|||||||||||
| Platanares Loan with DFC |
114.7 | 77.8 | 7.02 | % | 2032 | Platanares |
Honduras |
|||||||||||
| Viridity - Plumstriker |
23.5 | 11.1 | LIBOR+3.5 |
% | 2026 | Plumsted+Striker |
U.S. |
|||||||||||
| Géothermie Bouillante(4) |
8.9 | 4.2 | 1.52 | % | 2026 | Géothermie Bouillante |
Guadeloupe |
|||||||||||
| Géothermie Bouillante(4) |
8.9 | 5.3 | 1.93 | % | 2026 | Géothermie Bouillante |
Guadeloupe |
|||||||||||
| Total |
$ | 1,081.3 | $ | 579.9 | ||||||||||||||
| 1. |
LIBOR cannot be lower than 1.25%. Margin of 4.35% as long as the Company’s guaranty of the loan is outstanding (current situation) or 4.75% otherwise. |
| 2. |
Secured by equity interest. |
| 3. |
Secured by the assets. |
| 4. |
Loan issued in total aggregate amount of EUR 8.0 million. |
Full-Recourse Third-Party Debt
| Loan |
Amount Issued |
Outstanding Amount as of March 31, 2023 |
Interest Rate |
Maturity Date |
|||||||||
| (Dollars in millions) |
|||||||||||||
| Mizrahi Loan |
$ | 75.0 | $ | 70.3 | 4.10 | % | April 2030 |
||||||
| Hapoalim Loan |
125.0 | 98.2 | 3.45 | % | June 2028 |
||||||||
| Hapoalim Loan 2023 |
100.0 | 100.0 | 6.45 | % | February 2033 |
||||||||
| HSBC Loan |
50.0 | 39.3 | 3.45 | % | July 2028 |
||||||||
| Discount Loan |
100.0 | 81.3 | 2.90 | % | September 2029 |
||||||||
| Senior Unsecured Bonds Series 4 (1) |
289.8 | 249.0 | 3.35 | % | June 2031 |
||||||||
| Senior unsecured Loan 1 |
100.0 | 83.2 | 4.80 | % | March 2029 |
||||||||
| Senior unsecured Loan 2 |
50.0 | 41.6 | 4.60 | % | March 2029 |
||||||||
| Senior unsecured Loan 3 |
50.0 | 41.6 | 5.44 | % | March 2029 |
||||||||
| DEG Loan 2 |
50.0 | 27.5 | 6.28 | % | June 2028 |
||||||||
| DEG Loan 3 |
41.5 | 24.0 | 6.04 | % | June 2028 |
||||||||
| Total |
$ | 1,031.3 | $ | 856.0 | |||||||||
(1 ) Bonds issued in total aggregate principal amount of NIS 1.0 billion.
Financing Liability - Dixie Valley
The financing liability is related to the business combination purchase transaction of the Terra-Gen geothermal assets. The financing liability amount outstanding as of March 31, 2023 is $236.1 million, it bears a fixed interest rate of 2.5% per annum, principal and interest are payable semi-annually, and matures in March 2033.
Convertible Senior Notes
The convertible senior notes ("Notes") were issued in June 2022. The Notes bear annual interest of 2.5%, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2023. The Notes mature on July 15, 2027, unless earlier converted, redeemed or repurchased and the outstanding aggregate amount of the Notes as of March 31, 2023 is $431.3 million.
Liquidity Impact of Uncertain Tax Positions
The Company has a liability associated with unrecognized tax benefits and related interest and penalties in the amount of approximately $6.6 million as of March 31, 2023. This liability is included in long-term liabilities in our condensed consolidated balance sheet because we generally do not anticipate that settlement of the liability will require payment of cash within the next twelve months. We are not able to reasonably estimate when we will make any cash payments required to settle this liability.
Dividends
The following are the dividends declared by us since March 31, 2021:
| Date Declared |
Dividend Amount per Share |
Record Date |
Payment Date |
|||
| May 5, 2021 |
$ | 0.12 | May 18, 2021 |
June 1, 2021 |
||
| August 4, 2021 |
$ | 0.12 | August 18, 2021 |
September 1, 2021 |
||
| November 3, 2021 |
$ | 0.12 | November 17, 2021 |
December 3, 2021 |
||
| February 23, 2022 |
$ | 0.12 | March 9, 2022 |
March 23, 2022 |
||
| May 2, 2022 |
$ | 0.12 | May 16, 2022 |
May 31, 2022 |
||
| August 3, 2022 |
$ | 0.12 | August 17, 2022 |
August 31, 2022 |
||
| November 2, 2022 |
$ | 0.12 | November 16, 2022 |
November 30, 2022 |
||
| February 22, 2023 |
$ | 0.12 | March 8, 2023 |
March 22, 2023 |
||
| May 9, 2023 |
$ | 0.12 | May 23, 2023 |
June 6, 2023 |
||
Historical Cash Flows
The following table sets forth the components of our cash flows for the periods indicated:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Net cash provided by operating activities |
$ | 56,456 | $ | 81,776 | ||||
| Net cash used in investing activities |
(111,177 | ) | (139,332 | ) | ||||
| Net cash provided by (used in) financing activities |
350,381 | (44,721 | ) | |||||
| Translation adjustments on cash and cash equivalents |
(14 | ) | (34 | ) | ||||
| Net change in cash and cash equivalents and restricted cash and cash equivalents |
295,646 | (102,311 | ) | |||||
For the Three Months Ended March 31, 2023
Net cash provided by operating activities for the three months ended March 31, 2023 was $56.5 million, compared to $81.8 million for the three months ended March 31, 2022. The net decrease of $25.3 million was primarily due to an increase in our operational results, period over period, as explained above, offset by: (i) net increase in change to inventories of $18.2 million related to timing of allocating costs to projects under construction; (ii) an increase in prepaid expenses and other of $8.7 million primarily related to prepayment made to suppliers; and (iii) a net increase in the change in receivables of $31.8 million, as a result of the timing of collection from our customers. This increase was partially offset primarily by a net increase of $15.2 million in costs and estimated earnings in excess of billings on uncompleted contracts, period over period, as a result of timing of billing to our customers and increase in the change in accounts payable and accrued expenses of $9.1 million, mainly due to timing of payments to our supplier and construction of power plants.
Net cash used in investing activities for the three months ended March 31, 2023 was $111.2 million, compared to $139.3 million for the three months ended March 31, 2022. The principal factors that affected our net cash used in investing activities during the three months ended March 31, 2023 and 2022 were: capital expenditures of $106.9 million, and $137.2 million, respectively, primarily for our facilities under construction that support our growth plan.
Net cash provided by financing activities for the three months ended March 31, 2023 was $350.4 million, compared to net cash used in financing activities of $44.7 million for the three months ended March 31, 2022. The principal factors that affected the net cash provided by financing activities during the three months ended March 31, 2023 were: (i) net proceeds of $297.1 million and $99.9 million from issuance of common stock and the Hapoalim Loan 2023, respectively, primarily offset by: (i) repayment of long-term debt in the amount of $42.8 million; (ii) cash dividend payment of $6.7 million, and (iii) $3.0 million cash paid to noncontrolling interest. The principal factors that affected our net cash used in financing activities during the three months ended March 31, 2022 were: (i) repayments of long-term debt in the amount of $39.1 million; (ii) cash paid to noncontrolling interest of $3.4 million, and (iii) cash dividend payment of $6.7 million.
Non-GAAP Measures: EBITDA and Adjusted EBITDA
We calculate EBITDA as net income before interest, taxes, depreciation, amortization and accretion. We calculate Adjusted EBITDA as net income before interest, taxes, depreciation, amortization and accretion, adjusted for (i) mark-to-market gains or losses from accounting for derivatives, (ii) stock-based compensation, (iii) merger and acquisition transaction costs, (iv) gain or loss from extinguishment of liabilities, (v) cost related to a settlement agreement, (vi) non-cash impairment charges; (vii) write-off of unsuccessful exploration activities; and (viii) other unusual or non-recurring items. We adjust for these factors as they may be non-cash, unusual in nature and/or are not factors used by management for evaluating operating performance. We believe that presentation of these measures will enhance an investor’s ability to evaluate our financial and operating performance. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the United States, or U.S. GAAP, and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with U.S. GAAP. Our Board of Directors and senior management use EBITDA and Adjusted EBITDA to evaluate our financial performance. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.
Starting in the fourth quarter of 2022, we include accretion expenses related to asset retirement obligation in the adjustments to net income when calculating EBITDA and adjusted EBITDA. The presentation of EBITDA and adjusted EBITDA includes accretion expenses for the three months ended March 31, 2023, however, the prior year has not been recast to include accretion expenses as the amounts were immaterial.
Net income for the three months ended March 31, 2023 was $33.5 million, compared to $22.8 million for the three months ended March 31, 2022 respectively.
Adjusted EBITDA for the three months ended March 31, 2023 was $123.5 million, compared to $107.9 million for the three months ended March 31, 2022, respectively.
The following table reconciles net income to EBITDA and Adjusted EBITDA for the three months ended March 31, 2023 and 2022:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| (Dollars in thousands) |
||||||||
| Net income |
$ | 33,461 | $ | 22,793 | ||||
| Adjusted for: |
||||||||
| Interest expense, net (including amortization of deferred financing costs) |
21,780 | 20,739 | ||||||
| Income tax provision (benefit) |
8,885 | 10,163 | ||||||
| Adjustment to investment in an unconsolidated company: our proportionate share in interest expense, tax and depreciation and amortization in Sarulla |
2,982 | 2,124 | ||||||
| Depreciation, amortization and accretion |
52,396 | 46,769 | ||||||
| EBITDA |
$ | 119,504 | $ | 102,588 | ||||
| Mark-to-market (gains) or losses from accounting for derivative |
993 | 277 | ||||||
| Stock-based compensation |
2,990 | 2,814 | ||||||
| Allowance for bad debts |
— | 115 | ||||||
| Write-off related to Storage projects and activity |
— | 1,825 | ||||||
| Merger and acquisition transaction costs |
— | 249 | ||||||
| Adjusted EBITDA |
$ | 123,487 | $ | 107,868 | ||||
In May 2014, the Sarulla consortium ("SOL") closed $1,170 million in financing through SOL. As of March 31, 2023, the SOL credit facility had an outstanding balance of $836.6 million. Our proportionate share in the SOL credit facility is $106.7 million. During the second quarter of 2022, Sarulla agreed with its banks on a framework that will enable it to perform remediation work that is aimed to restore the plant’s performance. The recovery plan is ongoing; however, uncertainty remains regarding Sarulla’s ability to meet the plan and we are evaluating the impact of the plan on future performance. As we determined that the current situation and circumstances related to our equity method investment in Sarulla are temporary, no impairment testing was required for the period.
Capital Expenditures
Our capital expenditures primarily relate to: (i) the development and construction of new power plants, (ii) the enhancement of our existing power plants; and (iii) investment in activities under our strategic plan.
The following is an overview of projects that are fully released for construction.
Heber Complex (California). We are currently in the process of repowering the Heber 1 power plant. We are planning to replace the steam turbine and old OEC units with new advanced technology equipment that will add a net capacity of 8 MW. Following these enhancements, we expect the capacity of the complex to reach 89 MW. Pre-Commissioning activities at Heber 1 are ongoing. We expect commercial operation of Heber 1 repowering in the second quarter of 2023.
Steamboat Solar (Nevada). We are currently developing a Solar PV power plant adjacent to our Steamboat 2/3 geothermal power plant at the Steamboat complex in Nevada. The project is expected to generate approximately 7 MW that will be used for the ancillary needs of the geothermal power plant and will free a similar amount of MW to be sold from the geothermal resource to SCPPA under the SCPPA portfolio PPA. Construction of the Steamboat 2/3 Solar PV is delayed due to weather conditions and commercial operation is expected in the second half of 2023.
Zunil Upgrade (Guatemala). We are expanding the Zunil geothermal power plant in Guatemala to add 5 MW of additional capacity. We are planning to sell the electricity generated under the existing PPA with the local utility, Instituto Nacional de Electrification or “INDE”. Construction has been completed and drilling is still ongoing. Commercial operation is expected in the first half of 2023.
North Valley Solar (Nevada). We are currently developing a Solar PV power plant adjacent to our North Valley geothermal power plant in Nevada. The project is expected to generate approximately 6 MW that will be used for the ancillary needs of the geothermal power plant and will free a similar amount to be sold from the geothermal resource to SCPPA under the SCPPA portfolio PPA. Permitting is ongoing. Permits are expected any day. Commercial operation is expected in the third half of 2023.
Beowawe Upgrade (Nevada). We are currently in the process of upgrading the Beowawe project that we recently acquired. We are planning to replace the old equipment with new advanced technology equipment that will add a net capacity of 9 MW. Construction commenced and we expect commercial operation in the second quarter of 2024.
Steamboat Hills Solar (Nevada). We are currently developing a Solar PV power plant adjacent to our geothermal Steamboat complex in Nevada. The project is expected to generate approximately 3.5 MW that will be used for the ancillary needs of the geothermal power plant and will free a similar amount of MW to be sold from the geothermal resource to SCPPA under the SCPPA portfolio PPA. Engineering and procurement are ongoing and we expect commercial operation in the second half of 2023.
Beowawe Solar (Nevada). We are currently developing a Solar PV power plant adjacent to our geothermal Beowawe power plant in Nevada. The project is expected to generate approximately 6 MW that will be used for the ancillary needs of the geothermal power plant and will free a similar amount of MW to be sold from the geothermal resource under its PPA. Engineering and procurement are ongoing and we expect commercial operation in the first half of 2024.
| Project Name |
Size |
Location |
Customer |
Expected COD |
| Upton |
25MW/25MWh |
TX |
ERCOT |
Q2 2023 |
| Andover |
20MW/20MWh |
NJ |
PJM |
Q2 2023 |
| Pomona 2 |
20MW/40MWh |
CA |
PG&E and CAISO |
Q3 2023 |
| East Flemington |
20MW/20MWh |
NJ |
PJM |
Q4 2023 |
| Bottleneck | 80MW/320MWh | CA | CAISO | Q1 2024 |
| Montague |
20MW/20MWh |
NJ |
PJM |
Q4 2024 |
The following is an overview of projects that are in initial stages of construction:
Carson Lake Project. We plan to develop between 10 MW to 15 MW at the Carson Lake project on BLM leases located in Churchill County, Nevada. We signed a Small Generator Interconnection Agreement with NV Energy in December 2017. As of March 31, 2023, we are planning to begin the drilling activity next year.
We have budgeted approximately $570.0 million in capital expenditures for construction of new projects and enhancements to our existing power plants, of which we had invested $317.0 million as of March 31, 2023. We expect to invest approximately $164.0 million in the rest of 2023 and the remaining approximately $89.0 million thereafter.
In addition, we estimate approximately $330.0 million in additional capital expenditures in 2023 to be allocated as follows: (i) approximately $89.0 million for the exploration, drilling and development of new projects and enhancements of existing power plants that are not yet released for full construction; (ii) approximately $49.0 million for maintenance capital expenditures for our operating power plants; (iii) approximately $175.0 million for the construction and development of energy storage projects; and (iv) approximately $17.0 million for enhancements to our production facilities.
In the aggregate, we estimate our total capital expenditures for the last three quarters of 2023 to be approximately $494.0 million.
Exposure to Market Risks
Based on current conditions, we believe that we have sufficient financial resources to fund our activities and execute our business plans. However, the cost of obtaining financing for our project needs may increase significantly or such financing may be difficult to obtain.
We, like other power plant operators, are exposed to electricity price volatility risk. Our exposure to such market risk is currently limited because the majority of our long-term PPAs have fixed or escalating rate provisions that limit our exposure to changes in electricity prices. Our energy storage projects sell primarily on a "merchant" basis and are exposed to changes in the electricity market prices.
The energy payments under the PPAs of the Heber 2 power plant in the Heber Complex until the end of 2022, are determined by reference to the relevant power purchaser’s short run avoided cost. A decline in the price of natural gas will result in a decrease in the incremental cost that the power purchaser avoids by not generating its electrical energy needs from natural gas, or by reducing the price of purchasing its electrical energy needs from natural gas power plants, which in turn will reduce the energy payments that we may charge under the relevant PPA for these power plants. The Puna Complex is currently benefiting from energy prices which are higher than the floor under the 25 MW PPA for the Puna Complex. For Heber 2 power plant we signed a new PPA and for Puna we are currently negotiating a new PPA, for a fixed energy rate, as discussed above.
As of March 31, 2023, 98.8% of our consolidated long-term debt was fixed rate debt and therefore was not subject to interest rate volatility risk and 1.2% of our long-term debt was floating rate debt, exposing us to interest rate risk in connection therewith. As of March 31, 2023, $26.0 million of our long-term debt remained subject to interest rate risk.
Our cash equivalents are subject to interest rate risk. We currently maintain our surplus cash in short-term, interest-bearing bank deposits, money market funds, corporate bonds and debt securities available for sale (with a minimum investment grade rating of A+ by Standard & Poor’s Ratings Services).
We are also exposed to foreign currency exchange risk, in particular the fluctuation of the U.S. dollar versus the New Israeli Shekels ("NIS") in Israel and the Euro. Risks attributable to fluctuations in currency exchange rates can arise when we or any of our foreign subsidiaries borrow funds or incur operating or other expenses in one type of currency but receive revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary’s ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary, or increase such subsidiary’s overall expenses. In Kenya, the tax asset is recorded in Kenyan Shillings ("KES") similar to the tax liability, however any change in the exchange rate in the KES versus the U.S. dollar has an impact on our financial results. Risks attributable to fluctuations in foreign currency exchange rates can also arise when the currency denomination of a particular contract is not the U.S. dollar. Substantially all of our PPAs in the international markets are either U.S. dollar-denominated or linked to the U.S. dollar except for our operations on Guadeloupe, where we own and operate the Boulliante power plant which sells its power under a Euro-denominated PPA with Électricité de France S.A. Our construction contracts from time to time contemplate costs which are incurred in local currencies. The way we often mitigate such risk is to receive part of the proceeds from the contract in the currency in which the expenses are incurred. Currently, we have forward and cross-currency swap contracts in place to reduce our NIS/U.S. dollar currency exposure and expect to continue to use currency exchange and other derivative instruments to the extent we deem such instruments to be the appropriate tool for managing such exposure.
On July 1, 2020, we concluded an auction tender and accepted subscriptions for senior unsecured bonds comprised of NIS 1.0 billion aggregate principal amount (the “Senior Unsecured Bonds - Series 4”). The Senior Unsecured Bonds - Series 4 were issued in New Israeli Shekels and converted to approximately $290 million using a cross-currency swap transaction shortly after the completion of such issuance.
In June 2022, we issued $431.3 million aggregate principal amount of our 2.5% convertible senior notes due in 2027. The Notes bear annual interest of 2.5%, payable semiannually in arrears, and mature on July 15, 2027, unless earlier converted, redeemed or repurchased.
We performed a sensitivity analysis on the fair values of our long-term debt obligations, and foreign currency exchange forward contracts. The foreign currency exchange forward contracts listed below principally relate to trading activities. The sensitivity analysis involved increasing and decreasing forward rates at March 31, 2023 and December 31, 2022 by a hypothetical 10% and calculating the resulting change in the fair values.
At this time, the development of our strategic plan has not exposed us to any additional market risk. However, as the implementation of the plan progresses, we may be exposed to additional or different market risks.
The results of the sensitivity analysis calculations as of March 31, 2023 and December 31, 2022 are presented below:
| Assuming a 10% Increase in Rates |
Assuming a 10% Decrease in Rates |
||||||||||||||||
| Risk |
March 31, 2023 |
December 31, 2022 |
March 31, 2023 |
December 31, 2022 |
Change in the Fair Value of |
||||||||||||
| (Dollars in thousands) |
|||||||||||||||||
| Foreign Currency |
$ | (4,610 | ) | $ | (5,093 | ) | $ | 5,634 | $ | 6,220 | Foreign Currency Forward Contracts |
||||||
| Interest Rate |
(946 | ) | (946 | ) | 965 | 965 | Mizrahi Loan |
||||||||||
| Interest Rate |
(1,389 | ) | (1,493 | ) | 1,423 | 1,531 | Hapoalim Loan |
||||||||||
| Interest Rate |
(2.6 | ) | — | 2.7 | — | Hapoalim Loan 2023 |
|||||||||||
| Interest Rate |
(587 | ) | (631 | ) | 602 | 648 | HSBC Loan |
||||||||||
| Interest Rate |
(1,299 | ) | (1,378 | ) | 1,334 | 1,416 | Discount Loan |
||||||||||
| Interest Rate |
(3,895 | ) | (4,096 | ) | 4,024 | 4,232 | Financing Liability |
||||||||||
| Interest Rate |
(3,556 | ) | (3,693 | ) | 3,689 | 3,832 | OFC 2 Senior Secured Notes |
||||||||||
| Interest Rate |
(3,014 | ) | (3,178 | ) | 3,122 | 3,295 | DFC Loan |
||||||||||
| Interest Rate |
(242 | ) | (259 | ) | 250 | 268 | Amatitlan Loan |
||||||||||
| Interest Rate |
(5,307 | ) | (5,701 | ) | 5,513 | 5,925 | Senior Unsecured Bonds |
||||||||||
| Interest Rate |
(490 | ) | (527 | ) | 505 | 544 | DEG 2 Loan |
||||||||||
| Interest Rate |
(1,479 | ) | (1,528 | ) | 1,544 | 1,597 | DAC 1 Senior Secured Notes |
||||||||||
| Interest Rate |
(3,729 | ) | (3,902 | ) | 3,863 | 4,045 | Migdal Loan and the Additional Migdal Loan and the Second Addendum Migdal Loan |
||||||||||
| Interest Rate |
(967 | ) | (986 | ) | 1,029 | 1,051 | San Emidio Loan |
||||||||||
| Interest Rate |
(727 | ) | (748 | ) | 753 | 775 | DOE Loan |
||||||||||
| Interest Rate |
(2,377 | ) | (2,430 | ) | 2,548 | 2,606 | Idaho Holdings Loan |
||||||||||
| Interest Rate |
(2,109 | ) | (2,198 | ) | 2,199 | 2,293 | Platanares DFC Loan |
||||||||||
| Interest Rate |
(405 | ) | (435 | ) | 416 | 448 | DEG 3 Loan |
||||||||||
| Interest Rate |
(139 | ) | (155 | ) | 142 | 158 | Plumstriker Loan |
||||||||||
| Interest Rate |
(85 | ) | (96 | ) | 87 | 97 | Other long-term loans |
||||||||||
In July 2019, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR (London Interbank Offered Rate), announced that it intends to phase out LIBOR. LIBOR is still in use and being published until its phaseout in June 2023 in order to allow a transition period mainly for contracts that already exist using LIBOR. We have evaluated the impact of the transition from LIBOR, and currently believe that the transition will not have a material impact on our consolidated financial statements.
Effect of Inflation
We are seeing an increase in overall operating and other costs as the result of higher inflation rates, in particular in the United States. In addition, we are experiencing increases in raw material cost and supply chain delays, which may put pressure on our operating margins in the Product segment and increase our cost to build our own power plants and energy storage assets. To address the possibility of rising inflation, some of our contracts include certain provisions that mitigate inflation risk.
In connection with the Electricity segment, none of our U.S. PPAs, including the SCPPA Portfolio PPA, are directly linked to the Consumer Price Index ("CPI"). Inflation may directly impact an expense we incur for the operation of our projects, thereby increasing our overall operating costs and reducing our profit and gross margin. The negative impact of inflation would be partially offset by price adjustments built into some of our PPAs that could be triggered upon such occurrences. In addition to the Heber 2 and part of the Puna rates that are impacted by higher commodity prices, the energy payments pursuant to our PPAs for some of our power plants such as the Brady power plant, the Steamboat 2 and 3 power plants and the McGinness Complex increase every year through the end of the relevant terms of such agreements, although such increases are not directly linked to the CPI or any other inflationary index. Lease payments are generally fixed, while royalty payments are generally calculated as a percentage of revenues and therefore are not significantly impacted by inflation. In our Product segment, inflation may directly impact fixed and variable costs incurred in the construction of third party power plants, thereby lowering our profit margins at the Product segment. We are more likely to be able to offset long term, all or part of this inflationary impact through our project pricing. With respect to power plants that we build for our own electricity production, inflationary pricing may impact our operating costs which may be partially offset in the pricing of the new long-term PPAs that we negotiate.
Interest rate increases for both short-term and long-term debt have increased sharply. Although our outstanding debt mostly bears fixed interest rates, as we refinance it, or borrow additional amounts, we may incur additional interest expense versus expiring loans.
Contractual Obligations and Commercial Commitments
We have various contractual obligations, which are recorded as liabilities in our consolidated condensed financial statements. Other items are not recognized as liabilities in our consolidated condensed financial statements but are required to be disclosed. There have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2022 Annual Report.
Concentration of Credit Risk
Our credit risk is currently concentrated with the following major customers: Sierra Pacific Power Company and Nevada Power Company (subsidiaries of NV Energy), SCPPA and KPLC. If any of these electric utilities fail to make payments under its PPAs with us, such failure would have a material adverse impact on our financial condition. Also, as we implement our multi-year strategic plan we may be exposed, by expanding our customer base, to different credit profile customers than our current customers.
The Company's revenues from its primary customers as a percentage of total revenues are as follows:
| Three Months Ended March 31, |
||||||||
| 2023 |
2022 |
|||||||
| Sierra Pacific Power Company and Nevada Power Company |
18.9 | % | 19.5 | % | ||||
| Southern California Public Power Authority (“SCPPA”) |
26.7 | % | 21.9 | % | ||||
| Kenya Power and Lighting Co. Ltd. ("KPLC") |
14.5 | % | 14.1 | % | ||||
We have historically been able to collect on substantially all of our receivable balances. As of March 31, 2023, the amount overdue from KPLC in Kenya was $36.9 million of which $9.8 million was paid in April 2023. In Honduras, as of March 31, 2023, the total amount overdue from Empresa Nacional de Energía Eléctrica ("ENEE") was $16.6 million of which $5.9 million was paid in April 2023 In addition, due to the financial situation in Honduras, the Company may experience further delays in collection. The Company believes it will be able to collect all past due amounts in Honduras.
Government Grants and Tax Benefits
A comprehensive discussion on government grants and tax benefits is included in our 2022 Annual Report. There has been some change to the comprehensive discussion as noted below.
On August 16, 2022, the President of the United States signed into law the Inflation Reduction Act of 2022, which is effective for taxable years beginning after December 31, 2022. Additional information in respect of the Inflation Reduction Act is detailed under Note 1 and 10 to the condensed consolidated financial statements.
Ormat Systems received “Benefited Enterprise” status under Israel’s Law for Encouragement of Capital Investments, 1959 (the Investment Law), with respect to two of its investment programs through 2011. In January 2011, new legislation amending the Investment Law was enacted. Under the new legislation, a uniform rate of corporate tax will apply to all qualified income of certain industrial companies, as opposed to the previous law’s incentives that are limited to income from a “Benefited Enterprise” during their benefits period. As a result, we now pay a uniform corporate tax rate of 16% with respect to that qualified income. In March 2023, Ormat Systems received an approval from the Israeli Innovation Authority that it owns an "Innovation Promoting Enterprise" and therefore is eligible for a reduced corporate tax rate of 12% on its "Preferred Technological Income" for the tax years 2021 through 2023 (effective tax rate of approximately 13% for 2021 through 2023). The tax benefit of lower effective tax rate is reflected in the 2023 net income.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information appearing under the headings “Exposure to Market Risks” and “Concentration of Credit Risk” in Part I, Item 2 of this quarterly report on Form 10-Q is incorporated by reference herein.
ITEM 4. CONTROLS AND PROCEDURES
a. Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO (principal executive officer) and CFO (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(e) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of March 31, 2023. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2023 to provide the reasonable assurance described above.
b. Changes in internal control over financial reporting
There were no changes in our internal controls over financial reporting in the first quarter of 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
The information required with respect to this item can be found under “Commitments and Contingencies” in Note 9 of notes to the unaudited condensed consolidated financial statements contained in this quarterly report and is incorporated by reference into this Item 1.
A comprehensive discussion of our other risk factors is included in the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2022 which was filed with the SEC on February 24, 2023. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. During the period covered by this quarterly report on Form 10-Q, there have been no material changes in our risk factors as previously disclosed except the following:
Recent events affecting the financial services industry could have an adverse impact on our business and financial condition.
The recent closures of Silicon Valley Bank, Signature Bank and Silvergate Capital Corporation, as well as acquisitions of Credit Suisse and First Republic Bank at regulators’ behest, have created bank-specific and broader financial institution liquidity risks and concerns. While we did not have any material deposits at any of these institutions, uncertainty remains over liquidity concerns in the financial services industry and potential impacts on the broader global economy, and our business, our customers and suppliers, and/or industry as a whole may be adversely impacted in ways that we cannot predict at this time.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash and cash equivalents may be threatened. In addition, if any of our customers, suppliers or other parties with whom we conduct business are unable to access funds, such parties’ ability to pay or perform their obligations to us or to enter into new commercial arrangements requiring additional payments to us or additional funding could be adversely affected. Moreover, sufficient external financing may not be available to us on a timely basis, on commercially reasonable terms to us, or at all. Any of these events could adversely affect our business and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
None.
We hereby file, as exhibits to this quarterly report, those exhibits listed on the Exhibit Index below.
EXHIBIT INDEX
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ORMAT TECHNOLOGIES, INC. |
|||
| By: |
/s/ ASSAF GINZBURG |
||
| Name: |
Assaf Ginzburg |
||
| Title: |
Chief Financial Officer and Authorized Signatory |
||
Date: May 10, 2023
Exhibit 10.4
AMENDMENT TO PERSONAL EMPLOYMENT AGREEMENT
THIS AMENDMENT is entered into as of this March 31, 2023 (the ""Effective Date") by and between Ormat Systems Ltd., registration number 511597239, a company incorporated in the State of Israel, having its offices at the Industrial Area in Yavne, Israel (the "Company") and Shlomi Argas, I.D. number 059175026, residing at Givat Yeshayau (the "Employee").
WHEREAS the Company and the Employee have entered into a certain Employment Agreement dated as of November 1, 2017 (the "Agreement"); and
WHEREAS the parties wish to amend certain terms of the Agreement in accordance with the terms set forth herein, and to attach this Amendment to the Agreement, to serve as an integral part thereof;
NOW, THEREFORE, in consideration of their mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:
|
1. |
Preamble |
|
1.1. |
The preamble of this Amendment constitutes an integral part thereof. |
|
1.2. |
The division of the terms of this Amendment into clauses and the headings of the clauses are solely for the sake of convenience and they may not be used for interpretive purposes. The Appendixes to this Amendment constitute an integral part hereof. |
|
1.3. |
References in this Amendment to a particular gender shall be applicable to all genders. |
|
2. |
Position and Duties |
|
2.1. |
Position. As of 1 July 2023 (the: "Commencement Date") the Employee shall cease to serve as the President and EVP (Operations and Products) and shall start to serve as a Consultant to the CEO and Business Development assistant (the “Role”). At the Commencement Date the Employee shall also cease to serve as a member of the management of the Company. As of the Commencement Date the Employee shall serve in a part time capacity, of 30% capacity only. |
|
2.2. |
Duties. As part of the Role, the Employee will assist to and support the business activities of the Company and its affiliates in Greece; assist the Company and its affiliates with their business activities in New Zealand (sell of equipment and other operations); and fulfil any other task to be assigned by the CEO of the Company. |
 |
 |
|
2.3. |
The Employee undertakes to comply with the policies and working arrangements of the Company, to loyally and fully comply with the decisions of the Company, its management and his supervisors in Israel and abroad, to follow the Company procedures as established from time to time, to carry out the duties imposed upon him, whatever and whenever they shall be. |
|
3. |
Salary |
|
3.1. |
Starting as of the Commencement Date and thereafter, in consideration for the Employee's services, and subject to the fulfillment of all the Employee's duties and obligations under this Agreement, the Employee shall be entitled to a gross monthly salary 34,000 NIS (the “Salary”). |
|
3.2. |
The Salary shall be updated in accordance with the changes in the cost of living index as follows: Base index is the index known on the commencement Date. Adjustments will be done quarterly. If there is a decrease in the index, the Salary will not be reduced, but no increases will be granted until the index reaches the level prior to the reduction. |
|
3.3. |
As the Employee is employed hereunder in a managerial position involving a fiduciary relationship between the Employee and the Company, the Work and Rest Law (5711-1951), and any other law amending or replacing such law, shall not apply to the Employee or to his employment with the Company, and the Employee shall not be entitled to any compensation in respect of such law. The Employee acknowledges and agrees that the Salary and the compensation set for him hereunder include a proper and just reward for the requirements of his position and status and the obligation to work at irregular hours of the day. Accordingly, the Employee shall not be entitled to any additional bonus or other payment for extra hours of work. |
|
3.4. |
The working hours under in the Company are flexible and may be performed in the offices of the Company or elsewhere, as may be required from time to time. The Company will pay the Employee the full salary, even if the employee has not reached 55 working hours in a specific month, provided however that the employee has actually fulfilled his obligations and duties under this Agreement. |
|
3.5. |
All social benefits and/or other payments due and payable to the Employee (if any) shall be calculated only based on the Salary as defined herein. It is hereby declared and agreed that all participation in expenses and any other benefits, including, but without derogating from the generality of the foregoing, bonus payments (if payable) and benefits in kind given to the Employee in the terms of the Agreement, this Amendment or deriving therefrom, do not and shall not form part of the Salary. |
|
3.6. |
Other than in events, as defined in the Agreement as “Cause”, in which the Company will be entitled to withhold the special severance payment herein, the Company shall pay the Employee special severance payment beyond Section 14 of the Severance Pay Law (the: “Special Severance Payment”). Notwithstanding section 6.8 of the Agreement, the Special Severance Payment will be calculated as follows: (a) for the Employee’s employment term with the Company prior to the Commencement Date – based on the employee’s last monthly salary prior to the Commencement Date the employee’s gross salary for the month of June 20231) multiplied by the number of months of his employment at the Company until the Commencement Date (339 months) divided by twelve; (b) for the Employee’s employment term with the Company after the Commencement Date - based on the Salary (as defined herein) multiplied by the number of months of his employment at the Company from the Commencement Date, divided by twelve. The Special Severance Payment will be paid by releasing the amount accumulated under Section 14 of the Severance Pay Law at the insurance company and /or any other severance payment funds in the name of the Employee plus, if needed, a completion according to the calculation herein. |
|
4. |
Additional benefits |
|
4.1. |
Vacation. Starting on the Commencement Date, the Employee shall be entitled to 7 vacation days in each calendar year. Starting on the Commencement Date, the Employee shall be deemed to be utilizing and exercising all of his accrued and vacation and accruing vacation. |
|
4.2. |
Employee Equity Awards. Notwithstanding section 8.11 to the Agreement, the Parties acknowledge that the employee shall not be entitled, unless otherwise decided by the Company, to future equity grants under the employees equity incentive plan of the Company. For the avoidance of doubt, nothing in this Agreement shall serve to derogate of any right the Employee has under equity grants which were awarded to the Employee prior to the Commencement Date. |
|
4.3. |
Annual Bonus for the period starting at the Commencement Date. The Employee may receive annual bonus, per the discretion of the CEO. The Annual Bonus shall not constitute a part of the Salary for any purpose whatsoever, including for the purpose of the calculation of the Employee’s severance pay, to the extent such payment is applicable. For the avoidance of Doubt, the Employee’s Annual Bonus for the first six months of 2023, for the period ending at the Commencement Date, shall be calculated according to the Agreement, based on the Employee serving as the President of the Company during the first six months of 2023. |
For reference purposes - the employee’s monthly for the month of February 2023 is: [101,700 ISL]. 1
|
5. |
Employment Term and Termination |
|
5.1. |
This Agreement shall be in effect commencing as of the Commencement Date and shall continue in full force and effect until terminated. |
|
5.2. |
The Employee’s employment may be terminated by either party, at any time, pursuant to the delivery of four (4) months prior written notice; provided however that other than for Cause (as defined in the Agreement), the Company shall not terminate the Employee’s employment prior to March 31, 2025. |
|
6. |
Acknowledgement and Waiver |
|
6.1. |
The Employee hereby declares and confirms that the amendment of the Agreement herein is made following consultation and coordination between the Company and the Employee, and the Employee hereby approves and confirms that neither he nor anyone on his behalf has or shall have in the future any claim against the Company, its shareholders, officers or employees in connection with the amendment of the Agreement. |
|
7. |
General |
|
7.1. |
Except as amended hereby, all provisions, terms and conditions of the Agreement shall remain in full force and effect. In the event of any ambiguity or discrepancy between the provisions of this Amendment and any of the Agreement, the terms of this Amendment shall prevail. |
|
7.2. |
Without derogating of the generality of the above, it is hereby agreed the following terms and provisions of the Agreement shall remain in full force and effect: 1-3, 4.3-4.9, 5.2, 5.4-5.6, 6 to 7, 8.2-8.5, 8.7, 8.9, 9.2-9.9, 10-12. |
IN WITNESS WHEREOF, the Parties have caused this Amendment to Agreement to be executed and delivered as of the date hereof.
|
/s/Shlomi Argas |
/s/Ormat Systems Ltd |
Exhibit 10.5
PORTIONS OF INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN
EXCLUDED FROM THIS AGREEMENT BECAUSE IT IS BOTH NOT MATERIAL AND IS
THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
EXCLUDED INFORMATION IS MARKED AS [***] BELOW
Form of Performance Stock Unit Agreement
2018 Incentive Compensation Plan
Notice of Performance Stock Unit Grant
(TSR Performance Target)
|
Participant: |
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-% |
|
Company: |
Ormat Technologies, Inc. |
|
Notice: |
The Participant has been granted the following Performance Stock Units (“PSUs”) in accordance with the terms of this notice (the “Grant Notice”), the Performance Stock Unit Award Agreement attached hereto as Attachment A (the “PSU Award Agreement”), and the Plan identified below (all collectively referred to herein as the “Agreement). |
|
Type of Award: |
Performance Stock Units (the “PSUs”), Capital Gain Award |
|
Plan: |
Ormat Technologies, Inc. 2018 Incentive Compensation Plan, as amended from time to time (the “Plan”) |
|
Grant Date: |
%%OPTION_DATE,'Month DD, YYYY'%-% |
|
Target Number of PSUs: |
%%TOTAL_SHARES_GRANTED%-%
Actual number of TSR PSUs delivered will be between 0% and 150% of Target based on performance as defined in the PSU Award Agreement. |
|
Performance Period: |
The Performance Period begins on the Grant Date and ends on the Third Anniversary of the Grant Date, inclusive. |
| Vesting Date: | The Participant will receive a benefit with respect to a PSU only if it vests. Two vesting requirements must be satisfied in order for a PSU to vest - the “Active Requirement” and the applicable “Performance Requirement”. Except as otherwise provided in this Agreement, the PSUs will not vest if only one (or if neither) of such vesting requirements is satisfied. If both the Active Requirement and the applicable Performance Requirement are satisfied with respect to the applicable portion of the PSUs, the vesting date (“Vesting Date”) of each such portion of PSUs will be the first date upon which both of such requirements are satisfied. For the avoidance of doubt, the Vesting Date for the portion of PSUs that satisfies the Active Requirement after the applicable Performance Requirement is achieved will be different from the Vesting Date for the portion of PSUs that satisfied the Active Requirement prior to achievement of the applicable Performance Requirement. |
|
ORMAT TECHNOLOGIES, INC. |
|
|
6140 Plumas Street, Reno, NV 89519, USA • +1-775-356-9029 • ormat@ormat.com |
ormat.com |
|
Active Requirement: |
The Active Requirement (and the number of Shares as to which the Active Requirement is met) will be satisfied based on the Participant’s continued employment or service, as applicable, with the Company or any Subsidiary on each date set forth in the table below: |
|
Active Requirement |
Cumulative Percentage of Total Number of Shares as to which Active Requirement is Satisfied |
|
First Anniversary of Grant Date
|
25% |
|
Second Anniversary of Grant Date
|
25% |
|
Third Anniversary of Grant Date
|
25% |
|
Fourth Anniversary of Grant Date
|
25% |
|
|
Continuous employment includes any leave of absence approved by the Company or any Subsidiary. A transfer of the Participant’s employment from the Company to a Subsidiary or vice versa, or from one Subsidiary to another, without an intervening period, shall not be deemed a termination of employment or service for purposes of this Agreement. |
|
|
If the Participant’s employment or service is terminated for any reason, all PSUs as to which the Active Requirement has not been satisfied as of the date of such termination shall automatically terminate upon such termination. Except as otherwise provided in Section 5, Section 7 or Section 8 of this Agreement, any PSUs as to which the Active Requirement had been satisfied prior to an applicable termination of employment or service will remain outstanding until the satisfaction of the applicable Performance Requirement. If the Participant’s employment or service is terminated for Cause at any time prior to the occurrence of the Vesting Date, all PSUs shall automatically be forfeited upon such termination. |
|
Performance Requirement: |
With respect to the TSR PSUs (as defined in the Award Agreement), the Performance Requirement for the Performance Period is based on the Company’s Relative TSR, which is the rank (by percentile) of the TSR of the Company relative to the TSR of the companies in the Peer Group, as set forth in the Award Agreement. If the applicable Performance Requirement is not satisfied, the PSUs shall be automatically forfeited. |
|
Acknowledgement: |
PSUs will not be deemed granted unless the Participant accepts the grant online before 5:00 p.m. Eastern Time no later than two (2) weeks after the grants/awards have been added to your account and you have received the notification email. By accepting your grant online, you agree that the right is granted under and governed by the Plan and the PSU Award Agreement and acknowledge receipt of these documents as well as the Prospectus for the Plan. Questions regarding your grant can be directed to the Corporate Secretary at equityinfo@ormat.com. |
[Signature Page Follows]
The undersigned Participant acknowledges receipt of, and understands and agrees to, the terms and conditions of this Agreement and the Plan.
|
ORMAT TECHNOLOGIES, INC. |
|
|
|
|
|
Name: Doron Blachar
Title: CEO
Date: %%OPTION_DATE,'Month DD, YYYY'%-% |
|
|
PARTICIPANT |
|
|
Name: %%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-% |
|
|
*Israeli participants should print this document and email a signed copy to equityinfo@ormat.com. |
|
ORMAT TECHNOLOGIES, INC.
2018 Incentive Compensation Plan
Form of Performance Stock Unit Award Agreement
This Performance Stock Unit Award Agreement (this “PSU Award Agreement”), dated as of the Grant Date set forth in the Notice of Performance Stock Unit Grant to which this PSU Award Agreement is attached (the “Grant Notice”), is made between Ormat Technologies, Inc. and the Participant set forth in the Grant Notice. The Grant Notice is included in and made part of this PSU Award Agreement (collectively, this “Agreement”).
1. Definitions. Capitalized terms used but not defined herein have the meaning set forth in the Ormat Technologies, Inc. 2018 Incentive Compensation Plan, as amended from time to time (the “Plan”).
2. Grant of PSUs. Subject to the provisions of this Agreement and the provisions of the Plan, the Company hereby grants to the Participant, pursuant to the Plan, the number of Relative TSR PSUs and MW PSUs set forth in the Grant Notice.
3. Vesting Criteria Applicable to Relative TSR PSUs.
(a) Performance Period. The Performance Period for the Relative TSR PSUs shall commence on the Grant Date and shall end on the third anniversary of Grant Date.
(b) Performance Requirement. The Performance Requirement for the Performance Period for the Relative TSR PSUs is based on the Company’s Relative TSR, which is the rank (by percentile) of the TSR of the Company relative to the TSR of the companies in the Peer Group, in each case, for the Performance Period, equal to the product of (i) the quotient of (a) the numeric rank of Company’s TSR relative to the Peer Group, where the lowest TSR in the Peer Group is ranked number 1, and (b) the total number of companies in the Peer Group plus 1, rounded to the nearest hundredth, and (ii) 100. All determinations under this Section 3 shall be made by the Committee or its permissible delegate. Definitions applicable to the term “Relative TSR” are set forth below:
(i) “TSR” shall be measured by dividing (A) the sum of (1) the dividends paid (regardless of whether paid in cash or property) on Common Stock during the Performance Period, assuming reinvestment of such dividends in such stock (based on the closing price of such stock on the ex dividend date), plus (2) the difference between the average closing price of a share of Common Stock on the principal United States exchange on which such stock trades for the twenty (20) trading days occurring immediately prior to the first day of the Performance Period (the “Beginning Average Value”) and the average closing price of a share of such stock on the principal United States exchange on which such stock trades for the twenty (20) trading days immediately prior to and including the last day of the Performance Period (appropriately adjusted for any stock dividend, stock split, spin-off, merger or other similar corporate events affecting such stock), by (B) the Beginning Average Value.
(ii) “Peer Group” means the companies included on the Standard & Poor’s 500 Index on the first day of the Performance Period, provided, however, the Peer Group may be adjusted or changed by the Committee as circumstances warrant, including, without limitation, the following: (i) if a Peer Group company is acquired by another company, including through a management buy-out or going-private transaction, the acquired company will be removed from the Peer Group for the entire relevant period of measurement, (ii) if a Peer Group company becomes bankrupt, the bankrupt company will remain in the Peer Group, with such bankrupt companies being deemed to have a total shareholder return of negative 100% or (iii) if the Company’s or any Peer Group company’s stock splits (or if there are other similar subdivisions, consolidations or changes in such company’s stock or capitalization), such company’s stock price will be adjusted for the stock split so as not to give an advantage or disadvantage to such company by comparison to the other Peer Group companies.
(c) Earned Percentage. Except as provided in Section 5 or Section 7 hereof, the Relative TSR PSUs shall be earned based on the Company’s Relative TSR Earned Percentage, as determined from the table below (with the Relative TSR Earned Percentage between the levels set forth in the table determined by linear interpolation, to the nearest one-tenth of one percent).
|
Relative TSR |
Relative TSR Earned Percentage |
|
Less than 35th Percentile |
0% |
|
35th Percentile |
50% |
|
55th Percentile |
100% |
|
75th Percentile and above |
150% |
(d) Earned Relative TSR PSUs. Except as otherwise provided in this Agreement, the number of Relative TSR PSUs earned by the Participant (the “Earned Relative TSR PSUs”) shall be the product of the number of Relative TSR PSUs set forth in the Grant Notice multiplied by the Relative TSR Earned Percentage. Notwithstanding the foregoing, if the Company’s TSR for the Performance Period is negative, in no event shall the Relative TSR Earned Percentage be more than one hundred percent (100%). To the extent that the Relative TSR PSUs do not become Earned Relative TSR PSUs pursuant to this Section 3, such Relative TSR PSUs shall be automatically forfeited.
(e) Active Requirement. Except as set forth in Sections 5 and 7 below, vesting of the Earned Relative TSR PSUs shall be subject to the Participant’s continued employment or service with the Company or any Subsidiary on the Vesting Date applicable to each portion of Relative TSR PSUs, as set forth in the Grant Notice.
4. Vesting Criteria Applicable to MW PSUs.
(a) Performance Period. The Performance Period for the MW PSUs shall commence on the Grant Date and shall end on the third anniversary of Grant Date.
(b) [Performance Requirement. The Performance Requirement for the Performance Period for the MW PSUs is based on the Company’s megawatt COD production as set forth in the table below; provided, however, that to the extent any megawatt COD production that is attributable to extraordinary or non-routine sources or operations after the Grant Date, such as megawatt COD production derived from a non-routine transaction or acquisition, equals or exceeds 50% of the Performance Requirement, the excess portion of such megawatt COD production shall be excluded from any determination of the achievement of the Performance Requirement. All determinations under this Section 4 shall be made by the Committee or its permissible delegate. Definitions applicable to the term “COD” are set forth below:
(i) “COD” means commercial operation date and refers to the megawatt production that is derived as of a COD.
(c) Earned Percentage. Except as provided in Section 5 or Section 7 hereof, the MW PSUs shall be earned based on the Company’s MW Earned Percentage, as determined from the table below (with the MW Earned Percentage between the levels set forth in the table determined by linear interpolation, to the nearest one-tenth of one percent).
|
MW COD |
MW Earned Percentage |
|
Less than [***]MW |
0% |
|
[***] MW |
50% |
|
[***] MW |
100% |
|
[***] MW |
200% |
(d) Earned MW PSUs. Except as otherwise provided in this Agreement, the number of MW PSUs earned by the Participant (the “Earned MW PSUs” and together with the Earned Relative TSR PSUs, the “Earned PSUs”) shall be the product of the number of MW PSUs set forth in the Grant Notice multiplied by the MW Earned Percentage. To the extent that the MW PSUs do not become Earned MW PSUs pursuant to this Section 4, such MW PSUs shall be automatically forfeited.
(e) Active Requirement. Except as set forth in Sections 5 and 7 below, vesting of the Earned MW PSUs shall be subject to the Participant’s continued employment or service with the Company or any Subsidiary on the Vesting Date applicable to each portion of MW PSUs, as set forth in the Grant Notice.
5. Termination of Employment. Any PSUs that have not been settled in accordance with Section 6 hereof prior to the date on which the status of employment or service of the Participant with the Company or any Subsidiary shall terminate (any such termination, “Termination of Employment”) shall be immediately and automatically forfeited upon such date, except as follows:
(a) Termination due to Death. Upon a Termination of Employment by reason of the Participant’s death, then, notwithstanding such Termination of Employment, the Active Requirement set forth in the Grant Notice shall immediately be satisfied with respect to all outstanding and unvested PSUs and the applicable Earned Percentage shall (to the extent not already determined as of the date of such Termination of Employment) be deemed satisfied at 100%. The Earned PSUs shall be settled in accordance with Section 6 hereof.
(b) Termination other than for Cause. Except as provided in Section 5(a) hereof, upon a Termination of Employment for any reason other than for Cause, any PSUs as to which the Active Requirement had been satisfied prior to such Termination of Employment will remain outstanding until the satisfaction of the applicable Performance Requirement at the end of the Performance Period. In such event, the Participant shall be eligible to receive any Earned PSUs (based on the portion of PSUs that have satisfied the Active Requirement upon the Termination of Employment) that have been achieved based on the Company’s satisfaction of the applicable Earned Percentage. The Earned PSUs shall be settled in accordance with Section 6 hereof.
6. Settlement of PSUs. As soon as reasonably practicable following the Vesting Date, but in no event later than sixty (60) days following the applicable Vesting Date, the PSUs shall be settled and paid out, as the Committee, in its sole discretion, shall determine, subject to satisfaction of applicable tax withholding obligations with respect thereto in accordance with Section 8 of this Agreement; provided, however, that if the Participant incurs a Termination of Employment as described in Section 5(a) hereof, then such payment shall be made within sixty (60) days after the date of such Termination of Employment and such Fair Market Value shall be determined as of the date of such Termination of Employment, less applicable taxes in accordance with Section 8. Notwithstanding the foregoing provisions of this Section 6 to the contrary, if at the time of the Participant’s separation from service within the meaning of Code Section 409A, the Participant is a “specified employee” within the meaning of Code Section 409A, any payment hereunder that constitutes a “deferral of compensation” under Code Section 409A and that would otherwise become due on account of such separation from service shall be delayed, and payment shall be made in full upon the earlier to occur of (a) a date during the 31-day period commencing six months and one day following such separation from service and (b) the date of the Participant’s death.
7. Change in Control
(a) Change in Control (as defined in the Plan). Notwithstanding Sections 3, 4 and 6 hereof, in the event a Change in Control occurs prior to the settlement of the PSUs in accordance with Section 6 of this Agreement, and provided that the PSUs have not been forfeited pursuant to Section 5 prior to the date of such Change in Control, then:
(i) PSUs are not Assumed or Replaced. If upon the occurrence of a Change in Control, the Participant’s PSUs are not converted, assumed, or replaced by a successor with an economically equivalent award, then the Active Requirement set forth in the Grant Notice shall immediately be satisfied with respect to all outstanding and unvested PSUs, and the number of Earned PSUs shall be equal to the product of (A) the number of PSUs set forth in the Grant Notice multiplied by (B) the applicable Earned Percentage, with such percentage determined by using the greater of (i) target level of achievement (100%) and (ii) actual level of achievement (as determined by the Committee, in its sole discretion, as constituted immediately prior to the Change in Control). The PSUs shall be settled within sixty (60) days following the consummation of the Change in Control.
(ii) PSUs are Assumed or Replaced. Except as otherwise provided in an employment agreement between the Participant and the Company or any Subsidiary, if upon the occurrence of a Change in Control, the Participant’s PSUs are converted, assumed, or replaced by a successor with an economically equivalent award, then the outstanding and unvested PSUs shall convert to a restricted stock unit (“RSU”) award and such RSUs shall only remain subject to the Active Requirement set forth in the Grant Notice, with the number of converted RSUs to be calculated based on the product of (A) the number of PSUs set forth in the Grant Notice multiplied by (B) the applicable Earned Percentage, with such percentage determined by using the greater of (i) target level of achievement (100%) and (ii) actual level of achievement (as determined by the Committee, in its sole discretion, as constituted immediately prior to the Change in Control). The converted RSUs shall be settled in accordance with Section 6 of this Agreement.
(b) Vesting upon CIC Qualification Termination. On February 21, 2023, the Board of Directors of the Company adopted the Ormat Technologies, Inc. Change in Control Severance Plan (the "CIC Severance Plan"). Without derogating the generality of Section 7(a) regarding the treatment of the PSUs upon a Change in Control , to the extent that the Participant participates in the CIC Severance Plan, in the event that the Participant incurs a CIC Qualifying Termination (as defined in the CIC Severance Plan), then the terms of the CIC plan will govern.
8. Taxes. If and to the extent federal income tax withholding (and state and local income tax withholding, if applicable) may be required by the Company in respect of taxes on income realized by the Participant upon or after payment or settlement of any portion of the PSUs, or upon disposition of any shares of Common Stock acquired through the payment or settlement of any PSUs, the Company may withhold such required amounts from the Participant’s future paychecks or may require that the Participant deliver to the Company the amounts to be withheld. The Participant may also pay the minimum required federal income tax withholding (and state and local income tax withholding, if applicable) by electing either to have the Company withhold a portion of the shares of Common Stock otherwise issuable upon payment or settlement of the PSUs, or to deliver other shares of Common Stock owned by the Participant, in either case having a fair market value (on the date that the withholding amount is to be determined) of the minimum amount required to be withheld, provided that the election will be irrevocable and will be subject to such rules as the Committee may adopt. The Company or any Subsidiary may, in the discretion of the Committee, provide for alternative arrangements to satisfy applicable tax withholding requirements in accordance with Section 21 of the Plan. The provisions specified in Annex A attached hereto shall apply only to Participants who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of applicable tax. Regardless of any action the Company or any Subsidiary takes with respect to any or all tax withholding obligations, the Participant acknowledges that the ultimate liability for all such taxes is and remains the Participant’s responsibility (or that of the Participant’s beneficiary).
9. Dividend Equivalents. No dividend equivalents shall be payable or accumulated in respect of the number of PSUs set forth in the Grant Notice
10. No Rights as a Shareholder Prior to Issuance of Shares. Neither the Participant nor any other person shall become the beneficial owner of the shares of Common Stock underlying the PSUs, nor have any rights to dividends, Dividend Equivalents or other rights as a shareholder with respect to any such shares of Common Stock, until and after such shares of Common Stock, if any, have been actually issued to the Participant and transferred on the books and records of the Company or its agent in accordance with the terms of the Plan and this Agreement.
11. Transferability. The PSUs shall not be transferable otherwise than by will or the laws of descent and distribution; provided, however, that the Participant may file with the Company a written designation of a beneficiary on such form as may be prescribed by the Company and may, from time to time, amend or revoke such designation, and, in the event of the Participant’s death, any payment due under Section 6 of this Agreement shall be made to the most recently designated such beneficiary, and if no designated beneficiary survives the Participant, any such payment shall be made to the executor or administrator of the Participant’s estate. Any transferred PSUs shall continue to be subject to the terms and conditions of this Agreement.
12. No Right to Continued Employment or Service. Neither the PSUs nor any terms contained in this Agreement shall confer upon the Participant any rights or claims except in accordance with the express provisions of the Plan and this Agreement, and shall not give the Participant any express or implied right to be retained in the employment or service of the Company or any Subsidiary for any period, or in any particular position or at any particular rate of compensation, nor restrict in any way the right of the Company or any Subsidiary, which right is hereby expressly reserved, to modify or terminate the Participant’s employment or service at any time for any reason. The Participant acknowledges and agrees that any right to Earned PSUs is earned only by continuing as an employee, director or consultant of the Company or any Subsidiary at the will of the Company or such Subsidiary and satisfaction of other applicable terms and conditions contained in the Plan and this Agreement, and not through the act of being hired or being granted the PSUs hereunder.
13. The Plan. By accepting any benefit under this Agreement, the Participant and any person claiming under or through the Participant shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and this Agreement and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan. This Agreement is subject to all the terms, provisions and conditions of the Plan, which are incorporated herein by reference, and to such rules, policies and regulations as may from time to time be adopted by the Committee. In the event of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control, and this Agreement shall be deemed to be modified accordingly. A paper copy of the Plan and the prospectus shall be provided to the Participant upon the Participant’s written request to the Company at the address set forth in Section 15 of this Agreement.
14. Compliance with Securities Laws. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any shares of Common Stock or other securities pursuant to this Agreement if the issuance thereof would result in a violation of any such law. It is intended that the shares of Common Stock underlying the PSUs shall be registered under the Securities Act of 1933, as amended (the “1933 Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the 1933 Act (“Rule 144”), the Participant may not sell the shares of Common Stock except in compliance with Rule 144. Any certificates representing shares of Common Stock issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the shares of Common Stock as the Company deems appropriate to comply with federal and state securities laws (and if the shares of Common Stock are evidenced on a noncertificated basis, the shares of Common Stock shall be subject to similar stop transfer instructions). The Participant acknowledges and understands that the Company may not be satisfying the current public information requirement of Rule 144 at the time the Participant wishes to sell the shares of Common Stock or other conditions under Rule 144 which are required of the Company. If so, the Participant understands that the Participant will be precluded from selling the securities under Rule 144 even if the one-year holding period (or any modification thereof under Rule 144) of Rule 144 has been satisfied. Prior to the Participant’s acquisition of the shares of Common Stock, the Participant acquired sufficient information about the Company to reach an informed knowledgeable decision to acquire such securities. The Participant has such knowledge and experience in financial and business matters as to make the Participant capable of utilizing said information to evaluate the risks of the prospective investment and to make an informed investment decision. The Participant is able to bear the economic risk of his or her investment in the shares of Common Stock. The Participant agrees not to make, without the prior written consent of the Company, any public offering or sale of the shares of Common Stock although permitted to do so pursuant to Rule 144(k) promulgated under the 1933 Act, until all applicable conditions and requirements of Rule 144 (or registration of the shares of Common Stock issued pursuant to this Agreement under the 1933 Act) and this Agreement have been satisfied. The Participant further agrees hereby that, as a condition to the issuance of shares upon settlement of the PSUs, the Participant will enter into and perform any underwriter’s lock-up agreement requested by the Company from time to time in connection with public offerings of the Company’s securities.
15. Notices. All notices required to be given under this Agreement or the Plan shall be in writing and delivered in person or by registered or certified mail, postage prepaid, to the other party, in the case of the Company, at the address set forth in the Grant Notice, or, in the case of the Participant, at the Participant’s address set forth in the Company’s records; provided, however, any such notice to the Participant may be delivered electronically to the Participant’s email address set forth in the Company’s records. Each party to this Agreement agrees to inform the other party immediately upon a change of address. All notices shall be deemed delivered when received.
16. Adjustments/Changes in Capitalization. The shares of Common Stock underlying the PSUs are subject to the adjustment provisions set forth in Section 18 of the Plan.
17. Clawback. The PSUs are subject to recoupment in accordance with Section 16(i) of the Plan and any other recoupment or clawback policy adopted by the Company, or as agreed with the Participant.
18. Other Plans. The Participant acknowledges that any income derived from the PSUs shall not affect the Participant’s participation in, or benefits under, any other benefit plan or other contract or arrangement maintained by the Company or any Subsidiary.
19. Entire Agreement and Amendments. This Agreement and the Plan contain the entire agreement of the parties relating to the matters contained herein and supersede all prior agreements and understandings, oral or written, between the parties with respect to the subject matter hereof. This Agreement may be amended in accordance with Section 19 of the Plan.
20. Binding Effect. The terms and conditions hereunder shall, in accordance with their terms, be binding upon, and inure to the benefit of, all successors of the Participant, including, without limitation, the Participant’s estate and the executors, administrators, or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy, or representative of creditors of the Participant. This Agreement shall be binding upon and inure to the benefit of any successors to the Company.
21. Severability. If any provision of this Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by the decision of any arbitrator or by decree of a court of last resort, the parties shall promptly meet and negotiate substitute provisions for those rendered or declared illegal or unenforceable to preserve the original intent of this Agreement to the extent legally possible, but all other provisions of this Agreement shall remain in full force and effect.
22. Electronic Delivery and Signatures. The Company may, in its sole discretion, decide to deliver any documents related to the PSUs, this Agreement or to participation in the Plan or to future grants that may be made under the Plan by electronic means or to request the Participant's consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. If the Company establishes procedures of an electronic signature system for delivery and acceptance of Plan documents (including this Agreement or any Award Agreement like this Agreement), the Participant hereby consents to such procedures and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
23. Governing Law. The execution, validity, interpretation, and performance of this Agreement shall be governed by, and construed in accordance with, Delaware law applied without giving effect to any conflicts-of-law principles, except to the extent pre-empted by federal law.
24. Section 409A. This Agreement and delivery of shares of Common Stock under this Agreement are intended to be exempt from or to comply with Section 409A of the Code and shall be administered and construed in accordance with such intent. In furtherance, and not in limitation, of the foregoing: (a) in no event may the Participant designate, directly or indirectly, the calendar year of any payment to be made hereunder; and (b) notwithstanding any other provision of this Agreement to the contrary, a termination of employment hereunder shall mean and be interpreted consistent with a “separation from service” within the meaning of Code Section 409A with respect to any payment hereunder that constitute a “deferral of compensation” under Code Section 409A that becomes due on account of such separation from service. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or any Subsidiary be liable to the Participant on account of this Agreement’s failure to (a) qualify for favorable U.S. or foreign tax treatment or (b) avoid adverse tax treatment under U.S. or foreign law, including, without limitation, Section 409A of the Code.
ANNEX A - TAX WITHOLDING FOR ISRAELI EMPLOYEES
Tax Withholding For Israeli Employees - The provisions specified hereunder shall apply only to Eligible Individuals who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of applicable tax (such persons, “Israeli Participants”). All defined terms shall have the meaning ascribed to them in the Plan, unless the context requires otherwise.
(i) For the purposes of this Annex A, the following terms shall have the following meanings:
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“Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance. |
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“Approved 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and/or additional rights issued with respect thereto, including, but not limited to, bonus shares, and held in trust by a Trustee for the benefit of the Employee. |
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“Award” shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Sections 102 or 3(i) of the Ordinance, Awards shall not be settled in cash. |
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“Award Agreement” shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Section 102 of the Ordinance, an electronic acceptance may be used only pursuant to a tax ruling to be obtained, if so required by applicable law. |
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“Capital Gain Award” (or "CGA)” means an Approved 102 Award elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(3) of the Ordinance. |
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“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance. |
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“Employee” means a person who is employed by the Company or an Affiliate, including an individual who is serving as a director or an office holder, but excluding any Controlling Shareholder, all as determined in Section 102 of the Ordinance. |
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“ITA” means the Israeli Tax Authority. |
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“Ordinary Income Award"("OIA") means an Approved 102 Award elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) of the Ordinance. |
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“Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended. |
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“Rules” means the Israeli Income Tax Rules (Tax Relief in Issuance of Shares to Employees) 2003. |
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“Section 102” means Section 102 of the Ordinance and any regulations, Rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended. |
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“Trustee” means any individual or trust company appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance. |
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“Unapproved 102 Award” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee. |
(ii) Any tax liability, of any kind due to the Plan, or resulting from it (including, without derogating from the aforementioned, income tax, capital gains tax, social security, surtax and health tax), and any other obligatory payment applicable as a result of the grant of the right, its exercise and Employee's receipt of Common Stock as a result of such exercise or the sale of underlying Common Stock (the "Common Stocks”), will be fully borne by the Employee.
(iii) The Company recommends that Employee consults with professional advisors and consider the tax implications, including the result of the application of Section 102, of the grant of the right, of its exercise and of the receipt of any Shares.
(iv) Despite of anything to the contrary in the Plan, with respect to any Approved 102 Award, subject to the provisions of Section 102, an Employee shall not sell, release, assign, transfer or give as collateral or any right with respect to them given to any third party whatsoever (collectively “Transfer”) from trust any Share received upon the exercise of an Approved 102 and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Minimal Restriction Period (as defined below) required under Section 102. Notwithstanding the above, if any such sale or other Transfer occurs during the Minimal Restriction Period, the sanctions under Section 102 shall apply to and shall be borne solely by such Employee.
(v) In accordance with the provisions of Section 102, the Trustee will hold the right in trust for the benefit of the Employee until the right is exercised, if at all (or until the termination of the exercise period, to the extent the right remains unexercised, as applicable). Consequently, the Trustee will hold the right and/or the shares of Common Stock (including any stock dividend or shares of Common Stock derived from issuance of rights exercised during the right’s exercise period) in trust for the benefit of the Employee for the period set forth in Section 102 and the Rules. Such period is on the date of adoption of this Plan at least (i) in the case of a CGA, 24 months from the date on which the right is granted and deposited with the Trustee; or (ii) in the case of an OIA-, 12 months from the date on which the Right is granted and deposited with the Trustee (the “Minimal Restriction Period”), and will not transfer the right and the shares of Common Stock to the Employee prior to the full payment of the applicable taxes. Transfer of the shares of Common Stock from the Trustee to the Employee or their sale by the Trustee prior to the lapse of the Minimal Restriction Period, might involve tax implications (which the Employee should consider prior to taking any such action).
(vi) The Company was engaged with the Trustee with respect to the Awards, rights and Common Stocks (the “Trust Agreement”) and the provisions of the Trust Agreement will apply and obligate any Employee who receives rights under the Plan. The main provisions of the Trust Agreement are: (i) the Company will not grant Awards and rights to its Employees but will grant them to the Trustee who will hold them for at least the Minimal Restriction Period; (ii) during the Minimal Restriction Period, the Awards, rights and Common Stocks will not be transferable; and (iii) after termination of the Minimal Restriction Period, the Employee will be entitled to demand that the Trustee transfer the Common Stocks to the Employee’s name, provided either: (A) the tax applicable to the Employee under Section 102 has been paid and the Trustee holds a confirmation for the payment issued by the ITA; or (B) the Trustee has transferred to the ITA the appropriate percentage amount (determined in accordance with the applicable tax rate) of the consideration received by it for the sale of the Common Stocks, on account of the applicable tax. The Plan and the Trust Agreement will apply to any stock dividends and/or rights granted to the Employee, mutatis mutandis.
(vii) The Company has undertaken not to grant and Awards and rights to Employees under Section 102, unless it received a confirmation from the Employee that the Employee undertakes vis-a-vis the ITA not to exercise the Awards and rights prior to the termination of the Minimal Restriction Period (unless he or she pays all applicable tax).
(viii) The transfer of the Common Stocks from the Trustee to the Employee or their sale by the Trustee for the benefit of the Employee, all in accordance with the Employee’s order, is possible and may be done in accordance and under the rules, conditions and arrangements to be agreed between the Company and the Trustee and in accordance and subject to applicable law and arrangements (if existing) with the tax authorities.
(ix) The provisions of Section 102 will apply to the Awards and rights to be granted to the Employees, (i.e., grant to and deposit with the Trustee for the benefit of the Employee), in the capital gain tax route. Any tax liability to the Employee will occur upon the earlier of the time the Common Stocks will be transferred from the Trustee to the Employee or sold by the Trustee, without any tax event occurring on the date of grant of the Award.
(x) In accordance with Section 12(c)(ix) above, and since the Company has chosen the capital gains tax route, as specified in Section 102, any income resulting from the realization of the benefit by the Employee will be deemed as a capital gain and will be taxed on the date of the tax event at the applicable tax rate of 25%, excluding the portion of the income equaling the difference between the exercise price of the Award, if applicable, and the average price of the Common Stock during the 30 trading days prior to the date of grant, which will be deemed as working income and will be subject to income tax, according to the rate applicable to the Employee, and social security tax and health tax – all provided that all of the provisions of the capitl gains tax route are met.
(xi) With regards to Approved 102 Awards , the provisions of the Plan shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit and/or any pre-rulings obtained by the ITA, and the said provisions, permit and/or pre-rulings shall be deemed an integral part of the Plan. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan, shall be considered binding upon the Company and the Employees.
(xii) Any tax consequences arising from the grant or exercise of any Award, from the grant of right and/or the underlying Common Stocks, from the payment for stocks covered thereby or from any other event or act (of the Company, and the Trustee or the Employee), hereunder, shall be borne solely by the Employee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Employee shall agree to indemnify the Company and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Employee.
(xiii) The Company and/or, when applicable, the Trustee shall not be required to release any stock certificate to an Employee until all required payments (including any tax liability) have been fully made.
(xiv) With respect to an Unapproved 102 Award, if the Employee ceases to be employed by the Company, the Employee shall extend to the Company a security or guarantee for the payment of tax due at the time of sale of Common Stocks, all in accordance with the provisions of Section 102.
Exhibit 10.6
PORTIONS OF INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN
EXCLUDED FROM THIS AGREEMENT BECAUSE IT IS BOTH NOT MATERIAL AND IS
THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
EXCLUDED INFORMATION IS MARKED AS [***] BELOW
Form of Performance Stock Unit Agreement
2018 Incentive Compensation Plan
Notice of Performance Stock Unit Grant
(MW Performance Target)
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Participant: |
%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-% |
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Company: |
Ormat Technologies, Inc. |
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Notice: |
The Participant has been granted the following Performance Stock Units (“PSUs”) in accordance with the terms of this notice (the “Grant Notice”), the Performance Stock Unit Award Agreement attached hereto as Attachment A (the “Award Agreement”), and the Plan identified below (all collectively referred to herein as the “Agreement). |
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Type of Award: |
Performance Stock Units (the “PSUs”), Capital Gain Award |
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Plan: |
Ormat Technologies, Inc. 2018 Incentive Compensation Plan, as amended from time to time (the “Plan”) |
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Grant Date: |
%%OPTION_DATE,'Month DD, YYYY'%-% |
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Target Number of PSUs: |
%%TOTAL_SHARES_GRANTED%-%
Actual number of MW PSUs delivered will be between 0% and 200% of Target based on performance as defined herein. |
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Performance Period: |
The Performance Period begins on the Grant Date and ends on the Third Anniversary of the Grant Date, inclusive. |
| ORMAT TECHNOLOGIES, INC. | |
| 6140 Plumas Street, Reno, NV 89519-6075, USA • +1-775-356-9029 • ormat@ormat.com | ormat.com |
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Vesting Date: |
The Participant will receive a benefit with respect to a PSU only if it vests. Two vesting requirements must be satisfied in order for a PSU to vest - the “Active Requirement” and the applicable “Performance Requirement”. Except as otherwise provided in this Agreement, the PSUs will not vest if only one (or if neither) of such vesting requirements is satisfied. If both the Active Requirement and the applicable Performance Requirement are satisfied with respect to the applicable portion of the PSUs, the vesting date (“Vesting Date”) of each such portion of PSUs will be the first date upon which both of such requirements are satisfied. For the avoidance of doubt, the Vesting Date for the portion of PSUs that satisfies the Active Requirement after the applicable Performance Requirement is achieved will be different from the Vesting Date for the portion of PSUs that satisfied the Active Requirement prior to achievement of the applicable Performance Requirement. |
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Active Requirement: |
The Active Requirement (and the number of Shares as to which the Active Requirement is met) will be satisfied based on the Participant’s continued employment or service, as applicable, with the Company or any Subsidiary on each date set forth in the table below: |
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Active Requirement |
Cumulative Percentage of Total Number of Shares as to which Active Requirement is Satisfied |
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First Anniversary of Grant Date
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25% |
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Second Anniversary of Grant Date
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25% |
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Third Anniversary of Grant Date
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25% |
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Fourth Anniversary of Grant Date
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25% |
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Continuous employment includes any leave of absence approved by the Company or any Subsidiary. A transfer of the Participant’s employment from the Company to a Subsidiary or vice versa, or from one Subsidiary to another, without an intervening period, shall not be deemed a termination of employment or service for purposes of this Agreement. |
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If the Participant’s employment or service is terminated for any reason, all PSUs as to which the Active Requirement has not been satisfied as of the date of such termination shall automatically terminate upon such termination. Except as otherwise provided in Section 5, Section 7 or Section 8 of this Agreement, any PSUs as to which the Active Requirement had been satisfied prior to an applicable termination of employment or service will remain outstanding until the satisfaction of the applicable Performance Requirement. If the Participant’s employment or service is terminated for Cause at any time prior to the occurrence of the Vesting Date, all PSUs shall automatically be forfeited upon such termination. |
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Performance Requirement: |
With respect to the MW PSUs (as defined in the Award Agreement), the Performance Requirement for the Performance Period is based on the achievement of megawatt COD production targets, as set forth in the Award Agreement. If the applicable Performance Requirement is not satisfied, the PSUs shall be automatically forfeited. |
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Acknowledgement: |
PSUs will not be deemed granted unless the Participant accepts the grant online before 5:00 p.m. Eastern Time no later than two (2) weeks after the grants/awards have been added to your account and you have received the notification email. By accepting your grant online, you agree that the right is granted under and governed by the Plan and the PSU Award Agreement and acknowledge receipt of these documents as well as the Prospectus for the Plan. Questions regarding your grant can be directed to the Corporate Secretary at equityinfo@ormat.com. |
[Signature Page Follows]
The undersigned Participant acknowledges receipt of, and understands and agrees to, the terms and conditions of this Agreement and the Plan.
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ORMAT TECHNOLOGIES, INC. |
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Name: Doron Blachar
Title: CEO
Date: %%OPTION_DATE,'Month DD, YYYY'%-% |
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PARTICIPANT |
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Name: %%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-% |
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*Israeli participants should print this document and email a signed copy to equityinfo@ormat.com. |
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ORMAT TECHNOLOGIES, INC.
2018 Incentive Compensation Plan
Form of Performance Stock Unit Award Agreement
This Performance Stock Unit Award Agreement (this “PSU Award Agreement”), dated as of the Grant Date set forth in the Notice of Performance Stock Unit Grant to which this PSU Award Agreement is attached (the “Grant Notice”), is made between Ormat Technologies, Inc. and the Participant set forth in the Grant Notice. The Grant Notice is included in and made part of this PSU Award Agreement (collectively, this “Agreement”).
1. Definitions. Capitalized terms used but not defined herein have the meaning set forth in the Ormat Technologies, Inc. 2018 Incentive Compensation Plan, as amended from time to time (the “Plan”).
2. Grant of PSUs. Subject to the provisions of this Agreement and the provisions of the Plan, the Company hereby grants to the Participant, pursuant to the Plan, the number of Relative TSR PSUs and MW PSUs set forth in the Grant Notice.
3. Vesting Criteria Applicable to Relative TSR PSUs.
(a) Performance Period. The Performance Period for the Relative TSR PSUs shall commence on the Grant Date and shall end on the third anniversary of Grant Date.
(b) Performance Requirement. The Performance Requirement for the Performance Period for the Relative TSR PSUs is based on the Company’s Relative TSR, which is the rank (by percentile) of the TSR of the Company relative to the TSR of the companies in the Peer Group, in each case, for the Performance Period, equal to the product of (i) the quotient of (a) the numeric rank of Company’s TSR relative to the Peer Group, where the lowest TSR in the Peer Group is ranked number 1, and (b) the total number of companies in the Peer Group plus 1, rounded to the nearest hundredth, and (ii) 100. All determinations under this Section 3 shall be made by the Committee or its permissible delegate. Definitions applicable to the term “Relative TSR” are set forth below:
(i) “TSR” shall be measured by dividing (A) the sum of (1) the dividends paid (regardless of whether paid in cash or property) on Common Stock during the Performance Period, assuming reinvestment of such dividends in such stock (based on the closing price of such stock on the ex dividend date), plus (2) the difference between the average closing price of a share of Common Stock on the principal United States exchange on which such stock trades for the twenty (20) trading days occurring immediately prior to the first day of the Performance Period (the “Beginning Average Value”) and the average closing price of a share of such stock on the principal United States exchange on which such stock trades for the twenty (20) trading days immediately prior to and including the last day of the Performance Period (appropriately adjusted for any stock dividend, stock split, spin-off, merger or other similar corporate events affecting such stock), by (B) the Beginning Average Value.
(ii) “Peer Group” means the companies included on the Standard & Poor’s 500 Index on the first day of the Performance Period, provided, however, the Peer Group may be adjusted or changed by the Committee as circumstances warrant, including, without limitation, the following: (i) if a Peer Group company is acquired by another company, including through a management buy-out or going-private transaction, the acquired company will be removed from the Peer Group for the entire relevant period of measurement, (ii) if a Peer Group company becomes bankrupt, the bankrupt company will remain in the Peer Group, with such bankrupt companies being deemed to have a total shareholder return of negative 100% or (iii) if the Company’s or any Peer Group company’s stock splits (or if there are other similar subdivisions, consolidations or changes in such company’s stock or capitalization), such company’s stock price will be adjusted for the stock split so as not to give an advantage or disadvantage to such company by comparison to the other Peer Group companies.
(c) Earned Percentage. Except as provided in Section 5 or Section 7 hereof, the Relative TSR PSUs shall be earned based on the Company’s Relative TSR Earned Percentage, as determined from the table below (with the Relative TSR Earned Percentage between the levels set forth in the table determined by linear interpolation, to the nearest one-tenth of one percent).
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Relative TSR |
Relative TSR Earned Percentage |
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Less than 35th Percentile |
0% |
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35th Percentile |
50% |
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55th Percentile |
100% |
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75th Percentile and above |
150% |
(d) Earned Relative TSR PSUs. Except as otherwise provided in this Agreement, the number of Relative TSR PSUs earned by the Participant (the “Earned Relative TSR PSUs”) shall be the product of the number of Relative TSR PSUs set forth in the Grant Notice multiplied by the Relative TSR Earned Percentage. Notwithstanding the foregoing, if the Company’s TSR for the Performance Period is negative, in no event shall the Relative TSR Earned Percentage be more than one hundred percent (100%). To the extent that the Relative TSR PSUs do not become Earned Relative TSR PSUs pursuant to this Section 3, such Relative TSR PSUs shall be automatically forfeited.
(e) Active Requirement. Except as set forth in Sections 5 and 7 below, vesting of the Earned Relative TSR PSUs shall be subject to the Participant’s continued employment or service with the Company or any Subsidiary on the Vesting Date applicable to each portion of Relative TSR PSUs, as set forth in the Grant Notice.
4. Vesting Criteria Applicable to MW PSUs.
(a) Performance Period. The Performance Period for the MW PSUs shall commence on the Grant Date and shall end on the third anniversary of Grant Date.
(b) [Performance Requirement. The Performance Requirement for the Performance Period for the MW PSUs is based on the Company’s megawatt COD production as set forth in the table below; provided, however, that to the extent any megawatt COD production that is attributable to extraordinary or non-routine sources or operations after the Grant Date, such as megawatt COD production derived from a non-routine transaction or acquisition, equals or exceeds 50% of the Performance Requirement, the excess portion of such megawatt COD production shall be excluded from any determination of the achievement of the Performance Requirement. All determinations under this Section 4 shall be made by the Committee or its permissible delegate. Definitions applicable to the term “COD” are set forth below:
(i) “COD” means commercial operation date and refers to the megawatt production that is derived as of a COD.
(c) Earned Percentage. Except as provided in Section 5 or Section 7 hereof, the MW PSUs shall be earned based on the Company’s MW Earned Percentage, as determined from the table below (with the MW Earned Percentage between the levels set forth in the table determined by linear interpolation, to the nearest one-tenth of one percent).
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MW COD |
MW Earned Percentage |
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Less than [***]MW |
0% |
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[***] MW |
50% |
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[***] MW |
100% |
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[***] MW |
200% |
(d) Earned MW PSUs. Except as otherwise provided in this Agreement, the number of MW PSUs earned by the Participant (the “Earned MW PSUs” and together with the Earned Relative TSR PSUs, the “Earned PSUs”) shall be the product of the number of MW PSUs set forth in the Grant Notice multiplied by the MW Earned Percentage. To the extent that the MW PSUs do not become Earned MW PSUs pursuant to this Section 4, such MW PSUs shall be automatically forfeited.
(e) Active Requirement. Except as set forth in Sections 5 and 7 below, vesting of the Earned MW PSUs shall be subject to the Participant’s continued employment or service with the Company or any Subsidiary on the Vesting Date applicable to each portion of MW PSUs, as set forth in the Grant Notice.
5. Termination of Employment. Any PSUs that have not been settled in accordance with Section 6 hereof prior to the date on which the status of employment or service of the Participant with the Company or any Subsidiary shall terminate (any such termination, “Termination of Employment”) shall be immediately and automatically forfeited upon such date, except as follows:
(a) Termination due to Death. Upon a Termination of Employment by reason of the Participant’s death, then, notwithstanding such Termination of Employment, the Active Requirement set forth in the Grant Notice shall immediately be satisfied with respect to all outstanding and unvested PSUs and the applicable Earned Percentage shall (to the extent not already determined as of the date of such Termination of Employment) be deemed satisfied at 100%. The Earned PSUs shall be settled in accordance with Section 6 hereof.
(b) Termination other than for Cause. Except as provided in Section 5(a) hereof, upon a Termination of Employment for any reason other than for Cause, any PSUs as to which the Active Requirement had been satisfied prior to such Termination of Employment will remain outstanding until the satisfaction of the applicable Performance Requirement at the end of the Performance Period. In such event, the Participant shall be eligible to receive any Earned PSUs (based on the portion of PSUs that have satisfied the Active Requirement upon the Termination of Employment) that have been achieved based on the Company’s satisfaction of the applicable Earned Percentage. The Earned PSUs shall be settled in accordance with Section 6 hereof.
6. Settlement of PSUs. As soon as reasonably practicable following the Vesting Date, but in no event later than sixty (60) days following the applicable Vesting Date, the PSUs shall be settled and paid out, as the Committee, in its sole discretion, shall determine, subject to satisfaction of applicable tax withholding obligations with respect thereto in accordance with Section 8 of this Agreement; provided, however, that if the Participant incurs a Termination of Employment as described in Section 5(a) hereof, then such payment shall be made within sixty (60) days after the date of such Termination of Employment and such Fair Market Value shall be determined as of the date of such Termination of Employment, less applicable taxes in accordance with Section 8. Notwithstanding the foregoing provisions of this Section 6 to the contrary, if at the time of the Participant’s separation from service within the meaning of Code Section 409A, the Participant is a “specified employee” within the meaning of Code Section 409A, any payment hereunder that constitutes a “deferral of compensation” under Code Section 409A and that would otherwise become due on account of such separation from service shall be delayed, and payment shall be made in full upon the earlier to occur of (a) a date during the 31-day period commencing six months and one day following such separation from service and (b) the date of the Participant’s death.
7. Change in Control
(a) Change in Control (as defined in the Plan). Notwithstanding Sections 3, 4 and 6 hereof, in the event a Change in Control occurs prior to the settlement of the PSUs in accordance with Section 6 of this Agreement, and provided that the PSUs have not been forfeited pursuant to Section 5 prior to the date of such Change in Control, then:
(i) PSUs are not Assumed or Replaced. If upon the occurrence of a Change in Control, the Participant’s PSUs are not converted, assumed, or replaced by a successor with an economically equivalent award, then the Active Requirement set forth in the Grant Notice shall immediately be satisfied with respect to all outstanding and unvested PSUs, and the number of Earned PSUs shall be equal to the product of (A) the number of PSUs set forth in the Grant Notice multiplied by (B) the applicable Earned Percentage, with such percentage determined by using the greater of (i) target level of achievement (100%) and (ii) actual level of achievement (as determined by the Committee, in its sole discretion, as constituted immediately prior to the Change in Control). The PSUs shall be settled within sixty (60) days following the consummation of the Change in Control.
(ii) PSUs are Assumed or Replaced. Except as otherwise provided in an employment agreement between the Participant and the Company or any Subsidiary, if upon the occurrence of a Change in Control, the Participant’s PSUs are converted, assumed, or replaced by a successor with an economically equivalent award, then the outstanding and unvested PSUs shall convert to a restricted stock unit (“RSU”) award and such RSUs shall only remain subject to the Active Requirement set forth in the Grant Notice, with the number of converted RSUs to be calculated based on the product of (A) the number of PSUs set forth in the Grant Notice multiplied by (B) the applicable Earned Percentage, with such percentage determined by using the greater of (i) target level of achievement (100%) and (ii) actual level of achievement (as determined by the Committee, in its sole discretion, as constituted immediately prior to the Change in Control). The converted RSUs shall be settled in accordance with Section 6 of this Agreement.
(b) Vesting upon CIC Qualification Termination. On February 21, 2023, the Board of Directors of the Company adopted the Ormat Technologies, Inc. Change in Control Severance Plan (the "CIC Severance Plan"). Without derogating the generality of Section 7(a) regarding the treatment of the PSUs upon a Change in Control , to the extent that the Participant participates in the CIC Severance Plan, in the event that the Participant incurs a CIC Qualifying Termination (as defined in the CIC Severance Plan), then the terms of the CIC plan will govern.
8. Taxes. If and to the extent federal income tax withholding (and state and local income tax withholding, if applicable) may be required by the Company in respect of taxes on income realized by the Participant upon or after payment or settlement of any portion of the PSUs, or upon disposition of any shares of Common Stock acquired through the payment or settlement of any PSUs, the Company may withhold such required amounts from the Participant’s future paychecks or may require that the Participant deliver to the Company the amounts to be withheld. The Participant may also pay the minimum required federal income tax withholding (and state and local income tax withholding, if applicable) by electing either to have the Company withhold a portion of the shares of Common Stock otherwise issuable upon payment or settlement of the PSUs, or to deliver other shares of Common Stock owned by the Participant, in either case having a fair market value (on the date that the withholding amount is to be determined) of the minimum amount required to be withheld, provided that the election will be irrevocable and will be subject to such rules as the Committee may adopt. The Company or any Subsidiary may, in the discretion of the Committee, provide for alternative arrangements to satisfy applicable tax withholding requirements in accordance with Section 21 of the Plan. The provisions specified in Annex A attached hereto shall apply only to Participants who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of applicable tax. Regardless of any action the Company or any Subsidiary takes with respect to any or all tax withholding obligations, the Participant acknowledges that the ultimate liability for all such taxes is and remains the Participant’s responsibility (or that of the Participant’s beneficiary).
9. Dividend Equivalents. No dividend equivalents shall be payable or accumulated in respect of the number of PSUs set forth in the Grant Notice
10. No Rights as a Shareholder Prior to Issuance of Shares. Neither the Participant nor any other person shall become the beneficial owner of the shares of Common Stock underlying the PSUs, nor have any rights to dividends, Dividend Equivalents or other rights as a shareholder with respect to any such shares of Common Stock, until and after such shares of Common Stock, if any, have been actually issued to the Participant and transferred on the books and records of the Company or its agent in accordance with the terms of the Plan and this Agreement.
11. Transferability. The PSUs shall not be transferable otherwise than by will or the laws of descent and distribution; provided, however, that the Participant may file with the Company a written designation of a beneficiary on such form as may be prescribed by the Company and may, from time to time, amend or revoke such designation, and, in the event of the Participant’s death, any payment due under Section 6 of this Agreement shall be made to the most recently designated such beneficiary, and if no designated beneficiary survives the Participant, any such payment shall be made to the executor or administrator of the Participant’s estate. Any transferred PSUs shall continue to be subject to the terms and conditions of this Agreement.
12. No Right to Continued Employment or Service. Neither the PSUs nor any terms contained in this Agreement shall confer upon the Participant any rights or claims except in accordance with the express provisions of the Plan and this Agreement, and shall not give the Participant any express or implied right to be retained in the employment or service of the Company or any Subsidiary for any period, or in any particular position or at any particular rate of compensation, nor restrict in any way the right of the Company or any Subsidiary, which right is hereby expressly reserved, to modify or terminate the Participant’s employment or service at any time for any reason. The Participant acknowledges and agrees that any right to Earned PSUs is earned only by continuing as an employee, director or consultant of the Company or any Subsidiary at the will of the Company or such Subsidiary and satisfaction of other applicable terms and conditions contained in the Plan and this Agreement, and not through the act of being hired or being granted the PSUs hereunder.
13. The Plan. By accepting any benefit under this Agreement, the Participant and any person claiming under or through the Participant shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and this Agreement and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan. This Agreement is subject to all the terms, provisions and conditions of the Plan, which are incorporated herein by reference, and to such rules, policies and regulations as may from time to time be adopted by the Committee. In the event of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control, and this Agreement shall be deemed to be modified accordingly. A paper copy of the Plan and the prospectus shall be provided to the Participant upon the Participant’s written request to the Company at the address set forth in Section 15 of this Agreement.
14. Compliance with Securities Laws. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Company shall not be obligated to issue any shares of Common Stock or other securities pursuant to this Agreement if the issuance thereof would result in a violation of any such law. It is intended that the shares of Common Stock underlying the PSUs shall be registered under the Securities Act of 1933, as amended (the “1933 Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the 1933 Act (“Rule 144”), the Participant may not sell the shares of Common Stock except in compliance with Rule 144. Any certificates representing shares of Common Stock issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the shares of Common Stock as the Company deems appropriate to comply with federal and state securities laws (and if the shares of Common Stock are evidenced on a noncertificated basis, the shares of Common Stock shall be subject to similar stop transfer instructions). The Participant acknowledges and understands that the Company may not be satisfying the current public information requirement of Rule 144 at the time the Participant wishes to sell the shares of Common Stock or other conditions under Rule 144 which are required of the Company. If so, the Participant understands that the Participant will be precluded from selling the securities under Rule 144 even if the one-year holding period (or any modification thereof under Rule 144) of Rule 144 has been satisfied. Prior to the Participant’s acquisition of the shares of Common Stock, the Participant acquired sufficient information about the Company to reach an informed knowledgeable decision to acquire such securities. The Participant has such knowledge and experience in financial and business matters as to make the Participant capable of utilizing said information to evaluate the risks of the prospective investment and to make an informed investment decision. The Participant is able to bear the economic risk of his or her investment in the shares of Common Stock. The Participant agrees not to make, without the prior written consent of the Company, any public offering or sale of the shares of Common Stock although permitted to do so pursuant to Rule 144(k) promulgated under the 1933 Act, until all applicable conditions and requirements of Rule 144 (or registration of the shares of Common Stock issued pursuant to this Agreement under the 1933 Act) and this Agreement have been satisfied. The Participant further agrees hereby that, as a condition to the issuance of shares upon settlement of the PSUs, the Participant will enter into and perform any underwriter’s lock-up agreement requested by the Company from time to time in connection with public offerings of the Company’s securities.
15. Notices. All notices required to be given under this Agreement or the Plan shall be in writing and delivered in person or by registered or certified mail, postage prepaid, to the other party, in the case of the Company, at the address set forth in the Grant Notice, or, in the case of the Participant, at the Participant’s address set forth in the Company’s records; provided, however, any such notice to the Participant may be delivered electronically to the Participant’s email address set forth in the Company’s records. Each party to this Agreement agrees to inform the other party immediately upon a change of address. All notices shall be deemed delivered when received.
16. Adjustments/Changes in Capitalization. The shares of Common Stock underlying the PSUs are subject to the adjustment provisions set forth in Section 18 of the Plan.
17. Clawback. The PSUs are subject to recoupment in accordance with Section 16(i) of the Plan and any other recoupment or clawback policy adopted by the Company, or as agreed with the Participant.
18. Other Plans. The Participant acknowledges that any income derived from the PSUs shall not affect the Participant’s participation in, or benefits under, any other benefit plan or other contract or arrangement maintained by the Company or any Subsidiary.
19. Entire Agreement and Amendments. This Agreement and the Plan contain the entire agreement of the parties relating to the matters contained herein and supersede all prior agreements and understandings, oral or written, between the parties with respect to the subject matter hereof. This Agreement may be amended in accordance with Section 19 of the Plan.
20. Binding Effect. The terms and conditions hereunder shall, in accordance with their terms, be binding upon, and inure to the benefit of, all successors of the Participant, including, without limitation, the Participant’s estate and the executors, administrators, or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy, or representative of creditors of the Participant. This Agreement shall be binding upon and inure to the benefit of any successors to the Company.
21. Severability. If any provision of this Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by the decision of any arbitrator or by decree of a court of last resort, the parties shall promptly meet and negotiate substitute provisions for those rendered or declared illegal or unenforceable to preserve the original intent of this Agreement to the extent legally possible, but all other provisions of this Agreement shall remain in full force and effect.
22. Electronic Delivery and Signatures. The Company may, in its sole discretion, decide to deliver any documents related to the PSUs, this Agreement or to participation in the Plan or to future grants that may be made under the Plan by electronic means or to request the Participant's consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. If the Company establishes procedures of an electronic signature system for delivery and acceptance of Plan documents (including this Agreement or any Award Agreement like this Agreement), the Participant hereby consents to such procedures and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
23. Governing Law. The execution, validity, interpretation, and performance of this Agreement shall be governed by, and construed in accordance with, Delaware law applied without giving effect to any conflicts-of-law principles, except to the extent pre-empted by federal law.
24. Section 409A. This Agreement and delivery of shares of Common Stock under this Agreement are intended to be exempt from or to comply with Section 409A of the Code and shall be administered and construed in accordance with such intent. In furtherance, and not in limitation, of the foregoing: (a) in no event may the Participant designate, directly or indirectly, the calendar year of any payment to be made hereunder; and (b) notwithstanding any other provision of this Agreement to the contrary, a termination of employment hereunder shall mean and be interpreted consistent with a “separation from service” within the meaning of Code Section 409A with respect to any payment hereunder that constitute a “deferral of compensation” under Code Section 409A that becomes due on account of such separation from service. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or any Subsidiary be liable to the Participant on account of this Agreement’s failure to (a) qualify for favorable U.S. or foreign tax treatment or (b) avoid adverse tax treatment under U.S. or foreign law, including, without limitation, Section 409A of the Code.
ANNEX A - TAX WITHOLDING FOR ISRAELI EMPLOYEES
Tax Withholding For Israeli Employees - The provisions specified hereunder shall apply only to Eligible Individuals who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of applicable tax (such persons, “Israeli Participants”). All defined terms shall have the meaning ascribed to them in the Plan, unless the context requires otherwise.
(i) For the purposes of this Annex A, the following terms shall have the following meanings:
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“Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance. |
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“Approved 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and/or additional rights issued with respect thereto, including, but not limited to, bonus shares, and held in trust by a Trustee for the benefit of the Employee. |
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“Award” shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Sections 102 or 3(i) of the Ordinance, Awards shall not be settled in cash. |
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“Award Agreement” shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Section 102 of the Ordinance, an electronic acceptance may be used only pursuant to a tax ruling to be obtained, if so required by applicable law. |
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“Capital Gain Award” (or "CGA)” means an Approved 102 Award elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(3) of the Ordinance. |
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“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance. |
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“Employee” means a person who is employed by the Company or an Affiliate, including an individual who is serving as a director or an office holder, but excluding any Controlling Shareholder, all as determined in Section 102 of the Ordinance. |
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“ITA” means the Israeli Tax Authority. |
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“Ordinary Income Award"("OIA") means an Approved 102 Award elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) of the Ordinance. |
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“Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended. |
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“Rules” means the Israeli Income Tax Rules (Tax Relief in Issuance of Shares to Employees) 2003. |
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“Section 102” means Section 102 of the Ordinance and any regulations, Rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended. |
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“Trustee” means any individual or trust company appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance. |
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“Unapproved 102 Award” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee. |
(ii) Any tax liability, of any kind due to the Plan, or resulting from it (including, without derogating from the aforementioned, income tax, capital gains tax, social security, surtax and health tax), and any other obligatory payment applicable as a result of the grant of the right, its exercise and Employee's receipt of Common Stock as a result of such exercise or the sale of underlying Common Stock (the "Common Stocks”), will be fully borne by the Employee.
(iii) The Company recommends that Employee consults with professional advisors and consider the tax implications, including the result of the application of Section 102, of the grant of the right, of its exercise and of the receipt of any Shares.
(iv) Despite of anything to the contrary in the Plan, with respect to any Approved 102 Award, subject to the provisions of Section 102, an Employee shall not sell, release, assign, transfer or give as collateral or any right with respect to them given to any third party whatsoever (collectively “Transfer”) from trust any Share received upon the exercise of an Approved 102 and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Minimal Restriction Period (as defined below) required under Section 102. Notwithstanding the above, if any such sale or other Transfer occurs during the Minimal Restriction Period, the sanctions under Section 102 shall apply to and shall be borne solely by such Employee.
(v) In accordance with the provisions of Section 102, the Trustee will hold the right in trust for the benefit of the Employee until the right is exercised, if at all (or until the termination of the exercise period, to the extent the right remains unexercised, as applicable). Consequently, the Trustee will hold the right and/or the shares of Common Stock (including any stock dividend or shares of Common Stock derived from issuance of rights exercised during the right’s exercise period) in trust for the benefit of the Employee for the period set forth in Section 102 and the Rules. Such period is on the date of adoption of this Plan at least (i) in the case of a CGA, 24 months from the date on which the right is granted and deposited with the Trustee; or (ii) in the case of an OIA-, 12 months from the date on which the Right is granted and deposited with the Trustee (the “Minimal Restriction Period”), and will not transfer the right and the shares of Common Stock to the Employee prior to the full payment of the applicable taxes. Transfer of the shares of Common Stock from the Trustee to the Employee or their sale by the Trustee prior to the lapse of the Minimal Restriction Period, might involve tax implications (which the Employee should consider prior to taking any such action).
(vi) The Company was engaged with the Trustee with respect to the Awards, rights and Common Stocks (the “Trust Agreement”) and the provisions of the Trust Agreement will apply and obligate any Employee who receives rights under the Plan. The main provisions of the Trust Agreement are: (i) the Company will not grant Awards and rights to its Employees but will grant them to the Trustee who will hold them for at least the Minimal Restriction Period; (ii) during the Minimal Restriction Period, the Awards, rights and Common Stocks will not be transferable; and (iii) after termination of the Minimal Restriction Period, the Employee will be entitled to demand that the Trustee transfer the Common Stocks to the Employee’s name, provided either: (A) the tax applicable to the Employee under Section 102 has been paid and the Trustee holds a confirmation for the payment issued by the ITA; or (B) the Trustee has transferred to the ITA the appropriate percentage amount (determined in accordance with the applicable tax rate) of the consideration received by it for the sale of the Common Stocks, on account of the applicable tax. The Plan and the Trust Agreement will apply to any stock dividends and/or rights granted to the Employee, mutatis mutandis.
(vii) The Company has undertaken not to grant and Awards and rights to Employees under Section 102, unless it received a confirmation from the Employee that the Employee undertakes vis-a-vis the ITA not to exercise the Awards and rights prior to the termination of the Minimal Restriction Period (unless he or she pays all applicable tax).
(viii) The transfer of the Common Stocks from the Trustee to the Employee or their sale by the Trustee for the benefit of the Employee, all in accordance with the Employee’s order, is possible and may be done in accordance and under the rules, conditions and arrangements to be agreed between the Company and the Trustee and in accordance and subject to applicable law and arrangements (if existing) with the tax authorities.
(ix) The provisions of Section 102 will apply to the Awards and rights to be granted to the Employees, (i.e., grant to and deposit with the Trustee for the benefit of the Employee), in the capital gain tax route. Any tax liability to the Employee will occur upon the earlier of the time the Common Stocks will be transferred from the Trustee to the Employee or sold by the Trustee, without any tax event occurring on the date of grant of the Award.
(x) In accordance with Section 12(c)(ix) above, and since the Company has chosen the capital gains tax route, as specified in Section 102, any income resulting from the realization of the benefit by the Employee will be deemed as a capital gain and will be taxed on the date of the tax event at the applicable tax rate of 25%, excluding the portion of the income equaling the difference between the exercise price of the Award, if applicable, and the average price of the Common Stock during the 30 trading days prior to the date of grant, which will be deemed as working income and will be subject to income tax, according to the rate applicable to the Employee, and social security tax and health tax – all provided that all of the provisions of the capitl gains tax route are met.
(xi) With regards to Approved 102 Awards , the provisions of the Plan shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit and/or any pre-rulings obtained by the ITA, and the said provisions, permit and/or pre-rulings shall be deemed an integral part of the Plan. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan, shall be considered binding upon the Company and the Employees.
(xii) Any tax consequences arising from the grant or exercise of any Award, from the grant of right and/or the underlying Common Stocks, from the payment for stocks covered thereby or from any other event or act (of the Company, and the Trustee or the Employee), hereunder, shall be borne solely by the Employee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Employee shall agree to indemnify the Company and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Employee.
(xiii) The Company and/or, when applicable, the Trustee shall not be required to release any stock certificate to an Employee until all required payments (including any tax liability) have been fully made.
(xiv) With respect to an Unapproved 102 Award, if the Employee ceases to be employed by the Company, the Employee shall extend to the Company a security or guarantee for the payment of tax due at the time of sale of Common Stocks, all in accordance with the provisions of Section 102.
Exhibit 10.7
FORM OF RESTRICTED STOCK UNIT AGREEMENT
FOR TIME-BASED RSUs
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Company: Ormat Technologies, Inc. |
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Date of Grant: |
%%OPTION_DATE,'Month DD, YYYY'%-% |
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Total No. of Restricted Stock Units Granted: |
%%TOTAL_SHARES_GRANTED,'999,999,999'%-% |
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Vesting Schedule: |
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%%VEST_DATE_PERIOD1,'Month DD, YYYY'%-% |
%%SHARES_PERIOD1,'999,999,999'%-% |
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%%VEST_DATE_PERIOD2,'Month DD, YYYY'%-% |
%%SHARES_PERIOD2,'999,999,999'%-% |
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%%VEST_DATE_PERIOD3,'Month DD, YYYY'%-% |
%%SHARES_PERIOD3,'999,999,999'%-% |
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%%VEST_DATE_PERIOD4,'Month DD, YYYY'%-% |
%%SHARES_PERIOD4,'999,999,999'%-% |
Type: Restricted Stock Unit
Dear %%FIRST_NAME%-%,
We are pleased to inform you that, as an eligible employee of Ormat Technologies, Inc. (herein called the “Company”) or one of its subsidiaries, you have been granted one or more restricted stock units (herein called “RSUs”) under the Company’s 2018 Incentive Compensation Plan (as amended and restated) and the Restricted Stock Unit Terms and Conditions (herein called the “Plan” and the “Terms and Conditions”).
RSUs will not be deemed granted unless the Participant accepts the grant online before 5:00 p.m. Eastern Time no later than two (2) weeks after the grants/awards have been added to your account and you have received the notification email. By accepting your grant online, you agree that the right is granted under and governed by the Plan and the RSU Award Agreement and acknowledge receipt of these documents as well as the Prospectus for the Plan. Questions regarding your grant can be directed to the Corporate Secretary at equityinfo@ormat.com.
| ORMAT TECHNOLOGIES, INC. | |
| 6140 Plumas Street, Reno, NV 89519, USA • +1-775-356-9029 • ormat@ormat.com | ormat.com |
This agreement and the documents that accompany it constitute the entire agreement between you and the Company with respect to the RSUs granted hereunder and supersede in their entirety all prior undertakings and agreements of the Company and yourself, both written and oral, with respect to the RSUs granted hereunder (including the shares underlying it).
Furthermore, by your signature you hereby approve and agree to all the aforesaid in this agreement and the trust agreement signed with the Trustee (as defined in Annex A to the Terms and Conditions) and you declare that you are familiar with the provisions of Section 102 and the Capital Gains route. You hereby undertake not to sell or transfer the Shares underlying the RSUs prior to the lapse of the restrictions period, unless you pay all taxes, which may arise in connection with such sale and/or transfer.
Thank you for your contributions to the Company.
[Signature Page Follows]
The undersigned Participant acknowledges receipt of, and understands and agrees to, the terms and conditions of this Agreement and the Plan.
| ORMAT TECHNOLOGIES, INC. | |
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Name: Doron Blachar
Title: CEO
Date: %%OPTION_DATE,'Month DD, YYYY'%-% |
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| PARTICIPANT | |
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Name: %%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-% |
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| *Israeli participants should print this document and email a signed copy to equityinfo@ormat.com. | |
RESTRICTED STOCK UNITS
TERMS AND CONDITIONS
As a participant in the Ormat Technologies, Inc. 2018 Incentive Compensation Plan (as amended and restated, the “Plan”), you have been granted one or more Restricted Stock Units (herein called “RSUs”) under the Plan. RSUs give you the opportunity to receive at a specified future date, payment of an amount equal to all or a portion of the Fair Market Value of a specified number of shares of Common Stock after the Vesting Date(s) specified in Section 2 below (herein called the letter agreement) multiplied by the applicable percentage of RSUs specified in Section 2 below, subject to your acceptance of the RSUs as provided in Section 1 below and the other terms and conditions described below.
The date of the grant of the RSUs (herein called the Grant Date) is set forth in the letter agreement.
Note that all capitalized terms in the letter agreement and these Terms and Conditions are defined in the Plan, except as indicated in such agreement and herein. All terms of the Plan are hereby incorporated into these Terms and Conditions.
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1. |
Acceptance of RSUs: |
RSUs will not be deemed granted unless the Participant accepts the grant online before 5:00 p.m. Eastern Time no later than two (2) weeks after the grants/awards have been added to your account and you have received the notification email. By accepting your grant online, you agree that the right is granted under and governed by the Plan and the RSU Award Agreement and acknowledge receipt of these documents as well as the Prospectus for the Plan. Questions regarding your grant can be directed to the Corporate Secretary at equityinfo@ormat.com.
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2. |
Vesting: |
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(a) |
Subject to the provisions of this Section 2 and of Sections 5, and 6 of these Terms and Conditions the RSUs shall become vested in accordance with the vesting schedule identified in the Form of Restricted Stock Unit Agreement for Time-Based RSUs granted to Participant. |
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(b) |
No fractional shares shall be delivered and fractional shares shall be disregarded. All vesting increments shall be rounded to the nearest whole number of RSUs. |
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(c) |
The RSUs shall not become vested unless you shall have remained continuously in the employ or service of the Company or of one or more of its Subsidiaries on the applicable Vesting Date, except as provided in Section 5 of these Terms and Conditions. Any RSUs that are not vested will terminate on the date of your Separation from Service. |
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(d) |
Vesting upon CIC Qualification Termination. In February 2023 the Board of Directors of the Company adopted the Ormat Technologies, Inc. Change in Control Severance Plan (the "CIC Severance Plan"). To the extent the Participant participates in the CIC Severance Plan, and in the event Participant incurs a CIC Qualifying Termination (as defined in the CIC Severance Plan), the terms of the CIC plan will govern. |
3. Issuance of Shares: RSUs will be credited to an account to be maintained on your behalf. The Fair Market Value of any vested RSUs measured as of the Vesting Date will be paid within thirty (30) days of the date such Vesting Date. Payment of any RSUs shall be made by the issuance of shares of Common Stock, subject to section 9 hereof.
4. Transferability of RSUs: The RSUs shall not be transferable by you otherwise than (i) by will or (ii) by the laws of descent and distribution. Any transferred RSU shall continue to be subject to these Terms and Conditions.
5. Death: Section 2 to the contrary notwithstanding, if you incur a Separation from Service because you die, you will become fully vested in any unvested RSUs awarded under the letter of grant to which these Terms and Conditions are attached.
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6. |
Other Separation from Service: |
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(a) |
Except as otherwise clearly specified in a duly executed, written, valid and binding agreement between you and the Company, if you incur a Separation from Service before the end of the applicable Vesting Date for any reason other than death, you will immediately forfeit any unvested RSUs. |
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(b) |
For the purposes of the letter agreement, your employment by a Subsidiary of the Company shall be considered terminated on the date that the company by which you are employed is no longer a Subsidiary of the Company. |
7. The Plan. By accepting any benefit under this Agreement, the Participant and any person claiming under or through the Participant shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and this Agreement and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan. This Agreement is subject to all the terms, provisions and conditions of the Plan, which are incorporated herein by reference, and to such rules, policies and regulations as may from time to time be adopted by the Committee. In the event of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control, and this Agreement shall be deemed to be modified accordingly. A paper copy of the Plan and the prospectus shall be provided to the Participant upon the Participant’s written request to the Company at the address set forth in Section 15 of this Agreement.
8. Dividend Equivalents: Except as otherwise provided in Section 11, no dividend equivalents shall be payable or accumulated in respect of RSUs.
9. Clawbacks: The RSUs are subject to recoupment in accordance with Section 15(i) of the Plan and any other recoupment or clawback policy adopted by the Company, or as agreed with you.
10. Listing Requirements: The Company shall not be obligated to deliver any certificates representing any shares until all applicable requirements imposed by federal and state securities laws and by any stock exchanges upon which the shares may be listed have been fully met.
11. Transfer of Employment: Leave of Absence: A transfer of your employment from the Company to a Subsidiary or vice versa, or from one Subsidiary to another, without an intervening period, shall not be deemed a Separation from Service. If you are granted an authorized leave of absence, you shall be deemed to have remained in the employ of the Company or a Subsidiary during such leave of absence.
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12. |
Adjustments in RSUs: |
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(a) |
The existence of the letter agreement and the RSUs shall not affect or restrict in any way the right or power of the Board of Directors or the stockholders of the Company to make or authorize any reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the shares or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business. |
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(b) |
In the event of any change in or affecting the outstanding shares by reason of a stock dividend or split, merger or consolidation (whether or not the Company is the surviving corporation), recapitalization, spin-off, reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend in cash, securities or other property, the Board of Directors shall make such amendments to the Plan, the letter agreement, these Terms and Conditions and the RSUs and make such adjustments and take actions thereunder as it deems appropriate, in its sole discretion, under the circumstances. Such amendments, adjustments and actions may include, but are not limited to, (i) changes in the number and kind of shares underlying the RSUs set forth in the letter agreement, and (ii) accelerating the vesting of the RSUs. The determination by the Board as to the terms of any of the foregoing adjustments shall be conclusive and binding. |
13. Stockholder Rights: Neither you nor any other person shall have any rights of a stockholder as to shares underlying any RSUs unless and until (a) the Company pays or settles any vested RSUs in shares of Common Stock, and (b) such Common Stock shall have been recorded by the Company’s registrar, American Stock Transfer and Trust Company (herein called “AST”), as having been issued or transferred, as the case may be.
14. Tax Matters: You should consult your tax advisor about tax consequences of the RSUs.
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(a) |
Tax Withholding for U.S. Employees: If and to the extent Federal income tax withholding (and state and local income tax withholding, if applicable) may be required by the Company in respect of taxes on income you realize upon or after payment or settlement of any portion of the RSUs, or upon disposition of any shares of Common Stock acquired through the payment or settlement of any RSUs, the Company may withhold such required amounts from your future paychecks or may require that you deliver to the Company the amounts to be withheld. You may also pay the minimum required Federal income tax withholding (and state and local income tax withholding, if applicable) by electing either to have the Company withhold a portion of the shares of Common Stock otherwise issuable upon payment or settlement of the RSUs, or to deliver other shares of Common Stock you own, in either case having a fair market value (on the date that the withholding amount is to be determined) of the minimum amount required to be withheld, provided that the election will be irrevocable and will be subject to such rules as the Committee may adopt. |
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(b) |
Tax Withholding For Israeli Employees - The provisions specified in Annex A attached hereto shall apply only to Eligible Individuals who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the applicable payment of tax. |
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(c) |
Section 409A - The letter agreement, these Terms and conditions and delivery of shares of Common Stock hereunder are intended to be exempt from or to comply with Section 409A of the Code and shall be administered and construed in accordance with such intent. In furtherance, and not in limitation, of the foregoing: (a) in no event may you designate, directly or indirectly, the calendar year of any payment to be made hereunder; and (b) notwithstanding any other provision of the letter agreement and these Terms of Conditions to the contrary, a termination of employment hereunder shall mean and be interpreted consistent with a “separation from service” within the meaning of Code Section 409A with respect to any payment hereunder that constitute a “deferral of compensation” under Code Section 409A that becomes due on account of such separation from service. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or any Subsidiary be liable to you on account of the failure of the letter agreement and these Terms and Conditions to (a) qualify for favorable U.S. or foreign tax treatment or (b) avoid adverse tax treatment under U.S. or foreign law, including, without limitation, Section 409A of the Code. |
15. Employment or Other Service: Nothing contained herein shall confer any right to continue in the employ or other service of the Company or a Subsidiary or limit in any way the right of the Company or a Subsidiary to change your compensation or other benefits or to terminate your employment or other service with or without cause.
16. Short-Swing Trading: If you are a director or executive officer of the Company or one of its subsidiaries who is granted RSUs, you must report such grant, the vesting or settlement of such RSUs and any sale of Common Stock received upon settlement of any RSUs, on a Form 4 (Statement of Changes of Beneficial Ownership of Securities) within two business days of such reportable event pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended. The Corporate Secretary of the Company will provide you with a form of the Form 4 upon request, but such filing is the personal responsibility of the holder of RSUs. All holders of RSUs should consult the Company’s Insider Trading Policy before arranging any trade in any of the Company’s securities, including Common Stock.
17. Electronic Delivery and Signatures. The Company may, in its sole discretion, decide to deliver any documents related to the PSUs, this Agreement or to participation in the Plan or to future grants that may be made under the Plan by electronic means or to request the Participant's consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. If the Company establishes procedures of an electronic signature system for delivery and acceptance of Plan documents (including this Agreement or any Award Agreement like this Agreement), the Participant hereby consents to such procedures and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
18. Governing Law. The execution, validity, interpretation, and performance of this Agreement shall be governed by, and construed in accordance with, Delaware law applied without giving effect to any conflicts-of-law principles, except to the extent pre-empted by federal law.
19. Notices. All notices required to be given under this Agreement or the Plan shall be in writing and delivered in person or by registered or certified mail, postage prepaid, to the other party, in the case of the Company, at the address set forth in the Grant Notice, or, in the case of the Participant, at the Participant’s address set forth in the Company’s records; provided, however, any such notice to the Participant may be delivered electronically to the Participant’s email address set forth in the Company’s records. Each party to this Agreement agrees to inform the other party immediately upon a change of address. All notices shall be deemed delivered when received.
20. Time of Essence: Time is of the essence with respect to delivering notices and stock certificates hereunder. There is no grace period.
21. Successors: These Terms and Conditions are binding on your heirs and personal representatives and on the successors of the Company.
22. Counterparts: The letter agreement may be executed in duplicate counterparts, each of which shall be deemed to be an original.
ANNEX A - TAX WITHOLDING FOR ISRAELI EMPLOYEES
Tax Withholding For Israeli Employees - The provisions specified hereunder shall apply only to Eligible Individuals who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of applicable tax (such persons, “Israeli Participants”). All defined terms shall have the meaning ascribed to them in the Plan, unless the context requires otherwise.
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(i) |
For the purposes of this Annex A, the following terms shall have the following meanings: |
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“Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance. |
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“Approved 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and/or additional rights issued with respect thereto, including, but not limited to, bonus shares, and held in trust by a Trustee for the benefit of the Employee. |
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"Award" shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Sections 102 or 3(i) of the Ordinance, Awards shall not be settled in cash. |
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"Award Agreement" shall have the meaning ascribed to it in the Plan; provided, however, that for the purposes of Section 102 of the Ordinance, an electronic acceptance may be used only pursuant to a tax ruling to be obtained, if so required by applicable law. |
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“Capital Gain Award" (or "CGA)” means an Approved 102 Award elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(3) of the Ordinance. |
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“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance. |
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“Employee” means a person who is employed by the Company or an Affiliate, including an individual who is serving as a director or an office holder, but excluding any Controlling Shareholder, all as determined in Section 102 of the Ordinance. |
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“ITA” means the Israeli Tax Authority. |
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“Ordinary Income Award"("OIA") means an Approved 102 Award elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) of the Ordinance. |
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“Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended. |
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“Rules” means the Israeli Income Tax Rules (Tax Relief in Issuance of Shares to Employees) 2003. |
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“Section 102” means Section 102 of the Ordinance and any regulations, Rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended. |
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“Trustee” means any individual or trust company appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance. |
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“Unapproved 102 Award” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee. |
(ii) Any tax liability, of any kind due to the Plan, or resulting from it (including, without derogating from the aforementioned, income tax, capital gains tax, social security, surtax and health tax), and any other obligatory payment applicable as a result of the grant of the right, its exercise and Employee's receipt of Common Stock as a result of such exercise or the sale of underlying Common Stock (the "Common Stocks”), will be fully borne by the Employee.
(iii) The Company recommends that Employee consults with professional advisors and consider the tax implications, including the result of the application of Section 102, of the grant of the right, of its exercise and of the receipt of any Shares.
(iv) Despite of anything to the contrary in the Plan, with respect to any Approved 102 Award, subject to the provisions of Section 102, an Employee shall not sell, release, assign, transfer or give as collateral or any right with respect to them given to any third party whatsoever (collectively “Transfer”) from trust any Share received upon the exercise of an Approved 102 and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Minimal Restriction Period (as defined below) required under Section 102. Notwithstanding the above, if any such sale or other Transfer occurs during the Minimal Restriction Period, the sanctions under Section 102 shall apply to and shall be borne solely by such Employee.
(v) In accordance with the provisions of Section 102, the Trustee will hold the right in trust for the benefit of the Employee until the right is exercised, if at all (or until the termination of the exercise period, to the extent the right remains unexercised, as applicable). Consequently, the Trustee will hold the right and/or the shares of Common Stock (including any stock dividend or shares of Common Stock derived from issuance of rights exercised during the right’s exercise period) in trust for the benefit of the Employee for the period set forth in Section 102 and the Rules. Such period is on the date of adoption of this Plan at least (i) in the case of a CGA, 24 months from the date on which the right is granted and deposited with the Trustee; or (ii) in the case of an OIA-, 12 months from the date on which the Right is granted and deposited with the Trustee (the “Minimal Restriction Period”), and will not transfer the right and the shares of Common Stock to the Employee prior to the full payment of the applicable taxes. Transfer of the shares of Common Stock from the Trustee to the Employee or their sale by the Trustee prior to the lapse of the Minimal Restriction Period, might involve tax implications (which the Employee should consider prior to taking any such action).
(vi) The Company was engaged with the Trustee with respect to the Awards, rights and Common Stocks (the “Trust Agreement”) and the provisions of the Trust Agreement will apply and obligate any Employee who receives rights under the Plan. The main provisions of the Trust Agreement are: (i) the Company will not grant Awards and rights to its Employees but will grant them to the Trustee who will hold them for at least the Minimal Restriction Period; (ii) during the Minimal Restriction Period, the Awards, rights and Common Stocks will not be transferable; and (iii) after termination of the Minimal Restriction Period, the Employee will be entitled to demand that the Trustee transfer the Common Stocks to the Employee’s name, provided either: (A) the tax applicable to the Employee under Section 102 has been paid and the Trustee holds a confirmation for the payment issued by the ITA; or (B) the Trustee has transferred to the ITA the appropriate percentage amount (determined in accordance with the applicable tax rate) of the consideration received by it for the sale of the Common Stocks, on account of the applicable tax. The Plan and the Trust Agreement will apply to any stock dividends and/or rights granted to the Employee, mutatis mutandis.
(vii) The Company has undertaken not to grant and Awards and rights to Employees under Section 102, unless it received a confirmation from the Employee that the Employee undertakes vis-a-vis the ITA not to exercise the Awards and rights prior to the termination of the Minimal Restriction Period (unless he or she pays all applicable tax).
(viii) The transfer of the Common Stocks from the Trustee to the Employee or their sale by the Trustee for the benefit of the Employee, all in accordance with the Employee’s order, is possible and may be done in accordance and under the rules, conditions and arrangements to be agreed between the Company and the Trustee and in accordance and subject to applicable law and arrangements (if existing) with the tax authorities.
(ix) The provisions of Section 102 will apply to the Awards and rights to be granted to the Employees, (i.e., grant to and deposit with the Trustee for the benefit of the Employee), in the capital gain tax route. Any tax liability to the Employee will occur upon the earlier of the time the Common Stocks will be transferred from the Trustee to the Employee or sold by the Trustee, without any tax event occurring on the Grant Date of the Award.
(x) In accordance with Section 12(c)(ix) above, and since the Company has chosen the capital gains tax route, as specified in Section 102, any income resulting from the realization of the benefit by the Employee will be deemed as a capital gain and will be taxed on the date of the tax event at the applicable tax rate of 25%, excluding the portion of the income equaling the difference between the exercise price of the Award, if applicable, and the average price of the Common Stock during the 30 trading days prior to the Grant Date, which will be deemed as working income and will be subject to income tax, according to the rate applicable to the Employee, and social security tax and health tax – all provided that all of the provisions of the capital gains tax route are met.
(xi) With regards to Approved 102 Awards , the provisions of the Plan shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit and/or any pre-rulings obtained by the ITA, and the said provisions, permit and/or pre-rulings shall be deemed an integral part of the Plan. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan, shall be considered binding upon the Company and the Employees.
(xii) Any tax consequences arising from the grant or exercise of any Award, from the grant of right and/or the underlying Common Stocks, from the payment for stocks covered thereby or from any other event or act (of the Company, and the Trustee or the Employee), hereunder, shall be borne solely by the Employee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Employee shall agree to indemnify the Company and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Employee.
(xiii) The Company and/or, when applicable, the Trustee shall not be required to release any stock certificate to an Employee until all required payments (including any tax liability) have been fully made.
(xiv) With respect to an Unapproved 102 Award, if the Employee ceases to be employed by the Company, the Employee shall extend to the Company a security or guarantee for the payment of tax due at the time of sale of Common Stocks, all in accordance with the provisions of Section 102.
Exhibit 31.1
Ormat Technologies, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Doron Blachar, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2023 of Ormat Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: |
/s/ DORON BLACHAR |
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Doron Blachar Chief Executive Officer |
Date: May 10, 2023
Exhibit 31.2
Ormat Technologies, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Assaf Ginzburg, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2023 of Ormat Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: |
/s/ ASSAF GINZBURG |
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Assaf Ginzburg Chief Financial Officer |
Date: May 10, 2023
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Doron Blachar, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Ormat Technologies, Inc. on Form 10-Q for the quarter ended March 31, 2023 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and (ii) that information contained in such quarterly report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Ormat Technologies, Inc. This written statement is being furnished to the Securities and Exchange Commission as an exhibit accompanying such quarterly report and shall not be deemed filed pursuant to the Exchange Act.
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By: |
/s/ DORON BLACHAR |
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Name: Doron Blachar |
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Title: Chief Executive Officer |
Date: May 10, 2023
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Assaf Ginzburg, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of Ormat Technologies, Inc. on Form 10-Q for the quarter ended March 31, 2023 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and (ii) that information contained in such quarterly report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Ormat Technologies, Inc. This written statement is being furnished to the Securities and Exchange Commission as an exhibit accompanying such quarterly report and shall not be deemed filed pursuant to the Exchange Act.
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By: |
/s/ ASSAF GINZBURG |
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Name: Assaf Ginzburg Title: Chief Financial Officer |
Date: May 10, 2023