Business Context and Reporting Period
Company: Ormat Technologies, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 25, 2007
Subject: Entry into a Material Definitive Agreement regarding the Olkaria III geothermal power project in Kenya.
Key Financial Metrics and Project Details
This filing does not report consolidated revenue, profit, cash flow, or balance sheet metrics for the registrant. It focuses on specific project-level financial terms:
- Project Capacity: Phase Two will add approximately 35MW, bringing total capacity to approximately 48MW.
- Anticipated Annual Revenue: Approximately US$ 32 million following Phase Two completion.
- Security/Collateral: Kenya Power & Lighting Company (KPLC) agreed to provide a letter of credit equal to four months of anticipated revenues (approximately US$ 8 million).
- Tariff Structure:
- 75% of capacity: Base rate of US$ 561.6/kW/year reduced by US$ 76.6/kW/year.
- 25% of capacity: Base rate of US$ 561.6/kW/year reduced by US$ 25.5/kW/year.
- Tariffs are indexed to the U.S. Consumer Price Index (CPI).
Material Changes and Agreement Terms
On January 19, 2007, Ormat's subsidiary, OrPower 4, Inc., executed an Amended and Restated Power Purchase Agreement and a Project Security Agreement with KPLC. Key changes from the original agreement include:
- Construction Timeline: Shortened from approximately 26 months to 21 months, commencing upon deposit of collateral.
- Technical Configuration: Phase Two will utilize Ormat Energy Converters (OECs) for electricity generation.
- Regulatory Status: Agreements were executed after receiving appropriate regulatory approvals from Kenyan authorities.
Outlook, Risks, and Management Commentary
Outlook: Management expects the completion of Phase Two to result in total annual revenues of approximately US$ 32 million from the Olkaria III project.
Risks and Contingencies: The filing includes a Safe Harbor Statement noting that forward-looking statements are subject to risks and uncertainties. Actual results may differ materially due to factors discussed in the company's Form 10-K (filed March 28, 2006) and Prospectus Supplements (filed April 5 and December 14, 2006). The company undertakes no obligation to update these statements.
Investor Verification Checklist
- Verify the status of the US$ 8 million letter of credit deposit by KPLC to confirm the start of the 21-month construction period.
- Review the "Risk Factors" in the March 28, 2006 Form 10-K for specific geopolitical and operational risks in Kenya.
- Monitor the implementation of the Ormat Energy Converters (OECs) to ensure technical performance meets the revised configuration.
- Track U.S. CPI fluctuations to understand potential adjustments to the tariff rates under the indexation formulas.