Ormat Technologies, Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement. Dollars are U.S. dollars.
Business context
Ormat develops, owns and operates geothermal, recovered-energy, solar PV and battery-storage assets, and sells geothermal and recovered-energy equipment and EPC services. Its three segments are Electricity, Product and Energy Storage. Electricity remains the core business, contributing 86.0% of 2022 revenue. At year-end, the company reported 1,070 MW of generating capacity across consolidated and unconsolidated assets; geothermal represented 92% of capacity.
Key financial metrics
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total revenue | $734.2 million | $663.1 million | +10.7% |
| Electricity revenue | $631.7 million | $585.8 million | +7.8% |
| Product revenue | $71.4 million | $46.9 million | +52.2% |
| Energy Storage revenue | $31.0 million | $30.4 million | +2.1% |
| Gross profit / margin | $268.8 million / 36.6% | $264.3 million / 39.9% | Margin down 3.3 percentage points |
| Operating income / margin | $152.8 million / 20.8% | $169.4 million / 25.5% | Down 9.8% |
| Net income | $77.8 million | $76.1 million | +2.3% |
| Net income attributable to shareholders | $65.8 million | $62.1 million | +6.0% |
| Diluted EPS | $1.17 | $1.10 | Up $0.07 |
| Adjusted EBITDA | $435.5 million | $401.4 million | +8.5% |
| Operating cash flow | $281.0 million | $258.8 million | +$22.2 million |
| Capital expenditures | $563.5 million | $419.3 million | +$144.2 million |
Operating cash flow less capital expenditures was approximately negative $282.5 million, calculated from reported figures. Cash and cash equivalents were $95.9 million at year-end, alongside $130.8 million of restricted cash. The company reported $390.7 million of unused corporate borrowing capacity. Current assets were $456.7 million and current liabilities were $343.9 million.
Scheduled long-term debt and financing-liability principal totaled $2.053 billion, including $181.7 million due in 2023. The company had $431.3 million of 2.50% convertible notes due 2027. It reported a 4.13 net-debt-to-adjusted-EBITDA covenant ratio and equity equal to 43.8% of total assets. Approximately 98.7% of consolidated long-term debt was fixed rate.
Material changes and operating performance
- Electricity revenue increased with higher Puna revenue, a full year of contribution from the acquired Dixie Valley and Beowawe plants, and the commencement of CD4 and Tungsten Mountain 2 operations. Power generation rose 2.0% to 6.66 million MWh; average realized price increased to $94.8/MWh from $89.7/MWh.
- Product revenue rebounded from a lower 2021 base, reflecting new project activity. However, Product gross margin remained low at 15.3%, despite improvement from 11.8% in 2021. Management cited competition and higher raw-material costs as pressures on Product profitability.
- Gross margin contracted despite revenue growth. Electricity costs rose faster than segment revenue, and Energy Storage gross profit declined to $6.5 million from $10.0 million; its gross margin fell to 21.0% from 33.0%.
- Operating income included $32.6 million of long-lived-asset impairments, principally a $30.5 million non-cash impairment of Brawley. G&A expense declined to $61.3 million from $75.9 million, partly due to lower acquisition and legal costs.
- Net income benefited from a lower effective tax rate of 15.4%, versus 24.0%, and higher income from tax-benefit monetization. Net interest expense increased to $87.7 million from $82.7 million.
- New commercial operations included 78 MW of geothermal capacity and 30 MW of solar PV projects, according to the filing. The company also commissioned a 5 MW/20 MWh California battery project.
Outlook, risks and unusual items
- Growth targets: Ormat expects to add 230–260 MW by the end of 2025 and reach approximately 1.3 GW of Electricity-segment capacity. Energy Storage targets are 352 MW by the end of 2024 and 500–530 MW by 2025. These are targets, not guaranteed outcomes; development depends on permitting, interconnection, equipment availability and project economics.
- Investment needs: Estimated 2023 capital needs were approximately $589 million, alongside $181.7 million of scheduled debt principal repayments. Supplier purchase commitments totaled $569.9 million, all payable in 2023; approximately $404.1 million related to construction-in-process.
- Projects and backlog: Product backlog was $148.1 million as of February 22, 2023, versus $53.5 million a year earlier. Remaining Product-segment performance obligations were $113.4 million at year-end, expected to be recognized over the following 24 months. The figures have different dates and bases.
- Asset and resource issues: Brawley’s capacity was reduced to an expected operating level of 7 MW after wellfield remediation efforts failed to deliver expected results. Heber 1 suffered a February 2022 fire; the filing reports partial operation of binary units, planned complex repowering and $21.8 million of insurance recoveries received. Olkaria, Puna, Don A. Campbell and Sarulla also faced operational or resource constraints.
- Customer and collection exposure: SCPPA, NV Energy and Kenya Power (KPLC) accounted for 21.5%, 16.9% and 14.4% of total revenue, respectively. KPLC owed $27.0 million overdue at year-end, of which $15.2 million was collected in January and February 2023. Honduras utility ENEE had $13.9 million overdue, of which $2.6 million was collected in February 2023.
- Contingencies and investigations: Dixie Meadows construction was temporarily paused amid litigation and Endangered Species Act consultation concerning the Dixie Valley toad and tribal interests. The project had $84.4 million of net book value in construction-in-process; the ultimate outcome and potential loss were not estimable. The company also said it was providing information to the SEC and Department of Justice regarding allegations in a short-seller report on anti-corruption compliance; a special committee investigated the claims.
- Other risks: Merchant-market exposure in storage, battery supply and construction inflation, higher refinancing rates, foreign-currency and political risks, dependence on transmission systems, and concentration in key customers and international operations. Management expects the Inflation Reduction Act to support project economics, but was still evaluating its effects.
- Reporting and controls: The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. Management also concluded that disclosure controls and internal control over financial reporting were effective at December 31, 2022.
Important facts for investors to verify
- Whether Brawley’s 7 MW operating plan and remediation assumptions support future cash flows, and whether further impairment is possible.
- Progress, cost, timing and financing for the 2023 construction program, including the $569.9 million supplier commitments and debt repayments.
- Collections from KPLC and ENEE, and whether payment delays or customer credit conditions worsen.
- The status and potential cost or schedule impact of Dixie Meadows litigation and regulatory consultation.
- Whether Sarulla’s remediation restores performance and whether its projected debt-service coverage and premium payments remain achievable.
- Delivery against the geothermal and storage capacity targets, including interconnection, permitting and battery procurement milestones.
- The impact of Product competition, inflation and supply costs on margins, and the cash-flow and dilution implications of the convertible notes.