Ormat Technologies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 25, 2022. This is an annual report, not a standalone fourth-quarter report. Ormat develops, manufactures, owns and operates geothermal, recovered-energy, solar and battery-storage assets.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $663.1 million | $705.3 million |
| Gross profit / margin | $264.3 million / 39.9% | $276.3 million / 39.2% |
| Operating income / margin | $169.4 million / 25.5% | $214.0 million / 30.3% |
| Net income | $76.1 million | $101.8 million |
| Net income attributable to Ormat shareholders | $62.1 million; diluted EPS $1.10 | $85.5 million; diluted EPS $1.65 |
| Adjusted EBITDA (non-GAAP) | $401.4 million | $420.2 million |
| Cash from operations | $258.8 million | $265.0 million |
| Cash used in investing | $638.2 million | $386.0 million |
| Cash from financing | $186.4 million | $503.5 million |
Revenue mix was $585.8 million from Electricity (+8.2%), $46.9 million from Products (−68.3%) and $30.4 million from Energy Storage (+92.1%). Electricity generated 88.3% of revenue. Consolidated generation rose 8.0% to 6.53 million MWh; average realized price was $89.7/MWh, essentially unchanged. Overall gross margin edged up, but operating and net margins declined.
Liquidity at year-end included $239.3 million cash, $43.3 million marketable securities and $450.6 million of unused corporate borrowing capacity. Cash and restricted cash together totaled $343.4 million. Debt and financing liabilities were approximately $1.92 billion in aggregate; scheduled 2022 principal repayments were $386.3 million. Management estimated 2022 capital needs of about $515 million and said it expected to fund them through available liquidity, operating cash flow and future project financings and tax equity. The filing reports no specific revenue or earnings guidance.
Material changes and operating developments
- Total revenue fell 6.0%, primarily because Products revenue declined as prior-period international equipment projects wound down and COVID-related conditions affected orders. Product gross margin fell to 11.8% from 22.4%, with higher input and transportation costs also pressuring profitability.
- Electricity revenue increased with the July acquisition of Dixie Valley and Beowawe, the McGinness Hills expansion, and Puna’s return to partial operation. These gains were partly offset by weaker resource performance at Olkaria and temporary resource limitations at Bouillante. Electricity gross margin declined to 42.5% from 44.6%.
- Storage revenue nearly doubled, supported by the Pomona facility and volatile Texas market conditions. The segment recorded a 33.0% gross margin, versus 11.1% in 2020.
- The Terra-Gen geothermal acquisition closed in July for $171 million cash, excluding working-capital adjustments, and included assumed financing obligations with an acquisition-date fair value of approximately $258 million. Ormat also completed a $38.9 million Steamboat Hills tax-equity transaction.
- Operating assets totaled 1,012 MW of generating capacity as of the filing’s stated date. The company commissioned a 10 MW/40 MWh California storage project and reported an operating storage portfolio of approximately 83 MW/176 MWh at year-end.
Outlook, risks and unusual items
- Ormat targeted an energy-storage portfolio of 313–373 MW by the end of 2023, backed by a stated 2.3 GW/5.7 GWh development pipeline. The target depends on permits, interconnection, battery supply and project economics. Management also described ongoing geothermal, solar and storage construction, with permitting and supply-chain delays affecting schedules.
- Net income was affected by $14.5 million of losses on a Texas storage hedge after ERCOT restricted battery charging during the February 2021 power crisis, plus a $3.0 million provision for potentially uncollectible ERCOT-related receivables. Management said billing disputes with ERCOT remained unresolved.
- International customer collections warrant attention: $25.5 million was overdue from Kenya’s KPLC at year-end, of which $22.9 million was collected in January and February 2022; $20.7 million was overdue from Honduras’s ENEE, of which $2.9 million was collected in February 2022. Management believed the balances would be collected.
- Kenyan authorities recommended that KPLC review and seek tariff reductions in existing IPP contracts, including Ormat’s Olkaria contract. Olkaria also experienced lower wellfield performance. Ormat expected generation to recover to 135–140 MW by year-end 2022.
- The Sarulla investment reported lower generation and profitability; the project failed debt-service coverage tests in March and September 2021. A recovery plan involving additional wells and equipment changes was subject to lender approval. Ormat’s investment carrying value was $69.0 million, and failure to implement remedial measures could prompt impairment testing.
- Ormat’s Puna plant, affected by the 2018 Kilauea eruption, operated at about 25 MW in 2021. A proposed PPA extending to 2052 and increasing contracted capacity to 46 MW remained subject to regulatory approval. The company continued discussions with insurers over additional Puna claims; no impairment was recorded at year-end.
- A Special Committee investigated claims in a short-seller report concerning anti-corruption compliance; Ormat said it was providing information requested by the SEC and DOJ. The filing also describes a shareholder claim seeking approximately $100 million and a December 2021 lawsuit challenging BLM approval of the Dixie Meadows project. The company stated it believed it had strong defenses in specified claims; outcomes and potential losses for certain matters were not reasonably estimable.
- At year-end, Ormat reported covenant noncompliance at subsidiaries associated with the DAC 1 notes and Prudential Nevada loan, restricting certain equity distributions; Platanares distributions were also restricted due to ENEE’s overdue debt. The company reported compliance with its corporate-level financial covenants. Its auditors gave unqualified opinions on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.
Investor verification priorities
- Reconcile the expected 2022 capital program and $386.3 million of scheduled principal repayments with available liquidity, financing plans and covenant restrictions.
- Track recovery in Product revenue and margins, including backlog conversion, raw-material costs and transportation costs.
- Monitor KPLC and ENEE collections, any Kenyan PPA tariff discussions, and the operating recovery plans for Olkaria and Sarulla.
- Confirm ERCOT dispute outcomes and the final financial effect of the Texas storage event.
- Check approvals and construction progress for the Puna PPA, Dixie Meadows, and storage projects; assess any resulting impairment or delay exposure.
- Follow the SEC/DOJ information requests, related litigation and any subsequent company disclosures regarding anti-corruption allegations.