Business Context and Reporting Period
This Form 8-K Current Report, dated May 4, 2018, covers events occurring on April 30, 2018, for Ormat Technologies, Inc. The filing details a material definitive agreement entered into by Geotérmica Platanares, S.A. de C.V. ("Platanares"), an indirect subsidiary of Ormat, to secure financing for a geothermal power project in western Honduras.
Key Financial Metrics and Transaction Details
- Financing Amount: Up to $124.7 million in senior secured debt (the "OPIC Loan").
- Lender: Overseas Private Investment Corporation (OPIC), a U.S. government agency.
- Project Scope: Development of an approximately 35 MW geothermal power plant.
- Use of Proceeds: Reimbursement of costs incurred for development, engineering, procurement, and construction.
- Maturity Date: September 20, 2032.
- Repayment Structure: Approximately 58 equal quarterly principal installments; interest payable in arrears based on certificates of participation rates plus a guaranty fee.
- Security: First priority lien on all assets and ordinary shares of Platanares.
Material Changes and Covenants
The filing does not report changes to historical revenue, profit, or cash flow for the parent company, as this is a transaction-specific report. However, it establishes new financial obligations and covenants for the subsidiary:
- Debt-to-Equity Ratio: Disbursements require a ratio no greater than 75:25.
- Debt Service Coverage Ratio: Platanares must maintain a projected and historic ratio of no less than 1.1 to 1.
- Reserve Account: Funds or assets exceeding a minimum threshold must be maintained in a debt service reserve account.
- Prepayment Terms: Voluntary prepayments are permitted with a minimum of $5 million. A prepayment premium applies (2% in years 1-2 post-commitment, 1% in year 3, and 0% thereafter).
- Mandatory Prepayment: Triggered by specific events such as expropriation proceeds, termination payments, or asset sale proceeds exceeding certain thresholds.
Guidance, Risks, and Contingencies
The filing outlines specific risks and contingencies associated with the Finance Agreement:
- Conditions Precedent: Funding is contingent on satisfying conditions including delivery of disbursement requests, independent engineer certificates, and proof of reserve account funding.
- Events of Default: Include failure to pay principal/interest, non-payment of other indebtedness, change of control without approval, expropriation, judgments exceeding thresholds, covenant breaches, voluntary abandonment of the project, or bankruptcy events.
- Operational Restrictions: Negative covenants restrict Platanares from incurring additional indebtedness, creating liens, making distributions to equity holders, or disposing of assets without exceptions.
Investor Verification Checklist
- Verify the satisfaction of conditions precedent required for the first disbursement of the $124.7 million loan.
- Confirm the current Debt-to-Equity Ratio of Platanares to ensure it meets the 75:25 threshold.
- Review the independent engineer's certificate regarding the project's status.
- Assess the funding status of the debt service reserve account.
- Monitor the interest rate determination mechanism linked to OPIC certificates of participation.