Business Context and Reporting Period
Company: Ormat Technologies, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 25, 2017 (Signed June 1, 2017)
Subject: Entry into a Material Definitive Agreement (Power Purchase Agreement) and receipt of final regulatory approval.
Key Financial Metrics and Agreement Terms
This filing details a Power Purchase Agreement (PPA) between ONGP LLC (a wholly-owned subsidiary of Ormat) and the Southern California Public Power Authority (SCCPA). The filing does not contain historical revenue, profit, or cash flow statements for the company.
- Total Capacity: 150 MW of geothermal power generation capacity (subject to adjustment).
- Facilities: Nine geothermal facilities (including Tungsten Mountain, Steamboat Hills, Dixie Meadows, Baltazor Hot Springs, Brady, and Steamboat 2 & 3) with options to substitute up to 16 pre-defined additional facilities.
- Fixed Price: $75.50 per MWh (no escalation) for delivered energy up to maximum capacity.
- Test Energy Price: $56.63 per MWh for energy delivered during ramp-up prior to commercial operations.
- Performance Security: $16,000,000 letter of credit required to secure liquidated damages obligations.
- Delivery Term Security: Up to $48,750,000 letter of credit or guarantee, scaling with capacity.
- Liquidated Damages Cap: Maximum aggregate liability of $48,000,000 for failure to meet minimum capacity.
Material Changes and Delivery Obligations
The agreement establishes a phased delivery schedule with specific minimum and maximum capacity requirements:
- First Development Period (Effective Date – Dec 31, 2018): Minimum 60 MW; Maximum 85 MW. (Staged caps: 30 MW prior to Jan 1, 2018; 45 MW prior to Feb 23, 2018).
- Second Development Period (Jan 1, 2019 – Dec 31, 2020): Minimum 90 MW (cumulative); Maximum 130 MW (cumulative).
- Third Development Period (Jan 1, 2021 – Dec 31, 2022 and thereafter): Minimum 135 MW (cumulative); Maximum 185 MW (cumulative).
Penalties: Failure to meet minimum capacity triggers liquidated damages of $1,239 per MW of difference per day until the shortfall is cured or the period ends.
Outlook, Risks, and Contingencies
- Effective Date: Subject to satisfaction of conditions including regulatory notifications, delivery of credit support, and customary closing certifications.
- Term: The Delivery Term ends on December 31, 2043.
- Termination Risks: The agreement may be terminated if the California Energy Commission (CEC) determines the agreement fails to comply with greenhouse gas emission regulations for plants 10 MW and larger.
- Default Events: Includes failure to achieve a minimum of 40 MW aggregate net capacity by 90 days after the end of the Third Development Period.
- Shortfall Remedies: Seller must provide replacement energy for shortfalls; if unable, Seller pays the price difference between replacement energy costs and the contract price.
Investor Verification Checklist
- Verify the satisfaction of closing conditions to confirm the "Effective Date" of the PPA.
- Monitor the issuance and status of the $16,000,000 Performance Security letter of credit.
- Track the construction and commissioning progress of the nine initial facilities to ensure compliance with the staged minimum capacity milestones (60 MW by end of 2018).
- Review regulatory filings regarding California Energy Commission compliance for greenhouse gas emissions.
- Assess the financial impact of potential liquidated damages ($1,239/MW/day) if capacity targets are missed.