Ormat Technologies is a leading geothermal company, established in 1965 in Israel and based in Reno (Nevada); its objective is to become a leading global provider of renewable energy. The Company designs, builds, owns and operates geothermal power plants around the world.
According to the 2016 Company´s Annual Report Ormat has installed over 2,200 MW of gross geothermal capacity worldwide as of December 2016. It has nearly 1,200 employees globally and gains experience in more than 25 countries.
Currently the Company has two business segments: the Electricity segment and the Product segment.
The Electricity segment deals with building, owning and operating geothermal and recovered energy-based power plants in the USA and geothermal power plants in other countries around the world, and selling the electricity generated to the Company´s customers. The Product segment deals with manufacturing and selling equipment for geothermal and recovered energy power units and provides services like engineering, construction and maintenance of geothermal and recovered energy-based power plants.
Ormat´s consolidated power plants generated 5,396,959 MWh during 2016 and 4,835,109 MWh, during 2015, which means an increase of 11.6% over the previous year.
In 2016 the Company reached a total revenue figure of US $662.6 million, an increase of 11.4% (from $594.6 million to $662.6 million) over the previous year. This increase was attributable to both Ormat´s Electricity and Product segments, in which revenues increased by 16.1% and 3.5%, respectively, compared to the corresponding period in 2015.
Operating income in 2016 was $201.9 million, compared to $164.1 million in 2015, representing a 23.1% increase. This increase was attributable to the increase in the gross margin in both Ormat´s Electricity and Product segments due to the increase in revenues. For the full year 2016, adjusted EBITDA increased by 11.2% to a record of $323.8 million.
Segmentally, the Electricity segment revenues were $436.3 million in 2016, compared to $375.9 million in 2015, an increase of 16.1% over the previous year. The Product segment revenues were $226.3 million in 2016 compared to $218.7 million in 2015 and represented an increase of 3.5% over the previous year.
During 2016 the Electricity segment generated 65.8% of the total revenue, compared to 63.2% in 2015, while the Product segment generated 34.2% of the total revenue compared to 36.8% in 2015.
Geographically, the Electricity segment domestic revenues were approximately 96% higher than the foreign revenues in 2016. However, domestic Electricity segment has higher costs of revenues and expenses than the operations of the foreign Electricity segment as the power plants are located in lower-cost regions, like Kenya, Guatemala and Guadeloupe, which have a favourable
impact on the labour and maintenance expense. They are also newer than most of Ormat´s domestic power plants and therefore tend to have lower maintenance costs.
In contrast, Ormat´s foreign revenues of the Product segment were more than 90% of the total Product segment revenues in 2016. The Product segment foreign activity benefits from lower costs of revenues and expenses such as labour and transportation costs than Product segment domestic activity, therefore the Product segment foreign activity contributes more than the Product segment
domestic activity to Ormat´s income from operations. In spite of the fact that Ormat´s combined (domestic and foreign) Electricity segment revenues exceeded their combined Product segment revenues by approximately $210 million in 2016, the Product segment revenues resulted in higher income from foreign operations during the same year.
Total cost of revenues for the year 2016 was $391.8 million, compared to $376.4 million for the year 2015, representing a 4.1% increase. As a percentage of total revenues, the total cost of revenues for the year 2016 decreased to 59.1%, compared to 63.3% for the year 2015. Segmentally, the total cost of revenues attributable to the Electricity segment for the year 2016 was $261.6 million, compared to $242.6 million for the year 2015, representing a 7.8% increase. The total cost of revenue attributable to the Product segment for the year 2016 was $130.2 million, compared to $133.8 million for the year 2015, representing a 2.6% decrease from the prior period. This decrease was primarily attributable to efficiencies, cost savings and project management.
Research and development expenses in 2016 were $2.8 million, compared to $1.8 million in 2015, representing a 155% increase.
The financial progress Ormat made in 2016 makes for an encouraging outlook for 2017.