Ormat Technologies is a leading company that is primarily engaged in the geothermal and recovered energy power businesses. The сompany owns and operates geothermal and recovered energy-based power plants in various countries, including the U.S., Kenya, Guatemala, Guadeloupe and Honduras. The сompany’s equipment manufacturing operations are located in Israel. Ormat designs, develops, builds, sells, owns, and operates clean, environmentally-friendly geothermal and recovered energy-based power plants. In addition to the geothermal energy business, Ormat manufactures and sells products that produce electricity from recovered energy or so-called “waste heat”, which is generated as a by-product of gas turbine-driven compressor stations, solar thermal units and a variety of industrial processes, such as cement manufacturing. Such residual heat, which would otherwise be wasted, may be captured in the recovery process and used by recovered energy power plants to generate electricity without burning additional fuel and without additional emissions. In 2018 the сompany employed 1,346 employees.
Ormat currently conducts its business activities in three business segments - Electricity, Product and Other. In the Electricity Segment the Company develops, builds, owns and operates geothermal and recovered energy-based power plants in the U.S. and geothermal power plants in other countries around the world and sells the electricity they generate. In the Product Segment the Company designs, manufactures and sells equipment for geothermal and recovered energy-based electricity generation and remote power units and provides services relating to the engineering, construction, operation and maintenance of geothermal, solar PV and recovered energy-based power plants. In the Other Segment the сompany provides energy storage, demands response and energy management related services as well as services relating to the engineering, procurement, construction, operation and maintenance of energy storage units, mainly through its Viridity business.
According to the сompany´s Annual Report, total revenue increased by 3.8% from $692.8 million in 2017 to $719.3 million in 2018. This increase was attributable to the Electricity segment, in which revenues increased by $44.3 million or 9.5% compared to the year 2017, and to the Other segment in which revenues increased by $4.9 million or 180%. Operating income was $185.1 million in 2018, compared to $205.0 million in 2017, representing a 9.7% decrease from the previous period. The decrease in operating income was primarily attributable to the $13.5 million goodwill impairment charge and the decrease in Product segment gross margin. Net income in 2018 was $110.1 million, compared to $147.1 million in 2017, representing a decrease of $37.0 million or 25.1% from the previous period. This decrease in net income was primarily attributable to a decrease in operating income of $19.9 million. Adjusted EBITDA in 2018 was $368.0 million, compared to $343.8 million in 2017 and $323.8 million in 2016.
Electricity segment revenues were $509.9 million in 2018, compared to $465.6 million in 2017, an increase of 9.5% or $44.3 million. This increase was primarily attributable to the commercial operation of the Platanares power plant in Honduras, with revenues of $34.4 million in 2018 compared to $10.0 million in 2017, the Tungsten Mountain power plant in Nevada with revenues of $15.7 million in 2018 compared to $2.2 million in 2017, and the Plant expansion project in the Olkaria III Complex in Kenya.
Product segment revenues were $201.7 million in 2018, compared to $224.5 million in 2017, a decrease of 10.1% or $22.8 million. The decrease in Product segment revenues was attributable to the timing of revenue recognition. $31.4 million and $23.1 million in revenues, from the New Zealand and China projects, respectively, were recognized in 2017, compared to $8.8 million and $0.5 million in 2018. The projects were completed in 2018. The decrease in Product segment revenues was also attributable to other projects in Turkey, which were completed in 2017, and by a decrease in revenues as a result of completion of contracts for geothermal projects in Chile.
Other segment revenues were $7.6 million in 2018, compared to $2.7 million, an increase of 180% or by $4.9 million over the year as a result of revenues generated by the Viridity business from the provision of energy storage, demand response and energy management services, following the acquisition of substantially all of the business and assets of Viridity Energy, Inc. in March 2017.
During 2017 and 2018, the сompany´s consolidated power plants generated 5,489,234 MWh and 5,857,963 MWh, respectively, an increase of 6.7% over the year.
In 2018, the Electricity segment generated 70.9% of the total revenues of the company (67.2% in 2017), the Product segment generated 28.0% of the total revenues (32.4% in 2017), and the Other segment generated 1.1% of the total revenues (0.4% in 2017).
In 2018, 2017 and 2016, 54%, 57% and 54% of the сompany´s revenues were derived from international operations, respectively, and international operations were more profitable than the U.S. operations. A substantial portion of international revenues came from Kenya and Turkey and, to a lesser extent, from Guadeloupe, Guatemala, Honduras and other countries. The сompany´s operations in Kenya contributed disproportionately to gross profit and net income.
Electricity segment domestic revenues were approximately 60%, 63% and 66% of Ormat´s total Electricity segment for the years ending December 31, 2018, 2017 and 2016, respectively. However, domestic operations in the Electricity segment have higher costs of revenues and expenses than the foreign operations in the Electricity segment. Foreign power plants are located in lower-cost regions such as Kenya, Guatemala, Honduras and Guadeloupe, which favourably impact payroll and maintenance expenses. They are also newer than most of Ormat´s domestic power plants and therefore have lower maintenance costs and higher availability factors than domestic power plants. Consequently, in 2018 international operations of the segment accounted for 53% of total gross profits, 77% of net income and 53% of EBITDA.
Product segment foreign revenues were 93%, 99% and 92% of total Product segment revenues for the years 2018, 2017 and 2016, respectively. Product segment foreign activity also benefited from lower costs of revenues and expenses than Product segment domestic activity such as labour and transportation costs.
Cash and cash equivalents increased to $177.5 million in 2018, from $96.6 million in 2017. This increase of 83% was attributable to operating activities during 2018 and net proceeds from credit lines, loans and sale of limited liability company interest in Tungsten.
Research and development expenses for the year 2018 were $4.2 million, compared to $3.2 million for the year 2017.The Company has 77 U.S. patents that are in force (and has nine U.S. patents pending).
Ormat´s objective is to become a leading global provider of renewable energy and the company has adopted a strategic plan to focus on several key initiatives to expand its business.