2022 ANNUAL REPORT

TO STOCKHOLDERS

WITH A PROVEN TRACK RECORD IN GEOTHERMAL AND ENERGY STORAGE

A LEADING RENEWABLE

over

55

years of experienceOwn & operate

~1.16GW

Geothermal, Storage, Solar & REG(1)

1,480

Employees

734$M

2022 revenues

66$M

2022 Net income(2)

ENERGY PROVIDER

436$M

2022 adj. EBITDA(3)

  • (1) REG - Recovered Energy Generation

  • (2) Net income attributable to the company stockholders

  • (3) See appendix for reconciliation of non-GAAP financial measures.

DEAR FELLOW STOCKHOLDERS,

Installed capacity growth (MW)

1,095

1,158

2018

931

2019

957

1,005

2020

2021

2022

GeothermalREGSolar

Storage

2022 was a significant buildup year for Ormat marked by growth in all three of our business segments. We had several significant milestones achieved in 2022, including 10.7% year-over-year increase in total revenue and 8.5% increase in adjusted EBITDA. We made progress toward our long-term goals and added 78MW of new generating capacity to our operating portfolio. We also signed up to 365MW of Power Purchase Agreements (PPAs) and a tolling agreement with improved economics in the Electricity and Storage segments.

Our Product segment backlog at year end stands at $148 million, a level that marks meaningful recovery in the segment. We are encouraged by this trajectory as we continue to see a pickup in demand and a simultaneous decline in raw material cost, which should drive higher margins for the segment going-forward.

We exited the year with significant momentum as a result of our solid operating performance combined with the strong global regulatory tailwinds for renewable energy. This momentum has been bolstered by the Inflation Reduction Act (IRA) and the significant demand growth for geothermal energy and storage driven we are seeing as a result of volatile fossil fuel prices and global decarbonization efforts. We expect the IRA to reduce our capital needs significantly over the coming years and expect that each completed project in the USA will be funded by up to 50% utilizing tax benefits.

Looking ahead in 2023, we expect to deliver meaningful revenue expansion, driving growth of roughly 14% to our total adjusted EBITDA, year-over-year. In 2023, we expect to add new 14 projects of 170MW with 104MW just in the Energy Storage and 67MW in the Electricity segment, progressing toward our new capacity target of over 1.8 gigawatts by 2025. We believe strongly that the regulatory tailwinds and the increased PPA prices we are seeing in the market, combined with our strategy, our assets, vertical integration, and our advantageous cost structure, position Ormat for success. We strongly believe that this success will yield meaningful shareholder value in 2023 and beyond.

Delivering Strong Financial Performance

Total revenue for 2022 was $734.1 million, up roughly 11% year-over-year, reflecting growth across all three of our operating segments. This revenue growth was supported by continued expansion in our Electricity segment through:

  • z The full-year inclusion of the Dixie Valley and Beowawe power plants that added 67.5 MW of total net generating capacity to our operating portfolio

  • z The start of commercial operation of our CD4 power plant facility in July 2022

  • z The start of commercial operations of Tungsten Mountain 2 in April 2022

  • z Higher generation and electricity rates in Puna

In addition, we saw a notable recovery in the Product segment with considerably higher revenues, improved margin capture and new product contracts that increased our backlog to pre-Covid-19 levels, demonstrating the growing global demand for geothermal energy.

Investor Day

On March 30, 2022, Ormat hosted an Investor Day in New York City. Several members of our management team were present to share the Company's long-term strategy and financial outlook with analysts and investors. We outlined clear, multi-year growth targets and the robust opportunity to capitalize on an expanding total addressable market in the U.S. and international markets including Indonesia.

Operational Update

Our Puna geothermal power plant operated at a level of between 23 and 25 megawatts. In 2022 we received higher energy rates at the plant as a result of elevated oil prices globally. We are negotiating new amendments to the fixed price PPA we signed with HELCO that will allow us to continue with our plans to repower the Puna complex and increase its capacity to a total of 46MW.

At our Olkaria power plant in Kenya, the lower performance of the wellfield limited the generation of the power plant that is currently generating 125 MW. We are performing a drilling campaign and expect to increase plant capacity in 2023.

At our Electricity portfolio, we started the operation of Tungsten Mountain 2 and CD4 geothermal power plants that are operating at higher capacity than initially expected. Also, we added 30MW of Solar assets including the Wister Solar in California and 10MW of Hybrid Solar assets in Nevada.

At our Energy Storage portfolio, we connected the 5MW/20MWh Tierra Bueno facility to CAISO in California and are preparing for additional four facilities to start operation in the first quarter in 2023.

Increased Product segment backlog driven by growth in the demand for geothermal products

226 201

Q1/19

Q2/19

Q3/19

Q4/19

Q1/20

Q2/20

Q3/20

Q4/20

Q1/21

Q2/21

Q3/21

Commitment to a Sustainable Future

Q4/21

Q1/22

Q2/22

Q3/22

Q4/22

At Ormat, we recognize the importance of supplying sustainable, clean energy, in the fight against climate change particularly in areas that lack access to renewable power sources. We continue to view Geothermal energy as a means to reduce carbon emissions and the adverse effects of climate change. Our energy-generating and storage assets are helping create an alternate energy future, where greenhouse gas emissions are significantly reduced, and electricity grids are enabled to become more responsive and stable. We see significant long-term tailwinds for our business, supported by the increase in government mandates in support of the gradual long-term reduction in fossil fuel dependance, which has driven greater adoption of renewable sources of energy in the U.S. and abroad.

REVENUES & ADJUSTED EBITDA

Revenue Growth ($M)

$719

$746

2018

2019

Electricity Segment

$705

$663

2020

Product Segment

$734

2021

2022

Energy Storage

Adjusted EBITDA Growth ($M)

$420

$436

$384

$401

$368

2018

2019

2020

2021

2022

potential capcity of U.S. storage pipeline

~3GW

named prospects

34

104MW/ 124MWh

expected addition ny YE 2023

ORMAT'S CARBON FOOTPRINT

(TONS CO2e)

110,504

11,919

Hawaii

Scope 1

Ormat has been sustainably generating power since 1965, and we remain committed to providing renewable energy safely, economically, and in an environmentally responsible manner. This year, we made great strides to strengthen our commitment to ESG and focus our efforts on the most pertinent issues facing our planet. In 2022, we issued a comprehensive sustainability report, the fourth edition to be released in accordance with the GRI standards and the second according to the SASB framework. In addition, we have established a target of 5% annual average absolute reduction in Scope 1 and 2 greenhouse gas emissions measured against the 2019 base levels. These actions are representative of the responsibility we have taken, not only in our own geothermal and renewable energy recovery business, but also as a valuable partner as our assets and strategy will continue to play a role in helping businesses and governments facilitate the achievement of their sustainability goals.

In summary, 2022 was a very strong year, with growth across all our segments. In 2023, we look to continue this positive trajectory with the expectation that we drive a roughly 14% increase in revenue and adjusted EBITDA, while continuing to invest in and build out our portfolio. We are targeting to increase our Electricity and Energy Storage segments' capacity portfolio by over 20% and 450% by the end of 2025, respectively, expecting our total portfolio reaching between 1.8GW and 1.86GW. We continue to see strong tailwinds globally for renewable energy supported by the Inflation Reduction Act benefits, including the PTC for Geothermal and ITC for Storage, which are expected to reduce capital needs and boost our earnings in the years to come.

Before I conclude this letter, I would like to personally thank all our stakeholders and employees for their continued commitment and support. We look forward to achieving great things together, in 2023 and beyond.

Regards, Doron Blachar

Chief Executive Officer

2019

2020

2021

Scope 2

Note: In 2021, we exceeded our goal, and reduced our annual average by over 11% in comparison to our 2019 baseline.

8,985

2019

2020

2021

Scope 3

Note: Increase in Scope 3 emissions is due to constant improvement and expansion of our environmental data collection and measurement processes

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Ormat Technologies Inc. published this content on 28 March 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2023 12:38:05 UTC.