Ormat Technologies Q2 2025 Earnings Report

Ormat Technologies EPS Results

• Actual EPS: $0.48
• Consensus EPS: $0.37
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $0.37

Ormat Technologies Revenue Results

• Actual Revenue: $234.02 million
• Expected Revenue: $225.26 million
• Beat/Miss: Beat by +$8.76 million
• YoY Revenue Growth: +9.90%

Ormat Technologies Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 10:00AM ET

Ormat Technologies (NYSE:ORA) engages in the geothermal and recovered energy power business in the United States, Indonesia, Kenya, Turkey, Chile, Guatemala, Guadeloupe, New Zealand, Honduras, and internationally. It operates in three segments: Electricity, Product, and Energy Storage. The Electricity segment develops, builds, owns, and operates geothermal, solar photovoltaic, and recovered energy-based power plants; and sells electricity. The Product segment designs, manufactures, and sells equipment for geothermal and recovered energy-based electricity generation; and provides services relating to the engineering, procurement, construction, operation, and maintenance of geothermal and recovered energy-based power plants. This segment serves contractors; and owners and operators of interstate natural gas pipelines, gas processing plants, and cement plants, as well as companies in other energy-intensive industrial processes. The Energy Storage segment offers battery energy storage systems and related services. Ormat Technologies, Inc. was founded in 1965 and is headquartered in Reno, Nevada.

Ormat Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Ormat delivered record Q2 revenue of $234 million (up 9.9%), net income up 26.1%, and adjusted EBITDA up 6.7%, driven by strong product and energy storage performance.
• Negative Sentiment: Electricity segment gross margin fell to 24.3% from 28.8%, largely due to U.S. curtailments and Puna well-field maintenance, though management expects relief in H2.
• Positive Sentiment: Completed acquisition of the Blue Mountain geothermal plant and released 50 MW of new projects (28 MW geothermal, 22 MW solar), expanding capacity and development pipeline.
• Positive Sentiment: Secured $300 million of financing through tax equity and project debt for Heber, Boyan, storage and Dominica projects, underpinning future growth.
• Positive Sentiment: Recent federal spending bill extends PTC/ITC support for geothermal and storage projects starting construction through 2033, enhancing long-term project economics.

Presentation

[Joshua Carroll, Vice President at Alpha IR Group]

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer Ozzy Ginsberg, Chief Financial Officer and Smadar Lavey, Vice President of Investor Relations and ESG Planning and Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward looking statements related to current expectations, estimates, forecasts and projections about future events that are forward looking as defined in the Private Securities Litigation Reform Act of 1995. These forward looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections, future results, or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

[Joshua Carroll, Vice President at Alpha IR Group]

For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies' annual report on Form 10 ks and call reports on Form 10 Q that are filed with the SEC. In addition, during the call, the company will present non GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I'd like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab.

[Joshua Carroll, Vice President at Alpha IR Group]

With all that said, I would now like to turn the call over to Ormat's CEO, Doron Bouchard. Doron?

[Doron Blachar, CEO at Ormat]

Thank you, Josh. Good morning, everyone, and thank you for joining us today. Romant reported record second quarter revenue and adjusted EBITDA results with a 9.9% increase in revenue, a 26.1% rise in net income and a 6.7% improvement in adjusted EBITDA. This outstanding performance was driven by the full recovery of our product segment revenue and margins, improved performance of our Energy Storage segment, which continues to benefit from new projects that reach Commercial Operation 24 and higher merchant prices in the PGM market. During the quarter, we completed the acquisition of the Blue Mountain geothermal power plant and released for construction 50 megawatt of new projects, including 28 megawatts of geothermal and 22 megawatts of solar projects, primarily at our Heber complex.

[Doron Blachar, CEO at Ormat]

We also continue to advance our geothermal development pipeline benefiting from accelerated permit approvals due to recent federal permitting reforms. In July and August, we closed a significant tax equity transaction for the Heber 1 and two geothermal power plants and secured project finance debt for our Boyan power plant. Combined with the hybrid tax equity transaction we signed for our storage asset and the project finance debt raised for the Dominica project during the quarter, we have secured $300,000,000 of funding to support future development across the portfolio. Overall, we continue to see strong growth potential for geothermal in 2025 and beyond. This is supported by improved permitting timeline due to recent federal permitting reform, an increasing number of BLM land auctions, our expanded exploration efforts and robust secular demand for baseload renewable, which has translated into elevated PPA pricing and stronger market economics.

[Doron Blachar, CEO at Ormat]

Before I turn the call over to Assi, I would like to highlight the recently signed one big beautiful bill that for us is indeed very beautiful. The legislation has extended the PTC and ITC runway for both our geothermal and energy storage segments, positioning us uniquely within the renewable energy sector. Assi will provide further details on the new policy and our efforts to maximize its benefit in his remarks. With that said, I will now turn the call over to Assi to discuss our financial results. Assi?

[Assi Ginzburg, CFO at Ormat]

Thank you, Doron. Let me start my review of our financial highlights on Slide six. Total revenue for the second quarter was $234,000,000 a 9.9% increase compared to the last year's second quarter. This top line expansion was driven by the recovery of our product segment and the improved performance of our energy storage segment, partially offset by a slight reduction in the electricity segment. Gross profit for the second quarter was $56,900,000 down 7.3% from $61,400,000 in the 2024, resulting in a consolidated gross margin of 24.3% versus 28.8% last year.

[Assi Ginzburg, CFO at Ormat]

The decline was largely due to a temporary electric segment gross margin compression that I will discuss shortly. Net income attributable to the company's stockholders was $28,000,000 or $0.46 per diluted share, up compared to $22,200,000 or $0.37 per diluted share in the second quarter of prior year. Adjusted net income attributed to the company's stockholders was $29,100,000 or $0.48 per diluted share, reflecting an increase of 19.820% respectively. This performance highlights the strength and resilience of our portfolio and business model as we continue to grow our earning despite the temporary reduction in our electricity segment profitability. Adjusted EBITDA for the second quarter was $134,600,000 a 6.7% increase compared to last year.

[Assi Ginzburg, CFO at Ormat]

This strong year over year growth was driven by the higher revenue and better margins in the product segment, contribution from new assets and higher merchant pricing in the energy storage segment, a legal settlement with the battery supplier and better performance of the Dixie Valley and Biwawi power plants. The increase was partially offset by an approximate $12,000,000 reduction in EBITDA due to energy curtailment in The U. S. And previously reported well field work at the Puna Power Plant. Slide seven breaks down the revenue performance at the segment level.

[Assi Ginzburg, CFO at Ormat]

Electricity segment revenues for the second quarter decreased by 3.8% to $159,900,000 primarily due to ongoing maintenance work at the Pula Power Plant and continued energy curtailment in The U. S, which reduced revenues versus the same period last year by approximately $13,000,000 At our Puna Power plant, we finished the planned well field maintenance and resumed normal operation in July, and we continue to monitor well performance. We anticipate The U. S. Curtailment resulting from third party T line maintenance will significantly lessen in the second half of the year.

[Assi Ginzburg, CFO at Ormat]

Product segment revenues increased by 57.6% to $59,600,000 during the second quarter, driven by our strong backlog and the timing of progress made in manufacturing and construction. Energy Storage segment revenue increased by 62.7% to $14,500,000 in the second quarter, mainly due to the commencement of commercial operation of our new energy storage facilities in 2024 and strong merchant prices in the PJM market. Also on Slide seven, the gross margin for the electricity segment was 24.2% in the second quarter, down from 33.5% last year. Excluding these temporary disclosed events, the margin would have been approximately 30%. In the product segment, gross margin was 27.7%, up from 13.7% last year, driven by improved profitability on our contracts.

[Assi Ginzburg, CFO at Ormat]

We now anticipate that gross margin for the year in our product segment will increase to a range of 21 to 23%. The energy storage segment reported gross margin of 11.9%, up from 5.7% in the 2024. This improvement was driven by higher merchant prices in the PGM market, where hot weather along the East Coast contributed to elevated merchant pricing. With strong performance throughout the first half of the year and robust PJM prices in the month of July, we now anticipate full year gross profit for the storage segment to reach up to 20%. Slide eight and nine show the results of the first half twenty twenty five, highlighted by 6.16.5% increase in total revenue and adjusted EBITDA, respectively, with significant increase in both energy storage and product segment.

[Assi Ginzburg, CFO at Ormat]

Moving to Slide 10, I would like to discuss further the recent spending budget bill that was passed in The U. S. On July 4. As Doron mentioned, the bill extended PTC and ITC runway for our geothermal and energy storage segments. We now have the ability to receive full tax credit for geothermal and energy storage projects starting construction by 12/31/2033.

[Assi Ginzburg, CFO at Ormat]

After 02/1933, the credit phased down to 75% for the project starting construction by 2034, 50% by 2035, and then 0% thereafter. As for solar and PV projects, projects starting within twelve months of the bill's enactment can receive full credit if placed in service within four years. Otherwise, they must be in service by 12/31/2027. Regarding the foreign entity of concern or FEOC provision of the bill, the broader scope includes specified foreign entity and foreign influence entity. The law aims to limit content from FEOCs using energy related projects starting construction after 12/31/2025.

[Assi Ginzburg, CFO at Ormat]

While we are currently assessing the impact of the FEOC rules on our growth, we expect minimal to no impact on our geothermal business since we manufacture all of our product segment with minimal FeOC content. However, at this time, the entire energy storage industry is still heavily dependent on battery sourced from China, And we are actively evaluating all project development option while continuing to safe harbor additional projects. Ultimately, we will pursue the most economically viable option to advance our current storage pipeline and maintain flexibility in our procurement to stay on track with our expansion goals. Moving to Slide 11, we recorded $16,300,000 in income related to tax benefits in the second quarter compared to $15,800,000 last year. In the second quarter and 2025, we recorded ITC benefits of $10,300,000 and $24,200,000 respectively, in the income tax line.

[Assi Ginzburg, CFO at Ormat]

These benefits related to two storage facility that are expected to become operational in 2025. Recently, we entered into two tax equity transactions that secured $139,000,000 of cash tax benefits. In July, we received $77,000,000 from our Heber tax equity PTC transaction. Of the remaining $62,000,000 in ITC proceeds related to our rural area and a storage facility, we received $5,000,000 in the second quarter with the rest expected in the second half of the year. We expect OMAT tax rate will be positively impacted by the ITC benefits in 2025 with an annual tax benefit rate between five and fifteen percent excluding changes in law or one time events.

[Assi Ginzburg, CFO at Ormat]

Slide 12 detail our use of cash flow over the last twelve months, illustrating OMAT's ability to generate strong cash flows for reinvestment and strategy growth, while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of 06/30/2025, were approximately $2.00 $6,000,000 similar to the 2024. Our total debt as of 06/30/2025, was approximately $2,700,000,000 net of deferred financing cost, with the cost of debt at 4.95%. The majority of our debt liabilities are fixed interest rates providing stability and protection for market fluctuations. Moving to Slide 13, our net debt as of 06/30/2025, was approximately $2,500,000,000 equivalent to 4.4 times net debt to EBITDA.

[Assi Ginzburg, CFO at Ormat]

During the second quarter and early third quarter, we secured $300,000,000 in funding. This includes $139,000,000 of tax equity partnerships and $161,000,000 from project financing loan at attractive rates. These funds will support our new buoyant power plant in Guadalupe and our new project in Dominica. As shown on the slide, our total available liquidity is $551,000,000 Our total expected capital expenditure for the 2025 is $295,000,000 with detailed CapEx presented in Slide 33 of the appendix. We plan to invest approximately $200,000,000 in the electricity segment for construction, exploration, drilling and maintenance in the last February 2025.

[Assi Ginzburg, CFO at Ormat]

In addition, we plan to invest $85,000,000 in the construction of our storage assets. On 08/06/2025, our Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.12 per share payable on 09/03/2025, to shareholders of record as of 08/20/2025. The company expects to pay a quarterly dividend of $0.12 per share in each of the next two quarters. That concludes my financial overview. I would like now to turn the call over to Doron to discuss some of our recent developments.

[Doron Blachar, CEO at Ormat]

Thank you, Assi. Turning to Slide 15 for a look at our electricity segment operating portfolio. Portfolio growth during the quarter was supported by the addition of the Blue Mountain geothermal power plant. Moving to Slide 16. The Blue Mountain acquisition has immediately enhanced our generating capacity and offers significant revenue growth potential through planned upgrades, which are already underway and the possible addition of a solar facility.

[Doron Blachar, CEO at Ormat]

We are very excited about the opportunities that this addition presents, and we look forward to continuing our strong partnership with NV Energy to deliver reliable, clean energy to the people of Nevada. During the quarter, we also expanded our management team to support the growth of our electricity segment and our EGS initiatives. This expansion included the hiring of Aaron Willis as executive vice president, electricity segment and Daniel Mork as senior vice president, resource drilling and EGS. Aaron will oversee the operations of the electricity segment, ensuring alignment with the company's strategic goals and financial targets. Erron will also be responsible for optimizing plant performance and expanding profitability, ensuring compliance with safety and environmental regulations and driving continuous improvement initiatives to foster future profitable growth.

[Doron Blachar, CEO at Ormat]

Daniel will lead our resource drilling and EGS teams, focusing on implementing sophisticated processes and innovative technologies to further enhance our operations. His work will include creating efficiencies, shortening development time, developing OMAT's ongoing drilling and exploration global road map, and expediting well field and EGS development. We are thrilled to welcome both Aaron and Daniel to the team, where their valuable background and experience will help drive the next phase of growth for our leading geothermal operations. Turning now to Slide 17. Our product segment backlog stands at $263,000,000 representing a 59% increase compared to the 2024.

[Doron Blachar, CEO at Ormat]

This growth was primarily driven by significant contracts signed at the 2024. As highlighted in Assaf's presentation, the contribution of the product segment this quarter was significant with higher revenues and notable improvements in margins. Moving to Slide 18. Our Energy Storage segment demonstrated robust year over year growth with total revenues increasing by 62.7%. As previously mentioned, we anticipate that this strong performance in our energy storage business will continue throughout the remainder of 2025, driven by the benefits of recently commissioned storage facilities. On Slide 20, we are on track to achieve our portfolio capacity target of between 2.6 gigawatts to 2.8 gigawatts by the 2028. This confidence is driven by strong momentum in geothermal development and our intensified exploration efforts. In parallel, we are making progress in the storage segment, having successfully secured both batteries and safe harbor for additional projects, further reinforcing our path towards meeting our capacity growth targets. While safe harbor is not required for geothermal project, the extended construction start deadline now set for 2033 has allowed us to make significant progress on the storage front as shown on Slide 21.

[Doron Blachar, CEO at Ormat]

In 2024, four projects were successfully safe harbored followed by two more in 2025 with additional projects expected to be safe harbored later this year. These actions ensure ITC eligibility with no FUOC limitation for our entire storage portfolio through 2028 and, in some cases, even beyond under current regulations. This milestone strengthens our confidence in meeting our growth targets. Importantly, despite the recent changes in tariffs, we do not anticipate a material impact on our financial performance due to the import tariffs. Turning to Slide '22 and '23, which display our geothermal and hybrid solar PV projects currently underway.

[Doron Blachar, CEO at Ormat]

We anticipate adding 148 megawatts to our generating capacity from these projects by the 2026. In addition, we have released for construction 25 megawatt geothermal and 22 megawatt solar PV new capacity to our Heber Complex in California and a 3.5 megawatt addition to the Blue Mountain Power Plant in Nevada. Moving to Slide twenty four and twenty five. We currently have six projects under development in our energy storage segment, which are expected to add three eighty five megawatts or 1.3 gigawatt hour to our portfolio. Please turn to Slide 26 for a discussion of our 2025 guidance.

[Doron Blachar, CEO at Ormat]

We maintain our guidance and expect revenue to increase by 9% year over year at the midpoint, ranging between $935,000,000 and $975,000,000 Electricity segment revenues are projected to be between $710,000,000 and $725,000,000 Product segment revenues between $172,000,000 and $187,000,000 and energy storage revenues between $53,000,000 and $63,000,000 Adjusted EBITDA is expected to increase by approximately 5% at the midpoint, ranging between $563,000,000 and $593,000,000 with annual adjusted EBITDA attributable to minority interest at approximately $21,000,000 I will conclude our prepared remarks on Slide 27. This is an exciting and pivotal time for Ormat fueled by supportive policies in both geothermal and energy storage and the growing demand for carbon free baseload power, particularly to support AI data centers and the broader electrification trends that are significantly increasing electricity consumption. These developments, along with our financial results, not only validate our strategy, but also strengthens our confidence in our team's ability to achieve both our near term operating capacity milestones and long term financial objectives. As we look ahead to the second half of the year and beyond, we expect to finalize contracts to support data center and hyperscalers with improved economics and to continue the development and construction of future projects as planned.

[Doron Blachar, CEO at Ormat]

We are prioritizing innovation and exploration, the best ways to develop and integrate EGS technology into operations and future growth. As we have previously communicated, we are actively pursuing strategic partnerships to develop new EGS projects and provide advanced solution to potential EGS customers in our product segment. We believe the new management structure will allow for a greater focus on EGS and greenfield development. Our commitment to delivering reliable and sustainable energy solutions remains strong, and we are leveraging our unique capabilities to drive meaningful growth and create long term value for our shareholders. This concludes our prepared remarks.

[Doron Blachar, CEO at Ormat]

Now I would like to open the call for questions. Operator, please.

[Operator]

Your first question comes from the line of Noah Kaye with Oppenheimer. Please go ahead.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thank you. A lot of good things going on. I think one place to start would be around the geothermal development environment. You called out a number of expedited permitting advancements for several projects, I think, that was publicized by BLM perhaps mid quarter, if I remember correctly. Can you talk about the opportunity for additional permitting fast track? What you're anticipating over the next couple of years? And what this might actually mean for speeding up the development timetable?

[Doron Blachar, CEO at Ormat]

Yes. Hi, Noah. It's Domon. Thank you. The the changes in the administration and the tailwind, the support that we are getting is is very impressive and pushes us forward.

[Doron Blachar, CEO at Ormat]

We have today multiple projects that have advanced their exploration to to get into a position where we can start full size drilling and plan to release new projects in the next couple of years. I've been working now for over twelve years, and this is a situation that we haven't had in the past. We're actually drilling, getting a lot of responses from the BLM much faster than in the past, and we see quite a few of greenfield projects in The US that we will be able to release for construction in the next couple of years. You can also take, as example, Dogwood, the expansion of Hebrew that we just released. We started permitting of this project, I don't know, four, five, six years ago.

[Doron Blachar, CEO at Ormat]

And only now we're able, you know, with the push that we see today to get the permitting and to move it forward.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Very good. Thank you. I just want to make sure I've got this right on the storage side. I think you mentioned safe harboring all of your projects expected to come online through 2028. But you also mentioned, I think, active evaluation around FEOC implications for sourcing.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

So can you just sort of help us clarify those two points? Have you effectively safe harbored the battery supply already and eliminated any FOC concerns for those projects going on through 2028? Or is that an ongoing process?

[Doron Blachar, CEO at Ormat]

Thanks. So I will split it basically to three parts. All the projects that are in construction that will come online, obviously, safe harbor, the batteries are in The U. S. In construction, and that relates to all the projects that were released before 'twenty four.

[Doron Blachar, CEO at Ormat]

At the beginning of 'twenty five, even before any of the new regulation came out, we safe harbor additional couple of projects. And over the last few months and ongoing, we are safe harboring additional projects in 'twenty five. And all of them should come online by the '8 or 'twenty nine based on the current regulation. So I I would say we've safe harbor in '24, what, 700 megawatt hour. In '25, already 600 megawatt hour, and we are in the process of safe harboring another 1.6 gigawatt hour of projects in 2025.

[Operator]

Your next question comes from the line of Justin Clare with ROTH Capital Partners. Please go ahead.

[Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hi. Thanks for taking the questions. I guess, first, I just wanted to follow-up on the progress you're making on enhanced geothermal. I was wondering if you could just provide a little bit more detail on the progress that you've made to date and speak to the potential opportunity. Would you say it's more likely to first enable you to increase production at existing wells or existing plants?

[Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Or are you looking at drilling in new locations? It would be great to get an update there.

[Doron Blachar, CEO at Ormat]

Thanks, Justin. So on EGS, I would first start, we've just appointed a Senior Vice President, Daniel Molk, to lead our resource drilling at EGS. He comes from EVO, has a lot of experience and knowledge in the EGS in this area. And we're working on multiple approaches on EGS. Since there is no 100% proven technology today, we will be focusing on a few technologies in parallel.

[Doron Blachar, CEO at Ormat]

I believe that the first stage, as you said, we will try to utilize EGS in some of our existing facilities that have interconnection, that have permitting, that have already power plant operating and has the ability to generate more. But in the long term, once CGS is successful, I see this as just expanding significantly the potential growth that we see in Ormat, both on the development part and also on the product side, because once EGS will be a common technology and a proven technology, the demand for geothermal products and EPC projects should increase significantly. So we do hope, and I do hope, that the technology will be successful and EGS will be proven a viable solution in the next couple of years. And if it does happen, it opens a totally new area for OMA to grow, and it will have a significant impact once successful.

[Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Got it.

[Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. And then I guess curious, just following up on that, what kind of demand you might be seeing on the product side from others that are pursuing enhanced geothermal techniques? Or also, are you evolving your products in order for them to be potentially more adaptable to an enhanced geothermal well? Yes. Great.

[Doron Blachar, CEO at Ormat]

Look. At at the at the end of the day, you know, the main attribute to EGS is the subsurface impact, you know, drilling, getting the heat up. But once you get the heat up, it it will operate like similarly to other geothermal projects. And or Matt is the largest developer and the large seller of binary technology. We need to remember that we are not Chinese, so I believe it will give us a significant benefit versus any other Chinese company that are competing in this area to build geothermal projects.

[Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Got it. Thank you. I'll pass it on.

[Operator]

Next question comes from the line of Julien Dumoulin Smith with Jefferies. Please go ahead.

[Hannah Velásquez, Senior Associate - Equity Research at Jefferies]

Hey, good morning. This is Hannah Velasquez on for Julian. Congrats on the quarter and thanks for the update. I wanted to first start out with a follow-up on the safe harbor around the batteries. So it sounds like you haven't yet safe harbored fully the 2028, 2029 projects.

[Hannah Velásquez, Senior Associate - Equity Research at Jefferies]

I'm just wondering if the pause or hesitation there is to await and see what happens with treasury in terms of guidance. Is there any concern that guidance ruling might limit your ability to safe harbor any fiat exposed batteries?

[Assi Ginzburg, CFO at Ormat]

Hina, good morning, and thank you for joining the call. This is Assi. For the best of what we know today, the August 18 announcement on FEOC should be focused on wind and solar. And therefore, we don't think there should be a problem with us to safe harbor more projects between now and year end because we need to have the project start by December 31. This is just part of the evaluation of what project we believe will have interconnection by 2028 and 2029, and that's where we are doing those safe harbors.

[Assi Ginzburg, CFO at Ormat]

The good news is that at least we know that by 02/1933, 2033, we do have confirmation that the ITC benefits will continue. And I also think that even if there will be no Chinese equipment allowed to use after that, there will be US manufacturer or non FeOC manufacturer batteries. I think it's going that way. So overall, you can see these are big numbers that we are safe harboring, and we're just part of the work to decide what to safe harbor first.

[Hannah Velásquez, Senior Associate - Equity Research at Jefferies]

Got it. Thank you. And as a second question, could we get an update on the two fifty megawatts under negotiation regarding data center opportunity? I know you've said this in past quarters, but I wanted to see if there is anything incremental to touch on there. And if any of these potential projects, the two fifty megawatts, is contingent on you moving forward with pursuing EGS? Thank you.

[Doron Blachar, CEO at Ormat]

Hi, Hannah. Thank you. So I'll start with the end. All the pro all the PPAs that we are negotiating today are of the existing technology. They are not connected to EGS.

[Doron Blachar, CEO at Ormat]

This is based on our existing technology. And the way that we are approaching it basically is to see that we cover any potential greenfield that we will develop as well as any recontracting that we will have. Negotiations on the PPA are ongoing. Moving forward. Unfortunately, I still don't have the ability to tell you that we signed, but we are finalizing the terms with them, and I hope that we'll be able to announce PPA that we signed in the next few months.

[Hannah Velásquez, Senior Associate - Equity Research at Jefferies]

Thank you.

[Operator]

Your next question comes from the line of Ben Kallo with Baird. Please go ahead.

[Ben Kallo, Senior Research Analyst at Baird]

Hi, good day guys. Thanks for taking my question. Could you just talk a little bit about the certainty in tax credits and also the BLM permitting getting easier, how that has affected your early development strategy? And has it sped it up or slowed it down or any changes at all your development approach?

[Doron Blachar, CEO at Ormat]

Ivan, thank you. Thank you, Ben. So the the the the tax equity or the tax benefits that that we see with the new beautiful bill is definitely beautiful for us. The geothermal part has a has a runway till the end of 2033, and then there is a slow, gradual decline of a of the benefit. But still, it works on start of construction.

[Doron Blachar, CEO at Ormat]

So effectively, until '20 CODs until 2037, and in some cases, until 2043 even, we'll enjoy the the PTC or ITC benefits that they entitled us. We have no we don't expect to have any limitation on the FEOC on the geothermal part or manufacturing in different countries. The percentage that comes from China is minimal. It should not impact this. So on the geothermal front, it's very, very clear.

[Doron Blachar, CEO at Ormat]

On the energy storage, we know that all the sales and batteries are manufactured in China, and the market will need to adjust to the new regulations either by increasing prices and basically having power plants without benefits of the ITC or developing manufacturing capabilities outside of China that will allow us to get the benefits of the of the ITC. And again, with energy storage, it's until 02/1933, start of construction. On the

[Ben Kallo, Senior Research Analyst at Baird]

And then just on your '28 targets, could you just talk about how any of these changes or what you've seen in power prices have been either a positive or negative towards your twenty twenty eight targets you laid out? Because there's been a lot that's happened recently. So if you're net positive or net negative, if you could walk through that.

[Doron Blachar, CEO at Ormat]

The 28 targets that we set a couple of years ago are are totally valid. We still see them. Actually, the fact that permitting is faster and easier makes them more achievable. The extension of the ITC, the PTCs helps them in the same way. It didn't change the the playground for until 2028.

[Doron Blachar, CEO at Ormat]

And the PPA pricing and the extensive demand that we see for renewable energy basically supports totally these targets.

[Ben Kallo, Senior Research Analyst at Baird]

Thank you.

[Operator]

Your next question comes from the line of David Anderson with Barclays. Please go ahead.

[J. David Anderson, Managing Director at Barclays]

Hi. You were talking before about Enhanced Geothermal, but I was kind a little bit more curious, more specific around exploration. You talked about your exploration program and some talk on the BLM. I was wondering if you could talk about how much capital you're putting aside for exploration. What does that look like for, say, 2026?

[J. David Anderson, Managing Director at Barclays]

I'm curious, are you drilling any wells yet? Are you still in the kind of geologics or reservoir analysis phase?

[Doron Blachar, CEO at Ormat]

Thanks, David. So on the exploration, it's a great place to be and great questions. We've been doing core wells between 10 to 12 core wells starting in 'twenty three and 'twenty four, 'twenty five and drilling full size wells. Actually, we are today drilling full size exploration wells in two sites in The U. S, actively drilling.

[Doron Blachar, CEO at Ormat]

We're looking into next year, and I expect next year to be drilling on top of the COWELL program, between two to three full size exploration drilling in parallel. And so all in all, the move that we've done brings us much closer to to many more greenfield that we'll be able to develop. CapEx wise, we have, in the exploration part, on annual basis, have somewhere between $125,000,000 to $150,000,000 of drilling exploration wells. It obviously can move up and down a bit, but the way that we see today is that we would be drilling two or three different locations in parallel in The U. S. On exploration.

[J. David Anderson, Managing Director at Barclays]

Great. Thank you. Separate subject on your product segment. I was just wondering about the growth and kind of how you're projecting that going forward. We saw some of the backlog decreased a bit this quarter.

[J. David Anderson, Managing Director at Barclays]

I was just kind of curious how that should impact or not impact growth going forward. Can you just kind of provide some maybe some longer term views in terms of where how much that business can grow?

[Doron Blachar, CEO at Ormat]

Yeah. So backlog, you know, Matt, has many times a tendency to go down and up because we do sign large contracts. And, obviously, once you sign it, it it it would go up. And then, you know, once you start recognizing revenue, it starts to go down. So we do expect to see some ups and downs in the in the backlog.

[Doron Blachar, CEO at Ormat]

I think that's especially relevant when most of the project that we signed today are EPC contracts, not supply projects, meaning a much larger projects. Today, we see New Zealand, which is a big part of the backlog today, being a significant part of the backlog even in the coming years. We know about potential projects that are expected to be released next year and day after that in New Zealand. The other country that is very important for us on the product side is Indonesia. They've just issued a few tenders, and we see multiple tenders coming over the next couple of years in Indonesia.

[Doron Blachar, CEO at Ormat]

Both places prefer projects that are EPC, not supply, meaning relatively large order at the beginning that is spread over a period of around two years and a bit and sometimes a bit more. And so we do see a very nice future for the product segment. And I would say that once we add that to our exploration efforts and the greenfield that we plan to develop, that will add on to the product segment, not in direct revenue, but definitely in workload and potential.

[J. David Anderson, Managing Director at Barclays]

Appreciate the comments. Thank you.

[Doron Blachar, CEO at Ormat]

Thank you.

[Operator]

Your next question comes from the line of Derek Podhauser with Piper Sandler. Please go ahead.

[Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies]

Hey, good morning. I just wanted to go back to the accelerated permit approvals that you've been talking about. Maybe could you just remind us or give us a refresher on the improvements that have been made? How long did it take before? How long is it taking now?

[Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies]

And then help us understand how this all translate into being able to release that 25 megawatts at Eber.

[Assi Ginzburg, CFO at Ormat]

Good morning, Derek. Thank you for joining the call. Historically, the amount of time it took us to get environmental permit in Nevada could have been a year and sometimes even longer. I can tell you that in some cases, we have seen that now it's shortened to as short as two months. We got three permits during the quarter within two months, and OMAT is now trying to go and file as much as we can environmental permits in order to expedite additional projects that were not planned to be built over the next few years.

[Assi Ginzburg, CFO at Ormat]

I will say though that, for example, in California, they still need to have a specific environmental that is not the BLM permit, but another permit. And therefore, over there, it's probably going to take some time until we see improvements. But as you know, many of our greenfields are in Nevada. But if you think about permitting, it's not just environmental permit. It's also the knowledge that the project will be approved, the the knowledge that there will not be a new endangered species waking up after we have done the exploration work.

[Assi Ginzburg, CFO at Ormat]

So for us, it give us also a a lot of runway of where we go and choose where to drill. We are much more comfortable in our ability to progress those to the permitting. So it's one, accelerating, but second, also give us confidence that we will get all the permits on time.

[Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies]

Got it. That's helpful. Maybe switching to Blue Mountain. Can you remind us how much this is expected to contribute to revenue and EBITDA? I think you said you'll be getting contribution beginning next quarter, third quarter.

[Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies]

And then once all the plan enhancements and additions are made, where could this run rate step up to as we start thinking about 2026?

[Assi Ginzburg, CFO at Ormat]

Sure. Right now, for the second half of the year, we expect to bring around $4,000,000 of EBITDA for the plant. I will say that when we look at 2027, that number should go up by around 10%, 15% as we're increasing the capacity of the plant by 15%. We're going from 20% to 23.5%. And that project was already released in our construction.

[Assi Ginzburg, CFO at Ormat]

The next phase of growth for this project is that by the 2029, the PPA of this plant is over. And therefore, we expect to achieve a much better pricing on the PPA. The PPA of the plant is in the low 70s right now. And as you know, the market is about 100. One more thing to mention, we do believe that Blue Mountain is a great place to do some EGS projects.

[Assi Ginzburg, CFO at Ormat]

There is already an active well of EGS on-site, so so we know that the ground there is quite good. And the plant is running under capacity, which means it can grow significantly. So that's definitely a place we will look over the next few months to see where we're aiming some of our AGS efforts.

[Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies]

Great. I'll turn it back. Thank you.

[Operator]

Your next question comes from the line of Jeff Osborne with C. D. Cohen. Please go ahead.

[Jeffrey Osborne, MD & Senior Research Analyst at TD Cowen]

Thank you. Just two real quick ones. I was wondering, Assi, if you just could confirm the remediation work on the transmission line. Is that completed or is that still lingering in the third quarter? I know you said that curtailment would be meaningfully down, but I just wasn't sure if it's finished.

[Assi Ginzburg, CFO at Ormat]

Early in July, actually, in the July, the remediation of the well paid work and the permits. You're talking about Puna or you're talking about NV Energy? I think you're talking about the curtailment. Right?

[Jeffrey Osborne, MD & Senior Research Analyst at TD Cowen]

I'm talking about curtailment, I think, in the transmission line. It's 100 years old in Nevada.

[Assi Ginzburg, CFO at Ormat]

Okay. So we had slight very small curtailment in July, and NV Energy told us that they completed the work for the year. And that's why we gave the guidance to much less than curtailment. As you know, we had a very big impact this quarter from curtailment and also in Q1. So we definitely assume and based on what we were told that this will lessen in the second half.

[Jeffrey Osborne, MD & Senior Research Analyst at TD Cowen]

Got it. That's helpful. And then if I heard you right, I think you said there was a legal settlement as it related to a battery supplier. Was that around performance, availability? Can you just flush out with the system completed and not working appropriately? Or any any incremental detail would be helpful.

[Assi Ginzburg, CFO at Ormat]

Yeah. This is already a settlement that we have done a year ago where a battery supplier did not provide us batteries when we demanded them and when we issued the PO because the prices of battery at the time went up significantly and our contract was at fixed cost. And that's why he reimbursed us. So this is something that we will see in the financial, I believe, until the end of this year and into Q1 of next year. Every quarter, we should expect to see around $3,100,000 of income from that.

[Jeffrey Osborne, MD & Senior Research Analyst at TD Cowen]

Got it. Thank you.

[Operator]

That concludes our question and answer session. I will now turn the call back over to Doron for closing remarks.

[Doron Blachar, CEO at Ormat]

Thank you. Thank you all. I would like to thank you all for joining us today. This was a very good quarter for Oman. We are continuing our exploration and development and EGS efforts.

[Doron Blachar, CEO at Ormat]

And with the tailwind that we see from the current administration, we see significant growth in the coming years and forward. So thank you all, and goodbye.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Doron Blachar, CEO
• Assi Ginzburg, CFO

Analysts

• Joshua Carroll, Vice President at Alpha IR Group
• Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.
• Justin Clare, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Hannah Velásquez, Senior Associate - Equity Research at Jefferies
• Ben Kallo, Senior Research Analyst at Baird
• J. David Anderson, Managing Director at Barclays
• Derek Podhaizer, Director & Senior Research Analyst at Piper Sandler Companies
• Jeffrey Osborne, MD & Senior Research Analyst at TD Cowen