Ormat Technologies Stock

Good morning, everyone, and thank you for coming to Ormat's 2026 Investor and Analyst Day. We really appreciate you coming here. You will have a very full morning with management give you a background or our goal is to not just talk about what we're doing today and give you an update on what the company is doing now, but also give you a clear way to what we believe we can do from here.

We will start with Doron Blachar, our CEO. He will talk about the changing electricity market and what opportunities it will create to Ormat, how we scale the electricity segment and how much more value we can capture. Then we have Ofer Ben Yosef, our EVP, Business -- Energy Storage and Business Development, take you through the energy storage segment and we will talk about how we are building the momentum we have here in this segment. We will take -- sorry, Assi will come and talk a little bit about the product segment. And will most -- and more importantly, we'll convert everything you hear today to financial outlook, capital allocation and how we create more value from that. We will take a short break after that, maybe a few questions before a Q&A session and a short break. And then we come back, switch gears a little bit.

We have a few members of management coming to the stage, and we will have a deeper discussion on EGS, what we think how the EGS is going to change the geothermal market and what opportunities it may bring to Ormat. We will have another session of Q&A, and Doron will recap the day. And then we'll take -- we'll go to lunch. But I have one important job that I have to do. And apparently, this part of the presentation, I cannot change or skip because I have the GC here that I really like. So I have to do what she's telling me to do. So I have to read now the forward-looking statement with your permission.

So today's discussion includes forward-looking statements regarding our EGS strategy, technology, development, pilot results, resource potential, project time lines, capital requirement, manufacturing plans and potential financial outcomes. These statements reflect management's current expectations and assumptions. Actual results could differ materially due to the risks summarized in today's presentation and described in our most recent Form 10-K and subsequent SEC filings. Certain figures discussed today are preliminary estimates, design targets, ambitions or illustrative scenarios. They are subject to technical validation, commercial arrangements, regulatory approval, interconnection, financing and our return threshold. Please review the forward-looking statements and risk disclosure included in the presentation and available through our Investor Relations website. Ormat undertakes no obligation to update these statements, except as required by law.

And with that, out of the way, Doron, the floor is yours.

Good morning, everyone, and thank you for joining us here and in the webcast. I hope you enjoyed the long weekend you had and happy that you decided to start the week with us. So we have structured -- so these are the management members in here in the room. You'll see some of them on the stage later and here and the others are in the audience and obviously available for any questions that you have during the breaks. Also with us, not on the slide, is Stanley Stern, which is one of our directors in the company. So I will start with a very, very one slide discussion about Ormat, and we are the largest geothermal owner and operator globally. We have 1.3 gigawatts of operating assets, most of them in the U.S., and we'll see later all the locations that we are operating in other 5 countries. Our energy storage segment is 1.4 gigawatt hours. All of it is in the U.S. Ofer will later present the segment and the status in it and how we're growing it. But as a heads up, we are more than doubling our size as we are working today.

And the product segment, it's actually complementary to the electricity segment on one hand, but we are also selling our equipment to other developers and building other power plants. We are the largest in the binary technology, have been since, I think, the inception of the company and maintaining that position today. And later, Assi will elaborate on where the product segment is going. But our main market today is New Zealand. Over the last 12 months, just to understand the sizes, we've commissioned 3 power plants for 3 different customers. Each one is a 50-megawatt power plant. And next year, we will commission a 100-megawatt power plant in New Zealand for a fourth customer. We are used to work and build very large facilities.

Now let me take you back a little bit in time to what we said 2.5 years ago in our previous Investor Day. Our previous Investor Day was at the beginning of 2024. So all the numbers in the next few slides will be comparing to the year-end 2023. So we are 44% growth in the megawatts from 1.3 to 1.9 gigawatts, 22% in the electricity segment and 191% growth in the energy storage segment. And if we go to the megawatt hour, it's over 350% growth for the energy storage. I think what you see here is that we are continuously growing our core business and our energy storage business, the geothermal and the energy storage based on traditional geothermal and stand-alone storage facilities. Most of our facilities are stand-alone.

Basically, we are delivering services to the grid. Out of the 565, we acquired 180 megawatts. If you do follow Ormat over the years, we continuously acquire geothermal assets. Every -- I can tell you that any asset in the U.S., we see it as a target for an acquisition. We are continuously in discussions with the different owners to know and to see when is the right time for them to sell and for us to buy. And we did our first energy storage acquisition earlier this year, the 30 megawatt in Hawaii. It is the first one. And I'm sure that in the coming months and year, you'll see many more acquisitions like that.

If I move from the megawatts to the dollars, so revenue-wise, we've increased by 43% from the year-end '23 to the last 12 months in 2026 ending in June, and EBITDA went up 32%. This is more than a double-digit growth on both parameters. This is what we have been doing for the last few years. This is what we are committing as we move from Investor Day to Investor Day. And on the right, I think you can see somewhat of a change. If in '23 and before that, Ormat was purely or only a geothermal company where 94%, sometimes more percent of its revenue and adjusted EBITDA was allocated to the electricity segment.

Last 12 months, it went down to 75%. So 25% is product sales and energy storage. I think the product and the energy storage had a very, very good run in the last 12 months. So going forward, I don't see the same parameters. So I believe the electricity will go up, but it will not go up to the height it was in the past. It might go to 80%, 85%. But all in all, you can see a company that moving from being just a geothermal company to a renewable energy company, a view of a portfolio company, not of one technology company.

And if we move from the megawatts, dollars to execution, this is what we've been able to do in the last 2.5 years. We've signed 700 megawatts of PPA. These are 11 PPAs that we've signed over the last 2.5 years. We are a developing company. So we are in construction of 700 megawatts. This is something that continuously goes on because whenever we see COD a project, we already released the next project. We are accustomed to developing multiple projects in multiple locations between the geothermal and the energy storage.

And the additional pipeline that we have, if you look at it, it's between 2.9 to 3.7 gigawatts. And if you go to the lower, to the small print, we have 46 geothermal sites, and these sites have the potential of between 700 megawatts to 1.5 gigawatts. This is something that we haven't discussed in the past, but we are continuously acquiring prospects in every BLM auction. We compete on EGS, and we'll have a full session later on EGS, but we buy traditional geothermal land positions because as we COD project, as develop project, we need to continue and build our prospects and pipeline to go forward. So this is between 750 to 1.5 gigawatts. It's a large range because most of the sites haven't been fully explored yet, and it takes time to evaluate the actual megawatts that we'll be able to get from every site. And we have 26 sites for energy storage, 8.5 gigawatt hours.

Now when we talk about the site, it means it has a name. We usually have the land and we usually fight for interconnection. We are not just putting out megawatts that we think we might get that we have an option to buy maybe in the future. These are actual sites that we turn, it's actual pipeline and site that will turn into actual projects as time passes. So if you look in the 2.5 years since the last Investor Day, the revenue went up, the EBITDA went up, the megawatts that we have went up, we've grown to a much larger company and the execution, I think, is unmatched in the industry.

And with that, I will move actually to see what has changed in the electricity segment and what gives us the confidence that the 2.5 -- the last 2.5 years are a preview of the next 2.5 years that will be much better than these 2.5 years. And that's before talking or discussing EGS at all. So we see here the expected growth in the U.S. Now all the numbers that you see here are pure U.S. numbers. So if in the past, since 2005 until 2025, 20 years, the electricity market in the U.S. grew 13%. And in previous Analyst Day, we had to explain that the growth of renewable will come from moving from fossil fuel to renewable energy. So that trend hasn't changed, but what changed is the demand. And the demand for the next 25 years is 40% growth, 1.3% growth annually.

A large of it coming to data center, but not just data center. The world is moving to electrification, and that is creating the additional demand. And when you look at the demand, it was in '25, 1,250 gigawatt with 37% of renewable, and it's expected to grow to almost 2,000 gigawatts. And the part of the renewable is expected to grow to 49%. So on one hand, we are enjoying 37% of any growth. But on top of that, we are enjoying a move forward to renewable energy much stronger and much faster than people could have looked at.

And if renewable energy basically needs to double itself until 2050. Coal will exit and renewable energy will grow. And you'll see in a few minutes that renewable energy, obviously, geothermal cannot supply this amount of electricity, definitely without EGS. But the solar and the wind that will come with it demand the energy storage. They do not work without energy storage.

In the market, there is always concern about the data center and how the data center are impacting the demand. Are they asking for more? What will happen if they will need less? So this is an analysis of the growth of the demand in the U.S. You can see in the blue, light blue, the data center. So in the next 5 years, they're going to be 28% of the growth. But in the following years, their part in the growth is going down. They're doing now a catch-up of building data center to support the AI, things that are required to catch up what is missing. But afterwards, it goes down. And what continues to go up is residential, commercial, basically the electrification of the world. So if the 2 main parameters that drive the demand are data center and electrification and EV, then the simple answer will come. So what is the demand. How does their demand look over the day? Can solar or wind support this demand? And when you look at the numbers and the graph, you see that the demand is for baseload, exactly what geothermal is and what storage makes solar and wind.

If I would have asked you, how would be the load requirement for EV charging, most of us would say we charge at home at night. But the reality is that, that's correct. But there is commercial EV charging. And that actually flattens the demand for EV charging over the day. And I can tell you, I have a hybrid car. Sometimes I charge it at night at home, sometimes they charge it during the day at the office. The demand will continue and stay as a baseload demand and will add more and more requirement for geothermal energy and solar and storage and wind and storage and stand-alone storage to support the grid and make sure that the grid is stable. At the end of the day, we all want a stable grid.

And when you look at the grid, this is exactly Ormat. Ormat is a powerhouse. We are a powerhouse that generates electricity, firm, clean, flexible and reliable energy. Ormat is not one technology or one asset. We're a combination of assets and technologies that we have built over many, many years. We call it Ormat powerhouse because each line item here reinforces the other one. There's a very close relationship between the market fit, the technology leadership, the project delivery, the owner-operator DNA and obviously, the financial strength that supports all of it.

And I will go one by one. So the grid needs baseload and reliable energy. That's what the grid needs. And that's exactly what Ormat is providing. Geothermal provides firm and flexible generation. We operate 24/7, 360 days in the year, independent of weather. And storage on the other side adds the stability and the reliability for the grid. The larger the penetration of solar and wind and renewable energy to the grid, the larger demand for storage will be. And you'll see it later in our presentation that regardless of how much growth the market is forecasting for energy storage, the actual is much higher than the forecast. And the reality is that they keep on increasing the forecast demand for energy storage.

And when you look at these 2 businesses, and I was the CFO when we started this energy storage business, we had to explain are they competing, while doing this. But when you look today at the grid, you see the synergies between of them. We speak with the same customer. We work with the same business development. We use our own electrical engineers to design the storage facilities and the geothermal facilities, a lot of synergies, and they complement one another.

And on the technical leadership, we are 60 years in the geothermal value chain. We have subsurface expertise. We have the largest and the most professional subsurface team in the geothermal industry. They are very, very focused today on traditional geothermal and the same processes and the same professionalism that we have today, we will duplicate into the EGS, and Daniel will elaborate on it after the break.

On the engineering and R&D, we have our own engineering team. We have our own manufacturing facility, our R&D. We have been doing this back and forth for decades. We have built over 3,600 megawatts of geothermal assets globally. I mentioned the last 150 that we did in New Zealand and next year, another 100. When you look for a high-class geothermal asset, you come to Ormat because you know that Ormat builds geothermal facilities that operate for decades. And today, with the AI coming into play, we are investing significant amount on AI. We have trained our employees with AI. We have got licenses for AI. Everything is done in a very controlled and safe environment. We're looking how to do a drilling faster, more accurate. Part of the drilling is building numerical models, building the resource models. Some of the work can be done with AI on the engineering part, the design of a power plant can be implemented today, some within AI, over the future, much more with AI. So AI is part in the Ormat DNA in the technology that we built.

On the maintenance part, Ofer will elaborate again on it on the storage. AI is running through all the Ormat facilities. And manufacturing, we have the manufacturing facility in-house. It allows us to manage manufacturing between third-party requirements, internal Ormat requirements. At the end of the day, when you look at an R&D team, an R&D team has 2 issues. One, they need to develop something new. And when they do, they need to find a customer. So our R&D team has the largest and best customer. They don't need to look for a customer. They have the customer, which is Ormat power plants.

So we are investing in R&D, and there's a continuous dialogue between the different units. Think about today, if you have a problem with your Apple, you go to your call -- the call center back, back, back until you get an answer. If a power plant has a problem with a turbine or a generator or anything within the power plant, he calls immediately the engineer that designed it. He goes to the manufacturer. It's a phone call away. And that's how we maintain our technological leadership.

Project delivery. We are delivering projects globally. In the U.S., we have a very, very strong business development team that has been focused very much on getting interconnection, getting permitting, land. Now with EGS, we're looking also on water. It is an end-to-end capabilities. We've modeled it and doubled it to the energy storage business, and we are modeling and doubling it into the EGS project. The ability to learn from our experience and the project that we've done is endless, and it goes continuous back and forth. On the global part, today, presentation is focused on the U.S., but we are operating globally. We have power plants globally. We have in Guatemala, in Honduras, in Kenya, in the Caribbean, in Indonesia, and we're continuously delivering projects there. We have a very nice pipeline also in Indonesia. But today, the focus is the U.S.

Owner-operator DNA. This is one of the uniqueness that Ormat has. When we build power plants, we build power plants that last for decades. We are looking -- as an owner, your main target is to increase the return. As an operator, your main target is to reduce O&M cost. So an operator would like always to buy Cadillac and an owner will always like to sell a Japanese car that operates for decades. And the point is to find the right balance between these 2. And this is what Ormat has been doing for years. We are balancing between what Aron, who's leading the electricity segment wants and Elad who's building for him the power plants. And I just need to make sure the shareholders are happy. So it's a very simple but complicated situation to find the right balance between owners and operators.

And the last part is the financial. We can obviously not build and grow not megawatts, not in geothermal, not in energy storage without the financial support that we get. We get it from a very, very strong operating cash flow. Most of our investments are based on our operating cash flows. However, we also use, as you've all seen and know our tax equity transaction, selling ITC, getting financing if required and needed. And the strength of the company is the ability to continuously work and develop projects and get the financing. And as long as we have projects and later, Assi will show you the returns that are double-digit returns, we will continue to invest, and we'll continue to grow the business, and we'll continue to get financing. And we are always doing it in a very disciplined manner.

And the M&A that we have been done over the years are an example of Ormat powerhouse. We buy assets that are inefficient operation because we know how to make them better. We buy assets that we can grow them. We can expand them. We can increase the generation over there. We can buy things at lower prices because we are so large, because we have the ability to demand our suppliers. And if the supplier is Ormat, then it's even an easier ask to get a better pricing.

So M&A is summarizing the entire Ormat powerhouse into one transaction. And when we do have a transaction, every group in Ormat does the due diligence. It's not done by third parties. It's done by Ormat, and we build the model. And the model is what we present to the Board, and that's what goes into our budget. These are the numbers that we are committing and then we do the acquisition. And after the break, you will see how Ormat powerhouse is definitely will make Ormat a leader in the EGS arena because everything there is relating also to EGS. So let's see how the Ormat powerhouse impacts on 3 dimensions, basically, how it steps up, accelerate the pace of growth, how we capture more value in the assets and how we transform. The strategy here are very related to one another. They are not separate. They complement each other. And I will show you on the electricity and later Ofer and Assi will show on the other segments that we have.

So stepping up the electricity segment. So this is our portfolio today. We had the 1.4 gigawatt portfolio, mainly focused in the U.S. Last 12 months, revenue was over $700 million and almost $480 million of adjusted EBITDA for the last 12 months, operating in 5 areas today. And these are the 48 prospects that we have across the world. 35 are in the U.S., and I'll get to them in a minute. But Guatemala, Honduras, Indonesia, New Zealand are sites that we are looking to expand. Indonesia is a very, very nice pipeline. It takes longer over there. We are more cautious over there. We are much more managing the risk when we develop a project in Indonesia. And these assets will come to operate towards 2029, 2030 and onwards.

It's an ongoing process that we are doing. Guatemala, we have sites over there. I can tell you that in Kenya, we are also looking to see if there's a way to expand our facility over there. So a lot of prospects, a lot of places that we are operating, and we are looking how to grow the business. And this, again, excludes any EGS. In the U.S. lately, a lot of people have been starting to talk about how many acres you have and how many acres you bought. And we're not trying -- we're not in the race to get acres. It's very easy to buy acres everywhere in the U.S. We are in the business of generating electricity. That's what we're trying to do.

And we have 35 sites. We have 223 acres on these prospects. If you look on the existing facilities we have with the prospect, it's probably over 0.5 million acres. These are the assets that we have today. These assets can generate between 750 megawatts to 1.5 gigawatts. We are working them, and you'll see in a few slides, one by one, a few sites every year in order to develop them. And the regulatory pushes us forward.

The permitting tailwind improves us getting ready. I can tell you that when the energy emergency executive order went out, I think it went out on Thursday. I think Monday, we filed 5 projects based on this new emergency order because we are ready. We are a machine that generates projects. And if somebody gives us -- pushes us forward, we'll go faster. And all of that will bring us to a target of between 2 to 2.1 gigawatt by the end of 2030. The capacity addition you can see is 56% in the next 5 years versus 41% in the previous 5 years.

Now obviously, as you grow, percentages are much more impactful than other. This is a material step-up. And I'll show you from where it's coming. You saw the land that we have. And I think we have 2 more auctions of BLM auctions this year, and we'll buy some more assets because every project that we do exploration, we need to bring another greenfield, continuously fill the machine.

And when we say that we have a pipeline, a development pipeline, it's real pipeline. You can see that -- and I start from the bottom, people always talk about interconnection. Will we have interconnection, how complicated it is. So we are working for decades. And that's why out of the all the prospects that we have that should be COD by the end of 2030, almost 80% have an executed GIA. Executed GIA means there is an in-service date that the utility has committed to us. And the others are in the queue.

And as a general comment, my view to the company is that the in-service date should be the COD date of the project. And every time the COD comes after the in-service date, it means that the process was either too long or we were too slow or something external happens. Permitting doesn't always work as fast as I want them. We have 79% of all the permits required for these assets and 70% of the PPAs, which is a good number because the more you wait, the higher price you get. And this is the change that we've done and we are doing on exploration.

The light blue are the small diameter wells. This is part of the initial exploration that we do. We do between 3 to 4 sites every year. We've started that even before '24. I guess it's green, the middle color green. These are the exploration. Once we confirm with the small wells where we want to drill, we go to get a permit and we drill full-size exploration wells. We need between 2 to 3 full-size exploration wells to confirm the resource. And once that happens, we go to the development. And what you can see is that we start with light blue, we go to green, and we continue with dark blue. And the dark blue is the development.

It's actually -- we have confirmed the resource. We have the interconnection, we have the PPA and the permit, and we are starting to build the project. And you can see as we're going from 9 to 40. This year, we're going to do 29. Next year, we're going to do 34, and then we're going to go to the 40s. And our target is that as we get to the 40s, it will be 1/3 will be small diameter wells, 1/3 will be exploration, full-size well and 1/3 will be development. And that will allow us to bring to COD between 2 to 4 projects. Again, if the resource and the exploration is successful, there is no 100% success in exploration. There's always a risk that exploration will not be successful. But if the exploration is successful, these are the targets that we set to ourselves.

So this is again the outcome between 2 to 2.1 our conventional geothermal business targets. This is where we're looking to go before we start to discuss EGS and its implication. The growth in capacity is one part of the value creation. The second one is the ability to increase our value. You can see here the top bullets are the PPAs that Ormat have signed since 2017. And before 2017, there was a drought in PPA. There were no PPAs before 2017. I think the one before that was a few years before that. But PPA pricing went down until lower than $60 per megawatt. And today, they are above $100. The premium between solar and geothermal that was $40 went down, is going up again because the market understands we need baseload energy. We need renewable energy 24/7 with no emissions. When we speak with the hyperscalers, they want new geothermal facilities.

And over the years, obviously, in different times, we've signed different PPAs. These are the recontracting that we see over the coming horizon. So the first part are PPAs that we've already blended and extended, basically went to the utility, told them the PPA is ending in 2029, 2030. If you want us to recontract with you, let's recontract today, get the real pricing of today and all the pricing that was originally in the PPA. We've done that successfully with 2 power plants. We are looking at the next wave that should come in '27, '28 because the next recontracting starts in 2031, 2032 and onwards, and you need to get a little bit closer in order to do blend and extend.

If we would have wanted to just recontract all of these assets, we can do it today at a price of between $110 to $120 per megawatt hour. It is not what we're looking to do today. Today, we're looking to blend and extend over time. And for that, we need to get closer to the recontracting time. And we signed PPA for long term. We invest a lot of money in building the facility, and then we signed the PPA for long term. You can see the diversity, Google, Switch, CC Power, NV Energy, SCPPA, every player that buys electricity in the market is a potential customer for us. We speak with them and they speak with us, people want baseload renewable energy. That's the main demand that we see.

I talked a little bit about the tax credits. But if anybody would have asked me or anybody within Ormat before the new administration -- well, not new, before the Trump administration came, can I draft tax incentive and regulatory support for geothermal, none of us would have drafted something as good as we see today in the market. The OBBBA gives tax incentive to the company beyond 2033.

The permitting reform that I mentioned before, the BLM land auction. We used to have only BLM land auctions in Nevada. We had one in New Mexico that we acquired land. We had one in Utah, in Nevada, in California. We have another one in Nevada soon, and I forgot who else is this year, Idaho. So we continuously see and the fact that there's more selling of more land, these are many more prospects for us to develop projects.

So if you look at the market today and at Ormat, you see that the stars are aligned. There is power demand, which is continuously accelerating. There is significant regulatory support. Both of these push the power prices significantly higher. We have a very strong land position, interconnection. We know how to do exploration, the prospects that we have developed over the years. All of that brings the Ormat powerhouse into play and puts us at the right place at the right time to capture the opportunity that exists today in traditional geothermal. And later, we will talk, it puts us in an excellent place to catch the opportunity that lies with EGS.

And the last slide, I mentioned already a few times, and we'll have a full discussion later. EGS is a transformation event for the geothermal industry and for electricity in general. 90 gigawatts or 300 gigawatts, both are DOE numbers for 2050. You can choose number that you like, the low end or the high end. Today, there's 4 gigawatts of geothermal assets operating in the U.S. And we'll talk a lot about it later, but this is a transformation for Ormat, not just a transformation. When you look at Ormat powerhouse, we cannot be in a better place, a better situation than where we are now. And that's on the electricity and Ofer?

Thank you, Doron. My name is Ofer Ben Yosef, and I'm leading the storage segment. I'm very excited to share with you our plan for the next few years. We are very proud in what we achieved so far, but more excited about the future.

So Doron talked about the powerhouse of Ormat. Basically, it's the sum of all our capabilities that we developed over a few decades, the ability to develop projects, to construct projects to deal with the different agencies, with the utilities to get the money that we need to build the project, et cetera. We took all those capabilities, embedded them into the storage segment, and we generated so far a meaningful EBITDA for the company, and our plan is obviously to grow and accelerate this growth and this value for the company.

Let's start with where we are today. Today, we have a portfolio of 495 megawatts total assets, 1.3 gigawatt hour in 4 markets in CAISO, in PJM, in ERCOT and the recent one in Hawaii. Two years ago, when we presented our targets for 2028, we had $105 million to $110 million of revenue and I think $65 million for EBITDA. And the reason that I said that we are proud, we reached this target 2 years ahead of schedule, which gives us a lot of confidence in our future growth plan and our ability to execute them.

Doron talked about the growth in the storage market. You can see that in the last 3 years, the market grew in 2.3x, and we grew in the same rate as the market. But going forward, until 2030, the market planned to triple itself, but our plans is more ambitious. We think that we will grow 4x on top of what we have today. Now this 4x is not a wishful thinking. There are a list of projects behind it. We develop our pipeline over many years. And I will demonstrate later in the next few slides why we think that we have a solid plan with a very low risk for execution.

So let's talk about demand. Doron talked about the renewable growth, the 2x double capacity by 2050. And we need to understand one thing. When you add solar and wind to the mix, it's increased the generation, but it creates a challenge for the grid manager. The grid manager have to find a way to shift the electricity from high generation hours to high demand hours. That's only one problem. The second problem, it needs to stabilize the frequency. And there is no better tool than the storage to address these 2 challenges. So as long as we will continue to see a growth in the solar and in the wind, it will tail with additional growth for the storage.

Another aspect is the high prices. We see very high prices in some of the markets. I will start with PJM. The last auction for capacity was closed in north of $300 per megawatt day. This is an increase from the previous years. We are not operating in the capacity in PJM market. We are operating in regulation, and we will make much higher revenue than what you see here. Just as an anecdote, I think on the second quarter, we had 1 day that we earned $8 million for 125 megawatts of assets.

So you can divide it, you can make the math. It's much higher than the capacity market. So PJM is definitely a major, major contributor to our results. PJM market is not balanced. We see days that the reserve in PJM is less than 5%. This is not good. It's good for us. It's not good for the grid. So we are here to help the grid to solve the problem. We are part of the solution, and we enjoy very high revenue in PJM. We also see good tolling agreement and RA agreement in California. And this help us to continue and turn our pipeline in California into working assets. We have a few projects that we are now developing in very late stages of development and will go live soon in California, and we see very high price of tolling. We hope that this trend will continue to other markets as well.

And last but not least, we have the ITC, and it is to stay until 2033, which definitely gives us a lot of financial benefits. Let's talk about the supply chain because, yes, we have the demand, we have opportunity to go, but we need a support from the supply chain. So definitely, the FEOC creates some complications. But if you look on the overall picture, the prices of the battery continue to fall down. We see more and more new technologies, more dense that the outcome is less dollar per every megawatt of capacity. On top of it, we see local content starting to ramp up in the U.S. And there are other non-Chinese manufacturers that are coming to play in Mexico, in Korea, in Morocco. So the bottom line is that we don't think that the supply chain will limit our growth plan.

So I started to say that we have high confidence in our ability to meet our growth target, which I will reveal in a minute. But I just want to highlight why. So if we start with interconnection, interconnection is the most challenging item currently. 89% of the projects that we count against the growth for 2030 already have a LGIA. It means that we have a contract with the utility that we will get the connectivity to the network in a certain date. And based on this date, we can plan when the COD will be. If you look on permits, 57% of our pipeline for 2030 projects is already permitted and 24% is in advanced stages, which means that we will get the permit in the next 3 months.

Just as an anecdote, we never failed to get a permit in the storage segment. We know how to do it. Sometimes it's very challenging. We had a case in California in L.A. Basin that the permit took us a lot of time. We insist. We were very persistent. We used some smart ideas, and we got the permit in the end. There was another company that started in parallel for us. They gave up because it was very challenging with the fire department. So permitting is not easy, but we know how to do it. This is part of our secret sauce. And a lot of our projects already have permits.

And last but not least is PPAs. 56% of those projects already have PPAs. There is one very big project in California in L.A. Basin, that we deliberately decided not to sign a PPA now because we understand based on our experience and our knowledge that if we will wait close to the COD, we'll get higher PPA. So it's part of our tactics. But if we will add these projects, so almost 90% of our pipeline is having PPAs.

So those are our growth plan. From now until 2030, we plan to grow from 400 megawatts to 1.5, 1.6 gigawatt. This is the 4x that I referred to. And if we count it in megawatt hour, we get to 5.1 to 5.5 gigawatt hour, which is 6x. The difference is because we are moving from 1-hour and 4-hour batteries to 2-hour and 4-hour batteries. So the mix is changing. So 4x, 6x, that's definitely bigger than the market predicted growth.

So the main takeaway from those slides is we are going to grow more than the market, but this is not a wish list. We have a list of projects in advanced development. We released 5 out of the 7 projects, 2 we will release soon, 2 already in construction. The rest is under procurement, and we have high confidence that we will meet our growth plan. So we talked about the growth in megawatt, but this is not the whole story. The idea is how you can capture the maximum revenue from each and every megawatt that you have. And this is a lot of our secret sauce.

Let's start with the development. So we are doing everything in-house. We don't outsource to third parties. We take our own destiny in our own hands. We do everything, we learn, we do lessons learned, and we implement in future projects. That's how we make progress. I will start with the construction. One of the most challenging phases of every project is the commissioning. So you can start the construction to build the site, to put the containers, to connect everything and everything looks great. But until you energize the site, meaning the utility connected to the grid, only then you can really start and then you can see all the problems.

There are tons of parameters that you need to set up in order to make sure that everything will play as it should be. And you have certain equipment, which is not operating when you energize the system. And the result is that in the past, we always had delays in the project. Delays between 3 to 6 months was like a regular stuff. We decided that we cannot live with this, and we try to look for creative ways to overcome this challenge. So we decided not to wait for the utility to energize us. We decided to energize ourselves 3 to 4 months ahead of time.

We bring a generator. We connect the generator to one row of the site. We test it, we fix all the problem on one row and set up all the parameters and then we replicate all those items to the rest of the site. And then when the utility energize us, the commissioning is very fluent, very easy going, and we start to see that we are meeting our COD dates with no delays. This is a type of a secret sauce.

Second thing is how we operate. And we need to understand that operate the system is definitely not trivial. Everyone thinks that battery is simple stuff. No, it's not. I will give you a few examples. First, all our sites are unmanned and remote and monitored from a central location in Philadelphia. Now there are many challenges when you come to operate the system.

And let me give you one example. Every row or every container is divided to unit. Each unit is separate stand-alone. And in each unit, you have a lot of cells, thousands of cells. Now some of the cells can have 100% capacity. But if 1% of the cells have only 90% of capacity, this is the capacity that you can discharge to the network. This is the money that you can make. So you need to do a process of cell balancing and you need to do it in a smart way that will make sure that you capture the maximum capacity that you can from your batteries. And at some point, you have degradation. So you need to take specific cells and to concentrate all the low-capacity cells in one segment to make sure that all the other segments will give you as much power as you can.

And the other thing that we are doing, we implement an AI software, which has allowed us to do predictive maintenance. This AI software basically analyze all the failures that we see over time and can give us an indication that this component is about to burn out and you better replace it. And then it opens automatically a work order in the system to do the maintenance. And then the technician is doing the maintenance in structured maintenance hours that the prices are not high instead of doing it under pressure when the market prices are high and you need to take the site or part of the site down to do this replacement.

So by that, we make sure that we optimize the capacity and we optimize the availability and we capture as much as we can from each and every megawatt that we have. And the last thing, we have a team of asset management that their role is to trade in the merchant and to make sure that they build the right strategy to capture the highest available revenue and they are using AI-driven software in order to make it in an optimal way.

Let me give you 2 more examples. So -- we have a process that we call it percentage of perfect. What does it mean in the merchant to be perfect? Let's assume that you have 100% capacity, 100% availability and you have the crystal ball that can tell you what are the best hour to charge and discharge. Obviously, you don't have this crystal ball, right? But you can build a process that analyze every day what were the conditions, what decision you take and then to fix those decisions going forward and implement them. So we started this process in June a year ago. Our comparison to the perfect was 77%, and we increased it to 88%.

And this is a very -- as I explained, you cannot get 100%. Let's assume that the prices in ERCOT are $3. And now for 1 hour, they are jumping to $30. You discharge or you wait 1 hour, maybe the price will go to $60 and $100. So you need to look on all those occasions to understand when it stopped with $30 and that was the right thing to do to discharge. And when under what condition it went up to $60.

So next time that you have those conditions, you will know not to discharge all your capacity in $30, you will maybe discharge only 50% of your capacity. And on the other 50%, you will bet on a higher prices 1 hour later. Those are very tough decisions. But once you have the system to check it day in and day out and to understand the patterns, you can extract more revenue from your assets.

And the last example is PJM. PJM behaved in a different way. In PJM, there is a parameter that called performance score. And the assets with the highest performance score are the first one to be called by the network and have the best chance to get the higher prices. So you can see a comparison of our performance score in PJM compared to other best sites, hydro, demand response, steam and gas turbine. And the way that we maintain this high performance score over the last few years, this is part of our secret sauce.

Doron talked a lot about the long-term visibility. We're also trying to sign as much as possible long-term contracts. You can see the one in Hawaii, the one that we signed with CPA and the one that we signed with NV Energy. And the whole idea is to create predictability and visibility for the long run.

Scaling the growth and reducing risk. So you can see that we are moving from higher percentage of merchant to a bit lower. We want to balance between the merchant and the contracted and to be more on the contracted side and create predictability. And you can see that above our targets for 2030, this is not the end. We are not planning to stop there. On the right side, you can see that we have a significant pipeline to develop in many markets beyond 2030 to develop a project takes anywhere between 4 to 6 years. So we need to think now about what will happen in 4 to 6 years and make sure that we -- the machine is continue to work.

So it's the second time that we use the term, the stars are aligned, but this is true. We have the demand. We have the supply. We have the regulatory support. We have a very strong pipeline, and we have a very strong backup from Ormat powerhouse. Our CFO, Assi always tell us, you will bring the project, I will get you the money to build them. And this is a good opportunity to invite my dear friend, Assaf Ginzburg, our CFO. Thank you.

I'm very happy to be here today. You can hear from my voice that I'm not at 100%. And the reason why I'm so happy to be here today is that 2 weeks ago, I lost the voice completely. And Doron text me basically say to me, you cannot speak in the meeting in the next 2 weeks, and you need to stay away as much as you can from meetings. You need to reserve your voice for the Analyst Day. The people that know me here know that I really like to talk. So the fact that I was quiet for 2 weeks is devastating for me. My wife is very happy, by the way. She said that we never had as good marriage just the last 2 weeks when I was quiet. But starting tomorrow, I can -- I will try to speak up again, but that's the reason why my voice is not this best.

So in the first part of my presentation, I will cover the -- one may say a less exciting segment of Ormat, but I will say, if you look at the numbers, very good results that we got from this segment over the last few years. We have sold close to $1 billion of products over the last 6 years with a record 2026 revenue and very good operating margins.

When we look into the future, excluding EGS, you can see that the geothermal market, excluding EGS, is expected to add roughly 2.2 gigawatts of capacity around 400 megawatts per year for the next 5 years. With our 50% to 70% market share, assuming we will maintain it, it means that Ormat can sell as much as 200 megawatts every year, which will continue to support the $200 million range anywhere from $150 million to $250 million revenue going forward. Of course, these are third-party developers. They are not always moving as quick as we are. And you will notice that none of them besides Ormat is actually developing in the U.S. And that's where the biggest opportunity for Ormat in this segment is coming. We will talk later about product segment in the EGS world.

If today, we expect every year as an industry to add 400 megawatts, according to the DOE, we will add over the next 40 years, close to 100 gig, 90 gigawatt here, around 3 to 4 gigawatts every year. If Ormat will maintain its market share, it means billions of revenue on top of where we are today. So as I said, today, we've done very well. This segment support both our internal growth and third party. But with EGS -- and Nirit will discuss the improvement -- the technology improvement we made over the last few years, the product segment can definitely be a big factors in Ormat operation and growth for the next few years.

And now probably to the best part of my day. So we will talk over the next few slides of how Ormat is planned to bring value to its shareholders. First, we plan to accelerate our growth. Second, we plan to improve our operating margins, and I will discuss how we plan to do it. And then with EGS, the sky is the limit. Before I turn to this slide, I just want to talk about something personal that I have with these slides. So this is my third Investor Day as the CFO of Ormat. In the first one in 2022, I probably weighted additional 50 pounds. And at best, I could have run 1,000. In the second Analyst Day that we have done here in 2024, I lost around 50 pounds. And at that time, I ran my first half marathon. According to the target that Doron put here in front of you guys, in the next Analyst Day, I have to do a full Ironman. So this is very challenging, Doron, but I'm up to it.

So looking at the numbers, Doron mentioned the electricity segment growth for the next few years. Ofer provided the storage segment for the next few years. When you combine those 2, Ormat is going to double its capacity by 2030, even more than double. I think it's a remarkable how we were able to transform Ormat from a company that can grow 5% to 6% a year to a company that is doubling its size over 5 years. At the same time, we expect to grow our revenue by 60% in the next 5 years and to exceed $1.5 billion on an annual base run rate by 2030. But what is as important is that we are not skipping 2028, and we are going to meet the numbers we gave the market.

On a run rate base, we expect to reach our 2.6 to 2.8 gigawatts. We expect to generate close to $800 million of EBITDA by 2028 and achieve revenue of north of $1.2 billion for 2028. When we look at 2030, what's very notable on this slide is that while our revenue is expected to grow by 57%, our EBITDA is actually going to grow by 80%, which means every dollar on the revenue is going to generate more cash flow. And that's what I mean when I say return to shareholders.

We expect to improve our operating margin, and I will discuss it in a second on a by segment. But the more important part is we will have more than $1 billion of EBITDA by 2030. This is a remarkable growth story for Ormat, and I will show you we have the financial strength to get there with the cash flow from our business, our tax credits that we are getting and some additional debt. Let's drill down by the segment.

The electricity segment that didn't grow over the last 2 years is expected to grow, as you can see on the left side, by 57% in revenue, getting to above $1 billion in revenue. At the same time, adjusted EBITDA is expected to grow 67%. What does it mean that we expect to improve our operating margins. And as you can see on the bottom right, our gross margin that was negatively impacted over the last few years with the increase in cost to operate the power plants as a result of high inflation rates is expected to recover back to the 40% level. That 11%, more than half of it is going to come from the blend and extend and the remaining from the Google-type PPAs that is going to generate very nice returns for our shareholders.

Having all the new power plants coming with PTCs, which are north of $30 per megawatt hour now, plus over $100 PPA makes a big difference in our business model. And therefore, we expect to improve also our EBITDA margin above 70% in the electricity segment.

Now let's talk about the storage segment. Ofer mentioned the 4 times. Look at the left side. We expect to grow EBITDA and revenue close to 4x over the next 5 years and improve our operating margins. But what is impressive that we're going to do that in a much more balanced environment where our merchant exposure is actually coming down from 56% merchant last year to only 23% merchant next year. Now this growth is going to be also a very balanced growth. We are moving from operating in 4 states today to 9 states by 2030, diversification.

And the reason why we are comfortable with these numbers is that out of the 1.5 gigawatts that we plan to operate by 2030, 0.5 gigawatt is already under operation today and 0.5 gigawatt is already under construction. So it's quite easy to sit here in 2026 when we have very good visibility into the next few years of the company. On one hand, we have all the growth that we put in front of you. On the second half, we have all the enhanced margins because of the strong PPAs, the strong tolling agreements. We are not even relying on the PJM market to continue as it is in the last -- by 2030. We still think that it will have good results from PJM because remember, PJM market gave us the opportunity to generate more income. But how the way Ofer showed you guys, it's also what we did with the assets, close to 100% capture rate of the available dollars.

It's almost like we knew the lottery numbers the day ahead, we fill them and we won every day. We're using AI to do it. We're using our experience to do it, and it's showing up in our results. And we expect it to continue benefits over it over the next few years. But again, by 2030 on the storage segment, only 23% merchant. All the rest will be either contracted or RA, which is mainly contracted.

I mentioned return to shareholders. Ormat is continuing to target on the traditional business, which is geothermal, hydrothermal and -- sorry, storage, mid-teens return. I can tell you that, for example, the last project that we released to the market on the storage segment on the project level had a 12% to 13% project IRR. But the equity IRR of it was close to 20% equity IRR. Think about it, all of our assets are fully contracted. Therefore, we can leverage them. Therefore, the equity IRR of the geothermal and the storage is significantly above the mid-teens that you see here because of the ability to leverage it.

The interest rates have balanced over the last few years, and we take advantage of it. I'll remind you that our average cost of debt on our portfolio today is 3.9%, definitely allowing us to grow the company, achieve good returns. Now later, I will talk on EGS return, and we expect them to be even higher. And I will discuss it later, but I just want to give you some promo before our break. So can we finance all of this? How will Ormat look like in 2030? We asked those questions during the time that we build those 5-years plans.

As you can see on the bottom right, between cash from operations and tax benefits, almost we cover all of our CapEx needs and our dividend needs. We only plan to add $800 million of additional net debt throughout the next few years. So if our net debt today is around $2.7 billion, it will be around $3.5 billion by 2030, maybe slightly higher if we will invest in future growth. So these are for the projects that we plan that will operate full year in 2030. And we will have close to $1 billion of EBITDA. So we're going to deleverage. We're going to improve the return, and we're going to be probably still the largest geothermal company in the world.

Before I request my friends Ofer and my boss, Doron and also my friend to join me for some Q&A session, just a little bit of Q&A of where we are today. We have provided a robust growth plan in front of you guys. We've shown you how we plan to improve our profitability and provide attractive returns to our shareholders.

And I would like to open it now for a Q&A session where the focus will be on non-EGS. I promise you there will be a full session on EGS, smart people, not me, will be able to answer it like our friends here that are actually doing things, not just shuffling papers like the CFO. So we will cover a lot of EGS going in an hour.

Before we go to the break, let's jump to some Q&A session. Doron?

I'm Robert from Global Alpha. Thanks for this day today. My question is really on energy storage. And I would like to know if there's a risk or I guess you will say no, but the U.S. market replicates a little bit what happened in the Australian market where what was very attractive return is now becoming a commodity just because of the massive scale of energy storage that has been installed in Australia. That's my first question. And also on the energy storage, you mentioned derisking China supply, but the Moroccan supply is really China supply because that's what they're doing. So is that considered non-Chinese if it's coming from Morocco?

Yes. The answer is yes. And at any given time, we will compare between two options -- three options to buy Chinese equipment without ITC, to buy local content, which is probably expensive with ITC or to buy from manufacturers like the Korean or Morocco or whatever, which is somewhere in the middle, less expensive maybe than local content, but with ITC. And regarding the first questions, I'm not sure I understand the question. So can you...

The question is the Australian market has really collapsed in terms of price per megawatt and asset installed, no investment tax credit and the ancillary services are now pretty much 0 so much excess storage capacity.

So we are moving to be much more of contracted with PPAs, and this is exactly the reason why we are doing it to derisk this scenario.

So U.S. will accept to pay double, triple the price forever, some of the demand is for data centers and your compute is half the price in Australia or 1/10 of the price in China, I'm a user of compute unless I have -- I'm a state or the U.S. Department of Defense, I'll just be buying...

So once we have a PPA, we don't care. And for the portion of the merchant, we hope that by then, we will return our investment and everything that we will have on top of it will be like funny money.

But I will just add, we see the demand in the U.S. The U.S. is moving totally to renewable energy. Solar energy requires storage. We see there's not always a correlation between one market to the other market. We don't see the same correlation even between Texas, California and PJM within the U.S. PJM prices have been extremely high. Texas prices have been extremely low. That's why we are looking at the portfolio approach, not focusing on just market. And as was mentioned, we're going from 4 markets to 9 markets. And we're also looking to contract much more than what we have today.

Noah Kaye from Oppenheimer. So I want to ask you about the profitability improvement in electricity. There was a period of, I don't know, that 7-plus years where electricity consistently did above 40% gross margin. We've seen it come down. You think you can get back there. Give us some context on the inflationary trends that the segment experienced over the past several years to bring it to this point. How you think about embedding cost inflation expectations in your outlook? And you mentioned you're on track broadly for 2028, but how should segment profitability improve in the interim towards the 40%.

So I would say that when we signed PPA contracts, even today, most of the contracts are fixed price. That's how the utilities like the contracts to be signed. We are able to get some contracts with data centers and sometimes with hyperscalers that do include some indexation, but not all of it. And expenses are indexed for some part of them, not all of them. So by definition, there is a reduction in gross margin versus the first year. We see the improvement coming from enhancing the power plants, which happens every cycle from new contracts coming online and new power plants coming online.

And we did see in the past when I was the CFO, now I have a different CFO. So electricity segment above 40% gross margin, and we see now it's coming up. We expect to see it coming up next year versus this year and the following year. We do expect a trend of it increasing, starting from the blend and extend and new contracts coming online and Lone Mountain, the new greenfield that we are bringing online as well.

Helpful. Just to be more specific, if possible, what kind of cost inflation go forward should we embed for electricity? Are we thinking 3%, 5% on the cost?

We assume in general inflation on about 50% of the cost. The expected inflation in the U.S. between 2% to 3%.

I will just commit on behalf of Aron that sits here, and he's our new manager of the Electricity segment. We are also looking across our fleet, trying to reduce the overall cost. That's one of our goals next year. So I do hope that we will actually be able to improve margin, not only by PPAs improvement, but also by some optimization that we are doing between our plants. And Aron brought a lot of new ideas to the table. And in his behalf, I will tell you that he is committed to reduce costs next year.

Dylan Nassano, Wolfe Research. So just in the electricity segment, I appreciate the blend and extend strategy, but just curious how your outlook is accounting for potential recontracting risks, specifically in the international side?

I will tell you that we don't have a lot of risk on the international for the next few years in the international. The only plant is one plant in Guatemala that is coming into maturity. And we are under advanced negotiation to renew the PPA at potentially even a higher price.

Ben Kallo here. Thank you for all the information. Maybe first, when you talked about like the goals for 2030, they're very good just the capital allocation, the capital needs. Could you just maybe -- I don't think you included EGS and then you also have the convert is 2031. So like you'd be thinking about that in 2030, I would imagine. Just maybe -- I know there's a lot of unknowns there, but could you just maybe talk to how you think about capital needs for EGS when you pull the trigger on anything there? And then on that convert, I guess it's too early to tell where it's going to be in terms of in the money or not, but anything you can give there?

So what you've seen here is the capital allocation, excluding EGS. We have a long discussion on EGS, including the capital requirement for EGS just after the break. So I suggest we'll be able to respond that. Regarding the convertible for 2031, I would say it's very common that a year before the due date of the convert, we look at the market, we see what are the alternatives available. And then we either refinance or repay or issue something else. So it's definitely going to be a question that we'll be discussing a year ahead of time.

And then just maybe if you could -- I know you guys have talked about this in the last call, just on the product side with the new plant for EGS. Could you just talk about where you are in discussions on that front?

Ben, let's defer it to the EGS discussion.

Chris Dendrinos with RBC. I think you opened the conversation talking a little bit about M&A. And how should we think about that being incorporated in the outlook? Is that, call it, upside to the numbers you have there? Or should we think of this as inclusive?

M&A is something that we do. It's part of the numbers that we give to the market. It's something that we continuously do. So we do expect to have M&A within these numbers. Since we do not know the exact target size and everything, then on the capital allocation, obviously, this is something that we need to take into account, but it's in the numbers, yes.

And then maybe just on the electric side, I think the outlook has growth coming from, well, conventional geothermal and solar looked like it was maybe stepping up as well. Are those stand-alone solar projects? Are those just complementary to your geothermal existing projects? Just trying to get a sense for how you're thinking about the solar strategy here.

We have most of -- a big part of that relates to the solar for the auxiliaries for the geothermal facilities. We have 1 or 2 projects of solar and storage where we're utilizing existing interconnection that we have. We don't have any strategy of building a solar portfolio.

Ryan Levine with Citi. In terms of your growth, I appreciate the updates with margin expansion and some added balance sheet capacity. But as you're looking at acquisitions and different larger investment opportunities, are you looking to relever your balance sheet in order to pursue those opportunities? And specifically on M&A, there certain sectors or segments of your business that you're more focused on?

Can you repeat the question, please?

In terms of your ability to finance future acquisitions, are you looking to expand your balance sheet in order to fund those opportunities? And what type of acquisitions are you looking at between the different verticals?

If you look at the last 5 years, we have done acquisition, both on the geothermal and on the storage side, and we plan to continue to do so. The balance sheet is already very strong as it is today, close to $700 million of cash, plus $400 million of available revolving capacity. So we have $1 billion behind us to support the acquisitions. When we look at the acquisition, none of the one that we have done and nor the one that we expect to do are transformative acquisitions.

The majority of the growth of Ormat will come from the organic growth. And therefore, the organic growth is mostly financed from cash from operations together with the tax credit. So at this point, we are not planning to increase the size of the balance sheet. And if we do an acquisition over the next few months before the time we need to repay the remaining of the convert, we may do with the convert like what we did last time, just exchange the existing left of the convert with the new convert. If you look at the stock price today, it's $108. It's exactly the stock that was when we issued the convert. So the economics are very good, both for the company and for the holders. Hopefully, I answered the question.

Yes, I appreciate it. In terms of the technology development, I understand there's going to be another segment on EGS. But outside of EGS, are you seeing any opportunities to improve your cost structure around future geothermal or any other innovations to the core geothermal development cycle that you're seeing?

We are looking, as I mentioned, on AI and how AI can improve our maintenance, our operation. On the electricity side, we do expect to see some benefits coming over there. We're also utilizing AI on our engineering and construction, but we don't have today a specific target that we know how to get to reduce cost. In today pricing, Assi mentioned the returns. I think the returns are very good for traditional geothermal. And on EGS, we'll discuss a little bit later.

Justin Clare from ROTH Capital Partners. I just had a question on the IRRs. So for geothermal, they look fairly similar to what you presented in 2024. Wondering why you wouldn't see a greater uplift in the IRR opportunity as a result of PPAs going up? Are you seeing that offset by an increase in the CapEx expectations?

Since the last few years with the Ukraine war, a small war between Iran and Israel and the U.S. commodity-wise is not being supportive of growth. On top of 2 things that are coming with the new presidential elected Mr. Trump. One is the higher tariffs, which does impact us. And also the fact that in order to get all the tax credits, we need to pay certain amounts for the construction people as part of the rule. So we have seen an increase in the cost to build the geothermal plants. And therefore, the returns are similar.

Got you. And then just one on storage. Looking at the targets, it looks like the adjusted EBITDA is expected to grow a little bit slower than revenue, but you're seeing or you anticipate a gross margin expansion. Can you explain why you wouldn't see faster EBITDA growth for storage as a result of that?

So we are not expecting in 2030 that PJM will be as strong as what we saw in 2025. So in reality, you have -- if you normalize PJM, you need to build more capacity to generate more EBITDA, and therefore, you'll have more depreciation. So that's the way it works. But still, we're looking at 70% EBITDA margin at the storage, 75% EBITDA margin at the electricity. These are very good numbers to be in without taking into consideration a very good PJM market. So if we will be able to meet those numbers, I think this is a very good achievement for the company.

And again, I don't know how many companies you know that every dollar that show up in the revenue also show up in the EBITDA line item. One more thing to remember, different from some other public companies, because we are a U.S. GAAP company, we do not include the ITC income of the storage in our EBITDA or operating margin. Every year, often my friend comes to me and said, Assi, when are you going to give me credit for the ITC income? You always take it for the low tax rate, but you forget to say that it's the storage segment. So in reality, it's a little bit different than what others are showing. If we will include ITC income in our EBITDA margins, the number would have actually go up.

[ Wynne Lam ] from Nomura. Could you confirm on the capital structure for the new U.S. geothermal projects and whether you're taking ITC or PTC, and do you expect to qualify for the adders?

CapEx for traditional geothermal is around $5 million, $5.5 million depends on the specific site location, how deep are the wells, whether or not there is transmission line, how long is the transmission line. And we are usually getting PTCs. Economic-wise, PTCs on geothermal that is a base for 24/7 comes more attractive than taking ITCs.

Do you expect to qualify for both credit adders?

Not at this stage. We don't see that.

Derek Podhaizer, Piper Sandler. I wanted to go back to Noah's comments around the margin side. I know in the last couple of years, there's been issues around tea lines being down, certain curtailments, maybe some more third-party risk. But maybe talk to us a little bit more about the margin outlook of that 40% while considering some of those third-party issues that we've seen over the last couple of years.

Maybe I'll try to summarize. We see the gross margin and EBITDA margin going up from a few main items. One, we see the greenfields coming into play. Greenfield come with higher gross margin and higher EBITDA. This is one element that is part of the growth -- organic growth that we showed you. The second one will come into play is the blend and extend that we've shown and PPA pricing that are higher than what we've seen in the past. The third element that we do expect is a very thorough analysis and push that Aron and his segment are doing on reducing cost. These are the 3 elements that build up the gross margin going from 29% to around 40%.

That's helpful. And then I guess, you mentioned 48 sites for geothermal, 750 megawatts and 1.5 gigawatts. It's about 25 megawatts per site. I know we're going to get into EGS next. But what about optimization of the conventional geothermal? Any sort of technology that you're looking at? I know we've talked about AI optimizing some of your drilling operations, maybe some new products that are coming out. How can we think about maybe upside to that 25 megawatts per site that you're putting out there?

On traditional geothermal, the one major parameter that sets the megawatt is the resource. The temperature of the resource, the pressure that you find in the resource and the size of the resource. Many of these sites are pre-exploration. So if you do the analysis, it's roughly between 15 to 30 megawatts per site. That's our base assumption. As we move forward on the exploration, we fine-tune the number. So on the megawatts, we don't see a big change. We don't see AI will not generate more resource to generate more electricity. We're always trying to optimize the above surface equipment that we manufacture and design and that gives some additional upside, but not in significant numbers that you are looking for.

Alex Innes with Van Berkom Global. Just wondering, I understand that your 2030 forecast for energy storage doesn't assume that merchant prices stay where they are for PJM. But then it is very interesting that PJM is a big part of your development pipeline. So clearly, you see continued opportunity in that market. I guess is there anything specific that you're seeing, whether it's maybe significant growth in storage capacity in that market that may depress merchant prices over time? Because the reserve margin is what it is. I mean, as you said, it's at record lows and pricing continues to be really robust. So I'm just wondering if there's anything specific that you see that tempers your expectation for merchant pricing in PJM going forward?

Yes. We see a development of capacity market in PJM and all our new pipeline in PJM is towards this capacity market.

I'll just add that the project today in PJM are 1-hour project in the pipeline. Most of them are 4-hour megawatt -- 1 to 4 hours in order to support the capacity market that we expect to start.

Okay. So thank you all. We have a break until 11:00 AM. At 11:00 AM, we start the EGS discussion.

[Break]

Let's start. Thank you for coming back for the really interesting part of the day. So for this part, we have on stage Doron, Assi and Ofer that you already heard today. And joining us also Daniel Moelk, EVP, Subsurface, Wells and Next Generation; Nirit Grushko, EVP and CTO, Innovation, R&D and Technologies; and Paul Thomsen, VP, Business Development. Thank you.

So before we -- after we had that session on the core business, and we showed how a robust growth we have until 2030 and show how electricity demand is accelerating and changing and what that change plays directly to Ormat's core capabilities and strengths and how we are using those strengths to grow faster and capture more value from our existing businesses, we also presented a strong growth plan through 2030 that does not depend on EGS, as you saw on the slide. It is supported by projects, capabilities and opportunities that we have today.

EGS could be the geothermal industry's equivalent of the shale revolution, significantly expanding the accessible geothermal resource base and unlocking a step change in market size, project development opportunities and long-term growth. So before we get into the conversation, let's take a minute to see what EGS means.

[Presentation]

Okay. What you have just saw illustrate why there is a lot of excitement around next geothermal. And if we go to this slide, you can see here, Doron presented it before, EGS has the potential to expand geothermal into much larger source of reliable, low-carbon power. This could enable bigger projects with greater scale in new location and potentially even behind-the-meter opportunities. And for Ormat, this is about much more than technology. It is about combining decades of experience, expertise in development, power generation, technology, engineering, manufacturing, construction, subsurface capabilities and partnerships that we believe can expand the opportunity that is available to us.

So I'll start with Doron. There are many companies entering the next-generation market from start-ups, technology companies, oil service companies and major energy players. When you look at the competitive landscape, what gives you the confidence that Ormat can become a leader in this space?

So maybe before going back, we see the previous slide that shows the potential growth for EGS. And just think about what we've discussed in the past about the demand that continues to grow significantly, and this is the supply. So if EGS is technological, capable and economical, this is the supply. And what you see between the supply and the demand is the Ormat Powerhouse.

Now when we look at many other developers and many other companies, most of them are focused on technology. EGS is a technology how to generate heat from the ground. But what we know is that's not the target. The target is to develop power plants and generate electricity. This is the target. And this target can be achieved only if you are able to do all the elements that we have been doing for decades. It's starting with exploration. Even on the EGS part, you first need to understand the rock. You need to do some analysis before you actually start drilling an EGS project. We have the people to do it, and we are multiplying the people in other locations getting more experience.

Development. If you don't fight for interconnection and Paul will talk later about the interconnection, if you don't get land, if you don't have water rights, it doesn't happen. If you don't know how to design a power plant, how to build it and how to operate, it doesn't happen. So when I look at the market and see the various companies that are trying to enter the geothermal market, it's not the EGS market, it's a geothermal market. I can clearly see why we should be a leader in this market. You need to have the entire skills together.

So Doron, if I simplify that, the competitive advantage is not one individual piece of technology. It is the ability to bring the entire project together. Is that the right way to think about it?

Exactly. Ormat and we showed you before, is a powerhouse of generating electricity. We have the full capabilities from 0 to a power plant -- operating power plant and to operate it for decades. We know how to get the permitting, the water, the interconnection. We are filing -- we filed in the past. We will show you later today that effectively we are utilizing existing assets that we have today to build EGS projects. And from the long term, we are looking to be a long-term player. We have been a long-term player. We have power plants operating for 40 years. We're signing recontracting them for another 25 years. This is where we are. This is our bread and butter, developing geothermal power plants either on traditional technology that we've discussed before or on EGS technologies or on the other -- on the Sage technology that Daniel will elaborate, pressurized technology that Daniel will elaborate later. We have all the capabilities to maximize this opportunity.

So this is our fourth, the powerhouse of Ormat. So let's go below ground. One thing that sometimes gets lost in the EGS discussion is that there isn't just one technology or one approach. Ormat is currently pursuing 2 different subsurface pathways through the Ormat-SLB alliance and the Sage collaboration. And Daniel, you are leading our subsurface activities. So let's start with the technologies themselves. Can you please explain in practical terms how the 2 approaches differ and what each is designed for?

Yes, of course, I'm very excited actually to explain it a little bit. We have here in this slide a conceptual graphic showing the different technologies. And to the left on the hydrothermal system, you can see what we are doing today. And the EGS technologies or pressurized EGS technologies that we are pursuing, they are by concept, the same. We are trying to connect deep to the earth to mine heat from below the feed to the surface that we can electrify it.

In our hydrothermal systems, the heat is present and also the medium that transports the heat to the surface water is present already in natural damaged rock. To expand the portfolio of geothermal, we are expanding to places where only hot rock exists. The concept we are going to do with the geothermal alliance is that we drill the target rock horizontally, and recreate connections between a dedicated injection well and a dedicated production well by stimulating this rock and creating an artificial aquifer. In this artificial aquifer, we are injecting continuously cold water below the ground. It heats up, and we can produce it from the production well on surface and generate electricity where no hydrothermal reservoir is existing.

And with the Sage technology, the principle is also comparable. We are again connecting to hot rock with dedicated drilled wells. We are creating artificial aquifers with the Sage technology, the wells are not connected. Each well is a producer and an injector by its own. So to generate power, water is injected into a dedicated well, it heats up, it has pressure. And when the pressure is relieved, it is injected in another well and the flow of hot fluids to the surface can then be electrified. And this goes back and forth why the pressurized technology from Sage is very often also being described as an huff and puff system because one well is breathing out and the other one is breathing in and creating a baseload generation with this technology.

Sounds very simple, Daniel. What is the status of the 2 pilots today?

So currently, we are developing the first pilot with the SLB geothermal alliance. It's our venture we have together with SLB at our Desert Peak facility in Nevada. And it is currently in the planning stage and in the data acquisition stage. We are going to a proven field, but we are taking a much deeper look into the rock into the subsurface to plan very well. This exploration phase will end by the end of this year when we start mobilizing rigs and choosing our final targets. In the year of 2027, we will drill both wells, a dedicated injection well and a dedicated production well with the EGS technology and create this artificial reservoir. And we want to complete the installation of the wells by the end of next year and then go in 2028 into a testing, demonstration and operational phase with this pilot.

In parallel, Sage Geosystems is also going to implement their technology at an Ormat site in Nevada. The status is comparable to the one with SLB and the geothermal alliance. Currently, there is a planning phase and the planning of the first -- of the start of the first drilling campaign is actually by the end of this year. There's a little bit of an evaluation phase in between. So by 2028, it is planned that both wells have been drilled by Sage for their huff and puff system. And also there, during the year of 2028, we can go through the testing operation phase to, in the end of the day, evaluate the results from both pilots.

So as these pilots move forward, what are the most important things you want to learn and demonstrate?

So currently, we are choosing different pathways and different technologies for success. So we are also diversifying a little bit the toolkits that we want to use for EGS. But in principle, both pilots are supposed to answer the same question. We want to have the execution, of course, safe, but we also want to have it repeatable to be able to scale it up in the future. We have models behind both pilots that we want to prove. We want to prove them by demonstrating that the plant generation of electricity matches those models. We call it the reservoir performance is supposed to be proven. We also have fluid management, EGS projects, they need water, and we want to see that the water loss and the water amount we need is in accordance to our models. And we want to start during the pilot phase already to follow a learning curve for the drilling and for the performance. And we want to be on this learning curve when we enter into the production and operation stage of the pilots.

In the end of the day, if we take it all together, we want to be able to simulate and forward look what the generation cost per megawatt are with the technology that we want to demonstrate. And that will help us to scale up to commercial scale with already defined targets within a midterm commercial development. We want to bring the subsurface costs below EUR 3 million per megawatt and see a lot of potential then going forward to go below this target on the long term. But ultimately, we want to answer the question, how can this technology support future implementations and how do the economics of this technology look like in the future?

So how this collaboration gives us Ormat access to different subsurface technology and how those collaborations translate into Ormat's ability to develop PGS projects in the future?

I think it's important to mention that the collaborations with both companies with SLB where we have the partnership and with Sage, where we have made an investment in, they go far beyond the pure pilot implementation phase. After the pilot phase, we have signed already commercial agreements, how we have access to the technologies. And we can start right now thinking about commercial implementation in the future. So to do so, we are building our own EGS capabilities. We are building up a team of well engineers, reservoir engineers and reservoir models and production engineers and completion engineers who can capture the learning and the know-how from the pilots and hence our own capabilities and build a team and the know-how exactly like we have in the hydrothermal business today to be ready for commercial deployment in case the pilots are successful and can then be repeated on commercial scale.

Okay. It sounds like you're going to be very busy in the next months and years.

It's very exciting.

Okay. While that technology work is progressing, Ormat is not waiting to begin developing the opportunity. We are advancing another critical part of the equation in parallel, product development. Our BD teams are identifying the most attractive resources and securing the land and development rights needed to turn that resource potential into commercial projects. Paul and Daniel, your teams have been mapping the EGS opportunity across the Western U.S. What have you learned? And how are you turning that work into commercial development pipeline?

Maybe I start with the mapping process that we are doing because that is in the end of the day, a big handover and handshake between the subsurface team and the business development team. What we are currently doing to prepare commercial deployment of the technology if we get good results from the pilots, we are taking a very deep look into the subsurface. What we see here on the picture, that's a public map of the heat profile in the Western U.S. together with GeothermEx, a third-party geothermal specialized company by SLB. We're taking now a very, very detailed look state by state into the EGS potential, but also narrowing down the real locations for commercial deployment. So far, we have done it for 6 states, and we are continuing for the entire Western U.S. And narrowing down those opportunities provides a very good basis then for our business development team to come up with a plan how we can deploy those opportunities into projects.

Thanks, Daniel. EGS is very exciting, and it's created a lot of job security for us in Business Development because now Daniel's team can go find very high potential EGS resources all over the country. Before, we used to chase very bespoke hydrothermal resources and they kind of were where they were, and we had to develop them. And I think we developed them in some of the harshest conditions possible because where there was hydrothermal anomalies, there was permitting constraints, they could be located in the middle of nowhere, and we made these projects work, and we have a really successful 60-year history.

Now I'm getting polygons from our EGS team who worked with GeothermEx, and we are looking at these lands and trying to decide how we can get them. And we're going to cover kind of 3 examples for you. One, we combed through our 0.5 million acres that we have under control today to say, where are projects where we have potential EGS, and we've identified some of those projects. Then in the public land options, we've gone after EGS parcels, and we've been quite successful most recently in Utah and New Mexico. And then we're going after what's maybe most exciting to me, which is private lands where we can see projects that maybe have water rights with them that are close to existing transmission that allow us to really accelerate the EGS development. So our business development team is really applying our knowledge for the last 2 decades to advance EGS as quickly as possible.

So let me focus on the land position specifically. In Nevada, combing through those -- all of our existing leases, we've identified about 30,000 acres of land that we think has high EGS potential. And our General Counsel is here, so she's cautioned me to say, we think that there is a really good potential, but it's potential yet to be proven that this could result in about 1 gigawatt of generation. And it's important to note there that we have really good on-the-ground resources. We know the regulatory structure. We have existing transmission and interconnection. We have water rights for those projects. And so we've identified those. And as a teaser, you're going to hear a little more about one of those projects a little later on.

Three weeks ago, there was a BLM lease sale in Utah, and we went after an EGS project and we're successful in getting it. We are thrilled to add another 14,000 acres of high potential EGS to our portfolio through the public land auction. Again, we think there's a potential, a probability of potentially 660 megawatts of power from just that acquisition alone. In New Mexico, we went again after public lands, and we secured 10,000 acres. We think that could do approximately 470 megawatts, maybe if Daniel can find that resource and exploit it with all the technologies he just discussed.

And what's new to Ormat, and I think really exciting is in Oregon and Idaho, we have secured the access to private lands to evaluate 150,000 acres of land. We can exploit about 20,000 acres of that for subsurface and 1,000 acres on the surface. Going after private lands for us is kind of a new world because we've been so focused on the Western United States and these public lands. So being able to work with very large landowners in the United States that have not only land rights, but water rights gives us just really unparalleled flexibility for our Business Development team looking for these projects that we can get to market as quickly as possible. And that's just the beginning. The conversations are still ongoing. As Doron discussed earlier, we have 2 more public lease sales this year, both in Nevada and Idaho. There's an unbelievable amount of acreage up for auction in the state of Nevada. And we're talking to other large private landholders that we think can accelerate these projects much quicker.

So it sound like land is not really a problem. We have enough. But one of the biggest challenges facing new power generation in the U.S. today is getting access to the grid. Fitting the energy storage with less experience than in the geothermal, but now we're getting to a new market. How does Ormat's experience in securing interconnection in the past translate into advantage as you develop EGS projects?

As a long-term developer who's delivering thousands of megawatts, we know there's probably nothing more critical than the ability to interconnect to the system and transfer those electrons along the transmission system. It really set us apart for decades in having access to the ON Line in the state of Nevada. For those of you who don't know, there's a big transmission line kind of connecting Northern Nevada to Southern Nevada. Our public utility controls about 60% of it. Ormat controls the other 30%. And it enabled us to offer projects in California, originating in Nevada and gave us unparalleled flexibility to find the best value for our resources.

So when we start looking at EGS, we comb through our existing transmission and interconnection for our projects, and we have found places and been able to redirect transmission and find excess interconnection for hundreds of megawatts of EGS development today. I think you heard it before, those are projects where we have the interconnection in hand, and we have the transmission service rights in hand.

But we didn't stop there. We know that there is going to be a much larger scale for these projects. And so we really wanted to look at what was our advantage in the industry and having land position is critical for filing for this interconnection. And we have so much land that we said, let's start filing for this interconnection immediately ahead of these public land auctions where other people can't compete with us and secure our positions in these markets. So in the state of Nevada, we have filed for another approximately 400 megawatts of interconnection. And it rolls off the tongue, but it's really a paradigm shift for the business development team who used to file for 38.5 megawatts or 50 megawatts if the hydrothermal project was really successful.

So going to 400 megawatts in Nevada, we're filing for close to 700 megawatts in the state of Utah. We are going to have a gigawatt of interconnection coming online in the future, and we think we're ahead of the market because we're using our existing land positions in those states to secure that competitive advantage.

So another side in BD commercial project is customers. How are you leveraging those relationships today to build commercial markets for EGS?

So again, Ormat has this kind of unparalleled history with power purchase agreements. The first geothermal projects were kind of put on the standard PPA design. One power purchase agreement, one power plant, it was very rigid. If we overproduced -- we don't really know in the hydrothermal world what we are going to produce until we're producing it. But we had to sign these contracts upfront. And so the first contracts, if we overproduce, we got paid pennies on the dollar. If we underproduce, we got penalized very heavily. And so we started negotiating with utilities as a leader in the industry to say, look, we need a little more flexibility in these contracts. We need to create a range, whether it's 20%, and we're going to give you an idea when we capacity test the resource, and we really enhance those existing PPAs.

Next, we said, you know what's better than that is, let's go after portfolio PPAs where it's not just one project dictating success or not, let's take a suite of projects and offer them to utilities so that if one project hit the permitting snag, we can backfill it and unleash the power of Ormat instead of going after one project in serial fashion of unleashing and going after all of our projects simultaneously to try to get to scale quickly. We're going to take that same creativity to EGS. We are negotiating PPAs right now that have a cap, that have a floor that give us this flexibility because we're in the world of kind of the unknown of how much is this subsurface work going to cost. How often do we have to redrill doublets and so forth? And so we're having very positive conversations with offtakers on this range of success for these projects moving forward. And I think this design is going to give us unparalleled value. It's going to allow us to have the certainty to move these projects forward and get electrons to market as fast as possible.

So actually, as Paul just talked about, Ormat has negotiated with PPA and managed project risks for decades. How important is getting the commercial structure right before we are committing to significant capital?

I think there are a few elements we need to consider when we're developing an EGS plan. The first is how we're going to deploy capital over time, and we want to make sure it's financeable. Having a PPA that is supportive of the project allows you to better monetize the PTCs or ITCs, allows you to finance the transaction and potentially with EGS, bring some equity partners at the project level. So first, a PPA is a must in order for us to invest heavily in the business. Second is a way for us to manage the risk.

As Paul mentioned, potentially, our PPA will guarantee a certain return to Ormat. As I mentioned, we are expecting higher returns on EGS projects versus traditional projects. If the PPA price ties to our returns, it guarantees that when we will develop, we will get the best PPA in the industry. Ormat is only signing PPAs that allow us to develop assets and at the same time, reduce significantly the risk if the assets won't be as big or perform as well as we anticipate. So we're trying to protect the downside and, of course, enjoy from the high side from the side of the returns.

So okay, hearing so far, when we talk about an EGS development pipeline, it does not -- it goes well beyond identifying just a resource. So Doron, what needs to be in place for Ormat to consider a site commercially attractive and ready to advance?

I think the different stages will develop over time. The first EGS project, obviously, we will have more risk to it because we'll be basing on the pilot. But we need to know that we have all the elements for the development of the project. We need to know that we have the land. We have the water. We know the permitting interconnection and the PPA. Once we have all of this, we will be able to start developing a project. But this -- since this is new technology, there's obviously some more risk that might come later or before. But we are managing it as we go. The amount of information that exists today that will come up from the pilot of us and SLB or from Sage is enormous, and the risk should go down as we continuously develop the project. We want to be in the market sooner rather than later. And -- but we do want to make sure that when we go to the market with a project, we are getting the right returns for it.

So we have talked about what has to happen below ground and around the project. Now let's move above ground, an area where Ormat already has decades of technology, engineering and manufacturing experience. I'm sure you know that by now. Over the years, Ormat has supplied approximately 70% of the binary geothermal generating capacity installed globally. Nirit, Ormat recently introduced Ormega100. What is Ormega100? And why did you design a generating unit specifically for the scale of our envision for EGS?

So I think scale is really the starting point. With EGS products, you potentially talk about much larger geothermal development, hundreds of megawatts within a single location. So with that thing in our minds, we designed the Ormega100, which is 106 megawatt gross and between 72 to 80 megawatt net depends on the project configuration. So what we wanted is not a big unit, the most -- the biggest turbine in the industry. It's true that this is the biggest turbine in the industry, in the ORC industry. But still what was important for us is standardization, a standard repeatable generating package that can be deployed at any EGS project. Why standardization? Because it reduced engineering complexity. It reduced the schedule of procurement, construction and it also gives us an opportunity with the power plant in terms of the operational efficiency.

Okay. So there is an important philosophy behind the design. And our objective is not to build the cheapest plant and as you said, the bigger or quicker. Ormat owns and operate assets for decades. How does Ormat's owner-operator mindset influence the way you designed Ormega100?

So it influenced the design quite significantly because we are operating these assets for many, many years, for decades. So it's not just having -- looking on the initial CapEx. We are looking on the entire life cycle of a power plant. So we're taking all the elements around it. For example, the turbine. We plan to have a major maintenance once a decade. We designed it to have an autonomous operation. So availability is important to us, maintainability is important to us. And of course, a high performance over the entire life cycle of the power plant.

So it's going to be a standard unit unlike what we have today. And so what it will -- how it will impact the construction cost and time line?

So potentially, it will impact it quite a lot. And I will elaborate a little bit on the standardization. When you have a standard unit, you need to do the design only once you don't need to redesign it every time. You were excited about the size of the megawatts and the power plant. And it also impacts the fact that we have -- we will buy much more equipment, and we will improve our power with our suppliers so we can improve the margins within the negotiation that we will do with our equipment suppliers.

We can I mean it's like every mass production, it improved your spare parts inventory, and it improves the manufacturing setup time. So there are many, many aspects that can reduce the overall CapEx. So if we are looking on a current project, it will take us between 24 to 28 months. Our long-term goal is to reduce it below 18 months. Together with that, we want that the overall, the aboveground cost will reduce to $1.5 million per megawatt. And this is huge. So it's -- the standardization allow us to do it faster, faster deployment and reduce the duration and the cost. And we design it in a way that we will have high availability for many, many years.

Okay. That's very exciting. And we're manufacturing our turbine in our site in Yavne. And if EGS developed at the scale that we're discussing now, do we have the manufacturing capabilities to support it?

The short answer is yes. Yes, we can. Actually, this is one of the advantage of the [ OEC ] technology. With our current facility, we can manufacture around 300 megawatts per year, which is 4 Ormega. And with relatively low amount of investment and some outsourcing, we can increase this number dramatically. So I don't see any issue or any constraints with the manufacturing. I believe that as the market -- we will increase our capacity as the market demand growth.

So we discussed Ormega100 primarily in the context of project Ormat could develop and own, but Ormat has also sold geothermal equipment to third parties for many years now. How large could the product opportunity become if EGS develop at scale offer?

So naturally, we will be the first customer for Ormega100 for our own build projects, but opportunity is very big. And let's talk numbers. As he mentioned in his presentation that the DOE envisioned addition of 90 gigawatts of EGS capacity by 2050. It translates to a few gigawatts annually. And if you take this and our market share, which is 70%, you get to give and take 1 to 2 gigawatts of additional capacity every year, addressable market for us. Even if you cut this in 50% because you want to be conservative, doing about $1 billion opportunity for equipment sales annually once EGS will ramp up. This is big.

This is a large potential offer. And the offering would extend beyond simply selling the turbine?

So the short answer is yes. Now we are selling equipment and EPC as a service. But we understand that there are new developers when it comes to EGS that don't have experience in operating large geothermal facilities. So we will offer also to operate the sites for them. And by that, we'll give them end-to-end aboveground service that they can pick and choose and they can focus on the below ground. And if they want also the below-ground service, we have our alliance with SLB that can solve this problem.

I don't think there is anyone else in the market that can give this end-to-end solution to new developers.

Yes. Same as the hydrothermal. So potentially, we might participate in EGS through two complementary models, developing operating EGS projects ourselves, while also supplying technology and services to the broader EGS industry.

Yes, and, as you said, this is something that we have been doing for many, many years. focusing on these two elements. But I would say our primary focus is our own development of projects, building power plants for ourselves and selling the electricity. This is today our largest part of the business. This will be our largest part of the business, including EGS. This is the main focus for us.

The second part is to serve the industry. As Ofer mentioned, it's selling Ormega100 doing EPC like we're doing today, O&M services, the SLB and Ormat alliance. It is a vehicle that we've developed with SLB, and we are looking to see if we can sell more services than what we are offering today.

SLB obviously has a good relationship with other developers, with other players in the market, relationship that we do not have. So we believe the combination of the two can generate some more third-party sales. But again, the main focus that we have and the main focus that our engineers and the product segment will be focused on is building Ormat EGS portfolio.

So we heard what need to be done below ground, above ground around the project. So now let's make it tangible.

[Presentation]

So Doron, we're starting from a very different position than a greenfield developer. What still needs to happen to move the first EGS project, Dixie Valley from this development position to commercial operation?

I think you've heard over the day in many, many places, the fact that we are playing here for a long period of time and for a long term. So as EGS developed, we were looking and reviewing our internal assets, the 500,000 acres that we own to see which asset is good enough for EGS and where we can develop our first EGS project.

So when we looked at all of these assets, we found Dixie Valley as one of the best, if not the best location in Nevada for an EGS project. This is a location that we have today a geothermal -- traditional geothermal facility, and we will develop an EGS project.

So does Dixie Valley stand out -- why does Dixie Valley stand out as such an attractive opportunity for Ormat as you see it?

The first is the resource. We understand through the analysis that we've done that the resource in the land or the resource actually, the hot land in Dixie can generate and can be supportive for an EGS project. And based on that, we are basically targeting to the 280-megawatt EGS project. It's going to be a three phases project. And the target of the COD is starting from the end of 2029, going into 2032.

So I would say, the -- before getting into the specific dates of the target, Dixie is such an important -- a good place for us because we already have the land that is required for the project. We already have some of the interconnection already GI executed for 60-megawatt and file for interconnection for the rest of the 280 megawatts. So we have a very planned stage approach on the interconnection.

We have the water rights. Our existing facility uses water. We're not utilizing all the water rights that we have. We can use all the water rights in order to build this EGS project. And we are negotiating already a PPA that will fit an EGS project, taking into account the fact that it's not known exactly yet, everything is not known. There is more risk. So it will be in a higher PPA price.

And based on specific IRR, different model like Paul and Assi mentioned, it's going to be a PPA that a public company like Ormat can sign and can take a calculated risk reward into it.

And from time -- from a time line perspective, what are the milestones that we should expect?

So we expect to do the appraisal well, basically monitoring well, appraisal well, different terms for the same well in order to have a detailed understanding of the different layers in the ground and work with the right location to drill the doublets. The commercial drilling will start when we have the pilots.

So we are basically utilizing all of our powerhouse from the BD, from the design of the Ormega100, from the manufacturing to get ready that once the pilots are successful, either Sage or SLB or both of them, and we feel comfortable enough to move forward with a full project, we will start immediately the construction of the project.

And that should happen sometime in mid-2028. That should take us to the first COD towards the end of '29. It's 18 months a bit aggressive, but we usually put aggressive targets to ourselves. That's why you can see here year-end '29 till 2030, some contingency over there. And that's the first phase. And for this 25 megawatts, we have everything that is required to develop the project, waiting for the pilots to be successful and to know exactly where to drill and how to drill.

The same goes to the next phase of the 25-megawatt plus the 75 megawatts. This is the first Ormega. We will operate the first phase with an Ormega100 that will be partially utilized, and as we continue to drill the well, the doublets, we will connect them to the Ormega and generate electricity. The time frame of 2032 is basically based on the GIAs that we've signed and that are in the queue. And as we get the interconnection, we will be able to get to this 280 megawatts by 2032.

So Dixie Valley makes the opportunity much more tangible, as I said. But our ambition is clearly goes beyond one project. How do you take that what we are building at Dixie Valley in scale EGS across Ormat's broader portfolio?

So you see here basically 3 numbers and I can add many more. We had multiple discussions within the management, with our board, what target should we put, what are realistic targets, what are aggressive target? What is the market expectation and what will the market accept is a realistic target and target that we can be.

So we put the 100 megawatts, this is a target that we know the location, the place, we have the interconnection. We have the water. We have everything that is required to build the project and we are targeting 1 gigawatt between 2033 to 2035.

It's a relatively large time frame because it mainly relates to the interconnection and the ability to get enough water rights to drill this project. But it's a long-term target. It can be earlier, and it can be later. This is what we are looking for.

In 2028, once we finish the pilot, we'll have the technology. But Ormat powerhouse is working in parallel. So BD, as Ofer said, where -- Ofer and Paul said, we are buying land. We are filing for interconnection. We are getting more places and we will continue. And the 3 to 4 gigawatts that you see here on this slide, this is what we have today. But in the next BLM auction in Nevada or in Idaho this year, we will get more land. We will get more site potential for EGS. And at that time, the 3 to 4 gigawatt might will be a different number. And when additional auctions will come, the number would continue to grow.

And as Paul said, we have negotiated or negotiating with private landowners, 150,000 acres. We are negotiating with other large private owners additional sites because if you own a significant amount of land and you want to develop an EGS project, you want to sign it with the right partner. You want to sign it with somebody that you have confidence that will deliver a project.

The people that we were speaking, they are not just trying to sell land. They're actually trying to utilize and enjoy the EGS growth. And this is something that over the next few months and next year, we will continue to update you on more and more locations and sites and acres and gigawatts that we will acquire.

And in parallel to all of that, the interconnection is being filed continuously. So this is something that is evolving, this is what you see here is the initial step into the EGS market, and we will be happy to update you as we move forward with it.

Okay. So as from a capital allocation perspective, how are you thinking about funding EGS while maintaining the return and risk discipline you have described earlier in the day?

So as we mentioned earlier, we have all the toolkits to finance EGS projects for the next few years. It starts with the ability to utilize the great PPAs that we are signing also in EGS in order to get project finance. It's adding to our already existing capabilities of monetizing PTCs or maybe ITC in building the plant. And three, the way we know how to work with Ormat is that if equity is required, it may be at the project level. It may be a much later stage at the holdco level. All of those are available for us. The key is this project should have a very good returns.

Now when we think about the deployment of CapEx, in 2026, we are probably going to spend less than $30 million, $40 million on EGS. We have the investment in Sage. We have the land that Paul just mentioned that we leased, plus a few dollars that goes to the SLB.

Probably as we look in 2027, we expect to spend roughly $100 million to fund the SLB project to fund potentially in the second half of the year, the first appraisal wells for Dixie. And to spend some money on buying equipment for the product segment to support the rapid expected growth.

So at this level for the next 2 years, EGS from a capital perspective is not a big burden on the company. And when we will start spending heavier money in 2028, second half of 2028, as I said, we will use all the toolkits that already exist with Ormat to build a great company.

So we are targeting 1 gigawatt of EGS during 2033, 2035. And the questions investors will ultimately use to evaluate EGS, what economics are required for Ormat to deploy capital?

So I will just say that I wanted to have a 2035 goal. Doron said 2033. We couldn't agree, so we put a range. So this is a range. And you can see a lot of ranges here because there is a little of unknown here.

With that being said, let's start with the cost. Daniel said that we are targeting $3 million per megawatt for the subsurface. Nirit mentioned $1.5 million per megawatt for the above surface. So all in all, if you add those two numbers up, it's $4.5 million per megawatt.

Since this will be a long journey on our base assumption, when we are going to sign our first PPA, we are assuming that the initial costs will be anywhere from $5.5 million to $6.5 million per megawatt. And that's why in order to build 1 giga, we will need to spend $5.5 billion to $6.5 billion.

I will say, though, that potentially that number will be lower. This number is slightly higher than what some other companies presented to the market. But I will tell you that our goal and we've learned a lot about EGS already from SLB and Daniel can probably give more information than me about it. Our goal is to develop assets with very limited decline over the years with not a lot of need for makeup wells and to make sure that our land already have enough room for the makeup wells that we will require in the future. And that's why our capital numbers are slightly higher than what you saw with others.

All in all, if we're going to invest $5.5 billion to $6.5 billion, and this should be PTC eligible, and we are planning, as Nirit mentioned, to meet the local content, which means PTC won't be $33, will be close to $37. Close to $3 billion of that amount, we'll be getting over 10 years of operation from the PTC monetization. So a lot of it will be financed from PTC monetization.

We expect revenue from 1 gigawatt operation to be around $1 billion a year, which is exactly the amount that we expect to generate from the Electricity segment in 2030, so we will double it in a PPA of 120 and the PPA can be even higher.

From an EBITDA perspective, including the PTC, we expect to generate, again, $1.1 billion from EGS by 2033 to 2035 every year, again, doubling again Ormat expected EBITDA for 2030. Therefore, this can make Ormat larger, profitable, transform our business model, and this doesn't take into consideration at all the potential additional revenue, EBITDA and income from the product segment.

So let's recap. And Assi, you can tell us what -- how it will impact Ormat beyond 2030. We have two opportunities. One is owning our own EGS project and one selling equipment to other. Please give your thought about how it will impact Ormat after 2030?

Let me start by saying that the electricity segment targets and the Ormat targets that we provided for 2030 are independent of EGS. They are not including the potential Dixie Valley, 25- to 100-megawatt that is expected to operate between 2029 to 2031.

Second, the total 1 gigawatt that we plan to add in the first half of the 2030s, that should generate $1 billion of revenue, if successful, and the same amount of EBITDA.

On the product segment, as Ofer mentioned, if we will even capture a small part of the market, 20% to 50%, we can generate every year $1 billion to $2 billion of additional revenue. Again, this is dependent, of course, of other developers to generate more capacity. This doesn't develop -- pretend what Ormat will do. This will be only third-party developers.

And from what we see from the oil and gas industry, they are very interested to develop the subsurface and they are looking for solution and expertise above ground, and that's why Ormat can sell them equipment and potentially O&M services. So again, EGS can transform Ormat from being a great company to be probably one of the best growing company in the renewable industry. Very exciting.

Very much exciting. And I think that brings the discussion full circle. What we wanted to show through this conversation that Ormat EGS strategy is not based on waiting for a single technology breakthrough before beginning to develop projects. We are advancing the opportunities across the value chain in parallel.

So I want to thank you all our panel participants for the discussion. And now we will open the floor for questions.

Dylan Nassano, Wolfe Research. So you said you have PPAs currently under negotiation at Dixie Valley. I just wanted to clarify maybe the structure of the project or offtake agreement you're envisioning there? And can you just speak to, I guess, behind the meter and how that could fit into the strategy?

Sure. So the structure is going to follow kind of our typical PPA structure. It would -- it's going to be similar to our sleeve deal, where we move power through the existing utility system to a customer. And I think as we described, the concept is to have a cap price to protect the buyer. So if the price goes up above a threshold they don't like, they can exit from the PPA. And then we are going to tie kind of the floor to our rate of return.

So that if we're trying to develop the projects and to maintain a reasonable rate of return for Ormat, we see the price escalating, we can go to them and say, we've hit this price. Would you like us to continue and protect both of us in these kind of early phase EGS projects moving forward.

To your question, the 1 gigawatt that we put together in general is in front of the meter, but I can tell you that on the private land, we are also looking for discussion with data center operators that may be ready for some behind the meter.

But again, the focus of Ormat, because of the fact that we already have interconnection is on the -- in front of the meter.

Sunaina Ocalan from Bernstein. Can you maybe discuss what temperatures you're targeting at Dixie Valley? And then following up on that, potentially, what portion of your portfolio by the mid-2030s coming from EGS versus the conventional geothermal?

Sure. First, an apology, I have a European background, and I will answer in Degree C because that's where I'm more familiar with. But -- we will start in a range that is already from a temperature range proven for the industry for between 180 to 220 degrees C. That's what we know from the operating asset. While the technology evolves, we will always try to go deeper, even though the efficiency of the heat production, the heat mining also lies in the length of the drilling that you can deliver off the wells and not only on the temperature gradient.

Okay. And if I can just follow up on that. Between now and sort of mid-2028 when you're on the road map that you've shown, what are the KPIs that you're looking for from a technical perspective in terms of expecting progress?

The KPIs that are learning curve related. That's the most important thing. We will set the baselines. We have some minimal KPIs that we want to meet with the pilots. And behind the pilots, our performance curves and learning curves that are both time related, time related in performance, how does -- how will the pilots continue to generate the electricity amount as calculated over time?

How will the water consumption of the pilots be over time, plus the other time component is how does the economy of scale for the footprint drilling principle behind EGS layout. In the end of the day in a simple way, can we confirm that every new well that we drill in the location is cheaper than the previous one.

Just a follow-up. You mentioned what of the 2030 will be EGS. So in the plan that we presented, none of the numbers are EGS, they're all traditional, which mean there is basically an upside on the original plan, which is the EGS that we mentioned here.

Chris Dendrinos, RBC. Maybe just a follow-up on that prior question quick. What's the depth that you're going to Dixie? You can put that in meters if it's easier.

We're in the exploration stage. So we are anticipating a vertical depth between 4,500 and 6,500 feet in the reservoir. And this is all to be determined during the exploration phase that the asset is going through. And by the length of the wells itself, it's very simple, we will max out the capacity of the drilling rigs and that -- and the tools that we have to generate as long wells as we can.

Got it. And maybe separately, just thinking about SLB and Sage. I mean do you ultimately envision just picking one design? Or is there the potential to do both? And is there one -- I guess that, that would be like by a certain area, one design works better than another?

What is very important for us is to be on the one side, very technology open. And at the other side to have a very, very broad toolkit for EGS.

So the selection of the technology that we will deploy within a selected prospect or project location will always be a site-specific decision with the early development of those new technologies, it will also be a technology readiness decision.

Larry Oxley, Advent Capital. As long as we're on engineering, just one more engineering question for you. Just from a water usage standpoint, for a similar-sized megawatt project, how can you compare legacy geothermal versus enhanced geothermal, what is the water usage differential there quantified?

It's very much different because for hydrothermal project, you tap into an already existing water resource of water. And for an EGS project, you need to inject the water, you need to bring it to yourself. So an EGS project starts with a certain amount of water consumption to construct it at the beginning. That's where you do the highest consumption.

This is why Doron mentioned and Paul also in their part of the presentations that we are securing at this point of time already water rights, because without water supply and water rights, there is no possibility to build this artificial reservoir that we want to construct with EGS.

And then we have targets with the water consumption where the technology is today, water is lost when you circulate it through the artificial reservoir. With our partners, we have hope and potential that this water consumption is very manageable with the proprietary technologies that both partners are going to implement in the subsurface. This is part of the things we also want to demonstrate with the pilots.

Ryan Levine with Citi. One just on the -- or two questions, one on the follow-up on water. Is there any color you can give around specific numbers around what you're targeting for water consumption? And is there any need for water pipelines to help facilitate the consumption?

Let me start with the second part. The water pipeline water supply, that is something that we do today in our projects already. We need water during the operations of our plant. We consume a lot of water when we drill hydrothermal wells already because when we hit the permeable aquifer, then we lose the water that we are using to drill because we're going into an already permeable rock that has the fractures.

So the pipelines and water supply management that is required, that is copy and paste from our hydrothermal business. When it comes to the quantity and percentage, this is something where we are still working with our partners to define KPIs for the future. At this stage of the project preparations, it would be too early to mention those at this point of time.

And you mentioned how there is an internal team working on the EGS development that's distinct from the partners with Sage and your other partners. Can you -- any color you could provide around the line of demarcation between what the internal team is doing versus external and how they interplay with one another?

Yes. The external teams, they are partners right now in the pilots later for the technology and potentially also in projects that is to be determined later.

Our internal team is building exactly the same capabilities that we have on our hydrothermal business. That's -- I think that is a foundation for the industry leadership position that we have. It's the full vertical integration. And when it comes to the subsurface, we want to have our own well engineers for designing EGS projects on the subsurface. We want to have our own reservoir models and reservoir engineers.

So we become, like in the hydrothermal business, our own source of truth. We will run our own models, we will have our own concepts, and we will have our own development plans. And for EGS, there's also a very important decision to be made later. How do we operate an EGS project? How do we operate the wells?

So the production engineers that we will put behind it will also be internally because we want to rely on our own capacities and capabilities when it comes to the deployment of our own projects, but also to critical decision-making for this technology.

I will add just that our target is to be, as Daniel said, self-sustained. We want to build our projects without relying on Sage or SLB. It's always an option to rely them on our partners. We're very happy, but the basic demand that we have internally is to build a team that can build EGS project without any external support. Maybe on the surrounding but not on the essence of the project.

And that's what we're doing today. We are building the team now, it's going to be built in parallel to the existing teams that are focusing on our 2030 target that we mentioned to you. But that's the idea. We want to be able to do project by our own without depending not on SLB and not on Sage. We have in the agreement, the commercial agreement that we've signed with both of them the ability to do it by ourselves, and that's what we are targeting.

Assi, I know you acknowledged the costs are a little bit higher than some other public disclosures, but you mentioned that it's due to mitigate the potential future makeup wells. I found that pretty interesting. Could you expand on that exactly like what you're embedding in the initial CapEx to increase that dollar per megawatt, but then how that might be able to help in the future as you're not going to be drilling more makeup wells. So just if you could expand on that, please?

If you don't mind, I'll defer it to Daniel, who told me me everything I know about EGS. He can answer it better.

In the end of the day, like I mentioned in my introduction in the panel, we are building something artificial, which means you have choices, how you're construct it. We, with our partners for both the EGS technology that we developed within the geothermal alliance with SLB as well as what Sage is doing by themselves, have own technologies in our model, also deviating from others in the industry. And we are determining like for every other hydrothermal project also, what is the best design for the most economic sweet spot. And our current design foresees a long usability of the wells for two reasons.

Number one, there's a little bit changed design. And I think also the proprietary technology that the other parties give us access to make the well sustain longer. Maybe the megawatts are in the same dimension. You can always play a little bit with it. But what is important is that it is an economic decision, but it's also a sustainability decision because when you have extracted heat from the rock and you need to redrill, you need to utilize new acreage because you have utilized acreage before.

And we are a company who plans its projects to really deliver over decades. And we want to utilize for the production, the land that we have and don't want to cannibalize it very fast by having to utilize new land in a very short time period.

That's helpful. And then maybe just a follow-up. M&A is part of your DNA at Ormat. So maybe how should we think about what M&A looks like in EGS specifically as you continue to scale?

I will say that in general, we are focusing on organic growth in the EGS business. We may look into different technologies like the investment we made with Sage. But I would say the majority here is organic.

There are no other developer other than the one that already went public that is as advanced as Ormat to get to its first plant. And therefore, if there's anything that we can buy, it's technology-related. But as I mentioned, the idea is to develop the technology together with the partners that we already discussed. If there will be other opportunities in the technology part, we may look into it.

So I probably should start with this question. It's a little more high level. But just taking a step back, Thinking about your evolution of messaging for EGS over time, it's kind of progressed from a little more skeptical to more optimistic. And now you're putting out these long-term targets, which I'm sure you're aware now, investors are going to kind of hold you accountable to them and at least make progress towards them.

So what's really changed, I guess, is my question over maybe the last 6 months or a year to give you confidence that EGS is worth this investment that you're talking about? Yes. So I don't know if that makes sense.

So I would say we have been monitoring EGS for a long period of time. Ormat was the first one to drill EGS well 20 years ago. It wasn't a successful, the technology was -- the ] cost was not there, it wasn't there.

And we see -- and we continuously look at technology. We invested in Sage 1.5 years ago. We've been discussing with them before that. We signed with SLB the first agreement, I think, also about 1.5 years ago. We've been discussing with them. I think it's an evolution of looking into the technology and understanding better the technology and the potential for it to be successful.

And I think the other part is the PPA pricing. At the end of the day, the cost is not there yet. We say 5.5 to 6.5, other say different numbers. But none of them is the existing cost today. These are all forecasted to the future. But PPA pricing that goes up allows us to match between the cost and the price on one hand. The second, the big demand for AI and the ability to maybe sign behind the meter agreement also brings it.

So there's a lot of environment maybe on the -- related to the first part of my presentation in the morning on the electricity market and PPA pricing support that and the grid pricing to support to that. And in parallel to that, development in our technology that this is something that we continuously look at. And we brought Daniel to lead it.

We had to keep something for the Analyst Day.

We'll go on.

I think there's one question -- one more question.

I'm curious if you compare water loss versus resource cooling as technical problems, which is harder to solve at this stage? And then on a related note, Sage put out a press release recently that one of their pilots achieved less than 10% water loss over multiple cycles. I would have liked to know how many cycles, but certainly encouraging as an update because it's significantly better than the last data point we have for EGS. So yes, just those two questions.

On the Sage question, the answer is very easy. That's a fantastic question for Sage. But it's a different company that we generally don't comment on, independent if it's positive or negative, by the way.

If you ask me what is more challenging to control, if it's the cooling rate or the water loss. For EGS, it is the water loss because the cooling rate can be managed a little bit on the decisions, how you produce the heat, how you mine the heat. You can even with a completed EGS project, influence it by the production rates. The water loss is dictated by how you build it. And after you've built it, you have built it, you cannot change it anymore.

And the right architecture and the right technology to build the artificial reservoirs are the ones that most influence the [indiscernible] was later during production. And this is also something that we are focusing on with our partners.

I think our partner, Sage he has a good solution to address this. As you can see from the public announcements from the projects SMECI. And we will also use new technology provided by our partner within the geothermal alliance in the future.

So last 2 slides to summarize the discussions we had today. These are the growth numbers that we see today for the end of -- at the end of 2030, excluding EGS, basically doubling our portfolio, passing the $1.5 billion of revenue and passing the $1 billion of adjusted EBITDA. This is the summary of the first presentation we had.

And this is the EGS. As I said, the potential based on the DOE is 20x and more of what we have today, 90 gigawatts versus the 4 gigawatts operating today. And if you take the higher estimate, it's much, much more than that.

We are targeting 1 gigawatt between 2033 to 2035, and we already have today in the pipeline 3 to 4 gigawatts. We will be buying land in the various auctions. We will be buying land, private negotiated deals with private owned land, similar to what we did in Oregon and Idaho. And all of this land will support a much, much larger EGS opportunity as time passes. We have filed, as Paul mentioned, 1 gigawatt for interconnection. Some of it we have, some of it is on file. We are continuously filing.

Every land position that we acquire, we look to see what is the interconnection and whether or not we can get interconnection and when should we file. Interconnection time in the U.S. is somewhere between 4, 6, 7 years, you can choose, especially if you go to very large numbers. And that takes us to exactly the time frame that we are talking here today after 2030 going into 2033 and '35. These are numbers and actions that we are taking today. On the private land, we see much better potential because it can be faster. The permitting is faster. Most private land owners have water rights. That solved another issue. And with them, we will be discussing behind-the-meter transaction, basically bring the land. How did they call it, Paul? Powered land. So this is the term that we are working with them to build powered land to get the data centers to be there and enjoy the behind-the-meter transaction.

If you look at the demand that we talked and the supply that we have with EGS, Ormat is built exactly in the middle of it. We know how to develop the projects. We know how to build them. We know how to operate them. We have the financing for them. And this is probably the best time that Ormat could have. And basically, if you take the last 20 years of building and developing projects, preparing for a transformation point like today, an inflection point that we have today. So if EGS is successful, as -- as we said, the growth that Ormat will have is much, much -- could be much, much bigger than what we've seen in the past, and we see today up to the EGS era. Thank you, everyone, for joining us today.

Good morning, and welcome to the Ormat Technologies Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations, ESG Planning and Reporting.

Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating 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. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies' annual report on Form 10-K and quarterly 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's 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.

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

Thank you, Josh. Good morning, everyone, and thank you for joining us today.

Let me begin with the key highlights from the second quarter, starting on Slide 4. The first half of 2026 reflects accelerating momentum across all 3 business segments.

Second quarter revenue increased 10.6%, gross profit increased 20.8%, and adjusted EBITDA increased 6.9% compared with the prior year period. On the strength of these results, we are raising our full year revenue and adjusted EBITDA guidance.

In our Electricity segment, Blue Mountain's contribution, stronger performance at Olkaria and Puna, and lower curtailment in the United States drove continued growth. In Energy Storage segment, revenue nearly tripled year-over-year, supported by new capacity additions, high asset availability and favorable merchant pricing in PJM.

Taken together, these results demonstrate the strength and balance of our 3 segment model and the returns available when long-term contracted revenues are paired with selective merchant exposure.

On the development side, we added 155 megawatts to our generating portfolio since the beginning of the year, including the Hoku solar and storage acquisition, the Shire storage facility, and the commencement of commercial operations at our 10-megawatt Dominica geothermal power plant.

On the EGS front, we advanced both the SLB and Sage pilot program towards field execution and introduced Omega 100, our new 100-megawatt binary unit designed for large-scale conventional geothermal and EGS applications, both of which I will discuss in more detail shortly.

I will now turn the call over to Assi to review our financial results. Assi?

Thank you, Doron. I will begin my review of the financial results on Slide 6.

Second quarter revenue was $258.8 million, an increase of 10.6% compared with the prior year period, led by strong Energy Storage performance and continued growth in the Electricity segment. Gross profit increased 20.8% to $68.7 million, and consolidated gross margin expanded by 220 basis points to 26.5%, reflecting the strong performance and margin contribution of our storage assets in PJM.

Net income attributable to the company's stockholders was $27.1 million or $0.43 per diluted share compared with $28 million or $0.46 per diluted share in the prior year period. The year-over-year decrease reflects a $6.6 million write-off of a storage project we decided not to pursue, partially offset by stronger underlying operating performance.

Adjusted net income attributable to the company's stockholders in the second quarter of 2026 increased 6.5% to $31 million or $0.50 per diluted share compared with $29.1 million or $0.48 per diluted share in the second quarter of 2025. Adjusted EBITDA increased 6.9% to $143.9 million, led by Energy Storage performance.

Slide 7 provides additional details on our segment performance. Electricity segment revenue in the second quarter increased 5.8% to $169.3 million. The increase reflects a full quarter contribution for Blue Mountain, higher energy rates and improved performance at Puna, stronger generation at Olkaria following well field optimization and lower curtailments at the McGinness Hills, Dixie Valley and Tungsten, partially offset by planned maintenance activities.

Product segment revenue decreased 21.6% to $46.7 million, reflecting the timing of manufacturing and construction progress. Product segment gross margin was 9.7%, down from prior year period, mainly due to increased construction costs related to a project in Europe, and the impact of foreign exchange fluctuation on manufacturing costs.

We expect Product segment gross margin for the second half of the year to be approximately 15% and for the full year gross margin to be approximately 18%.

Energy Storage segment revenue increased 195.1% to $42.8 million. High asset availability enabled us to capture strong merchant pricing in PJM, while capacity addition completed over the past 12 months contributed incremental revenue.

The segment generated a gross margin of 56.2%, reflecting our strategy of optimizing the mix of contracted and merchant revenues. We expect Energy Storage gross margin to normalize to 30% to 40% in the second half of the year and for the full year to be approximately 40% to 50%.

Slides 8 and 9 summarize our first half results. Revenue increased 42.9% to $662.7 million, driven by substantial growth across all 3 segments. Adjusted EBITDA increased 18.9% to $338.8 million, and adjusted diluted EPS increased 54.3% to $1.79 per share.

Turning to Slide 10. During the first half of 2026, we collected approximately $52 million of proceeds from tax credit monetization transactions. For the full year, we continue to expect approximately $90 million in proceeds, including approximately $70 million related to ITCs and approximately $20 million related to PTC transfers.

During the second quarter, we recorded a $9.5 million ITC benefit. For the full year, we expect to record approximately $59.9 million in ITC benefits, which we expect to result in an effective income tax benefit rate of approximately 15% in the second half of the year, excluding changes, of course, in law and other onetime items.

Slide 11 presents the change in our cash position during the first half of the year. Cash and cash equivalents and restricted cash totaled approximately $658 million as of June 30, 2026, compared with approximately $281 million at year-end 2025.

The increase reflects the proceeds from our convertible notes offering and other financing activities, cash generated from operations, tax credit monetization, and the proceeds from the Top 2 sales, partially offset by capital expenditures, debt repayments, acquisitions, and investments.

Our total debt as of June 30, 2026, was approximately $3.4 billion, excluding deferred financing costs. And the weighted average interest rate on our debt portfolio was approximately 3.9%.

Turning to Slide 12. Total liquidity was approximately $1.1 billion as of June 30, 2026. Net debt was approximately $2.7 billion, equivalent to 4.3x net debt to adjusted EBITDA. And net debt represented approximately 50% of total capitalization.

We expect capital expenditures for the remainder of 2026 to be $449 million. Of that, approximately $281 million is allocated to the Electricity segment for construction, exploration, drilling, and maintenance; $129 million to the storage asset construction; and approximately $20 million to the SLB pilot and other EGS activities. Our detailed capital expenditure plan is included in Slide 34 of the appendix.

In support of our broader development program, we secured several important financing sources. In May, we closed a unique exploration financing facility up to $40 million for the Wapsalit geothermal project in Indonesia under the World Bank's geothermal resource risk mitigation program.

This structure provides a risk-sharing mechanism that reduce the financial exposure associated with early-stage exploration. Our strong liquidity and access to capital provide us with the flexibility to fund our development pipeline while continue to service our debt obligation and return cash to capital shareholders.

On August 5, 2026, our Board of Directors declared a quarterly dividend of $0.12 per share payable on September 2, 2026, to shareholders of record as of August 19, 2026. The company also expects to pay a quarterly dividend of $0.12 per share in the next quarter.

I will now turn the call over back to Doron to discuss the recent operating and strategic developments.

Thank you, Assi. Turning to Slide 14. Our total operating portfolio now stands at approximately 1.85 gigawatts. On Slide 15, our electricity portfolio stands at approximately 1,355 megawatts globally with new 15 megawatts added during the quarter.

We currently have 202 megawatts of electricity projects under construction and development through the end of 2028, including 87 megawatts of geothermal capacity and 115 megawatts of solar capacity. All of these projects are supported by long-term PPAs, providing strong visibility for future growth.

Slide 16 details the Electricity segment second quarter drivers. Curtailment in the U.S. declined by $4.2 million. Blue Mountain contributed approximately $2.6 million of revenue and Puna revenue increased by approximately $3 million on higher rates and recovery from prior year wellfield issues.

At Olkaria, stronger generation following wellfield optimization added approximately $2.5 million. Overall, power generation increased 3% year-over-year.

Moving to Slide 17. One of our strategic priorities over the past several years has been to proactively renegotiate contracts well ahead of expiration, extending the contract term, while capturing the significant improvement we are seeing in geothermal pricing.

Over the past year, we continue to make excellent progress on this initiative. In addition to signing new PPAs for projects with expiring contracts, we executed several blend and extend agreements, including the Blue Mountain power plant that increased the value of our existing asset base while providing our customers with long-term price certainty and reliable baseload renewable energy.

The re-contracted and blend and extend PPAs are expected to increase annual revenues by approximately $14 million as they become effective over the next several years starting in 2026, and continuing through 2030.

Importantly, these contracts are secured with minimal incremental capital investment, making them one of the most attractive sources of value creation within our portfolio.

Looking further ahead, we continue to see significant opportunities across our contracting portfolio. Between 2031 and 2034, we have approximately 190 megawatts under contract that are currently priced at a weighted average of approximately $86 per megawatt hour, lower than today's market pricing of over $100 per megawatt hour.

We believe our existing geothermal fleet provides a meaningful embedded opportunity to continue repricing contracts and creating long-term shareholder value.

Turning to Slide 18. Our Product segment backlog stood at approximately $203 million as of August 5, 2026. The decrease from year-end 2025 primarily reflects the recognition of $105 million of revenue from the Top 2 projects during the first quarter. The backlog remains geographically diversified with the majority associated with projects in Asia and Oceania.

Moving to Slide 19. Energy Storage revenue increased 195% to $42.8 million, including approximately $19.5 million of higher revenue from existing PJM assets and approximately $7.7 million generated by newly commissioned facilities. The operating portfolio now stands at 495 megawatts and 1,358 megawatt hours.

Turning to Slide 21. We remain on track to achieve our 2028 portfolio targets of 2.6 to 2.8 gigawatts, representing an expected compound annual growth rate of approximately 15% to 18% from 2025.

Slides 22 and 23 provide details on our geothermal and solar development pipeline. Recent milestones include commercial operations in Dominica and completion of the Cove Fort expansion, while construction and development continue across our U.S. and international portfolio, including the addition of Puna Expansion and Lone Mountain.

Turning to Slide 24 and 25. We have 7 Energy Storage projects under construction and development with total capacity of 497 megawatts or 1,888 megawatt hours. This includes the new 100-megawatt, 400-megawatt-hour Denali facility in California, which we recently approved for development.

Denali is expected to commence operation by the end of 2028 and will provide storage services under a 20-year tolling agreement with Clean Power Alliance. Our broader U.S. Energy Storage pipeline now totals approximately 2.5 gigawatts or approximately 10 gigawatt hours across 25 named prospects.

Turning to Slide 26. Our EGS strategy advanced across 3 pillars during the quarter: surface technology, subsurface pilot projects, and development footprint across the Western United States.

On the surface side, we introduced Omega 100, our modular 100-megawatt ORC unit designed for large-scale geothermal and EGS applications. Leveraging Ormat's decade of leadership in binary technology, Omega 100 is designed to serve both our future EGS development and third-party projects.

During the year, we also continued evaluating manufacturing readiness and the associated cost structure to support future commercial deployment.

On the subsurface side, we continue to advance both of our pilot projects. At our SLB Desert Peak pilot, we completed the analysis of geophysical seismic data and incorporated the results into an updated subsurface model. We also submitted drilling permit applications, progressed procurement of long lead items, and entered the final stages of vendor selection, keeping us on track to begin drilling in the fourth quarter of 2026.

The Sage pilot, we selected the project location, advanced permitting activities, reached the final stages of procurement drilling services, and made progress on the engineering work required to integrate Sage technology into an existing Ormat power plant.

Beyond the pilot projects, we are expanding our geothermal land position and securing additional water rights and interconnection opportunities across the Western United States.

During the year, we were awarded federal lease covering 10,642 acres in New Mexico for EGS development, and we are currently negotiating the acquisition of additional acres in Oregon and Idaho. Our resource team has also identified 2 promising prospects within our existing portfolio that we believe could support large-scale EGS development, and we continue to pursue additional interconnection opportunities in Nevada.

These initiatives, together with our strategic partnerships, expanding resource position, and proprietary surface technology, position Ormat to leverage its deep expertise to advance EGS toward commercial deployment, driving what we believe is a compelling long-term growth opportunity for the company.

Please turn to Slide 27 for an updated 2026 guidance. Based on our strong first half performance and continued business momentum, we are raising our full year revenue and adjusted EBITDA guidance. We now expect total revenues of $1.15 billion to $1.2 billion, representing growth of approximately 18.7% at the midpoint compared to 2025.

By segment, we expect Electricity revenue of $710 million to $725 million, Product revenue of $300 million to $320 million, and Energy Storage revenue of $140 million to $155 million. We now expect adjusted EBITDA of $630 million to $650 million, representing growth of approximately 10% at the midpoint compared with 2025. Approximately $17 million of adjusted EBITDA is expected to be attributable to minority interest.

Let me close on Slide 28. The second quarter reinforced the strength of our diversified business model and disciplined execution, double-digit revenue growth, gross profit expansion of more than 20%, a full year guidance raise, and continued progress on projects that will drive our long-term growth.

We also expanded our development pipeline, advanced the SLB and Sage EGS pilots and reinforced our funding platform in a supportive policy environment.

The demand for reliable, around-the-clock, low-carbon electricity continues to grow. Ormat is well-positioned to capture that demand through our combination of operating expertise, development capabilities, technology leadership, and strong capital position. We remain focused on executing our strategy, achieving our 2028 growth objectives, and creating long-term value for our shareholders.

Before we open the call for questions, I would also like to invite everyone to join us at our Investor Day, which we will host on September 8 at the New York Stock Exchange. During the event, we will provide a deeper look into Ormat's long-term growth strategy, including our plans to expand our Electricity and Energy Storage businesses as well as our road map for developing and commercializing EGS. We look forward to sharing more details with you then.

With that, I will conclude our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions] And our first question comes from the line of Justin Clare with ROTH Capital Partners.

I wanted to just start on the Electricity segment. So when I look at the Q2 electricity gross margin, it looks like it declined slightly year-over-year. This is despite the improved performance at Puna and Olkaria, lower curtailments, and then the contribution from Blue Mountain.

So just wondering if there were other factors that maybe offset the benefits? And then you also did modestly lower the full year outlook. So just wondering what explains the lowered expectation there for the Electricity segment.

Good morning, Justin. This is Assi. I hope everything is well. I'll start with the second part of the presentation. As you all know, in Q2, we do update the annual forecast for the first time, the guidance.

And first, I'm glad to report that the company is finally going to reach close to $1.2 billion of revenues, which is a huge increase versus the last few years. And we also increased the middle point of the EBITDA guidance and increased significantly the lower point of the EBITDA guidance.

And that came mostly as a result of weather-related activities on one hand that we saw in the East Coast, offset by lower $5 million in the Electricity segment, the majority of it related to 2 projects in the Caribbean. Those projects, we do have around 1 or 2 months delay on those projects on the COD.

But I'm glad to report that one of them already COD. Dominica is already in full operations, full operations since July 31. As of the offset of the gross margin on the quarter, I would say the only one time that we've seen is we did have some planned maintenance for the quarter, and we do expect margin to improve towards the end of the year.

Okay. Got it. That's helpful. Maybe then just shifting over to the Energy Storage segment. So for that segment, you lifted the revenue guide, I think $45 million at the midpoint. And so I was just wondering if you could speak to your assumptions around merchant pricing in the back half for the storage segment relative to what you experienced in the first half?

And maybe you could speak to kind of how pricing has trended in Q3, the quarter-to-date. Are you seeing any signs of pricing normalization in PJM at this point? Or are you seeing continued strength?

Thank you. It's Doron. So I'd say on the Energy Storage part, pricing in the first half was very, very strong. The merchant prices over the last few weeks, we see them becoming a bit more normal as we went towards the end of July and into August.

We are looking at the second half as a more normalized pricing, although a bit higher than what we've seen in previous years. And you can see also with the guidance that the first half is stronger than the second half.

But at the end of the day, it's impacted mainly by the weather conditions in the East Coast. I would say that the weather conditions in California and Texas actually had the opposite effect. But in total, it was a very, very positive impact for the Energy Storage.

And your next question comes from the line of Noah Kaye with Oppenheimer.

Looking forward to your Investor Day. And maybe I'll start with the project pipeline. It's really nice to see that growing. You added Lone Mountain to the official list here. So the question is, should we assume these new projects coming into pipeline are generally covered under the umbrella PPA with Google? And maybe just give us an update on how you're tracking towards meeting that portfolio target of 150 megawatts.

Thank you for the question. So yes, Lone Mountain is going to be part of this portfolio PPA with Google. I expect that in the coming quarters, we'll release some more greenfield that will be part of the portfolio PPA with Google.

We feel very comfortable in meeting the minimum or maximum target in the portfolio. We signed the portfolio with the range, like in the past, the minimum and maximum in order to allow us flexibility in managing the portfolio as pricing continues to increase.

Okay. Very good. And then I appreciate all the updates on the EGS pilots as they advance. Can you maybe help us understand and appreciate a little bit more what you're working towards solving in terms of the key technical challenges when you're looking to -- I know these are quite small projects, but when you're looking to integrate them into some of your existing operations? And basically, what have you had to sort of figure out in terms of operating these pilots safely and without having any real impact to the existing assets?

Thanks. So the pilots that we are doing, and we're planning in both pilots to drill the appraisal well or monitoring well this year and the full pilots next year -- during next year should not have any impact on the existing facilities.

They're going to be drilled outside of the existing reservoir and be connected to the existing facilities. We might have a short shutdown of a couple of days in order to connect them. But even that I believe will be very small and should happen hopefully by the end of '27 or beginning of '28.

I'd say the main challenges with EGS technology at the end of the day is how you maintain the water on one hand, build the facility that the fractures are connecting, and how you reduce the cooling effect that you continuously inject through the fracture, the cold water. In traditional geothermal, we have the large pool of resource that is heated up from below, continuously move water. I think this is one of the challenges that exist.

Your next question comes from the line of Jon Windham with UBS.

Perfect. Congratulations on the result, and I guess not taking it for granted. Thanks again for all the transparency on the projects. Maybe a couple of quick things I want to dig into. And first, unfortunately, is weather, but you mentioned it before.

I'm just trying to think through or if you have any color on potential impacts on the third quarter generation due to the heat dome in the West. I know a lot of the total generation of geothermal is a little bit about the temperature differentiation between subsurface and above ground. So just any comments you have on that? And I'll have a quick follow-up.

Yes. So since we did finish July, we're gathering all the information. All in all, July had some very hot days, but some days not hotter than the average. And all in all, July was relatively as we expected. August is starting very hot. And as you say, very hot has impact on geothermal. And we need to see how the weather continues in the West during August and September to know. But July was relatively flat.

Perfect. And maybe just another one. I know it's a smaller part of the -- sorry, go ahead.

I was just saying it's flat versus the guidance that we gave, which means there is no change to the guidance. It's more or less what we thought.

Perfect. And maybe just quickly, I know it's a smaller part of your business on the solar side, but any thoughts about the FCC's ruling on banning new models for inverter imports, whether that's any impact to storage or the solar business you have?

So of course, we are looking into it and following all the unknown changes that is coming. We do think that we will be able at this point to buy from China inverters, and we will be able basically to eliminate the ability to connect to them from remotely.

And that option is available when we talk to our vendors. And it looks like that's the main restriction at this point. So we are moving forward. We do have Jersey Valley Solar and Storage that it's under construction. We do have Denali that we just announced.

We actually have unprecedented amount of solar and storage under construction these days. So I will say we do think that we will be able to eliminate the ability to connect from remote to those inverters. And therefore, we will be able to buy foreign, not just Chinese, but in general, foreign inverters. Lately, we've gotten some of those from Spain, and we think that we'll be able to buy more.

Your next question comes from the line of David Sutherland with Baird.

Congrats on the results. And maybe I have 2, both on strategy. And I guess I'll start first with Energy Storage. I wanted to just ask if the grid congestion, weather events, all the things that have led to higher pricing for the merchant contract specifically have made you guys rethink or re-contemplate the strategy of merchant versus tolling and that mix element and just what you guys prefer in each region?

Thank you for the question. We started our strategy, and there's a lot of questions whether we should go fully contracted like geothermal or fully merchant, and we chose a risk-managed approach of 50% contracted and 50% merchant. We are still with this strategy.

There are markets where we see that the merchant prices are very low, like in Texas and California, and over those markets, we look for tolling agreement. PJM that has very fluctuated merchant pricing, we are merchant, so our strategy hasn't changed.

Overall, we're looking 50-50. I can say that we are looking at additional markets like Georgia, Oklahoma, and others to build a project there. And you can see in the pipeline that we have today almost 2 gigawatt-hours of projects under construction that will be COD'd no later than the end of 2028. And that's increasing significantly our portfolio. And this is one of the decisions we made a few years ago to focus on Energy Storage as a strong supporter for our renewable energy front.

And maybe turning to Electricity and just looking at the PPA environment, and I appreciate your commentary about it still remaining very constructive. I just wanted to ask how far out are negotiations stretching, your philosophy on contracting today versus waiting for potentially higher prices down the road? Or any other considerations on the PPA backdrop?

We see PPA pricing continue to increase. We are negotiating some additional contracts for projects. It's in the early stages of negotiations. It's always a question whether to sign today future contract or not. But when we see high PPAs like the one we signed with Google and with Switch, that takes away the risk of exploration.

These are things that we're happy to sign. They are limited in magnitude, number of megawatts as well as timing. So in case we see continued pricing increase, we can continue to sign new PPAs.

As I said, all of the PPAs have a minimum and a maximum all the portfolio, and this allows us, in case pricing goes up, to go to the lower level, prices stays down, to go to the higher level. I will say that also on the EGS front, we are discussing EGS PPAs. These tend to be a bit higher PPA pricing than we have signed so far.

[Operator Instructions] And our next question comes from the line of Chris Dendrinos with RBC.

I wanted to ask a bit more on the EGS side of things here. And you commented in the prepared remarks that you're adding some acreage, I think, New Mexico, Oregon, looking at Idaho as well as identified a couple of sites on your own side. And so maybe just how do we think about the investment strategy that you all are making right now, just given you haven't spud a well yet?

And so I guess, from my purview, it looks like you're quite confident in the outcome of this. But what's the level of, kind of, risk management, I guess, in terms of making investments today ahead of seeing initial pilot results?

Thank you. So on the technology side, and I mentioned before the challenges we have, but in order to deal with these challenges and what gives us a much higher confidence in the ability to solve all these issues is the joint venture that we did with SLB. As you know, SLB is one of the, if not the largest drilling company, and they have the expertise of drilling and fracking. And we believe that all technological issues can be solved if you have the right experts with you.

We have started significantly effort in developing EGS. The investment to date on land is not that material, definitely not for a company the size of Ormat. We have multiple discussions on -- in different states on different sizes of land, and we'll update the market as we progress, and also on our Investor Day in September in New York. But these so far are not a significant amount of money.

Got it. Maybe as a follow-up and just to the comment on the prior question, I think you mentioned that discussing PPA pricing for EGS projects that, that could be higher than other conversations. And so maybe just on that, what's the time frame that you're kind of looking to potentially -- well, sign these PPAs and when do you think delivery would start?

We will obviously give a lot of more information on our Investor Day. I would say that we are speaking with different hyperscalers, data centers and utilities about EGS projects. All of them are aware of the fact that the pilots are being developed.

And whatever PPA we will sign, we will take into account the fact that the technology is not fully yet developed, and will have -- and will allow us to manage the risk as we've been doing for many years.

There are no further questions at this time. I will now turn the call back over to Doron for closing remarks. Doron?

Okay. Thank you, everyone, for joining us today. Q2 was an excellent quarter for Ormat that allowed us also to increase our guidance. We have a very good pipeline, both on the Electricity, the geothermal part as well as on the Energy Storage part projects that are being developed.

And looking forward to seeing all of you in our Investor Day in September, where we'll be able to give much more color on our pipeline for the traditional, the energy, and also give quite a lot of more information about our EGS pipeline development. Thank you.

This concludes today's call. You may now disconnect.

Good morning, and welcome to Ormat Technologies First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations and ESG Planning and Reporting.

Before beginning, we'd like to remind you that the information provided during this call may contain forward-looking statements relating 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. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and current reports on Form 10-Q 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's reason 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 would 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.

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

Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me start with a few key highlights from the first quarter, and then I'll touch on several recent developments beginning on Slide 4.

We began 2026 with a record first quarter revenue, delivering 75.8% year-over-year growth alongside strong expansion in operating income and adjusted EBITDA. This performance reflects strong execution across our business with particularly strong contribution from our Energy Storage and Product segments, demonstrating the strength and resilience of our diversified portfolio.

Our Energy Storage segment continues to emerge as a key growth engine with revenues increasing 153% year-over-year, driven by both capacity expansion and our ability to capture favorable merchant pricing. This performance reinforces our strategy of optimizing the balance between contracted revenues and merchant exposure to maximize return.

Beyond financial performance, this quarter also reflects meaningful strategic progress within our Storage segment, including the COD of our Shirk Energy Storage facility, the acquisition of the Hoku hybrid solar plus storage facility in Hawaii and the signing of the PPA for Jersey Valley, 67-megawatt solar paired with a 67-megawatt 268-megawatt hour storage facility that we expect will come online in late 2027 or early 2028.

Our product segment delivered significant growth, primarily driven by the top two projects, highlighting the strength of our integrated business model and ability to create value across the full life cycle of our assets.

In the Electricity segment, we signed PPAs for approximately 200 megawatts at favorable pricing, including agreements with Google and Switch and two blend and extend contracts. These agreements, along with future contracts are creating incremental revenue opportunities for our electricity segment, improve visibility across our development pipeline and support the value of exploration and drilling investments we have made over the past few years.

We also strengthened our balance sheet through recent strategic financing transactions, supported by strong investor demand and favorable market conditions, we completed a $1 billion upsized convertible note offering. This transaction reinforces our financial position, increases flexibility and expand our capital base to support our growth initiatives.

We continue to make significant progress in our next-generation geothermal and EGS strategy and are advancing on multiple fronts. On subsurface technology, we are progressing with two pilots, including our pilots with SLB and our collaboration and investment in Sage Geosystems.

On the commercial development side, we are expanding our resource base, mapping our existing land position, advancing land acquisition and initiating PPA framework discussions with hyperscalers. On system innovations, we are developing next-generation high-capacity Ormat Energy Converter solutions tailored for EGS deployment. Taken together, these efforts position Ormat at the forefront of scalable, dispatchable next-generation geothermal, including EGS solutions with the potential to significantly expand our addressable market over time.

Before I provide some additional updates on our business, I would now like to turn the call over to Assi to discuss our financial results. Assi?

Thank you, Doron. Let me start my review of our financial highlights on Slide 6.

First quarter revenue was $403.9 million, up 75.8% versus the prior year period. This very strong top line growth was largely driven by the continued strength in our Energy Storage and Product segment. First quarter gross profit was $120.4 million, up 65.1% from $72.9 million in the first quarter of 2025, driven by contribution from the sale of the top two assets and the performance of our storage assets in the PJM market.

First quarter net income attributable to the company's stockholders was $44.1 million or $0.71 per diluted share compared to $40.4 million or $0.66 per diluted share in the prior year period. The increase is driven by improved business performance, partially offset by approximately $38 million of onetime pretax expenses, including $33.7 million related to induced conversion resulting from the repurchase of the 2027 convertible note, $10.2 million in write-offs and immaterial settlement expense, partially offset by $9.6 million gain related to the purchase transaction of the Hoku storage and solar facility in Hawaii.

Adjusted net income attributable to the company's stockholders for the first quarter increased by 93.5% to $80.3 million or $1.30 per diluted share compared to $41.5 million or $0.68 per diluted share in the first quarter of the prior year. Adjusted EBITDA for the first quarter was $194.9 million, a 29.7% increase compared to last year. The year-over-year growth was primarily driven by higher contribution from the Energy Storage segment, reflecting favorable PJM pricing and new capacity additions, all further supported by improved performance in the product segment as a result of the two project sales.

Slide 7 breaks down the key financial performance at the segment level. Electricity segment revenue for the first quarter increased by approximately 1% to $181.6 million, mainly due to the recent acquisition of Blue Mountain and the improved performance at Olkaria facility. The expansion to our operating portfolio helped to more than offset the reduction from lower rates at Puna and extremely high ambient temperature in Nevada, which reduced revenue by approximately $4.8 million.

Product segment revenues increased by 458.4% to $177.4 million during the first quarter. The performance was driven by $105 million revenue recognition from the top two projects, which we have previously disclosed. Our Energy Storage segment revenue increased by 153.1% in the first quarter. As Doron highlight earlier, the strong performance was driven mainly by high asset availability, which allow us to capitalize on strong merchant prices in the PJM market as well as new capacity additions over the past 12 months.

The gross margin for the Electricity segment decreased to 30.8% in the first quarter. This decline is driven by lower energy rates at Puna and high temperatures in Nevada that I just touched on. In the Product segment, gross margin for the quarter was 21.4%. For the full year 2026, we expect product segment gross margin to be between 18% and 20%, reflecting the segment sales mix. It's worth noting that due to the impact of the top two project sales, we recognized in the first quarter approximately 60% of the segment's expected annual revenue, gross profit and EBITDA.

The Energy Storage segment reported gross margin of 59.1% during the first quarter, making a significant improvement versus the prior year. The increase was driven by the effectiveness of our strategic approach to balance between contracted pricing and merchant exposure. For the full year 2026, we expect the Storage segment gross margin to be approximately 35% to 40%, reflecting the fact that we currently do not forecast similar merchant prices conditions during the remainder of the year.

Moving to Slide 8. We collected $48.6 million in cash from monetizing PTCs and ITC through tax equity transactions. For the full year 2026, we expect to collect approximately $90 million from ITC tax equity transaction and PTC transfers, including ITC tax equity proceeds from the recently signed Burdock tax equity transaction. As we discussed during our fourth quarter call, in 2026, we expect to record a tax benefit driven by higher ITC level that will result in a negative tax rate of 15% to 20%.

Slide 9 detail our cash flow over the last three months, illustrating Ormat's ability to generate strong cash flow, which allow us to reinvest in our strategic growth while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of March 31, 2026, were approximately $763 million compared to approximately $281 million at the end of 2025. Our total debt as of March 31, 2026, was approximately $3.4 billion, net of deferred financing costs. And our cost of debt decreased significantly following the recent convertible notes offering to 3.9%.

Moving to Slide 10. Our net debt as of March 31, 2026, was approximately $2.6 billion, equivalent to 4.2x net debt to EBITDA. As Doron noted, during the quarter, we successfully completed a $1 billion upsized convertible note offering. We elected to execute this capital raise in the convertible market because it provide us with the best combination of low and no cash coupon and reduced equity dilution through the repurchase of our shares at an attractive price of $108 per share.

We now expect our total capital expenditure for the remainder of 2026 to be $587 million. Our detailed CapEx plans are presented in Slide 32 in the appendix. We plan to invest approximately $436 million in the electricity segment for the construction, exploration and drilling and maintenance in 2026. We also plan to invest $111 million in the construction of our storage assets and approximately $20 million in the pilot with SLB as well as in other EGS activities.

On May 6, 2026, our Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.12 per share payable on June 3, 2026, to shareholders of record as of May 20, 2026. In addition, the company expects to pay a quarterly dividend of $0.12 per share in each of the next three quarters.

I would like now to turn the call back to Doron to discuss some of our recent developments.

Thank you, Assi. On Slide 12, you can see that our current total portfolio stands at 1.8 gigawatts of Geothermal, Solar and Energy Storage facilities.

Turning to Slide 13. Our Electricity portfolio now stands at approximately 1,340 megawatts globally. We added 30 megawatts in the first quarter of 2026 and currently have approximately 216 megawatts under construction and development through 2028.

Earlier this year, we acquired Hoku, a recently built solar plus storage facility on the Big Island of Hawaii for approximately $80 million in cash. The acquired asset include a 30-megawatt solar PV facility paired with a 30 megawatt 120-megawatt hour battery Energy Storage system with a 25-year PPA.

Moving to Slide 14. Our Electricity segment benefited mainly from improved generation at our Olkaria complex and contribution from our Blue Mountain facility, which was acquired during the second quarter of last year. We had also experienced lower curtailment during the quarter compared to the year ago period, especially in Nevada, and we expect this trend to continue throughout the remainder of the year. As Assi noted, performance within our Electricity segment was partially offset by lower energy rates at Puna and extremely high ambient temperature in Nevada that impacted our power plants generation. With respect to Puna, we anticipate energy rates in the next few months will improve following the impact of oil prices. Internationally, our Dominica plant is now operational. Full COD is expected in the second quarter of 2026 due to third-party transmission line delay.

Moving to Slide 15. We have negotiated two blend and extend PPAs for existing plants. The first agreement is for our CD4 geothermal power plant, which is part of our Mammoth Geothermal Complex in California. The amended agreement extends the original PPA, which was signed in 2022 and scheduled to expire in 2032 by five additional years through 2037 and increases contract pricing by approximately 27%. The amended PPA terms will go into effect in October of this year. The second blend and extend PPA for another facility that we cannot disclose at this time due to our agreement with the utility provider. These new PPAs show our consistent strategic execution over the past several years and reinforces our ability to secure high-quality long-term contracts that drive sustainable growth.

Turning now to Slide 16. Our product segment backlog stands at $239 million. The decline from the fourth quarter of 2025 was primarily driven by the recognition of $105 million in revenue from the top two project in the first quarter of 2026. Since the start of the year, we've also secured two supply contracts for projects in Asia totaling $56 million.

Moving to Slide 17. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 153%. The COD of Shirk and the addition of the Hoku facility in Hawaii brings the total Energy Storage portfolio to approximately 1.4 gigawatt hours with the majority operating in California.

On Slide 19, we continue to remain on track to achieve our portfolio capacity target of between 2.6 to 2.8 gigawatts by the end of 2028.

Turning to Slide 20 and 21, which display our geothermal and hybrid solar PV projects currently underway. We anticipate adding 216 megawatts to our generating capacity from these projects by the end of 2028. In geothermal, we are planning a 30-megawatt greenfield project that will come online in 2028. We added the Jersey Valley solar plus storage facility following the PPA signing and the Blue Mountain solar facility for the plant auxiliaries.

Moving to Slide 22 and 23. We currently have six projects under development in our Energy Storage segment, expected to more than double our portfolio and add approximately 1.5 gigawatt hour. As shown on the slide, the Jersey Valley project has been added and is expected to come online late 2027 or early 2028. The 100-megawatt 400-megawatt hour greenfield facility is now expected to reach COD in 2028 as permitting is still in progress. This timing update is reflected in our plan and does not impact our long-term target.

Turning to Slide 24 for a discussion of our EGS efforts. We continue to advance our next-generation geothermal strategy and are making meaningful progress across both technology and commercial development. We are actively progressing subsurface pilot initiatives with SLB. We have completed initial geoscience groundwork and are advancing well planning appraisal, positioning the project for key milestones over the coming quarters.

At the same time, our collaboration with Sage is moving through planning and early engineering stages, including permitting, drilling design and fracture testing activities. These efforts are designed to validate technical assumptions ahead of commercial scale deployment.

We are also strengthening our internal capabilities to support long-term scale. This includes advancing our above-ground system design and optimizing our Ormat Energy Converter for EGS applications alongside evaluating manufacturing readiness and cost structure. We are investing in resource development, including geographic heat mapping, land acquisition and state-level resource assessment to build a robust pipeline of future opportunities. Our resource team has already identified two prospects in our existing prospect portfolio, including Dixie Valley that can potentially support large-scale EGS development.

Finally, we are actively pursuing external funding opportunities to accelerate development and reduce upfront capital requirements. We have multiple applications underway under various U.S. DOE programs supporting both EGS field testing and next-generation resource development. Overall, these combined efforts position us to effectively bridge the gap from pilot project to commercial deployment while reinforcing our leadership in next-generation geothermal and integrated energy solutions.

Please turn to Slide 25 for a discussion of our 2026 guidance. We are maintaining our guidance and expect revenue to increase by 14.6% year-over-year at the midpoint, ranging between $1,110 million and $1,160 million. Electricity segment revenues are projected to be between $715 million and $730 million. Product segment revenues are expected to range between $300 million and $320 million and Energy Storage revenues are expected to range between $95 million and $110 million. Adjusted EBITDA is expected to increase by approximately 8.2% at the midpoint, ranging between $615 million and $645 million.

I will now conclude our prepared remarks with reference to Slide 26. The strong performance we delivered in the first quarter across our business segments highlights the strength of our diversified business and our ability to capitalize on the rising demand for reliable, low-carbon electricity. With improving contract pricing, new projects entering service and our pipeline continuing to grow, we have a clear line of sight towards achieving our long-term targets for 2028. Our focus remains on creating long-term value for our shareholders through disciplined execution, strategic investments and our proven ability to develop and operate world-class clean energy assets.

This concludes our prepared remarks. Now I would like to open the call for questions. Operator, please.

[Operator Instructions] And your first question comes from the line of Derek Podhaizer with Piper Sandler.

I guess maybe let's start on EGS. Obviously, a lot of encouraging and very strong commentary around your developments there. Obviously, there's an IPO going on currently with the new entrants in more of the EGS market. So maybe just if you could expand on it further as far as the technology advancements you're making on the surface. You talked about a tailored solution for EGS. Maybe if you could help us understand the potential size and scale of some of the progress you're working on with SLB and Sage. You pointed out Dixie Valley as a potential area to scale up EGS. Just -- it's obviously a very exciting outlook, and this is about to be more under the spotlight as far as EGS and geothermal. So just hoping to get an understanding of how big this could potentially be for you for Ormat over the medium to long term here.

Thank you for the questions. So I'll touch it on the different levels that you asked. And maybe I'll start with our equipment and technology. We are developing a unique solution, a new OEC that will be able to work efficiently with EGS. EGS comes with special parameters on the resource that comes out of the ground. And this will allow us to standardize our OEC and develop a very -- a much simpler power plant than the power plant planned today, which will over time reduce significantly the cost to construct the power plant.

On the SLB joint venture that we have as well as the work that Sage are doing, we are doing multiple phases of land analysis and well engineering. On both cases, with SLB, we are working to file the permit to drill the first well later this year. And Sage on their part are working similarly to design the well and do all the preparation to file for permitting.

Both pilots will be adjacent to our facilities in order to reduce the time to market. So once the pilot is successful, the heat can be immediately transferred to our facility to generate electricity and basically allow us to confirm the pilot performance and success. And the third element you mentioned Dixie, obviously, Ormat has a unique and very large presence in California and Nevada with multiple sites -- that we have been looking for for hydrothermal.

But also over the last few BLM options, we were able to acquire some land that we believe are fit to an EGS project. One of them that we mentioned is Dixie, not far from our Dixie Valley asset. And we have additional places that we see that are potential for EGS. We are also, at this stage, part of our business development efforts spanning multiple states on locations to develop EGS project, and we'll obviously update you as we make progress.

Maybe just switching to the Electricity margins. I fully understand you had some elevated ambient temperatures. And if you add that back, it looks like you're flat year-over-year from a margin perspective. But just thinking about how should these margins really develop this year into next year might be able to take advantage of some of the elevated commodity price with Puna here in the short term.

But as you bring on newer generation or maybe an increase in solar generation, just trying to think through the margin progression as we work through '26, '27 through 2028. So maybe some thoughts around that would be helpful.

Hi, Derek. It's Assi. Good morning, and thank you for joining us. And As you know, over the next few quarters, we have roughly 40 megawatts of new blend and extend that should add anywhere from $7 million to $10 million annually to the revenue of the company. So that should be able to give you another 1% margin. And then we have another 40 megawatts roughly that is being also already negotiated and already a new contract that will be adding in another around 2027 and that should add another $5 million, $6 million to the company.

So between the two, we should see to the revenue improvement of 1% to 2%. In addition to that, we are looking also on the expense side, reviewing our expenses, trying to focus on reduction in expenses. We do not anticipate similar weather also as warm as what we've seen in Q1. We are very happy that the curtailment is behind us. It was much more favorable in Q1.

And I would like to say also Ormat has a large portfolio which was very warm on the West Coast, and it was very cold in the East Coast. When you bundle those together, we lost roughly $5 billion on the West Coast, but we made approximately over $20 billion in the East Coast. So it's better weather overall does improve Ormat situation, but it does impact the margin of the electricity. So I do expect in the next two years to see 1% to 2% increase year-over-year, starting probably in the second half of this year when we don't expect the weather to impact us.

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

I wanted to just follow up on the EGS here. Wondering if you could share just how large the pilot projects are expected to be in terms of megawatts? And then if you could just update us on the anticipated timing for initial production from those EGS wells. I think previously, you've talked about 2027. And then just what would you need to see from the pilots in terms of the data or just what would you need to see before expanding to larger-scale development of EGS projects? And then any sense for the timing of a first commercial plant?

Thank you for the question. I would say that both pilots are looking to generate somewhere between 2 to 4 megawatts each. And that should occur based on the drilling schedules and permitting in 2027. I don't know to say exactly who's going to be the first one, but both of them are connected to Ormat. Once the pilot will operate, we will need a period of a couple of months, maybe more to see the performance of these pilots. I think it is going to be a bit different between Sage pilot and ours and SLB pilot. It's a different technology than the two of them. And I think the duration of the pilot should be a bit different.

But as the pilot starts and we are in the geothermal area for many, many years. We're doing flow test for hydrothermal. So we are testing the subsurface. And in reality, every day that we do a test, we get information. And there will be a point in time that we feel comfortable enough to release our first EGS project based on the pilot success.

Okay. I appreciate it. And then maybe just one on PPA pricing here. So you signed, I think, 270 megawatts so far in 2026. As you look through the balance of the year, could you speak to the opportunity you have to sign additional PPAs for either new projects or re-contracting existing assets? And then just any way to quantify the amount of megawatts in terms of capacity that could be eligible for the blend and extend strategy from here over the next several years here?

So new PPAs, a thing that we are discussing and it is basically based on the way we are able to do our exploration. The Jersey Valley Solar and Storage project that we just signed is basically us maximizing our interconnection that we already have in our assets. We have a couple of more assets with free interconnection that we are looking to see if we can duplicate the Jersey Valley Solar and Storage idea. Basically building a Solar and Storage facility not far from a Geothermal facility and utilizing the same interconnection is something that we are checking today, and I hope we'll have some more updates as the year progresses on these two options.

Regarding blend and extend, between 2031 and 2034, we have about 190 megawatts that come off contract. Their average PPA rate is in the mid-80s today. And all of them are basically items that we are looking for blend and extend. I don't know to say that we will have it in the next quarter or two since there is some duration, but all of them, we are speaking with the relevant off takers to see whether a blend and extend concept works for them and for us and at what price.

Your next question comes from the line of Noah Kaye with Oppenheimer.

This is Andre Adams on for Noah. Just to go back to the OEC for EDS applications. Could you give us a bit more detail on the kind of capacity ranges you're able to produce efficiency gains from the larger size and how you see the TAM for the product evolving and when we might see initial orders for that product?

We are now in the final stages of design. I expect that in the next few weeks, we will come out to the market with information about the size of the turbine, which would be much bigger than what we have done so far. But the specific number, we will come up in a few weeks. We will also try in that announcement to explain how we see it being a much standardize the power plants and by that, allow us to have a lower cost.

Regarding getting POs, we are in various negotiations with multiple EGS developers on potential projects. And the minute that we sign with one of them, we will obviously announce and update the market.

And then just as a follow-up, given the outperformance of storage and products in the first quarter, could you just give us a little bit of color on the cadence of those businesses for the balance of the year and why the company would be reiterating rather than raising guidance?

As you saw the margin achieving was around 59%. With that being said, the whole year we do expect anywhere from 35%-40%. We usually do not increase, decrease or change the guidance during the main call. We usually do it during the August and the November call, and we decided to stick with that. We need to see where the emerging market will be for the remaining of the year, and then we would make that decision.

Your next question comes from the line of Chris Dendrinos with RBC Capital Markets.

I guess maybe just to go back to EGS again, and you talked about the opportunity at Dixie. I guess what I'm wondering is, is there additional opportunities, call it, at your existing asset base to using EGS well to bring those back up to flush production if you've got extra transmission capacity or maybe capacity on the turbine. I'm just kind of wondering how amenable those -- that existing acreage position is with heat in place or something like that.

Okay. Thank you, and welcome to join us. Dixie Meadow is one site that we located. We have another site that we believe has potential for EGS projects. Existing interconnection facilities today that we have and free interconnection are not big enough for EGS. EGS project will be much, much bigger than what we see today. So we are looking to see places that we do have enough new interconnection available to build EGS projects.

We have some interconnection requests that we've already filed, some that we are working on to file. But for EGS projects, we would need much larger interconnection agreements than what we have available today.

Maybe as a follow-up here, I think you mentioned additional conversations with potential PPA customers. I think you mentioned data centers. Are you seeing an increase in interest from, call it, the nonconventional utility customer outside of switching Google? Have they kind of come in to the conversation here more recently?

Definitely. We have discussions with other hyperscalers on top of the names that you mentioned that are looking for renewable energy. And as EGS will progress, I believe we'll get much, much more attention and ability to sign more PPAs and larger ones.

[Operator Instructions] And your next question comes from the line of Ben Kallo with Baird.

Congrats on the results. Just maybe on EGS, I think that's the theme. The JV structure with SLB, could you just talk to us about as we advance a couple of years to where you have a commercial project, how you expect or think ownership of the power plant would work is my first question.

So thanks, Ben. The pilot with SLB is designed to develop the EGS solution for the subsurface. The above surface is obviously utilizing the Ormat technology. Once the pilot is successful, we can develop new EGS projects either as part of Ormat, utilizing our knowledge and the expertise that we've gained from the joint venture or alternatively utilize the knowledge within the joint venture that will supply services to the new power plants that we will build.

SLB, as you know, is a service provider. Ormat is a developer, owner and operator of power plants, and we will both have -- utilize our expertise. So once the JV is successful, we will be buying subsurface services from the JV that SLB will be able to provide, and we will continue to build the power plants and operate them and own them.

Great. My second question is just on -- you're in a unique position with both Geothermal and then developing Energy Storage as well. And I just wonder if that comes up or how much it comes up with hyperscalers and if there's an opportunity for adding storage with hyperscalers independently or with geothermal.

So with hyperscalers, -- we haven't had discussions about bundling Energy Storage with Geothermal since Geothermal is a 24/7 facility. But we have had discussions and there are RFPs coming out from hyperscalers that are looking for Energy Storage facilities. We are participating in these tenders and discussing with different hyperscalers about building for them Energy Storage facilities -- stand-alone Energy Storage facilities. And once there will be some kind of an agreement on any of these prospects, we will update the market.

There are no further questions at this time. I will now turn the conference back over to Doron for closing remarks. Thank you.

Thank you all for joining us today. It was a very, very good quarter for Ormat, and we are looking to continue this great year.

Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.

Good morning, and welcome to the Ormat Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

And I would like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, 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 relating 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. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and quarterly 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. Reconciliation to the most directly comparable GAAP measures and management's reason 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 would 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.

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

Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me start with a few key highlights from 2025, and then I will touch on several recent developments beginning on Slide 4.

2025 was a strong year for Ormat. Revenue increased 12.5% to approximately $990 million and adjusted EBITDA improved by 5.7% to $582 million. Our results reflect meaningful progress toward our long-term targets. This was supported by improved performance of our Product and Energy Storage segment alongside solid execution in our core electricity segment.

Within our Energy Storage segment, we captured higher energy rates in the PJM market and benefited from strong market pricing. In addition, our energy storage facilities operated at higher availability levels, enabling us to fully capitalize on these favorable market conditions. The segment delivered robust gross margin in both the fourth quarter and full year, demonstrating the effectiveness of our strategy to balance contracted pricing with merchant exposure.

Recently, we achieved several important new developments. We successfully commissioned Arrowleaf, our first solar and battery energy storage project in California. We completed the acquisition of our second solar plus storage project, Hoku in Hawaii, and we won a geothermal tender in Indonesia.

On the PPA front, I know many of you have been awaiting an update. As promised, we have secured over the last few months, approximately 200 megawatts of new PPAs with hyperscalers, data centers, developers and existing utility and municipal customers, all at elevated PPA prices with potential for additional growth. These agreements include a 15-year portfolio PPA for up to 150 megawatts supporting Google's data center through NV Energy, and a 20-year PPA with Switch for approximately 13 megawatts of energy from our Salt Wells plant, which can serve as a platform for future PPA expansions.

We also negotiated 2 blend and extend contracts totaling approximately 40 megawatts pending final approval, which will enable us to realize higher energy rates starting as early as 2027 rather than at the original expiration dates. Together, these contracts, along with future contracts provide profitable new revenue streams, enhance visibility into our development pipeline and validate the expansion of our exploration and drilling initiatives over the past several years.

We also made strong progress advancing EGS towards commercialization. This is highlighted by our co-lead role in Sage Geosystems Series B financing, supporting the continued development of its geothermal power generation and energy storage solutions. This investment, combined with our commercial agreement with Sage and our SMB partnership broadens our EGS initiatives and positions us to potentially accelerate EGS time to market and expand geothermal deployment globally. I will elaborate on these initiatives in a moment.

Before I provide some additional updates on our business, I would now like to turn the call over to Assi to discuss our financial results. Assi?

Thank you, Doron. Let me start my review of the financial highlights on Slide 6. Total revenues for 2025 were $989.6 million, up 12.5% year-over-year. Fourth quarter revenue was $276 million, up 19.6% versus the prior year period. This top line growth was largely driven by continued strength in our Product and Energy Storage segments.

Gross profit for 2025 was $272.7 million, in line with prior year. Fourth quarter gross profit was $78.8 million, up 7.2% from $73.6 million in the fourth quarter of 2024. Gross margin for the full year and the fourth quarter were 27.6% and 28.6%, respectively, compared to 31% and 31.9% in the prior year period. This modest annual comparison was driven by previously disclosed curtailments in our Electricity segment at several U.S. facilities throughout the year and a change in our mix of revenues with higher revenues in our Product segment.

Fourth quarter net income attributable to the company's stockholders was $31.4 million or $0.50 per diluted share compared to $40.8 million or $0.67 per diluted share in the prior year period. For the full year, net income attributable to the company's stockholders was $123.9 million or $2.02 per diluted share compared to $123.7 million or $2.04 per diluted share in 2024. The year-over-year decline in the fourth quarter was primarily driven by impairment charges related to our Brawley geothermal assets and one of our Ormat facilities, which we expect now to discontinue operation during 2026. This was partially offset by strong growth in profitability at our Energy Storage segment.

Adjusted net income attributable to the company's stockholders for the fourth quarter was $41.8 million or $0.67 per diluted share compared to $43.6 million or $0.72 per diluted share in the fourth quarter of the prior year. For the full year 2025, adjusted net income attributable to the company's stockholders was $137.3 million or $2.24 per diluted share compared to $133.7 million or $2.20 per diluted share last year. Full year adjusted EBITDA was $582 million, an increase of 5.7%. Adjusted EBITDA for the fourth quarter was $158.7 million, a 9.1% increase compared to last year.

The year-over-year growth was primarily driven by higher contribution from the Energy Storage segment, reflecting improved PJM pricing and new capacity addition as well as improved performance in our product segment.

Slide 7 breaks down the revenue performance at the segment level. Electricity segment revenue for the fourth quarter increased by 3.6% to $186.6 million, primarily due to the recent acquisition of Blue Mountain and the improved performance at our Dixie Valley facility. This expansion to our operating portfolio helped to more than offset $4.3 million reduction at our Puna complex in Hawaii that was mainly driven by lower energy rates.

For the full year, electricity revenue decreased by 1.2% to $693.9 million driven by curtailment in the U.S. earlier in the year that reduced segment revenues by $18.6 million as well as a temporary reduction in the generation at our Puna facility and repowering activities at our Stillwater facility. This was partially offset by new generation contribution from our Blue Mountain facility, the Beowawe repowering project and improved performance at Dixie Valley.

Product segment revenue increased by 59.1% to $63.1 million during the fourth quarter, and grew by 55.2% to $216.7 million for the full year. The performance was driven by our strong backlog and the timing of progress made in manufacturing and construction. Energy Storage segment revenue increased by 140.5% in the fourth quarter. For the full year, revenue grew by 109.3% to $79 million.

As Doron highlighted earlier, the strong performance was mainly fueled by elevated energy rate at our storage facilities in the PJM market, alongside contribution from new operational projects in late 2024 and in 2025, which include the Bottleneck, Montague and Lower Rio facilities.

Moving to Slide 8. The gross margin for the Electricity segment decreased to 30.2% in the fourth quarter and 28.5% for the full year. This decline was driven by the curtailment and lower energy rates at Puna that I just touched on.

In the Product segment, gross margin for the year came in at 21.2%, an increase of 280 basis points versus last year, in line with our expectation for the year. This performance was driven by the improved project profitability and more favorable geographic and contract mix in 2025.

The Energy Storage segment reported gross margin of 51.5% and 36.4% during the fourth quarter and the full year, respectively, making a significant improvement versus the prior year. The increase was driven by the effectiveness of our strategic approach to balancing contracted pricing with merchant exposure.

Moving to Slide 9. In the full year 2025, we collected more than $180 million in cash monetization PTCs and ITCs through tax equity transaction and ITC and PTC transfers. This is more than the anticipated $160 million in the year. In 2026, we expect to collect approximately $90 million from ITC tax equity transactions and ITC and PTC transfers.

We recorded $20 million in income related to tax benefits in the fourth quarter compared to $18.5 million last year and $66.7 million in the full year 2025 compared to $73.1 million in 2024. In the fourth quarter and full year, we recorded ITC benefits of $10.5 million and $44.2 million, respectively, in the income tax line that drove down the tax rate to a negative 20%. These benefits are related to the energy storage facilities that commenced commercial operation in 2025 and include Arrowleaf and Lower Rio. With the 2 new storage assets expected to start commercial operation in 2026, we expect to record a tax benefits driven by higher ITC levels that will result in a negative tax rate of 15% to 20%.

Slide 10 details our use of cash flow over the last 12 months, illustrating Ormat's ability to generate strong cash flow, which allow us to reinvest in our strategic growth while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of December 31, 2025, was approximately $281 million compared to approximately $206 million at the end of 2024. Our total debt as of December 31, 2025, was approximately $2.8 billion, net of deferred financing costs with a cost of debt of 4.8%.

Moving to Slide 11. Our net debt as of December 31, 2025, was approximately $2.5 billion, equivalent to 4.4x net debt to EBITDA. During the fourth quarter, we secured $165 million in funding. This includes approximately $100 million in corporate debt raising during the quarter. In addition, we received approximately $59 million in tax equity proceeds, including $30 million from Arrowleaf. As shown on the slide, our total available liquidity is $680 million.

We expect our total capital expenditure for 2026 to be $675 million. Following the sale of our Topp 2 plant in New Zealand during the first quarter for approximately $100 million, we expect the net investment to be around $575 million. Our detailed CapEx plan is presented in Slide 33 in the appendix. We plan to invest approximately $465 million in the Electricity segment for construction, exploration, drilling and maintenance in 2026. Additionally, we plan to invest $180 million in the construction of our storage assets and approximately $10 million in the EGS pilot with SLB.

On February 24, 2026, our Board of Directors declared, approved and authorized a payment of a quarterly dividend of $0.12 per share payable on March 24, 2026, to shareholders on record as of March 10, 2026. In addition, the company expects to pay quarterly dividends of $0.12 per share in each of the next 3 quarters.

Before I conclude my financial review, I would like to highlight that we anticipate a strong start to 2026. We expect first quarter performance to benefit from the approximately $100 million in additional product segment revenues, carrying an estimated gross margin of around 20% related to the sale of Topp 2.

I would like now to turn the call over to Doron to discuss some of our recent developments.

Thank you, Assi. Turning to Slide 13. Our electricity portfolio now stands at approximately 1,340 megawatts globally. We added 72 megawatts in the fourth quarter of 2025. And currently, we have approximately 149 megawatts under construction and development through 2027.

Moving to Slide 14 to discuss M&A activity. Subsequent to year-end, we closed an agreement to acquire Hoku, a recently built solar plus storage facility on the Big Island of Hawaii from Energix Renewable Energies for $80.5 million in cash. The acquired assets include a 30-megawatt solar PV facility paired with a 30-megawatt 120-megawatt hour battery energy storage system with a 25-year PPA. This transaction strengthens our growing storage platform and supports our 2028 energy storage growth targets while enhancing the stability and long-term visibility of our revenue profile.

The Blue Mountain Power Plant, which we acquired in June, has continued to contribute positively to our results and its capacity recently reached 22 megawatts. We are also making strong progress on planned upgrades to the facility that we expect to complete in the first half of 2027. In addition, we plan to add 12 megawatts of solar PV that will serve the auxiliary needs of the geothermal facility and enable more geothermal power to be sold to the grid. The upgrade and the solar addition will enhance the facility generation capacity and long-term revenue growth potential.

Moving to Slide 15. Our Beowawe plant delivered improved performance over the year following the successful completion of its repowering and our Dixie Valley facility demonstrated stronger results during the year as operation normalized after the unplanned outage experienced in 2024. On the international front, we were recently awarded the Telaga Ranu geothermal working area by the government of Indonesia under the Ministry of Energy and Mineral Resources. This concession was awarded following a competitive tender process involving 4 qualified bidders, securing Ormat's long-term rights to explore and develop the geothermal resource.

We have strong confidence in Indonesia geothermal potential and believe this site can add up to 40 megawatts to our exploration pipeline. This new award, together with previously announced Songa and Atedai tender wins and other prospects under exploration and development, sum up to 182 megawatts that we are currently developing in Indonesia.

Moving to Slide 16 to discuss the 2 significant PPAs I mentioned earlier. In January, we signed a 20-year PPA with Switch, a premier provider of AI, cloud and enterprise data center. This represented Ormat's first direct PPA with a data center operator, highlighting the strategic alignment between our geothermal capabilities and the growing demand for sustainable energy to power data center infrastructure. Under the agreement, which can serve as a platform for future PPAs, Switch will purchase approximately 13 megawatts of clean renewable energy from our Salt Wells geothermal plant.

Ormat also has the option to expand output by adding an approximately 7-megawatt solar PV facility to serve the plant's auxiliary power. The combined output will help support the power needs of Switch Nevada data centers, aligning with their commitment to sustainability and carbon reduction. More recently, we entered into a long-term geothermal PPA with Google. The PPA covers a multi-project portfolio enabled by NV Energy Clean Transition Tariff.

Under the agreement, Ormat will supply up to 150 megawatts of new geothermal capacity to Google's Nevada AI and data center operations. This is a landmark development for Ormat. The portfolio structure provides long-term profitable revenue growth and visibility into our development plans while solidifying our conviction in our expanded exploration and drilling activities we have undertaken over the past several years. It also establishes a strong framework for similar agreements going forward. The combination of these PPAs attractive terms and the extension of the geothermal tax credit under the OBBBA framework significantly enhances our ability to execute our long-term growth strategy.

In addition to these 2 agreements, we have negotiated 2 blend and extend PPAs for existing plants that are currently pending final approval. These agreements are expected to improve revenues at 2 facilities by approximately $20 to $30 per megawatt hour beginning in 2027. Collectively, these new PPAs demonstrate our consistent strategic execution over the past several years and reinforces our ability to secure high-quality long-term contracts that drive sustainable growth.

Turning now to Slide 17. Our product segment backlog stands at $352 million, representing a 19% increase on a sequential basis. This growth was primarily driven by the Topp 2 project, which was recently removed from our pipeline due to the customer exercising its option to purchase the facility and our agreement to sell. Topp 2 added approximately $100 million to the backlog that will be recorded as revenues in the first quarter of 2026.

Moving to Slide 18. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 140%. We anticipate that this strong performance in our energy storage business will continue into 2026, driven by higher energy rates in the PJM market.

On Slide 20, we continue to remain on track to achieve our portfolio capacity target of between 2.6 gigawatt to 2.8 gigawatt by the end of 2028. This confidence is underpinned by strong momentum in geothermal development and the accelerated exploration efforts. In addition, the efforts that we took throughout 2025 to secure both battery supply and safe harbor status for additional projects helped improve our visibility towards achieving our capacity growth targets.

Turning to Slide 21 and 22, which display our geothermal and hybrid solar PV projects currently underway. We anticipate adding 149 megawatts to our generating capacity from these projects by the end of 2028. As you can see from the table, we added a new 30-megawatt greenfield project, first since 2017 that we expect to start operation by the end of 2027.

Moving to Slide 23 and 24. We currently have 6 projects under development in our Energy Storage segment, which are expected to add 410 megawatts or 1,540 megawatt hour to our portfolio. These projects, as you can see from the table, include the new 100-megawatt, 400-megawatt hour Griffith facility that we plan to build in California and another 20 megawatts, 100-megawatt hour facility in Israel.

Turning to Slide 25 for a discussion on our EGS efforts. In 2025, we made significant progress advancing our efforts to bring new technologies, including EGS towards commercialization. Our partnership with SLB is designed to accelerate the development and commercialization of EGS projects. While still in the early stages, we are confident this collaboration will streamline project deployment from concept through power generation. By combining Ormat's market-leading capabilities in power plant design, development and operations with SLB strength in subsurface reservoir engineering and construction, we believe we can unlock greater efficiencies, reduce execution risk and deliver projects more effectively.

We also announced a strategic commercial agreement with Sage Geosystems to pilot its advanced pressure geothermal technology, which extracts heat energy from hot, dry rock at one of our existing power plants. In late January, we further advanced this partnership by serving as co-lead investor in Sage Series B financing, supporting the continued development and commercialization of its geothermal power generation and energy storage solution. This investment is a natural extension of our collaboration and underscores our confidence in Sage technology.

Overall, we are encouraged by the meaningful progress achieved across both our external partnership and internal EGS initiatives in recent months, which includes 2 pilots that will be conducted utilizing Ormat facilities. We believe these efforts position Ormat to expand our existing market leadership and accelerate the broader deployment of geothermal energy globally.

Importantly, beyond project development within our Electricity segment, we believe our proprietary binary on surface plant technology provides a competitive advantage in the emerging EGS market. Our decades-long operating experience and large installed capacity create a significant learning curve advantage versus new entrants. This positions us not only to develop EGS projects, but also to potentially supply equipment and technology solution to third parties as the market scales.

Ormat origins are rooted in technology and innovation. These developments, particularly in EGS will complement our market-leading capabilities in traditional geothermal applications. As these technologies mature, they will represent an additional growth vector at top our long-established core business. Given our expertise and strategic partnership, we believe we are uniquely positioned to bring these technologies to market efficiently and profitably.

Please turn to Slide 26 for a discussion of our 2026 guidance. For 2026, we expect revenue to increase by 14.6% year-over-year at the midpoint, ranging between $1,110 million and $1,160 million. Electricity segment revenues are projected to be between $715 million and $730 million. Product segment revenues are expected to range between $300 million and $320 million and Energy Storage revenues are now expected to range between $95 million and $110 million. Adjusted EBITDA is expected to increase by approximately 8.2% at the midpoint, ranging between $615 million and $645 million.

I will now conclude our prepared remarks with reference to Slide 27. Looking ahead to 2026, Ormat is well positioned to capitalize on the evolving electricity landscape driven by accelerating AI adoption, rapid data center expansion and supportive market fundamentals, including record high PPA prices and a constructive regulatory environment. This sustained demand reinforces our confidence in delivering on our long-term growth strategy and earnings objectives. We remain committed to delivering reliable, sustainable energy solutions while leveraging our expertise, proven track record and market leadership to drive meaningful growth and create long-term shareholder value.

This concludes our prepared remarks. Now, I would like to open the call for questions. Operator, please.

[Operator Instructions] Your first question comes from the line of Justin Clare with ROTH Capital.

And I wanted to start off here just talking about the PPAs. You've obviously signed a lot recently here. You highlighted the 40 megawatts of PPAs signed under a blend and extend strategy. And just wanted to see how should we think about the additional opportunity in terms of the amount of capacity that could be proactively renewed and with PPAs extended ahead of expiration? And then also just wondering if you could provide an update on the amount of capacity that might be coming up for renewal still here in 2026, 2027, 2028?

As you said, we initiated this blend and extend 40 megawatts that are in the approval phase. And hopefully, in the next few weeks, we will be able to announce once they are fully signed and approved. And we have a few more assets, not too many assets that we can blend and extend, and we have started to work on the next phase that will take a few months to get them updated to the current pricing.

Okay. Got it. So then maybe shifting over just on the curtailments. I think there was an $18.6 million impact in 2025. Wondering if you could quantify what the impact was in Q4. I think things improved in the quarter. Maybe if you could just speak to that improvement. And then your expectations for 2026, what level of curtailments might be assumed in the Electricity segment guidance?

Justin, this is Assi. I'll start by saying that the curtailment in Q4 did lessen. We saw around [ $3.5 billion ] of curtailment in Q4. I will say that for the full year 2026, we are not expecting more than $4 million to $5 million, maybe slightly higher than that. But at least what we know today from NVE, which is the one that caused most of the curtailment during 2025, we're not expecting too much into it.

Also in 2025, if you remember in January, there was some fires in California. Luckily to us this year, we didn't. So we don't expect in Q1 any significant curtailment. So things definitely are coming our way as we look into 2026.

Got it. Okay. And then maybe just one more. Considering those factors, could you share what you anticipate for the gross margin for the Electricity segment in '26 and how that compares to '25 given the factors you mentioned?

Yes, we do expect anywhere from 1% to 2% increase in gross margin. It's around $14 million, $15 million in total, which is in line with the difference in the curtailment. One thing that we do see this year slightly less than last year is the prices in Puna are lower. But with the tension in the Middle East, this can change very quickly. So right now, the prices in Puna are slightly lower. But again, we took it already into consideration in the guidance.

Your next question comes from the line of Noah Kaye with Oppenheimer.

Lots going on, lots to talk about. And I want to start with the comments you made in reference to the Google PPA. You talked about this portfolio structure being a model for future activity. And I was just wondering if you could expand on that a little bit in terms of how the structure kind of came to be, why it was the right fit for both you and Google as a counterparty and some of the optionality that it gives you in terms of development.

Thank you, Noah. So the Google basically, as we all know, is looking continuously for clean renewable energy, and that aligns perfectly with geothermal, it is a baseload. Over the last few years, we've invested quite a lot, and we're continuously investing in exploration and developing greenfields. And we actually released, as you've seen on the presentation, our first greenfield 30-megawatt project, the first time after close to 7 years. And we have a few in the pipeline that are in the final stages of exploration, and I expect to release a few more this year and the next year.

And the structure of the PPA basically, which is up to allows us, on one hand, to know that we have a PPA, a very strong and profitable PPA if we are successful on the exploration. And it basically give us the confidence to continue with this investment and exploration effort that we are doing that will grow significantly the company in the coming years.

I'm almost sure to say that if we do maximize this PPA, we will be able to add another one. At this stage, it relates to until the end of 2030. And with the exploration efforts we have, this gives us the confidence to continue with this strategy.

Okay. And then I think on the blend and extend comments that you made in response to Justin's question. So as we understood it, at this point, most of what was expiring through, I think, 2028 has already been recontracted. This blend and extend seems like a pull forward of contracts that were going to expire beyond that. So maybe you could just give us a little bit more insight on the contracts that are being affected here and the amount of kind of post 2028 capacity that you're looking at recontracting right now?

Yes. The contracts that are being blend and extend are contracts that end, as you said, in the next 3 to 5 years. We have one more contract in this time frame that we are looking to blend and extend. The next wave of contracts actually that are looking for recontracting are mainly in 2032 and 2033, that is Jersey Valley, Don Campbell, McGuinness 1, Tungsten. So we will be looking at this for blend and extend. I don't know to say we'll do it in the next few months because it is longer term.

But today, when NV Energy and others that have contracts with us that are set to expire in the range of 5 years plus/minus, they want to secure the recontracting with them. The fact that we did sign with Switch and we did sign with Google PPAs for a similar time frame actually drives their willingness or their desire to sign blend and extend and basically secure the baseload geothermal energy for a longer period of time.

Makes sense. One quick one to sneak in before I turn it over. Assi, I think you mentioned that the CapEx guide is $675 million, but once the Topp 2 conversion to product revs completes, it will actually be $575 million. Can you just walk us through the mechanics of that and explain the timing on that a little bit, please?

Sure. So in Q1, we closed the sale of the Topp 2 transaction to our customer after he basically exercised his option to buy the asset. As a result, you will see through the P&L around $100 million of revenue with approximately 20% margin that will boost Q1 results. And what you will see in the financials in addition in the cash flow section, you will see a line item that will be a sale of assets that will offset the CapEx.

So when we look at the cash flow for 2026, we will expect to see a CapEx of $675 million. In addition to that, we did made an acquisition in Q1 that was another $80.5 million. So you will see also the M&A of the $80.5 million in Q1. And then you will see a sale of assets of approximately $100 million. So that's what we expect to see on the cash flow. This is just for modeling for you guys to understand the debt and the net debt of the company throughout the year.

I want to mention one more thing. You ask us how did Google came about? I do have a recording call with you that you told me, "Assi, if you have to sign with somebody, you have to sign it with Google." So that there, I went to Doron and that's how it all started. So I think you can give yourself some kudos, and we appreciate the support here.

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

This is Hannah Velasquez on for Julien. So I'll go ahead and just get started. I wanted to circle back on this curtailment question. So if I'm just using 2024 revenue for the Electricity segment as a baseline, around $700 million, that's also what you did in 2025 for the segment. You brought on -- yes, I mean you brought on over 100 megawatts in the Electricity segment across that time period. And if I do the math there, that would suggest -- that would just suggest about $30 million of incremental revenue from those new assets that came online. And so that gets you to where your guidance currently is. So does that imply that curtailment is not being recovered from 2025? Or I know you talked about $4 million to $5 million recuperating it, but I'm just having a hard time bridging to the new assets or new capacity that you brought online for that segment and then also the curtailment that you expect to recover in the year.

Hannah, thank you for the question. First, some of the 100 megawatts that you mentioned is solar. So the capacity factor is closer to 22%. So I suggest that you look into it when you model the number. Second, as I mentioned, we do expect $4 million to $5 million curtailment in the year in -- maybe even $6 million in 2026 versus the $18.6 million. So there is around $10 million, $12 million reduction in curtailment. But I think the main difference is that some of the additions are solar.

Right, about 42 megawatts. Yes, I did do the math, and I'm getting about $25 million to $30 million contribution from the new geothermal and then less than $10 million from the new solar. So it still suggests to me not recovering.

As I mentioned earlier, the prices in Puna are slightly lower. And we're also trying to be quite careful with our guidance for 2026, making sure we can, if possible throughout the year, try to raise the guidance and not be in a position that like we've been in 2025 that we were behind on electricity sales. So it's again also us being proactive here.

Okay. I got it. That's super clear. So you do expect some of the, I guess, segment headwinds that you saw in 2025 to extend over potentially, but you're being cautious in your guidance outlook. Okay.

As a follow-up question, just on the EGS front, from what I understand, there are multiple technologies or variations within EGS. It sounds like you're currently betting through Sage Geosystems and also a partnership with SLB. But would you consider any incremental partnerships with other next-gen technologies just because, again, it seems like there's such a wide variance in how different companies are approaching EGS. I'm just trying to get a sense of like the probability of success here.

Yes. Thank you. That's exactly the way that we are operating, the reason that we have started the joint venture with SLB and also signed a commercial agreement with Sage and invested in Sage, is exactly, as you say, multiple approaches to EGS. There are technological barriers in EGS, mainly the water loss and the economics of it. And we are looking at spreading the risk. We are discussing with other developers in the EGS arena, different cooperations agreement. We believe that EGS, if successful, will turn the industry into something that is much, much bigger because you will be able to generate geothermal energy, baseload energy in many, many places.

So we are focused a lot on it. We are looking at the different players, all of them are speaking with us. We are the largest operator of geothermal globally. We are the largest binary seller of supply of products in EPC. And I assume that over the next time you'll see us making additional moves in the EGS in order to make sure that if EGS is successful, Ormat will be able to capture this opportunity.

Your next question comes from the line of Mark Strouse with JPMorgan.

Maybe a follow-up to Hannah's question there on EGS. Instead of kind of looking beyond the existing partnerships, within the partnerships that you have with SLB and Sage, do you think that we could see additional pilot activity announced in 2026, potentially different site selection with different conditions, whatever it might be?

And then on that same slide, on Slide 25, you mentioned the equipment sales to third-party developers. Can you talk about what you've embedded in your guide for 2026 from that? And how we should think about the timing of when that could potentially become more material?

Thank you, Mark. I'll start maybe with the second part of the question. EGS has technological challenges that needs to be solved. I think most of the players that we know are dealing with these challenges. I would expect that during 2026, we will be able to negotiate with some of them, maybe EPC contracts. But revenue from that, first, they will need to demonstrate the technological issue. They will need to drill wells. And then the EPC revenue will come. So we have multiple discussions with different of them, as I said before, both on EPC agreements. But this will be EPC that will impact product segment probably second half of '27, '28, definitely, if it is successful.

Regarding additional developments, we are speaking with other companies that are looking at technological ideas that have already invested and raised cash in order to develop them. We are also building internal capabilities to see how we adjust our technology to fit these large-scale power plants. We are speaking with different hyperscalers and data centers on PPAs once the technology is successful. So there's a lot, a lot of work that is being done within Ormat in the different areas. I'm sure that during the coming quarters and discussions, we'll keep on updating you on the various issues. And as I said before, if this is successful, it will take Ormat and the industry into a different level.

Yes. I understand. Okay. That's helpful. And then can I just switch over to the storage side of the business. Just given the initial guidelines that came out recently, just curious for your take on that and how you're approaching potential safe harbor before the July deadline that would give you further visibility out to 2030?

Ormat, over the last year, have safe harbored over 1 giga of project, and we plan to install and use it over the next few years. I will start by saying that Griffith, which is a 100-megawatt, 400-megawatt hour, which is our largest project was also safe harbor. We have basically for all of our interconnection for 2028, 2029, safe harbor basically the majority of the project. We were able to reiterate our 2028 targets for the storage, taking into consideration the FEOC. All in all, we are in a very good situation to continue and grow.

We also see more and more capacity of batteries coming from outside China, which is very favorable. We see also increase in U.S. production. So I believe that the FEOC eventually will not impact us. I think that our position in the queue, especially in California is very good, which should enable us to release over the next year, potentially additional 2 projects, almost similar size to Griffith.

So again, all in all, the ability to buy batteries, the extension of the credit and the fact that we safe harbored a sufficient project for the next 3 years really put us in a good place. In addition to the fact, when you look at our pipeline, you see the majority of it is in California, which battery is really, really needed. And those lines that we have in the queue really put us in a position to sign good tolling agreements or good RA contracts.

[Operator Instructions] Your next question comes from Ben Kallo with Baird.

Just thinking about -- as you think about longer-term targets past the '28 and there's been a lot of changes from the federal level in the United States. When do you think that you're in a position to update us on longer-term targets? And then have you adjusted the operations to the benefit of any of that and specifically just faster permitting or anything like that?

And then my second question is -- and thank you for that. You kind of answered this, but just on the EGS front, outside of technology, how do you think about just building the infrastructure around your own development if we look out to 2030, 2031, whether that's employees or its financing or other things there because scale will get bigger if and when you're successful.

Thank you, Ben. So we are -- I'll start with the second part. We're definitely looking how to prepare ourselves to this transformation event of EGS is successful. We are doing the exploration. We have increased our BD efforts. Obviously, the land position that you need for an EGS project is significantly bigger than what you need for geothermal. So we are looking at much larger land positions in additional states, not just Nevada and California. So the look for EGS is much broader than just Nevada and California.

We are looking on our binary technology, how you manufacture so many turbines to a power plant, heat exchangers, how to multiple Ormat's efforts. All of these are things that we are working on in parallel to make sure that once the technology is successful, we are able to utilize it and move forward with it.

Regarding the question on the growth target. So one, we've increased significantly over the last few years, the exploration efforts. We see the greenfield, the first one coming to fruition now. We will see additional coming. The change in the permitting helped us a lot and moved that faster than what happened in the past. The fact that there are multiple land options by BLM in different states in the West, again, push us faster. We are planning an Analyst Day in the September time frame. And at that time, we will give longer-term targets for megawatt.

And thank you. And with no further questions in queue, I'd like to turn the conference back over to Doron for closing remarks.

Thank you all for joining us today. 2025 was a very good year for Ormat. Looking to 2026, we continue to see growth in all our segments and expect significant progress in EGS during 2026. Thank you.

This concludes today's conference call. You may now disconnect.

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" Oppenheimer & Co. Inc., Research Division

" ROTH Capital Partners, LLC, Research Division

" JPMorgan Chase & Co, Research Division

" Jefferies LLC, Research Division

" UBS Investment Bank, Research Division

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" Barclays Bank PLC, Research Division

" Piper Sandler & Co., Research Division

Good morning, and welcome to the Ormat Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assaf Ginzburg, Chief Financial Officer; and Smadar Lavi, 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 relating 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 risk factors and uncertainties.

For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and quarterly 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 the slide presentation accompanying this call may be accessed on the company's website at ormat.com under the Presentation link that is found on the Investor Relations tab.

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

Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me start with quarter highlights on Slide 4. Ormat delivered another quarter of strong results, demonstrating continued advancement and successful execution of our strategic growth initiatives.

These achievements are reflected in a 17.9% increase in revenue, a 13.3% increase in operating income and a 9.3% growth in net income attributable to the company's stockholders. Our strong results were primarily driven by sustained improvements in both our Energy Storage and Product segments, which contributed to higher revenues and enhanced profitability. These strong results enabled us to increase our revenues and adjusted EBITDA guidance for 2025.

During the quarter, Ormat achieved several significant strategic milestones, including securing a 25-year extension to the PPA for the 52MW Heber 1 facility with SCPPA and obtaining 2 Geothermal exploration licenses in Indonesia, totaling 40MW. These long-term PPAs in Indonesia were executed in partnership with PLN, the country's national utility provider, reinforcing our strategic presence in the region.

Within our Storage segment, we successfully commissioned the Lower Rio Energy Storage facility in Texas on schedule. And in our Product segment, we expanded our backlog to $295 million through the addition of new supply agreement. Our legacy at Ormat is that of an innovative technology company. And as part of our strategy, we are always exploring additional ways to utilize our capabilities, knowledge and technology for new avenues to capture growth.

To that end, we have achieved significant progress in advancing our Enhanced Geothermal System strategy, demonstrating our commitment to innovation and sustainable growth. We entered into a partnership with SLB to develop an EGS solution. And in addition, we signed a collaboration agreement with Sage to develop another EGS solution based on different technologies. I will elaborate on this later.

Before I provide some additional updates on our business, I would now like to turn the call over to Assaf Ginzburg to discuss our financial results. Assaf?

Thank you, Doron.

Let me start my review of our financial highlights on Slide 6. Total revenue for the third quarter was $249.7 million, a 17.9% increase compared to last year's third quarter. This top line expansion was driven by growth across all 3 operating segments. Notably, our growth continued to reflect the strong results from both our Energy Storage and Product segments.

Gross profit for the third quarter was $64 million, up 8.8% from $58.9 million in the third quarter of 2024, resulting in a consolidated gross margin of 25.6% versus 27.8% last year. The increase in gross margin was a result of improvement in our Storage and Product segment, partially offset by lower performance of our Electricity segment.

Net income attributable to the company's stockholders was $24.1 million or $0.39 per diluted share compared to $22.1 million or $0.36 per diluted share in the third quarter of the prior year. Adjusted net income attributable to the company's stockholders was $24.9 million or $0.41 per diluted share compared to $26.3 million or $0.42 per diluted share in the third quarter prior year.

Adjusted EBITDA for the third quarter was $138.4 million, a 0.6% increase compared to last year. This year-over-year growth was driven mostly by higher revenue and better margins in the Product segment as well as contribution from new assets in the Energy Storage segment. These contributions were offset by lower income attributable to sales of tax benefits and reduced benefits from a legal settlement with a battery supplier in our Storage Segment, which were both exceptionally high during the third quarter of 2024.

Slide 7 breaks down the revenue performance at the segment level. Electricity segment revenue for the third quarter increased by 1.5% to $167.1 million, primarily due to the recent acquisition of Blue Mountain and the improved performance at our Dixie Valley facility. This expansion to our operating portfolio helped to more than offset $3.2 million reduction at our Puna complex in Hawaii due to lower energy rates.

Product segment revenues increased by 66.6% to $62.2 million during the third quarter, driven by our strong backlog and the timing of progress made in manufacturing and construction.

Energy Storage segment revenues increased by 108% to $20.4 million in the third quarter, primarily driven by the successful commissioning of the Bottleneck and Montague facilities in late 2024 and the COD of our 60-megawatt 120-megawatt hour Lower Rio facility this quarter. I would like to add that the Bottleneck storage facility in line with its contract contributed approximately 45% of its annual revenue during the third quarter, which generally significantly increased Storage revenue and profits in the third quarter compared to the rest of the year.

Also on Slide 7, the gross margin for the Electricity segment was 25.4% in the third quarter, down from 30.2% from last year. The gross margin in the third quarter of 2025 was negatively impacted by $5.5 million due to temporary lower generation at Stillwater from ongoing enhancement work, reduced output at our Imperial Valley assets following a third-party grid failure caused by September storm and to a lesser extent, curtailment in the U.S. In addition, lower energy prices at our Puna complex in Hawaii reduced gross margin by approximately $3.2 million.

In the Product segment, gross margin was 21.7%, up 250 basis points from 19.2% last year, with this margin expansion driven by improved profitability on our contracts. We continue to anticipate that gross margin for this year in our Products segment will remain in the range of 21% to 23%.

The Energy Storage segment reported gross margin of 39.4%, up meaningfully compared to 20.2% gross margin in the third quarter of 2024. This improvement was mainly driven by seasonally high margins at the Bottleneck Storage facility and higher merchant prices in the PJM region year-over-year. We believe that full year gross profit for the storage segment is likely to increase to about 25%.

Slides 8 and 9 show the results of the last 9 months of 2025, highlighted by 10% increase in total revenue and 11.6% and 4.5% increase in net income and adjusted EBITDA, respectively, with significant increase in both Energy Storage and Product segment. Moving to Slide 10. As discussed in the second quarter call on July 4, the U.S. budget bill extended the PTC and ITC runway for our Geothermal & Energy Storage segment.

Regarding the foreign entity of concern or FEOC, provision of the bill, the broader scope includes Specified Foreign Entity (SFEs) and Foreign Influence Entity (FIEs). At this time, the entire Energy Storage industry is still heavily dependent on batteries sourced from China. And we are actively evaluating all project development options 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 plan.

Moving to Slide 11. We recorded $14.4 million in income related to tax benefits in the third quarter compared to $19.8 million last year. In the third quarter and 9 months of 2025, we recorded ITC benefits of $9.5 million and $33.8 million, respectively, in the income tax line. These benefits are related to 2 Storage facilities that commenced operation or expect to commence commercial operation by the end of 2025. Recently, we entered 2 tax equity transactions.

And as of today, we collected approximately $109 million under these contracts. The balance of $32.4 million will be collected by the year-end. In addition, we sold transferable PTC and ITC and received mostly in October, $25.5 million. We now expect total cash from tax credit this year, will exceed our initial expectation of $160 million and will now reach approximately $167 million.

We expect our tax rate will be positively impacted by ITC benefits in 2025 with an annual benefit rate between 5% to 15%, excluding changes in law or onetime events.

Slide 12 details our cash flow over the last 12 months, illustrating our ability to generate strong cash flow that allows us to fund reinvestment and strategic growth while servicing debt obligation and returning capital to shareholders.

Cash and cash equivalents and restricted cash and cash equivalents as of September 30, 2025, were approximately $206 million, similar to the end of 2024. Our total debt as of September 30, 2025, was approximately $2.7 billion, net of deferred financing costs with the cost of debt at 4.8%. The majority of our debt liabilities are at fixed interest rates, providing stability and protection for market fluctuation.

Moving to Slide 13. Our net debt as of September 30, 2025, was approximately $2.5 billion, equivalent to 4.4x net debt to EBITDA. During the third quarter, we secured $254 million in funding. This includes $104 million from tax equity partnerships and transferable tax credits and $150 million from project finance loan at attractive rates. As shown on the slide, our total available liquidity is $667 million.

We expect our total capital expenditure for the remaining of the year to be $140 million with our detailed CapEx plan presented in Slide 33 in the appendix. We plan to invest approximately $100 million in the Electricity segment for construction, exploration, drilling and maintenance in the fourth quarter of 2025. Additionally, we plan to invest $34 million in the construction of our Storage Assets.

On November 3, 2025, our Board of Directors declared, approved and authorized a payment of quarterly dividend of $0.12 per share payable on December 1, 2025, to shareholders of record as of November 17, 2025.

Before I turn the call over to Doron, I would like you to know that depending on the average share price in Q4, we expect diluted share count will increase by approximately 800,000 shares due to the potential dilutive effect from our convertible senior notes. That concludes my financial overview.

I would like now to turn the call over to Doron to discuss some of our recent developments.

Thank you, Assaf.

Moving to Slide 16. The Blue Mountain power plant that we acquired back in June has contributed to our results, and we're continuing to make great progress in planned upgrades that will enhance the facility generation and revenue growth potential. Our DIXIE Valley facility exhibited improved performance during the quarter following an unplanned outage that took place during the prior year.

Turning now to our international activities. In August, we were chosen to develop 2 greenfield projects, [ Songa and Ambalat ] for the local government in Indonesia, further expanding our footprint in the region. Notably, Ormat is the first company chosen under this competitive bid process. We are planning to commence drilling at one of these sites by the end of 2026 and contingent on successful results, expect the projects to be fully operational by 2030.

With respect to our TOPP 2 project in New Zealand that is currently in commissioning stage, we recently received a formal notice from the customer that they have decided to exercise their option to purchase the facility. And once the project is complete, we will be delivering the facility to the customer. As a result, revenue from the sale of this project will now fall under the Product segment. Once it is finalized and closed next year, the TOPP 2 facility will be removed from our pipeline.

Turning now to Slide 17. Our Product segment backlog stands at $295 million, representing a 79% increase compared to the third quarter of 2024. This growth was primarily driven by a large contract we signed, which has added approximately $86 million to the backlog.

Moving to Slide 18. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 108%. As previously mentioned, we anticipate that the 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 targets of between 2.6 gigawatt to 2.8 gigawatts by the end of 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.

Turning to Slide 21 and 22, which display our Geothermal & Hybrid Solar PV projects currently underway. We anticipate adding 98 megawatts of generating capacity from these projects by the end of 2026.

Moving to Slide 23 and 24. We currently have 5 projects under development in our Energy Storage segment, which are expected to add 325 megawatts or 1,180-megawatt hour to our portfolio.

Turning to Slide 25. Last week, Ormat and SLB announced a partnership aimed to accelerate the development and commercialization of EGS projects. Together with SLB, we intend to streamline project deployment from concept to power generation by combining Ormat's expertise and market-leading capabilities in power plant design, development and operations with SLB's well-established strength in subsurface reservoir engineering and construction. Together, we intend to jointly develop a pilot at an Ormat facility with the goal of scaling EGS solution to enable widespread EGS adoption.

If the pilot proves successful, Ormat expects to expand its development pipeline in alignment with our commitment to delivering reliable, sustainable and efficient Energy solutions to meet the demands of AI, data centers and the broader transition to renewable energy. In addition to the SLB agreement during the third quarter, we announced a strategic commercial agreement with Sage Geosystems, a pioneer in next-generation Geothermal and Energy Storage technology. As part of the agreement, once closed, Sage will pilot its advanced pressure Geothermal technology to extract Geothermal heat energy from hot dry rock at one of our existing power plants. The goal of this collaboration is to significantly reduce the time and costs needed to bring EGS to market.

Following a successful completion of the pilot project, Ormat will gain the right to develop, build, own and operate Geothermal power plants levering Sage's proprietary pressure Geothermal technology. We also intend to advance long and short duration Energy storage projects, utilizing Sage cutting-edge pressure Geothermal Storage solution. We will provide additional updates on these agreements as the pilot program progresses.

Our partnership with SLB, coupled with our agreement with Sage has created a significant step forward for the Geothermal industry. As the global leader in Geothermal development, we are proud to drive progress towards a more sustainable future by delivering reliable, efficient and renewable energy solutions to power the global energy needs.

Please turn to Slide 26 for a discussion of our 2025 guidance. The great results we saw in the Product and Storage segments enabled us to update our guidance and increase our revenue and adjusted EBITDA targets for the year.

We expect revenue to increase by 10.2% year-over-year at the midpoint, ranging between $960 million and $980 million. Electricity segment revenues are projected to be between $700 million and $705 million. Product segment revenues are expected to range between $190 million and $200 million and Energy Storage revenues are now expected to range between $70 million and $75 million,

As a result of improvements in full year revenue and strong adjusted EBITDA results generated to date, adjusted EBITDA is now expected to increase by approximately 6.2% at the midpoint, ranging between $575 million and $593 million, with annual adjusted EBITDA attributable to minority interest at approximately $17.5 million.

I will now conclude our prepared remarks with reference to Slide 27. This is a pivotal and transformative period for Ormat. We are experiencing strong momentum across our business, fueled by new strategic partnership and expanding portfolio, robust PPA pricing, supportive regulatory developments and increasing demand for renewable energy solutions. As the global energy transition gains pace and AI-driven requirements for Power & Energy infrastructure expand the market for our core competence, we are exceptionally well positioned to deliver scalable and sustainable Energy Solutions.

We are also proud of the progress that we have made in advancing EGS technology. This initiative complements our established leadership in Geothermal development and positions us to drive future growth. Looking ahead to the fourth quarter and beyond, we remain committed to expanding our industry leadership and advancing innovative sustainable energy solution that will allow us to drive growth and long-term value for our shareholders. This concludes our prepared remarks.

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

[Operator Instructions] Your first question is from the line of Noah Kaye with Oppenheimer. Yes, your line is coming through.

Okay. All right. So maybe to start with, it was in the slide deck on Page 15, just referencing the 250 megawatts of PPAs under negotiation with hyperscalers and data centers. I don't believe I heard an update in the prepared remarks. Can you maybe just update on sorry, I'm getting a lot of feedback Yes, I'm sorry. [Technical Difficulty] Can you hear me?

Yes.

Okay. I'm sorry, I'm getting a lot of feedback, but I was just hoping for an update on the PPA discussions with hyperscalers.

So hopefully, you can hear me well. We are actually in very final negotiations on a couple of PPAs with hyperscalers and in the same magnitude that we have been discussing. We hope to be able to finalize them, sign them and announce them in the next couple of months. Hopefully even before that. But we have quite a significant development in the negotiations and drafting, and we're very close to finishing them in the next couple of months.

Great. We look forward to that. Second question, I think you mentioned TOPP 2 will likely convert over to a Products revenue since you'll be doing the EPC work there. Just how to think about how that might translate into additional products backlog and the revenue opportunity associated with that?

Yes. I would say it's an EPC project, roughly $100 million in that range. So, they have exercised the option. We need to close the transaction that will probably occur in Q1 of '26. And at that point, once the transaction closes, it's accounting-wise, the time we can actually account it as part of the project.

Very helpful. And then you mentioned a couple of these key collaborations on EGS. I was hoping you could give us a little bit more color on some of the pilots that are associated with that. Can you give us a little bit more detail on the scope of the pilot? What steps exactly you'll kind of be taking here in the early days to kind of assess commercial viability and what you'll be looking for to go ahead with a larger project?

Sure. So, 2 different transactions. So, with SLB, we've started a joint venture. And we have chosen the site, the pilot for the SLB will be next to our facility in Desert Peak in Nevada. Actually, it's the same location that 20 years ago Mart started an EGS project there. So, this, the project, the pilot starts with SLB looking into the right technology and developing the right technology for an EGS project; once they are complete or actually in parallel to that, we will be looking for permitting and all the business development-related issues that we'll be working on.

Once these are aligned, we will drill the pilot wells. We expect that will happen towards the second half or the end of '26. And then we will run the pilot, and we will utilize our Desert Peak site. And by that, save a lot of time for the need to build a facility to generate electricity. So, this is on the, on the Sage, so the Sage pilot is a pilot that they are managing. We are discussing with them what is the right location for an EGS project next to one of our facilities, similar again to Sage time. But on this case, be it the permitting and everything is done by Sage, not by us. We are just allowing them to utilize one of our facilities, which we haven't finalized with them yet which one.

Your next question is from the line of Justin Clare with ROTH Capital.

So I wanted to start out with the Electricity segment. Wondering if you could just discuss within the Electricity segment, how you anticipate the gross margins trending in Q4. There was a number of different factors that affected the margins in Q3. Wondering if those are being resolved or if they could affect Q4.

And then just looking into 2026, it'd be great if you could just talk about the puts and takes you see for the Electricity segment in regard to kind of operational issues that you, that impacted 2025 and the curtailments and how you see things evolving for that segment next year?

So, I would start maybe with FY’ 26. What we've seen we are not aware today of any material curtailments that are planned by Energy or from California near the control substation. So, the big impact that we had this year is not something that we expect to see next year. But this is usually up to the utilities and operators not us. This is regarding 2026. Regarding Q4 '26, I can tell you that we had some curtailment in October by NV Energy, which wasn't a planned one. an unplanned curtailment that they've done. Q4 is usually much stronger than Q3 and Q2. So, we do expect a higher gross margin in Q4 versus Q3.

Got it. And then I guess just some of the factors that affected Q3, the Stillwater enhancement, the Imperial Valley grid failure, have those been resolved at this point? Or could there be an effect in Q4? Wondering for Q4, could we see directionally an improvement versus the year ago period? Or could those factors result in a year-over-year decline?

Storm in the Imperial Valley impacted IID. They had, I think, a few hundred poles that fell down, and it took them a while to bring them up. So, this event is over and behind us. The Stillwater upgrade continued into October. So, it will have some impact, but not as big of an impact as in Q3.

I would just add from a season perspective, Q4 is usually one of the strongest quarters for the year, and we expect this to be probably the strongest for 2025. We see lessening the curtailment, which is very positive. If you look at 2024, our margin was 36%. We are running in general this year 200 to 300 basis points below that. So that's the expectation for Q4. So overall, again, it should be much improved versus what we saw this quarter. It should be probably the highest for the year, but slightly below 2024 because there is, as Doron mentioned, some curtailment in Q4 on one hand and also Stillwater is still not at its full capacity.

Got it. Okay. That's really helpful. And then just one more on PPAs. It seems like PPAs are continuing to trend higher. You mentioned pricing above $100 a megawatt hour. Wondering if you're seeing pricing at $105 or $110 or if you could provide any more granularity on the pricing that you're seeing? And then just related to that, it sounds like off takers may be looking to recontract earlier in order to lock in pricing before potential future increases in PPAs. Are you seeing any of that? Could you look to recontract assets earlier than what you typically would be expecting?

So, it's very hard to comment on the PPA price, if it's 105 or 110. It's in a similar vicinity and both of them are good numbers depending on the specific location and the offtaker. We are looking for recontracting today our 2029 and 2030 projects coming off contract. It's important we would like to recontract them to get the stability and the ability to focus and for longer term. Also, when you recontract a project, it doesn't come up with a lot of CapEx or some CapEx associated with enhancement, but it doesn't come with the full CapEx. So, in today's environment and PPA pricing, it is very attractive.

Your next question is from the line of Mark Strouse with JPMorgan.

Just a follow-up to Noah's earlier question. I know it's early, but can you talk about how, it's kind of a reasonable expectation of how long these pilots on the EGS side might last? And I appreciate kind of the longer-term opportunity here. But just specific to your 2028 targets, do you think that there's potential upside to that from these EGS deals? Or is it a bit more longer dated?

Thank you. 2028 targets, it's a bit aggressive to assume that EGS will have an impact. One of the main challenges with EGS is the water loss once you circulate the water, inject water and then bring it up again. This is something that will be verified or learned over time. So, if we see the pilot operating in FY ‘27 sometime, I think it's likely that we'll be able to, after a few months, be able to get the input on the viability of this technology. I can tell you that once we are starting the pilot development, we will be looking to sign PPAs, obviously, for a later period based on this technology to be successful. So, this is also something that we, together with SLB are planning to do.

Your next question is from the line of Julien Dumoulin-Smith with Jefferies.

This is Hanna Velasquez on for Julian. So, another follow-up question on the EGS part. Can you just give us a sense of the scale of EGS-type projects that you would be looking to target in terms of megawatts?

Yes. The nice thing about EGS project is that it is based on the amount of wells that you drill and the water that you use. So, the megawatts that can be developed are significant. It can be in the hundreds of megawatts similar to other companies PPAs. It's not like today that when we release a project, it's 25, 30, 35 megawatts. I believe the EGS projects will be in a few hundred megawatts. But again, it's very, very early to say before we have the pilot operation.

Okay. And as a follow-up, can you give us an update? I know a while back; we had talked about an executive order on the permitting side that came out of the Trump administration that was trying to accelerate the permitting process for Geothermal. I think it was like down to 28 days or something like that. Have you seen any updates or progress on that front?

In general, we do see getting permits become much less of an issue when it's federal permits. Although over the last few weeks, as we all know, the government is in a shutdown mode. So, we don't see a lot happening there. But I can tell you that we were able to get within weeks permits. And you will see in 2026 that will lead, as Doron mentioned on the call last time, to accelerating drilling program. Doron mentioned that we're adding a second rig for the second half of 2025. We may even add a third rig at one point next year. We may have, so that's going to be a different situation for us. And what it gives us is the ability to develop more assets to meet both our 2028 and of course, our longer-term goals. So very positive. Last few weeks, nothing is being done. It's all on a shutdown mode. We hope it will change shortly.

Your next question is from the line of Jon Windham with UBS Financial.

I'd be really interested if you could just provide some more color about how you're managing risk around the storage business. There's obviously a lot of uncertainty in the market around FEOC around that. Just how the contracts or how your development pipeline risk mitigates or potential outcomes for that would be very interested to hear your thoughts.

So, thank you, John. So, you saw the Storage margins this quarter, and we also increased guidance for the year for the Storage. So, all in all, our operation between PGM, Texas and California working very well. All the projects that we are developing have secured safe harbor and a few additional ones that we haven't already released for construction have safe harbor. Apart from that, the FEOC and the entire storage market is still trying to align itself to the new world that the administration has put. And we are looking also on the impact longer term. But at this stage, all the projects and the plan that we have are in line, and we are working on them, and we did safe harbor, whatever we could and had good enough view going forward.

Your next question is from the line of David Sutherland with Baird.

Most of my questions on EGS have already been answered. So maybe if I could just pivot. Assaf, I wonder if you could talk to us a little bit more about financing needs for next year and really maybe even for next year or '27, just looking at the 200 megawatts of Geothermal and solar roughly that you guys plan on bringing online and any needs or any things we should consider for tax partnerships between now and then?

So, I'll start by saying that if you look at this year, our expected EBITDA, the middle range plus the over $160 million, close to $167 million of cash cover basically completely all of our CapEx needs. And the only additional borrowing that we did this year is to basically for the acquisition that we made. We haven't finalized our plan yet for CapEx for next year. But also, next year, we expect to have at least $70 million of tax equity or ITC that we will get from 2 projects.

In addition to that, next year, towards the end of the year, the Puna plant is expected to come on. And if we close the transaction of the Puna plant already in December, which is unlikely, but it's possible, then this year and next year, tax credits will be quite similar, maybe even higher next year. So overall, the start for us is very, very good. It’s around can be as much as $170 million next year.

In addition to that, next year, as we mentioned at the beginning of the call, we expect to sell for around $100 million, a project that we already fully financed in New Zealand. So basically, we will start the year next year with above $250 million of non-proceeds.

Together with ongoing EBITDA, that should cover the majority of our CapEx needs. And if we will need slightly more, we can borrow. So, at this point, we don't see a need for equity for the company. Of course, the 2 pilots of the EGS at this point, they are not meaningful for the company or at least the one that we are spending the money with the SLB. It's not meaningful spend for the company, maybe $10 million to $20 million a year for the next year or 2. But once EGS will be something big, and we will need to start build instead of 100 megawatts a year, 3x or 4x that amount, Ormat will have to look into our capital structure. And I believe that there is plenty of cash available for great projects.

So, as I mentioned, right now, we will focus with great cash from operation plus tax credit, including a large onetime income next year coming from the sale of the project in New Zealand. So, we should be quite covered next year.

That's super helpful. And maybe, I guess, just building on that last question and to your point about EGS and the excitement there. Is there any opportunity that you guys see to maybe accelerate this development through M&A or any other actions you guys could take to build more or bigger partnerships in the near term?

We've just started these initiatives. I don't see an M&A transaction in the EGS field that can push it forward. I don't believe there's any targets today for M&A transaction. We believe that developing with SLB and the commercial agreement with Sage, which is a different technology than SLB actually will allow us to have 2 paths to reach EGS. And if either one or both of them are successful, as we said, the number of megawatts that can be developed that will impact Ormat own project as well as the Product segment are significant.

Your next question is from the line of David Anderson with Barclays.

On the Schlumberger agreement, they're providing the technology they do the permitting and the drilling. If this is successful, does Schlumberger participate in this project in the longer term in terms of CapEx or other means on this? How does that work longer term if this all works out?

I cannot answer for Schlumberger themselves. But the way the partnership works is that we're developing together, and after that, we can build project together or each one can build by themselves projects. Schlumberger is a service company. That's what they have done all the years. And we are developers. So once the pilot is successful, we will be able to utilize all the technology that was developed in the pilot and build Geothermal EGS projects that will be owned by Ormat.

Can you talk about the differences in the technologies that are being applied that what Sage is doing versus what Schlumberger is doing?

It's, these are 2 different technologies. These are very proprietary technology for Sage and SLB are still developing them. I think over time, as the pilot progresses and technology is developed, we will be able to share more information on how we are developing it and how do we see both of them operating over time.

Your next question is from Noah Kaye with Oppenheimer.

Really 2 ones. The first one is around the electricity performance kind of following up on the margin question before. I think maybe another way to get at it is, there have been a number of events all year. There were wildfires in California in 1Q, the Puna maintenance in 2Q and now Imperial Valley in 3Q and obviously, the Nevada curtailment all year. And I guess outside of Puna, these were really kind of exogenous factors, right? So, I guess if we add up all of these nonrecurring factors, is it possible to kind of quantify the total impact to revenue and EBITDA this year? I think that will help us re-baseline for next year.

Sure. So, when we look at the curtailment, it's probably around $14 million to $15 million this year. If you add to it some of the Puna impact plus the Ivy storms, you're probably going to be somewhere between $20 million to $25 million. But let's remember, every year, there is a few events. So, I would say it's probably a $20 million impact for the year. And when you look at our forecast for the year, you can see that we reduced our higher end part of the guidance by exactly those $20 million. That's why we went from $725 million to $705 million. So, if you want to make it easy on you, this is the high-level impact.

That's perfect. And the second one is really to think about land position and interconnection position. We noticed that NV Energy's interconnection queue, just to pick one utility for Geothermal increased by roughly 10x over the last couple of months. It does look like there is obviously a lot of project development. Can you talk about your interconnection position and your ability to bring online the Geothermal projects you have in development?

Our projects and prospects that we have that we are developing today have most of them already interconnection agreements and date. The others are in various stages of negotiations on finalizing the megawatts and the cost of the interconnection, the date. So, when we look at the near to midterm future, we feel confident that we will have interconnection for the projects that should be coming online in the next few years. Obviously, as you go down to later years, interconnection is something that needs to be worked on. But we are in this, in Nevada and California for many, many years in the Geothermal, and we are continuously filing for interconnection. And we have, as I said, for most of our projects going forward interconnection.

Our final question comes from the line of Derek Podhaizer with Piper Sandler.

I just want to ask about Product. Maybe just your outlook there on the backlog seems to be growing nicely, just upped your top line revenue guidance. Your implied 2028 guidance was, I think, in the $140 million range. You just guided up to $180 million to $190 million. Margins are sitting above 20%. Is this just a new run rate we should think about? Maybe just some comments around Product and how you see that progressing over the next couple of years, given that you're trending above your 2028 implied guidance?

Our long-term target for margin is anywhere from 17% to 20%. This year, we have an exceptional year with our ability to negotiate much better procurement on some of our contracts, in addition to the fact that some of the projects that are being finished right now in New Zealand, we were able to complete the EPC at a much lower cost than anticipated.

So, I will say from a margin perspective, this year is definitely, I would say, outstanding and probably on the higher end. And when I look forward, probably between, I would say, 17% to 20% is making more sense. On the revenue line item, there is no doubt that we continue to stay elevated. And also, next year, we expect to stay elevated. Historically, Ormat, in the years of COVID and the few years, others, we sold around $100 million. I will say right now, we are moving probably to the $200 million level. And next year maybe going to be slightly higher, but that's the idea at this point.

We signed a large contract in Asia a few weeks ago, and we're negotiating a few more as we speak. I think that what's more important when you look at the Product segment is to show to the world that Geothermal is light kicking, not just in the U.S. with all the AI, but it's a viable solution in many, many countries and the cheapest option to get electricity.

One more thing that will boost our revenues, but that's towards 2028, 2029 and 2030 is the fact that we did win 2 new PPAs in Indonesia. These are BOT projects with PLN. During the BOT project, we recognize revenue already at the time of the construction in the Product segment. So, I will say that over the next few years, we should see a very nice support coming from the project in Indonesia, from the New Zealand projects and also what we just signed in Asia. So overall, good timing. As I said, margin this year is exceptionally high. We're not anticipating that to be at this level.

Got it. That's helpful. And then just back to the partnership with SLB, maybe looking at it from a different angle. We already talked about EGS. But what about on the traditional side of things, your traditional Geothermal development, are you exploring projects with SLB to develop that type of power plants? Just trying to think of the cross synergies that can be utilized with SLB applying some of their technologies into the traditional space, fully acknowledging that EGS is where the interest is, but just thinking about traditional asset development as well.

Definitely. Traditional Geothermal is the core of what we are doing today, EGS needs to be developed. So, we are looking also with SLB on potential customers that are looking for Geothermal Energy and have the relevant locations or land that we can develop traditional Geothermal. So definitely, it's part of the discussion with them. It's something that both companies can enjoy if we get additional customer for them for the services they provide for drilling and as for the power plant. So, it definitely exists in the partnership.

This concludes the question-and-answer session of today's call. I will now hand the call over to Doron for closing remarks. Thank you.

So thank you, everyone. This was a strong quarter on our operations with strategic developments in the EGS technology. Our partnership with SLB and the commercial agreement we signed with Sage will impact our growth in the future and will allow us together with SLB to respond to the significant demand we see today in the market by data centers and AI for Electricity. We will obviously continuously update you on any progress we have in these pilots and how we plan to see them materializing into real projects. So, thank you all.

This concludes today's call. Thank you for joining. You may now disconnect your lines.