Ormat Technologies ((ORA)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Ormat Technologies presented a mixed sentiment, highlighting both strong growth in certain segments and challenges in others. While the company showcased impressive gains in energy storage and product segments, as well as strategic geothermal acquisitions, it also faced hurdles in the electricity segment due to revenue declines and tariff impacts.
Record Quarterly Adjusted EBITDA Growth
Ormat Technologies achieved a record quarterly adjusted EBITDA growth of 6.4% compared to the first quarter of last year. This growth was primarily driven by robust performance in the storage and product segments, signaling strong operational efficiency and strategic focus.
Significant Energy Storage Segment Growth
The energy storage segment saw a remarkable revenue increase of nearly 120% in the first quarter. This surge was largely attributed to new facilities and strong merchant prices in the PJM market, underscoring the segment’s pivotal role in Ormat’s growth strategy.
Geothermal Expansion and Acquisition
Ormat has signed an agreement to acquire the 20 MW Blue Mountain geothermal power plant for $88 million, with plans to upgrade it by an additional 3.5 MW by 2026. This acquisition aligns with Ormat’s strategy to expand its geothermal footprint and enhance its renewable energy capabilities.
Strong Product Segment Revenue Increase
The product segment reported a revenue increase of 27.9% to $31.8 million during the first quarter. This growth was driven by a strong backlog, reflecting the segment’s robust demand and market positioning.
Electricity Segment Revenue Decline
The electricity segment experienced a revenue decline of 5.8% to $180.2 million in the first quarter. This decrease was due to curtailments in Nevada and California, presenting a challenge for Ormat’s electricity operations.
Gross Margin Decrease in Electricity Segment
The gross margin for the electricity segment fell to 33.5% in the first quarter, down from 39% last year. This decline was primarily due to lower revenue from curtailments, impacting the segment’s profitability.
Impact of Tariffs on Energy Storage
The energy storage segment may face headwinds due to tariffs on China affecting imports of storage equipment components. This presents a potential challenge for Ormat as it navigates international trade dynamics.
Temporary Decrease in Puna Power Plant Output
Maintenance work on a well at the Puna power plant in Hawaii will result in a temporary decrease in electricity generation. This is expected to impact Q2 revenues and EBITDA, highlighting operational challenges in maintaining consistent output.
Forward-Looking Guidance
Ormat Technologies provided forward-looking guidance indicating strong growth across several financial metrics. The company expects continued robust performance in its storage and geothermal segments through 2025 and 2026. Despite challenges in the electricity segment, Ormat remains optimistic, with a guidance range for 2025 total revenues between $935 million and $975 million, and adjusted EBITDA between $563 million and $593 million. The acquisition of the Blue Mountain geothermal power plant and plans for capacity upgrades further support their growth strategy.
In conclusion, Ormat Technologies’ earnings call reflected a balanced sentiment, with significant growth in energy storage and product segments countered by challenges in the electricity segment. The company’s strategic acquisitions and forward-looking guidance suggest a focus on long-term growth, despite current hurdles.