Ormat Technologies, Inc. Second Quarter 2007 Earnings Call August 9, 2007

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GREEN ENERGY you can depend on

Ormat Technologies, Inc.

Second Quarter 2007

Earnings Call

August 9, 2007

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Disclaimer

Information provided during this call may contain statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking statements 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 of 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 the annual report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2007.

In addition, during this call, statements may be made that include a financial measure defined as non-GAAP financial measures by the Securities and Exchange Commission, such as adjusted EBITDA. This measure may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Management of Ormat Technologies believes that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from referring to this non-GAAP financial measure in assessing Ormat Technologies’ liquidity, and when planning and forecasting future periods. This non-GAAP financial measure may also facilitate management’s internal comparison to the company’s historical liquidity.

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Agenda

Second Quarter 2007 Prepared Remarks

o Business Overview; Dita Bronicki, President and CEOo Operations Overview; Yoram Bronicki, COOo Financial Overview; Joseph Tenne, CFO

Q & A

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Business OverviewMs. Dita Bronicki, President and CEO

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Financial Highlights

Q2 2007 Revenues - $84.1 milliono 31.2% year-over-year increase

Electricity Segment Revenues - $55.4 milliono 13.5% year-over-year increase

Products Segment Revenues - $28.7 milliono 87.3% year-over-year increase

Net Income - $8.5 milliono Q2 2006 Net Income - $8.4 million

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Portfolio Highlights

Added 24 MW to project portfolio for a total of 403-409**

MW in generating capacity at the end of Q2o Ormesa construction added 10MW

o Steamboat Hills OEC installation added 4MW

o Galena 2 commercial operation added 10MW

Desert Peak 2 declared 11MW commercial operation

**The 403 MW figure assumes the Brady project will continue to operate at 13 MW.

The 409 figure assumes successful resource drilling that will bring the project back to its original 19 MW capacity.

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Business Highlights – New PPAs Highline Electric Association

o 4MW REG facility in a compression station along a natural gas pipeline (near Denver, CO.)

o Commissioning Mid-2009 (estimated)o REG market building momentum

Southern California Edison Corporationo 50MW North Brawley project (Imperial County, CA)o ORMAT option to increase capacity to 100MW o Project on-line by end of 2008 (estimated)

Nevada Power Companyo 18 – 30 MW projecto Project on line in late 2010

Sarulla, Indonesiao Progress continues at the 340 MW projecto ORA to own 12.75% minority interest in special purpose company that

will own and operate the project and supply the equipment for the plant

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OPC Transaction

Concluded a transaction that raised cost-efficient capital

o Desert Peak 2, Galena 2, Steamboat Hills, and Galena 3 projects

o Transaction effectively reduce need for debt financing for these projects

o Allows Ormat to monetize its production tax credits and receive a large cash payment upfront

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Strategic Improvements

Acquired 2 Drilling rigs in H1 ’07o Construction of North Brawley projecto Exploration

Lease Agreements in California and Nevadao App. 7,200 Acres total

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Projects UpdatesProjectCapacity

(MW)StatusExpected

Completion

Amatitlan20In testingQ3 2007

Heber South10OEC Unit delivered, construction in progress

Q1 2008

Galena 317Construction in progressQ1 2008

Olikara III35Drilling Complete, construction in progress

Q4 2008

North Brawley50Construction in progress2008

OREG 222 (across 4 facilities)

Started construction of 2 facilities2008/2009

Peetz4Engineering2009

Carson Lake 18-30Exploration2009/2010

Buffalo Valley18-30Exploration2009/2010

Puna8Negotiating PPA2009

Brawley Phase II50Exploration2009/2010

GDL (New Zealand)4-5 (50%)Construction in progress2009

Grass Valley18-30Exploration2010

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Capex Requirements

Approximately $400 million for

o Construction activity*

o Investment in machinery, building and equipment

o Investment in operating projects

o Exploration

* The CapEx amount for the construction activity excludes Buffalo Valley, Brawley Phase II, Carson Lake and Grass Valley projects as their budget is not finalized yet

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Products Segment - New Order

A $5.7 million supply contract with Italcementi Group

o Cement Plant in Martinsburg, West Virginia

o Supply within 14 month

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Regulatory Support

Legislative efforts in the U.S. House of Representatives and the Senate have resulted in different proposals regarding:

o A national renewable portfolio standard o Extension of production tax credits beyond the placed-in-

service date of December 31, 2008

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Second Quarter Operations UpdatesMr. Yoram Bronicki

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Operational Highlights

Accumulation of issues impacting results in Q1 ’07 are mostly behind us

High availability in Heber, Puna and Ormesa – successful maintenance work in Q4 2006 and Q1 2007o Maintenance at Ormesa and Heber 1 completed before high-

demand summer months

Consolidation of Ormesa PPAs

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Operational Highlights

Interim solution for Steamboat 2 / 3 turbines failure succeeded

Brady project generating at 13 MW

Momotombo project - turbine failureo Project expected to be in full operation in Q4 ’07

Improvement in the OREG 1 pipeline’s gas flow

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Second Quarter 2007 Financial Results Mr. Joseph Tenne, CFO

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Revenues

$84.1

$64.1

Q206 Q207

Total Revenues

31.2 %

(in millions of USD)(in millions of USD)

$59.5

$40.5

Q206 Q207

Total Cost of Revenues

47.0 %

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Electricity Segment

*In millions of USD*In millions of USD

$55.4

$48.8

Q206 Q207

Revenues*

13.5 %

$35.3

$30.9

Q206 Q207

Cost of Revenues* Cost of Revenues*

14.2 %

Increase of $6.6 million revenues resulted from: Increase in generating capacity:o New projects came on line at the end of Q2 2006o Additional 24 MW in Q2 2007o Completion of Amatitlan project in Guatemala - not yet

declared commercial operation

Higher energy rates for the SO#4 contracts in California

Increase in revenues partially offset by $1.2 million

due to: o Capacity shortage in few projectso Turbine failure in the Momotombo project

Increase costs of new and enhanced projects placed in service Inclusion of a full quarter of costs of revenues generated from the Amatitlan project Increase in labor and materials costs in existing plants

Increase in Cost of Revenues resulted from:

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Products Segment

$28.7

$15.3

Q206 Q207

Revenues*

87.3 %

$24.2

$9.6

Q206 Q207

Cost of Revenues* Cost of Revenues*

152.8 %

Timing of revenue recognition – geothermal and recovered energy products

Increase of revenues resulted from

Increase in revenues over the same period in 2006Different product mixIncrease in labor, materials, construction and transportation costs, which affected our margins in this segment

Increase in Cost of Revenues resulted from:

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Gross Margin


36.2% 36.6%

Q206 Q207

Gross Margin Gross Margin Electricity SegmentElectricity Segment

15.6%

37.5%

Q206 Q207

Gross MarginGross Margin Products SegmentProducts Segment

29.2%

36.8%

Q206 Q207

Combined Gross Margin Combined Gross Margin

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Net Income and EPS


$0.22$0.24

Q206 Q207

$8.5

$8.4

Q206 Q207

Net Income*Net Income*

EPS EPS

Main reason for the small increase in Net Income - decline in the Operating Income in the Products Segment

Q2 2007 - 38.1 million shares

Q2 2006 - 35.1 million shares

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Adjusted EBITDA

$30.6

$29.1

Q206 Q207

We calculate EBITDA as net income before interest, taxes, depreciation and amortization. We calculate adjusted EBITDA to include operating income, depreciation and amortization of our equity investments in the Mammoth and Leyte Projects. EBITDA and adjusted EBITDA are not measurements of financial performance under accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net earnings as indicators of our operating performance or any other measures of performance derived in accordance with accounting principles generally accepted in the United States of America. EBITDA and adjusted EBITDA are presented because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of a Company’s ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and adjusted EBITDA differently than we do. A table that reconciles net income to EBITDA and adjusted EBITDA, for the three month periods ended June 30, 2007 and 2006 is included in the earning release that we issued on August 8, 2007

* For Adjusted EBITDA reconciliation see Appendix

5.1 %

*

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Cash

$116.7

$73.0

Dec 31, 2006 June 30, 2007

Cash, Cash Equivalents and Marketable Securities *

Funding of capital expenditures in the amount of $69.4 million

Repayment of long-term debt to our parent and third parties in the amount of $36.5 million

Payment of dividend - $4.6 million

$14.7 million of cash flow from operating activities

Net proceeds from OPC transaction - $69.5 million

Net increase of $17.9 million in restricted cash


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Cash Dividend

$0.03

$0.04 $0.04 $0.04

April 4, 06

May 30,06

August 30,06

December 13,06

$0.05 $0.05 $0.05

$0.07

March 29, 2007

May 29, 2007

Declared August 29, 07

Expected

The company’s dividend policy targets an annual payout of at least 20 percent of the Company’s net income, subject to Board approval.

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OPC Transaction

Return Profile

Milestones

Partners

Until OrmatNevada’s Capital Repaid

After Ormat Nevada’s Capital Repaid & Until Flip Date**

Post Flip Date

The Equity Investors

99.9% of all economic benefits 99.9% of all economic benefits and cash distributions

5% of tax benefits and cash distributions

Ormat NevadaAll cash distributions and 0.1% of all economic

benefits *

0.1% of all economic benefits and cash distributions

95% of economic benefits and cash distribution

*Economic Benefits - production tax credits and taxable income or loss**Flip Date –occur once the institutional equity investors reach a target after-tax yield on their investment

Allocation of Economic Benefits:

o Production tax creditso Taxable income or loss

Cash distributions

Economic Interests consist of:

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OPC Transaction-Accounting Treatment

Full consolidation of OPC The payments received from the investors for the equity

interest are recorded as Minority Interest.

As the economic benefits flow to the investors they are recognized by us as Minority Interest in the Statement of Operation.

Interest expense, representing the Investors targeted yield, charged to Minority Interest.

At the Flip Date, the Minority Interest is valued at 5% of the net assets of OPC.

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Updated Guidance

Revenues for the full year 2007

o Electricity Segment - $214 million and additional $18 million for the projects accounted for under the equity method*

o Product Segment - between $70 million and $72 million

*Based on today’s oil prices

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Q & A

Any Questions?

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Appendix -Reconciliation of Adjusted EBITDA (Unaudited)

2007 2006 2007 2006

Net income (loss) 8,547 8,395 2,706 16,287Adjusted for:

Equity in income of investees (1,181) (931) (2,412) (2,210)Minority interest in earnings of subsidiaries (305) 571 (305) 571Interest expense, net (including amortization of deferred financing costs) 5,449 5,394 11,816 11,732Other non-operating expense (income) (37) (135) 327 (230)Income tax provision (benefit) 1,992 2,156 (3) 4,070Depreciation and amortization 12,134 10,227 23,694 19,786

EBITDA 26,599 25,677 35,823 50,006Equity in income of Mammoth-Pacific L.P. and Ormat Leyte 1,181 931 2,412 2,484Depreciation, amortization, interest and taxes attributable

to the Company's equity in Mammoth-PacificL.P. and Ormat Leyte 2,848 2,461 5,752 5,049

Adjusted EBITDA 30,628 29,069 43,987 57,539

Three Months Ended June 30,

(in thousands)

Six Months Ended June 30,

(in thousands)

Ormat Technologies, Inc. Second Quarter 2007 Earnings Call August 9, 2007

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Transcript of Ormat Technologies, Inc. Second Quarter 2007 Earnings Call August 9, 2007