S-1 1 file001.htm REGISTRATION STATEMENT

As filed with the Securities and Exchange Commission on July 20, 2004

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ORMAT TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware
(State or Other Jurisdiction of
Incorporation of Organization)
4911
(Primary Standard Industrial
Classification Code Number)
88-0326081
(I.R.S. Employer
Identification Number)

980 Greg Street, Sparks, Nevada 89431
(775) 356-9029

(Address, including zip code, and telephone number including
area code, of registrant's principal executive offices)

Connie Stechman
Ormat Technologies, Inc.
980 Greg Street, Sparks, Nevada 89431
(775) 356-9029

(Name, address, including zip code, and telephone number including area code, of agent for service)

Copies to:


Philip L. Colbran, Esq.
J. Allen Miller, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-5100
Noam Ayali, Esq.
Chadbourne & Parke LLP
1200 New Hampshire Avenue, N.W.
Washington, District of Columbia 20036
(202) 974-5600
Joshua G. Kiernan, Esq.
Arthur A. Scavone, Esq.
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
(212) 819-8200

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") check the following box. [ ]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE


Title of each class of
securities to be registered
Proposed maximum aggregate
offering price(1)(2)
Amount of  
registration fee  
Common Stock, par value $0.001 per share $ 115,000,000   $ 14,571  

(1)    Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act.

(2)    Includes shares which the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated July 20, 2004

PROSPECTUS

          Shares

Ormat Technologies, Inc.

Common Stock

We are offering           shares of our common stock in this initial public offering. No public market currently exists for our common stock.

We intend to list our common stock on the New York Stock Exchange under the symbol "ORA." We anticipate that the initial public offering price will be between $          and $          per share.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 16.


  Per Share Total
Public offering price $              
Underwriting discount $  
Proceeds to Ormat Technologies, Inc. (before expenses). $  

We have granted the underwriters a 30-day option to purchase up to           additional shares of common stock at the public offering price less the underwriting discount to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about               , 2004.

LEHMAN BROTHERS

                , 2004







TABLE OF CONTENTS


  Page
Prospectus Summary   1  
Risk Factors   16  
Special Note Regarding Forward-Looking Statements   33  
Use of Proceeds   34  
Dividend Policy   35  
Capitalization   36  
Dilution   37  
Selected Consolidated Financial and Other Data   38  
Unaudited Pro Forma Condensed Combined Financial Data   40  
Management's Discussion and Analysis of Financial Condition and Results of Operations   46  
Business   74  
Management   102  
Certain Relationships and Related Transactions   110  
Description of Certain Material Agreements   113  
Principal Stockholders   126  
Description of Capital Stock   128  
Shares Eligible for Future Sale   131  
United States Federal Income Tax Consequences to Non-U.S. Holders   133  
Underwriting   136  
Validity of Common Stock   140  
Expert   141  
Where You Can Find More Information   142  
Index To Financial Statements   F-1  

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy shares of our common stock in any jurisdiction where such offer or any sale of shares of our common stock would be unlawful. The information in this prospectus is complete and accurate only as of the date on the front cover regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.

We use market data and industry forecasts and projections throughout this prospectus, which we have obtained from market research, publicly available information and industry publications and surveys. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers' experience in the industry and there is no assurance that any of the projected amounts will be achieved. Similarly, we believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.

This prospectus refers to brand names, trademarks, service marks and trade names of other companies and organizations, and these brand names, trademarks, service marks and trade names are the property of their respective holders.

Until              , 2004 (25 days after the commencement of this offering), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.




PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. We urge you to read this entire prospectus carefully, including the more detailed information about us and about the shares of our common stock being sold in this offering and our consolidated financial statements and related notes appearing elsewhere in this prospectus, the "Risk Factors" section, and the documents to which we refer, before making an investment decision. All references in this prospectus to "Ormat," "the Company," "we," "us," "our company" or "our" refer to Ormat Technologies, Inc. and its consolidated subsidiaries, except where it is clear that such terms refer to Ormat Technologies, Inc. only; "Ormat Industries" refers to ORMAT Industries Ltd., the parent company of Ormat Technologies, Inc.; "Ormat International" refers to Ormat International, Inc.; "Ormat Holding" refers to Ormat Holding Corp.; "Ormat Funding" refers to "Ormat Funding Corp."; and "Ormat Systems" refers to Ormat Systems Ltd. Ormat International, Ormat Holding, Ormat Funding and Ormat Systems are all wholly owned subsidiaries of ours. Unless the context otherwise requires, "plants" refers to the various power generating plants owned and/or operated or built by Ormat and "units" refer to particular power generating units at those plants or at remote sites. We refer to a plant or a group of plants and the geothermal resources associated with them in a certain geographic area as a "project." References to generating capacity refer to the net amount of electrical energy available for sale to the power purchaser, in the case of all of our existing domestic projects and the Momotombo and Olkaria III projects (two of our foreign projects), and to the generating capacity that is subject to the "take or pay" power purchase agreements in the case of the Leyte and Zunil projects (another two of our foreign projects). In the case of projects under construction or enhancement, references to generating capacity refer to the net amount of electrical energy that we expect will be available for sale to the relevant power purchasers. As used in this prospectus, "pro forma" information is information presented giving effect to the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project that was consummated on December 18, 2003 and the acquisition of the Puna project that was consummated on June 3, 2004, as if such acquisitions were consummated on January 1, 2003, but not including the acquisitions of the Steamboat 2/3 project and the Steamboat Hills project that were consummated on February 13 and May 20, 2004, respectively.

The Company

We are a leading vertically integrated company engaged in the geothermal and recovered energy power business. We design, develop, build, own and operate clean, environmentally friendly geothermal power plants, and we also design, develop and build, and plan to own and operate, recovered energy-based power plants, in each case, using equipment that we design and manufacture. We conduct our business activities in two business segments. We develop, build, own and operate geothermal power plants in the United States and other countries around the world and sell the electricity they generate. In addition, we design, manufacture and sell equipment for geothermal and recovered energy-based electricity generation and other power generating units and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy power plants.

All of the projects that we currently own or operate produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable form of energy derived from the natural heat of the earth. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. Therefore, electricity produced from geothermal energy sources contributes significantly less to local and regional incidences of acid rain and global warming than energy produced by burning fossil fuels. Geothermal energy is also an attractive alternative to other sources of energy as part of a national diversification strategy to avoid dependence on any one energy source or politically sensitive supply sources.

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In addition to our geothermal energy power generation business, we have developed and continue to develop products that produce electricity from recovered energy or so-called "waste heat." Recovered energy or waste heat represents residual heat that is generated as a by-product of gas turbine-driven compressor stations and in a variety of industrial processes such as cement manufacturing, and is not otherwise used for any purpose. Such residual heat, that would otherwise be wasted, is captured in the recovery process and is used by recovered energy power plants to generate electricity without burning additional fuel and without emissions.

Our Power Generation Business

We are the fastest growing geothermal power generation company in the United States measured by growth in generating capacity. We also own and operate or control and operate geothermal projects in Guatemala, Kenya, Nicaragua and the Philippines and continue to pursue opportunities to acquire and develop similar projects elsewhere in the world, including in the United States. Most of our projects are located in regions where there is, or is expected to be, demand for additional generating capacity.

In 2003, pro forma revenues from the sale of electricity by our domestic projects were $128.7 million, constituting approximately 79.1% of our total pro forma revenues from the sale of electricity, and pro forma revenues from the sale of electricity by our foreign projects were $33.9 million, constituting approximately 20.9% of our total pro forma revenues from the sale of electricity. In 2003, our actual revenues from the sale of electricity by our domestic projects were $43.8 million and by our foreign projects were $34.0 million, respectively. Pro forma revenues from the sale of electricity constituted approximately 79.6% of our total pro forma revenues in 2003. As noted previously, such pro forma revenues do not include revenues generated from the Steamboat 2/3 project and Steamboat Hills project, two additional domestic projects that were acquired this year.

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Our Projects.    The table below summarizes key information relating to our projects that are currently in operation, under construction and subject to enhancement.


Project Location Ownership(1) Commercial
Operation Date
Generating
Capacity
in MW(2)
Power Purchaser Contract
Expiration
Projects in Operation                    
Domestic                    
Ormesa East Mesa, California   100 1986/1987   52   Southern California Edison Company 2016/2017
Heber 1 Heber, California   100 1985   38   Southern California Edison Company 2015
Heber 2 Heber, California   100 1993   38   Southern California Edison Company 2023
Steamboat(3) Steamboat, Nevada   100 1986/1988/1992   34   Sierra Pacific Power Company 2006/2018/2022
Mammoth Mammoth Lakes, California   50 1984/1990   26   Southern California Edison Company 2014/2020
Puna Puna, Hawaii   100 1993   25   Hawaii Electric Light Company 2027
Brady Churchill County, Nevada   100 1985/1992   20   Sierra Pacific Power Company 2022
Steamboat Hills Steamboat Hills, Nevada   100 1988   7   Sierra Pacific Power Company 2018
Total Domestic Projects in Operation:             240      
Foreign                    
Leyte Philippines   80 1997   49   PNOC - Energy Development Corporation 2007
Momotombo Nicaragua   100 mid 1980's   28   DISNORTE/DISSUR 2014
Zunil Guatemala   21 1999   24   Instituto Nacional de Electrification 2019
Olkaria III Kenya   100 2000   13   Kenya Power & Lighting Co. Ltd. 2020(4)
Total Foreign Projects in Operation:             113      
Total Projects in Operation:             353      
Projects under Construction                    
Desert Peak 2 Churchill County, Nevada   100 2006(5)   15   Nevada Power Company n/a(7)
Galena Steamboat Hills, Nevada   100 2005(5)   13 (6)  Sierra Pacific Power Company n/a(7)
Amatitlan Guatemala   100 2006(5)   20   Instituto Nacional de Electrification n/a(8)
Total Projects under
Construction:
            48      

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Project Location Ownership(1) Commercial
Operation Date
Generating
Capacity
in MW(2)
Power Purchaser Contract
Expiration
Projects under Enhancement                    
Heber 1 and 2 Enhancement Heber, California   100     18 (9)     
Puna Enhancement(10) Puna, Hawaii   100     9 (11)     
Steamboat Hills Enhancement(10) Steamboat Hills, Nevada   100     7      
Mammoth Enhancement(10) Mammoth Lakes, California   50     4      
Total Projects under Enhancement:             38      
Total Projects under Construction or Enhancement:             86      
(1) We own and operate all of our projects, except the Momotombo project in Nicaragua, which we do not own but which we control and operate through a concession arrangement with the Nicaraguan government, and three of our other projects, in which we have less than full ownership.
(2) This column represents the net generating capacity of the project, not our net ownership in such generating capacity. Such net generating capacity is based on either (i) operational data for the previous 12 months or (ii) if operational data for the previous 12 months is not available but is available for a shorter period, such available data on an annualized basis.
(3) This reference includes the Steamboat 1/1A project and Steamboat 2/3 project.
(4) The power purchase agreement for the Olkaria III project will expire in 2020 or, if Phase II of the project is constructed and completed, 20 years from the completion of such Phase II. Phase II of this project involves a proposed construction of additional facilities that would add approximately 35 MW of generating capacity to this project.
(5) Projected.
(6) Incremental to the Steamboat complex.
(7) The power purchase agreement will expire 20 years from the January 1 immediately following the commercial operation date.
(8) The power purchase agreement will expire at the later of 20 years from the commencement of commercial operations and 23 years from the commencement of construction works.
(9) We are currently in discussions with Southern California Edison Company, the power purchaser for this project, regarding these proposed enhancements.
(10) These enhancements are in their early engineering stage.
(11) The enhancement will result in an additional 3 MW that can be sold under the existing power purchase agreement and another 6 MW is subject to negotiation of offtake arrangements with the existing power purchaser.

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All of the revenues that we derive from the sale of electricity are from fully-contracted payments under long-term power purchase agreements. In the United States, the power purchasers under such agreements are all investor-owned electric utilities. More than 80% of our total pro forma revenues for 2003 from the sale of electricity by our domestic projects were derived from power purchasers that currently have investment grade credit rating. The purchasers of electricity from our foreign projects are either state-owned entities or recently privatized state-owned entities. We have obtained political risk insurance from the Multilateral Investment Guarantee Agency of the World Bank group for all of our foreign projects (other than the Leyte project) in order to cover a portion of any loss that we may suffer upon the occurrence of certain political events covered by such insurance.

Development, Construction, and Acquisition.    We have experienced significant growth in recent years, principally through the acquisition of geothermal power plants from third parties and the expansion and enhancement of our existing projects. In December 2003, we acquired the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, in February 2004, we acquired the Steamboat 2/3 project, in May 2004, we acquired the Steamboat Hills project and in June 2004, we acquired the Puna project. In total, we have increased our net ownership interest in generating capacity from 94 MW as of December 31, 2001 to 312 MW as of June 30, 2004. We currently expect to continue growing our power generation business through:

•  the development and construction of new geothermal and recovered energy-based power plants;
•  the expansion and enhancement of our existing projects; and
•  the acquisition of additional geothermal and other renewable assets from third parties.

As part of these efforts, we regularly monitor requests for proposals from, and submit bids to, investor-owned electric utilities in the United States to provide additional generating capacity, primarily in the western United States where geothermal resources are generally concentrated. We also respond to international tenders issued by foreign state-owned electric utilities for the development, construction and operation of new geothermal power plants. In addition, we apply our technological expertise to upgrade the facilities of our existing geothermal power plants and to continuously monitor and manage our existing geothermal resources in order to increase the efficiency and generating capacity of such facilities.

We are currently in varying stages of development or construction of new projects and enhancement of existing projects. Based on our current development and construction schedule, which is subject to change at any time and which we may not achieve, we expect to have approximately 66 additional MW in generating capacity in the United States by the end of 2006 and approximately 20 additional MW in Guatemala by June 2006. In addition, we have obtained exclusive rights to develop the geothermal resources of a project in China, which, if implemented, is expected to produce approximately 50 MW in generating capacity. We are also currently in discussions with the Kenyan government and Kenya Power & Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya and the provision of certain collateral and government support. If implemented, Phase II would add approximately 35 MW in generating capacity to the current Olkaria III project. We are also in the early development stage of two new projects in El Salvador. We intend to pursue these opportunities to the extent they continue to meet our investment criteria and business strategy.

Our Products Business

We design, manufacture and sell the following products for electricity generation and provide the following services:

Power Units for Geothermal Power Plants.    We design, manufacture and sell power units for geothermal electricity generation, which we refer to as Ormat Energy Converters or OECs. Our customers include contractors and geothermal plant owners and operators.

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Power Units for Recovered Energy-Based Power Generation.    We design, manufacture and sell power units used to generate electricity from recovered energy or so-called "waste heat" that is generated as a residual by-product of gas turbine-driven compressor stations and a variety of industrial processes such as cement manufacturing, and is not otherwise used for any purpose. Our existing and target customers include interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators, and other companies engaged in other energy-intensive industrial processes.

Remote Power Units and other Generators.    We design, manufacture and sell fossil fuel powered turbo-generators with a capacity ranging between 200 watts and 5,000 watts, which operate unattended in extreme climate conditions, whether hot or cold. Our customers include contractors installing gas pipelines in remote areas. In addition, we design, manufacture and sell generators for various other uses, including heavy duty direct current generators.

Engineering, Procurement and Construction of Power Plants.    We engineer, procure and construct (EPC), as an EPC contractor, geothermal and recovered energy power plants on a turnkey basis, using power units we design and manufacture. Our customers are geothermal power plant owners as well as the same customers described above that we target for the sale of our power units for recovered energy-based power generation. Unlike many other companies that provide EPC services, we have an advantage in that we are using our own manufactured equipment and thus have better control over the timing and delivery of required equipment and its costs.

Operation and Maintenance of Power Plants.    We provide operation and maintenance services for geothermal power plants owned by us and by third parties.

In 2003, our actual revenues from our products business were $41.7 million, constituting approximately 20.4% of our total pro forma revenues and approximately 34.9% of our actual revenues.

Market Opportunity

The geothermal energy industry in the United States experienced significant growth in the 1970s and 1980s, followed by a period of consolidation of owners and operators of geothermal assets in the 1990s. The industry, once dominated by large oil companies and investor-owned electric utilities, now includes several independent power producers. During the 1990s, growth and development in the geothermal energy industry occurred primarily in foreign markets, and only minimal growth and development occurred in the United States. Since 2001, there has been renewed interest in geothermal energy in the United States as production costs for electricity generated from geothermal resources have become more competitive relative to fossil fuel-based electricity generation, due to the increasing cost of natural gas, and as legislative and regulatory incentives, such as state renewable portfolio standards, have become more prevalent.

Electricity generation from geothermal resources in the United States constitutes a $1 billion-a-year industry (in terms of revenues) and accounts for almost 20% of all non-hydropower renewable energy-based electricity generation in the United States (according to the Energy Information Administration, Annual Energy Outlook 2004). Although electricity generation from geothermal resources is currently concentrated in California, Nevada, Hawaii and Utah, there are opportunities for development in other states such as Alaska, Arizona, Idaho, New Mexico and Oregon due to the availability of geothermal resources and, in some cases, a favorable regulatory environment in such states.

A recent forecast of the U.S. Department of Energy projects the addition of geothermal installations with generating capacity totaling 6,800 MW by 2025, based on the assumption that natural gas prices will remain relatively stable at current levels. This forecast is based on existing, known geothermal resources and does not take into account any positive effects on generating capacity resulting from new technology, such as enhanced utilization of existing geothermal bases and engineered geothermal systems (according to the Energy Information Administration, Annual Energy Outlook 2004).

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Much of this growth potential stems from growing global concerns about the environment. Power plants that use fossil fuels generate higher levels of air pollution and their emissions have been linked to acid rain and global warming. In response to an increasing demand for "green" energy, many countries have adopted legislation requiring, and providing incentives for, electric utilities to sell electricity generated from renewable energy sources. In the United States, Arizona, California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Pennsylvania, Rhode Island, Texas, and Wisconsin have all adopted renewable portfolio standards, renewable portfolio goals, or other similar laws requiring or encouraging electric utilities in such states to generate or buy a certain percentage of their electricity from renewable energy sources or recovered heat sources. Eleven of these seventeen states (including California, Nevada and Hawaii, where we have been the most active in our geothermal energy development and in which all of our U.S. projects are located) define geothermal resources as "renewables." Several other states are also considering the adoption of renewable portfolio standards, renewable portfolio goals or similar legislation.

We believe that these legislative measures and initiatives present a significant market opportunity for us. For example, California generally requires that the electricity supplied by its investor-owned electric utility companies operating within the state must be increased by at least 1% every year until it reaches 20% by 2017. Presently, 9% of the electricity supplied by the three main electric utility companies in California is derived from renewable resources. Nevada's renewable portfolio standard requires each Nevada electric utility to obtain 5% of its annual energy requirements from renewable energy sources in 2004, which requirement increases to 7% in 2005 and thereafter increases by 2% every two years until 2013, when 15% of such annual energy requirements must be provided from renewable energy sources. Hawaii's renewable portfolio standard requires each Hawaiian electric utility to obtain 8% of its net electricity sales from renewable energy sources by December 31, 2005 and 10% by December 31, 2010 and 20% by December 31, 2020.

In addition, in some states an entity generating electricity from renewable resources, such as geothermal energy, is awarded renewable energy credits, which we refer to as RECs, that can be sold for cash. RECs have been sold in the market for 0.5 cents to 2 cents a kWh during the past year.

Outside of the United States, the majority of power generating capacity has historically been owned and controlled by governments. During the past decade, however, many foreign governments have privatized their power generation industries through sales to third parties and have encouraged new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity and related products. Different countries have also adopted active governmental programs designed to encourage clean renewable energy power generation. For example, China, where we are currently developing a project, has in place a five-year Plan for New and Renewable Energy Commercialization Development. The plan's goals include increasing production of geothermal energy as well as providing electricity in remote areas. Several Latin American countries have rural electrification programs and renewable energy programs. For example, Nicaragua, where we operate the Momotombo project, is currently developing a national rural electrification plan with the support of the World Bank. One of the plan's primary goals is the reduction of market barriers to renewable energy technologies useful for remote areas not connected to the main electricity grid. Nicaragua also has a national master plan for geothermal energy, which is intended to facilitate the awarding of concessions for geothermal exploration and development in the country. Guatemala, another country in which we have ongoing operations (the Zunil project) and development activities (the Amatitlan project), recently approved a law which creates incentives for power generation from renewable energy sources by, among other things, providing economic and fiscal incentives such as exemptions from taxes on the importation of relevant equipment and various tax exemptions for companies implementing renewable energy projects. We believe that these developments and governmental plans

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will create opportunities for us to acquire and develop geothermal power generation facilities internationally as well as create additional opportunities for us to sell our remote power units and other products.

In addition to our geothermal power generation activities, we have also identified recovered energy power generation as a significant market opportunity for us in the United States and internationally. We are initially targeting the North American market, where we expect that recovered energy-based power generation will be derived principally from compressor stations along interstate pipelines, from midstream gas processing facilities, and from processing industries in general. Several states, as well as the federal government, have recognized the environmental benefits of recovered energy-based power generation. For example, Nevada and Hawaii allow electric utilities to include recovered energy-based power generation in calculating their compliance with the state's renewable portfolio standards. In addition, North Dakota, South Dakota and the Department of Agriculture (through the Rural Electricity Service) have certified recovered energy-based power generation as "green" energy, which qualifies recovered energy-based power generators (whether in those two states or elsewhere in the United States) for federally subsidized, low cost funding. We believe that the European market has similar potential and we expect to leverage our early success in North America in order to expand into such market and other markets worldwide. In North America alone, we estimate the potential total market for recovered energy-based generation to be approximately 1000 MW.

Competitive Strengths

Competitive Assets. Our assets are highly competitive:

•  Contracted Generation.    All of the electricity generated by our geothermal power plants is currently sold pursuant to long-term power purchase agreements, providing generally predictable cash flows.
•  Baseload Generation.    All of our geothermal power plants supply a part of the baseload capacity of the electric system in their respective markets, meaning that they operate to serve all or a part of the minimum power requirements of the electric system in such market on an around-the-clock basis. Because our projects supply a part of the baseload needs of the respective electric system and are marginally weather dependent, we have a competitive advantage over other renewable energy sources, such as wind power, solar power, or hydro-electric power (to the extent dependent on rainfall), which compete with us to meet electric utilities' renewable portfolio requirements but which cannot serve baseload capacity because of the weather dependence and thus intermittent nature of these other renewable energy sources.
•  Competitive Pricing.    Geothermal power plants, while site specific, are economically feasible to develop, construct, own and operate in many locations, and the electricity they generate is generally price competitive as compared to electricity generated from fossil fuels or other renewable sources under existing economic conditions and existing tax and regulatory regimes.

Growing Legislative Demand for Environmentally-Friendly Renewable Resource Assets.    All of our existing projects produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable energy source. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. The characteristics of geothermal energy give us a competitive advantage over fossil fuel-based electricity generation as countries increasingly seek to balance environmental concerns with demands for reliable sources of electricity.

High Efficiency from Vertical Integration.    Unlike any of our competitors in the geothermal industry, we are a fully-integrated geothermal equipment, services and power provider. We design,

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develop and manufacture most of the equipment we use in our geothermal power plants. Our intimate knowledge of the equipment that we use in our operations allows us to operate and maintain our projects efficiently and to respond to operational issues in a timely and cost efficient manner. Moreover, given the efficient communications among our subsidiary that designs and manufactures the products we use in our operations and our subsidiaries that own and operate our projects, we are able to quickly and in a cost-effective manner identify and repair mechanical issues and to have technical assistance and replacement parts available to us as and when needed.

Highly Experienced Management Team.    We have a highly qualified senior management team with extensive experience in the geothermal power sector. The key members of our senior management team have worked in the power industry for most of their careers and average over 20 years of industry experience.

Technological Innovation.    We own or have rights to use more than 70 patents relating to various processes and renewable resource technologies. Our ability to draw upon internal resources from various disciplines related to the geothermal power sector, such as geological expertise relating to reservoir management and equipment engineering relating to power units, allows us to be innovative in creating new technologies and technological solutions.

No Exposure to Fuel Price Risk.    A geothermal power plant does not need to purchase fuel (such as coal, natural gas, or fuel oil) in order to generate electricity. Thus, once the geothermal reservoir has been identified and estimated to be sufficient for use in a geothermal power plant and the drilling of wells is complete, the plant is not exposed to fuel price or fuel delivery risk.

Business Strategy

Our strategy is to continue building a geographically balanced portfolio of geothermal and recovered energy assets, and to continue to be a leading manufacturer and provider of products and services related to renewable energy. We intend to implement this strategy through:

•  Development and Construction of New Projects — continuously seeking out commercially exploitable geothermal resources and developing and constructing new geothermal and recovered energy-based power projects in jurisdictions where the regulatory, tax and business environments encourage or provide incentives for such development and which meet our investment criteria;
•  Increasing Output from Our Existing Projects — increasing output from our existing geothermal power projects by adding additional generating capacity, upgrading plant technology, and improving geothermal reservoir operations, including improving methods of heat source supply and delivery;
•  Acquisition of New Assets — acquiring from third parties additional geothermal and other renewable assets that meet our investment criteria;
•  Technological Expertise — investing in research and development of renewable energy technologies and leveraging our technological expertise to continuously improve power plant components, reduce operations and maintenance costs, develop competitive and environmentally friendly products for electricity generation and target new service opportunities;
•  Developing Recovered Energy — establishing a first-to-market leadership position in recovered energy projects in North America and building on that experience to expand into other markets worldwide; and
•  Long-term Contracts — entering into long-term contracts with energy purchasers that will provide stable cash flows.

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History

Ormat Industries is our parent company. Ormat Industries is an international power systems company whose predecessor, Ormat Turbines Ltd., was founded in 1965 by Lucien and Yehudit Bronicki for the principal purpose of developing equipment for the production of clean, renewable energy. Lucien and Yehudit Bronicki continue to be Ormat Industries' controlling shareholders. Ormat Industries and its subsidiaries have developed geothermal power plants, remote power units, industrial recovered energy systems and solar energy plants worldwide. At December 31, 2003, Ormat Industries and its subsidiaries had more than 600 employees worldwide, and had revenues of approximately $119.8 million. Ormat Industries is listed on the Tel Aviv Stock Exchange under the symbol "ORMT." Ormat Industries and its subsidiaries have supplied, developed, constructed or rehabilitated over 700 MW of geothermal power plants in 22 countries, constituting approximately 10% of geothermal installed capacity worldwide.

We were formed by Ormat Industries in 1994 for the purpose of investing and holding ownership interests in power projects, as well as constructing and operating power plants owned by us and by third parties. We have served as the holding company for all of Ormat Industries' geothermal power projects. In December 2003, we acquired the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, in February 2004, we acquired the Steamboat 2/3 project, in May 2004, we acquired the Steamboat Hills project and in June 2004, we acquired the Puna project. On February 13, 2004, Ormat Funding, our wholly owned subsidiary, completed an offering of senior secured notes that raised gross proceeds of $190 million. Pursuant to the terms of such offering, Ormat Funding is required to exchange the senior secured notes it issued thereunder for senior secured notes registered under the Securities Act of 1933, as amended, no later than January 2005. Effective as of July 1, 2004, Ormat Industries sold to us its business relating to the manufacturing and sale of energy-related equipment and services, which is based in Israel. Following this sale, we now hold all of Ormat Industries' power generation products business, and had, as of July 1, 2004, 676 employees. Upon completion of this offering, Ormat Industries will own         % of our outstanding common stock.

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Corporate Structure

A summary chart of our corporate structure showing our main subsidiaries and assets following the completion of this offering is depicted below.

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The Offering

Issuer Ormat Technologies, Inc.
Common stock offered by Ormat Technologies, Inc.              shares
Underwriters' option to purchase additional shares              shares
Common stock outstanding after giving effect to this offering             shares
Use of proceeds We estimate that the net proceeds we will receive from this offering will be approximately $          million, or approximately $          million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discounts and commissions and estimated expenses of this offering payable by us. We expect to use the net proceeds from this offering to finance the continued growth of our business and for general corporate purposes, including for purposes of making investments or acquisitions. However, we have no present understanding or agreement relating to any specific acquisition. Accordingly, management will have significant flexibility in applying the net proceeds of the offering. Pending the use of such proceeds as described above, we intend to invest such proceeds in interest-bearing instruments. See "Use of Proceeds."
Proposed New York Stock Exchange symbol ORA

Except as otherwise indicated, all common stock information in this prospectus is based on the number of shares of common stock outstanding on              and:

•  assumes an initial public offering price of $                per share;
•  excludes                 shares of common stock subject to outstanding stock options with a weighted average exercise price of $           per share;
•  excludes                 shares of common stock available for future grant or issuance under our 2004 Incentive Compensation Plan; and
•  excludes the          shares of common stock subject to the option granted to the underwriters to purchase additional shares of common stock in this offering to cover over-allotments.
Dividend Policy We have adopted a dividend policy pursuant to which we currently expect, commencing with the first full fiscal quarter following the consummation of this offering, to distribute at least 20% of our annual profits available for distribution by way of quarterly dividends. Notwithstanding this policy, dividends will be paid only when, as and if determined by our board of directors out of funds legally

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available therefor. Our board of directors may, from time to time, examine our dividend policy and may, in their absolute discretion, change such policy.

Risk Factors

Investing in our common stock involves a number of material risks. For a discussion of certain risk factors that should be considered in connection with your investment in our common stock, see "Risk Factors" beginning on page 16.

Corporate Information

Our principal executive offices are located at 980 Greg Street, Sparks, Nevada 89431. Our telephone number is (775) 356-9029. The majority of our senior management and all of our production and manufacturing facilities are located in Yavne, Israel.

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Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial Data

The following table sets forth our summary historical and unaudited pro forma condensed consolidated financial data for the periods ended and at the dates indicated in such table. We have derived the historical consolidated financial data as of and for the periods ended December 31, 2001, 2002 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the historical consolidated financial data as of and for the three months ended March 31, 2003 and March 31, 2004 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of our management, our unaudited historical condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the three-month periods ended March 31, 2003 and March 31, 2004 are not necessarily indicative of the operating results to be expected for the full fiscal years encompassing such periods. The pro forma data as of and for the fiscal year ended December 31, 2003 is derived from the unaudited pro forma condensed financial statements included elsewhere in this prospectus and gives effect to the acquisition of the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project that was consummated on December 18, 2003 and the acquisition of the Puna project that was consummated on June 3, 2004, as if such acquisitions were consummated on January 1, 2003, but not including the acquisitions of the Steamboat 1/1A project, Steamboat 2/3 project and the Steamboat Hills project that were consummated on June 30, 2003, February 13, 2004 and May 20, 2004, respectively.

The information set forth below should be read in conjunction with "Unaudited Pro Forma Condensed Financial Data", "Selected Historical Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the financial statements relating to the Heber 1, Heber 2, Mammoth and Puna projects included elsewhere in this prospectus.

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Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial Data


  Year Ended December 31, Three Months
Ended March 31,
        Pro Forma     Pro Forma
  2001 2002 2003 2003 2003 2004 2004
        (Unaudited) (Unaudited) (Unaudited)
Statement of Operations Data:                                          
Revenues:                                          
Electricity Segment $ 33,956   $ 65,491   $ 77,752   $ 162,620   $ 17,604   $ 33,459   $ 39,062  
Products Segment   13,959     20,138     41,688     41,688     7,812     14,146     14,146  
    47,915     85,629     119,440     204,308     25,416     47,605     53,208  
Cost of Revenues:                                          
Electricity Segment   12,536     33,482     46,726     98,901     10,148     19,390     22,359  
Products Segment   17,454     17,293     29,494     29,494     6,317     11,328     11,328  
    29,990     50,775     76,220     128,395     16,465     30,718     33,687  
Gross margin   17,925     34,854     43,220     75,913     8,951     16,887     19,521  
Operating income   4,217     20,227     25,490     56,549     5,088     12,399     14,514  
Interest expense   (4,451   (6,889   (8,055   (40,343   (1,720   (8,523   (12,283
Income (loss) from continuing operations   (1,732   8,514     15,659     46,123     1,987     2,737     2,917  
Discontinued operations   (4,681   (9,558                    
Net income (loss) $ (6,413 $ (1,044 $ 15,454   $ 34,570   $ 1,782   $ 2,737   $ 1,762  
Basic and diluted income (loss) per share $ (0.21 $ (0.03 $ 0.50   $ 1.12   $ 0.05   $ 0.09   $ 0.06  
Income (loss) from continuing operations $ (0.06 $ 0.28   $ 0.51   $ 1.12   $ 0.06   $ 0.09   $ 0.06  
Loss from discontinued operations   (0.15   (0.31                      
Net income (loss)   (0.21   (0.03   0.50     1.12     0.05     0.09     0.06  
Weighted average number of shares outstanding   30,769,230     30,769,230     30,769,230     30,769,230     30,769,230     30,769,230     30,769,230  

  March 31, 2004
  Actual Pro Forma
  (Unaudited)    
Balance Sheet Data:
Cash and cash equivalents $ 28,901   $ 28,901  
Working capital   24,239     25,839  
Property, plant and equipment, net   398,630     465,389  
Total assets   697,884     772,796  
Long-term debt   427,576     427,576  
Notes payable to Parent   150,504     223,335  
Stockholder's equity   44,271     44,271  

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RISK FACTORS

You should carefully consider the risks described below together with the other information included in this Prospectus before deciding to invest in our common stock. Our business, financial condition, or results of operations could be adversely affected by any of these risks. If any of these risks occur, the value of our common stock could decline and you might lose all or part of your investment.

Risks Relating to Our Business and Industry

Our financial performance depends on the successful operation of our geothermal power plants which is subject to various operational risks.

We derive a significant portion of our revenues from, and we depend upon the successful operation of, our subsidiaries' geothermal power plants. The cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by a variety of factors, including some which are discussed elsewhere in these risk factors and the following:

•  regular and unexpected maintenance and replacement expenditures;
•  shutdowns due to the breakdown or failure of our equipment or the equipment of the transmission serving utility;
•  labor disputes;
•  the presence of hazardous materials on our project sites; and
•  catastrophic events such as fires, explosions, earthquakes, floods, releases of hazardous materials, severe storms or similar occurrences affecting our projects or any of the power purchasers or other third parties providing services to our projects.

Any of these events could significantly increase the expenses incurred by our projects or reduce the overall generating capacity of our projects and could significantly reduce or entirely eliminate the revenues generated by one or more of our projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

Our exploration, development, and operation of geothermal energy resources is subject to geological risks and uncertainties which may result in decreased performance or increased costs for our projects.

Our business involves the exploration, development and operation of geothermal energy resources. These activities are subject to uncertainties, which vary among different geothermal reservoirs and are in some respects similar to those typically associated with oil and gas exploration and development, such as dry holes, uncontrolled releases and pressure and temperature decline, all of which can increase our operating costs, capital expenditures or the efficiency of our power plants. Prior to our acquisition of the Steamboat Hills project, one of the wells related to such project experienced an uncontrolled release. In addition, the high temperature and high pressure in the Puna project's geothermal energy resource requires special reservoir management and monitoring. Further, the temperature of the geothermal resource at our Heber 1 project has declined since the project commenced operations and, as a result, the project currently operates at a level that is close to the minimum performance requirements set forth in the project's power purchase agreement. Because geothermal reservoirs are complex geological structures, we can only estimate their geographic area and sustainable output. The viability of geothermal projects depends on different factors directly related to the geothermal resource, such as the heat content (the relevant composition of temperature and pressure) of the geothermal reservoir, the useful life (commercially exploitable life) of the reservoir and operational factors relating to the extraction of geothermal fluids. Our geothermal energy projects may suffer an unexpected decline in the capacity of their respective geothermal wells and are exposed to a risk of geothermal reservoirs not being sufficient for sustained generation of the electrical power capacity desired over time. In addition, we may fail to find commercially viable geothermal resources in the expected quantities and temperatures which would adversely affect our development of geothermal power projects.

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Additionally, geothermally active areas, such as the areas in which our projects are located, are subject to frequent low-level seismic disturbances. Serious seismic disturbances are possible and could result in damage to our projects or equipment or degrade the quality of our geothermal resources to such an extent that we could not perform under the power purchase agreement for the affected project, which in turn could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow. If we suffer a serious seismic disturbance, our business interruption and property damage insurance may not be adequate to cover all losses sustained as a result thereof. In addition, insurance coverage may not continue to be available in the future in amounts adequate to insure against such seismic disturbances.

Our business development activities may not be successful and our projects under construction may not commence operation as scheduled despite the expenditure of significant amounts of capital.

We are currently in the process of developing and constructing a number of new power plants. Our success in developing a particular project is contingent upon, among other things, negotiation of satisfactory engineering and construction agreements and power purchase agreements, receipt of required governmental permits, obtaining adequate financing, and the timely implementation and satisfactory completion of construction. We may be unsuccessful in accomplishing any of these matters or doing so on a timely basis. Although we may attempt to minimize the financial risks attributable to the development of a project by securing a favorable power purchase agreement, obtaining all required governmental permits and approvals and arranging adequate financing prior to the commencement of construction, the development of a power project may require us to incur significant expenses for preliminary engineering, permitting and legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being financed.

Currently, we have power plants under development or construction in the United States, Kenya, Guatemala, China and El Salvador, and we intend to pursue the expansion of some of our existing plants and the development of other new plants. Our completion of these facilities is subject to substantial risks, including:

•  unanticipated cost increases;
•  shortages and inconsistent qualities of equipment, material and labor;
•  work stoppages;
•  inability to obtain permits and other regulatory matters;
•  failure by key contractors and vendors to timely and properly perform;
•  adverse environmental and geological conditions (including inclement weather conditions); and
•  our attention to other projects,

any one of which could give rise to delays, cost overruns, the termination of the plant expansion, construction or development or the loss (total or partial) of our interest in the project under development, construction or expansion.

We may be unable to obtain the financing we need to pursue our growth strategy and any future financing we receive may be less favorable to us than our current financing arrangements, either of which may adversely affect our ability to expand our operations.

Our geothermal power plants generally have been financed using leveraged financing structures, consisting of non-recourse or limited recourse debt obligations. As of March 31, 2004, we had approximately $427.6 million of total consolidated indebtedness, of which approximately 88.5% represented non-recourse debt and limited recourse debt held by our subsidiaries. Each of our projects under development or construction and those projects and businesses we may seek to acquire or construct will require substantial capital investment. Our continued access to capital with acceptable terms is necessary for the success of our growth strategy. Our attempts to obtain future financings may not be successful or on favorable terms.

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Market conditions and other factors may not permit future project and acquisition financings on terms similar to those our subsidiaries have previously received. Our ability to arrange for financing on a substantially non-recourse or limited recourse basis and the costs of such capital are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political situation in the country where the project is located and the continued existence of tax and securities laws which are conducive to raising capital. If we are not able to obtain financing for our projects on a substantially non-recourse or limited recourse basis, we may have to finance them using recourse capital such as direct equity investments, parent company loans or the incurrence of additional debt by us.

Also, in the absence of favorable financing options, we may decide not to build new plants or acquire facilities from third parties. Any of these alternatives could have a material adverse effect on our growth prospects.

Our foreign projects expose us to risks related to the application of foreign laws, taxes, economic conditions, labor supply and relations, political conditions and policies of foreign governments which risks may delay or reduce our ability to profit from such projects.

We have substantial operations outside of the United States. Our foreign operations are subject to regulation by various foreign governments and regulatory authorities and are subject to the application of foreign laws. Such foreign laws or regulations may not provide for the same type of legal certainty and rights, in connection with our contractual relationships in such countries, as are afforded to our projects in the United States, which may adversely affect our ability to receive revenues or enforce our rights in connection with such foreign operations. In addition, the laws and regulations of some countries may limit our ability to hold a majority interest in some of the projects that we may develop or acquire, thus limiting our ability to control the development, construction and operation of such projects. Our foreign operations are also subject to significant political, economic and financial risks, which vary by country, and include:

•  changes in government policies or personnel;
•  changes in general economic conditions;
•  restrictions on currency transfer or convertibility;
•  changes in labor relations;
•  political instability and civil unrest;
•  changes in the local electricity market;
•  breach or repudiation of important contractual undertakings by governmental entities; and
•  expropriation and confiscation of assets and facilities.

In particular, the Philippines is in the midst of an ongoing privatization of the electric industry, and in Guatemala the electricity sector was partially privatized and it is currently unclear whether further privatization will occur in the future. Such developments may affect our existing Leyte and Zunil projects and the Amatitlan project currently under construction if, for example, they result in changes to the prevailing tariff regime or in the identity and creditworthiness of our power purchasers. In Nicaragua, there is potential labor unrest and strengthening of labor unions, which may adversely affect our Momotombo project. In Kenya, the new government that was elected in 2002 is making an effort to deliver on campaign promises to reduce the price for electricity and is applying pressure on independent power producers, such as our Olkaria III project, to lower their tariffs. In addition, Kenya's new government is considering a further restructuring and privatization of the electricity industry in Kenya and may divide Kenya Power & Lighting Co. Ltd., the power purchaser for our Olkaria III project, into separate entities and then privatize one or more of such resulting entities. A material tariff reduction or any break-up and potential privatization of Kenya Power & Lighting Co. Ltd. may adversely affect our Olkaria III project. We are also currently in discussions with the Kenyan

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government and Kenya Power & Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya and the provision of certain collateral and government support. We must notify Kenya Power & Lighting Co. Ltd., by April 17, 2005, whether we will proceed to construct Phase II of the Olkaria III project and, if we notify Kenya Power & Lighting Co. Ltd. that we will not proceed with such construction, then the portion of the current power purchase agreement applicable to Phase II of the Olkaria III project will be terminated (but the current portion applicable to Phase I will be unaffected). If we fail to provide such notification we will be required to construct Phase II and reach commercial operations by May 31, 2007 in order to avoid the application of financial penalties, or at the latest by April 17, 2008 in order to avoid termination of the entire power purchase agreement. In addition, if we do not proceed with the construction of Phase II, we may lose some or all of our investment relating to Phase II, which is approximately $22.2 million.

Although we generally obtain political risk insurance in connection with our foreign projects, such political risk insurance does not mitigate all of the above-mentioned risks. In addition, insurance proceeds received pursuant to our political risk insurance policies, where applicable, may not be adequate to cover all losses sustained as a result of any covered risks and may at times be pledged in favor of the lenders to a project as collateral. Also, insurance may not be available in the future with the scope of coverage and in amounts of coverage adequate to insure against such risks and disturbances.

Our foreign projects and foreign manufacturing operations expose us to risks related to fluctuations in currency rates, which may reduce our profits from such projects and operations.

Risks attributable to fluctuations in currency exchange rates can arise when any of our foreign subsidiaries borrow funds or incur operating or other expenses in one type of currency but receive revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary's ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary or increase such subsidiary's overall expenses. In addition, the imposition by foreign governments of restrictions on the transfer of foreign currency abroad or restrictions on the conversion of local currency into foreign currency would have an adverse effect on the operations of our foreign projects and foreign manufacturing operations and may limit or diminish the amount of cash and income that we receive from such foreign projects and operations.

A significant portion of our net revenue is attributed to payments made by power purchasers under power purchase agreements. The failure of any such power purchaser to perform its obligations under the relevant power purchase agreement or the loss of a power purchase agreement due to a default would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

A significant portion of our net revenue is attributed to revenues derived from power purchasers under the relevant power purchase agreements. Southern California Edison Company, Hawaii Electric Light Company, PNOC-Energy Development Corporation and Sierra Pacific Power Company have accounted for 48.3%, 9.2%, 6.2% and 5.6% of our pro forma revenues, respectively, for the fiscal year ended December 31, 2003. Based on publicly available information, as of June 30, 2004, the issuer ratings of Southern California Edison Company, Sierra Pacific Power Company and Nevada Power Company (a potential power purchaser for the Desert Peak 2 and Desert Peak 3 projects) were Baa3 (under review), B1 (negative outlook) and B1 (negative outlook), respectively, from Moody's Investors Services and BBB (stable outlook), B+ (negative outlook), and B+ (negative outlook), respectively, from Standard & Poor's Ratings Services and the issuer rating of Hawaii Electric Light Company was BBB+ (stable outlook) by Standard & Poor's Ratings Services. The credit ratings of any power purchaser may decrease from time to time. There is no publicly available information with respect to the credit ratings or stability of the power purchasers under the power purchase agreements for our foreign projects.

Neither we nor any of our affiliates make any representations as to the financial condition or creditworthiness of any purchaser under a power purchase agreement and nothing in this prospectus should be construed as such a representation.

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There is a risk that any one or more of the power purchasers may not fulfill their respective payment obligations under their power purchase agreements. For example, as a result of the energy crisis in California, Southern California Edison Company withheld payments it owed under various of its power purchase agreements with a number of power generators (such as the Ormesa, Heber 1, Heber 2, and Mammoth projects) payable for certain energy delivered between November 2000 and March 2001 under such power purchase agreements until March 2002. In the case of our Ormesa project (which we acquired in April 2002), the payment withheld by Southern California Edison Company totaled $21.2 million. If any of the power purchasers fails to meet its payment obligations under its power purchase agreements, it could materially and adversely affect our business, financial condition, future results and cash flow.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison Company has raised an issue regarding a potential breach by the Ormesa project of such power purchase agreements as a result of the use of power from the GEM 2 and GEM 3 plants by the Ormesa project for auxiliary purposes. The loss of a power purchase agreement as a result of a default would materially and adversely affect our business, financial condition, future results and cash flow.

Seasonal variations may cause significant fluctuations in our cash flows, which may cause the market price of our common stock to fall in certain periods.

Our results of operations are subject to seasonal variations. This is primarily because some of our domestic projects receive higher capacity payments under the power purchase agreements during the summer months and due to the generally higher short run avoided costs in effect during the summer months. Some of our other projects may experience reduced generation during warm periods due to the lower heat differential between the geothermal fluid and the ambient surroundings. Such seasonal variations could materially and adversely affect our business, financial condition, future results and cash flow. If our operating results fall below the public's or analysts' expectations in some future period or periods, the market price of our common stock will likely fall in such period or periods.

Pursuant to the terms of some of our power purchase agreements with investor-owned electric utilities in states that have renewable portfolio standards, the failure to supply the contracted capacity thereunder may result in the imposition of penalties.

Pursuant to the terms of certain of the power purchase agreements that we have entered into and under which we will sell electricity from certain projects that are currently under development and construction, we may be required to make payments to the relevant power purchaser in an amount equal to such purchaser's replacement costs for renewable energy relating to any shortfall amount of renewable energy that we do not provide as required under the power purchase agreement and which such power purchaser is forced to obtain from an alternate source. In addition, we may be required to make payments to the relevant power purchaser in an amount equal to its replacement costs relating to any renewable energy credits we do not provide as required under the relevant power purchase agreement. We may also be required to pay liquidated damages if certain minimum performance requirements are not met under certain of our power purchase agreements, all of which could materially and adversely affect our business, financial condition, future results and cash flow. Our Puna project was not in compliance with the minimum performance requirements of its power purchase agreement at the time we acquired such project and is currently not in compliance with such requirements. Such non-compliance has resulted in the imposition of sanctions that have reduced, and as long as such non-compliance continues to exist, will continue to reduce, the aggregate amount of revenues payable to us from the power purchaser. Further, the temperature of the geothermal resource at our Heber 1 project has declined from the date on which the project has commenced operations and, as a result, the project currently operates at a level that is close to the minimum performance requirements set forth in such project's power purchase agreement.

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The short run avoided cost for our power purchasers may decline, which would reduce our project revenues and could materially and adversely affect our business, financial condition, future results and cash flow.

Under the power purchase agreements for our projects in California, the price that Southern California Edison Company pays for energy is based upon its short run avoided costs, which are the incremental costs that it would have incurred had it generated the relevant electrical energy itself or purchased such energy from others. Under settlement agreements between Southern California Edison Company and a number of Qualifying Facility power generators in California, including our subsidiaries, the energy price component payable by Southern California Edison Company has been fixed through April 2007, and thereafter will be based on Southern California Edison Company's short run avoided costs, as determined by the California Public Utilities Commission, which we refer to as CPUC. These short run avoided costs are made available by Southern California Edison Company to the public and may vary substantially on a monthly basis, based primarily on gas prices and other factors. The levels of short run avoided cost prices paid by Southern California Edison Company may decline following the expiration date of the settlement agreements, which in turn would reduce our project revenues derived from Southern California Edison Company under our power purchase agreements with it and could materially and adversely affect our business, financial condition, future results and cash flow.

In addition, under certain of the power purchase agreements for our projects in Nevada, the price that Sierra Pacific Power Company pays for energy and capacity is based upon its short run avoided costs. These short run avoided costs, and in turn the rates payable by Sierra Pacific Power Company, may decline, which in turn would reduce the aggregate amount of project revenues recovered by our Nevada projects pursuant to the relevant Nevada project power purchase agreements. Such a decrease in project revenues could adversely affect our business, financial condition, future results and cash flow.

In response to an order issued by a California State Court of Appeal, the CPUC has commenced an administrative proceeding in order to address short run avoided cost pricing for Qualifying Facilities for the period spanning from December 2000 to March 2001. The court directed the CPUC to modify short run avoided cost pricing on a retroactive basis to the extent that the CPUC determined that short run avoided cost prices were not sufficiently "accurate" or "correct." If the short run avoided cost prices charged during the period in question were determined by the CPUC not to be "accurate" or "correct," retroactive price adjustments could be required for any of our Qualifying Facilities in California whose payments are tied to short run avoided cost pricing, including the Heber 1, Mammoth and Ormesa projects. Currently, it is not possible to predict the outcome of such proceeding, however, any retroactive price adjustment required to be made in relation to any of our projects may require such projects to make refund payments or charge less for future sales, which could materially and adversely affect our business, financial condition, future results and cash flow.

If any of our domestic projects loses its Qualifying Facility status under PURPA, or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded to our Qualifying Facilities, our domestic operations could be adversely affected.

The operations of most of our domestic projects are subject to, and benefit from, the Public Utility Regulatory Policies Act of 1978, as amended, which we refer to as PURPA, are subject to limited provisions of the Federal Power Act, which we refer to as FPA, and are potentially subject to the provisions of various other energy laws and regulations, including the Public Utility Holding Company Act of 1935, as amended, which we refer to as PUHCA, other provisions of the FPA and certain state and local laws and regulations regarding rates and financial and organizational requirements for electric utilities.

Qualifying Facility status under PURPA exempts our projects from PUHCA, most of the provisions of the FPA, and certain state laws concerning rates and the financial and organizational regulation of electric utilities. If any of our domestic projects in which we have an interest loses its

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Qualifying Facility status and no regulatory exemptions apply or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded Qualifying Facilities, our operations could be adversely affected.

In the event that one of our domestic projects loses its Qualifying Facility status, such project and we would become subject to PUHCA and such project would become subject to the full scope of the FPA and applicable state regulations unless an exemption or waiver applies, such as "exempt wholesale generator" ("EWG", as defined under PUHCA) status or "utility geothermal small power production facility" (as defined under PURPA regulations) status, for such project. The application of PUHCA and such other regulations to our projects would require our operations to comply with an increasingly complex regulatory regime that may be costly and greatly reduce our operational flexibility. In the unlikely event that none of the PUHCA exemptions or waivers are available, we could become a public utility holding company under PUHCA, which could be deemed to occur prospectively or retroactively to the date that any of our projects lost its Qualifying Facility status. In addition, our other domestic projects could lose Qualifying Facility status because our interests in such projects could be considered to be electric utility holding company interests for purposes of the 50% limit on ownership of Qualifying Facilities by electric utilities or electric utility holding companies. As a result of such loss of Qualifying Facility status and in the absence of an applicable exemption or waiver, the Federal Energy Regulatory Commission, which we refer to as FERC, or relevant state regulators, whichever had jurisdiction, may order partial refunds of past amounts paid by the relevant power purchaser or order a reduction of the rate pursuant to the power purchase agreement prospectively, or both, and thus could cause the loss of some or all of our revenues payable pursuant to the related power purchase agreement, result in significant liability for refunds of past amounts paid, or otherwise impair the value of our projects.

A loss of Qualifying Facility status also could permit the power purchaser, pursuant to the terms of the particular power purchase agreement, to cease taking and paying for electricity from the relevant project or, consistent with FERC precedent, to seek refunds of past amounts paid. This could cause the loss of some or all of our revenues payable pursuant to the related power purchase agreement, result in significant liability for refunds of past amounts paid, or otherwise impair the value of our project. If a power purchaser were to cease taking and paying for electricity or seek to obtain refunds of past amounts paid, there can be no assurance that the costs incurred in connection with the project could be recovered through sales to other purchasers or that we would have sufficient funds to make such payments. In addition, the loss of Qualifying Facility status would be an event of default under the financing arrangements currently in place for some of our projects, which would enable the lenders to exercise their remedies and enforce the liens on the relevant project.

The United States Congress is considering proposed legislation that would amend PURPA by limiting the mandatory purchase obligations of power purchasers under new power purchase agreements. The enactment of such legislation could adversely affect our new projects or enhancements of existing projects that do not have a current power purchase agreement.

An adverse FERC ruling related to the use by the Ormesa project of power generated from another Qualifying Facility for auxiliary purposes may adversely affect our operations and financial results.

Our Ormesa project uses electricity generated by two of our power plants for pumps that help reinject its geothermal brine after it has been used for power generation. According to a recent FERC decision involving such project, a geothermal Qualifying Facility that obtains electricity for the operation of its reinjection pumps from an electric utility must reduce its net capacity available for sale by an equivalent amount, unless such electricity is obtained from another Qualifying Facility. FERC has recently granted a rehearing of its decision for further consideration. If FERC were to reverse its ruling regarding electricity provided by another Qualifying Facility for reinjection pumps, our Ormesa project would be required to reduce its capacity for sale by the amount of power used for such purposes. Such a reversal by FERC could have an adverse effect on the revenues that our Ormesa project receives from its power sales and may impact the operations at some of our other projects.

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Our Heber 1 and Mammoth projects purchase electricity for their reinjection pumps from Southern California Edison Company. If FERC were to uphold its ruling that electricity obtained from third parties that are not Qualifying Facilities for use by reinjection pumps must be subtracted from geothermal projects' net capacity, and if such ruling was to be sustained on appeal, this could have an adverse effect on the revenues that our Heber 1 and Mammoth projects receive from their power sales. Although FERC has not previously applied rulings such as these retroactively in similar cases, if FERC were to apply such rulings retroactively, our subsidiaries may owe Southern California Edison Company a refund for prior sales of electricity in amounts that correspond to the historical power purchases for reinjection pumping.

Our financial performance is significantly dependent on the successful operation of our projects which is subject to changes in the legal and regulatory environment affecting our projects.

All of our projects are subject to extensive regulation and therefore changes in applicable laws or regulations, or interpretations of those laws and regulations, could result in increased compliance costs, the need for additional capital expenditures or the reduction of certain benefits currently available to our projects. The structure of federal and state energy regulation is currently, and may continue to be, subject to challenges, modifications, the imposition of additional regulatory requirements, and restructuring proposals. We and our power purchasers may not be able to obtain all regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory approvals, or maintain all required regulatory approvals. In addition, the cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by changes in certain laws and regulations, including tax laws.

The federal government also encourages production of electricity from geothermal resources through certain tax subsidies. We are permitted to claim in our consolidated federal tax returns approximately 10% of the construction cost of each new geothermal power plant as a credit against our consolidated federal income taxes. We are also permitted to deduct, as a depreciation expense on our consolidated federal tax returns, up to 95% of the cost of the power plant over five years on an accelerated basis, which results in more of the cost being deducted in the first few years than during the remainder of the depreciation period. In addition, we have the ability to obtain value from these tax incentives through lease financing transactions even when we are not in a position to use them directly. Any reduction in such tax incentives or any restrictions on such lease financing transactions would materially and adversely affect our business, financial condition, future results and cash flow.

Any such changes could significantly increase the regulatory-related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate the revenues generated by one or more of the projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

The costs of compliance with environmental laws, which currently are significant, may increase in the future and could materially and adversely affect our business, financial condition, future results and cash flow and any non-compliance with such laws or regulations may result in the imposition of liabilities which could materially and adversely affect our business, financial condition, future results and cash flow.

Our projects are required to comply with numerous domestic and foreign federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required for construction and/or operation. Some of the environmental permits and governmental approvals that have been issued to the projects contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If we fail to satisfy these conditions or comply with these restrictions, or with any statutory or regulatory environmental standards, we may become subject to regulatory enforcement action and the operation of the projects could be adversely affected or be subject to fines, penalties or additional costs. In addition, we may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the projects, as a result of which the operation of the projects may be

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limited or suspended. Environmental laws, ordinances and regulations affecting us can be subject to change and such change could result in increased compliance costs, the need for additional capital expenditures, or otherwise adversely affect us.

We could be exposed to significant liability for violations of hazardous substances laws because of the use or presence of such substances at our projects.

Our projects are subject to numerous domestic and foreign federal, regional, state and local statutory and regulatory standards relating to the use, storage and disposal of hazardous substances. We use isobutane, isopentane, industrial lubricants and other substances at our projects which are or could become classified as hazardous substances. If any hazardous substances are found to have been released into the environment at or by the projects, we could become liable for the investigation and removal of those substances, regardless of their source and time of release. If we fail to comply with these laws, ordinances or regulations (or any change thereto), we could be subject to civil or criminal liability, the imposition of liens or fines, and large expenditures to bring the projects into compliance. Furthermore, in the United States, we can be held liable for the cleanup of releases of hazardous substances at other locations where we arranged for disposal of those substances, even if we did not cause the release at that location. The cost of any remediation activities in connection with a spill or other release of such substances could be significant.

We believe that there may have at one time been a gas station located on the Mammoth project site, but because of significant surface disturbance and construction since that time further physical evaluation of the former gas station site has been impractical. There may be soil or groundwater contamination and related liability exposure of which we are unaware related to this site which may be significant and may adversely and materially affect our operations and revenues.

We may not be able to successfully integrate companies that we have acquired or which we may acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow.

We recently acquired our Heber 1, Heber 2, Mammoth, Steamboat 2/3, Steamboat Hills and Puna projects. Our strategy is to continue to expand in the future, including through acquisitions. Integrating acquisitions is often costly, and we may not be able to successfully integrate our acquired companies with our existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating our acquired companies involves a number of risks that could materially and adversely affect our business, including:

•  failure of the acquired companies to achieve the results we expect;
•  inability to retain key personnel of the acquired companies;
•  risks associated with unanticipated events or liabilities; and
•  the difficulty of establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.

If any of our acquired companies suffers customer dissatisfaction or performance problems, the same could adversely affect the reputation of our group of companies and could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition, and we encounter competition from electric utilities, other power producers, and power marketers that could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition from electric utilities, other power producers and power marketers. In recent years, there has been increasing competition in the sale of electricity, in part due to excess capacity in a number of U.S. markets and an emphasis on short-term or "spot" markets, and competition has contributed to a reduction in electricity prices. For the most part, we expect that power purchasers interested in long-term arrangements with a capacity

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price component will engage in "competitive bid" solicitations to satisfy new capacity demands. This competition could adversely affect our ability to obtain power purchase agreements and the price paid for electricity by the relevant power purchasers. There is also increasing competition between electric utilities, particularly in California where the CPUC has launched an initiative designed to give all electricity consumers the ability to choose between competing suppliers of electricity. This competition has put pressure on electric utilities to lower their costs, including the cost of purchased electricity, and increasing competition in the future will put further pressure on power purchasers to reduce the prices at which they purchase electricity from us.

The existence of a prolonged force majeure event or a forced outage affecting a project could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

If a project experiences a force majeure event, our subsidiary owning that project would be excused from its obligations under the relevant power purchase agreement. However, the relevant power purchaser may not be required to make any capacity and/or energy payments with respect to the affected project or plant so long as the force majeure event continues and, pursuant to certain of our power purchase agreements, will have the right to prematurely terminate the power purchase agreement. Additionally, to the extent that a forced outage has occurred, the relevant power purchaser may not be required to make any capacity and/or energy payments to such project and if as a result the project fails to attain certain performance requirements under certain of our power purchase agreements, the purchaser may have the right to permanently reduce the contract capacity (and, correspondingly, the amount of capacity payments due pursuant to such agreements in the future), seek refunds of certain past capacity payments, and/or prematurely terminate the power purchase agreement. As a consequence, we may not receive any net revenues from the affected project or plant other than the proceeds from any business interruption insurance that applies to the force majeure event or forced outage after the relevant waiting period and may incur significant liabilities in respect of past amounts required to be refunded. Accordingly, our business, financial condition, future results and cash flows could be materially and adversely affected.

The existence of a force majeure event or a forced outage affecting the transmission system of the Imperial Irrigation District could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

If the transmission system of the Imperial Irrigation District experiences a force majeure event or a forced outage which prevents it from transmitting the electricity from certain of our projects to the relevant power purchaser, the relevant power purchaser would not be required to make energy payments for such non-delivered electricity and may not be required to make any capacity payments with respect to the affected project so long as such force majeure event or forced outage continues, thus reducing or eliminating the revenues of such project.

Some of our leases will terminate if we do not extract geothermal resources in "commercial quantities," thus requiring us to enter into new leases or secure rights to alternate geothermal resources, none of which may be available on terms as favorable to us as any such terminated lease, if at all.

Most of our geothermal resource leases are for a fixed primary term, and then continue for so long as geothermal resources are extracted in "commercial quantities" or pursuant to other terms of extension. The land covered by some of our leases is undeveloped and has not yet produced geothermal resources in "commercial quantities." Leases that cover land which remains undeveloped and does not produce, or does not continue to produce, geothermal resources in commercial quantities or leases that we allow to expire, will terminate. In the event that a lease is terminated and we determine that we will need that lease once the applicable project is operating, we would need to enter into one or more new leases with the owner(s) of the premises that are the subject of the terminated lease(s) in order to develop geothermal resources from or inject geothermal resources into such premises or secure rights to alternate geothermal resources or lands suitable for injection, all of which may not be possible or could result in increased cost to us which could materially and adversely affect our business, financial condition, future results and cash flow.

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Our Bureau of Land Management leases may be terminated if we fail to comply with any of the provisions of the Geothermal Steam Act of 1970 or if we fail to comply with the terms or stipulations of such leases, which may materially and adversely affect our business and operations.

Pursuant to the terms of our Bureau of Land Management (which we refer to as BLM) leases, we are required to conduct our operations on BLM-leased land in a workmanlike manner and in accordance with all applicable laws and BLM directives and to take all mitigating actions required by the BLM to protect the surface of and the environment surrounding the relevant land. Additionally, certain BLM leases contain additional requirements, some of which relate to the mitigation or avoidance of disturbance of any antiquities, cultural values or threatened or endangered plants or animals, the payment of royalties for timber and the imposition of certain restrictions on residential development on the leased land. In the event of a default under any BLM lease, or the failure to comply with such requirements, or any non-compliance with any of the provisions of the Geothermal Steam Act of 1970 or regulations issued thereunder, the BLM may, 30 days after notice of default is provided to our relevant project subsidiary, suspend operations until the requested action is taken or terminate the lease, either of which could materially and adversely affect our business, financial condition, future results and cash flows.

Some of our leases (or subleases) could terminate if the lessor (or sublessor) under any such lease (or sublease) defaults on any debt secured by the relevant property, thus terminating our rights to access the underlying geothermal resources at that location.

The fee interest in the land which is the subject of each of our leases (or subleases) may currently be or may become subject to encumbrances securing loans from third party lenders to the lessor (or sublessor). Our rights as lessee (or sublessee) under such leases (or subleases) are or may be subject and subordinate to the rights of any such lender. Accordingly, a default by the lessor (or sublessor) under any such loan could result in a foreclosure on the underlying fee interest in the property and thereby terminate our leasehold interest and result in the shutdown of the project located on the relevant property and/or terminate our right of access to the underlying geothermal resources required for our operations.

In addition, a default by a sublessor under its lease with the owner of the property which is the subject of our sublease could result in the termination of such lease and thereby terminate our sublease interest and our right to access the underlying geothermal resources required for our operations.

We depend on key personnel for the success of our business.

Our success is largely dependent on the skills, experience and efforts of our senior management team and other key personnel. In particular, our success depends on the continued efforts of Lucien Bronicki, Yehudit Bronicki, Hezy Ram, Nadav Amir and other key employees. The loss of the services of any key employee could materially harm our business, financial condition, future results and cash flow. Although we have been, to date, successful in retaining the services of senior management, we may not be able to locate or employ on acceptable terms qualified replacements for our senior management or key employees if their services were no longer available.

Our projects have generally been financed through a combination of parent company loans and limited- or non-recourse project finance debt. If our project subsidiaries default on their obligations under such limited- or non-recourse debt, we may be required to make certain payments to the relevant debt holders and if the collateral supporting such leveraged financing structures is foreclosed upon, we may lose certain of our projects.

Our projects have generally been financed using a combination of parent company loans and limited- or non-recourse project finance debt. Non-recourse project finance debt refers to debt that is repaid solely from the project's revenues and is secured by the project's physical assets, major contracts, cash accounts and, in many cases, our ownership interest in the project subsidiary. Limited recourse project finance debt refers to our additional agreement, as part of the financing of a project,

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to provide limited financial support for the project subsidiary in the form of limited guarantees, indemnities, capital contributions and agreements to pay certain debt service deficiencies. If our project subsidiaries default on their obligations under the relevant debt documents, creditors of a limited recourse project financing will have direct recourse to us, to the extent of our limited recourse obligations, which may require us to use distributions received by us from other projects, as well as other sources of cash available to us, in order to satisfy such obligations. In addition, if our project subsidiaries default on their obligations under the relevant debt documents and the creditors foreclose on the relevant collateral, we may lose our ownership interest in the relevant project subsidiary or our project subsidiary owning the project would only retain an interest in the physical assets, if any, remaining after all debts and obligations were paid in full.

Changes in costs and technology may significantly impact our business by making our power plants and products less competitive.

A basic premise of our business model is that generating baseload power at central geothermal power plants achieves economies of scale and produces electricity at a competitive price. However, traditional coal-fired systems and gas-fired systems may under certain economic conditions produce electricity at lower average prices than our geothermal plants. In addition, there are other technologies that can produce electricity, most notably fuel oil systems, hydroelectric systems, fuel cells, microturbines, windmills and photovoltaic (solar) cells. Some of these alternative technologies currently produce electricity at a higher average price than our geothermal plants, however research and development activities are ongoing to seek improvements in such alternate technologies and their cost of producing electricity is gradually declining. It is possible that advances will further reduce the cost of alternate methods of power generation to a level that is equal to or below that of most geothermal power generation technologies. If this were to happen, the competitive advantage of our projects may be significantly impaired.

Our expectations regarding the market potential for the development of recovered energy-based power generation may not materialize and as a result we may not derive any significant revenues from this line of business.

We have identified recovered energy-based power generation as a significant market opportunity for us. Demand for our recovered energy-based power generation units may not materialize or grow at the levels that we expect. We currently face competition in this market from manufacturers of conventional steam turbines and may face competition from other related technologies in the future. If this market does not materialize at the levels that we expect, such failure may materially and adversely affect our business, financial condition, future results and cash flow.

Our intellectual property rights may not be adequate to protect our business.

Our intellectual property rights may not be adequate to protect our business. While we occasionally file patent applications, such patents may not be issued on the basis of such applications or, if such patents are issued, they may not be sufficiently broad to protect our technology. In addition, any patents issued to us or for which we have use rights may be challenged, invalidated or circumvented.

In order to safeguard our unpatented proprietary know-how, trade secrets and technology, we rely primarily upon trade secret protection and non-disclosure provisions in agreements with employees and others having access to confidential information. These measures may not adequately protect us from disclosure or misappropriation of our proprietary information.

Even if we adequately protect our intellectual property rights, litigation may be necessary to enforce these rights, which could result in substantial costs to us and a substantial diversion of management attention. Also, while we have attempted to ensure that our technology and the operation of our business do not infringe other parties' patents and proprietary rights, our competitors or other parties may assert that certain aspects of our business or technology may be covered by patents held by them. Infringement or other intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management's attention from our core business.

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We are subject to risks associated with a changing economic and political environment which may adversely affect our financial stability or the financial stability of our counterparties.

The risk of terrorist attacks in the United States or elsewhere continues to remain a potential source of disruption to the nation's economy and financial markets in general. The availability and cost of capital for our business and that of our competitors has been adversely affected by the bankruptcy of Enron Corp. and events related to the California electric market crisis. Additionally, the recent rise in fuel costs may make it more expensive for our customers to operate their businesses. These events could constrain the capital available to our industry and could adversely affect our financial stability and the financial stability of our counterparties in transactions.

Possible fluctuations in the cost of raw materials may materially and adversely affect our business, financial condition, future results and cash flow.

Our manufacturing operations are dependent on the supply of various raw materials including primarily steel and aluminum, and are also dependent on the supply of various industrial equipment components that we use. We currently obtain all such materials and equipment at prevailing market prices. Supply interruptions or future cost increases of such raw materials and equipment, to the extent not otherwise passed along to our customers, could adversely affect our profit margins.

Conditions in Israel, where the majority of our senior management and all of our production and manufacturing facilities are located, may adversely affect our operations and may limit our ability to produce and sell our products or manage our projects.

Operations in Israel accounted for approximately 61.3%, 56.3%, and 51.0% of our operating expenses in fiscal year 2001, fiscal year 2002 and fiscal year 2003, respectively. Political, economic and security conditions in Israel directly affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, and the continued state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. Since October 2000, there has been a significant increase in violence, primarily in the West Bank and Gaza Strip, and more recently Israel has experienced a significant increase in terrorist incidents within its borders. As a result, negotiations between Israel and representatives of the Palestinian Authority have been sporadic and have failed to result in peace. We could be adversely affected by hostilities involving Israel, the interruption or curtailment of trade between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel. In addition, the sale of products manufactured in Israel may be adversely affected in certain countries by restrictive laws, policies or practices directed toward Israel or companies having operations in Israel.

In addition, some of our employees in Israel are subject to being called upon to perform military service in Israel, and their absence may have an adverse effect upon our operations. Generally, unless exempt, male adult citizens of Israel under the age of 41 are obligated to perform up to 36 days of military reserve duty annually. Additionally, all such citizens are subject to being called to active duty at any time under emergency circumstances.

These events and conditions could disrupt our operations in Israel, which could materially harm our business, financial condition, future results and cash flow.

Failure to comply with certain conditions and restrictions associated with tax benefits provided to Ormat Systems by the Government of Israel as an "approved enterprise" may require us to refund such tax benefits and pay future taxes in Israel at higher rates.

Our subsidiary, Ormat Systems, has received "approved enterprise" status under Israel's Law for Encouragement of Capital Investments, 1959, with respect to two of its investment programs. As an approved enterprise, our subsidiary is exempt from Israeli income taxes with respect to revenues derived from the approved investment program for a period of two years commencing on the year it first generates profits from the approved investment program and, thereafter, such revenues are

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subject to reduced Israeli income tax rates of 25% for an additional five years. These benefits are subject to certain conditions set forth in the certificate of approval from Israel's Investment Center, that include, among other things, a requirement that Ormat Systems comply with Israeli intellectual property law, that all transactions between Ormat Systems and our affiliates be at arms length, and that there will be no change in control of, on a cumulative basis, more than 49% of Ormat Systems' capital stock (including by way of a public or private offering) without the prior written approval of the Investment Center. If Ormat Systems does not comply with these conditions, in whole or in part, it would be required to refund the amount of tax benefits (as adjusted by the Israeli consumer price index and for accrued interest) and would no longer benefit from the reduced Israeli tax rates, which could have an adverse effect on our financial condition, future results and cash flow. If Ormat Systems distributes dividends out of revenues derived during the tax exemption period from the approved investment program, it will be subject, in the year in which such dividend is paid, to Israeli income tax on the distributed dividend.

If our parent defaults on its lease agreement with the Israel Land Administration, or is involved in a bankruptcy or similar proceeding, our rights and remedies under certain agreements pursuant to which we acquired our products business and pursuant to which we sublease our land and manufacturing facilities from our parent may be adversely affected.

We acquired our business relating to the manufacturing and sale of products for electricity generation and related services from our parent, Ormat Industries. In connection with that acquisition, we entered into a sublease with Ormat Industries for the lease of the land and facilities where our manufacturing and production operations are conducted and where our Israeli offices are located. Under the terms of our parent's lease agreement with the Israel Land Administration, any sublease for a period of more than five years may require the prior approval of the Israel Land Administration. As a result, the initial term of our sublease with Ormat Industries is for a period of four years and eleven months, extendable to twenty-five years (which includes the initial term) should our parent obtain the approval of the Israel Land Administration, to the extent necessary. If such an approval is required and our parent fails to obtain the Israel Land Administration's approval, our sublease will terminate on June 1, 2009, at which time we will have to renegotiate the terms of a new sublease. We may not be successful in reaching an agreement with our parent as to the terms of a new sublease or in obtaining such sublease on favorable terms, both of which circumstances will adversely affect our manufacturing activities and our financial position. Additionally, if our parent was to breach its obligations to the Israel Land Administration under its lease agreement, the Israel Land Administration may terminate the lease agreement and consequently, our sublease will terminate as well.

As part of the acquisition described in the preceding paragraph, we also entered into a patent license agreement with Ormat Industries, pursuant to which we were granted an exclusive license for certain patents and trademarks relating to certain technologies that are used in our business. If a bankruptcy case were commenced by or against our parent, it is possible that performance of all or part of the agreements entered into in connection with such acquisition (including the lease of land and facilities described above) could be stayed by the bankruptcy court in Israel or rejected by a liquidator appointed pursuant to the Bankruptcy Ordinance in Israel and thus not be enforceable. Any of these events could have a material and adverse effect on our business, financial condition, future results and cash flow.

We are a holding company and our revenues depend substantially on the performance of our subsidiaries and the projects they operate, most of which are subject to restrictions and taxation on dividends and distributions.

We are a holding company whose primary assets are our ownership of the equity interests in our subsidiaries. We conduct no other business and, as a result, we depend entirely upon our subsidiaries' earnings and cash flow.

The agreements pursuant to which most of our subsidiaries have incurred debt restrict the ability of these subsidiaries to pay dividends, make distributions or otherwise transfer funds to us prior to the

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satisfaction of other obligations, including the payment of operating expenses, debt service and replenishment or maintenance of cash reserves. In the case of some of our projects, such as the Mammoth project, there may be certain additional restrictions on dividend distributions pursuant to our agreements with our partners. Further, if we elect to receive distributions of earnings from our foreign operations, we may incur United States taxes on account of such distributions, net of any available foreign tax credits. In all of the foreign countries where our existing projects are located, dividend payments to us are also subject to withholding taxes. Each of the events described above may reduce or eliminate the aggregate amount of revenues we can receive from our subsidiaries.

Risks Relating to this Offering

Our controlling stockholders may take actions that conflict with your interests.

Immediately following this offering,         % of our common stock will be held by Ormat Industries, Ltd. (        % if the underwriters exercise their over-allotment option in full), which is controlled by Bronicki Investments Ltd. Bronicki Investments Ltd. is a privately held Israeli company and is controlled by Lucien and Yehudit Bronicki. Because of these holdings, our parent company and its controlling stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and they will have significant control over our management and policies. The directors elected by these stockholders will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. For example, our controlling stockholders will be able to control the sale or other disposition of our products business to another entity or the transfer of such business outside of the State of Israel, as such action requires the affirmative vote of at least 75% of our outstanding shares.

Some of our directors that also hold positions with our parent may have conflicts of interest with respect to matters involving both companies.

Two of our three directors are directors and/or officers of Ormat Industries. These directors will have fiduciary duties to both companies and may have conflicts of interest on matters affecting both us and our parent and in some circumstances may have interests adverse to our interests. Our Chairman, Director and Chief Technology Officer, Mr. Bronicki, will continue to be Chairman of our parent following the offering. In addition, our Chief Executive Officer and Director, Mrs. Bronicki, will continue to be the Chief Executive Officer of our parent following the offering.

There has been no prior market for our common stock and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following the closing of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares of common stock at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value and increase the volatility of your shares of common stock. An inactive market may also impair our ability to raise capital by selling shares of common stock and may impair our ability to acquire other companies or technologies by using our shares of common stock as consideration.

The price of our common stock may fluctuate substantially and your investment may decline in value.

The initial public offering price for the shares of our common stock sold in this offering will be determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

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•  actual or anticipated fluctuations in our results of operations including as a result of seasonal variations in our electricity-based revenues;
•  variance in our financial performance from the expectations of market analysts;
•  conditions and trends in the end markets we serve and changes in the estimation of the size and growth rate of these markets;
•  announcements of significant contracts by us or our competitors;
•  changes in our pricing policies or the pricing policies of our competitors;
•  loss of one or more of our significant customers;
•  legislation;
•  changes in market valuation or earnings of our competitors;
•  the trading volume of our common stock; and
•  general economic conditions.

In addition, the stock market in general, and the New York Stock Exchange and the market for energy companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources, which could materially harm our business, financial condition, future results and cash flow.

Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways that may not yield a positive return.

Presently, anticipated uses of the proceeds to us of this offering include funding business growth and expansion, providing additional working capital, and for other general corporate purposes. We cannot specify with certainty how we will use the net proceeds of this offering. Accordingly, our management will have considerable discretion in the application of these proceeds, and you will not have the opportunity to assess whether these proceeds are being used appropriately. These proceeds may be used for corporate purposes that do not increase our operating results or market value. Until the net proceeds are used, they may be placed in investments that do not produce income or that lose value.

Future sales of our common stock may depress our share price.

After this offering, we will have                  shares of common stock outstanding. The                  shares sold in this offering (or                  shares if the underwriters' over-allotment is exercised in full) will be freely tradable without restriction or further registration under federal securities laws unless purchased by our affiliates. The remaining shares of common stock outstanding after this offering are subject to lock-up agreements, will be available for sale in the public market beginning 180 days after the date of this prospectus, and will be subject to certain volume limitations under Rule 144 of the Securities Act of 1933, as amended. Lehman Brothers Inc. may waive the lock-up provisions in its sole discretion.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales may occur, could cause the market price of our common stock to decline. At or prior to the closing of this offering, we will enter into a registration rights agreement with Ormat Industries. See "Certain Relationships and Related Transactions" for more information.

This offering will cause substantial dilution in the net tangible book value of your shares of common stock.

The initial public offering price of our common stock is considerably more than the net tangible book value per share of our outstanding common stock. Accordingly, investors purchasing shares of

31




common stock in this offering will contribute         % of the total amount invested to fund our company, but will own only         % of the shares of common stock outstanding after this offering. To the extent outstanding stock options are exercised, there will be further dilution to new investors. See "Dilution" for more information.

Provisions in our charter documents and Delaware law may delay or prevent acquisition of us, which could adversely affect the value of our common stock.

Our restated certificate of incorporation and our bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. These provisions do not permit actions by our stockholders by written consent. In addition, these provisions include procedural requirements relating to stockholder meetings and stockholder proposals that could make stockholder actions more difficult. Our board of directors will be classified into three classes of directors serving staggered, three-year terms and may be removed only for cause. Any vacancy on the board of directors may be filled only by the vote of the majority of directors then in office. Our board of directors has the right to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more for our outstanding common stock. Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements made in this prospectus are forward-looking statements. These forward looking statements are based upon our current expectations and projections about future events. When used in this prospectus, the words "believe", "anticipate", "intend", "estimate", "expect", will", "should", "may" and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this prospectus are primarily located in the material set forth under the headings "Prospectus Summary", "Risk Factors", "Capitalization", "Management's Discussion and Analysis of Financial Condition and Results of Operations", and "Business", but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations or may affect the value of our common stock include, but are not limited to:

•  significant considerations and risks discussed in this prospectus;
•  operating risks, including equipment failures and the amounts and timing of revenues and expenses;
•  geothermal resource risk (such as the heat content of the reservoir, useful life and geological formation);
•  environmental constraints on operations and environmental liabilities arising out of past or present operations;
•  project delays or cancellations;
•  financial market conditions and the results of financing efforts;
•  political, legal, regulatory, governmental, administrative and economic conditions and developments in the United States and other countries in which we operate;
•  the enforceability of the long-term power purchase agreements for our projects;
•  contract counterparty risk;
•  weather and other natural phenomena;
•  impact of recent and future federal and state regulatory proceedings and changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, and incentives for the production of renewable energy, changes in environmental and other laws and regulations to which our company is subject, as well as changes in the application of existing laws and regulations;
•  current and future litigation;
•  our ability to successfully identify, integrate and complete acquisitions;
•  competition from other similar geothermal energy projects, including any such new geothermal energy projects developed in the future, and from alternative electricity producing technologies;
•  the effect of and changes in economic conditions in the areas in which we operate;
•  market or business conditions and fluctuations in demand for energy or capacity in the markets in which we operate; and
•  the direct or indirect impact on our company's business resulting from terrorist incidents or responses to such incidents, including the effect on the availability of and premiums on insurance.

33




USE OF PROCEEDS

We estimate that the net proceeds we will receive from this offering will be approximately $       million, or approximately $       million if the underwriters exercise their over-allotment option in full, in each case, after deducting the underwriting discounts and commissions and estimated expenses of this offering payable by us. We expect to use the net proceeds from this offering to finance the continued growth of our business and for general corporate purposes, including for purposes of making investments or acquisitions. However, we have no present understanding or agreement relating to any specific acquisition. Accordingly, management will have significant flexibility in applying the net proceeds of the offering. Pending the use of such proceeds as described above, we intend to invest such proceeds in interest-bearing instruments.

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DIVIDEND POLICY

We have adopted a dividend policy pursuant to which we currently expect, commencing with the first full fiscal quarter following the consummation of this offering, to distribute at least 20% of our annual profits available for distribution by way of quarterly dividends. In determining whether there are profits available for distribution, our board of directors will take into account our business plan and current and expected obligations and no distribution will be made that in the judgment of our board of directors would prevent us from meeting such business plan or obligations.

Notwithstanding this policy, dividends will be paid only when, as and if approved by our board of directors out of funds legally available therefor. The actual amount and timing of dividend payments will depend upon our financial condition, results of operations, business prospects and such other matters as the board may deem relevant from time to time. Even if profits are available for the payment of dividends, the board of directors could determine that such profits should be retained for an extended period of time, used for working capital purposes, expansion or acquisition of businesses or any other appropriate purpose. As a holding company, we are dependent upon the earnings and cash flow of our subsidiaries in order to fund any dividend distributions, and, as a result, we may not be able to pay dividends in accordance with our policy. Our board of directors may, from time to time, examine our dividend policy and may, in its absolute discretion, change such policy.

35




CAPITALIZATION

The following table summarizes our capitalization as of March 31, 2004 on:

•  a historical basis; and
•  as adjusted to give effect to the completion of this offering, including the application of the estimated net proceeds to us from this offering as described under "Use of Proceeds."

You should read the following table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


  As of March 31, 2004
  Actual Pro Forma
Consolidated
  (unaudited)
  (in thousands)
Cash and cash equivalents $ 28,901   $                
Debt:            
Parent company loans   150,504        
Long term debt   427,576        
Total debt   578,080        
Shareholders' equity:
Common stock, $0.001 par value; 200,000,000 shares authorized and 30,769,230 shares issued and outstanding, historical;        shares authorized and        shares issued and outstanding, pro forma consolidated   31        
Additional paid-in capital   6,994        
Unearned stock-based compensation   (76      
Retained Earnings   37,322        
Total shareholders' equity   44,271        
Total capitalization $ 622,351   $  

The discussion and tables above exclude        shares of our common stock available for future grant or issuance under our stock option plan(s). See "Management—Stock Option Plan."

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DILUTION

At March 31, 2004, the net tangible book value of our common stock was approximately $8.4 million, or approximately $0.27 per share of our common stock. After giving effect to the sale of shares of our common stock in this offering at an assumed initial public offering price of $       per share, and after deducting estimated underwriting discounts and commissions paid by us and the estimated offering expenses of this offering, the net tangible book value at March 31, 2004 attributable to common stockholders would have been approximately $       million, or approximately $       per share of our common stock. This represents an immediate increase in net tangible book value of $       per share, and an immediate dilution in net tangible book value of $       per share to new stockholders. The following table illustrates this per share dilution to new stockholders:


Assumed initial public offering price per share $             
Net tangible book value per share before the offering $             
Net increase in tangible book value per share attributable to new stockholders $             
Net tangible book value per share after the offering $             
Dilution in net tangible book value per share to new stockholders $             

The table below summarizes, as of        , the differences for our existing stockholders and new stockholders in this offering, with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid before deducting fees and expenses.


  Shares Issued Total Consideration Average Price
Per Share
  Number Percentage Amount Percentage
  (in thousands, except per share data)
Our existing stockholders                              
New stockholders in this offering                              
Total                              

The discussion and tables above exclude        shares of our common stock available for future grant or issuance under our stock plans. See "Management—Stock Option Plans."

37




SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth our selected consolidated financial and other data for the periods ended and at the dates indicated in such table. We have derived the selected consolidated financial and other data as of and for the periods ended December 31, 2001, 2002 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated financial data as of and for the periods ended December 31, 1999 and 2000 from our unaudited consolidated financial statements not included in this prospectus. We have derived the selected consolidated financial and other data as of and for the three months ended March 31, 2003 and March 31, 2004 from our unaudited consolidated financial statements included elsewhere in this prospectus. In the opinion of our management, our unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the three months ended March 31, 2003 and March 31, 2004 are not necessarily indicative of the operating results to be expected for the full fiscal years encompassing such periods.

The information set forth below should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus.


  Year Ended December 31, Three Months Ended March 31,
  1999 2000 2001 2002 2003 2003 2004
  (unaudited)       (unaudited)
Statement of Operations Data:
Revenues:                                          
Electricity $ 15,169   $ 20,780   $ 33,956   $ 65,491   $ 77,752   $ 17,604   $ 33,459  
Products   64,388     27,780     13,959     20,138     41,688     7,812     14,146  
    79,557     48,560     47,915     85,629     119,440     25,416     47,605  
Cost of revenues:                                          
Electricity   6,847     8,556     12,536     33,482     46,726     10,148     19,390  
Products   40,644     22,709     17,454     17,293     29,494     6,317     11,328  
    47,491     31,265     29,990     50,775     76,220     16,465     30,718  
Gross margin   32,066     17,295     17,925     34,854     43,220     8,951     16,887  
Operating Expenses:                                          
Research and development expenses   3,289     2,260     1,729     1,503     1,391     439     302  
Selling and marketing expenses   6,593     3,624     6,535     6,051     7,087     1,367     1,854  
General and administrative expenses   7,614     6,632     5,444     7,073     9,252     2,057     2,332  
Operating income   14,570     4,779     4,217     20,227     25,490     5,088     12,399  
Other income (expense):                                          
Interest income   982     1,606     1,441     1,319     542     109     244  
Interest expense   (3,814   (3,807   (4,451   (6,889   (8,055   (1,720   (8,523
Foreign currency translation and transaction gain (loss)   (9   25     305     (323   (316   (114   (321
Equity in income investees   4     69     166     314     559     89     787  
Other non-operating income   223     7,884     300     1,195     464     133     (24
Income from continuing operations before minority interest and income taxes   11,956     10,556     1,978     15,843     18,684     3,585     4,562  
Minority interest in earnings of subsidiaries   277     550     645     1,194     519     201     108  
Income from continuing operations before income taxes   11,679     10,006     1,333     14,649     18,165     3,384     4,454  
Income tax provision   (2,786   (494   (3,065   (6,135   (2,506   (1,397   (1,717
Income (loss) from continuing operations   8,893     9,512     (1,732   8,514     15,659     1,987     2,737  
Discontinued operations:                                          
Loss from operations of discontinued activities in Kazakhstan   (3,374   (2,911   (4,681   (3,114            
Loss on sale of Kazakhstan operations               (6,444            
Income (loss) before cumulative effect of change in accounting principle   5,519     6,601     (6,413   (1,044   15,659     1,987     2,737  
                                           

38





  Year Ended December 31, Three Months Ended March 31,
  1999 2000 2001 2002 2003 2003 2004
  (unaudited)       (unaudited)
Cumulative effect of change in accounting principle (net of tax benefit of $125)                   (205   (205    
                                           
Net income (loss) $ 5,519   $ 6,601   $ (6,413 $ (1,044 $ 15,454   $ 1,782   $ 2,737  
                                           
Basic and diluted income (loss) per share $ 0.18   $ 0.21   $ (0.21 $ (0.03 $ 0.50   $ 0.05   $ 0.09  
                                           
Weighted average number of shares outstanding   30,769,230     30,769,230     30,769,230     30,769,230     30,769,230     30,769,230     30,769,230  
Balance Sheet Data (at end of period):                                          
Cash and cash equivalents $ 7,803   $ 10,071   $ 17,669   $ 36,684   $ 8,873   $ 23,573   $ 28,901  
Working capital (deficit)   (864   (18,676   (49,867   (81,659   7,226     (71,444   24,239  
Property, plant and equipment, net   60,167     90,946     132,369     152,342     344,015     151,949     398,630  
Total assets   139,266     167,940     219,390     287,378     547,536     268,440     697,884  
Long-term debt   51,118     61,358     91,321     95,807     260,488     106,803     427,576  
Notes payable to Parent                   177,004         150,504  
Stockholder's equity   26,849     33,450     25,904     26,031     41,524     27,823     44,271  

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

Overview

The unaudited pro forma condensed combined balance sheet, as of March 31, 2004, is based on our consolidated financial statements and the financial statements of the Puna project, which was acquired by us on June 3, 2004, and adjusted to give effect to the acquisition of the Puna project as if it had occurred on March 31, 2004. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003 and for the three months ended March 31, 2004 are based on our consolidated financial statements and the financial statements of the Puna, Heber 1, Heber 2 and Mammoth projects, which Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project were acquired on December 18, 2003, and adjusted to give effect to the acquisition thereof as if each had occurred at the beginning of the periods presented.

The unaudited pro forma condensed combined financial data gives effect to the acquisitions of the Puna, Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, acquisitions which are accounted for using the purchase method of accounting. Pursuant to such method, the purchase price has been allocated to the principal categories of assets and liabilities in the accompanying pro forma financial data based on independent valuations related to the Heber 1 and Heber 2 projects and our 50% ownership interest in the Mammoth project, and on preliminary estimates of fair value related to the Puna project acquisition. The actual fair value and allocation of the purchase price of the Puna project acquisition will be determined upon the completion of an independent valuation. The actual allocation of the purchase price and the resulting effect on income from operations may differ for the estimate included herein for the Puna project. It should be noted that because the acquisitions of the (i) Steamboat 1/1A project on June 30, 2003, (ii) Steamboat 2/3 Project on February 11, 2004, and (iii) Steamboat Hills project on May 20, 2004 are not material under applicable Securities Act rules, such transactions have not been included in the accompanying pro forma balance sheet or results of operations.

The unaudited pro forma condensed combined financial data also give effect to (i) Ormat Funding's issuance of 8¼% senior secured notes in the amount of $190 million, which offering was completed on February 13, 2004, and (ii) Orcal Geothermal's entering into a loan agreement with Beal Bank amounting to $154.5 million in connection with the acquisition of the Heber 1, Heber 2 and Mammoth projects.

The unaudited pro forma condensed combined financial data presented herein does not necessarily reflect what our actual results of operations or financial position would have been had the transactions occurred at the dates indicated, or project our results of operations or financial position for any future date or period.

The unaudited pro forma condensed combined financial data should be read in conjunction with our historical consolidated financial statements and the historical financial statements of the Heber 1, Heber 2, Mammoth and Puna projects included elsewhere in this prospectus.

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Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2004
(in thousands)


  Ormat
Technologies
Consolidated
Puna Project Pro Forma
Adjustments
Pro Forma
Combined
Assets
Current assets:
Cash and cash equivalents $ 28,901   $ 5,112   $ (5,112) (a)  $ 28,901  
Restricted cash and cash equivalents   50,645     3,069     (3,069 )(a)    50,645  
Receivables   29,683     1,881     (281 )(a)    31,283  
Inventory   4,285     4,512     (4,512 )(a)    4,285  
Costs and estimated earnings in excess of billings on uncompleted contracts   4,211               4,211  
Prepaid expenses and other   2,446     77     (77 )(a)    2,446  
Total current assets   120,171     14,651           121,771  
Restricted cash and cash equivalents   25,800               25,800  
Investments   52,210               52,210  
Deposits and other   27,098     1,161     (1,161 )(a)    27,098  
Property, plant and equipment, net   398,630     136,039     (69,280 )(b)    465,389  
Construction-in-process   37,990     53           38,043  
Intangible assets, net   35,985         6,500 (b)    42,485  
Total assets $ 697,884   $ 151,904         $ 772,796  
Liabilities and Stockholder's Equity
Current liabilities:
Short-term debt $   $ 3,024   $ (3,024) (a)  $  
Accounts payable, accrued expenses and other   36,236     1,975     (1,975 )(a)    36,236  
Billings in excess of costs and estimated earnings on uncompleted contracts   6,301               6,301  
Current portion of long-term debt   53,395               53,395  
Total current liabilities   95,932     4,999           95,932  
Long-term debt, net of current portion   374,181     40,295     (40,295 )(a)    374,181  
Deferred income taxes   14,903               14,903  
Note payable to Parent   150,504         72,831 (b)    223,335  
Liabilities for severance pay and other   11,272     2,769     (2,769 )(a)    11,272  
Asset retirement obligation   6,752     2,081           8,833  
Total liabilities   653,544     50,144           728,456  
Minority interest in net assets of subsidiaries   69               69  
Stockholder's equity:
Common stock   31               31  
Additional paid-in capital   6,994               6,994  
Unearned stock-based compensation   (76             (76
Retained earnings   37,322     101,760     (101,760 )(a)    37,322  
Total stockholder's equity   44,271     101,760           44,271  
Total liabilities and stockholder's equity $ 697,884   $ 151,904         $ 772,796  

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Unaudited Pro Forma Condensed
Combined Statement of Operations
For the Three Months Ended March 31, 2004
(in thousands)


  Ormat
Technologies
Consolidated
Puna Project
for the three
months ended
March 31, 2004
Pro Forma
Adjustments
Pro Forma
Combined
Revenues:
Electricity segment $ 33,459   $ 5,603         $ 39,062  
Products segment   14,146               14,146  
    47,605     5,603           53,208  
Cost of revenues:
Electricity segment   19,390     3,655     (756 )(c)    22,359  
                70 (d) 
Products segment   11,328