Note 22 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 22 — COMMITMENTS AND CONTINGENCIES

Geothermal resources

The Company, through its project subsidiaries in the United States, controls certain rights to geothermal fluids through certain leases with the Bureau of Land Management (“BLM”) or through private leases. Royalties on the utilization of the geothermal resources are computed and paid to the lessors as defined in the respective agreements. Royalty expense under the geothermal resource agreements were $16,304,000, $13,896,000, and $12,048,000 for the years ended December 31, 2014, 2013, and 2012, respectively.

Letters of credit

In the ordinary course of business with customers, vendors, and lenders, the Company is contingently liable for performance under letters of credit totaling $353.1 million at December 31, 2014. Management does not expect any material losses to result from these letters of credit because performance is not expected to be required, and, therefore, is of the opinion that the fair value of these instruments is zero.

Purchase commitments

The Company purchases raw materials for inventories, construction-in-process and services from a variety of vendors. During the normal course of business, in order to manage manufacturing lead times and help assure adequate supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure goods and services based upon specifications defined by the Company, or that establish parameters defining the Company’s requirements.

At December 31, 2014, total obligations related to such supplier agreements were approximately $119.2 million (out of which approximately $44.1 million relate to construction-in-process). All such obligations are payable in 2015.

Grants and royalties

The Company, through Ormat Systems, had historically, through December 31, 2003, requested and received grants for research and development from the Office of the Chief Scientist of the Israeli Government. Ormat Systems is required to pay royalties to the Israeli Government at a rate of 3.5% to 5.0% of the revenues derived from products and services developed using these grants. No royalties were paid for the years ended December 31, 2014, 2013, and 2012. The Company is not liable for royalties if the Company does not sell such products and services. Such royalties are capped at the amount of the grants received plus interest at LIBOR. The cap at December 31, 2014 and 2013, amounted to $1.6 million and $1.5 million, respectively, of which approximately $0.6 million and $0.5 million, respectively, represents interest based on the LIBOR rate, as defined above.

Lease commitments

At December 31, 2014, 2013 and 2012, total lease expenses for leasing of land, building and equipment outside of the Puna lease (separately described in Note 11) amounted to $0.3 million, $0.4 million and $0.4 million respectively. The related future minimum lease payments are immaterial for each year.

Contingencies

● Jon Olson and Hilary Wilt, together with Puna Pono Alliance, an unincorporated association, filed suit on February 17, 2015, in the Third Circuit Court for the State of Hawaii, seeking declaratory and injunctive relief against Puna Geothermal Venture and the County of Hawaii.  The relief requested includes a declaratory ruling that a County ordinance adopted in 2012, prohibiting night time geothermal drilling and drilling operations, applies to PGV’s current drilling activities at the KS-16 well.  The Company believes that the allegations of the complaint have no merit, and will defend itself vigorously.

● On July 8, 2014, Global Community Monitor, LiUNA, and two residents of Bishop, California filed a complaint in the United States District Court for the Eastern District of California, alleging that Mammoth Pacific, L.P., Ormat Technologies, Inc. and Ormat Nevada, Inc. are operating three geothermal generating plants in Mammoth Lakes, California (MP-1; MP-II and PLES-I) in violation of the federal Clean Air Act (“CAA”) and Great Basin Unified Air Pollution Control District (“District”) rules. The Company believes the complaint is without merit, and intends to vigorously defend itself against the allegations set forth in the complaint and to take all necessary legal action to have the complaint dismissed. Filing of the complaint in and of itself does not have any immediate adverse implications for the Mammoth plants..

● On April 5, 2012, the International Brotherhood of Electrical Workers Local 1260 (“Union”) filed a petition with the National Labor Relations Board (“NLRB”) seeking to organize the operations and maintenance employees at the Puna Project.  PGV lost the union election by a slim margin in May 2012.  The election results and PGV’s obligation to negotiate with the Union were appealed to the United States Court of Appeals for the Ninth Circuit, but were remanded back to the NLRB after the U.S. Supreme Court’s decision in Noel Canning, 573 U.S., 134 S.Ct. 2550 (2014). On November 26, 2014, the NLRB found that a certification of representative should be issued. In January 2015, the parties submitted briefing to the NLRB as to whether summary judgment is appropriate.  PGV currently expects a decision in this matter will be rendered within the next two to four months. Depending on the decision, PGV expects to review its options and either accept negotiations with the Union or continue to appeal the decision.

● In January 2014, Ormat learned that two former employees alleged in a "qui tam" complaint filed in the United States District Court for the Southern District of California that Seller, PGV and select Affiliates of the Seller (collectively, the "Ormat Parties") submitted fraudulent applications and certifications to obtain grants. The United States Department of Justice has declined to intervene. The former employees have proceeded on their own and served the Ormat Parties with their initial complaint in April 2014, and then filed an amended complaint in May 2014. Pursuant to the Ormat Parties' motion to move the venue of the proceeding, and despite the complainants’ objection, the file was reassigned from the United States District Court for the Southern District of California to the District of Nevada.

● In July 2014, the Ormat Parties filed a motion to dismiss the amended complaint, in response to which the complainants have filed responses urging the court to reject the motion to dismiss. In August, 2014, the United States filed a statement of interest urging rejection of one of the Ormat Parties' arguments raised in the motion to dismiss - that the False Claims Act's "Tax Bar" excludes such Act's application to the case - while continuing to take no position as to the overall sufficiency of the complainants' complaint. The motion to dismiss remains pending before the Nevada United States District Court, and a hearing has been scheduled for March by the Reno court.

In the interim, FIMI and Ormat Industries (who were originally named on the complaint, but never served) have been removed from the complaint as co-defendants. The Ormat Parties continue to believe that the allegations of the lawsuit have no merit, and will continue to defend themselves vigorously.

● In addition, from time to time, the Company is named as a party to various other lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of our business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, claims and proceedings, the Company accrues reserves when a loss is probable and the amount of such loss can be reasonably estimated. It is the opinion of the Company’s management that the outcome of these proceedings, individually and collectively, will not be material to the Company’s consolidated financial statements as a whole.