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Note 1 - General and Basis of Presentation
9 Months Ended
Sep. 30, 2015
Disclosure Text Block [Abstract]  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 — GENERAL AND BASIS OF PRESENTATION


These unaudited condensed consolidated interim financial statements of Ormat Technologies, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of September 30, 2015, the consolidated results of operations and comprehensive income (loss) for the nine-month periods ended September 30, 2015 and 2014 and the consolidated cash flows for the nine-month periods ended September 30, 2015 and 2014.


The financial data and other information disclosed in the notes to the condensed consolidated financial statements related to these periods are unaudited. The results for the nine-month period ended September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015.


These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014. The condensed consolidated balance sheet data as of December 31, 2014 was derived from the audited consolidated financial statements for the year ended December 31, 2014, but does not include all disclosures required by U.S. GAAP.


Dollar amounts, except per share data, in the notes to these financial statements are rounded to the closest $1,000.


Deferred tax asset in Kenya


On September 11, 2015, Kenya's Income Tax Act was amended pursuant to certain provisions of the recently adopted Finance Act, 2015. Among other matters, these amendments retain the enhanced investment deduction of 150% under Section 17B of the Income Tax Act, extend the period for deduction of tax losses from 5 years to 10 years under Sections 15(4) and 15(5) of the Income Tax Act, and amend the effective date from January 1, 2016 to January 1, 2015 under Sections 15(4) and 15(5) of the Income Tax Act.


Previously, the Company had a valuation allowance for the additional 50% investment deduction reducing its deferred tax asset in Kenya as the utilization of the related tax losses was not probable within the original five year carryforward period. As a result of the change in legislation and the expected continued profitability during the extended carryforward period, the Company expects that it will be able to fully utilize the carryforward tax losses within the ten year period and as such released the valuation allowance in Kenya resulting in a $49.4 million of tax benefits in the three month period ended September 30, 2015.


Amatitlan financing 


On July 31, 2015, one of our indirect wholly-owned subsidiaries, Ortitlản, Limitada, obtained a 12-year secured term loan in the principal amount of $42.0 million for the 20 MW Amatitlan power plant in Guatemala. Under the credit agreement with Banco Industrial S.A. and Westrust Bank (International) Limited, we can expand the Amatitlan power plant with financing to be provided either via equity, additional debt from Banco Industrial S.A. or from other lenders, subject to certain limitations on expansion financing in the credit agreement.


The loan is payable in 48 quarterly payments commencing September 30, 2015. The loan bears interest at a rate per annum equal to of the sum of the LIBO Rate (which cannot be lower than 1.25%) plus a margin of (i) 4.35% as long as the Company’s guaranty of the loan (as described below) is outstanding or (ii) 4.75% otherwise. Interest is payable quarterly, on March 30, June 30, September 30 and December 30 of each year, on the stated maturity date of the loan and on any prepayment or payment of the loan. The loan must be prepaid on the occurrence of certain events, such as casualty, condemnation, asset sales and expansion financing not provided by the lenders under the credit agreement, among others. The loan may be voluntarily prepaid if certain conditions are satisfied, including payment of a premium (ranging from 100-50 basis points) if prepayment occurs prior to the eighth anniversary of the loan.


There are various restrictive covenants under the Amatitlan credit agreement. These include, among others, (i) a financial covenant to maintain a Debt Service Coverage Ratio (as defined in the credit agreement) of not less than 1.15 to 1.00 as of the last day of any fiscal quarter and (ii) limitations on Restricted Payments (as defined in the credit agreement) that among other things would limit dividends that could be paid to us unless the historical and projected Debt Service Coverage Ratio is not less than 1.25 to 1.00 for the four fiscal quarterly periods (calculated as a single accounting period). As of September 30, 2015, the actual historical and projected 12-month Debt Service Coverage Ratio was 7.94 and 1.97, respectively. The credit agreement includes various events of default that would permit acceleration of the loan (subject in some cases to grace and cure periods). These include, among others, a Change of Control (as defined in the credit agreement) and failure to maintain certain required balances in debt service and maintenance reserve accounts. The credit agreement includes certain equity cure rights for failure to maintain the Debt Service Coverage Ratio and the minimum amounts required in the debt service and maintenance reserve accounts.


The loan is secured by substantially all the assets of the borrower and a pledge of all of the membership interests of the borrower.


The Company has guaranteed payment of all obligations under the credit agreement and related financing documents. The guaranty is limited in the sense that the Company is only required to pay the guaranteed obligations if a “trigger event” occurs. A trigger event is the occurrence and continuation of a default by Instituto Nacional de Electricidad (“INDE”) in its payment obligations under the power purchase agreement for the Amatitlàn power plant or a refusal by INDE to receive capacity and energy sold under that power purchase agreement. Our obligations under the guaranty may be terminated prior to payment in full of the guaranteed obligations under certain circumstances described in the guaranty. If our guaranty is terminated early, the interest rate payable on the loan would increase as described above.


As of September 30, 2015, $41.1 million of this loan is outstanding.


OFC Senior Secured Notes prepayment


In June 2015, the Company repurchased $30.6 million aggregate principal amount of its OFC Senior Secured Notes from certain OFC noteholders. As a result of the repurchase, the Company recognized a loss of $1.7 million, including amortization of deferred financing cost of $0.5 million, which is included in other non-operating income (expense), net in the consolidated statements of operations and comprehensive income for the nine months ended September 30, 2015.


Northleaf transaction


On April 30, 2015, Ormat Nevada Inc. (“Ormat Nevada”), a wholly-owned subsidiary of the Company, closed the sale of approximately 36.75% of the aggregate membership interests in ORPD LLC (“ORPD”), a new holding company and subsidiary of Ormat Nevada, that indirectly owns the Puna geothermal power plant in Hawaii, the Don A. Campbell geothermal power plant in Nevada, and nine power plant units across three recovered energy generation assets known as OREG 1, OREG 2 and OREG 3 to Northleaf Geothermal Holdings, LLC for $162.3 million. The net proceeds to the Company were $156.8 million after payment of $5.5 million of transaction costs. The sale was made under the Agreement for Purchase of Membership Interests dated February 5, 2015. This transaction closed on April 30, 2015 and resulted in a taxable gain in the U.S. of approximately $102.1 million, for which the Company will utilize a portion of its Net Operating Loss (“NOL”) and tax credit carryforwards to fully offset the tax impact of the gain.


Following the transaction, the Company maintains control of ORPD and continues to consolidate the entity with non-controlling interest being recorded. Consequently, the Company recorded the net proceeds from the issuance of membership interests as an increase to additional paid-in capital of $71.3 million and non-controlling interests of $85.5 million. See Note 11 for tax details.


Share exchange transaction


On February 12, 2015, the Company completed the share exchange transaction with its then-parent entity, Ormat Industries Ltd. ("OIL") following which, the Company became a noncontrolled public company and its public float increased from approximately 40% to approximately 76% of its total shares outstanding. Under the terms of the share exchange, OIL shareholders received 0.2592 shares in the Company for each share in OIL, or an aggregate of approximately 30.2 million shares, reflecting a net issuance of approximately 3.0 million shares (after deducting the 27.2 million shares that OIL held in the Company). Consequently, the number of total shares of the Company outstanding increased from approximately 45.5 million shares to approximately 48.5 million shares as of the closing of the share exchange.


In exchange, the Company also received $15.4 million in cash, $0.6 million in other assets and $12.1 million in land and buildings and assumed $0.5 million in liabilities. OIL's principal business purpose was to hold its interest in the Company and the transaction resulted in a transfer of non-material assets from OIL to the Company. Therefore, there was no change in the reporting entity as a result of the transaction and the Company recognized the transfer of net assets at their carrying value as presented in OIL's financial statements. Any activities of OIL will be accounted for prospectively by the Company.


OFC 2 loan prepayment


On June 20, 2014, Phase I of the Tuscarora Facility achieved Project Completion under the OFC 2 Note Purchase Agreement. In accordance with the terms of the Note Purchase Agreement and following recalibration of the financing assumptions, the loan amount was adjusted through a principal prepayment of $4.3 million.


Solar project sale


On March 26, 2014, the Company signed an agreement with RET Holdings, LLC to sell the Heber Solar project in Imperial County, California for $35.25 million. The Company received the first payment of $15.0 million during the first quarter of 2014 and the second payment for the remaining $20.25 million in the second quarter of 2014. The Company recognized pre-tax gain of approximately $7.6 million in the second quarter of 2014.


Other comprehensive income


For the nine months ended September 30, 2015 and 2014, the Company classified $22,000 and $107,000, respectively, from accumulated other comprehensive income, of which $35,000 and $173,000, respectively, were recorded to reduce interest expense and $13,000 and $66,000, respectively, were recorded against the income tax provision, in the condensed consolidated statements of operations and comprehensive income. For the three months ended September 30, 2015 and 2014, the Company classified $7,000 and $35,000, respectively, from accumulated other comprehensive income, of which $10,000 and $57,000, respectively, were recorded to reduce interest expense and $3,000 and $22,000, respectively, were recorded against the income tax provision, in the condensed consolidated statements of operations and comprehensive income. 


Write-off of unsuccessful exploration activities


Write-off of unsuccessful exploration activities for the three and nine months ended September 30, 2015 were $0.2 million and $0.4 million, respectively. Write-off of unsuccessful exploration activities for the nine months ended September 30, 2014, was $8.1 million. This represents the write-off of exploration costs related to the Company’s exploration activities in the Wister site in California, which the Company determined in the second quarter of 2014 would not support commercial operations.


Acquisition of interests in Crump Geyser and North Valley geothermal projects


On August 5, 2014, the Company signed a definitive Purchase and Sale Agreement with Alternative Earth Resources Inc. (“AER”), pursuant to which the Company paid $1.5 million in cash and (i) purchased AER's (a) 50% interest in Crump Geyser Company (“CGC”), which holds the rights to the Crump Geyser geothermal project, and (b) rights to the North Valley geothermal project and (ii) obtained an option, exercisable over a four-year period, to purchase certain of AER's New Truckhaven geothermal leases. Prior to this transaction, CGC was consolidated by the Company as a variable interest entity. As a result of the acquisition of the remaining interest, the Company continues to consolidate CGC, but now as a wholly owned indirect subsidiary, and so the carrying value of the noncontrolling interest of CGC of $1.0 million was reclassified to the Company's equity and the difference of $0.2 million between the fair value of the consideration paid and the related carrying value of the nonconrolling interest acquired was recorded within “additional paid in capital” in the condensed consolidated statement of equity.


Concentration of credit risk


Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of temporary cash investments and accounts receivable.


The Company places its temporary cash investments with high credit quality financial institutions located in the United States (“U.S.”) and in foreign countries. At September 30, 2015 and December 31, 2014, the Company had deposits totaling $41,071,000 and $23,488,000, respectively, in seven U.S. financial institutions that were federally insured up to $250,000 per account. At September 30, 2015 and December 31, 2014, the Company’s deposits in foreign countries amounted to approximately $134,986,000 and $24,304,000, respectively.


At September 30, 2015 and December 31, 2014, accounts receivable related to operations in foreign countries amounted to approximately $22,981,000 and $21,935,000, respectively. At September 30, 2015 and December 31, 2014, accounts receivable from the Company’s primary customers amounted to approximately 73.7% and 69.0%, respectively, of the Company’s accounts receivable.


Sierra Pacific Power Company and Nevada Power Company (subsidiaries of NV Energy, Inc.) accounted for 15.3% and 14.7% of the Company’s total revenue for the three months ended September 30, 2015 and 2014, respectively and 19.3% and 16.6% for the nine months ended September 30, 2015 and 2014, respectively.


Southern California Edison accounted for 13.4% and 19.9% of the Company’s total revenue for the three months ended September 30, 2015 and 2014, respectively, and 11.1% and 15.2% for the nine months ended September 30, 2015 and 2014, respectively.


Kenya Power and Lighting Co. Ltd. accounted for 13.5% and 15.8% of the Company’s total revenue for the three months ended September 30, 2015 and 2014, respectively, and 15.4% and 15.6% for the nine months ended September 30, 2015 and 2014, respectively.


The Company performs ongoing credit evaluations of its customers’ financial condition. The Company has historically been able to collect on all of its receivable balances, and accordingly, no provision for doubtful accounts has been made.