Note 1 - General and Basis of Presentation

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

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

June 30, 2017,

the consolidated results of operations and comprehensive income (loss) for the

three

and

six

-month periods ended

June 30, 2017

and

2016

and the consolidated cash flows for the

six

-month periods ended

June 30, 2017

and

2016.

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

three

and

six

-month period ended

June 30, 2017

are

not

necessarily indicative of the results to be expected for the year ending

December 

31,

2017.

These condensed

unaudited 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,

2016.

The condensed consolidated balance sheet data as of

December 

31,

2016

was derived from the Company’s audited consolidated financial statements for the year ended

December 

31,

2016,

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.

Entry

 into a Material Definitive Agreement

.

During the

second

quarter of

2017,

ONGP LLC (“ONGP”),

one

of the Company

’s wholly-owned subsidiaries, entered into a Power Purchase Agreement (“PPA”) with Southern California Public Power Authority (“SCPPA”), pursuant to which ONGP will sell, and SCPPA will purchase, geothermal power generated by a portfolio of

nine

different geothermal power plants, owned by the Company and located in the US. The parties’ obligations under the PPA are based on a geothermal power generation capacity of

150

MW, and, pursuant to the PPA, ONGP is required to deliver a minimum of

135

MW and is entitled to deliver a maximum of

185

MW to SCPPA over the next

five

years. The portfolio PPA is for a term of approximately

26

years, expiring in

December 31, 2043

and has a fixed price of

$75.50

per MWh.

Assertion of p

ermanent reinvestment of foreign unremitted earnings in a subsidiary

During the

second

quarter of

2017,

in conjunction with the final approval of the SCPPA PPA which will require the Company to make significant capital expenditures in the U.S., the fact that the Company is currently looking for acquisitions in the U.S, and the acquisition of Viridity for a price of

$35.3

million with

two

additional earn-out payments expected to be made in

2018

and

2021,

the Company has re-evaluated its position with respect to a portion of the unrepatriated earnings of Ormat Systems (“OSL”), its fully owned Subsidiary in Israel, and after consideration of the aforementioned change in facts, determined that it can

no

longer maintain the permanent reinvestment position with respect to a portion of OSL unrepatriated earnings which will be repatriated to support the Company

’s capital expenditures in the U.S. Accordingly, and as further described in Note

11,

the permanent reinvestment assertion of foreign unremitted earnings of OSL was reassessed and removed and the related deferred tax assets and liabilities as well as the estimated withholding taxes on expected remittance of OSL earnings to the U.S. were recorded by the Company in the

second

quarter of

2017

.

Viridity transaction

On

March 15, 2017,

the Company completed the acquisition of substantially all of the business and assets of Viridity Energy, Inc. (“VEI”), a privately held Philadelphia-based company engaged in the provision of demand response, energy management and energy storage services.

Pursuant to the Asset Purchase Agreement dated as of

December 29, 2016,

Viridity Energy Solutions Inc. (“Viridity”), a wholly owned subsidiary of the Company paid initial consideration of

$35.3

million at closing. Additional contingent consideration with an estimated fair value of $

12.8

million will be payable in

two

installments upon the achievement of certain performance milestones measured at the end of fiscal years

2017

and

2020.

The acquired business and assets are operated by Viridity.

Using proprietary software and solutions, Viridity serves primarily retail energy providers, utilities, and large commercial and industrial customers. Viridity

’s offerings enable its customers to optimize and monetize their energy management, demand response and storage facilities potential by interacting on their behalf with regional transmission organizations and independent system operators.

The Company accounted for the transaction

in accordance with Accounting Standard Codification

805,

Business Combinations, and consequently recorded intangible assets of

$34.7

million primarily relating to Viridity’s storage and non-storage activities with a weighted-average amortization period of

17

years, approximately

$0.4

million of working capital and fixed assets, and

$13.9

million of goodwill. Following the transaction, the Company consolidated Viridity, in accordance with Accounting Standard Codification

810,

Consolidation. 

The acquisition will enable the Company to enter the growing energy storage and demand response markets and expand its market presence. 

The

revenues of Viridity for the period from

March 15, 2017

to

June 30, 2017

were included in the Company’s consolidated statements of operations and comprehensive income for the

three

and

six

months ended

June 30, 2017.

Accounting guidance provides that the allocation of the purchase price

may

be modified

for up to

one

year from the date of the acquisition to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date.

Other comprehensive income

For the

six

months ended

June 30, 2017

and

2016,

the Company classified

$3,000

and

$5,000,

respectively, related to derivative instruments designated as cash flow hedges, from accumulated other comprehensive income, of which

$5,000

and

$10,000,

respectively, were recorded to reduce interest expense and

$2,000

and

$5

,000,

respectively, were recorded against the income tax provision, in the condensed consolidated statements of operations and comprehensive income. For the

three

months ended

June 30, 2017

and

2016,

the Company classified

$1,000

and

$2

,000,

respectively, related to derivative instruments designated as cash flow hedges, from accumulated other comprehensive income, of which

$3,000

and

$6

,000

respectively, was recorded to reduce interest expense and

$1,000

and

$4

,000,

respectively, were recorded against the income tax provision, in the condensed consolidated statements of operations and comprehensive income. The accumulated net loss included in Other comprehensive income as of

June 30, 2017,

is

$0.6

million

Write-offs of unsuccessful exploration activities

There were

no

w

rite-offs of unsuccessful exploration activities for the

three

and

six

months ended

June 30, 2017.

Write-offs of unsuccessful exploration activities for the

three

and

six

months ended

2016

were

$0.9

million and

$1.4

million, respectively. The write-offs of exploration costs in

2016

were related to the Company’s exploration activities in Nevada and Chile, which the Company determined would

not

support commercial operations.

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

June 30, 2017

and

December 31, 2016,

the Company had deposits totaling $

31.3

million and

$72.5

million, respectively, in

seven

U.S. financial institutions that were federally insured up to

$250,000

per account. At

June 30, 2017

and

December 31, 2016,

the Company’s deposits in foreign countries amounted to approximately

$99.9

million and

$166.2

million, respectively.

At

June 30, 2017

and

December 31, 2016,

accounts receivable related to operations in foreign countries amounted to approximately

$53.5

million and

$53.3

million, respectively. At

June 30, 2017

and

December 31, 2016,

accounts receivable from the Company’s primary customers amounted to approximately

55%

and

60%

of the Company’s accounts receivable, respectively.

Sierra Pacific Power Company and Nevada Power Company (subsidiaries of NV Energy, Inc.) accounted for

16.7%

and

19.1%

of the Company’s total revenues for the

three

months ended

June 30, 2017

and

2016,

respectively, and

17.8%

and

21.1%

for the

six

months ended

June 30, 2017

and

2016,

respectively.

Kenya Power and Lighting Co. Ltd. accounted for

15.4%

and

17.1%

of the Company’s total revenues for the

three

months ended

June 30, 2017

and

2016,

respectively, and

14.8%

and

17.2%

of the Company’s total revenues for the

six

months ended

June 30, 2017

and

2016,

respectively.

Southern California

Public Power Authority (“SCPPA”) accounted for

8.7%

and

10.4%

of the Company’s total revenues for the

three

months ended

June 30, 2017

and

2016,

respectively, and

8.9%

and

11.2%

of the Company’s total revenues for the

six

months ended

June 30, 2017

and

2016,

respectively.

Hyundai

(Sarulla geothermal power project) accounted for

4.9%

and

8.6%

of the Company’s total revenues for the

three

months ended

June 30, 2017

and

2016,

respectively, and

6.3%

and

9.0%

for the

six

months ended

June 30, 2017

and

2016,

respectively.

The Company h

as historically been able to collect on all of its receivable balances, and accordingly,

no

provision for doubtful accounts has been made.