Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Platanares Geothermal Power Plant, Policy [Policy Text Block]

Platanares geothermal power plant

On

September 26, 2017,

the Company announced that its

35

MW

Platanares geothermal project in Honduras commenced commercial operation. The Company constructed the Platanares geothermal project under a Build, Operate, and Transfer (BOT) contract with ELCOSA, a privately owned Honduran energy company. The Company will operate the project for

15

years from commercial operation date (COD). Platanares sells its power under a

30

-year power purchase agreement with the national utility of Honduras, ENEE. 

A portion of the land on which the project is located at is held by us through a lease from a local municipality.

  Because the term of the lease exceeds the term in office of the relevant municipal government, it remains subject to an additional approval of the Honduran Congress in order to be fully valid.  The Company has commenced the necessary steps to obtain such approval but the current elections in Honduras

may

result in a delay in obtaining such approval.

OFC Senior Secured Notes Prepayment, Policy [Policy Text Block]

OFC Senior Secured Notes prepayment

In

September 2017,

the Company fully prepaid all of its outstanding OFC Senior Secured Notes for

$14.3

million. As a result of the prepayment, the Company recognized a loss of

$1.5

million, including amortization of deferred financing costs of

$0.2

million, which was included in other non-operating income (expense), net in the consolidated statements of operations and comprehensive income for the

three

and

nine

months ended

September 30, 2017.

DEG Loan Prepayment, Policy [Policy Text Block]

DEG Loan prepayment

In

September 2017,

the Company fully prepaid its DEG loan for

$11.8

million. As a result of the prepayment, the Company recognized a loss of

$0.5

million, including amortization of deferred financing costs of

$0.4

million, which was included in other non-operating income (expense), net in the consolidated statements of operations and comprehensive income for the

three

and

nine

months ended

September 30, 2017.

ORIX Transaction, Policy [Policy Text Block]

ORIX transaction

On

July 26, 2017,

we announced that ORIX Corporation (“ORIX”) closed its acquisition of approximately

11

million shares of our common stock, representing an approximately

22%

 ownership stake in the Company,   from FIMI ENRG Limited Partnership, FIMI ENRG, L.P., Bronicki Investments, Ltd. and certain senior members of our management team pursuant to a stock purchase agreement entered into by ORIX and the selling stockholders on

May 4, 2017.

In connection with the acquisition, on

May 4, 2017,

we entered into certain related agreements with ORIX, including a Governance Agreement, a Commercial Cooperation Agreement and a Registration Rights Agreement, following the unanimous recommendation of a Special Committee of the board of directors of the Company (the “Board”) that was formed to evaluate and negotiate the stockholder arrangements proposed by ORIX, and following approval by the Board. The closing of the transactions contemplated by the related agreements between ORIX and the Company also occurred on

July 26, 2017.  

Under the Governance Agreement, ORIX has the right to designate

three

persons to the Board, which was expanded to

nine

directors, and also propose a

fourth

person to be mutually agreed by the Company and ORIX to serve as a new independent director on the Board. In addition, for so long as ORIX is entitled to board representation pursuant to the Governance Agreement, ORIX will be subject to certain customary standstill restrictions, including an effective

25%

cap on its voting rights. Pursuant to the Registration Rights Agreement, ORIX also has certain customary registration rights with respect to the shares of the Company

’s common stock that it owns.

Under the Commercial Cooperation Agreement, the Company has exclusive rights to develop, own, operate and provide equipment for ORIX geothermal energy projects in all markets outside of Japan. In addition, the Company has certain rights to serve as technical partner and co-invest in ORIX geothermal energy projects in Japan. ORIX will also assist the Company in obtaining project financing for its geothermal energy projects from a variety of leading providers of renewable energy debt financing with which ORIX has relationsh

ips in Asia and around the world.

ORTP Buyout, Policy [Policy Text Block]

ORTP buyout

On

March 30, 2017,

the Company

’s partner JPM Capital Corporation (“JPM”) achieved its target after-tax yield on its investment in ORTP, LLC (“ORTP”) and on

July 10, 2017,

Ormat Nevada Inc. (“Ormat Nevada”) purchased all of the Class B membership units in ORTP from JPM for

$2.4

million. As a result, Ormat Nevada is now the sole owner of all of the economic and voting interests in ORTP and continues to consolidate ORTP in its financial statements. The purchase of Class B membership units of ORTP was recorded in equity as a reduction to Noncontrolling Interest with the surplus charged to Additional Paid-in Capital.

SCPPA Power Purchase Agreement, policy [Policy Text Block]

SCPPA power purchase 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 Permanent Reinvestment of Foreign Unremitted Earnings in Subsidiaries, Policy [Policy Text Block]

Assertion of p

ermanent reinvestment of foreign unremitted earnings in a subsidiary

During the

second

quarter of

2017,

in conjunction with (i) the final approval of the SCPPA PPA which will require the Company to make significant capital expenditures in the United Sates, (ii) the fact that the Company is currently exploring acquisition opportunities in the United States, and (iii) the acquisition of substantially all the assets of Viridity for

$35.3

million with

two

additional earn-out payments that

may

have 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 Ltd. (“OSL”), its wholly 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

’s unrepatriated earnings which will be repatriated to support the Company’s capital expenditures in the United Sates. 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 United States were recorded by the Company in the

second

quarter of

2017.

Business Combinations Policy [Policy Text Block]

Viridity transaction

On

March 15, 2017,

the Company completed the acquisition of substantially all of the business and assets of Viridity Energy, Inc., a privately held Philadelphia-based company formerly engaged in the provision of demand response, energy management and energy storage services. At closing, Viridity Energy Solutions Inc. (“Viridity”), a wholly owned subsidiary of the Company, paid initial consideration of

$35.3

million. 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 enabled 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

September 30, 2017

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

three

and

nine

months ended

September 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.

Comprehensive Income, Policy [Policy Text Block]

Other comprehensive income

For the

nine

months ended

September 30, 2017

and

2016,

the Company classified

$5,000

and

$7,000,

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

$9,000

and

$11,000,

respectively, were recorded to reduce interest expense and

$4,000

and

$4,000,

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, 2017

and

2016,

the Company classified

$2,000

and

$2

,000,

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

$6,000

and

$3,000

respectively, was recorded to reduce interest expense and

$4,000

and

$1,000,

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

September 30, 2017,

is

$0.6

million

Exploratory Drilling Costs Capitalization and Impairment, Policy [Policy Text Block]

Write-offs of unsuccessful exploration activities

There were

no

w

rite-offs of unsuccessful exploration activities for the

three

and

nine

months ended

September 30, 2017.

Write-offs of unsuccessful exploration activities for the

three

and

nine

months ended

2016

were

$1.3

million and

$2.7

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

2016

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

not

support commercial operations.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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 and in foreign countries. At

September 30, 2017

and

December 31, 2016,

the Company had deposits totaling $

23.9

million and

$72.5

million, respectively, in

seven

United States financial institutions that were federally insured up to

$250,000

per account. At

September 30, 2017

and

December 31, 2016,

the Company’s deposits in foreign countries amounted to approximately

$56.0

million and

$166.2

million, respectively.

At

September 30, 2017

and

December 31, 2016,

accounts receivable related to operations in foreign countries amounted to approximately

$67.5

million and

$53.3

million, respectively. At

September 30, 2017

and

December 31, 2016,

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

48%

and

60%

of the Company’s accounts receivable, respectively.

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

16.3%

and

14.4%

of the Company’s total revenues for the

three

months ended

September 30, 2017

and

2016,

respectively, and

17.4%

and

18.6%

for the

nine

months ended

September 30, 2017

and

2016,

respectively.

Kenya Power and Lighting Co. Ltd. accounted for

17.6%

and

15.1%

of the Company’s total revenues for the

three

months ended

September 30, 2017

and

2016,

respectively, and

15.7%

and

16.4%

of the Company’s total revenues for the

nine

months ended

September 30, 2017

and

2016,

respectively.

Southern California

Public Power Authority (“SCPPA”) accounted for

9.1%

and

7.7%

of the Company’s total revenues for the

three

months ended

September 30, 2017

and

2016,

respectively, and

8.9%

and

9.9%

of the Company’s total revenues for the

nine

months ended

September 30, 2017

and

2016,

respectively.

Hyundai

(Sarulla geothermal project) accounted for

0.9%

and

24%

of the Company’s total revenues for the

three

months ended

September 30, 2017

and

2016,

respectively, and

4.7%

and

14%

for the

nine

months ended

September 30, 2017

and

2016,

respectively.

The Company has historically been able to collect on all of its receivable balances, and accordingly,

no

provision for doubtful accounts has been made.

New Accounting Pronouncements, Policy [Policy Text Block]

New accounting pronouncements effective in the

nine

-month

period ended

September 30, 2017

Improvement to Employee Share-Based Payment Accounting

In

March 2016,

the Financial Accounting Standards Board “(FASB”) issued Accounting Standard Update (“ASU”)

2016

-

09,

Improvement to Employee Share-Based Payment Accounting, an update to the guidance on stock-based compensation. Under the new guidance, all excess tax benefits and tax deficiencies will be recognized in the income statement as they occur. This will replace previous guidance, which required tax benefits that exceed compensation cost (windfalls) to be recognized in equity. It also eliminated the need to maintain a “windfall pool,” and removed the requirement to delay recognizing a windfall until it reduces current taxes payable. The new guidance also changed the cash flow presentation of excess tax benefits, classifying them as operating inflows, consistent with other cash flows related to income taxes. Previously, windfalls were classified as financing activities. This guidance affects the dilutive effects in earnings per share, as there will

no

longer be excess tax benefits recognized in additional paid in capital. Previously those excess tax benefits were included in assumed proceeds from applying the treasury stock method when computing diluted EPS. Under the amended guidance, companies are able to make an accounting policy election to either (

1

) continue to estimate forfeitures or (

2

) account for forfeitures as they occur. This updated guidance is effective for annual and interim periods beginning after 

December 15, 2016. 

The adoption of this guidance did

not

have a material impact on the Company’s consolidated financial statements.

Interests Held through Related Parties that are under Common Control

 

In

October 2016,

the FASB issued ASU

2016

-

17,

Consolidation (Topic

810

): Interests held through Related Parties that are under Common Control. The amendments in this update require that if a decision maker is required to evaluate whether it is the primary beneficiary of a VIE, it will need to consider only its proportionate indirect interest in the VIE held through a common control party. The amendments in this update should be applied retrospectively for each period presented and are effective for financial statements issued for fiscal years beginning after

December 15, 2016,

and interim periods within those fiscal years. The adoption of this guidance did

not

have a material impact on the Company’s consolidated financial statements.

Simplifying the Measurement of Inventory

In

July 2015,

the FASB issued ASU

2015

-

11,

Simplifying the Measurement of Inventory, Topic

330.

The update contains

no

amendments to disclosure requirements, but replaces the concept of

‘lower of cost or market’ with that of ‘lower of cost and net realizable value’. The amendments in this update are effective for annual reporting periods beginning after

December 15, 2016,

including interim periods within those reporting periods. The amendments should be applied prospectively with early adoption permitted. The adoption of this guidance did

not

have a material impact on the Company’s consolidated financial statements.

New accounting pronouncements effective in future periods

Derivatives and Hedging

In

August 2017,

the

FASB issued ASU

2017

-

12,

Targeted Improvements to Accounting for Hedging Activities. The amendments in this Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this Update are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the Update. The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements, if any.

Intangibles

–Goodwill and Other

 

In

January 2017,

the FASB issued ASU

2017

-

04,

Intangibles – Goodwill and Other (Topic

350

). The amendments in this Update require the entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This Update, eliminated Step

2

from the goodwill impairment test under the current guidance. Step

2

measures a goodwill impairment loss by comparing the implied fair value of reporting unit’s goodwill with the carrying amount of that goodwill. The amendments in this Update should be applied on a prospective basis. An entity is also required to disclose the nature of and the reason for the change in accounting principal upon transition. That disclosure should be provided in the

first

annual period and the interim period within the

first

annual period when the entity initially adopts the amendments in this Update. The amendments in this Update are effective for the annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual impairment tests performed on testing dates after

January 1, 2017.

The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements.

Compensation -

Stock Compensation

In

May 2017,

the FASB issued ASU

2017

-

09,

Compensation—Stock Compensation (Topic

718

). The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

The amendments in this update require that an entity should account for the effects of a modification unless all of the following are met: (

1

) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (

2

) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; (

3

) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic

718

apply regardless of whether an entity is required to apply modification accounting under the amendments in this Update. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

Early adoption is permitted. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements.

Business Combinations

In

January 2017,

the FASB issued ASU

2017

-

01,

Business Combinations (Topic

805

). The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update primarily provide a screen to determine when a set of assets and activities is

not

a business and by that reduces the number of transactions that need to be further evaluated. The amendments in this update should be applied prospectively and are effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted.

 The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements.

Statement of Cash Flow

In

November 2016,

the FASB issued ASU

2016

-

18,

Statement of Cash Flows (Topic

230

)

– Restricted Cash. The amendments in this update require that a statement of cash flows explain the changes during the period in total cash, cash equivalents, and the amounts generally described as restricted cash or cash equivalents. Therefore, amounts of restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update should be applied retrospectively for each period presented and are effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements.

Intra-Entity Transfers of Assets Other than Inventory

In

October 2016,

the FASB issued ASU

2016

-

16,

Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The amendments in this update require that the entity would recognize the tax expense from the sale of the asset in the seller

’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does

not

apply to intra-entity transfers on inventory. The amendments in this update should be applied for each period presented and are effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. The modified retrospective approach will be required for transition to the new guidance, with cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. Early adoption is permitted in the

first

quarter of

2017.

The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements.

Revenues from Contracts with Customers

In

May 2014,

the FASB issued ASU

2014

-

09,

Revenues from Contracts with Customers, Topic

606,

which was a joint project of the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The update provides that an entity should recognize revenue in connection with the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, an entity is required to apply each of the following steps: (

1

) identify the contract(s) with the customer; (

2

) identify the performance obligations in the contracts; (

3

) determine the transaction price; (

4

) allocate the transaction price to the performance obligation in the contract; and (

5

) recognize revenue when (or as) the entity satisfies a performance obligation. ASU

2014

-

09

also prescribes additional financial presentations and disclosures. The amendments in this update are effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within those reporting periods. Early adoption is permitted

no

earlier than

2017

for calendar fiscal year entities. The Company expects the adoption of this standard to have an immaterial impact, if any, on its Electricity segment as it accounts for its PPA

’s under ASC

840,

Leases, however, the Company is still evaluating the related potential impact on its investment in an unconsolidated company. The Company is still evaluating the potential impact of the adoption of the standard on its Product segment, however, it believes that such impact, if any, will be immaterial.

In

March 2016,

the FASB issued ASU

2016

-

08,

Principal versus Agent Considerations. This

 update does

not

change the core principles of the guidance and is intended to clarify the implementation guidance on principal versus agent considerations. When another entity is involved in providing goods or services to a customer, an entity is required to determine if the nature of its promise is to provide the specific good or service itself (that is, the entity is a principal) or to arrange for that good or service to be provided by the other party (that is, the entity is an agent). The guidance includes indicators to assist an entity in determining whether it acts as a principal or agent in a specified transaction. The amendments in this update are effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within those reporting periods. Early adoption is permitted

no

earlier than

2017

for calendar fiscal year entities. The Company is currently evaluating the potential impact, if any, of the adoption of these amendments on its consolidated financial statements, however, it believes that any such impact, if any, will be immaterial.

Leases

 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases, Topic

842.

This update introduces a number of changes and simplifies previous guidance, primarily the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The Update retains the distinction between finance leases and operating leases and the classification criteria between the

two

types remains substantially similar. Also, lessor accounting remains largely unchanged from previous guidance. However, key aspects of the Update were aligned with the revenue recognition guidance in Topic

606.

Additionally, the Update defines a lease as a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The amendments in this update are effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within those reporting periods. Early adoption is permitted. The Company is currently evaluating the potential impact, if any, of the adoption of these amendments on its consolidated financial statements.

Recognition and Measurement of Financial Assets and Financial Liabilities

In

January 2016,

the FASB issued ASU

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities. The update primarily requires that an entity present separately, in other comprehensive income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The application of this update should be by means of cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments in this update are effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted as of the beginning of the fiscal year of adoption. The Company is currently evaluating the potential impact, if any, of the adoption of this update on its consolidated financial statements.