NOTE

— 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

March 31, 2018,

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

three

-month periods ended

March 31, 2018

and

2017

and the consolidated cash flows for the

three

-month periods ended

March 31, 2018

and

2017.

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

-month period ended

March 31, 2018

are

not

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

December

31,

2018.

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

-K/A for the year ended

December

31,

2017.

The condensed consolidated balance sheet data as of

December

31,

2017

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

December

31,

2017,

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.

Revision of previously issued condensed consolidated financial statements

As previously disclosed in the Company’s Form

-K/A as of and for the year ended

December 31 2017,

filed on

June 19, 2018,

the Company restated its previously issued

2017

financial statements due to the subsequent identification of material tax errors.

The Company also identified other tax errors in the previously issued unaudited condensed consolidated financial statements as of and for the

three

months ended

March 31, 2017,

including a prior period tax error for an unrecognized tax benefit related to intercompany interest. The Company assessed the materiality of these errors in accordance with the SECs Staff Accounting Bulletin (“SAB”) Topic

1.Materiality,

codified in ASC Topic

250,

Presentation of Financial Statements (“ASC

250”

), and concluded that such previously issued financial statements were

not

materially misstated. However, in connection with the fiscal

2017

restatement, the Company determined that it would revise such previously issued financial statements to correct for these errors. As a result, the revised financial statements for the

three

months ended

March 31, 2017

reflect a

$0.1

million increase in the income tax provision, with a corresponding decrease in net income and comprehensive income, and a

$1.7

million decrease to total equity as of

January 1, 2017

to correct for immaterial tax errors originating prior to

2017.

The effects of the revision on the line items within the Company's condensed consolidated statements of operations and comprehensive income for the

three

months ended

March 31, 2017

are as follows:


	Three months ended March 31, 2017
	As originally reported			Adjustments			As revised
	(Dollars in thousands)
Income tax provision	$	(10,886	)	$	(118	)	$	(11,004	)
Income from continuing operations		39,735			(118	)		39,617
Net income attributable to the Company’s Stockholders		35,312			(118	)		35,194
Loss in respect of derivative instruments designated for cash flow hedge		22			26			48
Comprehensive income		40,302			(92	)		40,210
Comprehensive income attributable to the Company’s stockholders		35,890			(92	)		35,798
Earnings per share
Basic:	$	0.71		$	-		$	0.71
Diluted:	$	0.70		$	-		$	0.70

The effects of the revision on the line items within the Company’s condensed consolidated statements of equity for the

three

months ended

March 31, 2017

are as follows:


	Three months ended March 31, 2017
	As originally reported			Adjustments			As revised
	(Dollars in thousands)
Balances as of December 31, 2016:
Retained earnings	$	216,644		$	(1,292	)	$	215,352
Accumulated other comprehensive loss		(7,732	)		(443	)		(8,175	)
Total stockholders’ equity attributable to the Company’s stockholders		1,078,425			(1,735	)		1,076,690
Total equity		1,170,007			(1,735	)		1,168,272
Net income for the three months ended March 31, 2017		39,391			(118	)		39,273
Net income attributable to the Company’s stockholders for the three months ended March 31, 2017		35,312			(118	)		35,194
Loss in respect of derivative instruments designated for cash flow hedge for the three months ended March 31, 2017		22			26			48
Balances as of March 31, 2017:
Retained earnings		243,508			(1,410	)		242,098
Accumulated other comprehensive loss		(7,076	)		(417	)		(7,493	)
Total stockholders’ equity attributable to the Company’s stockholders		1,107,658			(1,827	)		1,105,831
Total equity		1,196,501			(1,827	)		1,194,674

Although there was

impact to net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities, the effects of the revision on the line items within the condensed consolidated statements of cash flows for the

three

months ended

March 31, 2017

are as follows:

	Three months ended March 31, 2017

	As originally reported		Adjustments			As revised
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	39,735	$	(118	)	$	39,617
Liability for unrecognized tax benefits		574		118			692
Net cash provided by operating activities		71,463		-			71,463

Migdal Senior Unsecured Loan

March 22, 2018

the Company entered into a definitive loan agreement (the "Migdal Loan Agreement") with Migdal Insurance Company Ltd., Migdal Makefet Pension and Provident Funds Ltd. and Yozma Pension Fund of Self Employed Ltd., all entities within the Migdal Group, a leading insurance company and institutional investor in Israel. The Migdal Loan Agreement provides for a loan by the lenders to the Company in an aggregate principal amount of

$100

million (the “Migdal Loan”). The Migdal Loan will be repaid in

semi-annual payments of

$4.2

million each, commencing on

September 15, 2021,

with a final payment of

$37

million on

March 15, 2029.

The Migdal Loan bears interest at a fixed rate of

4.8%

per annum, payable semi-annually, subject to adjustment in certain circumstances as described below.

The Migdal Loan is subject to early redemption by the Company prior to maturity from time to time (but

not

more frequently than once per quarter) and at any time in whole or in part, at a redemption price set forth in the Migdal Loan Agreement. If the rating of the Company is downgraded to "ilA-", by Standard and Poor’s Global Ratings Maalot Ltd. (“Maalot”), the interest rate applicable to the Migdal Loan will be increased by

0.50%.

If the rating of the Company is further downgraded to a lower level, the interest rate applicable to the Migdal Loan will be increased by

0.25%

for each additional downgrade. In

event will the cumulative increase in the interest rate applicable to the Migdal Loan exceed

regardless of the cumulative rating downgrade. A subsequent upgrade or reinstatement of a rating by Maalot will reduce the interest rate applicable to the Migdal Loan by

0.25%

for each upgrade (but in

event will the interest rate applicable the Migdal Loan fall below the base interest rate of

4.8%

). Additionally, if the ratio between short-term and long-term debt to financial institutions and bondholders, deducting cash and cash equivalents to EBITDA is equal to or higher than

4.5,

the interest rate on all amounts then outstanding under the Migdal Loan shall be increased by

0.5%

per annum over the interest rate then-applicable to the Migdal Loan.

The Migdal Loan constitutes senior unsecured indebtedness of the Company and will rank equally in right of payment with any existing and future senior unsecured indebtedness of the Company, and effectively junior to any existing and future secured indebtedness, to the extent of the security therefore.

The Migdal Loan Agreement includes various affirmative and negative covenants, including a covenant that the Company maintain (i) a debt to adjusted EBITDA ratio below

(ii) a minimum equity amount (as shown on its consolidated financial statements, excluding noncontrolling interests) of

not

less than

$650

million, and (iii) an equity attributable to Company's stockholders to total assets ratio of

not

less than

25%.

In addition, the Migdal Loan Agreement restricts the Company from making dividend payments if its equity falls below

$800

million and otherwise restricts dividend payments in any

one

year to

not

more than

50%

of the net income of the Company of such year as shown on the Company’s consolidated annual financial statements as long as any of the Company's bonds issued in Israel prior to

March 27, 2018

remain outstanding. The Migdal Loan Agreement includes other customary affirmative and negative covenants and events of default.

Other comprehensive income

For the

three

months ended

March 31, 2018

and

2017,

the Company classified

$5,000

and

$2,000,

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

$9,000

and

$3,000,

respectively, were 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

March 31, 2018,

$0.6

million.

Write-offs of unsuccessful exploration activities

Write-offs of unsuccessful exploration activities for the

three

months ended

March 31, 2018

were

$0.1

million. There were

write-offs of unsuccessful exploration activities for the

three

months ended

March 31, 2017.

Reconciliation of Cash and cash equivalents and Restricted cash and cash equivalents

The following table provides a reconciliation of Cash and cash equivalents and Restricted cash and cash equivalents reported on the balance sheet that sum to the total of the same amounts shown on the statement of cash flows:

	March 31,		December 31,
	2018		2017
Cash and cash equivalents	$	54,723	$	47,818
Restricted cash and cash equivalents		50,332		48,825
Total Cash and cash equivalents and Restricted cash and cash equivalents	$	105,055	$	96,643

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

March 31, 2018

and

December 31, 2017,

the Company had deposits totaling

$20.3

million and

$21.2

million, respectively, in

eight

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

$250,000

per account. At

March 31, 2018

and

December 31, 2017,

the Company’s deposits in foreign countries amounted to approximately

$47.3

million and

$32.8

million, respectively.

March 31, 2018

and

December 31, 2017,

accounts receivable related to operations in foreign countries amounted to approximately

$73.3

million and

$78.1

million, respectively. At

March 31, 2018

and

December 31, 2017,

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

59%

and

57%

of the Company’s accounts receivable, respectively.

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

17.4%

and

18.8%

of the Company’s total revenues for the

three

months ended

March 31, 2018

and

2017,

respectively.

Southern California Public Power Authority (“SCPPA”) accounted for

16.3%

and

9.0%

of the Company’s total revenues for the

three

months ended

March 31, 2018

and

2017,

respectively.

Kenya Power and Lighting Co. Ltd. accounted for

15.1%

and

14.3%

of the Company’s total revenues for the

three

months ended

March 31, 2018

and

2017,

respectively.

The Company has historically been able to collect on substantially all of its receivable balances, and believes it will continue to be able to collect all amounts due. Accordingly,

provision for doubtful accounts has been made.