New accounting pronouncements effective in the

six

-month period ended

June 30, 2018

Income Taxes

March 2018,

the Financial Accounting Standards Board

FASB") issued ASU

2018

05,

Income Taxes (Topic

740

). The amendments in this update add several SEC paragraphs pursuant to the issuance of the SEC Staff Accounting Bulletin

No.

118,

Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB

118”

) in

December 2017.

The amendments in this update are effective immediately. For additional information, see Note

to the consolidated financial statements.

Revenues from Contracts with Customers

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: (

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

) identify the performance obligations in the contracts; (

) determine the transaction price; (

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

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

2014

also prescribes additional financial presentations and disclosures. In

March 2016,

the FASB issued ASU

2016

08,

Principal versus Agent Considerations. This update did

not

change the core principles of the guidance and was 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 included indicators to assist an entity in determining whether it acts as a principal or agent in a specified transaction.

The Company adopted this update effectively as of

January 1, 2018

using the modified retrospective approach with

one

-time cumulative adjustment to the opening balance of retained earnings as further described below and applied the

five

-step model described above on identified outstanding contracts at the date of adoption, under which revenues are generated. Under ASC

606,

an entity must identify the performance obligations in a contract, determine the transaction price and allocate the price to specific performance obligations recognize the revenue when the obligation is completed. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The standard also requires disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts.

The adoption of ASC

606,

Revenues from Contracts with Customers, as described above, did

not

have an impact on our Electricity, Product and Other segment revenues in

2018,

however, the adoption did have an impact on our accounting for investment in an unconsolidated company as further described in the following table and in the disclosure under the heading "Investment in an unconsolidated company" within this note below. Additionally, the following table below summarizes the impact of the adoption of ASC

606

on the Company’s consolidated financial statements as of

January 1, 2018,

followed by further information for each of the line items in the table:

	(Dollars in millions)
Electricity segment revenues	$	–
Product segment revenues		–
Other segment revenues		–
Investment in an unconsolidated company		24.0

Electricity segment revenues

: Electricity revenues are primarily related to sale of electricity from geothermal and recovered energy-based power plants owned and operated by the Company. Revenues related to the sale of electricity from geothermal and recovered energy-based power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. For power purchase agreements (“PPAs”) agreed to, modified, or acquired in business combinations on or after

July 1, 2003,

the Company determines whether such PPAs contain a lease element requiring lease accounting. Revenue from such PPAs is accounted for in electricity revenues. The lease element of the PPAs is also assessed in accordance with the revenue arrangements with multiple deliverables guidance, which requires that revenues be allocated to the separate earnings processes based on their relative fair value. PPAs with minimum lease rentals which vary over time are generally recognized on the straight-line basis over the term of the PPAs. PPAs with contingent rentals are recognized when earned. In the Electricity segment, revenues for all but

three

power plants are accounted for under ASC

840

(Leases) as operating leases, and therefore equipment related to geothermal and recovered energy generation power plants is considered held for leasing. For power plants in the scope of ASC

606,

the Company identified electricity as a separate performance obligation. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the invoiced amounts reasonably represented the value to customers of performance obligations fulfilled to date. The transaction price is determined based on the price per actual mega-watt output or available capacity as agreed to in the respective PPA. Customers are generally billed on a monthly basis and payment is typically due within

days after the issuance of the invoice.

Product segment revenues

: Product segment revenues are primarily related to sale of geothermal and recovered energy-based power plants, including equipment, engineering, construction and installation and operating services. Revenues from the supply and/or construction of geothermal and recovered energy-based power plant equipment and other equipment to

third

parties are recognized over time since control is transferred continuously to our customers. The majority of our contracts include a single performance obligation which is essentially the promise to transfer the individual goods or services that are

not

separately identifiable from other promises in the contracts and therefore deemed as

not

distinct. Performance obligations are satisfied over-time if the customer receives the benefits as we perform work, if the customer controls the asset as it is being constructed, or if the product being produced for the customer has

alternative use and we have a contractual right to payment. In our Product segment, revenues are spread over a period of

one

two

years and are recognized over time based on the cost incurred to date in ratio to total estimated costs which represents the input method that best depicts the transfer of control over the performance obligation to the customer. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are expensed as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

In contracts for which we determine that control is

not

transferred continuously to the customer, we recognized revenues at the point in time when the customer obtains control of the asset. Revenues for such contracts are recorded upon delivery and acceptance by the customer. This generally is the case for the sale of spare parts, generators or similar products.

Accounting for product contracts that are satisfied over time includes use of several estimates such as variable consideration related to bonuses and penalties and total estimated cost for completing the contract. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are based on historical experience, anticipated performance and our best judgment at the time.

The nature of our product contracts give rise to several modifications or change requests by our customers. Substantially all of the modifications are treated as cumulative catch-ups to revenues since the additional goods are

not

distinct from those already provided. We include the additional revenues related to the modifications in our transaction price when both parties to the contract approved the modification. As a significant change in

one

or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in Product revenues on contracts under the cumulative catch-up method. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period in which it is identified.

The Company generally provides a

one

-year warranty against defects in workmanship and materials related to the sale of products for electricity generation. The Company considered the warranty as an assurance type warranty since the warranty provides the customer the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in operating expenses in the period in which the related revenue is recognized. Such charges are immaterial for the

three

and

six

months ended

June 30, 2018

and

2017.

Contract Assets and Liabilities related to our Product segment: Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. Total contract assets and contract liabilities as of

June 30, 2018

and

December 31, 2017

are as follows:

	June 30,			December 31,
	2018			2017
	(Dollars in thousands)
Contract assets (*)	$	46,573		$	40,945
Contract liabilities (*)		(16,136	)		(20,241	)
Contract assets, net	$	30,437		$	20,704

(*) Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts" and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the consolidated balance sheet.

The following table presents the significant changes in the contract assets and contract liabilities for the

six

months ended

June 30, 2018:

	Contract assets			Contract liabilities
	(Dollars in thousands)
Recognition of contract liabilities as revenue as a result of performance obligations satisfied	$	-		$	11,094
Cash received in advance for which revenues have not yet recognized, net expenditures made		-			(12,901	)
Reduction of contract assets as a result of rights to consideration becoming unconditional		(59,634	)		-
Contract assets recognized, net of recognized receivables		71,174			-
Net change in contract assets and contract liabilities		11,540			(1,807	)

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets and contract liabilities on the condensed consolidated balance sheet. In our Products segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, or upon achievement of contractual milestones. Generally, billing occurs subsequent to the recognition of revenue, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue can be recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. The timing of billing our customers and receiving advance payments vary from contract to contract. We typically receive a down payment of between

10%

and

20%

of total contract consideration upon signing, followed by additional milestone payments for which timing varies from contract to contract. The majority of payments are received

later than the completion of the project and satisfaction of our performance obligation.

June 30, 2018,

we had approximately

$229.0

million of remaining performance obligations

not

yet satisfied or partly satisfied related to our Product segment. We expect to recognize approximately

91%

of this amount as Product revenues during the next

months and the rest will be recognized thereafter.

The following schedule reconciles revenues accounted for under ASC

840,

Leases, and ASC

606,

Revenues from Contracts with Customers, to total consolidated revenues for the

three

and

six

months ended

June 30, 2018:

	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
	(Dollars in thousands)		(Dollars in thousands)
Electricity Revenues accounted under ASC 840, Leases	$	118,984	$	246,812
Electricity, Product and Other revenues accounted under ASC 606		59,315		115,510
Total consolidated revenues	$	178,299	$	362,322

Disaggregated revenues from contracts with customers for the

three

and

six

months ended

June 30, 2018

are shown under Note

– Business Segments, to the condensed consolidated financial statements.

Investment in an unconsolidated company

: The Company also reviewed the impact of the adoption of ASC

606

on its investment in an unconsolidated company. As a result of the adoption, the Company recorded

one

-time cumulative credit adjustment to the opening balance of retained earnings of approximately

$24.0

million as of

January 1, 2018.

This impact is a result of the unconsolidated company’s variable consideration related to the construction of its power plant for which, under the new guidance, is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur when the uncertainty is resolved. As such, the comparative information will

not

be restated and shall continue to be reported under the accounting standards in effect for those periods.

The following schedule quantifies the impact of adopting ASC

606

on the statement of operations for the

three

months ended

June 30, 2018:

	2018, under previous standard		Effect of the New Revenue Standard			2018, as reported
	(Dollars in thousands)
Equity in earnings of investees, net	$	2,332	$	(734	)	$	1,598
Income from continuing operations		74,990		(734	)		94,356
Net income attributable to the Company’s stockholders		70,242		(734	)		86,606
Retained earnings		411,492		(734	)		422,794

Other segment revenues

: Other segment revenues are primarily related to energy storage, demand-response and energy management related services. Revenues are recorded based on energy management of load curtailment capacity delivered or service provided at rates specified under the relevant contract terms. The Company determined that the Other segment revenues are in the scope of ASC

606

and identified energy management as a separate performance obligation. Performance obligations are satisfied once the Company provides verification to the electric power grid operator or utility of its ability to meet the committed capacity or power curtailment requirements and thus entitled to cash proceeds. Such verification

may

be provided by the Company bi-weekly, monthly or under any other frequency as set by the related program and are typically followed by a payment shortly after. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the amounts included in the verification document reasonably represent the value of performance obligations fulfilled to date. The transaction price is determined based on mechanisms specified in the contract with the customer.

Compensation - Stock Compensation

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: (

) 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; (

) 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; (

) 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 under 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.

The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The adoption of this guidance did

not

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

Business Combinations

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. The adoption of this guidance did

not

have an impact on the Company’s condensed consolidated financial statements.

Statement of Cash Flow

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. The Company adopted this guidance retrospectively in its consolidated financial statements for the

three

month period ending

March 31, 2018

and adjusted its disclosure accordingly.

Intra-Entity Transfers of Assets Other than Inventory

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 is required for transition to the new guidance, with cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. The Company adopted this guidance in its consolidated financial statements for the

three

months ending

March 31, 2018

using the modified retrospective approach and recorded a net cumulative-effect adjustment to retained earnings of approximately

$1.8

million with a corresponding adjustment to deferred charges and deferred income taxes on the condensed consolidated balance sheet of approximately

$49.8

million and

$51.6

million, respectively.

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash payments (Topic

230

)

August 2016,

the FASB issued ASU

2016

15,

Statement of Cash-Flows (Topic

230

). This update addresses

eight

specific cash flow classification issues with the objective of reducing diversity in practice. One of the issues addressed in this update is debt prepayment or debt extinguishment costs which under the new guidance should be classified as cash outflows for financing activities. Additionally, the update addressed contingent consideration payments made after a business combination. Such cash payments made soon after the acquisition date to settle a contingent consideration liability should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities. The amendments in this update are effective for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company adopted this guidance and expects that the impact from the adoption of the update will result in a reclassification of approximately

$8.0

million of cash paid for achievement of production threshold in Guadeloupe during the

fourth

quarter of

2017

from cash outflows from investing activities to cash outflows from financing activities as required by this update.

Recognition and Measurement of Financial Assets and Financial Liabilities

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. The adoption of this update did

not

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

New accounting pronouncements effective in future periods

Derivatives and Hedging

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, if any, of the adoption of these amendments on its consolidated financial statements.

Intangibles –Goodwill and Other

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

from the goodwill impairment test under the current guidance. Step

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 principle 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, if any, of the adoption of these amendments on its consolidated financial statements.

Leases

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. This update requires the modified retrospective transition approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The modified retrospective approach includes a number of optional practical expedients related to identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with the previous generally accepted accounting principles in the United States unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous generally accepted accounting principles in the United States. 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.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive income

February 2018,

the FASB issued ASU

2018

02,

Income Statement – Reporting Comprehensive Income (Topic

220

). The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting for the Tax Cuts and Jobs Act of

2017

(the “Tax Act”). The guidance is effective for the fiscal years beginning after

December 15, 2018,

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, however, such impact, if any, is

not

expected to be material.