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

June 30, 2018,

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

three

and

six

-month periods ended

June 30, 2018

and

2017

and the consolidated cash flows for the

six

-month periods ended

June 30, 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

and

six

-month period ended

June 30, 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.

Tungsten Mountain partnership transaction

May 17, 2018,

one

of the Company’s wholly-owned subsidiaries that indirectly owns the

MW Tungsten Mountain Geothermal power plant entered into a partnership agreement with a private investor. Under the transaction documents, the private investor acquired membership interests in the Tungsten Mountain Geothermal power plant project for an initial purchase price of approximately

$33.4

million and for which it will pay additional installments that are expected to amount to approximately

$13

million. The Company will continue to operate and maintain the power plant and will receive substantially all the distributable cash flow generated by the power plant.

Under the agreements, prior to the

December 31, 2026 (

“Target Flip Date”), the Company’s fully owned subsidiary, Ormat Nevada Inc.("Ormat Nevada"), receives substantially all of the distributable cash flow generated by the project, while the private investor receives substantially all of the tax attributes of the project. Following the later of the Target Flip Date and the date in which the private investor reaches its target return, Ormat Nevada will receive

97.5%

of the distributable cash and

95.0%

of the taxable income, on a going forward basis.

On the Target Flip Date, Ormat Nevada has the option to purchase the private investor’s interests at the then-current fair market value, plus an amount that

may

be needed to cause the private investor to reach its target return, if needed. If Ormat Nevada exercises this purchase option, it will become the sole owner of the project again.

Puna

May 3, 2018,

the Kilauea volcano located in close proximity to the Company’s

MW Puna geothermal power plant in the Puna district of Hawaii's Big Island erupted following a significant increase in seismic activity in the area. While the Company has taken steps to secure and protect the Puna facilities, including, among others, taking electricity generation offline and placing physical barriers around, and protective coverings over, the geothermal wells, and has evacuated non-essential personnel at the power plant and removed all pentane from the site, it is still assessing the impact of the volcanic eruption and seismic activity on the Puna facilities. The approaching lava covered the wellheads of

three

geothermal wells and the substation of the Puna complex and an adjacent warehouse that stored a drilling rig were burned due to the approaching lava, all of which had a carrying value of approximately

$4.9

million that was written-off during the

second

quarter of

2018.

These property damages are expected to be covered by the Company’s insurance policies and therefore the Company recorded a provision for such recoveries out of which approximately

$7.2

million was included in “Other income” as excess recoveries over the carrying value of the rig which was destroyed by the lava. The write-off and related insurance recoveries, excluding the excess portion, were recorded under “Electricity cost of revenues” in the condensed consolidated statements of operations and comprehensive income. The Company is in discussions with the insurance companies on the reimbursement for profit and loss and property damages. The total net book value of the Puna property, plant and equipment is approximately

$102.2

million. The Company cannot currently estimate when the lava flow will stop nor when it will be able to assess all of the damages. Any significant physical damage to, or extended shut-down of, the Puna facilities could have an adverse impact on the power plant's electricity generation and availability, which in turn could have a material adverse impact on the Company’s business and results of operations. The Company continues to monitor the condition of the Puna facilities, coordinate with Hawaii Electric Light Company (“HELCO”) and local authorities, and is taking steps to both further secure the power plant and restore its operations as soon as it is safe to do so. In addition, the Company will continue to assess the accounting implications of this event on the assets and liabilities on its balance sheet and whether an impairment will be required.

U.S. Geothermal (“USG”) transaction

April 24, 2018,

the Company completed its previously announced acquisition of USG. The total cash consideration (exclusive of transaction expenses) was approximately

$110

million, comprised of approximately

$106

million funded from available cash of Ormat Nevada Inc. (to acquire the outstanding shares of common stock of USG) and approximately

million funded from available cash of USG (to cash-settle outstanding in-the-money options for common stock of USG). As a result of the acquisition, USG became an indirect wholly owned subsidiary of Ormat, and Ormat indirectly acquired, among other things, interests held by USG and its subsidiaries in:

•

three

operating power plants at Neal Hot Springs, Oregon, San Emidio, Nevada and Raft River, Idaho with a total net generating capacity of approximately

MW; and

• development assets which include a project at the Geysers, California; a

second

phase project at San Emidio, Nevada; a greenfield project in Crescent Valley, Nevada; and the El Ceibillo project located near Guatemala City, Guatemala.

As a result of the acquisition, the Company expanded its overall generation capacity and expects to improve the profitability of the purchased assets through cost reduction and synergies. The Company accounted for the transaction in accordance with Accounting Standard Codification ASC

805,

Business Combinations and following the transaction, the Company consolidates USG, in accordance with Accounting Standard Codification ASC

810,

Consolidation. 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. The Company deemed that the adoption of ASU

2017

01,

Business Combinations, as further described under Note

to the condensed consolidated financial statements, did

not

have an effect on the USG transaction.

The Company deemed the transaction to

not

meet the significant subsidiary threshold and as a result did

not

provide additional pro-forma and other related information, that otherwise would have been required.

The following table summarizes the fair value amounts of identified assets and liabilities assumed as of the transaction date (in millions):

Cash and cash equivalents and restricted cash	$	37.9
Working capital		(8.2	)
Property, plant and equipment and construction-in-process		77.3
Intangible assets (1)		127.0
Deferred tax liability		(4.9	)
Long-term term debt, net of deferred transaction costs		(98.3	)
Asset retirement obligation		(9.0	)
Total identifiable assets and liabilities acquired	$	121.8
Goodwill (2)	$	19.3

(

)

Intangible assets are primarily related to long-term electricity power purchase agreements and depreciated over an average of

years.

(

)

Goodwill is primarily related to the expected synergies in operation as a result of the purchase transaction and is allocated to the Electricity segment.

The fair value of the noncontrolling interest of

$34.9

million reflects the

40%

minority interests in the Neal Hot Springs project that was evaluated using the income approach. The fair value of the noncontrolling interest is based on the following significant inputs: (i) forecasted cash flows assumed to be generated in correspondence with the remaining life of the related power purchase agreement which is approximately

years; (ii) revenues were estimated in accordance with the price and generation capacity of the related power purchase agreement; (iii) assumed terminal value based on the realizable value of the project at the end of the power purchase agreement term; and (iv) assumed discount rate range of

9%.

Total Electricity segment revenues and operating losses related to the

three

USG power plants of approximately

$3.4

million and

$4.2

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

three

and

six

months ended

June 30, 2018.

The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on

January 1, 2017:

	Pro forma for the six months ended June 30, 2018		Pro forma for the six months ended June 30, 2017		Pro forma for the three months ended June 30, 2018		Pro forma for the three months ended June 30, 2017
	(Dollars in thousands)
Electricity revenues	$	265,965	$	241,420	$	125,003	$	117,207
Total revenues		373,619		384,010		181,123		185,675
Operating profit		89,219		114,753		36,200		53,238

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. As of

June 30, 2018

the Company was in compliance with all such covenants.

Other comprehensive income

For the

six

months ended

June 30, 2018

and

2017,

the Company classified

$10,000

and

$54,000,

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

$15,000

and

$30,000,

respectively, were recorded to reduce interest expense and

$5,000

and $(

24,000

), 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, 2018

and

2017,

the Company classified

$5,000

and

$30,000,

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

$6,000

and

$20,000,

respectively, were recorded to reduce interest expense and

$1,000

and $(

10,000

), 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, 2018

$1.0

million

Write-offs of unsuccessful exploration activities

Write-offs of unsuccessful exploration activities for the

three

and

six

months ended

June 30, 2018

were

and

$0.1

million. There were

write-offs of unsuccessful exploration activities for the

three

and

six

months ended

June 30, 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:

	June 30,		December 31,
	2018		2017
	(Dollars in thousands)
Cash and cash equivalents	$	66,696	$	47,818
Restricted cash and cash equivalents		76,041		48,825
Total Cash and cash equivalents and restricted cash and cash equivalents	$	142,737	$	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 (“U.S.”) and in foreign countries. At

June 30, 2018

and

December 31, 2017,

the Company had deposits totaling

$21.6

million and

$21.2

million, respectively, in

eight

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

$250,000

per account. At

June 30, 2018

and

December 31, 2017,

the Company’s deposits in foreign countries amounted to approximately

$59.8

million and

$32.8

million, respectively.

June 30, 2018

and

December 31, 2017,

accounts receivable related to operations in foreign countries amounted to approximately

$83.2

million and

$78.1

million, respectively. At

June 30, 2018

and

December 31, 2017,

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

55%

and

57%

of the Company’s accounts receivable, respectively.

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

17.0%

and

16.7%

of the Company’s total revenues for the

three

months ended

June 30, 2018

and

2017,

respectively, and

16.7%

and

17.8%

of the Company’s total revenues for the

six

months ended

June 30, 2018

and

2017,

respectively.

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

14.9%

and

8.7%

of the Company’s total revenues for the

three

months ended

June 30, 2018

and

2017,

respectively, and

15.6%

and

8.9%

of the Company’s total revenues for the

six

months ended

June 30, 2018

and

2017.

Kenya Power and Lighting Co. Ltd. accounted for

16.6%

and

15.4%

of the Company’s total revenues for the

three

months ended

June 30, 2018

and

2017,

respectively, and

15.8%

and

14.8%

of the Company’s total revenues for the

six

months ended

June 30, 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.