NOTE

— LONG-TERM DEBT AND CREDIT AGREEMENTS

Long-term debt consists of notes payable under the following agreements:

	December 31,
	2018			2017
	(Dollars in thousands)
Limited and non-recourse agreements:
Loans:
Non-recourse:
Other loans	$	6,241		$	7,252
Limited recourse:
Loan agreement with OPIC (the Olkaria III power plant)		210,641			228,635
Loan agreement with OPIC (the Platanares power plant)		112,652			-
Loan agreement with Banco Industrial S.A. and Westrust Bank (International) Limited		29,750			33,251
Senior Secured Notes:
Non-recourse:
OrCal Senior Secured Notes		18,652			32,142
DAC 1 Senior Secured Notes		83,319			88,339
Limited recourse:
OFC 2 Senior Secured Notes		217,810			232,526
Other loans		96,482			-
		775,547			622,145
Less current portion		(63,180	)		(54,720	)
Non current portion	$	712,367		$	567,425
Full recourse agreements:
Senior Unsecured Bonds	$	204,332		$	204,332
Senior Unsecured Loan (Migdal)		100,000			-
Loan agreements with DEG (the Olkaria III and IV power plants)		47,500			50,000
Loan from a commercial bank		-			587
Revolving credit lines with banks		159,000			51,500
		510,832			306,419
Less current portion		(164,000	)		(54,587	)
Non current portion	$	346,832		$	251,832

Loan Agreement with Banco Industrial S.A. and Westrust Bank (International) Limited

July 31, 2015,

Ortitlản, Limitada, the Company’s wholly owned subsidiary, obtained a

-year secured term loan in the principal amount of

$42.0

million for the

MW Amatitlan power plant in Guatemala. Under the credit agreement with Banco Industrial S.A. and Westrust Bank (International) Limited, we can expand the Amatitlan power plant with financing to be provided either via equity, additional debt from Banco Industrial S.A. or from other lenders, subject to certain limitations on expansion financing in the credit agreement.

The loan is payable in

quarterly payments commencing

September 30, 2015.

The loan bears interest at a rate

per annum

equal to of the sum of the LIBO Rate (which cannot be lower than

1.25%

) plus a margin of (i)

4.35%

as long as the Company’s guaranty of the loan (as described below) is outstanding or (ii)

4.75%

otherwise. Interest is payable quarterly, on

March 30,

June 30,

September 30

and

December 30

of each year, on the stated maturity date of the loan and on any prepayment or payment of the loan. The loan must be prepaid on the occurrence of certain events, such as casualty, condemnation, asset sales and expansion financing

not

provided by the lenders under the credit agreement, among others. The loan

may

be voluntarily prepaid if certain conditions are satisfied, including payment of a premium (ranging from

100

basis points) if prepayment occurs prior to the

eighth

anniversary of the loan.

There are various restrictive covenants under the Amatitlan credit agreement. These include, among others, (i) a financial covenant to maintain a Debt Service Coverage Ratio (as defined in the credit agreement) of

not

less than

1.15

1.00

as of the last day of any fiscal quarter and (ii) limitations on Restricted Payments (as defined in the credit agreement) that among other things would limit dividends that could be paid to us unless the historical and projected Debt Service Coverage Ratio is

not

less than

1.25

1.00

for the

four

fiscal quarterly periods (calculated as a single accounting period). As of

December 31, 2018,

the actual historical and projected

-month Debt Service Coverage Ratio was

1.58

and

1.59,

respectively. The credit agreement includes various events of default that would permit acceleration of the loan (subject in some cases to grace and cure periods). These include, among others, a Change of Control (as defined in the credit agreement) and failure to maintain certain required balances in debt service and maintenance reserve accounts. The credit agreement includes certain equity cure rights for failure to maintain the Debt Service Coverage Ratio and the minimum amounts required in the debt service and maintenance reserve accounts.

The loan is collateralized by substantially all the assets of the borrower and a pledge of all of the membership interests of the borrower.

The Company has guaranteed payment of all obligations under the credit agreement and related financing documents. The guaranty is limited in the sense that the Company is only required to pay the guaranteed obligations if a “trigger event” occurs. A trigger event is the occurrence and continuation of a default by INDE in its payment obligations under the PPA for the Amatitlàn power plant or a refusal by INDE to receive capacity and energy sold under that PPA. The Company’s obligations under the guaranty

may

be terminated prior to payment in full of the guaranteed obligations under certain circumstances described in the guaranty. If the guaranty is terminated early, the interest rate payable on the loan would increase as described above.

As of

December 31, 2018,

$29.8

million of this loan is outstanding.

Finance Agreement with OPIC (the Olkaria III Complex)

August

23,

2012,

OrPower

the Company’s wholly owned subsidiary, entered into a Finance Agreement with OPIC, an agency of the U.S. government, to provide limited-recourse senior secured debt financing in an aggregate principal amount of up to

$310.0

million (the “OPIC Loan”) for the refinancing and financing of the Olkaria III geothermal power complex in Kenya. The Finance Agreement was amended on

November 9, 2012.

The OPIC Loan is comprised of up to

three

tranches:

•

Tranche I in an aggregate principal amount of

$85.0

million, which was drawn in

November 2012,

was used to prepay approximately

$20.5

million (plus associated prepayment penalty and breakage costs of

$1.5

million) of the DEG Loan, as described below. The remainder of Tranche I proceeds was used for reimbursement of prior capital costs and other corporate purposes.

•

Tranche II in an aggregate principal amount of

$180.0

million was used to fund the construction and well field drilling for the expansion of the Olkaria III geothermal power complex (“Plant

2”

). In

November 2012,

an amount of

$135.0

million was disbursed under this Tranche II, and in

February 2013,

the remaining

$45.0

million was distributed under this Tranche II.

•

Tranche III in an aggregate principal amount of

$45.0

million was used to fund the construction of Plant

of the Olkaria III complex. In

November 2013,

an amount of

$45.0

million was disbursed under this Tranche.

July 2013,

we completed the conversion of the interest rate applicable to both Tranche I and Tranche II from a floating interest rate to a fixed interest rate. The average fixed interest rate for Tranche I, which has an outstanding balance as of

December 31, 2018

$56.6

million and matures on

December 15, 2030,

and Tranche II, which has an outstanding balance as of

December 31, 2018

$121.8

million and matures on

June 15, 2030,

6.31%.

November 2013,

we fixed the interest rate for Tranche III. The fixed interest rate for Tranche III, which has an outstanding balance as of

December 31, 2018

$32.2

million and matures on

December 15, 2030,

6.12%.

OrPower

has a right to make voluntary prepayments of all or a portion of the OPIC Loan subject to prior notice, minimum prepayment amounts, and a prepayment premium of

2.0%

in the

first

two

years after the Plant

commercial operation date, declining to

in the

third

year after the Plant

commercial operation date, and without premium thereafter, plus a redemption premium. In addition, the OPIC Loan is subject to customary mandatory prepayment in the event of certain reductions in generation capacity of the power plants, unless such reductions will

not

cause the projected ratio of cash flow to debt service to fall below

1.7.

The OPIC Loan is collateralized by substantially all of OrPower

4’s

assets and by a pledge of all of the equity interests in OrPower

The finance agreement includes customary events of default, including failure to pay any principal, interest or other amounts when due, failure to comply with covenants, breach of representations and warranties, non-payment or acceleration of other debt of OrPower

bankruptcy of OrPower

or certain of its affiliates, judgments rendered against OrPower

expropriation, change of control, and revocation or early termination of security documents or certain project-related agreements, subject to various exceptions and notice, cure and grace periods.

There are various restrictive covenants under the OPIC Loan, which include a required historical and projected

-month DSCR of

not

less than

1.4

(measured as of

March 15,

June 15,

September 15

and

December 15

of each year). If OrPower

fails to comply with these financial ratios it will be prohibited from making distributions to its shareholders. In addition, if the DSCR falls below

1.1,

subject to certain cure rights, such failure will constitute an event of default by OrPower

This covenant in respect of Tranche I became effective on

December 15, 2014.

As of

December 31, 2018,

the actual historical and projected

-month DSCR was

2.87

and

3.03,

respectively.

As of

December 31, 2018,

$210.6

million of the OPIC Loan was outstanding.

Debt service reserve

As required under the terms of the OPIC Loan, OrPower

maintains an account which

may

be funded by cash or backed by letters of credit in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the OPIC Loan in the following

six

months. This restricted cash account is classified as current in the consolidated balance sheets. As of

December 31, 2018

and

2017,

the balance of the account was

$2.6

million and

$3.7

million, respectively. In addition, as of

December 31, 2018,

part of the required debt service reserve was backed by a letter of credit in the amount of

$16.1

million (see Note

Well drilling reserve

As required under the terms of the OPIC Loan, OrPower

may

be required to maintain an account which

may

be funded by cash or backed by letters of credit to reserve funds for future well drilling, based on determination upon the completion of the expansion work.

Finance Agreement with OPIC (the Platanares power plant)

April 30, 2018,

Geotérmica Platanares, S.A. de C.V. (“Platanares”), a Honduran sociedad anónima de capital variable and an indirect subsidiary of Ormat Technologies, Inc., entered into a Finance Agreement (the “Finance Agreement”) with OPIC, pursuant to which OPIC will provide to Platanares senior secured non-recourse debt financing in an aggregate principal amount of up to

$124.7

million (the “Platanares Loan”), the proceeds of which will be used principally for the refinancing and financing of the Platanares

MW geothermal power plant located in western Honduras (the “Project”). The finance agreement was amended and closed in

October

2018.

Tranche I in an aggregate principal amount of

$114.7

million was drawn in

October 2018,

carries a fixed interest rate of

7.02%

per annum and matures in

September

2032.

The closing of tranche II of up to

$10

million is expected during the

first

half of

2019

subject to the satisfaction or waiver of certain conditions precedent.

Under the Finance Agreement, Platanares

may,

upon prior written notice to OPIC, make voluntary prepayments of the OPIC Loan, in whole or in part, in a minimum partial prepayment amount of

million together with payment to OPIC of all accrued but unpaid interest on the principal amount of the OPIC Loan to be prepaid, plus a prepayment premium. The prepayment premium is equal to (i)

of the principal amount of the OPIC Loan to be prepaid for any voluntary prepayment in the

first

second

year following expiration of the Commitment Period (as defined in the Finance Agreement) and (ii)

of the principal amount of the Platanares Loan to be prepaid for any voluntary prepayment in the

third

year following expiration of the Commitment Period. There is

prepayment premium for any voluntary prepayment in the

fourth

year following expiration of the Commitment Period or thereafter.

The OPIC Loan is also subject to customary mandatory prepayment upon the occurrence of certain events, including, among others, (i) receipt by Platanares of compensation or damages following a dispute that results in a material adverse change to the primary power purchase agreement for the Project, (ii) receipt by Platanares of a termination or indemnity payment from a

third

party (other than OPIC) or expropriation proceeds from a governmental authority upon the termination of any project documents or the condemnation, nationalization, seizure or expropriation of all or a substantial portion of the Project or property of Platanares by a governmental authority, respectively, and (iii) receipt by Platanares of sale proceeds in excess of a certain threshold from the disposition of all or any part of the property of Platanares, subject to certain exceptions.

The OPIC Loan will be secured by a

first

priority lien on all of the assets and ordinary shares of Platanares. The Finance Agreement contains various restrictive covenants applicable to Platanares, among others (i) to maintain a projected and historic debt service coverage ratio of

less than

1.1

(ii) to maintain on deposit in a debt service reserve account and well reserve account funds or assets with a value in excess of a minimum threshold and (iii) covenants that restrict Platanares from making certain payments or other distributions to its equity holders unless the projected and historic debt service coverage ratio is

not

less than

1.2

As of

December 31, 2018,

the projected

-month Debt Service Coverage Ratio was

1.50.

The Finance Agreement also contains customary events of default, including, among others, failure to pay principal, interest or other amounts when due, non-payment or acceleration of other indebtedness of Platanares, the occurrence of a change of control of Platanares without the prior approval of OPIC, expropriation, judgments rendered against Platanares in excess of a certain threshold, failure to comply with covenants, a voluntary abandonment of the Project and the occurrence of certain bankruptcy events, subject to various exceptions and applicable notice, cure and grace periods.

As of

December 31, 2018,

$112.7

million of the Platanares OPIC Loan was outstanding.

Debt service reserve

As required under the terms of the Platanares Loan, Platanares maintains an account which

may

be funded by cash or backed by letters of credit in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the Platanares Loan in the following

six

months (or

nine

months in case of overdue payments by the offtaker up to a certain agreed threshold). This restricted cash account is classified as current in the consolidated balance sheets. As of

December 31, 2018,

the balance of the account was

$13.4

million and

letter of credit was required to be issued.

Well drilling reserve

As required under the terms of the Finance Agreement, Platanares is required to maintain an account which

may

be funded by cash or backed by letters of credit to reserve funds for well costs, based on certain determinations. As of

December 31, 2018,

the balance of the account was

million and

letter of credit was required to be issued.

OFC Senior Secured Notes

February 2004,

our subsidiary OFC issued

$190.0

million of Senior Secured Notes (“OFC Senior Secured Notes”) for the purpose of refinancing the acquisition cost of the Brady, Ormesa and Steamboat

1A,

and

power plants, and financing the acquisition cost of

50%

of the Mammoth complex. Principal and interest on the OFC Senior Secured Notes, which would have matured on

December 30, 2020,

were payable semi-annually. The OFC Senior Secured Notes were collateralized by substantially all of the assets of OFC and those of its wholly owned subsidiaries and fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OFC. In

September 2017,

the Company fully prepaid the outstanding amount of

$14.3

million of OFC Senior Secured Notes, plus an additional make-whole premium of

$1.3

million.

OrCal Senior Secured Notes

December 2005,

OrCal, the Company’s wholly owned subsidiary, issued

$165.0

million,

6.21%

Senior Secured Notes (“OrCal Senior Secured Notes”) and received net cash proceeds of approximately

$161.1

million, after deduction of issuance costs of approximately

$3.9

million, which have been included in deferred financing costs in the consolidated balance sheet. The OrCal Senior Secured Notes have been rated BBB- by Fitch Ratings. The OrCal Senior Secured Notes have a final maturity date of

December 30, 2020.

Principal and interest on the OrCal Senior Secured Notes are payable in semi-annual payments. The OrCal Senior Secured Notes are collateralized by substantially all of the assets of OrCal, and those of its subsidiaries and are fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OrCal. There are various restrictive covenants under the OrCal Senior Secured Notes, which include limitations on additional indebtedness of OrCal and its wholly owned subsidiaries. Failure to comply with these and other covenants will, subject to customary cure rights, constitute an event of default by OrCal. In addition, there are restrictions on the ability of OrCal to make distributions to its shareholders, which include a required historical and projected

-month debt service coverage ratio (“DSCR”) of

not

less than

1.25

(measured semi-annually as of

June

and

December

of each year). If OrCal fails to comply with the DSCR ratio it will be prohibited from making distributions to its shareholders. OrCal is only required to measure these covenants on a semi-annual basis and as of

December 31, 2018,

the last measurement date of the covenants, the actual historical

-month DSCR was

1.18

and the pro-forma

-month DSCR was

1.41.

There was

$18.7

million and

$32.1

million of OrCal Senior Secured Notes outstanding as of

December 31, 2018

and

December 31, 2017,

respectively.

OrCal

may

redeem the OrCal Senior Secured Notes, in whole or in part, at any time at a redemption price equal to the principal amount of the OrCal Senior Secured Notes to be redeemed plus accrued interest, and a “make-whole” premium. Upon certain events, as defined in the indenture governing the OrCal Senior Secured Notes, OrCal

may

be required to redeem a portion of the OrCal Senior Secured Notes at a redemption price of

100%

of the principal amount of the OrCal Senior Secured Notes being redeemed plus accrued interest.

Debt service reserve

As required under the terms of the OrCal Senior Secured Notes, OrCal maintains an account which

may

be funded by cash or backed by letters of credit (see below) in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the OrCal Senior Secured Notes in the following

six

months. This restricted cash account is classified as current in the consolidated balance sheets. As of

December 31, 2018

and

2017,

the balance of such account was

$0.0

million and

$1.9

million, respectively. In addition, as of each of

December 31, 2018

and

2017,

part of the required debt service reserve was backed by a letter of credit in the amount of

$4.6

million (see Note

OFC

Senior Secured Notes

September 2011,

OFC

the Company’s wholly owned subsidiary and OFC

2’s

wholly owned project subsidiaries (collectively, the “OFC

Issuers”) entered into a note purchase agreement (the “Note Purchase Agreement”) with OFC

Noteholder Trust, as purchaser, John Hancock Life Insurance Company (U.S.A.), as administrative agent, and the DOE, as guarantor, in connection with the offer and sale of up to

$350.0

million aggregate principal amount of OFC

Senior Secured Notes (“OFC

Senior Secured Notes”) due

December 31, 2034.

Subject to the fulfillment of customary and other specified conditions precedent, the OFC

Senior Secured Notes

may

be issued in up to

six

distinct series associated with the phased construction (Phase I and Phase II) of the Jersey Valley, McGinness Hills and Tuscarora geothermal power plants, which are owned by the OFC

Issuers. The OFC

Senior Secured Notes will mature and the principal amount of the OFC

Senior Secured Notes will be payable in equal quarterly installments and in any event

not

later than

December 31, 2034.

Each series of notes will bear interest at a rate calculated based on a spread over the Treasury yield curve that will be set at least

ten

business days prior to the issuance of such series of notes. Interest will be payable quarterly in arrears. The DOE will guarantee payment of

80%

of principal and interest on the OFC

Senior Secured Notes pursuant to Section

1705

of Title XVII of the Energy Policy Act of

2005,

as amended. The conditions precedent to the issuance of the OFC

Senior Secured Notes includes certain specified conditions required by the DOE in connection with its guarantee of the OFC

Senior Secured Notes.

October 31, 2011,

the OFC

Issuers completed the sale of

$151.7

million in aggregate principal amount of

4.687%

Series A Notes due

2032

(the “Series A Notes”). The net proceeds from the sale of the Series A Notes, after deducting transaction fees and expenses, were approximately

$141.1

million, and were used to finance a portion of the construction costs of Phase I of the McGinness Hills and Tuscarora power plants and to fund certain reserves. Principal and interest on the Series A Notes are payable quarterly in arrears on the last day of

March,

June,

September

and

December

of each year.

June 20, 2014,

Phase

of Tuscarora Facility achieved Project Completion under the Note Purchase Agreement. In accordance with the terms of the Note Purchase Agreement and following recalibration of the financing assumptions, the loan amount was adjusted through a principal prepayment of

$4.3

million.

August 29, 2014,

OFC

sold

$140.0

million of OFC

Senior Secured Notes (the “Series C Notes”) to finance the construction of the

second

phase of the McGinness Hills project. The Series C Notes are the last tranche under the Note Purchase Agreement with John Hancock Life Insurance Company and are guaranteed by the DOE’s Loan Programs Office in accordance with and subject to the DOE's Loan Guarantee Program under Section

1705

of Title XVII of the Energy Policy Act of

2005.

The Series C Notes, which mature in

December 2032,

carry a

4.61%

coupon with principal to be repaid on a quarterly basis.

In connection with the anticipated sale of the Series C Notes, on

August 13, 2014,

the Company entered into an on-the-run interest rate lock agreement with a financial institution with a termination date of

August 15, 2014.

This on-the-run interest rate lock agreement had a notional amount of

$140.0

million and was designated as a cash flow hedge. The objective of this cash flow hedge was to eliminate the variability in the changes in the

-year U.S. Treasury rate as that is

one

of the components in the annual interest rate of the OFC

Senior Secured Notes that was forecasted to be fixed on

August 15, 2014.

The Company hedged the variability in total proceeds attributable to changes in the

-year U.S. Treasury rate for the forecasted sale of Series C Notes. On

August 18, 2014,

the settlement date, the Company paid

$1.5

million to the counterparty of the on-the-run interest rate lock agreement.

The Company concluded that the cash flow hedge was fully effective with

ineffective portion and

amounts excluded from the effectiveness testing, thus, in

2014,

the total loss from the cash flow hedge was fully recognized in “Loss in respect of derivatives instruments designated for cash flow hedge” under other comprehensive income of

$0.9

million noted above, which was net of related taxes of

$0.6

million. The cash flow hedge loss recorded is amortized over the life of the OFC

Senior Secured Notes using the effective interest method. In

2016

and

2015,

the Company reclassified

$0.1

million, each year, of the loss from “Accumulated other comprehensive income (loss)” into interest expense.

The OFC

Senior Secured Notes are collateralized by substantially all of the assets of OFC

and those of its wholly owned subsidiaries and are fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OFC

There are various restrictive covenants under the OFC

Senior Secured Notes, which include limitations on additional indebtedness of OFC

and its wholly owned subsidiaries. Failure to comply with these and other covenants will, subject to customary cure rights, constitute an event of default by OFC

In addition, there are restrictions on the ability of OFC

to make distributions to its shareholders.

Among other things, the distribution restrictions include a historical debt service coverage ratio requirement of at least

1.2

(on a blended basis for all OFC

power plants), measured, at the time of any proposed distribution, over each of the

two six

-months periods comprised of distinct consecutive fiscal quarters immediately preceding the proposed distribution, and a projected future DSCR requirement of at least

1.5

(on a blended basis for all OFC

power plants), measured, at the time of any proposed distribution, over each of the

two six

-months periods comprised of distinct consecutive fiscal quarters immediately following such proposed distribution. As of

December 31, 2018,

our historical DSCR was

2.55

and

2.21,

respectively for each of the

two six

-month periods, and our projected future DSCR was

2.09

and

2.18,

respectively for each of the

two six

-month periods.

There were

$217.8

million and

$232.5

million of OFC

Senior Secured Notes outstanding as of

December 31, 2018

and

December 31, 2017,

respectively.

The Company provided a guaranty in connection with the issuance of the Series A Notes and Series C Notes. The guaranty

may

be drawn in the event of, among other things, the failure of any facility financed by the relevant series of OFC

Senior Secured Notes to reach completion and meet certain operational performance levels (the “non-performance trigger”) which gives rise to a prepayment obligation on the OFC

Senior Secured Notes. The guarantee

may

also be drawn if there is a payment default on the OFC

Senior Secured Notes or upon the occurrence of certain fundamental defaults that result in the acceleration of the OFC

Senior Secured Notes, in each case, prior to the date that the relevant facility(ies) financed by such OFC

Senior Secured Notes reaches completion and meets the applicable operational performance levels. The Company’s liability under the guaranty with respect to the non-performance trigger is limited to an amount equal to the prepayment amount on the OFC

Senior Secured Notes necessary to bring the OFC

Issuers into compliance with certain coverage ratios. The Company’s liability under the guarantee with respect to the other trigger event described above is

not

so limited.

Debt service reserve; other restricted funds

Under the terms of the OFC

Senior Secured Notes, OFC

is required to maintain a debt service reserve and certain other reserves, as follows:

(i)

A debt service reserve account which

may

be funded by cash or backed by letters of credit (see below) in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the OFC

Senior Secured Notes in the following

six

months. This restricted cash account is classified as current in the consolidated balance sheet. As of

December 31, 2018,

part of the required debt service reserve was backed by a letter of credit in the amount of

$20.0

million (see Note

(ii)

A performance level reserve account, intended to provide additional security for the OFC

Senior Secured Notes, which

may

be funded by cash or backed by letters of credit. This reserve builds up over time and reduces gradually each time the project achieves certain milestones. Upon issuance of the Series A Notes, this reserve was funded in the amount of

$28.0

million. As of

December 31, 2018,

the balance of such account was

zero

million, and

letter of credit was required to be issued.

(iii)

Under the terms of the OFC

Senior Secured Notes, OFC

is also required to maintain a well field drilling and maintenance reserve that builds up over time and is dedicated to costs and expenses associated with drilling and maintenance of the project's well field, which

may

be funded by cash or backed by letters of credit.

(iv)

A performance level reserve account for McGinness Hills Phase II, intended to provide additional security for the OFC

Senior Secured Notes, which

may

be funded by cash or backed by letters of credit. As of

December 31, 2018,

there was

requirement for an additional security to be issued as the project was completed.

Don A. Campbell Senior Secured Notes — Non-Recourse

November 29, 2016,

ORNI

LLC (“ORNI

47”

), the Company’s subsidiary, entered into a note purchase agreement (the “ORNI

Note Purchase Agreement”) with MUFG Union Bank, N.A., as collateral agent, Munich Reinsurance America, Inc. and Munich American Reassurance Company (the “Purchasers”) pursuant to which ORNI

issued and sold to the Purchasers

$92.5

million aggregate principal amount of its

4.03%

Senior Secured Notes due

September 27, 2033 (

the “DAC

Senior Secured Notes”) in a private placement exempt from the registration requirements of the Securities Act of

1933,

as amended. ORNI

is the owner of the

first

phase of the Don A. Campbell geothermal power plant (“DAC

1”

), and part of the ORPD LLC (“ORPD”) portfolio.

The net proceeds from the sale of the DAC

Senior Secured Notes, after deducting certain transaction expenses and the funding of a debt service reserve account, were approximately

$87.1

million and ORNI

used the proceeds from the sale of the Notes to refinance the development and construction costs of the DAC

geothermal power plant, which were originally financed using equity.

ORNI

began paying a scheduled amount of principal of the DAC

Senior Secured Notes on

December 27, 2016

and now makes principal payments quarterly, on the

27th

day of each

March,

June,

September

and

December,

until the DAC

Senior Secured Notes mature.

The DAC

Senior Secured Notes constitute senior secured obligations of ORNI

and are secured by all of the assets of ORNI

47.

Under the ORNI

Note Purchase Agreement, ORNI

may

prepay at any time all, or from time to time any part of, the DAC

Senior Secured Notes in an amount equal to at least

million or such lesser amount as

may

remain outstanding under the DAC

Senior Secured Notes at

100%

of the principal amount to be prepaid plus the applicable make-whole amount determined for the prepayment date with respect to such principal amount. Upon the occurrence of a Change of Control (as defined in the ORNI

Note Purchase Agreement), ORNI

must make an offer to each holder of DAC

Senior Secured Notes to repurchase all of the holder’s notes at

101%

of the aggregate principal amount of such notes to be repurchased plus accrued and unpaid interest, if any, on such notes to, but

not

including, the date of repurchase. Each holder of DAC

Senior Secured Notes

may

accept such offer in whole or in part. In certain events, including certain asset sales outside the ordinary course of business, ORNI

must make mandatory prepayments of the DAC

Senior Secured Notes at

100%

of the principal amount to be prepaid. The ORNI

Note Purchase Agreement requires ORNI

to comply with certain covenants, including, among others, restrictions on the incurrence of indebtedness or liens, amendment or modification of material project documents, the ability of ORNI

to merge or consolidate with another entity. The ORNI

Note Purchase Agreement also contains customary events of default. In addition, there are restrictions on the ability of ORNI

to make distributions to its shareholders, which include a required historical and projected DSCR of

not

less than

1.20

for the

four

fiscal quarterly periods. As of

December 31, 2018,

the historical and projected DSCR were

1.35

and

1.69,

respectively.

As of

December 31, 2018,

$83.3

million is outstanding under the DAC

Senior Secured Notes.

USG loans

April 24, 2018,

the Company completed the acquisition of USG. As part of the acquisition we assumed the following non-recourse loans:

Prudential Capital Group – Idaho non-recourse

May 2016,

USG’s wholly owned subsidiary (Idaho USG Holdings LLC) entered into a loan agreement with the Prudential Capital Group to finance its development activities. The original principal totaled

$20.0

million and included the option to issue additional debt up to

$50.0

million within the following

two

years. The

$20.0

million loan amount bears interest at a fixed interest rate of

5.8%

per annum. The principal and interest payments are due semi-annually and the principal is partially repaid during the

first

seven

-year term and the remaining balance of

$16.0

million is due in full at this

seven

-year term. The loan is secured by the Company’s ownership interests in the Neal Hot Springs project and the Raft River project projects. As of

December 31, 2018,

$18.9

million of the Prudential Capital loan is outstanding.

U.S. Department of Energy – non-recourse

August 31, 2011,

USG’s wholly owned subsidiary, USG Oregon LLC (“USG Oregon”), completed the

first

funding drawdown associated with the U.S. Department of Energy (“DOE”)

$96.8

million loan guarantee (“Loan Guarantee”) to construct its power plant at Neal Hot Springs project in Eastern Oregon. All loan advances covered by the Loan Guarantee have been made under the Future Advance Promissory Note dated

February 23, 2011.

In connection with the Loan Guarantee, the DOE has been granted a security interest in all of the equity interests of USG Oregon, as well as in the assets of USG Oregon, including a mortgage on real property interests relating to the Neal Hot Springs site.

additional advances are allowed under the terms of the loan. A total of

draws were taken and each individual draw or tranche is considered to be a separate loan. The loan principal is scheduled to be paid over

21.5

years from the

first

scheduled payment date with semi-annual installments including interest calculated at an aggregate fixed interest rate of

2.6%.

The principal payment amounts are calculated on a straight-line basis according to the life of the loans and the original loan principal amounts. As of

December 31, 2018,

$51.4

million of the DOE loan is outstanding.

Prudential Capital Group – Nevada non-recourse

September 26, 2013,

USG’s wholly owned subsidiary (USG Nevada LLC) entered into a note purchase agreement with the Prudential Capital Group to finance the Phase I of San Emidio geothermal project located in northwest Nevada. The term of the note is approximately

years and bears interest at a fixed rate of

6.75%

per annum. Interest payments are due quarterly. Principal payments are due quarterly based upon minimum debt service coverage ratios established according to projected operating results made at the loan origination date and available cash balances. The loan agreement is secured by USG Nevada LLC’s right, title and interest in and to its real and personal property, including the San Emidio project and the equity interests in USG Nevada LLC. As of

December 31, 2018,

$27.8

million of the loan is outstanding.

Senior Unsecured Bonds

September 2016,

the Company concluded an auction tender and accepted subscriptions for

two

series of senior unsecured bonds comprised of approximately

$67

million aggregate principal amount of senior unsecured bonds (the “Series

Bonds”) and approximately

$137

million aggregate principal amount of senior unsecured bonds (the “Series

Bonds” and together with the Series

Bonds, the “Senior Unsecured Bonds”). The proceeds from the Series

Bonds and Series

Bonds were used on

September 29, 2016

to prepay the Company’s

$250

million aggregate principal amount of previously issued bonds that were payable on

August 1, 2017.

The Series

Bonds will mature in

September 2020

and bear interest at a fixed rate of

3.7%

per annum, payable semi-annually. The Series

Bonds will mature in

September 2022

and bear interest at a fixed rate of

4.45%

per annum, payable semi-annually. The Series

Bonds and Series

Bonds will be repaid at maturity in a single bullet payment, unless earlier prepaid by the Company pursuant to the terms and conditions of the trust instrument that governs such Senior Unsecured Bonds.

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

$100.0

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

$37.0

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 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-"(or equivalent), of any of Standard and Poor’s, Moody’s or Fitch (whenever in Israel or outside of Israel) (each a “Credit Rating Agency”), the interest rate applicable to the Migdal Loan will increase by

0.50%.

If the rating of the Company is further downgraded to a lower level by any Credit Rating Agency, 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 Loan exceed

regardless of the cumulative rating downgrade. A subsequent upgrade or reinstatement of a rating by any Credit Rating Agency 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.

Loan Agreements with DEG (the Olkaria III Complex

)

March 2009,

OrPower

the Company’s wholly owned subsidiary, entered into a project financing loan of

$105.0

million to refinance its investment in Phase I of the Olkaria III complex located in Kenya (the “DEG Loan”). The DEG Loan was provided by a group of European DFIs arranged by DEG. The DEG Loan was to mature on

December 15, 2018,

and payable in

equal semi-annual installments. Interest on the loan was variable based on

-month LIBOR plus

4.0%.

The Company fixed the interest rate on most of the loan at

6.90%.

September 2017,

the Company prepaid the outstanding amount of

$11.8

million of the DEG Loan, plus an additional prepayment fee of

$0.1

million.

October 20, 2016,

OrPower

entered into a new

$50

million subordinated loan agreement with DEG (the “DEG

Loan Agreement”) and on

December 21, 2016,

OrPower

completed a drawdown of the full loan amount of

$50

million, with a fixed interest rate of

6.28%

for the duration of the loan (the “DEG

Loan”). The DEG

Loan will be repaid in

equal semi-annual principal installments commencing

December 21, 2018,

with a final maturity date of

June 21, 2028.

Proceeds of the DEG

Loan were used by OrPower

to refinance Plant

of the Olkaria III Complex, which was originally financed using equity. The DEG

Loan is subordinated to the senior loan provided by OPIC for Plants

of the Olkaria III Complex. The DEG

Loan is guaranteed by the Company.

Under the DEG

Loan Agreement, OrPower

may

prepay at any time all, or from time to time any part of the DEG

Loan in an amount equal to at least

million or such lesser amount as

may

remain outstanding under the DEG

Loan at

100%

of the principal amount to be prepaid plus the applicable make-whole amount and certain prepayment premium amount determined for the prepayment date with respect to such principal amount. In certain events, OrPower

must make mandatory prepayments of the DEG

Loan at

100%

of the principal amount to be prepaid plus the applicable make-whole amount and certain prepayment premium amount determined for the prepayment date with respect to such principal amount. The DEG

Loan Agreement requires OrPower

to comply with certain covenants, including, among others, restrictions on the incurrence of indebtedness or liens. The DEG

Loan Agreement also contains customary events of default.

As of

December 31, 2018,

$47.5

million is outstanding under the DEG

Loan.

Revolving credit lines with commercial banks

As of

December 31, 2018,

the Company has credit agreements with

eight

commercial banks for an aggregate amount of

$468.0

million (including

$60.0

million from Union Bank, N.A. (“Union Bank”) and

$35.0

million from HSBC), as described below. Under the terms of these credit agreements, the Company, or its Israeli subsidiary, Ormat Systems Ltd. (“Ormat Systems), can request: (i) extensions of credit in the form of loans and/or the issuance of

one

or more letters of credit in the amount of up to

$233.0

million; and (ii) the issuance of

one

or more letters of credit in the amount of up to

$235.0

million. The credit agreements mature between end of

March 2019

and

September 2019.

Loans and draws under the credit agreements or under any letters of credit will bear interest at the respective bank’s cost of funds plus a margin.

As of

December 31, 2018,

$159.0

million in loans were outstanding, of which

$14.1

million are non-committed, and letters of credit with an aggregate stated amount of

$229.6

million were issued and outstanding under such credit agreements.

Credit Agreements

Credit agreement with Union Bank

February

2012,

Ormat Nevada Inc. (“Ormat Nevada”), the Company’s wholly owned subsidiary, entered into an amended and restated credit agreement with Union Bank. Under the credit agreement, the credit termination date is

June 30, 2019.

December 31,

2018,

the aggregate amount available under the credit agreement was

$60

million. The facility is limited to the issuance, extension, modification or amendment of letters of credit. Union Bank is currently the sole lender and issuing bank under the credit agreement, but is also designated as an administrative agent on behalf of banks that

may,

from time to time in the future, join the credit agreement as lenders. In connection with this transaction, the Company entered into a guarantee in favor of the administrative agent for the benefit of the banks, pursuant to which the Company agreed to guarantee Ormat Nevada’s obligations under the credit agreement. Ormat Nevada’s obligations under the credit agreement are otherwise unsecured.

There are various restrictive covenants under the credit agreement, which include a requirement to comply with the following financial ratios, which are measured quarterly: (i) a

-month debt to EBITDA ratio

not

to exceed

4.5;

(ii)

-month DSCR of

not

less than

1.35;

and (iii) distribution leverage ratio

not

to exceed

2.0.

As of

December 31, 2018: (

i) the actual

-month debt to EBITDA ratio was

2.91;

(ii) the

-month DSCR was

2.94;

and (iii) the distribution leverage ratio was

1.10.

In addition, there are restrictions on dividend distributions in the event of a payment default or noncompliance with such ratios, and subject to specified carve-outs and exceptions, a negative pledge on the assets of Ormat Nevada in favor of Union Bank.

As of

December 31, 2018,

letters of credit in the aggregate amount of

$51.5

million remain issued and outstanding under this credit agreement with Union Bank.

Credit agreement with HSBC

May

2013,

Ormat Nevada, entered into a credit agreement with HSBC Bank USA, N.A for

one

year with annual renewals. The current expiration date of the facility under this credit agreement is

August 31, 2019.

The aggregate amount available under the credit agreement was increased by

$10

million to

$35

million. Other than the

$10

million of this credit facility which

may

be drawn for our working capital needs, this credit line is limited to the issuance, extension, modification or amendment of letters of credit. HSBC is currently the sole lender and issuing bank under the credit agreement, but is also designated as an administrative agent on behalf of banks that

may,

from time to time in the future, join the credit agreement as parties thereto. In connection with this transaction, we entered into a guarantee in favor of the administrative agent for the benefit of the banks, pursuant to which we agreed to guarantee Ormat Nevada’s obligations under the credit agreement. Ormat Nevada’s obligations under the credit agreement are otherwise unsecured.

There are various restrictive covenants under the credit agreement, including a requirement to comply with the following financial ratios, which are measured quarterly: (i) a

-month debt to EBITDA ratio

not

to exceed

4.5;

(ii)

-month DSCR of

not

less than

1.35;

and (iii) distribution leverage ratio

not

to exceed

2.0.

As of

December 31, 2018: (

i) the actual

-month debt to EBITDA ratio was

2.91;

(ii) the

-month DSCR was

2.94;

and (iii) the distribution leverage ratio was

1.10.

As of

December 31, 2018,

letters of credit in the aggregate amount of

$30.0

million remain issued and outstanding under this credit agreement.

CHUBB Surety Bond

May 2017,

the Company entered into a surety bond agreement (the “Surety Agreement”) with Chubb Limited (“Chubb”) pursuant to which the Company

may

request that Chubb issue up to an aggregate

$200.0

million of surety bonds with respect to the contractual obligations of the Company and its subsidiaries in exchange for bank letters of credit or as otherwise

may

be required. There is

expiration date for the Surety Agreement, but it

may

be terminated by the Company at any time upon

twenty

days’ prior written notice to Chubb. Delivery of such termination notice will

not

affect any surety bonds issued and outstanding prior to the date on which such notice is delivered. As of

December 31, 2018,

Chubb issued a surety bond in the amount of

$141.1

million under the Surety Agreement.

Restrictive covenants

The Company’s obligations under the credit agreements, the loan agreements, and the trust instrument governing the bonds, described above, are unsecured, but are subject to a negative pledge in favor of the banks and the other lenders and certain other restrictive covenants. These include, among other things, a prohibition on: (i) creating any floating charge or any permanent pledge, charge or lien over our assets without obtaining the prior written approval of the lender; (ii) guaranteeing the liabilities of any

third

party without obtaining the prior written approval of the lender; and (iii) selling, assigning, transferring, conveying or disposing of all or substantially all of our assets, or a change of control in our ownership structure. Some of the credit agreements, the term loan agreements, as well as the trust instrument contain cross-default provisions with respect to other material indebtedness owed by us to any

third

party. In some cases, the Company has agreed to maintain certain financial ratios, which are measured quarterly, such as: (i) equity of at least

$600.0

million and in

event less than

25%

of total assets; (ii)

-month debt, net of cash, cash equivalents marketable securities and short-term bank deposits to Adjusted EBITDA ratio

not

to exceed

and (iii) dividend distribution

not

to exceed

35%

of net income for that year. As of

December 31, 2018: (

i) total equity was

$1,445.1

million and the actual equity to total assets ratio was

46.3%,

and (ii) the

-month debt, net of cash, cash equivalents marketable securities and short-term bank deposits to Adjusted EBITDA ratio was

3.21.

During the year ended

December 31, 2018,

the Company distributed interim dividends in an aggregate amount of

$26.8

million.

Future minimum payments

Future minimum payments under long-term obligations, excluding revolving credit lines with commercial banks, as of

December 31, 2018

are as follows:

	(Dollars in thousands)

Year ending December 31:
2019	$	68,180
2020		136,018
2021		64,039
2022		205,908
2023		84,101
Thereafter		570,751
Total	$	1,128,997