Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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 condensed consolidated financial position as of September 30, 2023, the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2023 and 2022 and the condensed consolidated statements of cash flows and the condensed consolidated statements of equity for the nine months ended September 30, 2023 and 2022.

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 periods presented are not necessarily indicative of the results to be expected for the year.

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 10-K for the year ended December 31, 2022. The condensed consolidated balance sheet data as of December 31, 2022 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2022 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.

Bank Loan [Policy Text Block]

Hapoalim Bank Loan

On February 27, 2023, the Company entered into a definitive loan agreement (the "BHI Loan Agreement") with Bank Hapoalim B.M. (“Hapoalim Bank”). The BHI Loan Agreement provides for a loan by Hapoalim Bank to the Company in an aggregate principal amount of $100 million (the “BHI Loan” or “Hapoalim Loan 2023”). The outstanding principal amount of the BHI Loan will be repaid in 20 semi-annual payments of $5.0 million each, commencing on August 27, 2023. The duration of the BHI Loan is 10 years. The BHI Loan bears interest at a fixed rate of 6.45% per annum, payable semi-annually. The BHI Loan Agreement includes various affirmative and negative covenants, including a requirement that the Company maintain (i) a financial debt to adjusted EBITDA ratio not to exceed 6.0, (ii) a minimum equity capital amount of not less than $750 million, and (iii) an equity capital to total assets ratio of not less than 25%. The BHI Loan Agreement includes other customary affirmative and negative covenants, including payment and covenant events of default. As of September 30, 2023, the covenants have been met.

Stockholders' Equity, Policy [Policy Text Block]

Equity Offering

On March 14, 2023, the Company entered into an underwriting agreement with Goldman Sachs & Co. LLC, as the sole underwriter (the “Underwriter”), in connection with a public offering, pursuant to which the Company agreed to issue and sell 3,600,000 shares of common stock, par value $0.001 per share, and the Underwriter agreed to purchase these shares at a price of $82.60 per share. In addition, the Company granted the Underwriter a 30-day option to purchase up to an additional 540,000 shares of common stock at the same price per share, which was fully exercised by the Underwriters on April 3, 2023. The total net proceeds from the offering, including the option, were approximately $341.7 million, after deducting offering expenses.

Debt, Policy [Policy Text Block]

Loans Repayments

On April 4, 2023, the Company voluntarily fully prepaid the Plumstriker Loan in the amount of $11.1 million. On September 29, 2023, the Company voluntarily fully prepaid the Amatitlan Loan in the amount of $14.0 million.

Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block]

ORPD Transaction

On July 11, 2023, ORPD LLC ("ORPD"), a subsidiary of the Company in which Northleaf Geothermal Holdings, LLC ("Northleaf") and the Company hold 36.75% and 63.25% equity interest, respectively, sold OREG 1, OREG 2, OREG 3 ("OREGs") and the Don A. Campbell complex to Ormat Nevada Inc. ("ONI"), a fully owned subsidiary of the Company. The proceeds from the sale were partially used by ORPD to make a distribution to its shareholders in which Northleaf's share was $30.0 million. Following this purchase transaction with the noncontrolling interest, the Company fully owns the OREGs and the Don A. Campbell power plant complex and ORPD remains the holder of the Puna geothermal power plant. The Company accounted for this transaction as an equity transaction. 

Kenya Finance Act [Policy Text Block]

Kenya Finance Act 2023

As described under Note 10 to the condensed consolidated financial statements, on June 26, 2023, the President of Kenya signed into law the 2023 Finance Act ("Finance Act"). On June 30, 2023, the Kenyan High Court issued a Temporary Conservatory Order against the Finance Act which barred the implementation of the Finance Act until a decision was made by the High Court. On July 28, 2023, the Kenya appeals court lifted the Temporary Conservatory Order on the Finance Act which resulted in the Finance Act being implemented as signed. The Company applied the applicable changes in the Finance Act in its third quarter condensed consolidated financial statements. The impact resulting from the reduction of the statutory corporate income tax rate for Branches from 37.5% to 30% was recorded under Income tax (provision) benefit in the amount of approximately $9.4 million.

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

Write-offs of Energy Storage project assets and unsuccessful exploration activities

During the three and nine months ended September 30, 2023, the Company wrote off accumulated costs of $2.3 million, and $2.3 million, respectively. During the three and nine months ended September 30, 2022, the Company wrote off accumulated costs of $0.8 million, and $2.8 million, respectively. These costs are related to energy storage projects and unsuccessful exploration activities that the Company decided to no longer pursue.

Cash and Cash Equivalents, Policy [Policy Text Block]

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 as reported on the balance sheet to the total of the same amounts shown on the statement of cash flows:

	September 30,		December 31,
	2023		2022
	(Dollars in thousands)
Cash and cash equivalents	$	78,079	$	95,872
Restricted cash and cash equivalents		108,188		130,804
Total Cash and cash equivalents and restricted cash and cash equivalents	$	186,267	$	226,676

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

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash investments and accounts receivable.

The Company places its cash investments with high credit quality financial institutions located in the United States (“U.S.”) and in foreign countries. At September 30, 2023 and December 31, 2022, the Company had deposits totaling $20.4 million and $10.0 million, respectively, in ten U.S. financial institutions that were federally insured up to $250,000 per account. At September 30, 2023 and December 31, 2022, the Company’s deposits in foreign countries amounted to approximately $82.5 million and $64.3 million, respectively.

At September 30, 2023 and December 31, 2022, accounts receivable related to operations in foreign countries amounted to approximately $118.0 million and $78.9 million, respectively. At September 30, 2023 and December 31, 2022, accounts receivable from the Company’s primary customers, which each accounted for revenues in excess of 10% of total consolidated revenues for the related period, amounted to approximately 60% and 60% of the Company’s trade receivables, respectively. The aggregate amount of notes receivable exceeding 10% of total receivables as of September 30, 2023 and December 31, 2022 is $106.5 million and $89.8 million, respectively.

The Company's revenues from its primary customers as a percentage of total revenues are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Southern California Public Power Authority (“SCPPA”)		18.7	%		18.7	%		22.0	%		21.4	%
Sierra Pacific Power Company and Nevada Power Company		14.0			14.0			16.5			17.1
Kenya Power and Lighting Co. Ltd. ("KPLC")		13.1			15.2			14.0			14.9

The Company has historically been able to collect on substantially all of its receivable balances. As of September 30, 2023, the amount overdue from KPLC in Kenya was $50.6 million of which $0.5 million was paid in October 2023. The Company believes it will be able to collect all past due amounts in Kenya. This belief is supported by the fact that in addition to KPLC's obligations under its power purchase agreement, the Company holds a support letter from the Government of Kenya that covers certain cases of KPLC non-payment (such as were caused by government actions and/or political events).

In Honduras, as of September 30, 2023, the total amount overdue from Empresa Nacional de Energía Eléctrica ("ENEE") was $10.0 million of which $0.7 million was paid in October 2023. In addition, due to the financial situation in Honduras, the Company may experience further delays in collection. The Company believes it will be able to collect all past due amounts in Honduras.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Allowance for credit losses

The Company performs an analysis of potential credit losses related to its financial instruments that are within the scope of ASU 2018-19, Codification Improvements to Topic 325, Financial Instruments – Credit Losses, primarily cash and cash equivalents, restricted cash and cash equivalents, investment in marketable securities, receivables (excluding those accounted under lease accounting) and costs and estimated earnings in excess of billings on uncompleted contracts, based on classes of financing receivables which share the same or similar risk characteristics such as customer type and geographic location, among others. The Company estimates the expected credit losses for each class of financing receivables by applying the related corporate default rate which corresponds to the credit rating of the specific customer or class of financing receivables. For trade receivables, the Company applied this methodology using aging schedules reflecting how long the receivables have been outstanding. The Company has also considered the existence of credit enhancement arrangements that may mitigate the credit risk of its financial receivables in estimating the applicable corporate default rate.

The following table describes the changes in the allowance for expected credit losses for the three and nine months ended September 30, 2023 and 2022 (all related to trade receivables):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(Dollars in thousands)				(Dollars in thousands)
Beginning balance of the allowance for expected credit losses	$	90	$	90	$	90	$	90
Change in the provision for expected credit losses for the period		—		—		—		—
Ending balance of the allowance for expected credit losses	$	90	$	90	$	90	$	90

Revenue [Policy Text Block]

Revenues from contracts with customers

Contract assets related to our Product segment reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities related to the Company's Product segment reflect payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in the contracts. Total contract assets and contract liabilities as of September 30, 2023 and December 31, 2022 are as follows:

	September 30,			December 31,
	2023			2022
	(Dollars in thousands)
Contract assets (*)	$	25,766		$	16,405
Contract liabilities (*)	$	(10,619	)	$	(8,785	)

(*) 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 condensed consolidated balance sheets. The contract liabilities balance at the beginning of the year was not yet fully recognized as product revenues during the nine months ended September 30, 2023 as a result of performance obligations having not been fully satisfied yet.

On September 30, 2023, the Company had approximately $192.1 million of remaining performance obligations not yet satisfied or partly satisfied related to our Product segment. The Company expects to recognize approximately 100% of this amount as Product revenues during the next 24 months.

Disaggregated revenues from contracts with customers for the three and nine months ended September 30, 2023 and 2022 are disclosed under Note 8 - Business Segments, to the condensed consolidated financial statements.

Lessor, Leases [Policy Text Block]

Leases in which the Company is a lessor

The table below presents lease income recognized as a lessor:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(Dollars in thousands)				(Dollars in thousands)
Lease income relating to lease payments from operating leases	$	129,903	$	127,748	$	392,665	$	394,901

Marketable Securities, Policy [Policy Text Block]

Marketable securities

The Company’s investments in marketable securities consisted of debt securities with maturity of up to one year and a high credit rating. The investments in marketable securities were classified as available-for-sale ("AFS") and thus measured at fair value based on quoted market prices. Unrealized gains and losses from AFS debt securities were excluded from earnings and reported net of the related tax effect in "Accumulated other comprehensive income (loss)". Realized gains and losses from sale of marketable securities, as determined on a specific identification basis, as well as interest income earned, were included in earnings. The Company considers available evidence in evaluating potential impairments of its investments, including credit market conditions, credit ratings of the security as well as the extent to which fair value is less than amortized cost. The Company estimates the lifetime expected credit losses for all AFS debt securities in an unrealized loss position under its allowance for credit losses model. The Company assesses the security’s credit indicators, including credit ratings when estimating a security’s probability of default. If the assessment indicates that an expected credit loss exists, the Company determines the portion of the unrealized loss attributable to credit deterioration and records an allowance for the expected credit loss in earnings. Unrealized gains and losses attributable to non-credit factors were recorded in "Accumulated other comprehensive income (loss)", net of tax. Marketable debt securities with original maturities of three months or less that are readily convertible into a known amount of cash are presented under "Cash and cash equivalents" in the condensed consolidated balance sheets.

Derivatives, Policy [Policy Text Block]

Derivative instruments

Derivative instruments (including certain derivative instruments embedded in other contracts) are measured at their fair value and recorded as either assets or liabilities unless exempted from derivative treatment as a normal purchase and sale. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in "Other comprehensive income (loss)" and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to earnings to offset the remeasurement of the underlying hedge transaction which also impacts the same line item in the consolidated statements of operations and comprehensive income.

The Company maintains a risk management strategy that may incorporate the use of swap contracts, put options, forward exchange contracts, interest rate swaps, and cross-currency swaps to minimize significant fluctuation in cash flows and/or earnings that are caused by oil and natural gas prices, exchange rate or interest rate volatility.

Transferable Production and Investment Tax Credits [Policy Text Block]

Transferable production and investment tax credits

The Inflation Reduction Act (“IRA”) was signed into law in August 2022 and introduces a transferability provision for certain tax credits related to the clean production of energy. Under this provision, a reporting entity can monetize such credits through sale to a third party. The option for transferability of credits applies to taxable years beginning after December 31, 2022. Several of the Company’s projects that are not currently part of a tax monetization transaction generate eligible tax credits, such as investment tax credits (“ITCs”) and production tax credits (“PTCs”), that are eligible to be transferred to a third-party under the provisions of the IRA. The Company accounts for ITCs under ASC 740 through the “Income tax (provision) benefit” line in the consolidated statement of operations and comprehensive income. PTC’s are accounted similarly to refundable or direct-pay credits outside of the tax line with income recognized in the “Income attributable to sale of tax benefits” line in the consolidated statement of operations and comprehensive income. Income recognized related to such transferable PTC’s during the three and nine months ended September 30, 2023 was $2.4 million and $6.9 million, net of discount, respectively. Tax benefits recognized related to such transferable ITC’s during the three and nine months ended September 30, 2023 was $6.6 million and $17.2 million, net of discount, respectively.