Note 4 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received upon selling an asset or paid upon transferring a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below: 

Level 1 — unadjusted observable inputs that reflect quoted prices for identical assets or liabilities in active markets; 

Level 2 — inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly; 

Level 3 — unobservable inputs.

The following table sets forth certain fair value information at March 31, 2024 and December 31, 2023 for financial assets and liabilities measured at fair value by level within the fair value hierarchy, as well as cost or amortized cost. As required by the fair value measurement guidance, assets and liabilities are classified in their entirety based on the lowest level of inputs that is significant to the fair value measurement.

				March 31, 2024
				Fair Value
	Carrying Value at March 31, 2024			Total			Level 1		Level 2			Level 3
	(Dollars in thousands)
Assets:
Current assets:
Cash equivalents (including restricted cash accounts)	$	55,316		$	55,316		$	55,316	$	—		$	—
Derivatives:
Interest rate swap (3)		1,502			1,502			—		1,502			—
Currency forward contracts (2)		593			593			—		593			—
Liabilities:
Current liabilities:
Derivatives:
Cross currency swap (1)		(4,323	)		(4,323	)		—		(4,323	)		—
Long term liabilities:
Cross currency swap (1)		(10,174	)		(10,174	)		—		(10,174	)		—
	$	42,914		$	42,914		$	55,316	$	(12,402	)	$	—

				December 31, 2023
				Fair Value
	Carrying Value at December 31, 2023			Total			Level 1		Level 2			Level 3
	(Dollars in thousands)
Assets
Current assets:
Cash equivalents (including restricted cash accounts)	$	53,877		$	53,877		$	53,877	$	—		$	—
Derivatives:
Currency forward contracts (2)		1,406			1,406			—		1,406			—
Liabilities:
Current liabilities:
Derivatives:
Cross currency swap (1)		(3,686	)		(3,686	)		—		(3,686	)		—
Long-term liabilities:
Cross currency swap (1)		(8,137	)		(8,137	)		—		(8,137	)		—
	$	43,461		$	43,461		$	53,877	$	(10,416	)	$	—

1. These amounts relate to cross currency swap contracts valued primarily based on the present value of the cross currency swap future settlement prices for U.S. Dollar (“USD”) and New Israeli Shekel (“NIS”) zero yield curves and the applicable exchange rate as of March 31, 2024 and December 31, 2023, as applicable. These amounts are included within “Accounts payable and accrued expenses” or “Other long-term liabilities”, as applicable, in the condensed consolidated balance sheets on March 31, 2024 and December 31, 2023. Cash collateral deposits in the amount of $10.4 million and $10.6 million as of March 31, 2024, and December 31, 2023, respectively, are presented under “Other receivables” in the condensed consolidated balance sheets.

2. These amounts relate to currency forward contracts valued primarily based on observable inputs, including forward and spot prices for currencies, net of contracted rates and then multiplied by notional amounts, and are included within “Receivables, other” or “Accounts payable and accrued expenses”, as applicable, in the condensed consolidated balance sheets on March 31, 2024 and December 31, 2023, with the corresponding gain or loss being recognized within “Derivatives and foreign currency transaction gains (losses)” in the condensed consolidated statements of operations and comprehensive income.

3. This amount relates to interest rate swap contracts valued primarily based on the present value of the interest rate swap future settlement prices based on USD zero yield curve as of March 31, 2024. This amount is included within “Accounts payable and accrued expenses” in the condensed consolidated balance sheets on March 31, 2024. There are no cash collateral deposits on March 31, 2024.

The following table presents the amounts of gain (loss) recognized in the consolidated statements of operations and comprehensive income on derivative instruments (in thousands):

		Amount of recognized gain (loss)
Derivative instruments	Location of recognized gain (loss)	Three Months Ended March 31,
		2024			2023
		(Dollars in thousands)
Derivatives not designated as hedging instruments
Currency forward contracts (1)	Derivative and foreign currency transaction gains (losses)	$	1,078		$	(1,656	)
Derivatives designated as cash flow hedging instruments
Cross currency swap (2)	Derivative and foreign currency transaction gains (losses)	$	(3,236	)	$	(6,792	)
Interest rate swap (2)	Interest expense, net	$	457		$	—

1. The foregoing currency forward transactions were not designated as hedge transactions and were marked to market with the corresponding gains or losses recognized within “Derivatives and foreign currency transaction gains (losses)” in the condensed consolidated statements of operations and comprehensive income.

2. The foregoing cross currency and interest rate swap transactions were designated as a cash flow hedge as further described above and under Note 1 to the condensed consolidated financial statements. The changes in the cross currency swap fair value are initially recorded in “Other comprehensive income (loss)” and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to “Derivatives and foreign currency transaction gains (losses)” to offset the remeasurement of the underlying hedged transaction which also impacts the same line item in the condensed consolidated statements of operations and comprehensive income. The changes in the interest rate swap fair value are initially recorded in “Other comprehensive income (loss)” and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to “Interest expenses, net” to offset the remeasurement of the underlying hedged transaction which also impacts the same line item in the condensed consolidated statements of operations and comprehensive income.

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the three months ended March 31, 2024 and 2023.

The following table presents the effect of derivative instruments designated as cash flow hedges on the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024			2023
	(Dollars in thousands)
Cash flow hedges:
Balance in Accumulated other comprehensive income (loss) beginning of period	$	(318	)	$	3,920
Gain or (loss) recognized in Other comprehensive income (loss):
Cross currency swap		(2,675	)		1,389
Interest rate swap		1,523			—
Amount reclassified from Other comprehensive income (loss) into earnings
Cross currency swap		3,236			(6,792	)
Interest rate swap		(457	)		—
Balance in Accumulated other comprehensive income (loss) end of period	$	1,309		$	(1,483	)

The estimated net amount of existing gain (loss) that is reported in "Accumulated other comprehensive income (loss)" as of March 31, 2024 that is expected to be reclassified into earnings within the next 12 months is immaterial. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flow is from the transaction commencement date through June 2031.

The fair value of the Company’s long-term debt approximates its carrying amount, except for the following: 

	Fair Value				Carrying Amount (*)
	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
	(Dollars in millions)				(Dollars in millions)
Hapoalim 2024 Loan	$	75.9	$	—	$	75.0	$	—
HSBC Bank 2024 Loan		126.5		—		125.0		—
Mammoth Senior Secured Notes		137.4		—		135.1		—
Mizrahi Loan		61.2		61.4		60.9		60.9
Mizrahi Loan 2023		51.8		52.0		50.0		50.0
Convertible Senior Notes		417.4		444.6		431.3		431.3
HSBC Loan		30.1		33.8		32.1		35.7
Hapoalim Loan		76.0		75.0		80.4		80.4
Hapoalim Loan 2023		93.5		99.7		90.0		95.0
Discount Loan		63.2		69.9		68.8		75.0
Finance liability - Dixie Valley		224.2		207.2		223.3		225.8
Olkaria III Loan - DFC		111.6		116.4		116.2		120.7
Olkaria III plant 4 Loan - DEG 2		22.0		21.6		22.5		22.5
Olkaria III plant 1 Loan - DEG 3	19.3		19.0		19.7		19.7
Platanares Loan - DFC		68.8		71.3		69.6		71.7
OFC 2 LLC ("OFC 2")		128.9		134.2		142.5		142.5
Don A. Campbell 1 ("DAC 1")		50.5		52.3		55.8		57.4
USG Prudential - NV		22.0		22.3		23.8		23.9
USG Prudential - ID Refinancing		51.2		54.1		57.2		58.9
USG DOE		28.2		30.0		28.7		30.2
Senior Unsecured Bonds		198.5		202.8		217.3		220.6
Senior Unsecured Loan		139.7		150.4		149.6		158.0
Other long-term debt		6.7		6.8		6.8		7.7

^(*) Carrying amount value excludes the related deferred financing costs.

The fair value of the long-term debt is determined by a valuation model, which is based on a conventional discounted cash flow methodology and utilizes assumptions of current borrowing rates, except for the fair value of the Convertible Senior Notes for which the fair value was estimated based on a quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. A hypothetical change in the quoted bid price will result in a corresponding change in the estimated fair value of the Notes. The carrying value of the deposits, the short term revolving credit lines with banks and the commercial paper approximate their fair value.

Recently, interest rates for both short-term and long-term debt have increased sharply which may have a direct impact on the fair value of the Company's long-term debt presented above, should this trend continues.

The following table presents the fair value of financial instruments as of March 31, 2024:

	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
Hapoalim 2024 Loan	$	—	$	—	$	75.9	$	75.9
HSBC Bank 2024 Loan		—		—		126.5		126.5
Mammoth Senior Secured Notes		—		—		137.4		137.4
Mizrahi Loan		—		—		61.2		61.2
Mizrahi Loan 2023		—		—		51.8		51.8
Convertible Senior Notes		—		417.4		—		417.4
HSBC Loan		—		—		30.1		30.1
Hapoalim Loan		—		—		76.0		76.0
Hapoalim Loan 2023		—		—		93.5		93.5
Discount Loan		—		—		63.2		63.2
Finance liability - Dixie Valley		—		—		224.2		224.2
Olkaria III Loan - DFC		—		—		111.6		111.6
Olkaria III plant 4 Loan - DEG 2		—		—		22.0		22.0
Olkaria III plant 1 Loan - DEG 3		—		—		19.3		19.3
Platanares Loan - DFC		—		—		68.8		68.8
OFC 2 Senior Secured Note		—		—		128.9		128.9
DAC 1 Senior Secured Note		—		—		50.5		50.5
USG Prudential - N		—		—		22.0		22.0
USG Prudential - I		—		—		51.2		51.2
USG DO		—		—		28.2		28.2
Senior Unsecured Bond		—		—		198.5		198.5
Senior Unsecured Loa		—		—		139.7		139.7
Other long-term deb		—		—		6.7		6.7
Deposit	20.0			—		—		20.0

The following table presents the fair value of financial instruments as of December 31, 2023:

	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
Mizrahi Loan	$	—	$	—	$	61.4	$	61.4
Mizrahi Loan 2023		—		—		52.0		52.0
Convertible Senior Notes		—		444.6		—		444.6
HSBC Loan		—		—		33.8		33.8
Hapoalim Loan		—		—		75.0		75.0
Hapoalim Loan 2023		—		—		99.7		99.7
Discount Loan		—		—		69.9		69.9
Financing Liability - Dixie Valley		—		—		207.2		207.2
Olkaria III Loan - DFC		—		—		116.4		116.4
Olkaria IV - DEG 2		—		—		21.6		21.6
Olkaria IV - DEG 3		—		—		19.0		19.0
Platanares Loan - DFC		—		—		71.3		71.3
OFC 2 Senior Secured Notes		—		—		134.2		134.2
DAC 1 Senior Secured Notes		—		—		52.3		52.3
USG Prudential - NV		—		—		22.3		22.3
USG Prudential - ID		—		—		54.1		54.1
USG DOE		—		—		30.0		30.0
Senior Unsecured Bonds		—		—		202.8		202.8
Senior Unsecured Loan		—		—		150.4		150.4
Other long-term debt		—		—		6.8		6.8
Deposits	20.9			—		—		20.9