Welcome to the Ormat Technologies Fourth Quarter and Year-End 2009 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be question-and-answer session. (Operator instructions) Thank you. I would now like to turn the conference over to Marybeth Csaby with KCSA Strategic Communications. You may begin your conference.

Thank you and thank you everyone. Hosting the call today are Dita Bronicki, Chief Executive Officer; Yoram Bronicki, President and Chief Operating Officer; Joseph Tenne, Chief Financial Officer; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations. Before beginning, we would like to remind you that information provided during this call may contain forward looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2009. In addition, during this call statements that may be made that include financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission such as EBITDA and adjusted EBITDA. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management of Ormat Technologies believes that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from referring to this non-GAAP financial measure in assessing Ormat Technologies' liquidity, and when planning and forecasting future periods. This non-GAAP financial measure may also facilitate management's internal comparison to the company's historical liquidity. Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanies this call and can be accessed on company's website at www.Ormat.com under the Events Calendar link found in the Investor Relations tab. With that said, I would like to turn the call over to Dita.

Thank you, Marybeth and good morning to everyone. Thank you for joining us today for the presentation of the summary of 2009 and the outlook for the near future. We are pleased to report strong results for 2009 resulted in an impressive increase in revenues and a 58.4% increase in net income. As we announced this morning in our earning release, we have allocated up to two hours to the call today to allow enough time for discussion. We are also scheduling an Analyst/ Investor's Day in New York on April 9. A "save the date" will be forthcoming later this week. Yoram will start with review of our operations. Joseph will review the financials and elaborate on the 2008 restatement. And as usual, following my closing remarks, we will give time for Q&A. Let me now turn the call to Yoram.

I would like to start with the operational highlights on slide four. As you can see in the chart, in the past four years, we have increased our total generation by approximately 40% with 2009's generation being 14% higher than 2008 and totaling 3.4 million megawatt hours. The steady growth in total generation each year is a result of completing new projects and enhancements to existing plants. In the past year we have benefited from the first full year of generation from the expansion of the Olkaria plant. Numerous enhancements to existing plants and added to our fleet 20 megawatt of REG units. This January the previous owner of the 8 megawatt GDL power plant in New Zealand exercised the call option and we sold our interest. As a result, we will record a pretax gain of approximately $6 million in this first quarter of 2010. Slide 5 reviews the status of the North Brawley and Puna power plants. As we have recently disclosed, the North Brawley power plant has been placed in service in mid January. The decision was preceded by a series of experiments that proved that the plant can operate long-term at commercial loads. Over the past months, we have seen considerable improvement in the quality of the produced geothermal fluid especially from the longer running wells and we were successful in devising means to prevent the produced solids from contaminating the rest of the system. We have installed temporary filtration on all of our injection wells and identified qualified vendors for our filtration needs. We were also successful in developing efficient ways to clean our injection wells as they plug up over time. The results of these efforts allowed us to inject treated brine at as much as 40% of the nominal flow, with the ability…

Thank you, Yoram and good morning everyone. Beginning Slide 12 for the year total revenues were $415.2 million a 20.4% increase from revenues of $344.8 million in the previous year. In our product segment on slide 13, total revenues for the year were $159.4 million, a 72.2% increase over total revenues of $92.6 million in the previous year. Most of the increase in revenues was derived from three large EPC contracts for the construction of the Blue Mountain project in Nevada, the Centennial Binary Plant in New Zealand, and the Las Pailas project in Costa Rica Total cost of revenues attributable to our product segment for the year was $112.5 million compared to $72.8 million in 2008. On slide 14, in our Electricity Segment total revenues for the year were $255.9 million, over total revenues of $252.3 million in the previous year. The increase in revenues is attributable to an increase of 14.2% in our U.S. and international electricity generation. Despite this increase in generation, our electricity revenues increased by a modest 1.4% due to decline in the average revenues per megawatt hour from $86 to $76 mainly attributable to a decrease in the energy rates in the Puna plant and "Adder" payment expiration under the Heber 2 PPA. The increase in generation is primarily attributable to a commissioning of Olkaria III in Kenya, GDL in New Zealand, Galena 3 in Nevada and generation restoration following turbine replacement in Steamboat 2 and 3 also in Nevada. This was partially offset by a temporary decrease in the generating capacity of the Puna power plant. Total cost of revenues attributable to our electricity segment was $180.2 million compared to $170.1 million in the previous year, which represented a 5.9% increase. This reflects increased cost including depreciation, as a result of new and…

Thank you, Joseph. I will cover in my remarks the recent business development and update on our financing activity and capital requirement and will conclude with the revenue guidance of 2010. Let me start on slide 24, with two business developments that demonstrate our dedication to promote growth and to diversity in our generating portfolio. We continue to consider various opportunities in the solar energy market in addition to our activity in R&D in the solar field. Our roots in solar power as well as the potential synergies with our geothermal power plants encouraged us to explore opportunities in this field. The decline in cost of solar PV technologies and the attractive electricity prices that may be achieved in certain countries create an attractive opportunity, and in October last year, we entered as a developer to the solar PV market. We signed a joint venture with Sunday for 36 megawatt PV energy systems in Israel, where the approved feed-in-tariff is at an average of $0.36 per kilowatt hour. So, given our EPC and development expertise, we view this venture as a good first activity for us to undertake as we explore other opportunities and technologies in the solar market. In parallel with our solar activity, we continue to look to organic growth and acquisition opportunities in geothermal. The acquisition of the ownership interest in the Tuscarora project is an example for this. We have been acquiring development leases for a few years and have amassed a substantial portfolio from which we can explore and build plants, literally from the ground up. What made the Tuscarora project attractive is that it is a project that is already in an advanced stage of development. Looking at our financing activity, on slide 25, during the year we continued to secure our growth by…

(Operator instructions) Your first question comes from Lasan Johong of RBC Capital Market.

Thank you. Good morning, Dita.

Good morning.

A few questions actually. Over the last year and a half, there seems to have been a pretty big slowdown in new geothermal projects either being announced or and/or being funded. Are you seeing that fund change, are we getting back on track to kind of more of an accelerated development and new project requests from utilities?

Is your question specifically for Ormat or an industry question?

Well, obviously Ormat primarily but yes, industry as well.

Because I think that there is really many factors, and they are different. I would say that the biggest roadblock that we were facing is how slow the regulatory process has been and as - I think this is probably the first time that we actually give the numbers but with 22 prospects where we could do exploration, we were generally unable to leave the start line just because of the slowness in the getting the permit. And this, of course, flies in the opposite direction from both very intensive solicitation from the different IOUs in the west for additional power, all the incentive programs, whether the ITC cash grant 1703 to 1705. But there is no way to take - either use your own money or enjoy that - those incentives if you can't get the permits to do the exploration, that really starts the project and in some places as we described on East Brawley, we have done the exploration but because of the regulatory cycle, we can't get the permit to construct. And so, when you analyze Ormat, I would say that these are the factors that affected us are mostly external factors and not internal factors. And we are - I have to say that we remain optimistic since there is all this goodwill and everybody is interested in doing more renewal projects, we remain optimistic that there would be a way to open this bottleneck.

So if the regulatory bottleneck is kind of taken out of the equation, then is it fair to say that you are seeing more request for projects than you did a year ago, let's say?

I mean again we have and you have to recognize the difference between us and some of the other players method we prefer to operate is first we explore a site, conclude what the size and then we sign a PPA than do it the other way around because people don't always recognize how far how big is the gap between encouraging signs on the surface that the geothermal underneath and actually producing hot brine from it. And so for us we would like to bring our land position to a certain area and at that point sign the PPAs, and this is what you should expect from us.

I think that's conservative, I think that's a good way of doing it. On the projects that you currently have under construction, how much of the - I am assuming that the ITC grant money is what you will tap. How much of that construction cost would you eventually get back? And does that then negate a need for any future equity issues?

The ability to leverage new construction under today's program is in excess of 80%, maybe 78% around this because the DOE guaranteed loan is for 80%. The ITC grant reduces it a bit, so in the order of 80%. Depending, of course, how fast we grow is one element which will go into it and the other is how much we can still leverage our balance sheet today with paying back some of the loans, with having several projects which are not financed on our balance sheet like all the recovered energy generation project are not financed in our balance sheet. We do have a debt capacity on our balance sheet. So we don't see a need to go back to the equity market in the near future in order to finance our growth as we see it say now. Depending, of course, how fast the process of the DOE loan guarantees will be implemented. We believe that with the regulations out since October of last year, the process is now going to be smooth and fast, but of course time will tell.

Okay, so near term meaning at least over the next 12 months?

Pardon me?

You said you don't expect to tap the equity market in the near term. I am assuming that's at least in the next 12 months.

But listen, everything that I say is based on what we know today. If a large acquisition opportunity will come up, this may change totally. From what we have today we think that, from the 260 or so megawatts that we have today under construction and development, at least 160 are available for stimulus money and that's a big part of it.

That is exactly what I needed to know. And then, I was a little confused about the backlog situation. Yoram, you had mentioned that upon receipt of down payment on $20 million of backlog that it would become effective. Was that 20 million included in the $90 million backlog you currently have or excluded?

No, it's included.

Oh, it's included in that, okay. And then on a yearly basis, it seems like the monetization of the backlog is very, very bumpy meaning in some years it's like - this year you are expecting to get something like 70% or so or 80% or so of that backlog monetized whereas last year it was significantly less than that. Is there any way you can give us a rule of thumb of how much of your backlog you can monetize in any given year?

I am afraid that it's hard to do. It's even hard to ask. If you look at the changes that we had to do to give in our expected revenue from the product segment over the year, you can see that it was even difficult for us to project it. Not to say that we cannot share our rule of thumb, it depends on timing of progress that is literally out of our control. If a supplier that has promised a four-month delivery is late and he is delivering it only after six months, there is a delay in it income recognition. If a supplier promised a four-month delivery is doing better and he is delivering after three months, there is an increase in income recognition. It has nothing to do with final completion of the project, it's just a timing of income recognition and unfortunately, it is very hard to predict.

The next question comes from Gregg Orrill of Barclays Capital.

I was wondering if you could talk about the injections that you are doing at North Brawley and sort of what it is you are injecting there and how that complies with environmental regulations.

We are not injecting anything other than geothermal brine. What I referred to is there is a measure that is called an injectivity index, which is a way to normalize an individual well's capacity to take fluid and that's really - you would calculate this by how many gallons per minute can you inject for every one PSI of pumping pressure. And theoretically the wells could take a very large amount of geothermal brine into them, however a pore injectivity well would require high pressure, which then translates into higher parasitic loads. And we had a certain plan for our injection wells, which was in our design basis and it's based on our experience in similar plants in Heber and Ormesa. And the majority of our injection wells have been providing us with a lower injectivity index, which is really the reason why at this point we can inject only 40% or 45% of the amount of brine that we could actually produce from the production wells. But in terms of the material itself that is being injected is just the brine.

Okay, and then I think it was mentioned earlier that - I think Dita mentioned that the first quarter would be a loss. Does that come as a result of the treatment of capitalized interest related to the North Brawley project or what's really causing that?

It's certainly a very important factor in it. As we have placed Brawley in service in the middle of January, we cannot capitalize any more of the interest related to the investment in Brawley. We are starting to depreciate the full amount of the investment but our revenues have been 17 megawatts and I don't want to take it away from Yoram but we are already a 20 megawatt as we speak, 21, Yoram, correct me. So it's ramping up, but it's ramping up slowly and as a result of it, during the first quarter the high level of expenses of Brawley, one element. The other element is lower product revenue, but Brawley - and the third element is the low income level in Puna, which is operating at 17 megawatts rather than a 25 megawatt or 30 megawatt. So these three factors may, I said may, creates a loss in the first quarter, maybe a breakeven.

Okay. And coming back to the accounting change, what's a decent rule of thumb going forward in terms of looking at your exploration spending, how much of that should be considered capitalized versus expense?

It's a good question and of course, the answer is an estimate and we are not guiding related to it or anything. If we have budgeted for this year a $15 million of exploration expenses and it's lower because we have a participation of the Department of Energy in the exploration expenses. And if the success rate is going to be is similar to 2009, which wasn't bad and we have also improved in the costs of a unsuccessful project, we incur today less cost in a project until we know it is successful or not and this is all a result of a learning curve over the years. You could think of a couple of million dollars.

The next question comes from Michael Lapides of Goldman Sachs.

Hey, guys, two questions; one kind of big picture in terms of just financing and cash flows from individual project. In general, are you likely to more, I mean generally take the ITC rather than the production tax credits on new geothermal projects built here in the U.S.?

The answer is if we have to say generally, yes, as long as the ITC is provided as a cash grant, which means projects that are going to be - to start construction until the end of 2010 under current regulations are eligible for ITC cash grant and on those more likely than not, we will take the cash grant. Even though there might be - depending what happens with the tax equity market, if it comes back, if it doesn't come back and at what prices it comes back, it has always been even in 2009 it was there but at prices which didn't make sense to do a transaction. But I think that as a rule of thumb, we should think that as long as ITC cash grant is available, we will take the ITC cash grant. When the ITC cash grant goes away and we will have to make a choice between PTC and ITC; there an analysis has to be made on a project by project basis. Some projects may be more advantageous to take the ITC and for other projects it may be more advantageous to do a PTC.

One other question on the product side, I mean I think the backlog items have been beaten to death, but want to talk about margins a little bit because gross margins in the fourth quarter kind of coming in right around just under maybe 20%, your run rate historically had been a bit above that. Curious how you are thinking about competition in the product segment and what that does, if anything, to the margins or what might be creating downward pressure on gross margins there?

I think we have spoken about it during several calls during the year that the margins of 2009 were higher than what we expect average margins to be. We explained the reasons for it and we expect margins to go back as of the latter part of 2010 to more historical numbers which have been between 20% and 25%.

Okay. And the only reason I ask is that the fourth quarter came in at the low end of that range that you just gave, trying to figure out if there is risk to the downside to that.

Like everything which relates to the product segment, it's bumpy.

The next question comes from Dan Mannes of Avondale.

A couple of quick follow-up questions. First briefly on Blue Mountain, which I think is done, it sounds like maybe there were some warranty issues there on the site. Can you maybe give us a frame of reference on what your potential exposures there?

Well, there has been a warranty problem on Blue Mountain and it's really a big warranty problem. The exposure is, of the warranty, is fully provided for in our results. It's probably one of the reasons of a lower margin a bit in the fourth quarter, because we have fully provided for the warranty problem and it has to do with installation of cables. We are aware of some workmanship by our subcontractor issue, there were some design errors by ourselves. We are not free from responsibility and that's why we had to provide for it in our financial statement.

And then just real briefly the incremental $40 million of product wins, are you going to disclose who that's with? I mean are those domestic geothermal, international or etcetera.

That's no problem to answer, there is no domestic geothermal yet in this number. The domestic geothermal project, we expect to come later on and that's the slowness, I think Yoram spoke about, the slowness at which the stimulus money is coming to the market, it is not yet in the market and that's why we don't see yet in our backlog in our external backlog. It's international and it's remote power units as well. It's not only geothermal.

Got it. Two more quick ones. On the Hot Sulfur Springs or Tuscarora can you give us a little bit of color around how we should think about what you paid for it and what's the difference in return profile for you buying sort of an advanced development project versus doing it yourself and what made this one uniquely attractive to you?

I will not answer the first question but I will answer the second and the third. We are a potential buyer for any geothermal asset in the United States, but we are a potential buyer when it is at the right price. We know there were assets in 2008 and 2009 that have been sold to private equity participants at prices that we didn't find economical and therefore we didn't participate. When it is economical we are a buyer because as we have said more than once the limiting factor of our growth is the ability to explore projects and improve them fast enough to bring them from the exploration stage to the construction phase. And you cannot jump-start it. I mean, it takes time whether it's because of permitting or whether it's because of exploration. If you have an opportunity to jump a step and start immediately from a construction phase, after the exploration is done and the early development is done, it is an advantage and we took that advantage.

Is it fair to say, I mean especially given the higher relative risk profile of drilling versus the actual construction and operation and you have experience in all three, is it acceptable that you guys get a lower overall return just to be able to avoid the higher risk step?

I am not sure that has really a direct impact on the overall return, but maybe.

Okay, two last questions. One of them, on the Q1 potential for a loss, is that after taking into account the gain on sale of GDL or is that before that item?

We have taken it into account and we are cautious. It may happen, it may not happen, but yes, it's after.

Got it and then the final one, as you look at the capital profile for 2010 between cash on hand and the availability underlines etcetera, and plus being able to extract the cash back out of Brawley, 2010 looks pretty well covered. But if you look 2011, you don't really have other than Jersey Valley, anything else coming on in '10 and none of the other projects come until 2012. So how much are you sort of in your thought process leaning on the loan guarantees or potential modernization of the ITC before the plants come online to fund 2011 in your head or do you have another plan that you haven't really laid out yet?

First of all we are always attentive to market opportunities, also on the financing structures and financing side we will and we are watching the market development, and they may be other opportunities than the DOE loan guarantee. But in between the loan guarantee, ITC, and don't forget cash from operating activity. In 2009 our cash from operating activity was more than $100 million. It's not a negligible number.

The next question comes from Ben Kallo of Baird.

I wanted to start on guidance and maybe get some assumptions around 2010 guidance. First on the electricity side, what are your assumptions around Brawley and then also Puna and how they ramp up over the year? And then have you included any solar revenue in the electricity segment guidance?

No solar revenue. We don't think that the solar projects are going to be online in 2010. So that's easy. What we have assumed both on Puna and Brawley is in line with the press release that we issued couple of weeks ago. Brawley will ramp up gradually, but will not reach the full capacity before the end of the year and these are our assumptions in the revenue. And Puna will take to about the middle of the year until we reach full production. Of course, if we are able to do better, it will improve, but these are the assumptions.

Okay, so although there is possible downside, if it doesn't ramp up like that, like you mentioned earlier, Brawley is producing about 20 megawatts, is that ahead of expectations so there could be some upside to the guidance there?

I think that there could be an upside to the guidance but it's a long way to go and since you have been following us for quite a while, you know that there is always the unexpected. So there is - we would rather stay with this number.

Okay, and then on the product side, similar question. I know in last call you mentioned a couple deals you were following. Is that the $40 million that you mentioned in the presentation there? Are there some potential winds out there that could affect 2010 to the upside in the back half or even in the early 2011?

The truth is that the large order that we mentioned in the November call, which was the Brazilian order [ph] still didn't come in. So the answer is yes there could be additional product order. If they are finalized soon enough we still have an impact on the product segment in 2010.

Okay, have you seen any changes to the pipeline outside of what's going to affect 2010 and outside of Sarulla because I'll get to that in a minute. But outside of that, have you seen changes to your pipeline since our last call here? Has that improved?

Yes, I mean all the $40 million that we got are all new orders since our last call and these are not the orders that we expected. Actually one of them is, all the others not. So, yes. I mean we do see start of movement, not yet in the U.S.

Okay. In your prepared remarks on Sarulla, you mentioned, it sounded like there were some movements since the last call and then I think everyone out there has been reading some - that the price has been finalized. So how do you see that progressing and if you can give us any more detail on that?

But Ben, the price has not been finalized. What was finalized is a committee to negotiate with us and approve the price. So it's a very small step forward. It's not really the breakthrough. Once the price is finalized, this is going to be the breakthrough but we are not yet there. We are at least in structured process that the result of which can be finalization of the price the price is not yet finalized. We have been reading the same probably newspaper clipping and the Indonesian was much more optimistic about this happening. The reality that it is probably at least two months away but being Indonesia I am not sure even about that.

Okay, great. And then as far as the timing of the financing of Brawley, could you give us some detail on that because it does contribute to your CapEx there for the year. So how do we think about that?

We have to take a decision when to apply for the ITC grant and that's actually an internal decision. It has an impact on how much the ITC cash grant is going to be. As Yoram said, the CapEx budget for Brawley is not defined yet, it's a range between $15 million and $30 million. Once this is going to be defined in well advance [ph] will be the right time to submit the ITC grant application because you can submit an ITC grant application only once and all the CapEx that was not incurred by the time you submit your application is not eligible to the ITC grant anymore. So if you are not under pressure and we are not under pressure, you should manage the time that you submit your application. So I think that - and for the project financing, that's another $100 million in our financing plan. I think a good assumption should be in the third quarter.

Is there a certain threshold that you have to meet to get that project financed as far as megawatts production?

It's not yet defined with the lenders. There is going to be one but we didn't define it yet.

Okay. And then my last question is more of a high -level question. As far as what you guys think - we have talked about this before, but as far as replacement value for your current assets? And I know every asset is different, but if you guys could give a range or some type of replacement valuation per megawatt for your assets?

Replacement value you mean how much would a third party pay for them or how much it would cost to build a new.

Yes.

How much it would cost to build new capacity?

More of what the market is valuing the assets right now.

I don't know what the market value. I don't know that there were any geothermal transaction closed recently so I don't know that we have a number. I don't know if Smadar you know?

No. Not for operating power plan. I mean we can estimate but I am not sure it will be in line with the market. We can estimate - our estimation for replacement cost, but not the market.

Your next question comes from Elaine Kwei of Piper Jaffray.

This is Connie Wing for Elaine Kwei. Thank you for taking my question. Going back to East Brawley, can you speak a bit about what is the difference between the permitting process for East Brawley from your previous experience, that is are you see the regulatory environment becoming more difficult?

Specifically, East Brawley I would say that it's more a local issue than the regulatory environment by itself. As we described in the past we were caught in the controversy between some of the users of irrigation water and those who have to allocate the water and therefore we cannot get - although the quantity of water that we use, compared to the agricultural use and others is not that significant we cannot get a commitment from the agency or the co-op that sells the water we cannot get a commitment from them to supply the water, and therefore the county is not willing to give us a permit to construct. So that in both cases, they don't want this to be used against them in that political fight and so we are stuck in the middle. We think that our use of the water makes a lot of sense in terms of the economic development of the area and that good sense would prevail because it does serve everybody's interest. And in the meantime, we are not willing to move to a technical solution that is less optimal just because we are caught there in the middle. So it is really a county issue. It does give an indication on the long term issues around water in the West and so there is a global aspect there, but for us there it's very site specific and county specific.

Any more insight on timing on that?

We think that we are in a process that we are now following a process that would allow us to get the right commitment and basically it's a process where all the parties involved would be comfortable that they have no exposure from us building the plant and using the water. And our hope is that this will be completed in about, somewhere towards the middle or the end of the second quarter, which would then release the next steps in the permitting and this is why we think that we would take 2011 for the construction of the plant and will be up sometime in 2012.

Do you hedge PPA selling prices at Puna?

I am sorry, can you repeat that?

Do you hedge PPA selling prices at Puna?

No.

No, okay. Would you consider doing it in the future?

Can't say that no but that's not in our plan at this point.

Are any existing PPAs at risk of being renegotiated at this time?

No, we don't see this as a risk and we are not planning to renegotiate PPAs that are in effect. As PPAs come to maturity and we do have some, not this year, but we do have some that will expire, we will negotiate them. But there's nothing, there's nothing that is coming for negotiation this year.

Next question comes from Paul Clegg of Jefferies.

Some questions for Joseph actually. How much of the quarter-over-quarter decline in gross margins and electricity revenues in 4Q was due to Puna versus other issues like seasonality or you also mentioned warranty expense I think in there. I am just trying to get a sense of a more normalized gross margin for the electricity business.

For electricity a big part of it and we said it in the call is coming from a decrease in the rates in Puna and its performance and as a result of seasonality as you know, third quartet is always better. As to the product segment, of course, as Dita said before, in this fourth quarter the decline is because of the Blue Mountain issue. But going forward to 2010 we've said that we will not repeat the level of 30% gross margins in the product segment.

No, I understood. Really more on the electricity segment, I guess is my concern and trying to kind of quantify the Puna effect. So once that we see Puna come back online, I want to get a sense of what level of potential positive impacts I could have in the gross margin outside of potential seasonality issues or warranty issues that may have affected the fourth quarter otherwise.

Electricity depends on prices in Puna and also if you see we've said that the average rate decreased from $86 to $76 per MWh so this reflects the impact of the pricing not the generating that is positive.

So capacity utilization didn't really have much of an impact on the margin?

The percentage of Puna is going down when more projects are coming online. So we think this should be taken into account.

Okay, I guess another question on Puna. How much of the CapEx budget that you laid out is related to issues at Puna also?

We have the total CapEx total for operating plants approximately $15 million. So all in all it's not a major number.

Okay. I just wanted to talk, Dita, to the methodology on the 2008 restatement and the impact, did it have any impact on the December quarter. In other words, if you anticipated - if you were to have used the same accounting methodology, was there a negative effect in the fourth quarter? And then as we extrapolate that into 2010 is it having any effect on the guidance, and if so, can you kind of help quantify it?

On Q4 2009, there was no impact if that's the question. In 2009, we are talking about one project, in 2008 we are talking about two projects. And if you see the numbers, there was a separate line item in the P&L, so you can see the numbers. And as Dita and Yoram said, we spend less on each project on exploration. So that's why 2009 number is lower than 2008 number.

Let me add to the last part of your question whether it has an impact on guidance, we are giving guidance for revenue. This has the impact on costs so no it has no impact on guidance.

And it's not a drive for the anticipated loss, it's not expected.

It's not, okay. Very good. And net loss it sounded like if I understood correctly it sounds like you still think you have a chance of being profitable. So in terms of magnitude of the loss, it doesn't sound like we are talking about something that large for the first quarter?

It's true.

And then final question, do you anticipate, there has been a lot of disruption in the currency markets. How does that affect your business model in 2010 and if you could just talk about hedging strategies on the currency?

Until this year, we have, if you want, three currencies, the U.S. currency, of course and the some New Zealand and the Israeli shekel. The New Zealand uncertainty if you want, has gone by the fact that the GDL project was sold. So the only currency uncertainty is the Israeli shekel and we have the policy to hedge about 50% of our exposure, sometimes even a larger portion for the next six months or so. So we are trying to avoid fluctuations resulting from currency fluctuation.

But, Paul, let me add to what Dita said. As we say and you see it in our 10-K, that even if we hedge our foreign currency operations, we do not implement the hedge accounting. So if you see a loss on exchange difference, that means that we gain on the operating income. So you have to look it at that way. And these fluctuations do not represent a real loss or a gain on the other side that would be better. Paul Clegg – Jefferies: Okay. I said last question but may one more detail question. In terms of tax rate outlook in 2010, would you expect it to be significantly different than 2009 in anyway?

Look, the tax rate is impacted by the pre-tax income, because the amounts of PTC we enjoy is relatively stable, so any decrease in net income will decrease the tax rate. Sorry with pre-tax income. Any increases in the pre tax income will increase the rates.

I am sorry, will increase the percent - because of the PTC?

Increase the effective tax rate.

Next question comes from John Segrich of Gabelli.

Just a couple of more questions. I didn't catch the amount of revenues that you generated in the U.S. I know you end up giving it in the K, but could you just give it to us now?

How much of the revenues were in the U.S.?

Yes.

Joseph will find it.

In electricity?

Yes, the electricity.

About $185 million as I recall. For the full year.

Let's move on to the next question in the meantime.

If I could, just following on to that then, I guess I am just trying to understand on back to electricity margin question, you have got some plans that are really running well below optimal capacity and there's some remediation work that's being done. So maybe could you just give us a sense of what you think the electricity margins will be kind of a range in 2010? And clearly, they got to be down from 2009.

They are going to be down. I don't know that we are prepared to give a range.

Do you think it's sort of a 24%, 25% level?

We cannot give it.

It's okay. If I can ask in a different way then, you have given pretty good revenue guidance, very explicit. We have talked about some of these costs and overruns; you have got sort of less capitalized interest coming through on the P&L. Your OpEx, I assume is going to be up in 2010 versus 2009?

Our OpEx in 2010 compared to 2009, was that the question?

Yes.

I think that if you ignore the fact that Brawley costs were not part of the OpEx in 2009 and they will be in 2010, we don't expect dramatic changes to the numbers, certainly not when it's normalized to generation. So there has been constant growth of our operating expenses as we added more megawatts to our fleet. But generally speaking on a dollars per megawatt hour sold, we are not seeing a dramatic increase. And I only quantify this with the impact of the depreciation of Brawley, which is not so insignificant. This may actually modify the picture temporarily.

Right, but that's in the gross margin, right?

No cost. We are actually becoming more efficient as time goes by in our fleet growth.

But the OpEx whether it's in R&D or sales and marketing, you should show some growth in dollar value on a year-on-year basis, right?

I think that the R&D and sales and marketing, not necessarily will not, we don't expect huge changes in our operating method. We have been fairly active.

Let me just clarify, the sales and marketing are a function of volume of sales in the product segment. So they are related to the volume. G&A, we don't expect to go up in the next year substantially, maybe slightly. R&D depends on the program that we have. We have currently a program of REG for LNG. We have spoken about it several years ago, didn't mention much about it in the last probably year or two. We have currently under - and you will see it when you look at the R&D explanations in the 10-K, if we didn't say it in the prepared remarks, but we have a $10 million program of building a beta site unit in an LNG installation in Spain it was recorded in the fourth quarter and it will continue to be recorded in the early quarters of 2010 in R&D. And once the beta site is successful it may be moved into income. So you may see some - but these are small numbers, they are not big numbers, but they may have some impact on results.

I guess what trying to understand is been very clear on margins coming down in both segments of the business now talked about the OpEx. Can you give us any range of what you think EPS might come in for 2010 or order of magnitude that you think it will be down?

No, we cannot do it.

But do you think you will earn more than a dollar?

We cannot do it.

To give you an answer on your question, the exact number and this is $182 million.

$182 million, okay, thank you.

The question on revenues in the U.S. in 2009, the electricity revenues, it was $182 million and that would be included in our 10-K.

Next question comes from Peter Christiansen of Merrill Lynch.

Just going back to the Faulkner I issue, is there a potential for Ormat to be anyway financially responsible for the lost output either to the developer or the off-taker on that project? And additionally, do you carry any EPC or warranty insurance for these types of issues?

Contractually the answer is very clear. The warranty liability does not include loss of revenues and our warranty is not insured. We have the product liability but there is no product liability claim here, it is a warranty issue and not a liability issue. What we have decided is to do first what we have to and this is to bring a project back on line as quickly as possible and that's what we have been concentrating in doing and we are in the process of bringing the power plant back on line two units I believe, started yesterday, I'm not sure. Everything else will be dealt with our customer later on.

I know it might be a little bit too early to tell but is there any way from what you guys have seen, is there any difference in the characteristics of the resource of East Brawley from North Brawley? Does that have difficulties of a higher degree, a lesser degree from what you can tell so far?

Our expectation is that it would be identical. Now there is always variability within the wells. Even in North Brawley, some wells are easier, both on the production or on the injection side. But it seems that it's generally a resource of the same kind and the things that we should have or that we have done or should have done in North Brawley would apply to East Brawley as well.

With the new area of interest basis that you are using, of the write-downs I guess so far, I was wondering if you would break that - are you going to break that down in terms of what percentage was exploration related, what percentage was dealing with the lease, if you can give us any color on that?

Let me try to clarify because maybe it wasn't clear. Unfortunately the area of interest concept for testing impairment of exploration was not accepted and the reason for the restatement is that we are doing the review for impairment on a project by project basis and not on an area of interest basis. So whatever was written off is a specific project that was determined to be not commercially viable and therefore it was written off.

Just one last question. We have heard of a private developer has developed an interesting technology, extracting lithium from geothermal brine. And I was wondering if you are aware of the technology, is this something that Ormat has looked into given the potential that lithium ion batteries have here for electric vehicles across the world. This sounds like it could be interesting.

You are right, it could be interesting. The lithium is not present in all brines, the composition of brines do differ between sites. The same concept could be applied not only to lithium, but to all - to other elements that are sometimes present in the brine and it's true that for some elements recovering them from the brine is actually a shortcut compared to what needs to be done when they are produced, were they need to be extracted from ore or from solids. So it could be very interesting. But the things with such technology is that first it needs to work and then you need to see whether the numbers actually work. At this point it's not a business objective for us. There could be corporation like this sometime in the future and we may even decide to do something on our own. But our focus at this point is really making par.

Your next question comes from Thomas Daniels of Thomas Weisel Partners.

I just wanted to kind of rehash the ITC cash grants question. I guess when you look at your guys' project, you have a lot of potential projects to come online before you enter 2013 but kind of a gray area for us is what the DOE means by breaking ground by year end 2010. Could you clarify what that means and then maybe talk what specific projects you guys expect to file ITC applications for aside from North Brawley?

I can share with you what the common understanding is today of what it means to start construction. There are expectations, the specific guidelines will come out soon but until the guidelines come out, there is a general definition of substantial site construction and it's totally gray and totally undefined what substantial site construction means, but certainly it includes a requirement that all the permits fell in place so that you can do a substantial site construction. But there is an alternative method that the people are calling the Safe Harbor method and this is to incur fully non-refundable commitment of at least 5% of total project cost and this can be implemented by ordering the equipment doesn't have necessarily to be site construction. I believe that some sites work has to be done but specifically it can exclude the actual construction and be replaced by 5% of project cost. So at least it's quantifiable and easy to implement and to know that you are there or not there. We believe that a number of our projects will be eligible for ITC cash grant in addition to North Brawley. North Brawley, we can already apply. All the other projects, we are not yet there but we will be before the end of 2010 and this will include Jersey Valley which is in construction, it will include Puna, the 8 megawatt; this will include East Brawley, it will include McGinness and maybe additional projects that are still in exploration and this may still reach a construction by - start of construction by that time, Carson Lake, Tuscarora, all additional projects that may reach that point.

And your REG projects, they don't qualify for ITC cash grants, do they?

No, they don't.

Next question, which is, I know North Brawley is going to have cost overruns, I think it's around maybe for CapEx around $6.5 million per megawatt, I know we have been kind of using $5 million per megawatt and capital expenditures. Is that still a good run rate if we are to add up all your projects and megawatts you are going to bring online and expected how much that's going to cost you around, $5 million per megawatt?

It's on the high side if you exclude North Brawley.

Okay, that's on the high side, great. And then just one final one, on the loan guarantee and the loan programs under 1705 and 1703, I know there is a set sum of money. Is there any time requirements on those, you think how many of these projects do you think you will be able to access low cost government loans or loan guarantees?

The loan guarantees are available for projects that start construction by September 2011. So it's a nine months later than the ITC cash grant. They need to be completed by 2013 and this is why we are talking about what we think we will have by 2013.

The next question comes from Justin Cable of Global Hunter Securities.

Most of my questions have been answered, but I was curious about the dividend payment, why the jump-up this quarter and then falling back down in the next three quarters.

Our dividend policy is 20% of net income. So because the net income - and the way we are doing it is that we are announcing the first three quarter number at the beginning of the year and doing a true up based on the fourth quarter. So at the beginning of the year we announce $0.06 per share and did the true up and got to a total for the year of $0.30 per share. For next year we are announcing $0.05 a quarter and once in place then what we announced at the beginning of this year because we expect next year to be weaker than this year and we will do the true up in the fourth quarter.

The $0.05 a share, I mean can we then not extrapolate that or can we extrapolate that as kind of giving the direction for EPS?

You cannot.

For 2010 CapEx, how much of this is for solar?

Almost nothing. Most of the solar activity is going to be - in 2010 it's not - permitting, planning, zoning - I mean the big issue is to get the zoning approval, so solar is not a big portion of it.

Last question I have is just on any kind of one-time gains or write-downs that we should anticipate for 2010. I think there's already been mention of a gain for the Q1. But maybe you can give us - if there is anything else that we should expect for 2010 as a whole?

I mean we have the GDL, the $6 million of GDL and we are not aware of anything else.

Next question comes from Brian Yerger of AERCA.

I joined the call late, I am just wondering on the product segment, did you give any visibility? I know you don't give quarterly guidance but did you do anything in terms of first half, second half in terms of product revenue?

No, we have not done it and we cannot do it now.

So you don't know if it's going to be more distributed fairly even throughout the quarters or just not sure?

We know that the first quarter is going to be weaker than the others.

Okay, so Q1 is going to be weak for 2010 on the product side?

Yes.

Your next question comes from Carter Driscoll of Capstone Investments.

Wanted to just take a step back and readdress the state of U.S. thermal market, obviously with your branded presence domestically, you know probably at what stage lot of these projects are in and maybe you could help us look at the landscape a little differently from your perspective as it affects obviously the product segment. Are there specific things you can do to accelerate engagements with some of these potential customers by using your expertise and in terms of pulling some of the - your potential EPC or equipment sales forward or do you really just have to wait until kind of a proposal is put out there and go through the bidding process?

So the answer is that with some developers we have a more intimate relationship, with some of them it's more a formal one. So we certainly hope that in some cases we could work - process that as much better to all parties. But what you have to recognize is that the issue is really without not only good exploration results, but without the confirmation of the well field. It is a very tough especially for a single project developer or a developer that has just a few projects. It is very hard for that developer to release the construction of the power plant. And since our product on the product side this is what we generally provide. We do not provide the field development work, just the power plant. It has to wait. Any well commitment beyond this really has to wait till the field is developed. And the change, I would say that a change in the last two years is relevant both to lenders and also from what we understand to the DOE's criteria, they put a very strong emphasis on approving the field and with numbers ranging from 70% of the brine, behind pipe, as they call it to sometimes a 100% of the brine behind pipe. And therefore that requires probably somewhere between a quarter and a third of the total installed cost of the project, to be spent before equipment can be released. And, and so therefore this I think that if you want to look at the bigger picture when it comes not to forging relationships but to actual release of projects in our product segment, there is a lot of work that needs to be done and it takes time. And my understanding is that only a little bit of this was done in the last year and a half and in the U.S. by other developers.

Would it be fair to qualify that more of it was an unrealistic expectation maybe of pushing - getting from exploration to the drilling stage for some of your potential domestic customers or was it more of a kind of a capital constraint or a combination of the two? It almost seems that you are better funded than most of the potential customers and domestically and therefore maybe they underestimated one or both of those aspects.

No, no, I think that, yes that it's a fair statement to say that is a combination of the two and really the disparity between very strong endorsement of geothermal or renewable energy as a way to jump start the economy and what actually needs to happen or it needs to be done by the developers that are often cash constrained and it's just - and the product comes at very late in that stage, the actual sale of product.

Your next question comes from Lasan Johong of RBC Capital Market.

I just had a follow-up question, Dita, on the solar issue. I know you are focusing primarily on Israel but have you looked at opportunities since last we talked in the U.S. where you might be able to take advantage of your locations? Are you still studying that, is that still an option, is there any progress?

The answer is that we are looking at it ,studying it but there is nothing specific to report yet but yet we are looking at it very seriously.

And I guess the other question is more of a comment. Any chance Ormat might start getting EBITDA guidance going forward?

We are noting your request, but I don't think anytime soon.

This concludes the question-and-answer portion of today's conference. I would now like to turn the call back over to Dita for closing remarks.