Good day and welcome to the Ormat Technologies Second Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jeff Stanlis MS/Hayden IR. Please go ahead sir.

Thank you, operator. Hosting the call today are Isaac Angel, Chief Executive Officer; Doron Blachar, Chief Financial Officer; as well as Smadar Lavi, Vice President of Corporate Finance and Investor Relations. Before beginning, we would like to remind you that the 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, future results or trends. Actual 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 the risk factors as described in Ormat Technologies’ annual report on Form 10-K filed with the SEC. In addition during the call, we will present non-GAAP financial measures, such as EBITDA and adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night, as well as in the slides posted on the company’s website. Because these measures are not calculated in accordance with U.S. GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company’s website at www.ormat.com, under the Events & Presentations link that’s found on the Investor Relations tab. With all that said, I would like to turn the call over to Isaac Angel. Isaac, the call is yours.

Thank you very much, Jeff, and good morning everyone. Thank you for joining us today for the presentation of our second quarter 2015 results. I’ll start with slide number four. The second quarter was a strong quarter in which we delivered both revenue and profit growth. Similar to the first quarter this year, oil and natural gas prices had a material impact in our electricity segment. However, the new capacity that came online along with the improved efficiency of our operating portfolio mitigated this impact and supported good results in the segment. This is a direct outcome of the enhancements and improvements we are implementing throughout the entire value chain. This quarter, we also had a progress with our expansion plan and began executing our initiatives to set the stage for our next growth phase. As we have stated, our multiyear plan is designed to elevate Ormat from a leading geothermal company to a recognized global leader in the larger renewable energy industry. I’d like now to turn the call over to Doron to discuss our financial results for the quarter.

Thank you, Isaac, and good morning everyone. Let me start by providing an overview of our financial results for the second quarter ended June 30, 2015. Starting with slide six, total revenue for the second quarter of 2015 were $140.5 million compared to $127.6 million in the second quarter of 2014 with 65% of revenue coming from the electricity segment. In our electricity segment, as you can see on slide seven, revenues were $90.9 million in the second quarter of 2015 compared with $91.7 million in the second quarter of last year. The slight decrease was mainly due to lower energy rates resulting from lower oil and natural gas prices that amounted to approximately $9 million. Additionally, we had lower generation at Puna power plant due to the well field maintenance that was required as a result of last summer hurricane. The decrease was partially offset by the contribution from the second phase of McGinness Hills in Nevada. McGinness Hills was also the main driver for the 12.4% increase in our generation project. Following our risk management policy, we recently entered into the derivative transaction to reduce 50% of our exposure to fluctuations in natural gas prices at a fixed price of $3 to MMbtu until December 31, 2015. In the product segment on slide eight, revenues were $49.6 million compared to $35.9 million in the second quarter of 2014, which represented a 38% increase. As many of you already know, our product segment is characterized by fluctuations in quarterly revenue. In the first quarter, we accelerated the construction of the Don Campbell Phase 2 project in order to commence commercial operation by the end of 2015 and in the second quarter we focused on delivering against our backlog to third party. We remain on schedule with our contract with…

Thank you, Doron. Starting with slide 18 for an update on operations, our portfolio generation in the second quarter increased by 12.4% from 1 million megawatt hours to 1.2 megawatt hours in the second quarter 2015. This increase is mainly due to contribution of McGinness Hills complex. The generation increase was offset by lower generation in the Puna plant in Hawaii due to well field maintenance related to last year’s hurricane. Moving to slide 19 to other projects, we are on track with the construction of Don Campbell Phase 2 in Nevada and are expecting it online towards the end of this year. In Olkaria, Kenya, we are on schedule with the construction of the 24 megawatt expansion. The fourth plant is expected to bring the complex generation capacity to 134 megawatts and the commercial operation is expected in the second half of 2016. And with regards to Sarulla, Indonesia, engineering, procurement and construction are in progress and infrastructure work has been completed. The construction has successfully drilled part of the plant production wells and drilling of additional production and injection wells is underway. The first phase is expected to commence operation in the second half of 2016 and the remaining two phases are scheduled to commence within 18 months thereafter. The projects I just described as well as additional projects on the various stages of development are expected to add between 90 and 115 megawatts by the end of 2017. Besides the investments in new projects, we are continuing our exploration and business development activities to support further growth. If you could please turn to slide 20, you will see our CapEx requirements for the remainder of 2015. We plan to invest a total of $50 million in capital expenditures or new projects under construction and enhancements. An additional…

Thank you, sir. [Operator Instructions] And our first question will come from Paul Coster of JPMorgan. Please go ahead.

Yeah, thanks very much for taking my questions. So, the first one really relates to oil and gas prices. All of your electricity contracts, did they have some sensitivity to oil and gas prices, perhaps you can give us some color around that and also on a go forward basis, the new PPAs that get signed, are they also expressing sensitivity to oil and gas?

Paul, first of all, thanks for participating in the call. In all our new PAAs, they don’t have any connection to oil and gas prices, we have three old contracts actually that they are – two of them are linked to the gas prices and one of them in Hawaii, Puna is linked to the oil price. One of these gas price linked contract is going away at the end of this year, which means about one-third of our exposure is going – more or less is going away by the end of this year and we will remain with two more – two years? We will have two years and then we will remain only with one of them for a long time to come.

On a go forward basis, new PPAs will not include a sensitivity to gas and oil, is that correct statement?

That’s correct.

Okay. And then my follow-up question, obviously, you are delivering against a backlog here and the backlog is still pretty healthy, but it’s coming down. I imagine though you’ve got a lot of stuff in your late state pipeline. Can you give us any color regarding the components of the late state pipeline? Is it all sort of the traditional Ormat business or are you starting to see a broader side of renewables in that portfolio, can you give us some sense of what the geographies might be and what kind of timeline before we see it start to enter sort of the contractual state?

Paul, as you mentioned before, we have a very healthy pipeline. We just added $100 million to the power plant a quarter ago, which is a contract we signed in Chile for EPC and we should also remember that we have a serious amount of a pipeline – in the pipeline of Sarulla project that it will be running with us until 2018, which – and we don’t expect every month or every quarter to sign $100 million or $200 million deal. On the other hand, we have small deals that are adding to the pipeline, which will be probably joining us before the end of this year. But from the product sales point of view, the company is concentrating today mainly in few countries, in South America, Africa, and Far East. We are expecting – we have – as you mentioned before, we have a few deals on that is – that are close to fruition. We don’t know if they are going to hit sometime in Q3, Q4, or next year, in any case, we feel very comfortable from the backlog point of view looking forward two to three years.

Okay. Thank you very much.

Our next question will come from Dan Mannes of Avondale Partners. Please go ahead.

Thanks. Good morning, everyone.

Hi, Dan.

Hi, Dan, thank you for joining.

Of course. The first question for Isaac, you talked a lot about, it’s a regulatory backdrop, but I want to talk about what’s going on real time. I mean we’ve seen a number of Power Purchase Agreements signed in Texas and California and Nevada, that’s in very, very low prices for solar. I was wondering if you could talk at all about geothermals competitiveness in this kind of environment, number one. And number two, maybe cross reference that with some of your initiatives as it relates to direct to consumer sales. Because I guess what I’m trying to figure out with the outlook is for new plants in that kind of environment?

Dan, as you know, we will not – we don’t have the liberty to talk about PPAs which are under discussion or preparation or at the final stage, we only announce them after they are signed. But obviously we are aware of those low price solar PPAs that were signed in the last few weeks, but regardless – you know that there is a huge advantage between an intermediate power, which is affecting the grid and on the other hand, base load power, which is adding to the stability of the grid. There is still more than certain appetite for geothermal PPAs that we are working on and that the most I can say at this stage. I am not worried on the immediate stage in the state. The case can change in the upcoming years but that’s why the company has changed, not changed but added focus in going elsewhere we changed the whole structure of our sales and marketing team with focusing on counties which is outside of the U.S., which is the appetite for geothermal is not necessarily driven against solar prices, but are driven because of other reasons which are availability of the resource access to the resource and frankly lack of energy and other political reasons even in some countries that are driving these requests and those markets in one hand are pushing our product sales and in other end are pushing our ability to build our own power plants and we have new concessions in new African countries that we got and I think overall looking I am very optimistic in the future.

So, if I can just briefly summarize and make sure I understand. So from your perspective even in spite of how well solar may be going, there is still enough of in advantage for being base load that you can get a relative premium price that makes it attractive to continue to develop, both U.S. and abroad right now.

Yes, it is absolutely true at least in the immediate years in the U.S.

Okay. And then two other quick questions.

Has to be true within the next five years. That we don’t know.

In your project development you obviously gave us an update on both OREG 3 as well as Campbell 2, can you may be give us any update on what’s going on at [indiscernible] I know those are kind of the next two projects that you have identified there, I think we still have, hopefully coming online in 2017.

[indiscernible] is still at the lender stage, which means we went beyond certain stages in the process and we have located lenders and we are working to finalize contracts with them and it’s a go project at this stage.

And [indiscernible]?

And [indiscernible] we are in exploration phase, and we have successfully went few exploration phases, but we didn’t finish yet and unfortunately I cannot say it is a go project yet. I am very optimistic and positive, but will let you guys know in due time.

Okay. And then lastly just on the product side, we looked at the margins in the quarter obviously very strong, we know they’re lumpy , can you just confirm was there anything unique in this quarter, I don’t know if you had a project closing out or something that happened that maybe help margins out?

Yes we have few projects in this quarter and the upcoming few quarters, which I don’t want to mention name because of obvious reasons which are more profitable than the others. As Doron mentioned this profitability will not be able to be maintained in the long term of yield, but it will be a – that we can maybe run in this rate a few quarters and then it will be on the regular basis.

I think – it is Doron and if I may add. I think that when you look at the product segment, the best way to look at the margin is to look at the 12 month trailing and see over the last four quarters and then 12 months back and then move back a few quarters, still you can get probably a much more standardized margins in just looking into one quarter or swiftly of just 12 months trailing for the quarter.

Understood. Great we will take a look at that. Thanks guys.

[Operator Instructions] The next question will come from JinMing Liu of Ardour Capital, please go ahead.

Good morning. Thanks for taking my question.

Thanks for joining.

No problem. First of all regarding [indiscernible] the EPA clean par announced yesterday, my understanding is that that could well be ultimately enforced by each individual state paving the locations of your facilities, do you kind of lead by the user demand for energy within those space or do you have the ability to export power to other states that are in need of the energy?

It is very individual to a state. There are states that we are – we have the ability to export such as between Nevada and California, but on the other hand there are other states that – the import of power from other states and then you have to look at it on state by state basis. As a matter of fact we have today a few contracts which are interstate as we speak.

Okay, got that. Switch to the Northleaf transaction, it looks like to me a portion of the proceed was allocated to our equity, so what was it that [indiscernible] investments?

It’s Doron, the way the location of the cash was that it is split between two parts both of them in the equity, one is the non-controlling interest that represents the equity part of what they acquire and there was an additional paid in capital increase that represents basically the theoretical profit that Ormat has from this transaction. Today, according to U.S. GAAP unless you sell control you cannot recognize the revenue from selling equity. You put it into additional paid in capital.

Oh, I see. I see, that’s why – okay, I got that. I understand those two will add. Lastly, regarding the cost of electricity in the second quarter is increase slightly against a first quarter, even I back out the benefit from the first quarter. How much was the start-up cost regarding about – from the McGinness Hills second phase?

Give us one second please.

Okay.

You were talking on dollar basis, or negative power base?

Just dollar.

On dollar basis.

Right.

Do we give dollar number basis.

We don’t usually…

We don’t disclose the dollar number per power plant basis, unfortunately.

But obviously you can expect the second phase in a power plant has the relatively lower additional cost compared to the revenue yields. Most of the existing man power, so the additional cost is lower that the new power plant.

But JinMing, I want to mention here something that you should be aware of the fact that since the last three quarters we are basically concentrating on each and every power plant and trying to effect the profitability of those power plants and not necessarily and sometimes even reducing the generated output on the gains increasing profitability. We have few power plants, the generation was simply cut by the fact that we stopped very old steam turbine, which effectively were not profitable. So, you can see now few power plants that the generation went down, but the profitability went up seriously and if you look at our profitability of the electricity segment it is going on quarter on quarter basis. So, just comparing the total generation, quarter after quarter is not necessarily only the addition of the new power plant, but sometimes there is also reduction of some megawatt hours comparing to the quarter before.

Okay got that. All right. Thanks.

Thank you.

The next question will come from Ella Fried of Leumi. Please go ahead.

Good afternoon. I also have three questions, two of them are follow-up questions. The first one is to Dan’s question, your plans to expand in the solar business. Additional tax I didn’t quite get it, additional tax in terms of expanding in U.S. or outside the U.S., and then how do you view all the recent developments in addition to what you mentioned regarding the base load.

First of all, I want to clarify something. We are not abandoning to geothermal in becoming a solar developer. That was…

Yes. It’s clear.

And the idea was that wherever its possible we will be able also to offer a solar solution which we are doing. That mainly relating to C&I customers which are enterprise customers which are looking for a comprehensive solution to their electricity problem if we may call it. And when we are offering them a solution, this solution may also include a solar plant and we have a pipeline of those types of offer that we are working on in the U.S. but mainly outside of the U.S. And as I said before, we will not become a solar developer out of the blue that was not the intention.

So it’s more using the existing infrastructure and adding solar megawatts, and then other forms of energy that are available at the location.

Yes and also we are working very diligently which is not easy thing to do, so add solar complimentary power into our existing facility, it is something that we are working on for a long time now and not very successfully so far, but I am optimistic we all realize that from the logical point of view it works unfortunately from the PPA and PUC point of view, it’s a difficult thing to do but we are – I am personally very optimistic yet and we are working on it diligently and that was the idea with the solar.

Okay. Thank you. That sounds very interesting. About your exposure to natural gas, I just didn’t catch it. In terms of megawatts, how many megawatts will be left exposed to natural gas in the end of 2015?

We have today about 140 megawatts that are exposed to natural gas, prices out of the almost 650 that we have. Out of this 140, about a third is ending the relationship together we have – we signed already a contract in Heber [indiscernible] at the end of this year. So in 2016, we see about 100 megawatts only tied to natural gas pricing. We have also – when we signed the Heber contracts, we said that - will increase EBITDA about $8 million adjusted changing price. And out of the 100 megawatt that are left, we have about half of that, 50 megawatt. The contract ends at the end of 2017 and the rest is further down the road.

Okay. Thank you. And the last question, you mentioned that North Brawley incurred some expenses, does it mean that it’s not – is it breakeven operationally or is it breakeven EBITDA wise or does it incur some more expenses?

North Brawley as illustrated on slide 7 had higher cost in Q2 of last year. This quarter, it had lower cost. The plant is still not profitable and then we are working very hard and diligently to bring it to be profitable. And Again, we made lots of changes in North Brawley. When I arrived to Ormat a bit more than a year ago, this is one of the challenges we took as new management and I am certain that we will be able to overcome this challenge and bring this plant to be profitable. As I said, we did lots of changes in North Brawley during the last two quarters.

Okay. Thank you. And one more question to Doron, income tax provision went up about $1 million approximately. Is there an explanation?

I think it basically relates to the higher profit that we have before income tax as a percentage wise I think we went down a little bit. And in addition according to U.S. GAAP, the tax provision is done on forecasted basis basically looking at the entire year we do it, but it went up and profit also went up entirely.

Okay. Thank you. And congratulations on great results.

Thank you.

Thank you very much and thanks for joining.

And ladies and gentlemen, at this time, we will conclude the question-and-answer session. I would like to hand the call back to management for any closing remarks.

Good morning again, ladies and gentlemen. Thank you very much for your ongoing support and we will be probably seeing you during the quarter on our road shows. Thank you very much. Bye-bye.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines.