Good morning. And welcome to the Ormat Technologies' Fourth Quarter and Full Year 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rob Fink with Hayden IR. Please go ahead.

Thank you, Amy. Hosting the call are Isaac Angel, Chief Executive Officer; Doron Blachar, Chief Financial Officer; and 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 operation and are based on management’s current estimates and projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risk factors and uncertainties. For a discussion of such risks and uncertainties, please see 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’s 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 our website. Because these measures are not calculated in accordance with U.S. GAAP, they should not be considered in isolation from the financial statement 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 ormat.com, under the Events and Presentations link that’s found on the Investor Relations' tab. With all that said, I’d now like to turn the call over to Isaac Angel. Isaac, the call is yours.

Thank you very much Rob, and good morning, everyone. Thank you for joining us today for the presentation of our fourth quarter and full year 2016 results and our outlook for 2017. Starting with Slide 4, 2016 was an excellent for Ormat as we delivered another year of record revenue in adjusted EBITDA with double digit growth and strong execution on all our key metrics. Our Electricity segment performed as expected. As we continue to adjust capacity to maximize efficiency and bring new phases online. In addition, our Product segment delivered another strong year and we continue to enhance our Products’ backlog. Global demand for advanced geothermal energy remains robust, and Ormat continues to expand its presence in the market through strong execution. Solid financial results, resources and industry leadership. During the fourth quarter, we entered into a series of financial transactions to leverage and monetize our portfolio including four key transactions, which provided over $2 million in local capital, which will be used to accelerate our growth. Also in the fourth quarter, we announce our entry into the growing energy storage and distributed generation markets with the agreement we signed to acquire Bouillante Energy’s assets and businesses. This acquisition is expected to close in early March and we expect it to provide us with a rapid entry into these fast growing markets. I will elaborate on the progress we made and our plan for the future after Doron reviews the financial results. Doron?

Thank you, Isaac and good morning everyone. Starting with revenues on Slide 6. For the full year 2016 total revenues was $662.6 million, up 11.4% compared to $594.6 million in 2015. This increase was attributable to both our Electricity and Product segment in which revenues increased by 16.1% and 3.5% respectively, compared to the corresponding period in 2015. Moving to slide 7. Full year 2016 revenues in our Electricity segment were $436.3 million, compared to $375.9 million for the full year of 2015. This increase was primarily attributable to commencement of operation of the second phase of the McGinness Hills McGinnis and Don Campbell power plants in Nevada. In February 2015 and September 2015, as well as the commencement of operations of our plant 4, the Olkaria III complex in Kenya in January 2016. The increase was also driven by higher energy rates under the Heber 1 PPA commencing in December 2015 and consolidation of our Bouillante power plant effective July 5, 2016. Shortly after the closing of Bouillante acquisition we were able to increase its capacity from 10 megawatts to 15 megawatts. Moving to Slide 8. Full year revenue for our Product segment were $226.3 million compared to $218.7 million for the full year of 2015, representing an increase of 3.5%. This increase was primarily due to higher revenue recognition for the approximately $100 million contract of Cerro Pabellon in Chile and approximately $260 million contract of Sarulla project in Indonesia. Moving to slide 9 for a look at our gross margin. For the full year, gross margin increased from 36.7% in 2015 to 40.9% in 2016. Our Electricity segment gross margin increased to 40% from 35.5%, primarily due to higher efficiency inside our operating power plants as well as, lower cost of operations in the new power plants…

Thank you very much. Starting with slide 19 for an update on operations. During 2016, we have added 44 megawatts and increased our fleet to 713 megawatts by bringing new power plants online. Integrating and acquired power plant and expand in existing plants. Additionally, as you can see on slide 20, we adjusted the generating capacity of our existing power plants based on their performances. We increased the generating capacity over McGinness Hills complex from 82 megawatts to 86 megawatts, taking advantage of a high performing resource. While the generating capacity of the Ormesa complex was reduced from 42 megawatts to 40 megawatts in 2016, mainly due to lower performance of resource. The power generation in our power plants increased by 11.6% from 4.8 million megawatt hours at the end of 2015 to 5.4 million megawatt hours at the end of 2016, mainly due to commencement of commercial operation of the second phase of the McGinness Hills and Don Campbell power plants in Nevada. The commencement of operations of our power plant 4 Olkaria III complex in Kenya. Another factor is the contribution of the recently acquired power plant in Guadalupe, which as Doron mentioned we were able to rapidly increase its capacity to 15 megawatts. Moving on to slide 21. During the fourth quarter, we executed the new PPA to deliver electricity from our Ormesa complex beginning November 13, 2017. The 25 year PPA with SCPPA will replace on its current 30 year SO#4 PPA with Southern California Edison. The current contract was a variable energy rate tied primarily to volatile natural gas price and will expire on November 29, 2017. Under the terms of the PPA and energy from Ormesa complex will be sold got to SCPPA at at a rate of $77.25 per megawatt hour with no…

[Operator Instructions] The first question is from Paul Coster at JPMorgan.

Yeah, thanks. So Isaac, first of all on the first half loading on projects revenues, can you just elaborate a little bit. I missed the detail there? A – Isaac Angel: Okay, what I’m meaning is that we expect that the first half and especially the first quarter of this year will be loaded on the product comparing to the second half. And you already have our guidance for the full year.

All Right. Good. Okay. Gross margin outlook at this point and EBITDA outlook, you basically hit your targets. Should we at this point, really sort of be focused on growth more than margin expansion? A – Isaac Angel: We are expanding our margins for the third year in a row. We all realize that the pace of the growth will not be kept going forward and as we already hit a serious gross margin on the Electricity segment, which I expected still to grow, but in a lower pace. On the Product segment, on the other hand, I expect the gross margins to be lower due to a completely different mix of countries and products that we will be selling to them in 2017 and 2018 on the expected $251 million of backlog.

All right. Got it. And then just one last question, which is as you know there has a bit of noise around sort of potentially strategic interest in the company and I think you’ve issued a press release. Have you received any direct interest from a strategic and so can you provide us with some color there? A – Isaac Angel: Paul, as we said in our press release, the interest was directed to two of our shareholders, which were indicated in the press release. There is nothing here that was directed to the company or company’s sale or asset sales of the company. If there will be a third party transaction between interested strategic company buying the shares of our shareholders, it doesn't have much to do with the company we will continue to work as we did in 2016, 2017 and going on.

Thanks Sir. Congratulations on an excellent year. A – Isaac Angel: Thank you very much, Paul.

The next question is from Noah Kaye at Oppenheimer.

Thank you. Good morning or good afternoon to you Isaac and Doron. May I come back to the question that Paul was raising on the margin trajectory? You’ve commented to expect lower gross margins and product; talked about the overall trajectory. But if I take the midpoint of guidance, I get 50% EBITDA margin or adjusted EBITDA margin for the whole company in 2017 that’d be 110 bps expansion year-over-year. So I guess, my question is how should we think about underlying margin performance trend in the two segments and where are you seeing the margin expansion at this point? A – Isaac Angel: Good morning Noah. For us it’s 7:30 in the morning, we’re in Reno, so on the margin side, you’re right, as I answered to Paul before. We expect Electricity margins to go up due to few factors. The first one as we did, we started our efficiency plan throughout all of our assets in the space and around the world in about two years ago, two and a half years ago. We still have a way to go, which will increase our possibility in our existing assets. The second part, our new coming power plant are obviously coming with a higher profitability due to the fact that we are talking about more advanced technology, less O&M expenses and more experience. The third part is we have few power plants, which are not domestic, which are increasing and they are carrying higher profitability. So overall, we expect Electricity statement to take the profitability numbers up. But on the other hand, as I said before, on the Product segment we are expecting lower gross margins in 2017 and 2018 annually comparing to 2016 and 2015, if you recall about three years ago Product segments were around 25% to 30%.

Great. We have structurally underlying improvement in the margin expansion for Electricity segment. So then to get to that product segment, maybe you can comment you've got a very strong backlog. Can you comment into the activity levels that you’re seeing in the market as far as your expectation is to replenish that backlog? A – Isaac Angel: You’re right, our backlog today is higher than expected at the end of last year, but it is due to two effects. The first one, we experience somehow competition on our Product segments in few countries, which make us go back and make series efficiencies in our production facilities, purchasing facility and engineering, which basically enabled us to compete. But at the same time also obviously took the margins to a lower level that there were affected from our Sarulla and Cerro Pabellon project. Our expectation is that going forward, the growth of our product segment will be a more flex than the growth in our Electricity segments. If you recall, in our strategic session, we already declare that our expectation going forward is to try to change the mix between the Electricity and the Product segments, which something used to be around for 60/40 to something 80/20 obviously 80 being the electricity. I think this pretty much covers the question and Doron has an add on here.

I’d just like to add now. Isaac mentioned earlier with the first half in Q1 was going to below determined [ph] as well as, profitability. So although, we say that on a full year 2017, product margin was below than the full year of 2016 and the first half and especially the first quarter, we expect still to see relatively high margins.

Okay. Thank you very much and to your point, your expectations are for a 30% increase in the capacity of the backlog give or take by the year-end 2019, so clearly that is where market growth is. May be if I could just ask one last question, it’s around the Viridity pending acquisition. Issac, can you may be sketch the broad outlines of your expectation for that business. You mentioned some continuing consideration related to milestones. It’s an open question, if you can speak to those milestones that would be great. Maybe just give us a sense of how you view the opportunity with this platform thinking about the potential brownfield energy storage in your footprint of your own geothermal base and the potential overlap between Viridity, C&I demand management business in your existing core operations. A – Isaac Angel: Okay, Noah, obviously, it’s a very, very long answer to your question, I’ll try to be very short. Basically as indicated in our area strategic plan storage for us will be an additional segments looking for the Future. First, we started to utilize already existing assets and abilities within the company in order to enter the market. What we have realized that we are lacking some part of technology, which will be added on through Viridity and not necessarily only through Viridity, but maybe through additional acquisitions that we’ll do at the same time and same arena. At the end of the day the numbers for this particular segment for 2017 and the outlook for 2018 are relatively low to Ormat’s revenues and profits. But as the segment itself or the market itself was before the meter and after the meter are expected to grow exponentially within the upcoming five years. We look at our outlook, five or more years. In the future we think the growth in this segment will be much, much higher than the growth in our traditional segments, which our Products, as I already talked about and Electricity. So it is only an incubation of a phase that will grow exponentially, I'm very optimistic about the growth in the storage arena. As I said before we will be concentrating in solution in both sides of the meter, we are not going into the battery market.

Great. Thank you very much. A – Isaac Angel: Thank you very much, Noah.

[Operator Instructions] And the next question comes from Gerard Sweeney at ROTH Capital.

Good morning guys. I appreciate you taking my call. So, the question on the U.S. market in terms of how the PPA discussions are going. You highlighted 11 new projects, eight in the U.S., so there's definitely a little bit of focus as to how this market is developing, not only, I guess from the federal government side, but obviously the states are pushing it. But just curious as to see how PPA negotiations are going in terms of pricing versus your expectations? A – Isaac Angel: Gary, it’s a very good question, which you know lots of people in the industry will like to have the answer to including us. We don't know and nobody actually knows where the federal markets are going as you put it. But on the other hand, we still expect to add between 215 megawatt and 225 megawatt by the end of 2019, which means we are optimistic. As you said, there is a push at the state level. We are negotiating as I mentioned in my script a California PPA as we speak. We are seeing more upcoming demand or more than demand from few more state. So, overall even though the future is a bit blur, we are optimistic on the immediate two years or three years.

Would you characterize the pricing on the PPA negotiations as in line versus 12 months to 18 months ago versus today? Up, down any way you can comment on that? A – Isaac Angel: Gary, we all know that the PPA prices are scrolling down in the last five years. But there is a certain stability during the last 12 months. I’m expecting that the new PPAs to be pretty much in line with what we have.

Okay, so that's very helpful. I appreciate it. Just, let me see here, have one other question, I believe. On the Electricity front, you discussed making process improvements through the fleets. What inning are you in that process, I mean, I think 12 months ago, you said you're still very early. But today versus where you have to go, how many more plans do you have to go through and what’s the timeline on completion? A – Isaac Angel: You know what, I don't want to give you an accurate number and I don’t to be hold on. But if you, give or take, I think we are beyond the first half and we are already in the second half, but not necessarily the efficiencies on the second half by numbers will be as efficient in the first half because don't forget that first we started with the low hanging fruit.

Got it. Thanks. Then one quick, if I may, I mean, you’ve bumped up some of the power plants a little quicker than anticipated that probably haven't been in some of your slide decks, like McGinness. I think right from the 70s, to 83 to 86 megawatts. Do you have any little tweaks, are there a bunch of tweaks in terms of improving power plants in your model for 2017 and 2018. A – Isaac Angel: We are working on a few them. Yes, we might still surprise you with few ones that, I think that in the last two years. We are modifying the numbers on R&D basis. So we still, yes, we still have a few to go.

Okay. Perfect. I appreciate it. Congrats on a great year and thank you for your time. A – Isaac Angel: Thank you very much, Gary. Thank you.

The next question is from Ella Fried at Bank Leumi.

How are you. Well, congratulations on a very impressive quarter and the year. On the last question, I think concerned most is really investors. Is acquisition of the controlling stake and it takes place, what are the chances that the company will be delisted from the Israeli companies and Israel market? I know that you are not answering on the behalf of the controlling stake, but you have some faint idea about the interested parties. A – Isaac Angel: Ella, first of all as you say I cannot really comment on behalf of the shareholders. They will hold share, but from the company point of view, we don't have any plans to delist from the Tel Aviv. We have very good Israeli investor. We lacked Israeli market, we just issued a bond in Israel, not long ago and we are staying over there.

Okay. Thank you. This was very encouraging. A – Isaac Angel: Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Isaac Angel for closing remarks.

First of all, I’d like to thank you for support during the years and for your support in the future regardless the even that are taking place. The company is continuing as a battle ship forward and we have are very optimistic about 2017, 2018 and going forward. And thank you very much.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.