Good morning and welcome to the Ormat Technologies Inc. First Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to Rob Fink. Please go ahead.

Thank you, operator. Hosting the call today 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, forecast, 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 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 Ormat Technology's annual report on Form 10-K and quarterly reports on 10-Q that are filed with the SEC. In addition during the call, the company will present non-GAAP financial measures such as adjusted EBITDA and adjusted net income attributable to the company's stockholders. 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 that were posted on the Company's website. Because these measures are not calculated in accordance with 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 ormat.com under the presentation link that's found on the Investor Relations tab. With all that said, I would 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. Starting with slide 5, the first quarter was an excellent start for 2019. We continue to enjoy the benefits of our diversified and operationally efficient core electricity generation business. Generation during the quarter increased 11% quarter-over-quarter, reflecting the contribution of new and expanded plans as well as the continuing growth resulting from our recent USG acquisition. This drove a 7.9% increase in electricity segment revenue and then 8.2% increase in overall consolidated revenues, even as one of our important plant Puna in Hawaii remains closed following the last year volcanic eruption. I'm incredibly proud of our team for continuing to deliver profitable growth while facing such challenges. We delivered $101.8 million in adjusted EBITDA for the quarter, up 3.4% even with the lost revenue and profits from Puna. Adjusted EBITDA excluding the impact of Puna is approximately $103 million, up 4.7% from last year. In our product segment, we generated growth of more than 7% and we continue to benefit as the industry's only vertically-integrated company. Our pipeline continues to build and based on our current backlog, we are optimistic about the continued contribution of the segment to our business. As you know, our electricity segment is characterized by seasonality in generation, while our product segment is characterized by fluctuations in quarterly revenues. Although, we usually expect the second and third quarters to be weaker than the first and fourth quarters, we reiterate the 2019 guidance provided in the fourth quarter earnings release. Also, we reiterate our expectation to resume operation at Puna by year end. I will turn the call over to Doron for a review of the financial results before I provide an update on our operations. Doron please.

Thank you, Isaac and good morning everyone. Starting with revenues on slide 7, total revenue for the quarter were $199 million, up 8.2% compared to the same quarter last year. Breaking this down, the electricity segment grew 7.9% and product segment revenues increased 7.1%. Moving to slide 8, revenues in our electricity segment were $142.9 million for the quarter compared to $132.5 million in the same quarter last year; the growth resulting from recently expanded operations at McGinness Hills and Olkaria, as well as contributions from recently acquired US Geothermal power plants combined to overcome the loss of revenues resulting from the temporary shutdown of the Puna power plant. Turning to slide 9, product segment's revenues increased 7.1% to $52.1 million, up from $48.7 million in same quarter last year. Both the increase in revenues as well as the lower margin on this business segment are attributable to two large but lower-margin Turkish quarter. We expect margin performance in product to be stronger for the balance of the year. On slide 10, you can see that other segment contributed $4 million of revenues compared to $2.9 million in 2018. This segment includes revenues from the provision of energy storage, demand response and energy management services. Moving to slide 11 for a discussion of our total gross profit and margin; first quarter consolidated gross margin was 37.3% compared to 39.9% in the same quarter last year. On slide 12, gross margin for the Electricity segment expanded to 45.7%, despite the overhang of Puna ongoing fixed expenses, demonstrating our continuing commitment to expanding the operating efficiency of our core Electricity generation business. Gross margin, without the impact of Puna, was approximately 48.2%. In our Product segment, gross margin was 19.2% in the first quarter compared to 30.7% for the first quarter last…

Thank you very much Doron. Starting with slide 24 is an update on operations. During the first quarter of 2019, we added approximately 167,000 megawatt hours and increased our fleet to 1.69 million megawatt hours by adding our McGinness Hills Phase 3 and Olkaria III expansion as well as from the consolidation of Neal Hot Springs, San Emidio and Raft River power plants. This was partially offsetting the Puna shutdown. The overall generation year-over-year increased by 11%. Turning to slide 25. Let me spend a few moments providing an update on the situation at Puna. We continue to make progress in the efforts to bring the plant back online with the target of resuming operation by the end of the year. We are currently removing the plugs from the production wells and mobilizing large rig to the island to help with the drilling of additional wells and fixing existing wells if required and we are progressing with the building of the electrical substation. As a vertically integrated company, we have the unique advantage of controlling the entire value chain of geothermal development. This will help us bring Puna on time. Moving to slide 26. As of March 31, 2019 we claimed $30.6 million of business interruption and received $13.1 million. In April, we reached an agreement with another insurance company that paid for the past and future business interruption claims approximately $4 million that will be recorded in the second quarter this year. The business interruption coverage compensates the company for the loss of profit that resulted from the inability of the own surface property to generate electricity. Moving to slide 27. We remain on track with our near-term growth. We plan to add between 127 megawatts and 142 megawatts by the end of 2021 from organic growth. This target…

Thank you. We will now being the question-and-answer session. [Operator Instructions] Our first question today comes from Noah Kaye with Oppenheimer. Please go ahead.

Hi. Good morning. Congrats on the strong start to the year. Just a couple of questions to start with on the pipeline. So you added CD4, the 30-megawatt plant, and in your remarks you said 16 megawatts is contracted with SCPPA. Can you talk about progress in contracting the remaining capacity there? When we do expect to have that tide up?

We're negotiating with the additional cities in the area to add more capacity and I'm optimistic that at least the part of the remaining will be contracted very soon. And our intention is to sell the rest -- if there will be a rest in the spot market.

Okay. Great. And then it looks like Carson Lake was taken out from last quarter or this quarter just a little bit later timing or what was that due to?

Noah, the thing is -- actually it is delayed. So, it is not really taken out, but we have other projects which are in much advanced stages that we are promoting them and Carson Lake will be done in a later stage.

Okay. And maybe if I ask about the project pipeline solar exposure, it looks like solar that -- those projects are booked about 32 megawatts. If we understand right these are solar projects that are adjacent to or on your geothermal sites, so we can understand that given there is already an interconnection, can you talk about the returns you're expecting from these solar projects? And then maybe what you see at the opportunity to add more solar on your project sites?

Okay. Noah, as we discussed before our intention is not to be a solar company, but on the other hand, we should always remember that adding solar to our operating facilities to provide electricity to our ancillary services is basically giving us a huge return on those solar power plants, such as Tungsten solar and Steamboat solar and more will follow later on. When we are talking about solar, frankly speaking it is something that we won the COD -- sorry -- the RFP long time ago and the COD is very soon. So we decided to go ahead and build it and it will be COD if I recall correctly 2020. So it is something that we're doing; obviously as you realize the return on this particular one as it stands today is a bit lower than our regular return on US Geothermal power plants, but saying that we are still participating in RFPs outside of the US which over there the returns are much higher than in the US.

Okay. That’s very helpful. And maybe if I could sneak one more in, I think there was a bullet in the slide deck on how you're working on financing for the two PJM storage plants, the Amergan [ph]. So would this be non-recourse debt and how close are you do you think in terms of closing that debt? And then what would that mean for kind of recapitalizing and your total equity requirement in the project? And I ask because obviously you've got more in the pipeline now, so just want to understand as you go forward how to think about kind of equity requirements and returns.

Okay. First of all, a contrary to what we told at the beginning of these types of projects, those projects are totally financeable. The first two financing; it's the one -- actually one contract -- the first contract that will be financing those two power plants are almost done, the level of very close to closing and we can also see growing appetite for more. It is completely non-recourse and on a normal premium.

Thank you, very much.

Thank you, very much Noah. Have a nice day.

[Operator Instructions] Our next question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

All right. Good morning. Thanks for taking my call. I was curious, could you talk a little bit more on the drivers of your margin expansion on the Electricity side. Obviously, I know some of the expansion efforts and Phase two efforts have higher margins, but maybe specifically talk about some of the remaining opportunities to expand it maybe are you in what -- what margin are you targeting longer term?

Hi Gerry. Thanks for the question. Look, basically we are executing on our strategy. I mean it's the -- in the last five years, we said that our first target will be to work on our existing assets and increase profitability and then build the new assets on a different manner that they will be more profitable specifically by means of using more automation and so on and that's what we're doing. As more and more new facilities are coming online such as McGinness III and the new Olkaria power plant, obviously the profitability overall is growing. As we stand -- I think if you recall on our last Analyst Day, we said that our target will be to be around 45% to 48% for the upcoming few years and we are pretty much there.

Okay. And then also I think on the -- was it the CD4 you said the PPA was $68 per hour. How does that factor into everything you just said you talked about new projects better automation et cetera and margins, but if I remember correctly and I could be wrong. I think some of the PPAs on some of the other projects were probably more in the $70 area. Does this have an impact going forward and this is the new market for geothermal?

Gerry, you right, but we have already experienced ups and downs in the geothermal market in the last 20 years. We are expecting that this particular project, which was on the -- in the oven for the last seven, eight years, we decided to go ahead and contract it. I don't think that the $68 will be representing the future but nobody really knows. Our expectation is that with the new RPS coming up in Nevada, California and other states, the appetite for geothermal will grow and with that we expect that the PPA prices eventually if we are looking four, five, six years to the future that will be higher than $68.

Great. Thanks. I appreciate it.

Thank you very much, Gerry

The next question comes from Jeff Osborne with Cowen & Company. Please go ahead.

Hi, good morning. Couple of questions on my end. I was just wondering if you can elaborate on Puna, and when you talk about it being operational by year-end, is that one well or all 11 wells that were originally there. I understand, I think three were covered by lava. So I wasn't sure what the extent of new drilling needs to be done and as you uncap those what the efficacy will be is? As any of that testing been done?

Okay, Jeff. Thanks for the question. And it's following, as you probably know better than anybody else, we have production injection wells. The injections were not flat on the first place and they are operational and out of the production well. When the power plant became un-operational there were -- if I recall right between three to four production wells providing 38 megawatts with two of them providing the majority of the flow, and those are the wells that we are unplugging right now and very, very soon we will know how this is progressing. One thing we know for sure, again for sure is an estimation that resource as it is, is warmer than it was before and it is there because we are monitoring the injection wells all the time. Now we have to unplug those three or four wells, it will take us some time but we are optimistic as I said before that we will be -- as we are working in parallel, we will be operational by the end of this year.

Got it. And then I know you're not giving guidance for 2020, but how do you think -- is there any negotiation as it relates to pricing of that or do you revert to the old PPA and what would you advise investors to do as they think about the 2020 profile of Puna? Should we add that back to our models now or wait to see more evidence of this?

Jeff, we have a contract until 2027 at the existing rates. It's not a secret and we talked about it before that we have certain negotiations with HELCO to go beyond that. What is going to be the outcome of those negotiations, nobody knows at this stage. One thing is for sure that 38-megawatt or 50-megawatt geothermal power plant for Hawaii is crucial. And today after the unfortunate episode of this lava thing, everybody realizes today that 30% of the Island's electricity shutdown is damaging the state and -- but let's wait and see where this thing will end.

Make sense. Two other quick ones on my end if I could. On Turkey, the pie chart is helpful as it relates to the backlog being 38% there. But with the volatility of the lira in recent weeks and months, is there any change or risk to that? I know you've highlighted potential risk in the past, it looks like Q1 that that came through just based on the gross margins, but how do we think about any risks of projects being delayed or canceled in light of the currency fluctuations that we've seen?

Let's divide this thing to three. The first part is all our contracts are dollar denominated. The second part is those two particular contracts were done because of a severe competition that we had to make a point out of it which we did. And the third part is you're right there are -- the country is in some kind, of a, turbulence and there might be delays or push-ups of project. Based on the fact that the local developers may find or not find investment to finish or finalize the power plants. That's why Ormat during the second half of 2018, started to push very, very severely if it's the word I can use other markets in the world. And you have a list of them and if you look at the markets that we are operating in. And the last significant contract that was signed in Chile and you will see that even though Turkey was and still is one of our largest prospects, we want to diversify, and approach additional markets such as New Zealand, Philippines and Central America. And you will see in our future PRs that we are quite successful.

And it's great to see the diversification there. Just very quickly, reflecting on two things from the Analyst Day some time ago, both the ORIX presentation as well as the Viridity comments. Can you just remind us on the other segments that you report? What it will take to get to the scale for that to turn EBITDA positive? Is there a certain revenue level? Or maturity of the business, I wasn't sure how we should think about that in the years ahead? And then also just bigger picture-wise on ORIX, it doesn't seem like there's been about a lot in the public domain about them working with you and project development. And some of the items that were highlighted at the Analyst Day, some time ago. And I was just wondering if you can update us on the status of that partnership potential for funding projects together.

Jeff, first of all, on the storage business as a whole, as we all understand, that it is a big potential for all of us within this market, but the timeline for the maturity of those projects is not exactly as we want but much slower. Ormat is building or already finalized three projects in this storage projects. We have another one which will be done within the next two quarters and then another one at the beginning of next year. So we are making progress. But, we changed a bit our focus, being -- which means that instead of building a power plant for other company, all the power plants that I mentioned are built and owned by us. And then, we also changed a bit the focus to -- in front of the meter power plants, providing frequency regulation and voltage regulation, which is great. But when you build your own power plants the revenue starts to build up slower, than you were selling power plants to a third party. So we have to be a bit patient about it. But we all understand that from the corporate point of view, long-term vision. I think it's the best thing to do. This is on the -- on your first question. On the second one, we are working with ORIX, but unfortunately nothing substantial happened yet. But I'm optimistic that it will.

Great good to hear, thank you.

Thank you very much Jeff.

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

Thank you very much for -- everyone for joining us this morning. We are very excited with the -- with our performance of our Q1, very proud of our employees that made it happen. And I hope it will be a sign for a very successful year. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.