Ormat Technologies: Growth is coming from products and storage, but electricity no longer carries the story alone

Company Overview

Ormat is no longer just a geothermal electricity producer. That is still the core identity, but by 2025 the company looks much more like a renewable-energy platform with three engines: electricity, products and energy storage. That distinction matters because the surface read of the year is too flattering. Revenue grew 12.5% to $989.5 million, adjusted EBITDA rose 5.7% to $582.0 million, and net income attributable to shareholders was essentially flat at $123.9 million. Anyone who stops there misses the key point: growth came from the newer engines while the legacy electricity engine weakened.

What is working now is real. First, storage has finally moved from promise to actual operating contribution. Segment revenue rose to $79.0 million from $37.7 million in 2024, and segment operating income jumped to $31.2 million from almost zero a year earlier. Second, the Products segment had a strong year, with revenue rising to $216.7 million from $139.7 million, helped mainly by project progress in New Zealand and Dominica. As of February 25, 2026, product backlog had already reached $351.7 million, of which 67.7% was concentrated in New Zealand and another 25.7% in Asia.

The problem is that the improvement still does not solve Ormat’s active bottleneck: financing flexibility. Operating cash flow fell to $335.1 million while capital expenditures jumped to $619.8 million. The company also paid $265.5 million of debt principal and $29.1 million of dividends. This was not a year in which the business funded growth internally. It was a year in which Ormat relied on new debt, tax monetization and credit lines to keep pushing its 2028 plan forward.

There is another easy misread here. Arrowleaf, for example, added 42 MW of solar capacity to the electricity portfolio, but 100% of project revenue is booked in the Energy Storage segment. That is a good illustration of the current Ormat story more broadly: asset mix, reporting structure and actual profit pools no longer line up neatly. Looking only at total MW will not tell you where value is really being created, or where the balance-sheet burden is sitting.

Ormat’s economic map in 2025 looks like this:

Events And Triggers

Ormat’s real triggers are not all inside the 2025 income statement. Part of the story is already spilling into 2026 and beyond. That matters because the market is looking less at the year that closed and more at whether 2025 was just a heavy investment year, or the start of a successful transition into a broader and more profitable structure.

Arrowleaf pushes storage into a new phase

First trigger: the start of commercial operations at Arrowleaf in California. This is Ormat’s first hybrid solar-plus-storage project, combining 42 MW of solar generation with 35 MW / 140 MWh of storage under a long-term tolling agreement with San Diego Community Power. Beyond the symbolic value, it shows what Ormat is trying to build: less reliance on pure spot-market electricity economics and more assets with long-duration contracts, visible cash flows and early value capture through tax equity.

Management also highlighted that the hybrid tax equity partnership on Arrowleaf closed in December 2025 and generated about $38 million of upfront proceeds, while the company collected more than $160 million of tax credits during 2025. That is central to the story. Storage is not only a new revenue engine. It is also a vehicle that helps Ormat turn tax attributes into cash. The benefit is obvious. The open friction is obvious too: this supports the balance sheet, but it does not replace the need to prove that the underlying assets can generate durable operating cash flow on their own.

The Switch deal shows where Ormat wants to take the electricity segment

Second trigger: the 20-year power purchase agreement with Switch for about 13 MW from the Salt Wells geothermal plant in Nevada, with an option to add about 7 MW of solar PV to serve the plant’s auxiliary needs. Deliveries are expected to begin in the first quarter of 2030, after a major Salt Wells upgrade that management expects to complete in the second quarter of 2026.

Why does it matter? Because this is Ormat’s first direct agreement with a data-center operator, and management went further by saying it sees potential to recontract more than 100 MW of the existing fleet under this framework. That turns the story from a single PPA into an attempt to reposition part of Ormat’s geothermal fleet from a traditional utility read into a reliable-power infrastructure read for data centers. That can improve pricing, and the 10-K explicitly says Ormat has signed several U.S. PPAs at prices above $100 per MWh versus roughly $60 to $80 per MWh during the prior five years. But there is a practical caveat: Salt Wells is currently a 10 MW plant, so this story still depends on upgrades, timing and execution long before it shows up in revenue.

Indonesia expands the pipeline, not near-term cash

Third trigger: the Telaga Ranu geothermal concession in Indonesia. Ormat described the project as having potential of up to 40 MW and said the award lifts its exploration pipeline in Indonesia to about 200 MW, in addition to the 59 MW associated with its operating asset base there. That fits the broader 10-K framing: across 2024 and 2025 Ormat won four tenders in Indonesia with total potential of 122 MW, while the Ijen plant started commercial operation in February 2025 and contributes 17 MW on Ormat’s share basis.

This strengthens the long-term growth case for Ormat as a geothermal developer in markets that have both resource depth and policy support. But it needs to be read correctly: this is pipeline, not near-term cash.

Efficiency, Profitability And Competition

The central point in 2025 is that the company grew, but the quality of growth was uneven. Products and storage improved sharply, while electricity deteriorated. The right read is therefore not “Ormat is growing,” but “Ormat is replacing its main earnings engine while still running at full speed.”

Electricity weakened more than the top line suggests

Electricity segment revenue fell 1.2% to $693.9 million, but segment gross profit fell 18.5% to $197.9 million and segment operating income fell 29.2% to $114.6 million. That is not noise. That is the core engine losing power.

The reasons are clear. On revenue, the company absorbed an $18.6 million decline from curtailments in the U.S., mainly at McGinness Hills, Mammoth, Tungsten and Dixie Valley. It also took a $13.9 million revenue hit at Puna because of wellfield issues and lower energy rates versus 2024. Stillwater contributed another $3.2 million decline because of planned repowering. There were offsets from Blue Mountain, Beowawe and a cleaner comparison at Dixie Valley after unplanned maintenance in 2024, but not enough to reverse the picture.

The deeper operating read is also weaker than the headline suggests. Consolidated generation rose only 0.6% to 7.49 million MWh, while 277,923 MWh were lost to curtailments. Average realized price fell to $92.6 per MWh from $94.3 per MWh in 2024. At the same time, segment cost of revenue rose by $36.5 million, driven mainly by a $20.0 million increase in depreciation and an $8.3 million increase in property taxes. That means Ormat was hit on volume, price and cost at the same time.

This is why the electricity debate is not about whether demand for geothermal is improving. Demand is improving, and PPA pricing is better. The question is whether the existing fleet can translate that backdrop into output, pricing and margin. In 2025 the answer was only partial.

Storage is finally becoming an operating contributor

Storage was the operating highlight of the year. Segment revenue rose 109.3% to $79.0 million. Gross profit rose to $28.8 million from $4.1 million, and operating income rose to $31.2 million from just $0.2 million in 2024. That improvement came from two places: $15.8 million of higher merchant revenues at PJM storage facilities, and the contribution from assets that entered operation in 2024 and 2025, including East Flemington, Bottleneck, Montague and Lower Rio.

But it is still important to separate good growth from clean growth. Part of the segment still lives with merchant exposure, and the company itself says its goal is to balance long-term contracted revenues, including tolling agreements, with selective merchant exposure. So 2025 clearly shows that storage can contribute real earnings. It does not yet prove that the whole segment has become a clean, fully contracted infrastructure-style business.

Products are strong, but quality still depends on execution

The Products segment had a sharp year: revenue of $216.7 million versus $139.7 million in 2024, gross profit of $46.0 million versus $25.8 million, and operating income of $23.4 million versus $10.3 million. The company explains that this came mainly from project progress and the timing of revenue recognition, and that is exactly the right framing. This was not a simple volume-growth story. It was a project-recognition story.

That matters because the filing adds two layers that investors should not ignore. First, Ormat ended 2025 with about $245.0 million of remaining performance obligations in the Products segment, and it expects to recognize approximately 100% of that amount during the next 24 months. Second, the auditor explicitly flagged future-cost estimates in Product revenue recognition as a critical audit matter. That is not a footnote. It means Products is strong, but it is still dependent on the quality of cost-to-complete estimates, project execution and supply-chain discipline.

There is also an important concentration point inside the backlog. As of February 25, 2026, product backlog stood at $351.7 million, with $238.0 million in New Zealand and $90.5 million in Asia. So more than 93% of the backlog sits in two geographic pockets. That is not necessarily negative, but it does mean the Products engine is less diversified than the headline total implies.

Competition matters as well. Management explicitly says competition in the Products segment has already started to make it harder to secure new orders and has begun to pressure operating margins. So 2025 does not prove that this issue is gone. It only shows that, this year, project mix and timing worked in Ormat’s favor.

Cash Flow, Debt And Capital Structure

This is where the real 2026 test sits. To avoid confusion, the right framework here is all-in cash flexibility: how much cash is left after the period’s real cash uses, not a narrow EBITDA or earnings read.

Operating cash flow did not fund the investment year

Operating cash flow fell to $335.1 million from $410.9 million in 2024. The main reason was not a collapse in reported earnings. It was working capital: a $60.5 million net increase in costs and estimated earnings in excess of billings and billings in excess of costs, a $7.2 million increase in inventory and a $1.8 million net decline in accounts payable and accrued expenses. In other words, part of the product growth consumed cash before it returned it.

Against that, capital expenditures jumped to $619.8 million from $487.7 million in 2024. Add $29.1 million of dividends and Ormat ended 2025 with an all-in cash deficit of $313.8 million even before debt principal payments. Add $265.5 million of scheduled debt repayments and the gap reaches $579.3 million.

The implication is straightforward: 2025 was not a year in which the business generated excess cash and then decided to invest it. It was a year in which the company had to build a financing bridge to sustain growth.

How Ormat financed the gap

That bridge had several layers. During 2025 Ormat received $548.5 million of net proceeds from new long-term loans, $152.0 million from tax monetization transactions, $80.0 million from revolving credit lines and $10.3 million from noncontrolling interests. That was enough to fund investment, meet debt repayments and raise cash balances.

But the quality of those funding sources still matters. Tax monetization is a very effective way to accelerate cash generation in a business that is building ITC- and PTC-eligible assets. Still, it is not the same as the installed fleet fully funding its own growth internally.

At year-end 2025 Ormat had $147.4 million of cash and cash equivalents, plus $388.9 million of unused committed corporate borrowing capacity. That gives the company breathing room, but it does not solve the forward picture. Ormat itself estimates about $675.0 million of 2026 capital needs and another $303.7 million of long-term debt repayments. So 2026, like 2025, still relies on operating cash flow together with project financing and refinancing.

Debt is still under control, but it is no longer a side note

The good news is that covenants are not tight. Net debt to adjusted EBITDA stood at 4.36 at year-end 2025 against a 6.0 ceiling, and the equity-to-assets ratio stood at 42.9% versus a 25% minimum. In addition, 84.3% of consolidated long-term debt carried fixed interest rates, so immediate rate sensitivity is relatively contained.

The less comfortable news is that this is no longer a company where debt belongs in a footnote. Principal on long-term debt and financing liability stood at $2.66 billion at year-end 2025. Principal payments are $303.7 million in 2026 and $780.9 million in 2027. The 2027 figure is especially important because it also captures the convertible notes maturity.

So Ormat’s balance-sheet story is two-sided. The company is not sitting at the covenant edge. But it is clearly in a phase where delays, slower backlog conversion or tighter funding markets matter more than they used to.

Outlook

2026 looks like a bridge year with proof points. Before getting into projects, there are four non-obvious observations that matter:

1. The weakness in 2025 was not about demand. It was about electricity-segment execution. Better PPA pricing alone will not fix that.
2. Storage is already proving profitability, but the market will still focus on contract quality. New MW are not equal if they stay merchant rather than tolling.
3. Products look strong, but this is still a segment driven by project recognition. Cash conversion lags the headline backlog read.
4. The balance sheet still allows growth, but not much room for execution mistakes.

What has to happen in the electricity core

The first test will be stabilization in electricity. Salt Wells is expected to complete its major upgrade in the second quarter of 2026, preparing the ground for deliveries to Switch in 2030. Puna is expected to benefit from a new fixed-price PPA with higher capacity and an extension to 2052, assuming it becomes effective in early 2027. In addition, Ormat has several COD points in 2026: the 10 MW Dominica plant in the first quarter, the 10 MW Bouillante expansion in the third quarter, the 7 MW Cove Fort upgrade in the second quarter and the 3 MW Stillwater upgrade in the fourth quarter.

If that line-up lands on time, the market can start to believe that 2025 was a transition year rather than a structural deterioration. If timing slips, the pressure on the electricity read will remain.

What has to happen in storage

Storage has already passed a first proof-of-concept year. Now it needs to prove scale. The company is building eight additional projects totaling 410 MW / 1,540 MWh across California, Texas and Israel. Bird Dog is expected in the second quarter of 2026, Shirk in the first quarter of 2026, Griffith in 2027, and the Israeli projects later through 2028.

What the market will watch here is not simply more MW, but a better revenue mix. If tolling and PPA exposure continue to rise, storage can start to look like a more visible contracted infrastructure engine. If most of the growth stays merchant, the valuation discount from volatility will not fully go away.

What has to happen in Products

Products enters 2026 with real workload: $245.0 million of remaining performance obligations at year-end 2025, with almost all of that expected to convert to revenue within 24 months. Backlog also rose to $351.7 million by February 2026, including about $100 million tied to the TOPP2 project in New Zealand.

The challenge is twofold. First, backlog still needs to convert at a good pace. Second, margin still has to hold. Because of the recognition model, cost overruns, logistics delays or weak cost-to-complete estimates can quickly erode the profitability that looks strong in the 2025 report.

How the market is likely to frame 2026

Taken together, next year does not look like a clean breakout year. It looks like a year in which Ormat has to prove three things at once: that electricity can stabilize, that storage can grow without leaning too heavily on merchant exposure, and that Products can translate backlog into revenue without giving back too much on margin.

If all three happen together, 2025 will look in hindsight like a weak electricity year but an important base year for a broader business model. If one of them stalls, especially electricity or funding, the market will stay with a reading of a company that is growing nicely but consuming too much flexibility along the way.

Risks

First risk: electricity erosion may not be purely temporary

Management can fairly argue that some of the 2025 pressure was specific: curtailments, maintenance, repowering and Puna wellfield issues. But investors should also remember that Brawley took a $7.2 million impairment because of continuing losses driven by wellfield issues, and OREG 2 took a $4.9 million impairment because of the expected termination of a waste-heat agreement. That is more than just a string of temporary outages. It also raises questions about the durability of parts of the asset base.

Second risk: 2026 and 2027 are heavy financing years

The threat is not immediate covenant pressure. It is the combined execution and funding load. The company has to fund elevated capex, refinance part of the debt stack, preserve access to credit lines and keep monetizing tax benefits. Any tighter funding environment, project delays or EBITDA shortfall would make that burden heavier.

Third risk: customer concentration and collections

Ormat still depends on a small number of large customers:

On top of that, Honduras had $20.3 million overdue from ENEE at year-end 2025, of which only $1.0 million was collected in January and February 2026. The company believes it will collect the balance, but this is exactly the type of gap between accounting profitability and actual cash timing that matters in a heavy-capex story.

Fourth risk: external bottlenecks in policy and supply chain

Ormat explicitly says growth in the U.S. storage segment relies on batteries imported from China, and that some of the electricity-segment growth in the U.S. also relies on imported solar equipment from China. FEOC restrictions in U.S. law for projects that start construction after December 31, 2025 do not stop Ormat’s growth plan, but they do add real risk around costs, timing and project economics.

Fifth risk: short interest is not signaling pressure, so the debate stays fundamental

From a market-technical perspective, there is no obvious short squeeze or dislocation here. Short interest as a percentage of float stood at just 0.08% in late March 2026, versus a 0.95% sector average, while SIR was only 0.37. That means the Ormat debate is more likely to stay a clean argument about operating quality, storage economics and financing rather than a technical market positioning story.

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Conclusions

Ormat exits 2025 as a more interesting company, but not yet a cleaner one. Products and storage are now real earnings contributors, the U.S. geothermal demand backdrop looks better, and PPA pricing has improved. At the same time, the electricity engine weakened in the same year that capital intensity moved sharply higher. So the central question is no longer whether there is growth. It is whether Ormat can keep growing without consuming too much balance-sheet flexibility on the way.

Current thesis: Ormat is moving from a predominantly geothermal power company into a broader renewable-energy platform, but 2025 showed that the new growth engines still do not fully compensate on their own for erosion in the core electricity business and for the funding burden.

What changed: 2025 shifted the center of gravity. This is no longer a story in which electricity explains almost everything and Products is just an add-on. Storage and Products became meaningful contributors, but they also made financing quality and cash conversion much more central to the investment read.

Counter thesis: The strongest pushback is that the electricity weakness is temporary, and that better PPA pricing, new projects, larger-scale storage and the Indonesia pipeline can lift the whole platform materially within a few quarters.

What may change the market read in the short to medium term: faster stabilization in electricity, clean project CODs in 2026 and a continuing move in storage toward contract-backed revenue. On the other side, any execution slip or need for more expensive funding will pull the focus straight back to the balance sheet.

Why it matters: Ormat is now being judged less as a traditional geothermal utility and more as a platform that must prove it can grow, fund and price three engines at once without losing control of cash conversion.

What must happen over the next 2 to 4 quarters: electricity needs to stabilize, storage needs to keep adding earnings under higher-quality contracts, and Products needs to convert backlog into revenue without margin leakage. What would weaken the thesis is the opposite: more delays, more capex without matching cash generation, and continued dependence on financing moves to sustain growth.