Geothermal company Ormat Industries Ltd. (TASE: ORMT) posted $99.1 million revenue for the first quarter of 2011, 16.3% more than the $85.2 million for the corresponding quarter of 2010. However, the company's operating profit fell 53% to $6.1 million and it posted a net loss of $6.8 million ($0.03 per share) for the first quarter, compared with a net profit of $6 million for the corresponding quarter.
Ormat CEO Yehudit Bronicki said that the company would also report a loss for the second quarter, but that she expects to return to profit in the second half, and to report a net profit for the year as a whole.
A 35.6% increase in financing costs to $13.2 million for the first quarter from $9.7 million for the corresponding quarter, weighed on Ormat. The company attributes the increase to higher interest payments after it converted bank loans to bonds, and to an increase in its long-term liabilities.
Cash flow from operations totaled $17.6 million, and the company had $233.6 million in cash, deposits, and financial assets at the end of March.
During the first quarter, Ormat sold its holding in tax partnership OPC LLC, which it bought from Lehman Brothers in October 2009, to JPMorgan Chase & Co. (NYSE: JPM) for $24.9 million. Although the sale increased Ormat's cash, it did not say whether it made a profit on the sale.
Ormat posted a net loss of $44.3 million for the fourth quarter of 2010, due to a $128.6 write-down on its North Brawley geothermal project in California, because operating problems cut production by 60%. In today's conference call, Ormat president and COO Yoram Bronicki said, "We're making progress at North Brawley. The field's unique characteristics make it difficult for us to offer a precise timetable."
Asked about the worst-case scenario for North Brawley, Yoram Bronicki said, "The plant won't work. The realistic thing to say is that North Brawley is currently affecting us in two ways. We dealt with the first by the write-down in the preceding quarter, and the return on capital of the plant. The second thing and more painful right now is the real operating loss from the plant's operations. The worst realistic scenario for us is to conclude, 'OK, this plant generates 33-38 megawatts, less than the 50 megawatts we believe that it can generate, and we'll have to rebuild a plant balanced at this level of production. The question is how efficiently we can operate a 35-megawatt plant."
Bronicki attributed the increase in electricity segment revenue (14.5% to $78.2 million for the first quarter) to a 10% increase in electricity production, partly thanks to the Puna Geothermal Power Station in Hawaii, the commercial operation of the North Brawley Geothermal Power Station, the full consolidation of the Mammoth Springs complex, and increased production from the cogeneration turbine at the station. In addition, the average price of electricity rose to $75 per megawatt hour from $72, thanks to higher rates at the Puna power station.
Ormat's share price fell 1.2% to NIS 22.38, giving a market cap of NIS 2.7 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on May 22, 2011
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