Ormat Technologies, Inc. (NYSE:ORA) and ORIX Corporation (TSE:8591) (NYSE:IX) announced today that ORIX will acquire an approximately $627 million ownership stake in Ormat by purchasing approximately 11.0 million shares of Ormat common stock from FIMI ENRG Limited Partnership, FIMI ENRG, L.P. (collectively, FIMI), Bronicki Investments, Ltd., and senior members of management, representing in the aggregate an approximately 22.1% ownership position in Ormat. The per share sale price to be paid by ORIX at closing (subject to satisfaction of customary conditions, including regulatory approvals) is $57, which was the prevailing market price at the time that ORIX, FIMI and Bronicki reached agreement on the commercial terms of their transaction. The parties expect closing to occur in the third quarter of 2017.
Ormat Technologies' share price is currently down 2.54%, at $57.65.
Under terms of a new Commercial Cooperation Agreement between the two companies, Ormat will have exclusive rights to develop, own, operate and provide equipment for ORIX geothermal energy projects in all markets outside of Japan. In addition, Ormat will have certain rights to serve as technical partner and co-invest in ORIX geothermal energy projects in Japan. Also, ORIX will assist Ormat in obtaining project financing for its geothermal energy projects from a variety of leading providers of renewable energy debt financing with which ORIX has relationships in Asia and around the world.
Under related agreements, ORIX will have the right to designate three persons to be appointed to an expanded nine-person Ormat board of directors and also propose a fourth person to be mutually agreed by Ormat and ORIX to serve as a new independent director on the Ormat board. In addition, for so long as ORIX is entitled to board representation, ORIX will be subject to certain customary standstill restrictions, including an effective 25% cap on its voting rights. ORIX will also have certain customary registration rights with respect to the shares of Ormat common stock that it will own.
FIMI holds 13.9% of Ormat, and the Bronicki family 7.1%. Israeli investment institutions are also invested in Ormat, among them Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), Psagot Investment House Ltd. and Excellence. ORIX is traded on the Tokyo stock exchange with a market cap of some $20 billion.
Ormat was founded in 1965 by Judith and Yehuda (Lucien) Bronicki. FIMI first invested in the company in 2011, and increased its stake in 2012, when it signed an agreement with the Bronicki family to buy 11.7% of the company for NIS 297 million. Altogether, FIMI invested $140 million in Ormat. Its holding is now worth $400 million. Together with the dividends it has received over the years, this gives it a return of nearly 200%.
FIMI came into Ormat in the course of a control battle between the Bronicki family and Gazit Globe that led to the family getting into difficulties over a large bank loan.
Ormat's business is geothermal energy, both construction of geothermal power plants for customers and operation of its own plants. In recent years the company has expanded its activity to energy storage.
"We are excited to partner with ORIX, one of the world’s leading diversified companies with operations in 36 countries, to advance the interests of both companies," commented Gillon Beck, Ormat's chairman. "With ORIX's significant presence around the world, access to capital and strong positioning throughout Asia, we believe Ormat can enhance and accelerate its strategic growth plans in the renewable energy market."
"We are delighted to be partnering with Ormat to support the company’s expansion in the global geothermal energy market" said Mr. Yuichi Nishigori, Head of Energy and Eco Services Business Headquarters of ORIX. "As one of Asia’s leading investors in the renewable energy sector, and with a growing portfolio of renewable energy investments around the world, we recognize the importance of having clean, reliable, baseload power such as that which geothermal provides, and we believe that the geothermal sector has the potential to become an increasingly large component of the world’s overall energy mix. Given Ormat’s technological leadership and increasingly global portfolio of operations, we believe the company is well positioned to help lead this expansion, and we look forward to working with the Ormat board and existing management team to facilitate the company’s future growth and value creation."
"Following the meetings and discussions I had with ORIX’s management in the last several weeks, I am confident that this significant cooperation agreement will support our strategic plan to expand our geographical footprint as well as technological and customer base" said Isaac Angel, Ormat’s CEO. "We expect that the comprehensive capabilities and track record of Ormat together with ORIX’s commitment to expanding the scope of its geothermal and other renewable energy activities will accelerate our growth. I look forward to leading our cooperation with ORIX on future opportunities."
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2017
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