"Today we reveal how ESG-darling Ormat, a developer and operator of geothermal power plants, has engaged in what we believe to be widespread and systematic acts of international corruption. We expect the blowback to these revelations to be severe, threatening Ormat’s contracts in its most lucrative markets," Hindenburg Research, an investment house that specializes in short selling recommendations, stated in a report released yesterday.
According to the report, the power production contracts in these markets contributed 70% of Ormat Technologies' (TASE: ORA; NYSE: ORA) net profit in 2020. The contracts concerned are mostly in Kenya, Guatemala, and Honduras, the report claims. "We have uncovered evidence tying Ormat to corruption with senior government officials in this lucrative international business," it states.
The report points out that Ormat director Ravit Barniv and the company's general counsel and chief compliance officer Yehezkiel (Hezi) Kattan previously worked at Shikun & Binui Holdings Ltd. (TASE: SKBN) and face pre-indictment hearings in Israel on charges of bribing officials when they were with that company in two of Ormat's main markets, Kenya and Guatemala. It claims that Ormat has concealed this information from investors.
Since February 10, Ormat Technologies' share price has dropped by 30%.
In a statement issued yesterday, Ormat Technologies responded to the report by Hindenburg Research as follows:
"Hindenburg is a self-proclaimed short seller who we believe stands, along with its clients, to realize significant gains in the event that Ormat’s stock price declines. Hindenburg’s claims are inaccurate and filled with innuendo in an attempt to mislead investors about Ormat.
"We have been providing clean renewable energy in Kenya, Honduras and Guatemala for many years, supporting local communities. Our facilities are financed by numerous leading multinational banks, which conduct extensive due diligence on the company and its operations prior to entering into lending agreements. We are committed to conducting all of our business according to the highest ethical standards, and we have clear policies in place to ensure our people and our partners act accordingly and consistent with all applicable laws and regulations.
"The company is aware of claims being investigated in Israel regarding Ravit Barniv, an Ormat Board member, and Hezi Kattan, the company’s general counsel and chief compliance officer. The claims involve Ms. Barniv’s and Mr. Kattan’s work at another company, prior to joining Ormat. Those claims remain subject to a governmental hearing that may take time to conclude and Ormat is monitoring the process closely.
"On February 24, 2021, the company’s board of directors determined that, at this time, it would be prudent to transfer the responsibility for the company’s compliance function to other members of the Ormat management team until these issues are resolved. In addition, Ms. Barniv told the board of directors that she believes that investor attention should be focused on Ormat’s strong performance and future prospects. Accordingly, she has decided not to stand for reelection at the upcoming annual meeting expected in May.
"Ormat is a global leader in geothermal energy. As the only vertically integrated company in our industry, Ormat is uniquely positioned to serve customers from plant design to supply and development of geothermal, recovered energy, and energy management and storage solutions.
Ormat’s board of directors and leadership team are confident in the company’s strategy. Our strong performance shows that we are on the right path for long-term success and to continue the company’s growth trajectory. We are focused on capitalizing on our momentum - even in light of the Covid-19 pandemic - and will continue to serve and act in accordance with our values, high ethical standards and in our shareholders’ best interests."
Ormat's share price is up 1.28% on the Tel Aviv Stock Exchange this morning, after falling 5.52% in yesterday's session.
Published by Globes, Israel business news - en.globes.co.il - on March 2, 2021
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