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Ormat (ORA) Unit Inks PPA for California Geothermal Complex

Zacks

Ormat Technologies, Inc. ORA announced that one of its affiliate has signed a 25-year power purchase agreement (PPA) with Southern California Public Power Authority (SCPPA) for power generated by the Ormesa geothermal complex in Imperial Valley, CA.

Details of the Deal

The SCPPA will buy energy from Ormesa at the rate of $77.25 per megawatt-hour (MWh) with no annual escalation. The capacity of the contract is 35 megawatts (MW), with a maximum generation equivalent to a net capacity of about 43 MW.

The term of the agreement will be effective from Nov 30, 2017 and replace Ormesa's current 30-year Standard Offer Contract No. 4 with Southern California Edison, a subsidiary of Edison International EIX, which is set to expire on Nov 29, 2017.


SCPPA will resell around 86% of the complex's output to the Los Angeles Department of Water and Power (LADWP) and the remaining 14% to the Imperial Irrigation District (IID).

ORMAT TECH INC Price

Benefits of the Deal

The new contract will reduce the company’s exposure to natural gas to about 50 MW, which is less than 10% of its portfolio.

Meanwhile, Ormesa's operating profit and EBITDA (earnings before interest, taxes, depreciation and amortization) are expected to improve by $8.5 million in 2018 compared to the estimated levels of 2016.

Also, geothermal power will support LADWP’s goal of a portfolio comprising 33% renewable energy by 2020, while it continues to shift away from coal.

Price Movement

Ormat Technologies has largely outperformed the Zacks Categorized Other Alternative Energy industry. The company’s current rate of return is 31.2%, compared to the average industry decline of 18.3% over the last 12 months.

The company has delivered an average positive earnings surprise of 25.48% in the last four quarters. Its 2017 earnings estimates have also moved up from $2.03 to $2.05 in the last 60 days.

Zacks Rank & Key Picks

Ormat Technologies carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the Oil – Energy sector include Transmontaigne Partners L.P. TLP and McDermott International, Inc. MDR.

Transmontaigne Partnersdelivered an average positive earnings surprise of 5.53% in the trailing four quarters.The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McDermott Internationalrecorded an average positive earnings surprise of a whopping 474.04% in the trailing four quarters. The company flaunts a Zacks Rank #1 as well.

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