Ormat Technologies, Inc. (ORA) Q3 2026 Earnings Call Transcript

Operator: Good morning, and welcome to Ormat Technologies' third quarter 2026 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please note that this event is being recorded. I would now like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Josh Carroll: Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer, Assi Ginzburg, Chief Financial Officer, and Smadar Lavi, Vice President of Investor Relations and ESG Planning Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections, future results, or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risk and uncertainties, please see risk factors as described in Ormat Technologies' annual report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as Adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information are set forth in the press release that was issued last night, as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab. With all that said, I would now like to turn the call over to Ormat CEO, Doron Blachar. Doron?

Doron Blachar: Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me begin with the key highlights from the third quarter, starting on slide four. Ormat delivered a strong third quarter, building on the momentum we have sustained throughout the first nine months of the year. During the third quarter, revenue increased 10.2% and Adjusted EBITDA grew 11.1% compared with the prior year period, reaching a third quarter record. As a result of this growth and our visibility into the fourth quarter, we are raising the midpoint of our full-year revenue and Adjusted EBITDA guidance. Energy storage was the main driver of our growth this quarter, supported by new capacity, high asset availability, and favorable merchant pricing in PJM. In our electricity segment, our 10 MW Dominica geothermal plant began commercial operations in July, and generation at Olkaria continued to improve following our resource utilization work. These gains were partially offset by lower generation at our Puna plant due to hurricane-related forced outage. On the EGS front, we continue to advance two pilot projects with SLB and Sage while negotiating power purchase agreement for Dixie Valley, our first planned commercial EGS project, and for other potential projects. I will provide more details shortly. Finally, as many of you are aware, we hosted an investor day in September where we outlined our growth target for 2030. While it is still early, we believe today's results reflect solid initial progress towards these goals. Before I dive deeper into some of our operational highlights, I would like to turn the call over to our CFO, Assi, to cover the financial results for the quarter. Assi?

Assi Ginzburg: Thank you, Doron. I will begin my review of the financial results on slide six. The third quarter revenue was $275 million, marking an increase of 10.2% compared with the prior year period, led by strong energy storage performance. Gross profit increased 20.8% to $77.4 million, and consolidated gross margin expanded by 250 basis points to 28.1%. Net income attributable to the company stockholders was $31.9 million, or $0.51 per diluted share, compared with $24.1 million, or $0.39 per diluted share, in the prior year period. The year-over-year increase of 32.2% was mainly driven by higher energy storage revenue and gross profit. Adjusted net income attributable to the company stockholders in the third quarter of 2026 increased 39.8% to $34.8 million, or $0.56 per diluted share, compared with $24.9 million, or $0.41 per diluted share, in the third quarter of 2025. Adjusted EBITDA increased 11.1% to a third quarter record of $153.8 million. Slide seven provides additional details on our segment performance. Electricity segment revenue in the third quarter declined 2.1% to $163.7 million. The decline was driven by a temporary lower generation at Puna following a hurricane-related forced outage, which had a $5.1 million revenue impact in the quarter. In the fourth quarter, we plan to clean out wells at Puna. While this work will temporarily reduce revenue, we expect it to support higher generation in 2027. The Puna impact was partially offset by $2.2 million in revenue from our new Dominica plant and $1.9 million from higher generation at Olkaria following improved resource utilization. Segment gross margin was 22.2% compared with 25.4% in the prior year period. Excluding the Puna impact, electricity gross margin would have been approximately 24.5%. For the fourth quarter, we expect electricity gross margin to be slightly above last year's level, as improved operation at the remaining of our plants should more than offset the temporary impact of the Puna well cleanouts. Product segment revenue was $61.5 million, down 1.2%, mainly reflecting the timing, manufacturing, and construction progress. Gross margin was 16.5%, an improvement from the second quarter, compared with 21.7% in the prior year period. We continue to expect full-year product segment gross margin of approximately 18%. Energy storage segment revenue increased 145.2% to $49.9 million. High assets availability enabled us to capture strong merchant pricing in PJM, while capacity additions over the past 12 months contribute incremental revenue. The segment generated a gross margin of 62.1%, reflecting our strategy of optimizing the mix of contracted and merchant revenues. We expect energy storage segment gross margin for the full year to be approximately 50%-55%. Slide eight and nine summarize our nine-month results. Revenue increased 31.4% to $937.8 million, driven mainly by strong growth in the product and energy storage segments. Adjusted EBITDA increased 16.4% to $492.6 million, while adjusted diluted EPS increased 50% to $2.34. Turning to slide 10. During the first nine months of 2026, we collected approximately $69.3 million of proceeds from tax credit monetization transaction. For the full year, we now expect approximately $90 million in proceeds, including approximately $68 million related to ITCs and approximately $22 million related to PTCs transfers. During the third quarter, we recorded $10.6 million of ITC benefits. For the full year, we expect to record $59.9 million in ITC benefits, which should result in effective income tax benefit rate of approximately 15% in the fourth quarter, excluding changes in law and any other one-time items. Slide 11 presents the change in our cash position during the first nine months of the year. Cash and cash equivalents and restricted cash totaled approximately $512 million as of September 30, 2026, compared with approximately $281 million at year-end 2025. The increase reflected proceeds from our convertible notes offering and recent financing activity, cash generated from operation, and tax credit monetization, partially offset by capital expenditures, debt repayments, acquisitions, and investments. As of September 30, 2026, total debt was approximately $3.3 billion, excluding deferred financing costs, as shown on slide 34. The weighted average interest rate on our debt was approximately 3.9%. Turning to slide 12. Total liquidity was approximately $977 million as of September 30, 2026. Net debt was approximately $2.8 billion, equivalent to 4.3x net debt to Adjusted EBITDA. Net debt represented approximately 50% of total capitalization. We expect capital expenditure for the remainder of 2026 to be approximately $287 million. Of the total, approximately $157 million is allocated to electricity segment for construction, exploration, drilling, and maintenance, approximately $90 million to the storage segment asset construction, approximately $80 million to the SLB pilot and other EGS activities, and approximately $22 million to the product segment and business development. Our detailed capital expenditure plan is on slide 35 of the appendix. Our liquidity and access to capital provide us with the flexibility to fund our development pipeline while continue to service our debt and return capital to shareholders. On November 4th, 2026, our board of directors declared a quarterly dividend of $0.12 per diluted share, payable on December 2nd, 2026, to shareholders on record as of November 18th, 2026. I will now turn the call back to Doron to discuss our recent operating and strategic development.

Doron Blachar: Thank you, Assi. Turning to slide 14, our total operating portfolio now stands at approximately 1.85 GW. On slide 15, our electricity portfolio stands at approximately 1,358 MW globally, with 13 MW added during the quarter. We currently have 204 MW of electricity project under construction and development through the end of 2028, including 89 MW of geothermal capacity and 115 MW of solar capacity. All of these projects are supported by long-term PPAs with attractive pricing, providing strong visibility for future growth. Slide 16 details the electricity segment third quarter drivers, as mentioned earlier. Moving to slide 17. Recontracting remains one of our key priorities. We are actively negotiating blend-and-extend agreements with several utility customers, engaging well ahead of contract expiration to extend terms and capture a meaningful share of today's higher geothermal pricing without significant incremental capital. With market pricing for new geothermal PPAs still above $100 per megawatt hour, we see recontracting as a multi-year opportunity. We expect it to be a primary driver of electricity gross margin recovery toward our 2030 target of 40%. Turning to slide 18. Our product segment backlog stood at approximately $183 million as of November 4th, 2026. The backlog remains geographically diversified, with the majority associated with projects in Asia and New Zealand. Moving to slide 19. The increase in energy storage revenue includes $19.6 million of higher revenue from existing PJM assets and approximately $9.3 million from newly commissioned facilities. The operating portfolio now stands at 495 MW or 1,358 MWh. While we continue to benefit from strong merchant pricing in our storage portfolio, our long-term strategy does not depend on today's high electricity prices to drive long-term performance. Our future U.S. storage projects are expected to come online under full tolling agreements, providing strong, stable, long-term revenues and reducing the portfolio reliance on PJM. Slide 21 outlines our long-term portfolio growth target. We remain on track to achieve our 2028 portfolio target of 2.6-2.8 GW. Looking further out to our recently released 2030 targets, we expect to approximately double our year-end 2025 capacity by year-end 2030, with our electricity segment reaching 2-2.1 GW and storage reaching 1.5-1.6 GW. This growth is supported by projects already under construction or in advanced development, many with interconnections, permitting, and contracting in place. As a reminder, these targets do not include any contribution from EGS. Slides 22 and 23 provide details on our geothermal and solar development pipeline. Construction and development continues across our U.S. and international portfolio, including the Puna expansion and Lone Mountain projects. Turning to slide 24 and 25. We have seven energy storage projects under construction and development, with total capacity of 497 MW or 1,888 MWh. This includes the 100 MW, 400 MWh Denali Energy Storage Facility in California, which we decided to move forward with in August. Upon completion, expected by the end of 2028, the project is anticipated to provide energy storage services under a 20-year tolling agreement with Clean Power Alliance. Our broader U.S. energy storage pipeline now totals approximately 3 GW or approximately 11.6 GWh across 31 named prospects. Turning to EGS on slide 26. As we outlined during our investor day, our EGS approach leverages the full range of capabilities that we have developed over the past six decades as a leading geothermal developer, owner, operator, and technology provider. We believe EGS has a credible path to commercial viability, but that path must be demonstrated site by site. The question that matters is not whether initial flow can be achieved. It is whether a project can sustain temperature, flow, water balance, and well integrity over many years with seismicity safely managed at the cost the PPA supports. That is exactly what our pilots are designed to answer. We continue to advance two subsurface pilots through our alliance with SLB and our collaboration with Sage Geosystems, with drilling planned for late 2026 to early 2027. In parallel, we are building commercial and operational foundations. At Dixie Valley, an existing Ormat site, we have the land, water rights, and an executed interconnection agreement for the first Ormega100 unit, and we have filed interconnection for the rest of the project. We are negotiating a PPA structure to reflect the risk profile of a new technology, with commitments that scale as the technology matures. We continue to secure land and file for interconnection across Nevada, Utah, and New Mexico. In September, the Department of Energy selected Ormat, alongside SLB and the University of Utah, for up to $35 million in funding to advance EGS at Dixie Valley and hydrothermal development at Cove Fort, Utah. Moving to slide 27. Since our Investor Day in September, we have significantly expanded our EGS land position. We added approximately 16,000 acres of new BLM leases through Nevada's October lease sale and identified additional acres with EGS potential within our existing portfolio. As a result, our EGS land position has grown from approximately 70,000 acres to approximately 170,000 acres in the last two months. We estimate it could support 5 to 6 GW of future EGS development, up from the 3 to 4 GW we outlined at our Investor Day. Longer term, we are targeting 1 GW of operating EGS projects between 2033 and 2035, subject to the pilot results, project economics, and final investment decision. Our experience as an owner, operator, our land, water, and interconnection positions, and our manufacturing capabilities give us a strong foundation to pursue this opportunity with discipline. Please turn to slide 28 for our updated 2026 guidance. Based on our strong performance in the first nine months and continued business momentum, we are raising the midpoint of our full-year revenue and Adjusted EBITDA guidance. We now expect total revenue of $1.17 billion-$1.2 billion, representing growth of approximately 19.7% at the midpoint compared with 2025. By segment, we expect electricity revenue of $700 million-$710 million, reflecting the Puna impact in the third and fourth quarters. Product revenue of $310 million-$320 million, and energy storage revenue of $160 million-$170 million. We now expect Adjusted EBITDA of $640 million-$650 million, representing growth of approximately 10.8% at the midpoint compared with 2025. Approximately $13 million of Adjusted EBITDA is expected to be attributable to minority interest. Let me close on slide 29. The third quarter showed the strength of our diversified model. We delivered double-digit revenue growth, expanded gross margin, and raised the midpoint of our full-year guidance. As we look ahead, we remain focused on executing the plan we outlined at our recent Investor Day, doubling our year-end 2025 capacity, and reaching annual revenues and Adjusted EBITDA of more than $1.5 billion and $1 billion run rates, respectively, by the end of 2030, excluding any contribution from EGS. With growing demand for reliable power and our expanding portfolio of contracted geothermal and storage projects, we believe Ormat is well-positioned to execute this strategy and deliver sustainable long-term growth for our shareholders. With that, I will conclude our prepared remarks. Operator, we are now ready to take questions.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Noah Kaye with Oppenheimer. Your line is open. Please go ahead.

Noah Kaye: Hey, good morning all, and thanks for taking the questions. I would like to start with electricity. I think, Assi, you mentioned in the prepared remarks, what gross margin would have been in 3Q ex the Puna factor, and then you mentioned that we should see some slight year-over-year expansion in 4Q. My question is just broadly on how expansionary trends start to play out as we lap some of these items and see some of the benefits of blend-and-extend. Because I think last year there was a one-time headwind, if I remember correctly, of about $5 million related to some discrete cost that I presume didn't recur. Just when do you, in your view, expect the segment to start seeing some real expansion on an underlying basis, and what drives that? Thank you.

Doron Blachar: Hi, Noah. I will start, and Assi can follow. We see the electricity segment gross margins increase over time, and as we said on our investor day, that we are looking to reach 40% end of 2030. The increase is expected to come from ongoing enhancements that we are doing, from blend-and-extend that we are doing on contract for new partners coming online. There is a variety of things that we are doing in order to increase the gross margin, and we have a detailed plan that as time passes, we will share with you and show you in the future guidance that we give to the market. Assi?

Assi Ginzburg: First, thank you for the question. I will start by saying that we should start seeing an increase in margin already in Q4, and we expect to see a jump already in 2027. In general, there are three main items that will impact our profitability going forward. One is the blend-and-extend opportunity that will kick in. Every year, we will see additional megawatts. Two, Puna, for example, we expect next year to have a brand new facility towards the second half of the year. So hopefully, we should not have the issues that we have seen this year with Puna. And three is we are adding more assets to our Google and other data centers portfolio. The average price of the PPA of new facilities is expected to be higher. In addition to that, we are looking and we are turning every, I would say, quarter to make sure that we are running our plants in the most efficient way, and we expect this to start seeing improvement already in Q4.

Noah Kaye: Very helpful, guys. Turning to EGS, I would say that to have this kind of expansion of the pipeline in such a short period of time is very positive and encouraging. Maybe just help us understand, when you talk about that pipeline potential, how exactly are you assessing the gigawatts of potential capacity there? At a high level, what assumptions are you making about the new land position, and what kind of gives you confidence in the development potential of those new resources?

Doron Blachar: Yeah. On the EGS, the significant increase is basically, when we acquire land, private or through BLM for our traditional hydrothermal projects, we usually take land that is also surrounding the asset, the hydrothermal system, in order to make sure that we maximize the system. What we've seen is that adjacent to hydrothermal systems, many times, there's potential for EGS, and that's what we've seen. We've analyzed the land positions we have across our assets, and this is the big jump that you see in the potential that we have. Obviously, there are some locations that have potential for significant megawatts in the hundreds of megawatts, and other places have in the tens of megawatts, and some are not relevant for EGS. At this stage, when we look at the land, we have all the information from the hydrothermal system, and through geological analysis and models, we estimate what is the potential we see. Obviously, until you don't drill, actually drill, you don't have to confirm the number, but this is the range that we give, and we expect it to be in that range, and we hope it might be even higher than that. But we usually take the more conservative view on the numbers we give to the market.

Noah Kaye: Very helpful. I won't ask a question on energy storage. I'll just say well done, and good job on the quarter, guys. Thank you.

Doron Blachar: Thank you, Noah.

Operator: Your next question comes from the line of Justin Clare with Roth Capital Partners. Your line is open. Please go ahead.

Justin Clare: Hey, good morning. Thanks for taking the question here. Wanted to just touch on the PPAs here, and the 60 MW that you have already recontracted at this point. Can you share how those contracts will start and how those will layer in over the coming years here? Could we see a meaningful portion of those that have been recontracted kind of kick in in 2027? Then there is the longer-term opportunities, 2031 to 2034, I think 200 MW there. Just wondering if you could give us a little bit more color on the conversations you are having and how willing customers are to renegotiate, and then how far in advance of those contracts could you recontract them?

Doron Blachar: The contract that we already blend-and-extend, one of them started in October, the other one is expected to recontract sometime next year. So these are the ones that we have already negotiated. But the discussion basically with the utility or the offtaker basically starts with the fact that prices are going up, the demand for electricity is very high, and power plants that end the contract in two, three, four years down the road, and there is a joint basically willingness by us and by the offtaker to extend the relationship. Then the question comes, at what price? We negotiate the price. The blend-and-extend from our perspective, we would like to get the price today. They would like to get the extension, and it is a negotiation, when it starts and what price do you reach? On appendix slide 17, you can see the potential upside that we have split into years. Obviously, to try today to recontract the PPA that ends in 2034 or 2035, it is very hard. As time passes, these PPAs are getting closer, and we are speaking with the utilities.

Justin Clare: Got it. Okay. Maybe then just shifting over to storage here. Wondering if you could just share how merchant pricing has been trending into Q4 here. Have you seen any normalization at this point? Just curious on the expectations for Q4 in your guidance. Are you assuming kind of normal merchant conditions? Looking into 2027, what potential do you see for this year's outperformance to extend into next year, given what you're seeing in terms of market conditions?

Doron Blachar: When we look into Q4 of this year, what we do see is that October was a much more stable or normal month with not very high merchant pricing. November, December, we don't know yet. It's coming, and we'll see how it falls. In 2026, it was a very, very high year for merchant prices in PJM. When we look into 2027, we hope the prices will be the same, but it's very hard to forecast so high prices. 2026 prices are more than double of the 2025 prices. For 2027, we expect to be a bit lower than the 2026 numbers, but it's merchant. It depends on climate, depends on prices, and we will see as time passes.

Justin Clare: Got it. Okay. Thanks very much.

Operator: Your next question comes from the line of Derek Podhaizer with Piper Sandler. Your line is open. Please go ahead.

Derek Podhaizer: Hey, good morning, everyone. Wanted to ask about just some of the new details around your EGS build-out with the leased acreage purchases. You now have land that could be up to 5 to 6 GW. It is up from the 3 to 4 GW we heard during the investor day. I think there is some concern as far as interconnection delays and what those gigawatts can look like. Can you talk about what your expectations are for behind the meter with the EGS projects, and when you think these should be coming online? Just some more thoughts around how we should balance interconnection delays, but also the appeal of deploying behind-the-meter projects with EGS.

Doron Blachar: Sure. So, thank you. I will say one, we gave on our investor day our 2030 targets, excluding EGS, that basically doubles the megawatts that we have today. These are projects that most of them have permitting, interconnection, land, and others. When we look on the EGS front, we expect the first phase of the Dixie Valley EGS project to come online between 2029 to 2030. For this first phase, we have interconnection, we have water and land, and we are basically looking at the pilots that we are developing to get the right technology to develop it. Interconnection for additional EGS projects down the road after the pilot, basically 2030 and onwards, these are interconnection requests that we are filing today. We already filed in 2026. We will be continuing to file in 2027 and onwards. We expect that by the time that the project will be ready, we will have the relevant interconnection to develop them. We said on the investor day that we are looking for 1 GW between 2033 to 2035. We assume this will not be behind the meter. We will have interconnection by that time. On behind-the-meter discussion, we have discussions on behind the meter. None of them have moved to a very advanced stage. Taking the risk of behind the meter, it is not a risk that we would be taking. Obviously, it is the data center risk that we will be taking. I think that it can maybe compensate for a period of time, waiting for the interconnection and actually having a data center earlier. But at this stage, we do not see somebody going all in on the behind-the-meter 1 GW project.

Derek Podhaizer: Great. Okay. I appreciate all that color. Moving over to energy storage. I know a couple months ago, there was a bulk power executive order out by the administration, included the battery energy storage systems. Just wanted to get your thoughts and color on how this could potentially impact your energy storage segment, just given the supply chain out of China. Just some thoughts around that would be helpful. Thanks.

Doron Blachar: We follow very closely the regulation that continues to come up. We obviously meet all the requirements. We buy batteries from China if we can, and if it is allowed based on the regulation. We buy from Tesla, we buy from others. We feel very comfortable with the guidance we gave to the market on getting to about 1.5 to 1.6 GW of energy storage project by end of 2030, taking into account all of these limitations.

Derek Podhaizer: Great. Thanks, Doron. I'll put it back.

Operator: Your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open. Please go ahead.

Julien Dumoulin-Smith: Hey, guys. This is partner on for Julien. Thank you for taking our questions. Just another one on PPA pricing. As we think about the gross margin improving to that 40% level and blend-and-extend and new projects coming online driving a lot of that, just wanted to touch on what you're seeing in terms of leading-edge pricing data points as you have some of these discussions. I think at the investor day, you were talking about $110-$120 a megawatt hour if you wanted to re-contract the whole portfolio today. I'm curious if anything has changed in your view on pricing given some of these discussions you're having today.

Doron Blachar: We talked in the investor day and before that. PPA pricing today are well above $100 per megawatt hour. We do not see any trend of reducing this pricing. On the contrary, we see a potential increase to these prices, and that is why we are looking for the blend-and-extend. I think that increase in prices actually pushes the off-taker to actually come early and do a blend-and-extend earlier rather than later, managing the risk of increased PPA pricing. In the appendix slide 17, you can see the potential upside that we have today on the blend-and-extend. Assi, do you want to add something?

Assi Ginzburg: No. No, no.

Julien Dumoulin-Smith: Great. Thank you for that. Then shifting to EGS, we talked about the pipeline expansion a little bit here. You called out the PPA negotiations at Dixie Valley as well as other potential projects. You guys have been talking, I think, about in the illustrative slide you laid out at the investor day, roughly $120 a megawatt hour. Curious as you are having some of those discussions on EGS specifically, what you are seeing on pricing.

Doron Blachar: On EGS PPA pricing, this is a much more complicated discussion than a traditional one, the hydrothermal. Due to the fact that technology is not fully proven yet, we are working with the pilots to prove the technology. Obviously, even once the technology will be proven, there is the question of scalability and long-term operations. We are trying to negotiate a bit of a different PPA that has a balance between the return that we can get from the project versus the PPA price. I think in today's pricing and technology, a $100 PPA for an EGS project is not high enough in order for it to be economic. Maybe over time, when the cost to develop EGS projects will continue to go down, it will become economical. Today, we believe we need higher pricing than that. These are the discussions we have on the relevant, on the EGS, on the Dixie Valley EGS projects, as well as other projects.

Operator: Your next question comes from the line of David Anderson with Barclays. Your line is open. Please go ahead.

David Anderson: Hi, good morning. Just in relation to the two pilot projects that are going on with Sage and SLB, presumably both are going to be starting to effectively test the concept to make sure it works. But beyond that, the key will clearly be the economics around commercialization. Can you talk about how you see some of those economics kind of lining up today versus commercial geothermal and whether or not they're superior as of now? What are some of the metrics that you're looking at? Can you talk perhaps, say, on CapEx to megawatt? Is there like a target that you're trying to get to? Is there a hurdle that you need to see in order to move ahead with commerciality on these two projects?

Doron Blachar: Yes. We have our targets for the long term on the EGS, and as we presented on the investor day, it's between $5.5 million to $6.5 million per megawatt. These are the long-term targets that we have. I can tell you that internally we have lower targets, but at this stage, these are the targets that we feel comfortable with, the $5.5 million-$6.5 million. I believe the first project will be higher than that. It takes time to have all the lessons learned and reduce cost. But from the pilot, I think the pilot needs to demonstrate, on one hand, the technological feasibility of the EGS, and on the other hand, it needs to give us comfort how the cost will go down to the levels I mentioned. On the above surface, we are the largest ORC supplier in the world by far. We are working on the Ormega100, building the right supply chain to get the above-surface cost to around $1.5 million-$2 million per megawatt. On the subsurface, we need to see the pilots, see the technology that we with SLB will develop, or Sage will develop, and see how we are able to reduce this to economical pricing. As I said before, we need higher PPAs for the first project with EGS to make them economical.

David Anderson: You now have 170,000 acres that you're looking at. Let's assume that Sage and SLB and the SLB pilots are both successful. What then? On that 170, are you going to be licensing SLB or Sage? Will you be taking equity interest in this? What does that arrangement look like going forward in terms of developing that 170,000 acres, either with Sage or SLB? How does that work in terms of a framework?

Doron Blachar: Ormat is a developer and an owner of our plants. We are not going to license any technology to anybody else. We don't own the Sage technology as a starting point. We have a license to their technology. With the SLB, it's a joint development. On the 5 GW to 6 GW, if the technology does well as we expect, and economically, we will develop them. I don't know to tell you timing-wise, because we need first to see the pilot. Then we have the Project Dixie Valley EGS that we expect to first phase to start end of 2029, beginning of 2030. After that, we will develop. We're not licensing or selling the land to anybody else. Not what we do.

David Anderson: Okay. Thank you.

Operator: Your next question comes from the line of Ben Kallo with Baird. Your line is open. Please go ahead.

Ben Kallo: Hey, thank you guys. Good day. Just maybe just, I know it's very soon after the U.S. elections, but is there anything I know there's very good policy support for geothermal and batteries, but anything that you think that the industry, either industry storage or geothermal, will be looking for? And then I have a follow-up.

Doron Blachar: I think, as you said, I'd say that geothermal has had always both bipartisan support. Geothermal started receiving PTCs and grants in 2010, regardless of the president, if it was a Democrat or Republican, all of them extended them, similarly to what Trump did. Democrats will obviously support it more. Think of the energy storage, the OBBB law that came into support energy storage. It has some limitation on China, but that's a limitation that doesn't relate specifically to renewable. It relates to the relationship between the U.S. and China on many aspects. So, a Democratic regime or a Republican regime, both, we see them as supporting our business model.

Ben Kallo: Great. Thank you. Just as we look ahead to the product segment, could you just talk about what you guys see out there in early stages? Not necessarily guided for next year, but just how you think about that business and the growth rate.

Doron Blachar: Yes. The product segment, third-party sales, what you see on the P&L, relies basically on other developing projects. We see projects being developed in Indonesia, in New Zealand, and in other locations. We do not see too many projects being developed over time in the last few months, but we do see usually there is some kind of a wave when there is more projects, after that some less projects, and then again higher number of projects. We do not see today that many projects coming online.

Ben Kallo: Okay. Thank you very much.

Operator: Your next question comes from the line of Sunaina Ocalan with Bernstein. Your line is open. Please go ahead.

Sunaina Ocalan: Hey, good morning, good afternoon. I think I will stick with EGS for my question. Thank you for all the color that you have been providing on the previous questions. Maybe as much as possible without going into names, because it is early, if you can provide some color on who the counterparties are in your PPA negotiations. Are they data centers? Are they hyperscalers? Are they utilities? Any color would be great. Then I have a follow-up on schedule of the first 100 MW, but I will wait for that.

Doron Blachar: Obviously, we cannot come with specific names on our negotiations, but we are negotiating with data center company, we are negotiating with hyperscalers, and we are negotiating with utilities. All of them, we are negotiating with them on different kinds of PPAs, different duration, but we have the structure of a PPA for a technology that we are developing, basically managing the risk in a way that a public company like Ormat can manage without taking risk that is not reasonable when you don't have a confirmation for the technology, the scalability of it. We are speaking with all of them.

Sunaina Ocalan: Excellent. Thank you. Maybe if I can just follow up on the schedule. I'm trying to understand just if you can provide any color on the first 100 MW coming online. What's the critical path between now and then, and then how much contingency do you have in the project planning? How do we think about when it comes online?

Doron Blachar: The timeline that we said is that we will have the first phase end of 2029, beginning of 2030. The critical paths for this are the pilots, because we do have already the interconnection, we do have the land, and we have the water rights. Effectively, we need the technology to develop. The pilots are due to start end of 2027, and as the pilot operates for a few months, at that time, we need to make a decision when we feel comfortable enough with the pilot performance to start drilling the first phase of Dixie Valley. It's really a question of the pilots, because the development part or the business development part of the first phase, we have it. We have it because that's what Ormat has been doing for decades. We are working now on the development of the other phases of the project and other projects. But for the first phase that you asked, the one critical milestone is the pilot success.

Sunaina Ocalan: Great. Thank you so much. I'll hand it back.

Operator: There are no further questions at this time. I will now turn the call back to Doron Blachar for closing remarks.

Doron Blachar: Thank you. This was another strong quarter for us. We are very focused on our geothermal and storage operating assets while continuing to develop new assets. In parallel to that, we're developing the new EGS technology and increasing the pipeline for EGS projects. Thank you for joining us today, and thank you for your continued support.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.