Ormat Technologies Inc (ORA) 2009 Q1 法說會逐字稿

Good morning. My name is Brandy, and I will be your conference operator today. At this time I would like to welcome everyone to the Ormat Technologies first-quarter 2009 earnings conference call. (Operator Instructions). I would now like to turn the call over to Marybeth Csaby of KCSA Strategic Communications. Please go ahead.

Thank you, Brandy. Hosting the call today are Dita Bronicki, Chief Executive Officer; Yoram Bronicki, President and Chief Operating Officer; Joseph Tenne, Chief Financial Officer, and Smadar Lavi, Vice President of Corporate Finance and Investor Relations.

Before beginning, we would like to remind you that 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 of future trends or results. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risk factors and uncertainties, please see Risk Factors as described in the annual report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2009.

In addition, during this call, statements that may be made also include financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission such as adjusted EBITDA. This measure may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management of Ormat Technologies believes that adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from referring to this non-GAAP financial measure in assessing Ormat Technologies liquidity and when planning and forecasting future periods. This non-GAAP financial measure also may facilitate management's internal comparison to the Company's historical liquidity.

Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanies this call and can be accessed on Ormat's website at www.ormat.com under the Events link as found in the Investor Relations tab.

With that said, I would now like to turn the call over to Joseph to review the quarter's financials. Yoram will then update the status of operations, and following Dita's remarks, we will open the call to questions. Joseph, the floor is yours.

Thank you, Marybeth, and good morning, everybody. We are including certain financial highlights from our Company's statement of operations and balance sheets in our earnings release and in the accompanying slides. I would like now to review the main issues that affected our financial results, starting with slide four.

For the first quarter of 2009, total revenues were $99.9 million, a 44% increase from revenues of $69.4 million in the first quarter of 2008. As you can see on slide five, this quarter the Products Segment had a significant contribution with record revenues of $37.3 million as compared with $9.9 million for the first quarter of 2008. Most of the increase in revenues was derived from EPC contracts for the construction of two large geothermal projects in Nevada and in New Zealand.

With regards to our Electricity Segment on the next slide, while the revenues increased by 5.2% to $62.6 million mainly as a result of new power plants that came online in Kenya and New Zealand in the US and due to better performance of the Steamboat 2 and 3 plans, the average revenue rate per megawatt hour declined from $81 in the first quarter of 2008 to $70 in the first quarter of 2009. The decline was as a result of lower energy rates in the Puna powerplant due to lower oil prices as a result of the -- and as a result of exploration of the adder, an additional energy rate paid to us under the Heder 2 power purchase agreement.

Moving to slide seven, the Company's gross margin was 31.8% compared to 32.7% in the same period last year. Gross margin for the electricity segment was 29.9% for the first quarter of 2009 compared to 35% in the same quarter last year. The decrease is mainly due to a lower average revenue rate per megawatt hour as I mentioned before and on the cost side due to accelerating well field maintenance we did in our Ormesa and Heber plants in California in order to ensure higher well field availability during the summer.

In the Products Segment, gross margins was 34.9% compared to 18.4% for the same quarter last year. This increase is attributable to a high volume of revenues, a different product mix and to a decreasing cost of revenues as a result of the global decrease in commodity prices.

And on slide eight, net income for the first quarter was $14.5 million or $0.72 per share basic and diluted as compared to net income of $10 million or $0.24 per share basic and diluted for the first quarter of 2008. Such increase in net income was principally attributable to an increase in our freight and (inaudible) costs.

As shown in slide nine, adjusted EBITDA in the first quarter of 2009 increased 13.5% to $35.9 million as compared with the same quarter last year of adjusted EBITDA. Adjusted EBITDA includes consolidated EBITDA and the Company's share in the operating income and depreciation and amortization totaling $1.5 million for each of the first quarters of 2009 and 2008 related to the Company's unconsolidated investment interest in its 50% interest in the Mammoth complex in California.

Turning now to slide 10, as of March 31, 2009, the Company had cash and cash equivalents of $42.7 million compared to $34.4 million as of December 31, 2008. We used in the first quarter of this year $73.8 million to fund capital expenditures and $28.6 million to partially revolving cash and long-term debt. However, our cash position improved by $90 million proceeds from the refinancing of the Olkaria III project power plant and $42.5 million derived from operating activities.

Our total outstanding debt as of the end of the first quarter of 2009 is $474 million, and it will be repaid as presented in slide 11.

Moving on to slide 12, on May 8, 2009, Ormat's Board of Directors approved the payment of a quarterly dividend of 6% -- $0.06 per share pursuant to the Company's dividend policy, which starts at an annual payout ratio of at least 20% of the Company's net income subject to board approval. The dividend will be paid on May 27, 2009 to shareholders of record as of the close of business on May 20, 2009. The Company expects to pay a dividend of $0.06 per share in the next two quarters.

Before I will turn the call over to Yoram, I would like to note that certain amounts in the financial statements relating to the OPC tax monetization transaction have been reclassified to reflect the implementation of FAS number 116. The main impact is the specification of most of the minority interest to liabilities. There is also an impact on the status of operations presentation with no impact on the net income. A full reconsolidation is included in Note 8 to our financial statements.

And now let me turn the call over to Yoram.

Thank you, Joseph, and good morning, everyone. I would like to begin with slide 14.

Our generation from both US and international facilities was approximately 890,000 MWh, an increase of about 21% from the same quarter last year. The year-over-year increase in our generation resulted from the completion of new facilities and from improved performance in some of our existing power plants.

This quarter we have completed the construction of 9.5 MW of red powerplants, plant number 2 of our OREG 2 projects and the Peetz plant in Colorado.

Slide 15 is an update on our construction development and exploration activities. In the past quarter, we have successfully drilled one well in the Heber complex and one well in the Amatitlan powerplant in Guatemala. We expect that the completion of the tie-ins of the wells during the second quarter will bring both facilities to their design capacities.

In Ormesa we anticipate the testing of a new exploration well. A successful test will indicate an increase in the resource potential of the Ormesa complex.

Turning to slide 16, we have continued our work in North Brawley and have updated our forecast to reaching full capacity towards the end of the third quarter, a three-month delay from our previous schedule. As we noted in February, we have encountered a higher than expected solid content in our geothermal fluid, which leads to limitation on injection capacity.

During this quarter we have successfully implemented mitigation measures in surface of equipment, which will be coupled with modification to the completion of existing injection wells and drilling three shallow injection wells. We expect that this will provide us with the required injection capacity and hence power generation. One of these shallow wells is already complete, and we are proceeding with the drilling of the other two.

The increased cost of North Brawley was taken into account in the CapEx guidance we give for 2009. On the next slide, you can see an update on our construction activity. In the next two years, we plan to add between 72 MW and 83 MW of generating capacity from both geothermal and recovered energy power plants. As we shared with you in the past, it is our intent to add 8 MW in Puna through the addition of OEC units that will make use of resource that has not been used so far and through other optimization of the plant and well field. Although we would have liked to complete the project in late 2009, the negotiation on the PPA for the additional power is not complete, and we will limit the project activity in this quarter to well field upgrades and maintenance.

Given where we are in the PPA negotiations, we now expect a very late 2009 or early 2010 completion. The extensive well field work will reduce our second-quarter revenue from this powerplant but should reduce downtime when the expansion project is complete.

In the 30 MW East Brawley project, we have begun manufacturing equipment and performed exploration drilling but are still waiting for the required permits. The project completion is still expected in 2010. We have continued engineering and permitting work of the Jersey Valley project in parallel to the exploration drilling in the field.

The next slide addresses our activity on our longer-term projects. In Cerullo the consortium continues to negotiate certain amendments, including an adjustment to the commercial term of the PPA, and we intend to proceed with the project after those amendments become effective.

The next slide describes the Products Segment. As we previously announced, we have started the year off with the record backlog in our Products Segment, which includes a significant order of the $65 million supply contract for the Las Pailas project in Costa Rica. As of the end of the first quarter, our backlog for the Products Segment was approximately $153 million, which implies a revenue contribution of approximately $70 million for 2010.

Thank you and I would like to turn the call to Dita.

Thank you. Starting with slide 20, our business continues its services development in the federal environmental renewable energy, and while it was not too long ago that we reviewed the business and regulatory environment in our February earnings call, there are several points that I would like to bring to your attention. I want to briefly review the recent enactment of the American Recovery and Investment Act of the stimulus activity (inaudible) material for our business environment.

The stimulus extended their eligibility period for production tax credits by three years from (inaudible) geothermal power plant placed in service by December 31, 2013. It also increased the 10% investment tax credit, which can be taken in place of the production tax credit to 30%. In most cases tax holds permit accelerated depreciation. Companies also make the choice of a client sought cash grant from the US Department of Treasury in an amount equal to the 30% investment tax credit. Regulations covering the core sale are now expected by July of this year.

We believe that the number of our energy thermal power plants under construction and development made (inaudible) for this price for the cash * grants from the Department of Treasury. Geothermal is also supported by a new program established with the Department of Energy, which expands the scope of existing federal law and guarantees program to cover renewable energy projects. To be a little bit (inaudible) under the new program is the project must start construction and become (inaudible) issued by December 30, 2011. Regulations of (inaudible) we are hearing that the implementation of the new loan guarantee program will require the involvement of commercial financial institutions that will assist in screening for available projects.

Looking now at our financing identity on slide 21. In March 2009 we closed the project financing of $105 million of our Olkaria III geothermal in Kenya. The first disbursement of $90 million occurred on March 23, and the second disbursement of approximately $50 million is expected in early June '09. This additional cash, when combined with cash flow from operations and our available lines of credit with banks, secure our ability to maintain our growth plan for 2009 and to make the necessary investment toward the 2010 construction and exploration throughout the period beyond 2010.

Also, as we previously mentioned, it had been our intent to refinance not fully in Amatitlan. Regarding Amatitlan, we are in final phases of documentation of the final thing, and closing is expected shortly. With respect to North Brawley, we explored several financing options, including those also under the stimulus which opened the door to new options. We decided that the best course of action for North Brawley is to take the cash grant available under the new act and finance the balance with long-term debt. We have started to review possible debt options in the capital markets.

Looking at our capital expenditure requirements on slide 22, we plan to invest during the rest of 2009 $158 million for enhancement of existing power plants and development and construction of new projects. In addition, our capital expenditure budgets for our operating product line is approximately $10 million for the rest of 2009.

We also expect to invest $31 million in exploration during the rest of 2009 and approximately $2 million were budgeted to invest in machinery and equipment.

To recap we have in place the capital resources more than necessary to fund our capital requirements of about $201 million. If you turn to the final slide, slide 23, I'll provide with our revenue update guidance for 2009.

Mainly due to the delay in commercial operation of North Brawley but also due to a bigger than expected reduction in the Puna rates, we expect our electricity segment revenues to be between $265 million and $275 million. We also expect an additional $9 million of revenue from our share of electricity revenue generated by a subsidiary, which is accounted for under the equity method. With respect to our Products Segment, we currently expect that our 2009 revenue will be between $110 million and $120 million.

I would like to thank you all for your continued support of Ormat. We continue to move forward with our aggressive exploration and development activity, and our strong product backlog demonstrates the high regard of (inaudible) technology holds in the global renewable energy arena. We continue to adapt our financing plans to the financing opportunities, currently the opportunities available under the Stimulus Act, and we will continue to do so taking advantage of our strong balance sheets.

Thank you and I will now open the call for questions. Operator, please.

(Operator Instructions). Paul Clegg, Jefferies.

You mentioned a loan guarantee program, and I was curious if you are seeing any strings attached to the loan guarantee program that make them less palatable for you to pursue? Some parties we have been talking to seem to be worried about requirements for labor rights, environmental assessments, things like that.

Well, the new loan guarantee does not have yet -- the new loans guarantee does not have yet the regulations, but in the existing loan guarantee, the 2005 loan guarantee, you are right that there is a requirement to create labor rates, which are equivalent to union rates. It is not that you have to use the union, but the rates have to be equivalent to union rates. It may cause a slight increase in construction costs, but the benefit outweighs by much these additional costs.

On the environmental side, I did not see any changes.

Okay. And then if I may, you mentioned a decrease in global commodity costs or commodity pricing again. Last quarter you were talking about that, expecting to start seeing the benefit at some point that really we were just not at a point yet where you were seeing it. Any better visibility this quarter on seeing that flow into your capital costs?

I think that our result from the product side is to compare the gross margin and how it reflects those reduced commodity prices already.

I'm sorry, can you repeat that please? I'm afraid I could not understand.

The gross margin in our Products Segment, which is way higher than what it used to be, is a reflection of the reduction in the commodity price. It is hard to quantify it. I'm not sure that it has reached the bottom or not, but we definitely see the results of it in our Products Segment results already.

So any visibility on when that might actually start flowing for you guys into your construction costs at some point?

I believe that the project (inaudible) will already see this result. North Brawley certainly does not stay because most of the costs have been incurred before. East Brawley, some of the costs have been incurred before. Some we already benefit from the reduced costs. I think that Jersey Valley is going to be the first project where we are going to see the full impact of it.

What kind of magnitude would you be looking for in a CapEx per megawatt basis?

It is hard to say, but if I had to give a guess, it is probably in the 10% to 15%.

Dan Mannes, Avondale.

A couple of quick follow-up questions. First, on North Brawley it was an incremental three-month delay there. What is the confidence level as to the startup now at the end of Q3 just given the delays we have seen to date? If you could just give us a little bit more color just on the specific issue with the solids, if you have seen this anywhere else, and how -- what sort of mitigation plan you are actually putting into place?

I think that we are fairly confident, and I think that it is hard for me to tell you any more than that. I think that as soon as the plant is operating, we will probably notify the world on that. But we're fairly confident that we understand the situation and the challenge is just the high inertia of these problems that after you have understood the problem or, let's say, that after you have developed a hypothesis on what the problem is, it does take a number of months to source the equipment and sometimes you also need permitting. But just sourcing the equipment and putting it in place until you can see the results.

And the problem that we have is not unique to North Brawley, but I think that the magnitude is probably unique. I think we see this -- we have seen this in sandy wells everywhere. But in most cases, our fields were diverse enough for the problems to be more localized to specific wells and not to have such a big impact where in North Brawley just the nature of the field is one where the problem is fairly uniform. So that's a general question.

In terms of being a little more specific, the issue is both large particulates and small particulates that are produced with the produced fluids and then some that get dislodged even in the injection well bore. And because we are dealing with both the large particulates and the small particulates and because they come from two separate sources, our solution does require -- if you like, it is an involved solution that addresses both the upstream part of capturing and getting rid of some of the particulates just by the production well, and then disposing or removing some of the particulates just before injection and then a different completion of the injection well to make sure that neither particulate can plug injection.

Okay. And as you look forward to East Brawley and I assume putting a similar type of mitigation plan in place, how does this impact the capital costs on East Brawley if you have to do something similar there, which it sounds like you probably will?

It has no dramatic impact on the capital costs. And, of course, for East Brawley, having this experience would make it a complete -- completely unnoticeable -- I don't know, it will just be a design feature. It does not carry. It is not a big ticket item in terms of cost in no way. It's just not having it in the original design, figuring out what the problem is and sourcing the solution that takes more time.

Okay. And that is already entailed in your current schedule for East Brawley?

Correct.

Okay. And then just lastly, moving over to the product side, as Dita mentioned, great quarter in terms of gross margins on the Products Segment. Can you talk about how much of that related to falling commodity costs versus maybe better pricing. And then I know historically you have said maybe in the 20% to 30% range was a sustainable margin. Can we assume maybe for the next couple of quarters as you benefit from lower commodity prices we will see more elevated margin levels?

I think the answer to your first question is we are trying to quote fair prices, and even more or as important as this, it is important for us to stand behind our quotes. And when we have given a firm price, we make everything that is within our part to deliver on-time, on budget and at performance, and this affected us very much in 2007, and we have taken measures to protect ourselves for the very rapid increase in costs in other if you would like proposals that some of them actually materialize into contracts later on.

Because the drop -- it was not so much a drop in prices, but just the fact that price increases stopped. This is what had a very significant impact on what is happening on our product side today. It is not so much the reduction in prices. It is just if you like the complete reversal of the trend of continuous increases, and as much as we were hurt in 2007, we were more fortunate in 2009. I would not say that this would be our practice going forward, and therefore, what we said about our guidance on what we expect long-term on our product sector stays the same.

Okay. But given the fact that you are going to be working off a couple of major contracts between now and mid next year in this better input price environment, then maybe the long-term does not change, but maybe the short-term does?

Maybe.

Jesse Pichel, Piper Jaffray.

This is [Elaine Quay] for Jessie Pichel. I was wondering if you could talk a little more about your oil price assumption under prior guidance for electricity and how that has changed and whether that oil pricing is tied to futures or your thoughts or just a little more color there?

You know, we have only one project drilled. The oil prices have remained flat, and this is the Puna project. When we initially projected our revenue for the year, we assumed that the oil prices are going to be similar to early -- not the oil prices, that the revenue -- that the (inaudible) that we will get is going to be similar to early 2007 prices with the similar oil prices.

For some reason the (inaudible) electric avoided costs in the last month, and the last published tally is not more than our assumptions. We do not fully understand why. We don't know if it is a one-time event or if it is a continuous event. But to report it, we have reduced slightly our revenue projection to take into account the lower tariff that is available for this month, ever this month.

Now they are issuing the tariff once a month and changing it once a month, and maybe it is a temporary reduction. We don't know. But to be prudent, we reduced our projections.

: Okay. And how significant was the Heber 2 adder in terms of the revenue change in electricity?

I think it was about $1.25 million or so, $2.5 million.

Okay. Could you break out the domestic versus foreign generation and whether the lower US revenue was primarily due to Heber and Puna, and what might have accounted for the higher foreign revenue?

I don't think that they have informed of me a breakout of domestic and international. But the domestic part of kilowatt hours was reduced not only because of the reduction of the Puna, but also because of the addition of a couple of energy generation megawatts into our megawatt space, and the rate of recovery energy on a per megawatt basis is lower than the geothermal one. All-in-all we have a reduction of, say, I think a 12% or 15% of megawatt hours from last year through this period. So it is a substantial reduction the majority is taken from.

Great. Just lastly, are there any incremental new projects you're seeing being considered now as a result of the stimulus package and the ITC cash grant?

If you look at our exploration plan, it is one that we are exploring these incremental projects depending, of course, on the exploration results.

(Operator Instructions). Emily Christy, RBC Capital Markets.

Congratulations on the quarter. When you look out beyond 2010, do you have the target growth megawatts per year? When you think about that, what are kind of the biggest bottlenecks that might interfere with that?

Our target is, as I stated, we would like to come back to the hundred megawatts that we have targeted in the past, and there is one bottleneck -- exploration, exploration, exploration. It is not financing. It is not production capacity. It is (inaudible) manufacturing changes. It is people, engineering people. We are well staffed in all of these areas.

Exploration is what was slower than what we expected in two areas. Number one, the permit which enables us to add more exploration sites in parallel, and number two, people and equipment. We have (inaudible) our sales, and our exploration team today is large enough to meet our target. Drilling equipment is not a problem in today's business environment, but it takes years from the time you release an exploration target to the time that it is explored, proven, and you can release its full construction. And it takes a long time, number one, because of permitting. You would not believe how long it takes to permit exploration wells. But in some cases, it is more than a year. And the other is the time that you take to do the scientific work, you know, to get results. So with the wells that we have started two years ago, we believe that beyond 2010 we will have a positive exploration result, which will enable us to come back to a higher rate of construction.

Okay. In terms of the exploration, have you seen costs come down? I mean have you seen any positive implications from the slowdown in oil and gas at the moment?

You mean technical implications?

In terms of more availability of people to do this work? You know, maybe a faster permitting process because there's less permits for oil and gas, that sort of thing.

The answer is no.

The answer is no. In many cases the regulating agencies are -- they could be the same, but they work under different rules. So we have not seen any relief in terms of the time that it takes, and then on exploration the biggest issue is really time and doing the work. Sometimes it is securing access to land, and then it is the permitting side, and then it is performing the work. That is the biggest issue. It is not so much the accessibility of equipment or the cost of the equipment. So there, there is no -- a slowdown in oil and gas does not help.

When it comes to development, the field development drilling contains, there's large amounts of quantities of equipment and so on. This is where drilling wells today is most expensive and would be substantial when you develop the field for a project. But it is not that substantial on exploration.

Okay. And just one more question. In terms of the Puna, the new PPA that you are negotiating there, can we expect the same sort of mechanism with voided costs for that PPA?

That is not our expectation, no.

Mary Austin, Pax World Fund.

Thank you. I had difficulty making out some of the call because of my connection, but I'm wondering you talked about issuing debt to finance one of your projects. And I'm wondering did you mention how much it was or where it would be in the capital structure?

We are looking at the traditional for not rolling. We are looking at the traditional project finance base. Based on current market conditions, we think that you can get it with the best service coverage ratio of 1.5. We are now exploring the market. So it is too early to say what the terms are going to be.

Okay. And your backlog in the products, it was $153 million at the end of the first quarter. Do you have that number for fourth-quarter '08?

If we have that number for -- ?

For the fourth quarter ending December 31, '08.

At December 31, it was 180? (multiple speakers). 193.

193?

Yes.

Okay, 193. And my last question is your guidance for the year is revenues of between 375 and 395, and that looks like there will be an upside that the remaining three quarters can either be flat or an upside of $20 million in revenue? Is that correct then?

Can you ask again the question?

Yes, when I look at my model, the last 12 months looks like -- if it is correct -- $375 million of revenue, and your forecast for the year in revenue is $375 million to $395 million. So that leaves either flat to upside of $20 million in the remaining three quarters. I just wanted to make sure that was correct.

In total more or less, you are right that the mix might be different because in the summer months we typically have higher electricity revenues. So the next (inaudible) might be different, but yes, we are talking about $375 million to $395 million total revenue.

Okay.

If that is total, that the 100. So yes.

Okay. Thank you very much.

[Gil Bushan], IBI.

My question is regarding the article that was published in the Israeli paper regarding the lawsuit that was filed in regards to the North Brawley project. And what is true, what is not true? Can you comment on that?

Yes, to the best of our knowledge, there is a pending case in court between a group of farmers in the IID, which is the entity that manages -- among other things manage the water allocation and distribution in the Imperial Valley.

The reason I qualify this and say that it's to the best of our knowledge is that we are not part of that lawsuit. It is not about us. It is really over -- it is a dispute over long-term plans for water distribution and rights in the area. And a lot of this is driven by the fact that with recent droughts, the droughts that have been extending for quite a number of years in the area, people are getting concerned about whether they will have all the water that they wanted going on. And, as I said, we are not part of the case.

The only reason that we were mentioned there is that North Brawley was given as an example in the plaintiff's documents. And really at this time, we don't think that this will have any impact on North Brawley. Currently it does not have an impact today. We are getting the water that we need. We have all the water to generate 50 MW, and as I explained earlier, this has not been the issue. And since we have valued the agreement with the IID for the supply of the water to North Brawley, I find it difficult to see how North Brawley could be affected. (multiple speakers)

So this issue has nothing to do with the delay?

No, it has nothing to do -- it has nothing to do really with North Brawley. So, you know, where it could have an impact in the bigger picture is around East Brawley. And for as long as water become such a hot issue in the local policies, then this slows down the regulatory process somewhat. But given the minimal impact that our use of water has on the overall water consumption in the area, we think that it is not likely that our water allocation would be granted, and we think we will get the permits and eventually the water.

Okay, thank you. I joined the call a little bit late, so did you tell -- did you mention when you predict a commercial operation will begin in the North Brawley project?

Yes, we think that we anticipate full capacity late in the third quarter.

Okay. Thank you very much.

Michael Lapides, Goldman Sachs.

Thank you. My question has been asked and answered. Much appreciated.

Patrick McGlinchey, Sidoti & Co.

Could you just give a little more clarification on the red tape that has been holding up the Sarulla project in Indonesia and when you think construction of that project might realistically begin?

We can drill by a call without (inaudible). Not to repeat my question, any day we expect it, but we don't know when. The information that we are getting from Indonesia is that the issues surrounding the total system agreement, which are the ones which are holding the projects up, are very close to being resolved. Now very close can be next week and can be several weeks. Who knows? And only once these are resolved, we will be able to go through the financing process, which means that in my conservative estimate from the time we have a positive resolution of the total disagreement, it will take between nine and 12 months to start actual construction.

Okay. Great. Thank you. And just you guys were very successful over the past year in securing contracts for the product side of the business for construction or either supplying equipments to third parties. I'm just wondering is there anything they can speak about prospects on the horizon that might -- projects that you might be able to secure over the next nine to 12 months?

The difficulty with the Products Segment is that it is much more difficult to predict than the other segments. So unfortunately we cannot say, other than the Sarulla project, we say when it happens, not if it happens, but when it happens, is going to be a direct contributor to the total segment. We can not identify what will come online in the coming months.

Seth Tennant, Citi.

I was just wondering if you could have a little bit of extra detail in terms of what some of the cost drivers were in the quarter. It seems like it was fairly good, and I was wondering if you could just touch on that again real quickly. I might have missed it.

What were the cost drivers for?

In terms of in the electricity segment, they were a little bit better than I had been predicting. I wondered if you could just give a little bit of highlights on what might have been some drivers there this quarter?

I don't think that there is anything to mention in particular. There was an element that is predictable in our annual workplan. There is an element that is somewhat driven by statistics where some costs are incurred with somewhere of a soft timing as an example. Part of the well field work is preplanned. Part of the well field work we just anticipate that it will occur during the year because we have a good database of how many pumps require replacement. But we do not replace the pump before it actually shows that level of wear. So I think that there is -- there are challenges in a very precise prediction on costs on the power plants on a quarterly basis, but generally on an annual basis, it evens out.

Okay. Could you just compare your outlook for capacity adds for the full-year 2009 now as maybe what it was previously?

It depends on how far back you want to go, and I think it will be hard for us -- we are not prepared with everything that we've said in the past. But I think that really the two major points that we had for 2009 and we are now putting into the end of 2009 or actually into 2010 are Puna and East Brawley, two projects that if you go a year back were slated to be in 2009, and we have now revised that. I think that these are the big items that were shifted from 2009.

I guess one last question. What was CapEx in the quarter again?

This quarter was approximately $70 million.

And so the outlook for the remainder of the year now is $200 million? Is that correct?

Yes.

Michael Lapides, Goldman Sachs.

Can you talk about which plants used that are already built that you think you have the best opportunity to do either the ITC or the cash grant from the government as part of the stimulus or if available tax equity?

Only North Brawley, Michael.

Okay. Thank you.

Timothy Arcuri, Citi.

Two things. First of all, given the delay at North Brawley, when do you think that will be full? Do you still think that is kind of end of Q2, Q3? Also following up on that, I think last call you talked about East Brawley being up late 2010. Is that still the expectation?

Yes, what we mentioned earlier on was that we expect North Brawley late in the third quarter and East Brawley still in 2010.

Okay. And then you had previously guided capacity adds this year to be 34 MW, now you're saying something like 24 MW. So, as that pushes into next year, do you have some outlook in terms of what capacity adds will be for 2010?

Yes, you know, the changes on 2009 is mostly because we have taken out what was already started up, the 9.5 that was started up in the first quarter. And then on 2010, we are quickly calculating approximately 50.

50? I'm sorry, 5-0?

Correct.

At this time there are no further questions. I will now turn the call back to Dita Bronicki for closing remarks.

Not really closing remarks but just thank you for your interest. I think it was a good conversation. We think we had a good quarter, but we had a good quarter call conversation, and we want to continue a good collaboration with you all. Thank you.

This concludes today's Ormat Technologies first-quarter 2009 earnings conference call. You may now disconnect.