Ormat Technologies Inc (ORA) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to the Ormat Fourth Quarter Year-End 2014 Conference Call. All lines have been placed on listen-only mode and the floor will be opened for your questions and comments following the presentation.

I would now like to turn the conference over to Mr. Jeff Stanlis of MS/Hayden IR. Mr. Stanlis, you may begin your conference.

Thank you, Jelda. Hosting the call today are Isaac Angel, Chief Executive Officer; and Doron Blachar, Chief Financial Officer; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations.

Before beginning, I 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 operation and are based on management's current estimates and projections for future results and trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see the Risk Factors as described in Ormat Technologies' annual report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2014.

In addition, during the call, we will present non-GAAP financial measures, such as EBITDA and adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night, as well as in the slides posted on the Company's website. Because these measures are not calculated in accordance with US GAAP, they should not be considered in isolation from the Company's 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 IR Events and Presentations link that's down on the Investor Relations tab.

With that said, I would like to turn the call over to Isaac Angel. Isaac, the call is yours.

Thank you, Jeff; and good morning, everyone. Thank you for joining us today for the presentation of our fourth quarter and full-year 2014 results and outlook for the near future. On the slides 4 and 5, we identified the highlights for what has been a busy, productive and successful year.

We continue to deliver strong financial performance year-over-year with record revenues, 48% increase in operating income, 31% increase in net income and robust adjusted EBITDA of $272.7 million. Doron will go into the numbers in detail in a minute.

During 2014, we took meaningful steps to increase shareholders' value as well as giving the Company the resources to expand and improve its operations. I'm excited with the progress we made last year and today, we have a wide range of opportunities to continue this progress in 2015 and beyond. I will elaborate on the progress we made on our plans for the future and Doron will review the financial results. Doron?

Thank you, Isaac; and good morning, everyone. Let me start by providing an overview of our financial results for the year-end December 31, 2014.

Starting with slide seven. Total revenue for 2014 was $559.5 million, a 4.9% increase over revenue of $533 million in 2013. In our Electricity segment, as you can see on slide eight, revenue grew 15.9% to $382.3 million in 2014 from $329.7 million in 2013. The increase was primarily due to the new capacity coming online at the Olkaria complex in Kenya as well as the commencement of Don Campbell power plant in Nevada.

In 2014, we managed our economic exposure to natural gas and oil prices in our electricity segment through hedging activity. As a result of such activities, we recorded in the electricity revenue the net gain on derivative contracts on oil and natural gas prices of $5.7 million in 2014 compared to a net loss of $5 million in 2013.

In the Product segment on slide nine, product revenues were $177.2 million, in line with our guidance expectations, compared to $203.5 million in 2013. The decrease is due to timing of revenue recognition and [different product mix].

Moving to slide 10, the Company combined gross margin for 2014 increased $203.7 million or 36.4% compared to $160.8 million or 30% in 2013. In the Electricity segment, gross margin for 2014 increased to $135.7 million or 35.5% compared to $96.9 million or 29.4% in 2013. This increase was mainly due to the higher margin that new power plants contributed as well as the impact of mark-to-market related to the derivative contracts.

In the Product segment, gross margin for 2014 was $68.1 million or 38.4% compared to $62.9 million or 30.9% in 2013. The interest in the product gross margin is mainly attributable to the different product mix and margin in the various sales contracts. Specifically, in 2014, the product mix was comprised of a relatively high portion of supply contract versus 2013. The gross margin for 2014 is higher than the typical level for this segment and we do not expect it to remain at these levels in 2015.

Moving to slide 11, operating income increased 48% to $143.5 million compared to $97 million in 2013. Operating income attributable to our electricity segment in 2014 was $90.4 million compared to $54.3 million in 2013. Operating income attributable to our Product segment increased to $53.1 million compared to $42.7 million in 2013. The increase was mainly due to the improvement in our Electricity segment gross margin and due to one-time early termination fee of $11.6 million included in 2013 selling and marketing expenses. This increase was partially offset due to a $15.4 million write-off of unsuccessful exploration activities in 2014 compared to $4.1 million in 2013.

The write-off represents $8.1 million exploration and development cost related to the Wister site in California and $7.3 million exploration cost related to the Mount Spurr prospect in Alaska, out of which $3.5 million account for land cost. After conducting exploratory drilling in those sites, management concluded that the geothermal resource as well as the commercial environment would not support commercial operations in the foreseeable future.

Moving to slide 12, interest expense, net of capitalized interest, for 2014 was $84.7 million compared to $73.8 million last year. The increase is mainly due to the conversion in OPIC interest loans to fixed interest long-term rate and due to a $4.4 million decrease in interest capitalized to [project].

Moving to slide 13, net income attributable to the Company stockholders for 2014 increased 31.4% to $54.2 million or $1.18 per share compared to $41.2 million or $0.91 per share in 2013. Net income attributable to the Company's shareholders excluding the $15.4 million write-off of unsuccessful exploration activities was $69.6 million or $1.51 per share in 2014.

Now, I would like to go over a few quarterly financial highlights beginning with slide 14. For the fourth quarter of 2014, total revenue increased 14% to $149.2 million compared to $130.9 million in the fourth quarter of 2013. Revenues in the Electricity segment increased 10.1% to $93.3 million in the fourth quarter of 2014, up from $84.7 million in the fourth quarter of last year. Revenues in the product segment were $56 million, an increase of 21.2% compared to $46.2 million in the fourth quarter 2013.

Now, on slide 15, operating income in the fourth quarter of 2014 increased 61% to $34.8 million compared to $21.6 million in the fourth quarter of last year. Net income attributable to the Company's stockholders for the fourth quarter was $7 million or $0.15 per share compared to $8.2 million or $0.18 per share in the fourth quarter of last year. The net income of the fourth quarter was impacted by a $7.3 million write-off of unsuccessful exploration activities and approximately $4 million increase in income tax, mainly due to the impact of the devaluation of the shekel against the dollar and its impact on the tax expense in Israel.

Please move to slide 16 on adjusted EBITDA. Adjusted EBITDA for 2014 was $272.7 million compared to $241 million in the same period last year, which represents a 13.1% increase. Adjusted EBITDA for the fourth quarter of 2014 was $68.3 million as compared to $62.2 million in the same quarter last year, which represents a 9.9% increase.

We reviewed our adjusted EBITDA calculation as well as compared it to other companies and we decided to revise our definition to a more presentative adjusted EBITDA. We believe adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We understand that the investors use adjusted EBITDA among other things to assess our period-to-period operating performance and to gain insight into the manner in which management analyzes operating performance.

Adjusted EBITDA is calculated as net income before interest, taxes, depreciation and amortization, adjusted for termination fees, impairment of long-lived assets, write-off of unsuccessful exploration activities, any mark-to-market gains or losses from accounting for derivatives, mergers and acquisition transaction cost, stock-based compensation, gain from extinguishment of liabilities, and gain on sale of subsidiaries and property, plant and equipment.

On slide 17, you can see the reconciliation of the last 12 quarters of the adjusted EBITDA as currently defined and calculated.

Moving to slide 18, cash and cash equivalents as of December 31, 2014, was $40.2 million. The accompanying slide breaks down the use of cash during 2014. Net cash provided by operating activities was $213.2 million in 2014 compared to $86.7 million in 2013. For the fourth quarter of 2014, net cash provided by operating activities was $35.5 million compared to $54.5 million in the fourth quarter of 2013.

Our long-term debt as of December 31, 2014, and payment schedules are presented in slide 19 of the presentation. The average cost of debt for the Company stands at 6.1%.

On February 24, 2015, Ormat's Board of Directors approved the payment of a quarterly dividend of $0.08 per share for the fourth quarter. The dividend will be paid on March 27, 2015, to shareholders of record as of the closing of business on March 16, 2015. In addition, the Company expects to pay quarterly dividends of $0.06 per share in the next three quarters.

This concludes my financial overview. I would like now to turn the call to Isaac for operational and business update. Isaac?

Thank you very much, Doron. Starting with slide 21, during 2014, we focused on the commencement of Plant 3 of Olkaria complex and construction of the McGinness Hills Phase 2 power plant. In addition, we began construction in Don Campbell Phase 2 project.

In early February 2014, we announced that we successfully completed construction and reached commercial operation of Plant 3 in the Olkaria complex in Kenya. With Plant 3 online, the complex's total generation capacity has increased to 110 megawatts. In December, we amended the existing PPA with KPLC, paving the way for the expansion of the complex with an additional 24 megawatts.

Early this year, we announced that the second phase of McGinness Hills power plant in Nevada has begun commercial operations. Since February 1, 2015, the complex sells electricity under the amended PPA with NV Energy at a new energy rate of $85.6 per megawatt with a 1% annual escalation through December 2032.

The second phase broke ground on March 2014 following resource confirmation and excellent performance of the first phase, which had been operational since June 2012. Implementing our phased development approach enabled us to bring online the second phase rapidly as well as to take advantage from economies of scale. We expect the complex will further improve our financial performance. The total generation for 2014 was approximately 4.4 million megawatt hours, which is an increase of 4.6% from the last year. The growth in generation is mainly due to contribution of Don Campbell power plant in Nevada, Olkaria Plant 3 in Kenya, and Amatitlan in Guatemala.

In Puna, following the Hurricane Iselle that hit the Hawaiian Big Island in August 2014, we were required to temporarily shut down our power plant. As a result, one of the production wells did not fully recover and the plant lost approximately 5 megawatts. We started to drill a new production well and convert one of the drilled wells into an injection well. We expect to restore the generation capacity to 38 megawatts by mid-2015.

Our current generation capacity increased to nearly 650 megawatts, as you can see in slide 22. We made few adjustments to reflect the updated status of generating capacity. We increased Don Campbell to 19 megawatts and added 34 megawatts to McGinness Hills complex. At the Steamboat complex, Jersey Valley and North Brawley power plants, we adjusted the generating capacity to better reflect the actual generations of these plants. We also provided the average capacity factor for each operation area. Few of our plants are operating at a lower capacity factor. The enhancements we are performing are expected to provide an upside and increase capacity factor for several power plants.

Moving to slide 23, in 2015, we plan to invest in new projects under development and construction as listed in the slide. In addition, our CapEx plan includes investment in global projects that are currently under advanced exploration and we expect them to start the development process during the year.

In Don Campbell, field development and construction of 19 megawatt second phase has begun. Additionally, the PPA for these projects is under approval process with the offtaker. We expect to complete the project in the first quarter of 2016.

Northleaf, our new joint venture investor, will purchase approximately 40% interest in the project and it will be added to the existing joint venture when it's completed and tested. This validates our expectation that this relationship will represent a long-term agreement.

In Olkaria, we expect to increase the generation capacity of the complex by 24 megawatts, bringing the complex's total capacity to 134 megabytes. The fourth plant is expected to come online in the second half of 2016.

And with regard to Sarulla, the construction is continuing the testing and development activities at the site. The first phase is expected to commence operation in 2016 and the remaining two phases of operations are scheduled to commence within 18 months thereafter.

In Platanares, we plan to continue to speed development of the project. Once the well field is validated, we will determine the expected capacity and begin construction of the first phase anticipated to be approximately 18 megawatts and to reach commercial operation in 2017. In Kenya, we signed key agreements related to 35 megawatts Menangai project. Together with our project company partners, we will operate this project on a built-own-operate basis for 25 years and sell the electricity under a 25-year PPA with KPLC.

GDC, which is wholly owned by the Government of Kenya, will develop the geothermal resource, supply the steam for conversion to electricity, and maintain the geothermal fuel throughout the term of the agreement. We expect to start construction once financing is secured.

To summarize, the project that we plan to work on this year may add between 90 megawatt to 115 megawatt in the years 2016 and 2017. Besides the investment in new projects, as I just described, we are also enhancing some of our existing power plants. We expect that these enhancements will improve our EBITDA margins going forward.

Moving to slide 24, we have 32 prospects in [Euro] exploration or where activity is yet to begin in the US, Chile, Guatemala and New Zealand. Slide 25 provides for an update on the Products segment. Our revenue from the product segment was within our 2014 guidance range of $170 million to $180 million. We have secured $41 million in new orders in the fourth quarter, positioning our product backlog as of February 16, 2015, at approximately $326 million.

Let me continue my review of business update on slide 26. We recently announced the completion of share exchange transaction to acquire our part parent company. This step created a streamline corporate structure and increase liquidity for our shareholders. We also listed our shares on the Tel Aviv Stock Exchange. These accomplishments should help us attract institutional investors and diversify our investor base.

We also announced a milestone agreement with Northleaf Capital Partners under which Ormat will contribute certain geothermal and recovered energy generation power plants into a newly established holding company and new Northleaf will acquire approximately 40% of equity interest in the joint venture.

Ormat will continue to consolidate in the joint venture and its assets and will continue to provide day-to-day management, operations and maintenance control over the projects. This transaction will raise approximately $175 million for a month at a compelling valuation. The purchase price implies a total transaction value of $438 million.

Moving to slide 27, global demand for renewable energy remains strong. In the United States, interest in the geothermal energy remained strong for numerous reasons, including legislative support of renewable portfolio standards, coal and nuclear-based energy retirement, and increasing awareness of positive value of geothermal characteristics as compared to intermittent renewable energy.

In California, Governor Jerry Brown announced on January 5th that he would like to raise the renewables portfolio standard target to 50% by 2030 from its current goal of getting 33% of its electricity generation from renewable resources by 2020. The legislator responded by introducing Assembly Bill 197. The bill will require the California Public Utilities Commission to evaluate the cost effectiveness of renewable energy sources, not only in regards to their upfront cost, but also for their ability to benefit by group supplementing intermittent solar and wind or by providing baseload electricity generation that could benefit geothermal energy, which has the advantage of generating baseload power.

In addition, the Hawaii Electric Light Company submitted a long-term energy plan to the Hawaii PUC that includes the target goal of generating 92% of its electricity from renewable energy sources by the year 2030. We see similar initiatives in other areas as well and trust that encouraging environment will continue to drive growth in both of our segments.

If you could please turn to slide 28, you will see our CapEx requirements for 2015. We plan to invest a total of the $153 million in capital expenditures on new projects under construction and enhancements; an additional $96 million is budgeted for development, exploration activities, maintenance capital for our operating projects, and invested in machinery and equipment. In addition, $92 million will be required for debt repayment.

Turning to slide 29, we outlined our revenue outlook for 2015. For the full-year 2015, we expect Electricity segment's revenues to be between $380 million and $390 million, and the Product segment revenues to be between $180 million and $190 million, which sum up to total revenues of between $560 million and $580 million. In addition, as we continue to make operational progress and monetize our assets, we felt it was an appropriate time to provide adjusted EBITDA guidance. For 2015, we expect to generate adjusted EBITDA of between $280 million and $290 million.

With that said, I would like to thank you for your support and at this time, I would like to open the call for questions. Operator?

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Daniel Mannes, Avondale.

Thank you. Good morning, everyone. First of all, thank you very much for the adjusted EBITDA guidance. I think, it's something we've all been looking for for a while and I think it's a nice step, but unfortunately that also means we have a whole bunch questions about it. So, I wanted to first sort of, can you talk at all about your hedge position for 2015 as it relates to natural gas and oil and maybe help build up the revenue guidance on power in relation to any hedges you may have?

Yes, Dan, [to be fair]. Regarding the hedge activities, today, we have natural gas hedged for the first quarter of 2015 at the price of $4.95. This is the only hedge that we have today for oil and natural gas. And obviously, as you alluded to, the reduction in the prices had an impact on our revenue guidance, which assumes the December pricing of oil and natural gas.

So as we look at year-over-year, so for instance, for 2014, your power revenue was $380 million. For 2015, you're giving us a range of what $380 million to $390 million. You have some pretty substantial headwinds on the natural gas side and on the crude side at Puna. So maybe could you just help us, other than the inclusion of McGinness, anything else we should be thinking about that may be helpful on the power side this year?

Basically, the reduction in the oil prices and natural gas prices are the reason that you don't see a higher increase due to the McGinness contract, the plan going into operations. If you would take the 2015 generation number and try to calculate it based on the pricing of 2014 to get an apples-to-apple comparison, the impact is roughly $20 million on the revenue.

Got it. Thank you. And then, similarly, as you look at the EBITDA number, your adjusted EBITDA was $272 million for 2014, you did back out the benefit of the hedges in 2014. So, this is apples to apples, assuming no benefit from the hedges in 2015. Can you maybe talk to us about where the upside is coming from year-over-year when revenue is kind of flattish on the power side? And then, on product, you're telling us that while revenue is higher, margins will probably be lower? So, can you point to us what's driving the year-over-year EBITDA growth?

First of all, in the adjusted EBITDA, we are not neutralizing the hedging. What we did there, we are only neutralizing the mark-to-market effect. So actually, we're having an apples-to-apple calculation. Accounting wise, we need to mark to market, but economic wise, obviously, the hedge impacts the relevant period. So by excluding the mark to market, we actually give the right impact for the hedging activities that we do.

So you're including the cash benefit of the hedges in the quarter that it impacts, but not the mark-to-market impact?

Yes.

Okay, got it. Thank you.

Okay. And the additional upside that we see within the EBITDA that helps us actually [cover] first of all the McGinness Hill plant that Phase II coming online has a nice -- a relatively high EBITDA compared to other power plants that we have which is second phase; it's based on the existing operations that we have. So that compensates for quite a lot of the impact or more than the total impact of the hedge; and in addition, we see additional upside in the power plants that we are operating today, some cost reductions activities that we took and that obviously impact more the EBITDA line than the revenue line.

So it's fair to assume that we should see better gross margins at the power business year-over-year?

Yes.

That's the key driver. Anything below the gross profit line that might be benefiting? Do we expect to see a reduction in either G&A or S&M?

S&M is basically subject to the product sales and it's subject to the product sales and product revenue. It recognize the sales commission usually over time. That's the biggest element there, the salespeople. And so, this should be in line with our product revenue. And on the G&A, the saving and cost reduction initiative are also impacting the G&A, of course, but we don't have a specific number to give out.

Okay. And then, as we think about the Northleaf transaction which -- first of all, can you give us an update on when you expect that to close? And then, two, how do we think about the impact of the Northleaf transaction on your adjusted EBITDA calculation?

Regarding closing, we don't have any updates. We said we expect it to close in Q1. This is still our expectation. We don't have any insight to accelerate it or delay today. We are working obviously on all the closing conditions that we have there, the regular ones and we still expect it in Q1. Since the transaction hasn't closed yet, so what you see here is the 100% EBITDA of all of our power plants. In the future, since we are consolidating, the calculation of the EBITDA will come to the 100%, but obviously part of that will go to Northleaf.

Got it. So on the other side, we should probably be thinking about your enterprise values and we probably need to gross that up for Northleaf's investment?

Yes. If you would go to the enterprise value then, we would have allocated to us maybe lower EBITDA, but on the other hand, there was going to be additional cash on the balance sheet. So the net debt is going to be much lower.

Got it. And then, real quick on Don Campbell, that seems to have come together very, very quickly. Can you talk at all about, number one, the PPA? Is it similar to the current one, which I believe is with SCPPA or LADWP? And then, two, will this qualify for the production tax credit? i.e., did it get the 5% in service by the end of 2014, or the 5% construction?

Well, regarding the PPA, once it's going to be finalized and approved, we'll be able to share with the market all the information. This is the power plant that is in construction. We are in the final stages of approving the PPA. So, we cannot yet share this with the market. But obviously, the PPA takes into account the fact it is a Phase II project and the Phase II projects, the risks and the cost are lower than a Phase I project. Don Campbell does file -- based on our understanding does qualify for the PTC. We do have the 5% investment in 2014 and in addition, we can also -- the continuous construction clause, so we expect it to be entitled to PTC.

Great. This is Isaac, Dan, and you are right, we are accelerating. Don Campbell is going very fast and the same goes for other power plants we are building. Obviously, it affects our bottom line.

Well, I think one of the things we're seeing is the phased approach obviously. The first greenfield does take awhile, but these expansions, I mean, you look at McGinness, you look at Olkaria, you look at what you do with Don Campbell, they are coming on a lot quicker and financially, they do seem to be impacting the bottom line more meaningfully than maybe power plants that you had added in the past?

You are right and that's the plan going forward.

And then, the last follow-up I have is on Hawaii. You mentioned the long-term plan there. I think there was some news in Hawaii that they finally selected someone to provide 25 megawatts on the Big Island and it's you. Can you maybe give us any color on what your plans are in Hawaii and whether it's going to be an expansion of Puna or something else?

It's not going to be an expansion of Puna, no doubt on that. But it's too early to say what is going to be done there. The first part of your question is right, we were selected, but it happened only two days ago. So, we really have to sit down and plan ahead and then we'll come up with more information in what's happening. I hope that on our March 31 meeting that I hope to see you there, we will have more color on that.

Sounds great. I apologize. I do have one last one. Any update on CD4 and how that's going and maybe -- because that's not on your list of projects, but it's a pretty advanced development?

We are working behind the scene over there. But nothing that we can report as of today. Again, in the upcoming calls, I hope to give you more color on that.

Sounds good. Thanks a lot guys and thanks for the EBITDA guidance.

Thank you very much, Dan.

JinMing Liu, Ardour Capital.

Good morning, thanks for taking my question.

Thank you.

Thank you, Jin.

First off, regarding your product segments, how much revenue you recognize from the Sarulla project in 2014 and how much you put into your guidance for 2015 from that project?

We don't usually speak about specific projects, because the status of projects over the life of a project changes due to either priorities in the manufacturing that we might shift from one project to another to an internal project.

Regarding 2014, since we did give the guidance of $35 million that we're recognizing in Sarulla, we recognized a little bit more than that, about $38 million; and going forward, you can see this as an ongoing project. It's a very large project. It has another three years until we finish all the manufacturing and deliveries. So all-in-all, roughly a linear spread, maybe a little bit higher at the beginning of the period is the right spread.

Okay. Understand. Regarding your Phase II of the Don Campbell projects, you mentioned you want to sell that 40% of interest back to Northleaf. Well, that transaction will be based on the similar multiples as you did. Is that the case?

The Phase II transaction has a different characteristic than the current transaction. Obviously, it's a project that is still in construction. We don't have any history of operation to show. So it's not there. So there is an agreed price that is based on the timing of the project and the cost of the project. Once Campbell Phase II goes online, we will be able to share with you.

Okay. Got that. Lastly, regarding your Puna facility, how much will the cost be to fix up the facility?

Jin, we are not giving out these numbers. So frankly, I cannot tell you the number. Sorry about it.

Okay, got that. Okay, thanks a lot.

Thank you very much.

(Operator Instructions) Mark Barnett, Morningstar.

Hey, good morning, everyone.

Morning.

Morning.

Also, just thank you for the EBITDA guidance. I appreciate that and you went through a lot of detail on that already. A couple of bigger-picture questions maybe. You mentioned specifically obviously, the new RPS target and Bill [197] in California. And the RPS is fairly straightforward. But can you discuss a little bit how you think 197 might actually play out in terms of benefits for more baseload resources like geothermal?

I think if you look at California on the Bill and the other, there is a basic understanding into the regulators of the advantages and benefits of geothermal and the more they understand the fact that the geothermal is a baseload, is reliable, then we'll see these embedded into the Bill in California and we expect this to support our future growth and beneath for geothermal energy in the future.

Okay. I know still early days on that. So it's hard to really detail it. Are there any further, I guess, tweaks to programs or existing policies or new proposals outside of these two items in California that will impact your either existing or future plans that are on your radar?

There is none, which are determined as we speak now, but we are working very diligently at the capital and in Nevada and California for local teams and I hope there are a few things that we will be able to talk to you about on our March meeting.

Okay. I appreciate that. Last question from me. You have a fairly full plate for development in the near term at the moment. I'm just curious if other operators, maybe a little bit less capitalized or less experienced, does anything out there present an M&A opportunity that could be attractive or are you looking fully internally at this point?

Mark, I will relate to it very lengthily in our next meeting, but just a bit of information. We are planning some step-up functions to M&As. So we are not only looking [on in general] growth and we have the financial abilities to do so and you probably know there are lot of prospects in the market, as we speak. So, we are looking around to find synergetic M&As for us. But at this stage, it's only opportunistic and as I said before, we are restructuring the Company also to build an M&A team that we work on that, but at this stage, it's only an opportunistic stages, but we are not [outsourcing] it at all.

Okay, great. Thanks for the color. Appreciate it.

Thank you very much, Mark. Have a nice day.

Ella Fried, Leumi.

Hello and good morning and good afternoon to those in Israel. In order to understand the allocation of EBITDA to Ormat and to Northleaf, could you maybe examine the allocation in terms of EBITDA of 2014 as if it were already here with the JV?

Hi, Ella. Thanks for the questions. They're on the allocation, basically what Northleaf are going to invest up to 40% or approximately 40% in Puna, Campbell and the oil. So, they are going to be allocated 40% of the EBITDA of these specific power plants. When we announced the transaction, we says that it was roughly -- the 100% was about $40 million. So, their part would be 16%, but obviously there is no commitments. SO, if the power plants and the oils do better then they would get a higher EBITDA and if they do lower they will get lower EBITDA.

So, in terms of 2014, if the JV already existed, we would be looking at the EBITDA of around $250 million, am I right?

We would be looking at the $272 million minus $16 million EBITDA, but obviously when you go into this calculation, you need to look at the enterprise value because...

I did just went with the oil prices, but in general that would be [the numbers moving].

Yes, you're right.

Okay. Thank you. And another question about the write-off of the geothermal assets that are not going to be developed. How many locations are we talking?

The majority of the number relates to two locations. It was Wister in California that was written off in Q2 and Mount Spurr in Alaska that was written off in Q4 of this year.

Okay, thank you. And congratulations onto your results.

Thank you.

Thank you very much.

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Isaac Angel for any closing remarks.

Guys, thank you very much for your ongoing support and thank you very much for being with us this morning. And I would like to remind you that we are holding an investment conference on March 31 in New York and we will be more than glad to see you all there and have a nice day. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.