Ormat Technologies : Report of Periodic or Interim Report

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

• QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024

or

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from	to
	Commission file number: 001-32347
	ORMAT TECHNOLOGIES, INC.
	(Exact name of registrant as specified in its charter)
	Delaware	88-0326081
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
6140 Plumas Street, Reno, Nevada	89519-6075
(Address of principal executive offices)	(Zip Code)
	[phone]
	(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past

90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of R e g u l a t i o n S - T ( § 2 3 2 . 4 0 5 o f t h i s c h a p t e r ) d u r i n g t h e p r e c e d i n g 1 2 m o n t h s ( o r f o r s u c h s h o r t e r p e r i o d t h a t t h e r e g i s t r a n t w a s r e q u i r e d t o s u b m i t s u c h

files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

As of May 1, 2024, the number of outstanding shares of common stock, par value $0.001 per share, was 60,421,682.

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ORA	NYSE

Table of Contents
	ORMAT TECHNOLOGIES, INC.
	FORM 10-Q
	FOR THE QUARTER ENDED MARCH 31, 2024
PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52
ITEM 4.	CONTROLS AND PROCEDURES	52
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	53
ITEM 1A.	RISK FACTORS	53
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	53
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	53
ITEM 4.	MINE SAFETY DISCLOSURES	53
ITEM 5.	OTHER INFORMATION	53
ITEM 6.	EXHIBITS	53
SIGNATURES		55
	ii

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Certain Definitions

Unless the context otherwise requires, all references in this quarterly report to "Ormat", "the Company", "we", "us", "our company", "Ormat Technologies" o r "our" refer to Ormat Technologies, Inc. and its consolidated subsidiaries.

iii

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		March 31,		December 31,
		2024		2023
		(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	201,506	$	195,808
Restricted cash and cash equivalents (primarily related to VIEs)		97,455		91,962
Receivables:
Trade less allowance for credit losses of $163 and $90 respectively (primarily related to VIEs)		154,557		208,704
Other		33,916		44,530
Inventories		53,874		45,037
Costs and estimated earnings in excess of billings on uncompleted contracts		23,616		18,367
Prepaid expenses and other		44,311		41,595
Total current assets		609,235		646,003
Investment in unconsolidated companies		127,386		125,439
Deposits and other		43,832		44,631
Deferred income taxes		173,627		152,570
Property, plant and equipment, net ($3,010,086 and $2,802,920 related to VIEs, respectively)		3,220,246		2,998,949
Construction-in-process ($349,731 and $376,602 related to VIEs, respectively)		837,205		814,967
Operating leases right of use ($10,334 and $9,326 related to VIEs, respectively)		27,318		24,057
Finance leases right of use (none related to VIEs)		3,216		3,510
Intangible assets, net		323,657		307,609
Goodwill		151,122		90,544
Total assets	$	5,516,844	$	5,208,279
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	197,035	$	214,518
Short term revolving credit lines with banks (full recourse)		-		20,000
Commercial paper (less deferred financing costs of $28 and $29, respectively)		99,972		99,971
Billings in excess of costs and estimated earnings on uncompleted contracts		21,376		18,669
Current portion of long-term debt:
Limited and non-recourse (primarily related to VIEs)		68,211		57,207
Full recourse		150,835		116,864
Financing liability		3,620		5,141
Operating lease liabilities		3,914		3,329
Finance lease liabilities		1,291		1,313
Total current liabilities		546,254		537,012
Long-term debt, net of current portion:
Limited and non-recourse (primarily related to VIEs and less deferred financing costs of $9,128 and $7,889, respectively)		557,946		447,389
Full recourse (less deferred financing costs of $4,877 and $3,056, respectively)		835,841		698,187
Convertible senior notes (less deferred financing costs of $7,564 and $8,146, respectively)		423,686		423,104
Financing liability		219,682		220,619
Operating lease liabilities		22,273		19,790
Finance lease liabilities		1,979		2,238
Liability associated with sale of tax benefits		175,586		184,612
Deferred income taxes		74,967		66,748
Liability for unrecognized tax benefits		9,255		8,673
Liabilities for severance pay		10,703		11,844
Asset retirement obligation		123,087		114,370
Other long-term liabilities		28,954		22,107
Total liabilities		3,030,213		2,756,693

Commitments and contingencies (Note 9)

Redeemable noncontrolling interest
Equity:
The Company's stockholders' equity:
Common stock, par value $0.001 per share; 200,000,000 shares authorized; 60,421,682 and 60,358,887 issued and outstanding
as of March 31, 2024 and December 31, 2022, respectively
Additional paid-in capital
Treasury stock, at cost (258,667 shares held as of March 31, 2024 and December 31, 2023, respectively)
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders' equity attributable to Company's stockholders
Noncontrolling interest
Total equity
Total liabilities, redeemable noncontrolling interest and equity	$

10,112		10,599
6 0		6 0
1,619,593		1,614,769
(17,964)		(17,964)
751,238		719,894
(843)		(1,332)
2,352,084		2,315,427
124,435		125,560
2,476,519		2,440,987
5,516,844	$	5,208,279

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(Unaudited)
	Three Months Ended March 31,
	2024		2023
	(Dollars in thousands,
	except per share data)
Revenues:
Electricity	$	191,253	$	170,310
Product		24,832		10,042
Energy storage		8,081		4,880
Total revenues		224,166		185,232
Cost of revenues:
Electricity		116,730		94,758
Product		21,154		9,351
Energy storage		7,472		5,054
Total cost of revenues		145,356		109,163
Gross profit		78,810		76,069
Operating expenses:
Research and development expenses		1,564		1,288
Selling and marketing expenses		5,126		3,948
General and administrative expenses		19,537		17,667
Operating income		52,583		53,166
Other income (expense):
Interest income		1,839		1,851
Interest expense, net		(30,968)		(23,631)
Derivatives and foreign currency transaction gains (losses)		(1,582)		(1,937)
Income attributable to sale of tax benefits		17,476		12,566
Other non-operating income, net		26		60
Income from operations before income tax and equity in earnings of investees		39,374		42,075
Income tax (provision) benefit		147		(8,885)
Equity in earnings of investees		829		271
Net income		40,350		33,461
Net income attributable to noncontrolling interest		(1,763)		(4,432)
Net income attributable to the Company's stockholders	$	38,587	$	29,029
Comprehensive income:
Net income		40,350		33,461
Other comprehensive income (loss), net of related taxes:
Change in foreign currency translation adjustments		(2,163)		(696)
Change in unrealized gains or losses in respect of the Company's share in derivatives instruments of an
unconsolidated investment that qualifies as a cash flow hedge		510		(1,014)
Change in unrealized gains or losses in respect of a cross currency swap derivative instrument that qualifies
as a cash flow hedge		561		(5,403)
Change in unrealized gains or losses in respect of an interest rate swap derivative instrument that qualifies as
a cash flow hedge		1,066		-
Other changes in comprehensive income		53		14
Total other comprehensive income (loss), net of related taxes:		27		(7,099)
Comprehensive income		40,377		26,362
Comprehensive income attributable to noncontrolling interest		(1,301)		(4,042)
Comprehensive income attributable to the Company's stockholders	$	39,076	$	22,320
Earnings per share attributable to the Company's stockholders:
Basic:	$	0.64	$	0.51
Diluted:	$	0.64	$	0.51
Weighted average number of shares used in computation of earnings per share attributable to the Company's
stockholders:
Basic		60,386		56,710
Diluted		60,536		57,104

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

			The Company's Stockholders' Equity
					Accumulated
		Additional			O t h e r
C o m m o n S t o c k	Paid - in	Treasury	R e t a i n e d	C o m p r e h e n s i v e		Noncontrolling	Total
S h a r e s	A m o u n t	C a p i t a l	Stock	Earnings	Income (Loss)	Total	Interest	Equity
			(Dollars in thousands, except per share data)

Balance at December 31, 2022	56,096	$	5 6	$	1,259,072	$	(17,964)	$	623,907	$	2,500	$ 1,867,571	$	153,404	$	2,020,975
Stock-based compensation	-		-		2,990		-		-		-	2,990		-		2,990
Exercise of stock-based awards by
employees and directors (*)	-		-		2 7		-		-		-	2 7		-		2 7
Issuance of common stock	3,600		4		297,117		-		-		-	297,121		-		297,121
Cash paid to noncontrolling interest	-		-		-		-		-		-	-		(2,360)		(2,360)
Cash dividend declared, $0.12 per
share	-		-		-		-		(6,732)		-	(6,732)		-		(6,732)
Change in noncontrolling interest	-		-		1,239				-		-	1,239		(2,396)		(1,157)
Net income	-		-		-		-		29,029		-	29,029		4,235		33,264
Other comprehensive income
(loss), net of related taxes:
Change in foreign currency
translation adjustments	-		-		-		-		-		(306)	(306)		(390)		(696)
Change in unrealized gains or
losses in respect of the
Company's share in derivative
instruments of an
unconsolidated investment that
qualifies as a cash flow hedge	-		-		-		-		-		(1,014)	(1,014)		-		(1,014)
Change in unrealized gains or
losses in respect of a cross
currency swap derivative
instrument that qualifies as a
cash flow hedge	-		-		-		-		-		(5,403)	(5,403)		-		(5,403)
Other	-		-		-		-		-		1 4	1 4		-		1 4
Balance at March 31, 2023	59,696	$	6 0	$	1,560,445	$	(17,964)	$	646,204	$	(4,209)	$ 2,184,536	$	152,493	$	2,337,029
Balance at December 31, 2023	60,359	$	6 0	$	1,614,769	$	(17,964)	$	719,894	$	(1,332)	$ 2,315,427	$	125,560	$	2,440,987
Stock-based compensation	-		-		4,769		-		-		-	4,769		-		4,769
Exercise of stock-based awards by
employees and directors (*)	6 3		-		5 5		-		-		-	5 5		-		5 5
Cash paid to noncontrolling interest	-		-		-		-		-		-	-		(2,587)		(2,587)
Cash dividend declared, $0.12 per
share	-		-		-		-		(7,243)		-	(7,243)		-		(7,243)
Net income	-		-		-		-		38,587		-	38,587		1,924		40,511
Other comprehensive income
(loss), net of related taxes:
Change in foreign currency
translation adjustments	-		-		-		-		-		(1,701)	(1,701)		(462)		(2,163)
Change in unrealized gains or
losses in respect of the
Company's share in derivative
instruments of an
unconsolidated investment that
qualifies as a cash flow hedge	-		-		-		-		-		5 1 0	5 1 0		-		5 1 0
Change in unrealized gains or
losses in respect of a cross
currency swap derivative
instrument that qualifies as a
cash flow hedge	-		-		-		-		-		5 6 1	5 6 1		-		5 6 1
Change in unrealized gains or
losses in respect of an interest
rate swap derivative instrument
that qualifies as a cash flow
hedge	-		-		-		-		-		1,066	1,066		-		1,066
Other	-		-		-		-		-		5 3	5 3		-		5 3
Balance at March 31, 2024	60,422	$	6 0	$	1,619,594	$	(17,964)	$	751,118	$	(723)	$ 2,352,084	$	124,435	$	2,476,519

(*) Resulted in an amount lower than $1 thousand.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
	Three Months Ended
		March 31,
	2024		2023
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	40,350	$	33,461
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		62,351		53,161
Accretion of asset retirement obligation		1,910		1,532
Stock-based compensation		4,769		2,990
Income attributable to sale of tax benefits, net of interest expense		(8,627)		(7,645)
Equity in earnings of investees		(829)		(271)
Mark-to-market of derivative instruments		813		993
Disposal of property, plant and equipment		(312)		(123)
Gain on severance pay fund asset		(97)		(116)
Loss on foreign currency exchange rates		741		-

Deferred income tax provision Liability for unrecognized tax benefits

Changes in operating assets and liabilities, net of businesses acquired: Receivables

Costs and estimated earnings in excess of billings on uncompleted contracts Inventories

Prepaid expenses and other

Change in operating lease right of use asset Deposits and other

Accounts payable and accrued expenses

Billings in excess of costs and estimated earnings on uncompleted contracts Liabilities for severance pay

Change in operating lease liabilities Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures

Investment in unconsolidated companies

Cash paid for business acquisition, net of cash acquired

Decrease (increase) in severance pay fund asset, net of payments made to retired employees Net cash used in investing activities

Cash flows from financing activities:

Proceeds from long-term loans, net of transaction costs Proceeds from exercise of options by employees Proceeds from revolving credit lines with banks Repayment of revolving credit lines with banks

Cash received from noncontrolling interest Repayments of long-term debt

Proceeds from issuance of common stock, net of related costs Cash paid to noncontrolling interest

Payments under finance lease obligations Deferred debt issuance costs

Cash dividends paid

Net cash provided by financing activities Effect of exchange rate changes

Net change in cash and cash equivalents and restricted cash and cash equivalents

Cash and cash equivalents and restricted cash and cash equivalents at beginning of period Cash and cash equivalents and restricted cash and cash equivalents at end of period

Supplemental non-cash investing and financing activities:

Change in accounts payable related to purchases of property, plant and equipment Right of use assets obtained in exchange for new lease liabilities

	(9,683)		501
	582		22
	57,193		(26,626)
	(5,249)		(731)
	(8,837)		(22,615)
	(3,710)		(15,903)
	935		720
	262		(22)
	(16,333)		22,226
	2,707		15,866
	(1,141)		(439)
	(816)		(289)
	(1,770)		(236)
	115,209		56,456
	(103,386)		(106,877)
	(608)		(4,235)
	(274,631)		-
	791		(65)
	(377,834)		(111,177)
	331,345		99,850
	55		27
	40,000		-
	(60,000)		-
	12,251		7,341
	(37,826)		(42,814)
	-		297,121
	(3,168)		(2,985)
	(352)		(570)
	(1,118)		(857)
	(7,243)		(6,732)
	273,944		350,381
	(128)		(14)
	11,191		295,646
	287,770		226,676
$	298,961	$	522,322
$	(3,158)	$	(1,221)
$	1,897	$	1,028

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL AND BASIS OF PRESENTATION

These unaudited condensed consolidated interim financial statements of Ormat Technologies, Inc. and its subsidiaries (collectively, the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company's condensed consolidated financial position as of March 31, 2024, the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2024 and 2023 and the condensed consolidated statements of cash flows and the condensed consolidated statements of equity for the three months ended March 31, 2024 and 2023.

The financial data and other information disclosed in the notes to the condensed consolidated financial statements related to these periods are unaudited. The results for the periods presented are not necessarily indicative of the results to be expected for the year.

These condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated balance sheet data as of December 31, 2023 was derived from the Company's audited consolidated financial statements for the year ended December 31, 2023 but does not include all disclosures required by U.S. GAAP.

Dollar amounts, except per share data, in the notes to these financial statements are rounded to the closest $1,000.

Business combination - Enel purchase transaction

On January 4, 2024, the Company closed a purchase transaction with Enel Green Power North America ("EGPNA"), a subsidiary of Enel SpA (ENEL.MI) to acquire a portfolio of assets which includes two contracted geothermal power plants, one triple hybrid power plant which consists of geothermal, solar PV and solar thermal units, two stand alone solar power plants, and two greenfield development assets, for a total cash consideration of $274.6 million (including customary post-closing working capital adjustment to the purchase price, based on the levels of net working capital of the acquired companies) for 100% of the equity interests in the entities holding those assets.

The geothermal power plants include the Cove Fort power plant located in Beaver County, Utah, which sells electricity under a long-term power purchase agreement with Salt River Project and the Salt Wells power plant located in Churchill County, Nevada, which sells electricity under a long-term power purchase agreement ("PPA") with NV Energy. The Stillwater triple hybrid geothermal, solar PV and solar thermal power plant is located in Churchill County, Nevada, and sells electricity to NV Energy under a power purchase agreement. The Solar assets of Stillwater Solar PV II in Churchill County, Nevada, and Woods Hill in Windham County, Connecticut, sell their electricity under power purchase agreements, respectively.

As a result of the acquisition, the Company expanded its overall generation capacity and expects to improve the profitability of the purchased assets through cost reduction, synergies and development of the greenfield assets. The Company accounted for the transaction in accordance with Accounting Standard Codification ("ASC") 805, Business Combinations, and following the transaction, the Company consolidates the power plants and all other assets included in the transaction in accordance with ASC 810, Consolidation.

In the first quarter of 2024, and during annual 2023, the Company incurred $1.3 million and $1.1 million of acquisition-related costs, respectively. Such costs are included under "General and administrative expenses" in the consolidated statements of operations and comprehensive income for the respective periods. Accounting guidance provides that the allocation of the purchase price may be adjusted for up to one year from the date of the acquisition to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The primary area of the purchase price allocation that is not yet finalized is related to intangible assets, property, plant and equipment, and certain tax matters and the related impact on goodwill.

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

The following table summarizes the purchase price allocation to the fair value of the assets acquired and liabilities assumed (in millions):
Trade receivables and others ( 1 )	$	4.4
Deferred income taxes		3.1
Property, plant and equipment and construction-in-process( 2 )		197.7
Operating lease right of use		1.2
Other long-term assets		0.2
Intangible assets ( 3 )		23.6
Goodwill ( 4 )		60.7
Total assets acquired	$	290.9
Accounts payable, accrued expenses and others	$	1.5
Other current liabilities		1.8
Operating lease liabilities		1.2
Other long-term liabilities		5.0
Asset retirement obligation		6.8
Total liabilities assumed	$	16.3
Total assets acquired, and liabilities assumed, net	$	274.6

( 1 ) The gross amount of trade receivables was fully collected subsequent to acquisition date.

( 2 ) The fair value of Property, Plant and equipment was estimated by applying the income approach and utilizing the discounted cash flow method. This methodology assesses the value of tangible assets by computing the anticipated cash flows expected to be generated by the respective assets.

( 3 ) Intangible assets are related to the long-term electricity PPAs described above and are amortized over the term of those PPAs. The fair value of the intangible assets was estimated by applying the income approach and utilizing the With and Without method.

( 4 ) Goodwill is primarily related to the expected synergies, potential cost savings in operations as a result of the purchase transaction as well as potential future development of the greenfield assets. The goodwill is allocated to the Electricity segment and is deductible for tax purposes.

For the period from acquisition date to March 31, 2024, the acquired portfolio of assets contributed $9.4 million to the Company's Electricity revenues, and $3.3 million to the Company's earnings, which were included in the Company's condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2024.

The following unaudited pro forma summary presents condensed consolidated information of the Company as if the business combination had occurred on January 1, 2023. The pro forma results below include the impact of certain adjustments related to the depreciation of property plant and equipment, amortization of intangible assets, transaction-related costs, and the related income tax effects. This pro forma presentation does not include any impact from transaction synergies or any other material, nonrecurring adjustments directly attributable to the business combination.

		Pro forma for the Three
		Months Ended March 31,
		2024		2023
		(Dollars in millions)
Electricity revenues	$	191.3	$	179.8
Total revenues	$	224.2	$	194.7
Net income attributable to the Company's stockholders	$	39.9	$	27.7
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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

Hapoalim 2024 Loan

Concurrently with the purchase transaction with EGPNA, on January 2, 2024, the Company entered into a definitive loan agreement (the "BHI Loan Agreement 2024") with Hapoalim Bank. The BHI Loan Agreement 2024 provides for a loan by Hapoalim Bank to the Company in an aggregate principal amount of $75 million (the "Hapoalim 2024 Loan"). The outstanding principal amount of the Hapoalim 2024 Loan will be repaid in 32 quarterly payments of $2.3 million each, commencing on April 1, 2024. The duration of the Hapoalim 2024 Loan is 8 years and it bears interest of 6.6%, payable every three months. The BHI Loan Agreement 2024 includes various affirmative and negative covenants, including a requirement that the Company maintain (i) a financial debt to adjusted EBITDA ratio not to exceed 6.0, (ii) a minimum equity capital amount of not less than $750 million, and (iii) an equity capital to total assets ratio of not less than 25%. The BHI Loan Agreement includes other customary affirmative and negative covenants, including nonpayment and noncompliance events of default.

HSBC Bank 2024 Loan

Concurrently with the purchase transaction with EGPNA, on January 2, 2024, the Company entered into a definitive loan agreement (the "HSBC Loan Agreement 2024") with HSBC Bank. The HSBC Loan Agreement 2024 provides for a loan by HSBC Bank to the Company in an aggregate principal amount of $125 million (the "HSBC Bank 2024 Loan"). The outstanding principal amount of the HSBC Bank 2024 Loan will be repaid in 7 semi-annual payments of $12.5 million each, commencing on July 1, 2024, and an additional final principal payment on January 1, 2028 of $37.5 million. The duration of the HSBC Bank 2024 Loan is 4 years and it bears interest of 3- month Secured Overnight Financing Rate ("SOFR") plus 2.25%, payable quarterly. The HSBC Loan Agreement 2024 includes various affirmative and negative covenants, including a requirement that the Company maintain (i) a financial debt to adjusted EBITDA ratio not to exceed 6.0, (ii) a minimum equity capital amount of not less than $750 million, and (iii) an equity capital to total assets ratio of not less than 25%. The HSBC Loan Agreement 2024 includes other customary affirmative and negative covenants, including nonpayment and noncompliance events of default.

Interest Rate Swap

Concurrently with the issuance of the HSBC Bank 2024 Loan, the Company entered into a long-term interest rate swap ("IR Swap") transaction with the objective of hedging the variable interest rate fluctuations related to the HSBC Bank 2024 Loan at a fixed 3-month SOFR of 3.9%. The terms of the IR Swap match those of the HSBC Bank 2024 Loan, including the notional amount of the principal and interest payment dates. The Company designated the IR Swap as a cash flow hedge as per ASC 815, Derivatives and Hedging, and accordingly measures the IR Swap instrument at fair value. The changes in the IR Swap fair value are initially recorded in Other Comprehensive Income (Loss) and reclassified to Interest expense, net in the same period or periods during which the hedged transaction affects earnings. The hedged transaction and the IR Swap effect in earnings are presented in the same line item in the consolidated statements of operations and comprehensive income.

Mammoth Senior Secured Notes

On March 28, 2024, Mammoth Pacific, LLC (the "Issuer"), a wholly owned indirect subsidiary of the Company, entered into a note purchase agreement with the Prudential Insurance Company of America, pursuant to which the Issuer issued approximately $135.1 million principal amount of senior secured notes (the "Mammoth Senior Secured Notes"). The note purchase agreement also includes an approximately $9 million tranche of floating rate notes to be issued in the event of a shortfall in debt service with respect to the Mammoth Senior Secured Notes. The Issuer shall pay a commitment fee on the revolving note tranche at a rate of 0.5% per annum. If drawn, the revolving notes shall bear interest at a rate equal to Term SOFR plus 1.25%. The Mammoth Senior Secured Notes are secured by the equity interests in the Issuer, and by the Issuer's 100% ownership interests in its project subsidiaries including four geothermal power plants known as the G1, G2, G3 and CD4 projects. The remaining classes of ownership interests in CD4 are owned by an unrelated third party and are not part of the collateral security package for the Mammoth Senior Secured Notes. The Mammoth Senior Secured Notes will be repaid in 46 semi-annual payments, commencing on November 30, 2024. The Mammoth Senior Secured Notes bear interest at a fixed rate of 6.73% per annum and have a final maturity date of July 14, 2047. The Company has provided a limited guarantee with respect to certain obligations of the Issuer as a member of CD4.

There are various restrictive covenants under the Mammoth Senior Secured Notes, including limitations on additional indebtedness of the Issuer and its subsidiaries. Failure to comply with these and other covenants will, subject to customary cure rights, constitute an event of default by the Issuer. In addition, there are restrictions on the ability of the Issuer to make distributions to its shareholders. Among other things, the distribution restrictions include both a historical and projected minimum debt service coverage ratio requirement. As part of the security package, the note purchase agreement states the Issuer shall establish and maintain customary reserve accounts which include a debt service reserve account, a make-up well reserve account and a maintenance reserve account.

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