10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2005

or

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

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)

980 Greg Street, Sparks, Nevada 89431
(Address of principal executive offices)

Registrant’s telephone number, including area code: (775) 356-9029

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class				Name of each exchange on which registered
Ormat Technologies, Inc. Common Stock $0.001 Par Value				New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes     No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes     No

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer                 Accelerated filer                 Non-accelerated filer

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 June 30, 2005, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $137,281,250 based on the closing price as reported on the New York Stock Exchange.

The number of outstanding shares of common stock of Ormat Technologies, Inc., as of March 1, 2006, was 31,562,496 par value $0.001 per share.

Documents Incorporated by Reference: Part III (Items 10, 11, 12, 13 and 14) incorporates by reference portions of the Registrant’s Proxy Statement for its Annual Meeting of Stockholders, which will be filed not later than 120 days after December 31, 2005.

ORMAT TECHNOLOGIES, INC.

FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS

								Page No.
PART I
ITEM 1.				BUSINESS				5
ITEM 1A.				RISK FACTORS				40
ITEM 1B.				UNRESOLVED STAFF COMMENTS				56
ITEM 2.				PROPERTIES				56
ITEM 3.				LEGAL PROCEEDINGS				56
ITEM 4.				SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS				57
PART II
ITEM 5.				MARKET FOR REGISTRANT’S COMMON EQUITY,   RELATED STOCKHOLDER MATTERS AND ISSUER   PURCHASES OF EQUITY   SECURITIES				58
ITEM 6.				SELECTED FINANCIAL DATA				59
ITEM 7.				MANAGEMENT’S DISCUSSION AND ANALYSIS OF   FINANCIAL   CONDITION AND RESULTS OF OPERATIONS				62
ITEM 7A.				QUANTITATIVE AND QUALITATIVE DISCLOSURES   ABOUT MARKET RISK				93
ITEM 8.				FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA				94
ITEM 9.				CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS   ON ACCOUNTING AND FINANCIAL DISCLOSURE				166
ITEM 9A.				DISCLOSURE CONTROLS AND PROCEDURES				166
ITEM 9B.				OTHER INFORMATION				167
PART III
ITEM 10.				DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT				168
ITEM 11.				EXECUTIVE COMPENSATION				172
ITEM 12.				SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS   AND MANAGEMENT				172
ITEM 13.				CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS				172
ITEM 14.				PRINCIPAL ACCOUNTANT FEES AND SERVICES				172
PART IV
ITEM 15.				EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND   REPORTS ON FORM 8-K				172
SIGNATURES								187

 

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Cautionary Note Regarding Forward-Looking Statements

This annual report includes ‘‘forward-looking statements’’ within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections of annual revenues, expenses and debt service coverage with respect to our debt securities, future capital expenditures, business strategy, competitive strengths, goals, development or operation of generation assets, market and industry developments and the growth of our business and operations, are forward-looking statements. When used in this annual report, the words ‘‘may’’, ‘‘will’’, ‘‘could’’, ‘‘should’’, ‘‘expects’’, ‘‘plans’’, ‘‘anticipates’’, ‘‘believes’’, ‘‘estimates’’, ‘‘predicts’’, ‘‘projects’’, ‘‘potential’’, or ‘‘contemplate’’ or the negative of these terms or other comparable terminology are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this report are primarily located in the material set forth under the headings ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ contained in Part II, Item 7, "Risk Factors" contained in Part I, Item IA, and ‘‘Notes to Financial Statements’’ contained in Part II, Item 8 of this annual report, but are found in other locations as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this annual report completely and with the understanding that actual future results and developments may be materially different from what we expect due to a number of risks and uncertainties, many of which are beyond our control. We will not update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations include, but are not limited to:

	•	significant considerations and risks discussed in this annual report;

	•	operating risks, including equipment failures and the amounts and timing of revenues and expenses;

	•	geothermal resource risk (such as the heat content of the reservoir, useful life and geological formation);

	•	environmental constraints on operations and environmental liabilities arising out of past or present operations, including the risk that we may not have, and in the future may be unable to procure, any necessary permits or other environmental authorization;

	•	construction or other project delays or cancellations;

	•	financial market conditions and the results of financing efforts;

	•	political, legal, regulatory, governmental, administrative and economic conditions and developments in the United States and other countries in which we operate;

	•	the enforceability of the long-term power purchase agreements for our projects;

	•	contract counterparty risk;

	•	weather and other natural phenomena;

	•	the impact of recent and future federal, state and local regulatory proceedings and changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and incentives for the production of renewable energy in the United States and elsewhere, changes in environmental and other laws and regulations to which our company is subject, as well as changes in the application of existing laws and regulations;

	•	current and future litigation;

	•	our ability to successfully identify, integrate and complete acquisitions;

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	•	competition from other similar geothermal energy projects, including any such new geothermal energy projects developed in the future, and from alternative electricity producing technologies;

	•	the effect of and changes in economic conditions in the areas in which we operate;

	•	market or business conditions and fluctuations in demand for energy or capacity in the markets in which we operate;

	•	the direct or indirect impact on our company’s business resulting from terrorist incidents or responses to such incidents, including the effect on the availability of and premiums on insurance; and,

	•	the effect of and changes in current and future land use and zoning regulations, residential, commercial and industrial development and urbanization in the areas in which we operate.

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PART I

ITEM 1.    BUSINESS

Certain Definitions

Unless the context otherwise requires, all references in this annual report to ‘‘Ormat’’, ‘‘the Company’’, ‘‘we’’, ‘‘us’’, ‘‘our company’’, ‘‘Ormat Technologies’’ or ‘‘our’’ refer to Ormat Technologies, Inc. and its consolidated subsidiaries. The ‘‘OFC Senior Secured Notes’’ refers to the 8¼% Senior Secured Notes due 2020 that were issued in February 2004 by our subsidiary, Ormat Funding Corp. The ‘‘OrCal Senior Secured Notes’’ refers to the 6.21% Senior Secured Notes due 2020 that were issued in December 2005 by our subsidiary, OrCal Geothermal Inc.

Overview

We are a leading vertically integrated company engaged in the geothermal and recovered energy power business. We design, develop, build, own and operate clean, environmentally friendly geothermal power plants, and we also design, develop and build, and plan to own and operate, recovered energy-based power plants, in each case using equipment that we design and manufacture. We conduct our business activities in two business segments. In our Electricity Segment, we develop, build, own and operate geothermal power plants in the United States and other countries around the world and sell the electricity they generate. In our Products Segment, we design, manufacture and sell equipment for geothermal and recovered energy-based electricity generation, remote power units and other power generating units and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy power plants.

All of the projects that we currently own or operate produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable form of energy derived from the natural heat of the earth. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. Therefore, electricity produced from geothermal energy sources contributes significantly less to local and regional incidences of acid rain, and global warming than energy produced by burning fossil fuels. Geothermal energy is also an attractive alternative to other sources of energy as part of a national diversification strategy to avoid dependence on any one energy source or politically sensitive supply sources.

In addition to our geothermal energy business, we have developed and continue to develop products that produce electricity from recovered energy or so-called ‘‘waste heat’’. We are also constructing new recovered energy projects to be owned and operated by us. Recovered energy or waste heat represents residual heat that is generated as a by-product of gas turbine-driven compressor stations and in a variety of industrial processes, such as cement manufacturing, and is not otherwise used for any purpose. Such residual heat, that would otherwise be wasted, is captured in the recovery process and is used by recovered energy power plants to generate electricity without burning additional fuel and without emissions.

Company Contact and Sources of Information

We file annual, quarterly and periodic reports, proxy statements and other information with the Securities and Exchange Commission, which we refer to as the SEC. You may obtain and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and other information statements, and other information regarding issuers that file electronically with the SEC. Our SEC filings are accessible via the Internet at that website.

Our reports on Form 10-K, 10-Q and 8-K, and amendments to those reports are available at our website www.ormat.com for downloading, free of charge, as soon as reasonably practicable after these

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reports are filed with the SEC. Our Code of Business Conduct and Ethics, Code of Ethics Applicable to Senior Executives, Audit Committee Charter, Corporate Governance Guidelines, Nominating and Corporate Governance Committee Charter, Compensation Committee Charter, Insider Trading Policy, and amendments thereof are also available at our website address mentioned above. The content of our website, however, is not part of this annual report.

You may request a copy of our SEC filings, as well as the foregoing corporate documents at no cost to you, by writing to the Company address appearing in this annual report or by calling us at (775) 356-9029.

Our Power Generation Business

We own or control, and operate geothermal projects in the United States, Guatemala, Kenya, Nicaragua, and the Philippines and continue to pursue opportunities to acquire and develop similar projects throughout the world. Most of our projects are located in regions where there is, or is expected to be, demand for additional generating capacity. We increased our net ownership interest in generating capacity by 21 MW between December 31, 2004 and December 31, 2005, of which 13 MW was attributable to the construction of the Burdette (formerly called Galena) geothermal power plant in Nevada and 9 MW was attributable to increased generating capacity of our existing geothermal power plants resulting from improvements to the geothermal well fields of some of our existing projects. We experienced a 1 MW reduction in generating capacity at our Momotombo project as a result of mechanical problems in one of the project’s wells.

In the year ended December 31, 2005, revenues from our electricity segment were $177.4 million, constituting approximately 74.5% of our total revenues in 2005. Revenues from the sale of electricity by our domestic projects were $155.7 million, constituting approximately 87.8% of our total revenues from the sale of electricity, and revenues from the sale of electricity by our foreign projects were $21.7 million, constituting approximately 12.2% of our total revenues from the sale of electricity.

The table below summarizes key information relating to our projects that are currently in operation, under construction and/or subject to enhancement.

Project				Location				Ownership				Commercial Operation Date				Generating Capacity in MW(1)				Power Purchaser				Contract Expiration
Projects in Operation
Domestic
Ormesa				East Mesa, California					100	%		1986/1987					47			Southern California Edison Company				2017/2018
Heber Complex				Heber, California					100	%		1985/1993					76	(20)		Southern California Edison Company and Southern California Power Public Authority				2015/2023/2031
Steamboat Complex(17)				Steamboat, Nevada					100	%		1986/1988/ 1992/2006					47			Sierra Pacific Power Company				2006/2018/ 2022/2026
Mammoth(2)				Mammoth Lakes, California					50	%		1984/1990					25			Southern California Edison Company				2014/2020
Puna				Puna, Hawaii					100	%		1993					30			Hawaii Electric Light Company				2027
Brady				Churchill County, Nevada					100	%		1985/1992					20			Sierra Pacific Power Company				2022
Steamboat Hills				Steamboat, Nevada					100	%		1988					6			Sierra Pacific Power Company				2018
Total Domestic Projects in Operation																251

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Project				Location				Ownership				Commercial Operation Date				Generating Capacity in MW(1)				Power Purchaser				Contract Expiration
Foreign
Leyte(2)				Philippines					80	%		1997					49			PNOC — Energy Development Corporation					2007
Momotombo(2)				Nicaragua					100	%		mid 1980’s					27			DISNORTE/DISSUR				2014
Zunil(2)				Guatemala					71.8	%		1999					24			Instituto Nacional de Electricidad				2019
Olkaria III				Kenya					100	%		2000					13			Kenya Power and Lighting Co. Ltd.					2020
Total Foreign Projects in Operation																113
Total Projects in Operation																364
Projects under Construction and Enhancement
Desert Peak 2				Churchill County, Nevada				100%					2006			15			Nevada Power Company				N/A(6)
Galena 2(19)				Churchill County, Nevada				100%					2006			10			Sierra Pacific Power Company				N/A(6)
OREG 1 (14)				North and South Dakota				100%					2006			22			Basin Electric Power Cooperative				N/A(12)
OrSumas(14)				Washington State				100%					2007			5			Puget Sound Energy				N/A(13)
Heber Complex:
Heber 1				Heber, California				100%				2006					3	(9)		Southern California Edison Company				2015
Gould				Heber, California				100%				2006					6	(10)		Southern California Public Power Authority				2031
Steamboat Hills				Steamboat Hills, Nevada				100%					2006			5			Sierra Pacific Power Company				2018
Mammoth				Mammoth Lakes, California				50%				2006					4			Southern California Edison Company				2014/2020
Ormesa				East Mesa, California				100%					2006			10				N/A		N/A
Imperial Valley(8)				East Mesa, California				100%				2007/2008(5)					10			N/A				N/A(8)
Puna(8)				Puna, Hawaii				100%				2007/2008(5)					8	(11)		N/A				N/A
Amatitlan				Guatemala				100%					2006			20			Instituto Nacional de Electricidad				N/A(7)
Olkaria III Phase II				Kenya				100%				2007/2008(5)					35			Kenya Power and Lighting Co. Ltd.				N/A(15)
Momotombo				Nicaragua				100%				2006					5	(16)		DISNORTE/DISSUR				2014
Total Projects under Construction and Enhancement																	158

(1)

References to generating capacity refers to the gross capacity less auxiliary power, in the case of all of our existing domestic projects and the Momotombo and Olkaria III projects (two of our foreign projects), and to the generating capacity that is subject to the ‘‘take or pay’’ power purchase agreements in the case of the Leyte and Zunil projects (another two of our foreign projects). We derive the generating capacity figures from available historical operational data of our operating projects. In the case of projects under construction and enhancement, references to generating capacity refer to the amount of gross capacity less auxiliary power that we expect will be available after completion of such

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	construction or enhancement, based on detailed geothermal reservoir and plant, technical and engineering modeling and testing. This column represents the generating capacity of the project, not our net ownership in such generating capacity.

		In any given year, the actual power generation of a particular project may differ from that project’s generating capacity due to operational issues affecting performance during that year. In 2005, the total actual power generation of our projects was 341 MW. Of the difference from the total generating capacity of 364 MW, 6 MW was due to operational factors discussed elsewhere in this annual report, and another 17 MW was due to the coming on line of additional generation capacity from projects under construction or enhancement at the end of 2005 and in the beginning of 2006 as well.

(2)

We own and operate all of our projects, except the Momotombo project in Nicaragua, which we do not own but which we control and operate through a concession arrangement with the Nicaraguan government, and the Mammoth project, the Leyte project and the Zunil project, in which we have a 50%, 80% and 71.8% ownership, respectively. On March 13, 2006, we increased our ownership interest in the Zunil project from 21% to 71.8%. See ‘‘Description of Our Projects’’ below.

(3)	The power purchase agreement for the Olkaria III project will expire in 2020 or, if Phase II of the project is constructed and completed, 20 years from the completion of such Phase II. Phase II of this project involves a proposed construction of additional facilities that we expect would add approximately 35 MW of generating capacity to this project. See ‘‘Description of our Projects’’ below.

(4)	Projected second quarter of 2006.

(5)	Projected.

(6)	The power purchase agreement will expire 20 years from the January 1 immediately following the commercial operation date.

(7)	The power purchase agreement will expire at the later of 20 years from the commencement of commercial operations or 23 years from the commencement of construction works.

(8)	These projects are in their early engineering stage.

(9)	We expect to sell an additional 3 MW of generation from Heber 1 under the existing power purchase agreement with Southern California Edison Company.

(10)	Currently we sell 4 MW from the Gould project under our existing 25-year power purchase agreement with Southern California Power Public Authority and we expect to commence selling the additional 6 MW in the second quarter of 2006.

(11)	We are currently negotiating with a third party for the sale of this additional output.

(12)	The power purchase agreement will expire on September 30, 2031.

(13)	The power purchase agreement will expire 20 years from the January 1 immediately following the commercial operation date.

(14)	These are recovered energy projects.

(15)	We are currently finalizing with a Kenyan utility an amendment to the power purchase agreement for this additional capacity.

(16)	We expect to add 5 MW during 2006 to be sold under the existing power purchase agreement.

(17)	The Steamboat Complex includes the Steamboat 1 and 1A projects, the Steamboat 2 and 3 projects and the new Burdette project, which started to deliver electricity to Sierra Pacific Power Company in the fourth quarter of 2005.

(18)	The Leyte project will be transferred to the power purchasing utility in September 2007 for no consideration. This will reduce our foreign generation capacity by 49 MW.

(19)	Formerly Desert Peak 3.

(20)	Includes 4 MW from the Gould project. In addition, in the beginning of 2006, we added 3 MW to the Heber Complex, which is used to replace power for auxiliary purposes that we purchased from a third party.

All of the revenues that we currently derive from the sale of electricity are pursuant to long-term power purchase agreements. In the United States, the power purchasers under such agreements are investor-owned electric utilities or public power utilities. Approximately 78.4% of our total revenues in 2005 from the sale of electricity by our domestic projects were derived from power purchasers that currently have investment grade credit rating. The purchasers of electricity from our foreign projects are either state-owned entities or recently privatized state-owned entities. We have obtained political risk insurance from the Multilateral Investment Guarantee Agency of the World Bank Group (MIGA) or from Zurich Re, a private sector political risk insurer, for all of our foreign projects (other than the Leyte project) in order to cover a portion of any loss that we may suffer upon the occurrence of certain political events covered by such insurance.

Development, Construction and Acquisition. We have experienced significant growth in recent years, principally through the acquisition of geothermal power plants from third parties and the

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expansion and enhancement of our existing projects, including the following: (i) in November 2005, we completed the construction of the Burdette project, which added 13 MW to the Steamboat complex; (ii) in November 2005, we completed the enhancement program at the Puna project, which added 5 MW to our generating capacity; and (iii) in the beginning of 2006, we added 4 MW of generating capacity to the Heber Complex from the Gould project, and began delivering power under our new power purchase agreement with Southern California Power Public Authority, which we refer to as SCPPA. In addition, we added 3 MW to the Heber complex, which replaced power that was purchased from a third party. We currently expect to continue growing our power generation business through:

	•	the development and construction of new geothermal and recovered energy-based power plants;

	•	the expansion and enhancement of our existing projects; and

	•	the acquisition of additional geothermal and other renewable assets from third parties.

As part of these efforts, we regularly monitor requests for proposals from, and submit bids to, investor-owned and others electric utilities in the United States to provide additional generating capacity, primarily in the western United States where geothermal resources are generally concentrated. We also respond to international tenders issued by foreign state-owned electric utilities for the development, construction and operation of new geothermal power plants. In addition, we apply our technological expertise to upgrade the facilities of our existing geothermal power plants and to continuously monitor and manage our existing geothermal resources in order to increase the efficiency and generating capacity of such facilities.

We are currently in varying stages of development of new projects and construction and enhancement of new and existing projects. Based on our current development and construction schedule, which is subject to change at any time and which we may not achieve, we expect to add approximately 98 MW in generating capacity from geothermal and recovered energy power plants in the United States by the end of 2007 or the beginning of 2008. We also expect to add approximately 20 MW in Guatemala in the second half of 2006, approximately 5 MW in Nicaragua during 2006 in the Momotombo project, and approximately 35 MW in Kenya at the end of 2007 or the beginning of 2008, subject to reaching a definitive agreement and obtaining regulatory approval. We have recently held discussions with the Kenyan government and Kenya Power and Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya, as discussed under ‘‘Business — Projects under Construction’’. In addition, we have obtained exclusive rights to develop the geothermal resources of a project in China, which, if implemented, is expected to produce approximately 42 MW in generating capacity. In September 2007, the Leyte project will be transferred to PNOC — Energy Development Corporation for no consideration. We do not anticipate any material financial loss as a result of such transfer, although going forward this will reduce our foreign generation capacity by 49 MW.

Our Products Business

We design, manufacture and sell products for electricity generation and provide the related services described below. Generally, we manufacture products only against customer orders and do not manufacture products for our own inventory.

Power Units for Geothermal Power Plants. We design, manufacture and sell power units for geothermal electricity generation, which we refer to as Ormat Energy Converters or OECs. Our customers include contractors and geothermal plant owners and operators. We recently sold one of our OEC units with a gross output of approximately 7 MW to the Aydin Salavatli power plant in Turkey.

Power Units for Recovered Energy-Based Power Generation. We design, manufacture and sell power units used to generate electricity from recovered energy or so-called ‘‘waste heat’’ that is generated as a residual by-product of gas turbine-driven compressor stations and a variety of industrial processes, such as cement manufacturing, and is not otherwise used for any purpose. Our existing and

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target customers include interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators, and other companies engaged in other energy-intensive industrial processes. We have installed one of our recovered energy-based generation units at Enterprise Product’s Neptune gas processing plant in Louisiana. We recently signed a supply contract with UltraTech Cement Ltd. in Mumbai, India for the supply of one OEC for a new Recovered Energy Generation (REG) power plant.

Remote Power Units and other Generators. We design, manufacture and sell fossil fuel powered turbo-generators with a capacity ranging between 200 watts and 5,000 watts, which operate unattended in extreme climate conditions, whether hot or cold. Our customers include contractors installing gas pipelines in remote areas. In addition, we design, manufacture and sell generators for various other uses, including heavy duty direct current generators. We have begun to supply remote power units to be installed on the Sakhalin pipeline in Russia.

Engineering, Procurement and Construction (EPC) of Power Plants. We engineer, procure and construct, as an EPC contractor, geothermal and recovered energy power plants on a turnkey basis, using power units we design and manufacture. Our customers are geothermal power plant owners as well as the same customers described above that we target for the sale of our power units for recovered energy-based power generation. Unlike many other companies that provide EPC services, we have an advantage in that we are using our own manufactured equipment and thus have better control over the timing and delivery of required equipment and its costs. Recent examples of our construction activities include the design and construction of the Mokai and Wairakei geothermal power plants, which we recently completed in New Zealand. Additional plants are currently under construction, including the San Miguel geothermal plant in the Azores and the Alliance REG plant in Canada.

Operation and Maintenance of Power Plants. We provide operation and maintenance services for geothermal power plants.

In the year ended December 31, 2005, our revenues from our products business were $60.6 million, constituting approximately 25.5% of our total revenues.

History

We were formed by Ormat Industries Ltd. (also referred to in this annual report as the ‘‘Parent’’, ‘‘Ormat Industries’’, ‘‘the parent company’’ or ‘‘our parent’’) in 1994 in the state of Delaware for the purpose of investing and holding ownership interests in power projects, as well as constructing and operating power plants owned by us and by third parties. Ormat Industries, which is based in Israel, is an international power systems company whose predecessor, Ormat Turbines Ltd., was founded in 1965 by Lucien and Dita Bronicki for the principal purpose of developing equipment for the production of a clean, renewable and generally sustainable form of energy. Ormat Industries sold to us its business relating to the manufacturing and sale of energy-related equipment and services. Following this sale, we now hold all of Ormat Industries’ power generation products business, and had, as of December 31, 2005, 733 employees. Ormat Industries owns 77.2% of our outstanding common stock.

Industry Background

Geothermal Energy

All of our projects in operation produce electricity from geothermal energy. Geothermal energy is a clean, renewable and generally sustainable energy source that, because it does not utilize combustion in the production of electricity, releases significantly lower levels of emissions, principally steam, than those that result from energy generation based on the burning of fossil fuels. Geothermal energy is derived from the natural heat of the earth when water comes sufficiently close to hot molten rock to heat the water to temperatures of 300 degrees Fahrenheit or more. The heated water then ascends toward the surface of the earth where, if geological conditions are suitable for its commercial

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extraction, it can be extracted by drilling geothermal wells. The energy necessary to operate a geothermal power plant is typically obtained from several such wells which are drilled using established technology that is in some respects similar to that employed in the oil and gas industry. Geothermal production wells are normally located within approximately one to two miles of the power plant as geothermal fluids cannot be transported economically over longer distances due to heat and pressure loss. The geothermal reservoir is a renewable source of energy if natural ground water sources and reinjection of extracted geothermal fluids are adequate over the long-term to replenish the geothermal reservoir following the withdrawal of geothermal fluids and if the well field is properly operated. Geothermal energy projects typically have higher capital costs (primarily as a result of the costs attributable to well field development) but tend to have significantly lower variable operating costs, principally consisting of maintenance expenditures, than fossil fuel-fired power plants that require ongoing fuel expenses.

Geothermal Power Plant Technologies

Geothermal power plants generally employ either binary systems or conventional flash systems. In our projects, we also employ our proprietary technology of combined geothermal cycle systems. See ‘‘Our Technology’’.

Binary System

In a plant using a binary system, geothermal fluid, either hot water (also called brine) or steam or both, is extracted from the underground reservoir and flows from the wellhead through a gathering system of insulated steel pipelines to a heat exchanger, which heats a secondary working fluid which has a low boiling point. This is typically an organic fluid, such as isopentane or isobutene, which is vaporized and is used to drive the turbine. The organic fluid is then condensed in a condenser which may be cooled by air or by water from a cooling tower. The condensed fluid is then recycled back to the heat exchanger, closing the cycle within the sealed system. The cooled geothermal fluid is then reinjected back into the reservoir. The binary technology is depicted in the graphic below.

Flash Design System

In a plant using flash design, geothermal fluid is extracted from the underground reservoir and flows from the wellhead through a gathering system of insulated steel pipelines to flash tanks and/or separators. There, the steam is separated from the brine and is sent to a demister in the plant, where any remaining water droplets are removed. This produces a stream of dry saturated steam, which

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drives a turbine generator to produce electricity. In some cases, the brine at the outlet of the separator is flashed a second time (dual flash), providing additional steam at lower pressure used in the low pressure section of the steam turbine to produce additional electricity. Steam exhausted from the steam turbine is condensed in a surface or direct contact condenser cooled by cold water from a cooling tower. The non-condensable gases (such as carbon dioxide) are removed through the removal system in order to optimize the performance of the steam turbines. The condensate is used to provide make-up water for the cooling tower. The hot brine remaining after separation of steam is injected back into the geothermal resource through a series of injection wells. The flash technology is depicted in the graphic below.

In some instances, the wells directly produce dry steam (the flashing occurring under ground). In such cases, the steam is fed directly to the steam turbine and the rest of the system is similar to the flash power plant described above.

Market Opportunity

The geothermal energy industry in the United States experienced significant growth in the 1970s and 1980s, followed by a period of consolidation of owners and operators of geothermal assets in the 1990s. The industry, once dominated by large oil companies and investor-owned electric utilities, now includes several independent power producers. During the 1990s, growth and development in the geothermal energy industry occurred primarily in foreign markets, and only minimal growth and development occurred in the United States. Since 2001, there has been renewed interest in geothermal energy in the United States as production costs for electricity generated from geothermal resources have become more competitive relative to fossil fuel-based electricity generation, due to the increasing cost of natural gas, and as legislative and regulatory incentives, such as state renewable portfolio standards, have become more prevalent.

Electricity generation from geothermal resources in the United States currently constitutes a $1.5 billion-a-year industry (in terms of revenues) and accounts for 19% of all non-hydropower renewable energy-based electricity generation in the United States. Although electricity generation from geothermal resources is currently concentrated in California, Nevada, Hawaii and Utah, there are opportunities for development in other states such as Alaska, Arizona, Idaho, New Mexico and Oregon due to the availability of geothermal resources and, in some cases, a favorable regulatory environment in such states.

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A 2005 forecast of the U.S. Department of Energy projects the addition of geothermal installations with generating capacity totaling 4,620 MW by 2025, based on the assumption that natural gas prices will remain relatively stable. This forecast is based on existing, known geothermal resources and does not take into account any positive effects on generating capacity resulting from new technology, such as enhanced utilization of existing geothermal bases and engineered geothermal systems (according to the Energy Information Administration, Annual Energy Outlook 2005).

An additional factor fueling recent growth in the renewable energy industry is global concern about the environment. Power plants that use fossil fuels generate higher levels of air pollution and their emissions have been linked to acid rain and global warming. In response to an increasing demand for ‘‘green’’ energy, many countries have adopted legislation requiring, and providing incentives for, electric utilities to sell electricity generated from renewable energy sources. In the United States, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Vermont, Wisconsin and the District of Colombia have all adopted renewable portfolio standards, renewable portfolio goals, or other similar laws requiring or encouraging electric utilities in such states to generate or buy a certain percentage of their electricity from renewable energy sources or recovered heat sources. Fourteen of these twenty two states (including California, Nevada and Hawaii, where we have been the most active in our geothermal energy development and in which all of our U.S. projects are located) define geothermal resources as ‘‘renewables’’. A bill establishing renewable portfolio standards is currently before the Kansas legislation.

We believe that these legislative measures and initiatives present a significant market opportunity for us. For example, California generally requires that each investor-owned electric utility company operating within the state increase the amount of renewable generation in its resource mix by 1% per year so that 20% of its retail sales are procured from eligible renewable energy sources by 2017. As a matter of policy, the State Energy Action Plan adopted by the California Energy Commission and the California Public Utilities Commission has accelerated the deadline to 2010. Presently, approximately 11% of the electricity generated in California is derived from renewable resources (not counting hydroelectricity as renewable power). Nevada’s renewable portfolio standard requires each Nevada electric utility to obtain 6% of its annual energy requirements from renewable energy sources in 2005, which requirement thereafter increases by 3% every two years until 2015, when 20% of such annual energy requirements must be provided from renewable energy sources or energy efficiency projects. At least three-quarters of the annual total requirements must come only from renewable energy projects. Hawaii’s renewable portfolio standard requires each Hawaiian electric utility to obtain 8% of its net electricity sales from renewable energy sources by December 31, 2005, 10% by December 31, 2010 and 20% by December 31, 2020.

In addition, in some states an entity generating electricity from renewable resources, such as geothermal energy, is awarded Renewable Energy Credits (which we refer to as RECs) that can be sold for cash. RECs have been sold for a wide range of prices during the past year, but because the markets for these RECs still remain limited, the prices have been volatile, and vary greatly from state to state. On October 14, 2004, we entered into agreements with Sierra Pacific Power Company, a utility company in the state of Nevada, to sell RECs resulting from electricity we generate for station use at our Desert Peak, Brady, Steamboat Hills and Steamboat 2/3 projects. The price for such RECs under such agreements is $0.005 per kWh, subject to a reduction to $0.0045 per kWh if we generate less than 80% or more than 120% of a baseline amount. On February 23, 2005 these agreements were approved by the Public Utility Commission (PUC).

The federal government also encourages production of electricity from geothermal resources through certain tax subsidies. We are permitted to claim approximately 10% of the cost of each new geothermal power plant in the United States as an investment tax credit against our federal income taxes. Alternatively, we are permitted to claim a ‘production tax credit’’ of 1.9 cents per kWh. The production tax credit may be claimed on the electricity output of new geothermal power plants put into service during a ‘‘window period’’ that runs from October 23, 2004 through December 31, 2007. Credit may be claimed for five years on the output from any new geothermal power plants put into

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service during the first part of the window period from October 23, 2004 to August 8, 2005. Plants put into service during the remainder of the ‘‘window period’’ qualify for 10 years of tax credits. The owner of the project must choose between the production tax credit and the 10% investment tax credit described above. In either case, under current tax rules, any unused tax credit has a 1-year carry back and a 20-year carry forward.Whether we claim the production tax credit or the investment credit, we are also permitted to depreciate most of the plant for tax purposes over five years on an accelerated basis, meaning that more of the cost can be deducted in the first few years than during the remainder of the depreciation period. If we claim the investment credit, our ‘‘tax base’’ in the plant that we can recover through depreciation must be reduced by half of the tax credit; if we claim production tax credit, there is no reduction in the tax basis for depreciation.

Collectively, these tax benefits (to the extent fully utilized) have a present value equivalent to approximately 30% to 40% of the capital cost of a new project.

The Kyoto Protocol entered into force on February 16, 2005, making the emission targets undertaken for the 2008 to 2012 period by more than 30 developed countries, including the EU members, Russia, Japan, Canada, New Zealand, Norway and Switzerland, legally binding. We expect that the effect of the Kyoto treaty will be to encourage renewable energy installation outside of the United States, as the United States has not ratified the Kyoto treaty.

Outside of the United States, the majority of power generating capacity has historically been owned and controlled by governments. During the past decade, however, many foreign governments have privatized their power generation industries through sales to third parties and have encouraged new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity and related products. Some countries have also adopted active governmental programs designed to encourage clean renewable energy power generation. For example, China, where we are currently developing a project, has recently enacted a Renewable Energy Law (effective January 1, 2006) defining fiscal incentives, priority dispatching, preferential pricing and other supporting mechanisms, and has announced long-term targets for renewable energy capacity growth, including mandatory renewable portfolio standards for large generation utilities. Several Latin American countries have rural electrification programs and renewable energy programs. For example, Nicaragua, where we operate the Momotombo project, is currently developing a national rural electrification plan with the support of the World Bank. One of the plan’s primary goals is the reduction of market barriers to renewable energy technologies useful for remote areas not connected to the main electricity grid. Nicaragua also has a national master plan for geothermal energy, which is intended to promote the geothermal exploration and development in the country. Guatemala, another country in which we have ongoing operations (the Zunil project) and construction activities (the Amatitlan project), approved in November 2003 a law which creates incentives for power generation from renewable energy sources by, among other things, providing economic and fiscal incentives such as exemptions from taxes on the importation of relevant equipment and various tax exemptions for companies implementing renewable energy projects. We believe that these developments and governmental plans will create opportunities for us to acquire and develop geothermal power generation facilities internationally as well as create additional opportunities for us to sell our remote power units and other products.

In addition to our geothermal power generation activities, we have also identified recovered energy power generation as a significant market opportunity for us in the United States and internationally. We are initially targeting the North American market, where we expect that recovered energy-based power generation will be derived principally from compressor stations along interstate pipelines, from midstream gas processing facilities, and from processing industries in general. Several states, as well as the federal government, have recognized the environmental benefits of recovered energy-based power generation. For example, Nevada, New Mexico and Hawaii allow electric utilities to include recovered energy-based power generation in calculating their compliance with the state’s renewable portfolio standards. In addition, North Dakota, South Dakota and the Department of

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Agriculture (through the Rural Utilities Service) have approved recovered energy-based power generation units as renewable energy resources, which qualifies recovered energy-based power generators (whether in those two states or elsewhere in the United States) for federally funded, low interest loans. We believe that the European market has similar potential and we expect to leverage our early success in North America in order to expand into Europe and other markets worldwide. In North America alone, we estimate the potential total market for recovered energy-based generation to be approximately 1,000 MW.

Competitive Strengths

Competitive Assets. Our assets are competitive for the following reasons:

	•	Contracted Generation. All of the electricity generated by our geothermal power plants is currently sold pursuant to long-term power purchase agreements, providing generally predictable cash flows.

	•	Baseload Generation. All of our geothermal power plants supply a part of the baseload capacity of the electric system in their respective markets, meaning that they operate to serve all or a part of the minimum power requirements of the electric system in such market on an around-the-clock basis. Because our projects supply a part of the baseload needs of the respective electric system and are only marginally weather dependent, we have a competitive advantage over other renewable energy sources, such as wind power, solar power or hydro-electric power (to the extent dependent on precipitation), which compete with us to meet electric utilities’ renewable portfolio requirements but which cannot serve baseload capacity because of the weather dependence and thus intermittent nature of these other renewable energy sources.

	•	Competitive Pricing. Geothermal power plants, while site specific, are economically feasible to develop, construct, own and operate in many locations, and the electricity they generate is generally price competitive as compared to electricity generated from fossil fuels or other renewable sources under existing economic conditions and existing tax and regulatory regimes.

Growing Legislative Demand for Environmentally-Friendly Renewable Resource Assets. All of our currently operating projects produce electricity from geothermal energy sources. Geothermal energy is a clean, renewable and generally sustainable energy source. Unlike electricity produced by burning fossil fuels, electricity produced from geothermal energy sources is produced without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide. Such clean and sustainable characteristics of geothermal energy give us a competitive advantage over fossil fuel-based electricity generation as countries increasingly seek to balance environmental concerns with demands for reliable sources of electricity.

High Efficiency from Vertical Integration. Unlike any of our competitors in the geothermal industry, we are a fully-integrated geothermal equipment, services and power provider. We design, develop and manufacture most of the equipment we use in our geothermal power plants. Our intimate knowledge of the equipment that we use in our operations allows us to operate and maintain our projects efficiently and to respond to operational issues in a timely and cost-efficient manner. Moreover, given the efficient communications among our subsidiary that designs and manufactures the products we use in our operations and our subsidiaries that own and operate our projects, we are able to quickly and cost effectively identify and repair mechanical issues and to have technical assistance and replacement parts available to us as and when needed.

Highly Experienced Management Team. We have a highly qualified senior management team with extensive experience in the geothermal power sector. Key members of our senior management team have worked in the power industry for most of their careers and average over 20 years of industry experience.

Technological Innovation. We own or have rights to use more than 70 patents relating to various processes and renewable resource technologies. All of our patents are internally developed and

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therefore costs related thereto are expensed as incurred. Our ability to draw upon internal resources from various disciplines related to the geothermal power sector, such as geological expertise relating to reservoir management, and equipment engineering relating to power units, allows us to be innovative in creating new technologies and technological solutions.

No Exposure to Fuel Price Risk. A geothermal power plant does not need to purchase fuel (such as coal, natural gas, or fuel oil) in order to generate electricity. Thus, once the geothermal reservoir has been identified and estimated to be sufficient for use in a geothermal power plant and the drilling of wells is complete, the plant is not exposed to fuel price or fuel delivery risk.

Business Strategy

Our strategy is to continue building a geographically balanced portfolio of geothermal and recovered energy assets, and to continue to be a leading manufacturer and provider of products and services related to renewable energy. We intend to implement this strategy through:

	•	Development and Construction of New Projects — continuously seeking out commercially exploitable geothermal resources, developing and constructing new geothermal and recovered energy-based power projects and entering into long-term power purchase agreements providing stable cash flows in jurisdictions where the regulatory, tax and business environments encourage or provide incentives for such development and which meet our investment criteria;

	•	Developing Recovered Energy Projects — establishing a first-to-market leadership position in recovered energy projects in North America and building on that experience to expand into other markets worldwide;

	•	Acquisition of New Assets — acquiring from third parties additional geothermal and other renewable assets that meet our investment criteria;

	•	Increasing Output from Our Existing Projects — increasing output from our existing geothermal power projects by adding additional generating capacity, upgrading plant technology, and improving geothermal reservoir operations, including improving methods of heat source supply and delivery; and

	•	Technological Expertise — investing in research and development of renewable energy technologies and leveraging our technological expertise to continuously improve power plant components, reduce operations and maintenance costs, develop competitive and environmentally friendly products for electricity generation and target new service opportunities.

Operations of our Power Generation Segment

How We Own Our Power Plants. We customarily establish a separate subsidiary to own interests in each power plant. Our purpose in establishing a separate subsidiary for each plant is to ensure that the plant, and the revenues generated by it, will be the only source for repaying indebtedness, if any, incurred to finance the construction or the acquisition (or to refinance the acquisition) of the relevant plant. If we do not own all of the interest in a power plant, we enter into a shareholders agreement or a partnership agreement that governs the management of the specific subsidiary and our relationship with our partner in connection with our project. Our ability to transfer or sell our interest in certain projects may be restricted by certain purchase options or rights of first refusal in favor of our project partners or the project’s power purchasers and/or certain change of control and assignment restrictions in the underlying project and financing documents. All of our domestic projects, with the exception of the Puna project, which is an Exempt Wholesale Generator (EWG), are Qualifying Facilities under the Public Utility Regulatory Policies Act of 1978 (PURPA) and are eligible for regulatory exemptions from most provisions of the Federal Power Act (FPA) and certain state laws and regulations.

How We Obtain Development Sites and Geothermal Resources. For domestic projects, we either lease or own the sites on which our power plants are located. In our foreign projects, our lease rights

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for the plant site are generally contained in the terms of a concession agreement or other contract with the host government or an agency thereof. In certain cases, we also enter into one or more geothermal resource leases (or subleases) or a concession or other agreement granting us the exclusive right to extract geothermal resources from specified areas of land, with the owners (or sublessors) of such land. A geothermal resource lease (or sublease) or a concession or other agreement will usually give us the right to explore, develop, operate and maintain the geothermal field including, among other things, the right to drill wells (and if there are existing wells in the area, to alter them) and build pipelines for transmitting geothermal fluid. In certain cases, the holder of rights in the geothermal resource is a governmental entity and in other cases a private entity. Usually, the terms of the lease (or sublease) and concession agreement correspond to the terms of the relevant power purchase agreement. In certain other cases, we own the land where the geothermal resource is located, in which case there are no restrictions on its utilization.

How We Sell Electricity. In the United States, the purchasers of power from our projects are typically investor-owned electric utility companies. Outside of the United States, the purchaser is typically a state-owned utility or distribution company or a recently privatized state-owned entity and we typically operate our facilities pursuant to rights granted to us by a governmental agency pursuant to a concession agreement. In each case, we enter into long-term contracts (typically called power purchase agreements) for the sale of electricity or the conversion of geothermal resources into electricity. A project’s revenues under a power purchase agreement usually consist of two payments: energy payments and capacity payments (although our recent power purchase agreements provide for energy payments only). Energy payments are normally based on a project’s electrical output actually delivered to the purchaser measured in kilowatt hours, with payment rates either fixed or indexed to the power purchaser’s ‘‘avoided’’ costs (i.e., the costs the power purchaser would have incurred itself had it produced the power it is purchasing from third parties, such as us). Capacity payments are normally calculated based on the generating capacity or the declared capacity of a project available for delivery to the purchaser, regardless of the amount of electrical output actually produced or delivered. In addition, most of our domestic projects located in California are eligible for capacity bonus payments under the respective power purchase agreements upon reaching certain levels of generation.

How We Operate and Maintain Our Power Plants. We usually employ one of our subsidiaries, Ormat Nevada Inc., to act as operator of our power plants pursuant to the terms of an operation and maintenance agreement. Our operations and maintenance practices are designed to minimize operating costs without compromising safety or environmental standards while maximizing plant flexibility and maintaining high reliability. Our approach to plant management emphasizes the operational autonomy of our individual plant managers and staff to identify and resolve operations and maintenance issues at their respective projects; however, each project draws upon our available collective resources and experience and that of our subsidiaries. We have organized our operations such that inventories, maintenance, backup and other operational functions are pooled within each project complex and provided by one operation and maintenance provider. This approach enables us to realize cost savings and enhances our ability to meet our project availability goals.

We currently operate and maintain approximately 364 MW of generating capacity (See Note 1 page 7 for an explanation of how we determine the generating capacity of our projects). Since our recent acquisitions in California, Hawaii and Nevada, as a result of our vertical integration, our proprietary technology and our operational and maintenance expertise, we have been successful in increasing the capacity, efficiency and performance of most of our acquired facilities and have been able to use the staff required to operate these facilities more efficiently. For example, we have been able to increase the output of the Puna project by approximately 5 MW since the date of its acquisition in June 2004. We have also increased the capacity of the Heber Complex by 7 MW (3 MW were used for auxiliary power) and plan to increase it by an additional 9 MW by the end of the second quarter of 2006.

Safety is a key area of concern to us. We believe that the most efficient and profitable performance of our projects can only be accomplished within a safe working environment for our

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employees. Our compensation and incentive program includes safety as a factor in evaluating our employees, and we have a well-developed reporting system to track safety and environmental incidents at our projects.

How We Finance Our Power Plants. Historically, we have funded our projects with a combination of non-recourse or limited recourse debt, lease financing, parent company loans and internally generated cash. Such leveraged financing permits the development of projects with a limited amount of equity contributions, but also increases the risk that a reduction in revenues could adversely affect a particular project’s ability to meet its debt obligations. Leveraged financing also means that distributions of dividends or other distributions by plant subsidiaries to us are contingent on compliance with financial and other covenants contained in the financing documents.

Non-recourse debt or lease financing refers to debt or lease arrangements involving debt repayments or lease payments that are made solely from the project’s revenues (rather than our revenues or revenues of any other project) and generally are secured by the project’s physical assets, major contracts and agreements, cash accounts and, in many cases, our ownership interest in that project affiliate. These forms of financing are referred to as ‘‘project financing.’’ Project financing transactions generally are structured so that all revenues of a project are deposited directly with a bank or other financial institution acting as escrow or security deposit agent. These funds then are payable in a specified order of priority set forth in the financing documents to ensure that, to the extent available, they are used first to pay operating expenses, senior debt service (including lease payments) and taxes and to fund reserve accounts. Thereafter, subject to satisfying debt service coverage ratios and certain other conditions, available funds may be disbursed for management fees or dividends or, where there are subordinated lenders, to the payment of subordinated debt service.

In the event of a foreclosure after a default, our project affiliate owning the project would only retain an interest in the assets, if any, remaining after all debts and obligations were paid in full. In addition, incurrence of debt by a project may reduce the liquidity of our equity interest in that project because the interest is typically subject both to a pledge in favor of the project’s lenders securing the project’s debt and to transfer and change of control restrictions set forth in the relevant financing agreements.

Limited recourse debt refers to project financing as described above with the addition of our agreement to undertake limited financial support for the project affiliate in the form of certain limited obligations and contingent liabilities. These obligations and contingent liabilities take the form of guarantees of certain specified obligations, indemnities, capital infusions and agreements to pay certain debt service deficiencies. To the extent we become liable under such guarantees and other agreements in respect of a particular project, distributions received by us from other projects and other sources of cash available to us may be required to be used to satisfy these obligations. To the extent of these limited recourse obligations, creditors of a project financing of a particular project may have direct recourse to us.

How We Mitigate International Political Risk. We generally purchase insurance policies to cover our exposure to certain political risks involved in operating in developing countries. The policies are issued by entities which specialize in such policies, such as MIGA, and from private sector providers, such as Zurich Re, AIG and other such companies. To date, our political risk insurance contracts are with MIGA and Zurich Re. Such insurance policies cover, in general and subject to the limitations and restrictions contained therein, 80% to 90% of our revenue loss derived from a specified governmental act such as confiscation, expropriation, riots, the inability to convert local currency into hard currency and, in certain cases, the breach of agreements. We have obtained such insurance for all of our foreign projects in operation except for the Leyte project.

Recent Developments

	•	On March 13, 2006, one of our wholly-owned subsidiaries acquired an additional 50.8% (49.28% on a fully diluted basis assuming the exercise of an option by a third party)

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		partnership interest in Orzunil I de Electricidad, Limitada (Orzunil), which owns the Zunil project in Guatemala. Our subsidiary increased its existing 21.0% ownership interest in the Zunil Project to 71.8% (69.67% on a fully diluted basis assuming the exercise of an option by a third party). The purchase price was $14.8 million.

	•	On February 13, 2006, one of our wholly owned subsidiaries entered into a $7.7 million agreement with Tauropaki Power Company of New Zealand for the sale of one air-cooled OEC unit. This OEC unit will be used to expand the generating capacity of the existing Mokai geothermal power plant located near Lake Taupo in New Zealand, and is expected to be supplied within 12 months from the contract date.

	•	On January 25, 2006, one of our wholly owned subsidiaries, OrSumas LLC, entered into a 20-year power purchase agreement with Puget Sound Energy for the supply of power from a REG facility, which will be located adjacent to the Sumas Compressor Station of Northwest Pipeline Inc. in Sumas, Washington State. The facility is expected to begin commercial operations in the fourth quarter of 2007 or the first quarter of 2008 and is expected to have a generating capacity of 5 MW.

	•	On January 17, 2006, we filed a universal shelf registration statement on Form S-3, which was declared effective by the SEC on January 31, 2006. The shelf registration statement provides us with the opportunity to issue various types of securities, including debt securities, common stock, warrants and units of our company, from time to time for a period of three years, in one or more offerings up to a total dollar amount of $1 billion. Pursuant to the shelf registration statement, we may periodically offer one or more of the registered securities in amounts, at prices, and on terms to be announced when, and if, the securities are offered. At the time any offering is made under the shelf registration statement, the offering specifics will be set out in a prospectus supplement.

	•	On January 13, 2006, one of our subsidiaries entered into a supply agreement in the amount of $2.4 million with ICQ Energetica s.r.l. (ICQ) in Italy for the supply of OEC systems for REG Plants.

	•	On December 8, 2005, we entered into new definitive 25-year power purchase agreements with Southern California Public Power Authority for the Heber complex and we began to make deliveries pursuant to this power purchase agreement in the first quarter of 2006.

	•	On December 8, 2005, our wholly owned subsidiary, OrCal Geothermal Inc. (OrCal), which owns the Heber 1, Heber 2, and Gould projects, completed the issuance of $165.0 million 6.21% Senior Secured Notes pursuant to an exempt offering under Rule 144A and Regulation S of the Securities Act of 1933.

	•	On November 14, 2005, we completed the construction of the Burdette project, which is the first geothermal power plant constructed in Nevada following the passage of the Nevada Renewable Portfolio Standards (RPS) legislation. We reached commercial operation on February 28, 2006.

	•	On September 8, 2005, one of our subsidiaries entered into a $4.4 million supply contract with UltraTech Cement Ltd. in Mumbai, India for the supply of one OEC for a new REG power plant. The equipment is to be supplied within 14 months from the contract date.

	•	On June 30, 2005, our wholly-owned subsidiary, Puna Geothermal Ventures (PGV) completed the re-drilling of an existing production well, and in November 2005 completed the drilling of an additional injection well at the Puna project. These wells increased net generating capacity of the power plant by approximately 5 MW, bringing the total net generating capacity to approximately 30 MW.

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	•	On June 20, 2005, our 25-year power purchase agreement with Basin Electric Power Cooperative became effective, pursuant to which we will supply approximately 22 MW from REG power plants. The power plants are to be constructed between 15 and 18 months from the effectiveness of the power purchase agreement. The power plants will be constructed on gas compressor stations along the Northern Border natural gas pipeline in North and South Dakota.

	•	On June 1, 2005, two of our subsidiaries entered into supply and construction contracts with Alliance Pipeline Limited Partnership in Western Canada for an Ormat REG power plant in the amount of approximately $9.1 million. The power plant will have design capacity of 5 MW net and will utilize recovered waste heat from gas turbines driving compressors on the natural gas pipeline.

	•	On May 19, 2005, PGV completed a refinancing of the cost of the June 2004 acquisition of the Puna geothermal power plant located on the Big Island of Hawaii. A secondary stage of the lease transaction, which is refinancing two new geothermal wells that PGV drilled in the second half of 2005, was completed on December 30, 2005.

	•	On April 2005, we waived the receipt of a letter from the Kenyan government that would have supported the payment obligations of Kenya Power and Lighting Co. Ltd. (KPLC) as a necessary prerequisite for proceeding with Phase II of the Olkaria III project in Kenya and therefore did not provide a notice of cancellation of Phase II to KPLC. We have recently held discussions with the Kenyan goverment and KPLC regarding, among other things, the construction of Phase II. Upon implementation, we expect Phase II to add 35 MW in generating capacity to the current Olkaria III project. Under existing documentation for the Olkaria III project, our subsidiary was required to construct Phase II and to reach commercial operations by May 31, 2007, which we refer to as, the completion date, in order to avoid financial penalties, or by April 17, 2008, at the latest, to avoid termination of the entire power purchase agreement. We have reached an agreement with KPLC, subject to execution of a definitive agreement and regulatory approval, to amend the power purchase agreement, pursuant to which the tariff under the Phase II contract will be reduced, KPLC will be required to provide a letter of credit to secure their payment obligations, the completion date will be extended to December 2007 if the definitive agreements are entered into and the letter of credit is opened until April 1, 2006.

	•	On February 14, 2005, two of our subsidiaries entered into a contract in the total amount of Euro 19.2 million for the supply of equipment and construction of a geothermal power plant on Sao Miguel Island in the Azores.

Description of Our Projects

In the year ended December 31, 2005, revenues from the sale of electricity by our domestic geothermal projects were $155.7 million, constituting 87.8 % of our total revenues from the sale of electricity, and revenues from the sale of electricity by our foreign geothermal projects were $21.7 million, constituting 12.2 % of our total revenues from the sale of electricity. During 2006 we expect to begin selling electricity from our recovered energy projects that are currently under construction, as described below.

The financing of certain of our projects and the terms of our power purchase agreements and certain other agreements related to our operations are further described in the ‘‘Description of Certain Material Agreements’’ section.

Domestic Projects

Our projects in operation in the United States have a generating capacity of approximately 251 MW. All of our current domestic projects are located in California, Nevada and Hawaii. We also have projects under construction or enhancement in California, North and South Dakota, Nevada, Hawaii and soon in the State of Washington.

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The Ormesa Project

The Ormesa project is located in East Mesa, Imperial County, California. The Ormesa project consists of six plants, OG I, OG IE, OG IH (collectively, the OG I plants), OG II, GEM 2 and GEM 3. The various OG I plants commenced commercial operations between 1987 and 1989, and the OG II plant commenced commercial operations in 1988. The GEM 2 and GEM 3 plants commenced commercial operations in April 1989. The OG plants utilize a binary system, and the GEM plants utilize a flash system. The OG I plants have a generating capacity of 29 MW, the OG II plant has a generating capacity of 15 MW; and the GEM 2 and GEM 3 plants have a combined generating capacity of 3 MW. Part of the electricity generated by the GEM 2 and GEM 3 plants is sold under an interim agreement (as discussed below) and part of it is used to provide auxiliary power for well field operations at the Ormesa project. The Ormesa project sells its electrical output to Southern California Edison Company, which we refer to as Southern California Edison, under two separate power purchase agreements. In certain circumstances, Southern California Edison or its designee has a right of first refusal to acquire the OG I and OG II plants. The Ormesa project was acquired by us in April 2002, was initially refinanced with project finance debt from United Capital and was refinanced again with the proceeds from the issuance by Ormat Funding of its Senior Secured Notes on February 13, 2004. The OFC Senior Secured Notes are collateralized by all of the assets of the Ormesa project (and any and all proceeds arising therefrom) and our project subsidiary, Ormesa LLC, the direct owner of the Ormesa project, has jointly and severally with certain of our other subsidiaries fully and unconditionally guaranteed Ormat Funding’s obligations under the OFC Senior Secured Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for a further description of the collateralization of the OFC Senior Secured Notes.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison has expressed its intent not to pay the contract rate for the power supplied by the GEM 2 and GEM 3 plants to the Ormesa project. Southern California Edison contends that California ISO real-time prices should apply, while management believes that SP-15 prices quoted by NYMEX should apply. According to Southern California Edison’s estimation, the amount under dispute is approximately $2.5 million. The parties have signed an Interim Agreement, whereby Southern California Edison will continue to procure the GEM 2 and GEM 3 power at the current energy rate of 5.37 Cents/kWh until May 1, 2007. In addition, a long-term power purchase agreement is expected to be entered into for the GEM 2 and GEM 3 power. The negotiations of the long term power purchase agreement are still under way and there is no guarantee that it will be successfully completed. Management believes that such settlement agreement will not have a material financial impact on us.

Since the second quarter of 2005, we have experienced a relatively high rate of well and pump failure at the Ormesa project resulting in a lower availability of the Ormesa well field, causing increased operating costs in and reduced revenues from this project. We are currently implementing an optimization plan for the Ormesa well field, which includes the drilling of four new wells and the conversion of some of the existing production wells into injection wells. We are in a process of drilling the additional wells and we expect to complete the modification of the well field by June 2006. We believe these actions will restore the availability of the well field, reduce our operating costs for this project and will increase the generating capacity. As part of the construction described in the ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ section in this annual report, we plan to increase the generating capacity of the Ormesa project by 10 MW.

The Heber Complex

The Heber 1 Project. The Heber 1 project is located in Heber, Imperial County, California. The Heber 1 project includes one power plant, which commenced commercial operations in 1985, and a geothermal resource field. The plant utilizes a dual flash system and has a generating capacity of approximately 38 MW. The Heber 1 project sells its electrical output to Southern California Edison under a long-term power purchase agreement. In certain circumstances, Southern California Edison and its affiliated entities have a right of first refusal to acquire the power plant. Upon satisfaction of certain conditions specified in the power purchase agreement and subject to receipt of requisite

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approvals and negotiations between the parties, our project subsidiary will have the right to demand that Southern California Edison purchase the power plant. The acquisition of the Heber 1 project in December 2003 was financed with equity and non-recourse debt from Beal Bank, and was refinanced with the proceeds from the issuance by OrCal of its Senior Secured Notes on December 8, 2005.

The Heber 2 Project. The Heber 2 project is also located in Heber, Imperial County, California. The Heber 2 project includes one power plant which commenced commercial operations in 1993. The plant utilizes a binary system and has a generating capacity of approximately 34 MW. The Heber 2 project sells its electrical output to Southern California Edison under a long-term power purchase agreement. The acquisition of the Heber 2 project in December 2003 was financed with equity and non-recourse debt from Beal Bank, and was refinanced with the proceeds from the issuance by OrCal of its Senior Secured Notes on December 8, 2005.

The Gould Project. The Gould project is also located in Heber, Imperial County, California. The Gould project consists of a bottoming-cycle OEC at Heber 1 and additional Ormat Integrated Two Level Units (ITLU) at Heber 2. The project is expected to produce 10 MW to be sold under a new long-term power purchase agreement with Southern California Power Public Authority, which was signed on December 18, 2005. The project sells the electricity to SCPPA for a fixed price of $57.50/MWh, which will escalate annually at a rate of 1.5%. In addition, if and when available, 30% of the production tax credits generated from the applicable project will be shared with Southern California Power Public Authority . Currently we deliver 4 MW under this power purchase agreement and we expect to begin delivering the additional 6 MW in the second quarter of 2006.

The Steamboat Complex

The Steamboat complex consists of the Steamboat 1/1A project, the Steamboat 2/3 project and the Burdette project, which was formerly known as Galena.

The Steamboat 1/1A Project. The Steamboat 1/1A project is located in Steamboat Hills, Washoe County, Nevada. The Steamboat 1/1A project includes two power plants which commenced commercial operations in 1986 and 1988, respectively. The Steamboat 1/1A project utilizes a binary system and currently has a generating capacity of 5 MW, which will be reduced to 2 MW during 2006 due to a re-allocation of a portion of the geothermal resource to the Burdette Project, but we do not anticipate any material financial loss as a result of such reduction. The Steamboat 1/1A project sells its electrical output to Sierra Pacific Power Company under two separate power purchase agreements. The Steamboat 1/1A project was acquired in June 2003 using internally generated cash, and was refinanced with the proceeds from the issuance by Ormat Funding of its Senior Secured Notes on February 13, 2004. The OFC Senior Secured Notes are collateralized by all of the assets of the Steamboat 1/1A project (and any and all proceeds arising therefrom) and our project subsidiary, Steamboat Geothermal LLC, the direct owner of the Steamboat 1/1A project, has jointly and severally with certain of our other subsidiaries fully and unconditionally guaranteed Ormat Funding’s obligations under the OFC Senior Secured Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for further description of collateralization of the OFC Senior Secured Notes.

The Steamboat 1 power purchase agreement expires by the end of 2006 and the plant will be retired during 2006.

The Steamboat 2/3 Project. The Steamboat 2/3 project is also located in Steamboat Hills, Washoe County, Nevada. The Steamboat 2/3 project consists of two power plants which commenced commercial operations in 1992. The Steamboat 2/3 project utilizes a binary system and has a generating capacity of 24 MW, which was reduced from 29 MW due to a re-allocation of a portion of the geothermal resource to the Burdette Project. The Steamboat 2/3 project sells its electrical output to Sierra Pacific Power Company under two separate power purchase agreements. The Steamboat 2/3 project was acquired in February 2004 using internally generated cash and proceeds from the issuance by Ormat Funding of its Senior Secured Notes on February 13, 2004. The OFC Senior Secured Notes are collateralized by all of the assets of the Steamboat 2/3 project (and any and all proceeds arising therefrom) and our project subsidiary, Steamboat Development Corp., the direct owner of the

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Steamboat 2/3 project, has jointly and severally with certain of our other subsidiaries fully and unconditionally guaranteed Ormat Funding’s obligations under the OFC Senior Secured Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for further description of collateralization of the OFC Senior Secured Notes.

The Burdette Project. The Burdette Project is located in Steamboat, Washoe County. The Burdette plant has a generating capacity of 21 MW, thereby adding an incremental 13 MW to the Steamboat complex. We completed the construction of this project in November 2005 and we reached commercial operation on February 28, 2006. The project sells and transfers its electrical output and transfers its renewable energy credits to Sierra Pacific Power Company under a power purchase agreement that has a 20-year term ending on December 31, 2026.

The Steamboat Hills Project

The Steamboat Hills project is also located in Steamboat Hills, Washoe County, Nevada. The Steamboat Hills project is comprised of one plant and commenced commercial operations in 1988. The Steamboat Hills project utilizes a single flash system and water cooled condenser and has a generating capacity of 6 MW, although the capacity under the power purchase agreement is 12.5 MW. The Steamboat Hills project sells its electrical output to Sierra Pacific Power Company pursuant to a power purchase agreement. The project, under the predecessor owner, experienced difficulties operating at full capacity, among other reasons because of a well blow-out. We intend to increase the generating capacity of the Steamboat Hills project by additional construction to take full advantage of the power purchase agreement. The Steamboat Hills project was acquired in May 2004 using internally generated cash.

The Mammoth Project

The Mammoth project is located in Mammoth Lakes, California. The Mammoth project is comprised of three plants, G-1, G-2 and G-3. The G-1 plant commenced commercial operations in 1985 and the G-2 and G-3 plants commenced commercial operations in 1990. The Mammoth project utilizes a binary system and has a generating capacity of 25 MW. Our project subsidiary, OrMammoth, Inc., owns a 50% partnership interest in Mammoth-Pacific, L.P., which owns 100% of the Mammoth project. The other 50% partnership interest is owned by an unrelated third party. The Mammoth project sells its electrical output to Southern California Edison under three separate power purchase agreements. Under the G-1 power purchase agreement, in certain circumstances, Southern California Edison or its affiliates has a right of first refusal to acquire the plant. Our 50% ownership interest in the Mammoth project was acquired in December 2003 using internally generated cash and project finance debt from Beal Bank, and was refinanced with the proceeds from the issuance by Ormat Funding of its Senior Secured Notes on February 13, 2004. The OFC Senior Secured Notes are collateralized by a pledge of our 50% ownership interest in Mammoth-Pacific, L.P. and our project subsidiary, OrMammoth Inc. has jointly and severally with certain of our other subsidiaries fully and unconditionally guaranteed Ormat Funding’s obligations under the OFC Senior Secured Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for further description of collateralization of the OFC Senior Secured Notes.

The Brady Project

The Brady project is located in Churchill County, Nevada and includes the Brady plant and the Desert Peak 1 plant. The Desert Peak 1 plant is approximately 4.5 miles southeast of the Brady plant. The Brady plant commenced commercial operations in 1992 and the Desert Peak 1 plant commenced commercial operations in 1985. The Brady project has a generating capacity of 20 MW and has in the past utilized a dual flash design. In August 2002, an additional 6 MW binary unit was added to the Brady plant to generate additional power from the brine before its reinjection. The Desert Peak 1 plant utilizes a dual flash design. The Brady project sells its electrical output from the Brady plant and Desert Peak 1 plant to Sierra Pacific Power Company under a power purchase agreement. The Brady project was acquired in June 2001 using internally generated cash and was refinanced with the

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proceeds from the issuance by Ormat Funding of its Senior Secured Notes on February 13, 2004. The OFC Senior Secured Notes are collateralized by all of the assets of the Brady project (and any and all proceeds arising therefrom) and our project subsidiary, Brady Power Partners, the direct owner of the Brady project, has jointly and severally with certain of our other subsidiaries fully and unconditionally guaranteed Ormat Funding’s obligations under the OFC Senior Secured Notes. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ for further description of collateralization of the OFC Senior Secured Notes.

The Puna Project

The Puna project is located in the Puna district, Big Island, Hawaii. The Puna plant commenced commercial operations in 1993. The Puna plant utilizes an Ormat geothermal combined cycle system, and has a generating capacity of 30 MW. The Ormat geothermal combined cycle system consists of a back pressure steam turbine, in which the lower pressure steam exhausted from the turbine is condensed in a binary system. This system assures a higher efficiency of geothermal steam, with a resulting lower steam rate, in resources producing steam above 150psi (10 bar), or even 100psi if the steam has a high non-condensable gas content. The Puna project sells its electrical output to Hawaii Electric Light Company under two power purchase agreements. Although the Puna project has significant geothermal resources, because of existing geological conditions, these resources are difficult to manage. In the past, the Puna project required extensive levels of investment mainly to address problems with the production and injection wells related to the geothermal resources. The Puna project was acquired in June 2004 with the proceeds of parent company loans and short-term bank loans. We completed a refinancing of the project acquisition, as described under ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’.

We intend to increase the output of the Puna project by an additional 8 MW through the addition of Ormat Energy Converters. We are in the process of negotiating a new power purchase agreement for the additional generating capacity that will be available as a result of such activities.

Foreign Projects

Our projects in operation outside of the United States have a generating capacity of approximately 113 MW. We also have projects under construction in Guatemala and projects under development in China and Kenya.

The Leyte Project (The Philippines)

The Leyte project is located in the Philippines, on the Isle of Leyte. The Leyte project consists of four power plants. The Leyte plants utilize steam systems; one conventional flash steam plant and three ORMAT manufactured topping steam turbines and have a combined generating capacity of 49 MW. The ORMAT topping steam turbines generate additional power by using the reduction in pressure to the inlet of the conventional flash steam plant, situated downstream, necessitated when the existing steam field produced steam at a higher pressure than can be accommodated by the conventional flash steam plant. Our project subsidiaries have an 80% partnership interest in Ormat-Leyte Co. Ltd., which owns 100% of the Leyte project. The remaining 20% partnership interest in Ormat-Leyte Co. Ltd. is held by two unrelated third parties. In August 1995, following a build-operate-transfer agreement, which we refer to as BOT, international tender, Ormat Inc. (which later transferred its interest in the BOT agreement to Ormat-Leyte Co. Ltd.) entered into a BOT agreement with PNOC-Energy Development Corporation, a Philippine company wholly owned by Philippine National Oil Company, a government-owned company. Under the BOT agreement, the project will be transferred to PNOC-Energy Development Corporation in September 2007 for no consideration. We do not anticipate any material financial loss as a result of such transfer, although going forward this will reduce our foreign generation capacity by 49 MW. Ormat-Leyte Co. Ltd. has an outstanding non-recourse loan from the Export-Import Bank of the United States the outstanding balance of which was $8.9 million as of December 31, 2005. The loan is due and payable in approximately equal quarterly installments through July 2007.

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The Government of The Philippines has initiated the privatization of its electricity industry. However, we cannot foresee when such privatization may be completed. If such privatization is achieved in a manner that jeopardizes PNOC-Energy Development Corporation’s or its affiliate’s ability to comply with their obligations under the BOT agreement, the parties are required to negotiate an amendment to the power purchase agreement. Should they fail to reach an agreement, PNOC-Energy Development Corporation has the obligation (and our project subsidiary has the right to require PNOC-Energy Development Corporation) to buy out Ormat-Leyte Co. Ltd.’s rights in the project at a price based upon the net present value of the projected cash flow from the project for the remaining term of the BOT agreement.

The Momotombo Project (Nicaragua)

The Momotombo project is located in Momotombo, Nicaragua. The Momotombo project is comprised of one plant and a geothermal field. The plant was already in existence when we signed the concession agreement for the project in March 1999, and had commenced commercial operations in the mid-1980s utilizing a dual flash system. In 2003, an additional 6 MW binary unit was added, bringing the generating capacity to approximately 27 MW. The Momotombo project has a power purchase agreement with Empresa Distribuidora de Electricidad del Norte (DISNORTE) and Empresa Distribuidora de Electricidad del Sur (DISSUR), two corporations which own the power distribution rights in Nicaragua. Our project subsidiary, which operates the Momotombo project, has an outstanding loan from Bank Hapoalim B.M., the outstanding balance of which was $14.1 million as of December 31, 2005. In 2005 we experienced a 1 MW reduction in generating capacity at the project as a result of mechanical problems in one of the project's wells. We intend to increase the output of the Momotombo project by 5 MW through work-over of the project’s existing wells.

The Olkaria III Project — Phase I (Kenya)

The Olkaria III project is located in Naivasha, Kenya. The Olkaria III project is comprised of one plant, which commenced commercial operations in August 2000, and a geothermal field. The plant currently has a generating capacity of approximately 13 MW (Phase I). The parties have been working on the construction of Phase II of this project which we expect, upon completion, would increase the generating capacity of the Olkaria III project to approximately 48 MW. A description of Phase II of this project is set forth below in ‘‘Projects under Development.’’ Phase I of the Olkaria III project utilizes a binary system. In November 1998, following an international tender, our project subsidiary entered into a power purchase agreement with the Kenya Power and Lighting Co. Ltd. (KPLC), which was further amended in July 2000 and April 2003. Our project subsidiary leases the site on which the geothermal resources and the plant facilities are located from the Kenyan government, pursuant to an agreement which will expire in 2040. The Kenyan government granted our project subsidiary a license giving it exclusive rights of use and possession of the relevant geothermal resources for an initial period of 30 years, expiring in 2029, which initial period may be extended for two additional five-year terms by us. The Kenyan Minister of Energy has the right to terminate or revoke the license in the event our project subsidiary ceases work in or under the license area during a period of six months, or has failed to comply with the terms of the license or the provisions of the law relating to geothermal resources. Our project subsidiary is obligated to pay the Kenyan government monthly fees and royalties based on the amount of power supplied to KPLC.

The Zunil Project (Guatemala)

The Zunil project is located in Zunil, Guatemala. The Zunil project is comprised of one plant which commenced commercial operations in 1999. The plant utilizes a binary system consisting of Ormat Energy Converters and has a generating capacity of 24 MW. The project is owned by Orzunil I de Electricidad, Limitada, which owns 100% of the Zunil project. Another of our subsidiaries provides operation and maintenance services to the project. The Zunil project sells its generating capacity to Instituto Nacional de Electrification pursuant to a power supply agreement. As of the date of this annual report, Orzunil I de Electricidad, Limitada has two senior outstanding non-recourse loans, one from International Finance Corporation (IFC) and the other from the Commonwealth Development

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Corporation (CDC), the aggregate total balance of which was, as of December 31, 2005, $24.4 million. The loans are due and payable in quarterly installments through November 2011. Each of the IFC and the CDC owns 14.1% of the issued and outstanding partnership interests of Orzunil I de Electricidad, Limitada. On March 13, 2005, we consummated the acquisition of an additional 50.8% partnership interest in the Zunil project and increased its 21% ownership interest to 71.8% (69.67% on a fully diluted basis assuming the exercise of an option by a third party). Recently, due to hurricane activity, the access roads and the piping from the wells to the Zunil power plant were damaged and, as a result, the project was not in operation from October 14, 2005 to March 10, 2006. We have filed an insurance claim, which is currently under discussion with the insurance company. We have already received an advance payment against the claim and we believe that any final resolution of the claim will not have a material impact on our results of operation.

Projects under Construction or Enhancement

We are in varying stages of construction or enhancement of projects, both domestic and foreign. Based on our current construction and enhancement schedule, we expect to have an additional generating capacity of approximately 98 MW in the United States and approximately 60 MW throughout the rest of the world by the end of 2008. The following is a description of the projects currently undergoing construction:

The Desert Peak 2 Project

Our project subsidiary is currently constructing the Desert Peak 2 project in Churchill County, Nevada (near the Brady project). The Desert Peak 2 project is expected to have a generating capacity of up to 15 MW and will utilize our Ormat Energy Converters. The electrical output from the project will be sold, and renewable energy and environmental credits will be transferred, to Nevada Power Company under a power purchase agreement that our project subsidiary has already entered into and that has a 20-year term commencing on the January 1 following the commercial operation date of such power plant. The Desert Peak 2 project is expected to be completed in the second quarter of 2006.

The Galena 2 Project (formerly Desert Peak 3 Project)

The Galena 2 project in Washoe County, Nevada is currently under construction and is expected to have a generating capacity of 10 MW. Our project subsidiary will sell electrical output from the plant, and transfer the renewable energy and environmental credits, to Nevada Power Company under a power purchase agreement that has a 20-year term commencing on the January 1 following the commercial operation date of the plant and which was signed as part of Nevada Power Company’s efforts to comply with Nevada’s renewable portfolio standards. We expect the construction to be completed by the end of 2006.

The OREG 1 Project

The OREG 1 project is a REG plant currently under construction and is expected to have a generating capacity of 22 MW. Our project subsidiary has entered into a 25-year power purchase agreement with Basin Electric Power Cooperative pursuant to which the project will sell the electrical output to Basin Electric. The power plants will be constructed on gas compressor stations along a natural gas pipeline in North and South Dakota. We expect the construction to be completed before the end of 2006.

The Amatitlan Project (Guatemala)

Our project subsidiary is currently constructing a geothermal power plant in Amatitlan, Guatemala on a ‘‘build, own and operate’’ or ‘‘BOO’’ basis. The project is comprised of one power plant which we expect will have a generating capacity of 20 MW, and has obtained the rights to various geothermal production and reinjection wells. The Amatitlan plant will use our Ormat Energy Converters.

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The term of the power purchase agreement for the Amatitlan project is 20 years from the date of the commencement of operations at the power plant or 23 years from the date of commencement of the construction work, whichever is later. During a period of two years after the completion of the construction of the power plant, and subject to the signing of an additional agreement with the Instituto Nacional de Electrification and the result of a feasibility test, our project subsidiary may increase the power generating capacity of the power plant to up to an aggregate of 50 MW by drilling additional wells. We anticipate that the Amatitlan project will be completed in the third quarter of 2006.

The local municipal authorities have claimed that a construction license is required for the project, while our local counsel has advised us that no such license is required under the applicable laws and regulations. We are simultaneously proceeding to challenge the claim of the local municipal authorities and to obtain the construction license. In what appears to be a related occurrence, a group of demonstrators from the municipality have attempted to block the access road to our Amatitlan project. A separate group of demonstrators from another municipality have turned out in support of the project and Guatemalan authorities have promised assistance in maintaining access to the project.

The OrSumas Project

The OrSumas project is a REG plant currently in the engineering stage and is expected to have a generating capacity of 5 MW. Our project subsidiary has entered into a 20-year power purchase agreement with Puget Sound Energy pursuant to which the project will sell its electrical output to Puget Sound. The power plant will be constructed on a gas compressor station along the Northwest Pipeline in the State of Washington. We expect the construction to be completed by the end of 2007 or early 2008.

The Olkaria III Project — Phase II (Kenya)

As previously noted, our project subsidiary in Kenya has been working towards the construction of Phase II of the Olkaria III project. As of the date hereof, our project subsidiary has drilled wells and commenced preliminary construction activities but has not begun any material construction activities with respect to Phase II. We have recently held discussions with the Kenyan goverment and KPLC regarding, among other things, the construction of Phase II. Upon implementation, we expect Phase II to add 35 MW in generating capacity to the current Olkaria III project. Under existing documentation of the Olkaria III project, our subsidiary was required to construct Phase II and reach commercial operations by May 31, 2007, which we refer to as, the completion date, in order to avoid financial penalties, or by April 17, 2008, at the latest, to avoid termination of the entire power purchase agreement. We have reached an agreement with KPLC, subject to execution of a definitive agreement and regulatory approval, to amend the power purchase agreement pursuant to which the tariff under the contract will be reduced. KPLC will be required to provide a letter of credit to secure their payment obligations; the completion date will be extended to December 2007 if the definitive agreements are entered into and the letter of credit is opened until April 1, 2006. As of December 31, 2005, we incurred approximately $21.6 million in costs, in connection with the construction of Phase II and do not believe that Phase II assets are impaired as a result of these delays.

Other Projects

We are currently pursuing construction or enhancement activities in the following projects:

	•	Heber complex: We are adding 9 MW of generating capacity (in addition to the 7 MW that were added in the beginning of 2006) through mainly the construction of OEC units;

	•	Ormesa project: We plan to add 10 MW through the construction of OEC units and the drilling of new wells;

	•	Puna project: We plan to add 8 MW through the construction of OEC units;

	•	Mammoth project: We plan to add 4 MW by connecting the wells drilled in 2005 to the power plant;

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	•	Steamboat Hills project: We plan to add 5 MW through the construction of OEC units; and

	•	Momotombo project: We plan to add 5 MW through well work over.

We believe that these activities may increase the generating capacity of these projects collectively by approximately 28 MW in 2006 and 13 MW in 2007. We are currently in discussions with Southern California Edison and Hawaii Electric Light Company for the sale of additional electrical power from the Ormesa and Puna projects.

Projects under Development

We also have projects under development in the United States and China. In certain cases, we have obtained concession agreements and/or financing commitments, and in other cases, the projects are in early development stages. We expect to continue to explore these and other opportunities for expansion so long as they continue to meet our business objectives and investment criteria.

The Imperial Valley Project (U.S.)

We are currently developing a 10 MW power plant, which will be located in the Heber known geothermal resource area. The construction activity is expected to include the drilling of production and injection wells and the construction of an OEC unit.

The Yunnan Project (China)

OrYunnan Geothermal Co., Ltd., which is a joint venture established between our project subsidiary and Yunnan Province Geothermal Development Co., Ltd., owns exclusive rights to develop all of the geothermal resources in Teng Chong County, Baoshan City, in Yunnan Province, southwest China. Our project subsidiary owns 85% of the interests in OrYunnan Geothermal Co. Ltd., which owns all of the ownership interests in the Yunnan project. The area of the geothermal concession is approximately 65 square miles and is located approximately 200 miles southwest of Kunming, the provincial capital of Yunnan, and approximately 40 miles from the border with Myanmar. We estimate the potential of the geothermal resources in the concession area to be between 150 to 200 MW. Initially, our project subsidiary and its partner intend to develop a geothermal field and construct a power plant with a generating capacity of approximately 42 MW, which we estimated would require a capital investment of approximately CNY 807.8 million (approximately $99.6 million calculated at the prevailing exchange rate as of December 31, 2005). As of the date hereof, our project subsidiary is awaiting Yunnan Provincial Government approval, following which negotiations with the provincial utility company towards the signing of a power purchase agreement can conclude. Following the approval of the Yunnan Provincial Government, the electricity feed-in tariffs would still require central government approval. Such tariffs will be based on the implementing regulations to be announced shortly. On May 29, 2002, our project subsidiary entered into a memorandum of understanding, which we refer to as an MOU, regarding the main terms of the power purchase agreement and other major project agreements with Yunnan Electric Power Co., Ltd., a state-owned utility company, concerning the purchase of electric power by the utility company from our project subsidiary on a 30-year basis and the related interconnection arrangements. The MOU estimates that the commercial operation date of the plant was to be January 1, 2006. However, we have been in the development stage of the OrYunnan Project for several years and this date will have to be extended for an appropriate period following the completion of the Chinese central government’s approval.

Development Inventory

We have various geothermal leases for future development in the United States and other development rights outside of the United States. These geothermal leases and rights include the following:

	•	Meyberg lease near Steamboat, Nevada;

	•	rights to the Fallon geothermal resource in Churchill County, Nevada;

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	•	Truck Haven lease in the Imperial Valley, California;

	•	Grass Valley lease in Nevada, in which we started primary exploration and drilled temperature holes;

	•	Jersey Valley lease in Nevada, in which we started primary exploration and drilled temperature holes;

	•	Buffalo Canyon lease in Nevada, in which we started primary exploration;

	•	Newberry lease in Oregon;

	•	Rhyolite Plateau lease near Mammoth, California, (50% partnership);

	•	BLM lease in Idaho;

	•	various leases in Puna, Hawaii;

	•	various other leases in Nevada;

	•	leases for additional development in the Amatitlan project; and

	•	an option on four additional compressors stations for REGs on the Northern Boarder pipeline.

Operations of our Products Segment

Power Units for Geothermal Power Plants. We design, manufacture and sell power units for geothermal electricity generation, which we refer to as Ormat Energy Converters or OECs. Our customers include contractors and geothermal plant owners and operators. Recently, one of our 7.35 MW power units was installed at Aydin Salavatli power plant in Turkey.

The consideration for the power units is usually paid in installments, in accordance with milestones set in the supply agreement. Sometimes we agree to provide the purchaser with spare parts (or alternatively, with a non-exclusive license to manufacture such parts). We provide the purchaser with at least a 12-month warranty for such products. We usually also provide the purchaser (often, upon receipt of advances made by the purchaser) with a guarantee, which expires in part upon delivery of the equipment to the site and fully expires at the termination of the warranty period. The guarantees are covered by letters of credit. Ormat has not received any claims under the performance guarantees to date.

Power Units for Recovered Energy-Based Power Generation. We design, manufacture and sell power units used to generate electricity from recovered energy or so-called ‘‘waste heat’’ that is generated as a residual by-product of gas turbine-driven compressor stations and a variety of industrial processes, such as cement manufacturing, and is not otherwise used for any purpose. Our existing and target customers include interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators, and other companies engaged in other energy-intensive industrial processes. We view recovered energy generation as a significant market opportunity for us, and plan to utilize two different business models in connection with such business opportunity. The first, which is similar to the model utilized in our geothermal power generation business, consists of the development, construction, ownership and operation of recovered energy-based generation power plants. In this case, we will enter into agreements to purchase industrial waste heat, and into long-term power purchase agreements with off-takers to sell the electricity generated by the recovered energy generation unit that utilizes such industrial waste heat. We expect that the power purchasers in such cases will be investor-owned electric utilities or local electrical cooperatives. We recently signed a supply contract with UltraTech Cement Ltd. in Mumbai, India for the supply of one OEC for a new REG power plant.

Pursuant to the second business model, we construct and sell the power units for recovered energy-based power generation to third parties for use in ‘‘inside-the-fence’’ installations or otherwise. Our customers include gas processing plant owners and operators, cement plant owners and operators and companies in the process industry. The Neptune recovered energy project is an example of such a

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model. There, we installed one of our recovered energy-based generation units at Enterprise Product’s Neptune gas processing plant in Louisiana. The unit utilizes exhaust gas from two gas turbines at the plant and is providing electrical power that is consumed internally by the facility (although a portion of the generated electricity is also sold to the local electric utility). Recently we signed two agreements (with ICQ and Ultratech) for the supply of Ormat OEC systems for Recovered Energy Generation plants.

Our recovered energy generation units, if structured properly, may be eligible for favorable tax treatment, such as the seven year modified accelerated cost recovery under relevant U.S. federal tax rules.

Remote Power Units and other Generators. We design, manufacture and sell fossil fuel powered turbo-generators with a capacity ranging between 200 watts and 5,000 watts, which operate unattended in extreme climate conditions, whether hot or cold. The remote power units supply energy for remote and unmanned installations and along communications lines and cathodic protection along gas and oil pipelines. Our customers include contractors installing gas pipelines in remote areas. In addition, we manufacture and sell generators for various other uses, including heavy duty direct current generators. Our remote power units were recently supplied to the Sakhalin pipeline in Russia. The terms of sale of the turbo-generators are similar to those for the power units produced for power plants.

Engineering, Procurement and Construction (EPC) of Power Plants. We engineer, procure and construct, as an EPC contractor, geothermal and recovered energy power plants on a turnkey basis, using power units we design and manufacture. Our customers are geothermal power plant owners as well as the same customers described above that we target for the sale of our power units for recovered energy-based power generation. Unlike many other companies that provide EPC services, we have an advantage in that we are using our own manufactured equipment and thus have better control over the timing and delivery of required equipment and its costs. Recent examples of our construction activities include the design and construction of the Mokai and Wairakei geothermal power plants in New Zealand that were recently completed.

The consideration for such services is usually paid in installments, in accordance with milestones set in the EPC contract and related documents. We usually provide performance guarantees or letters of credit securing our obligations under the contract. Upon delivery of the plant to its owner, such guarantees are replaced with a warranty guarantee, usually for a period ranging from 12 months to 36 months. The EPC contract usually places a cap on our liabilities for failure to meet our obligations thereunder. For example, we are currently acting as EPC contractor for two power plants including the San Miguel geothermal plant in the Azores and the Alliance REG plan in Canada.

We also design and construct the recovered energy generation units on a turnkey basis, and may provide a long-term agreement to supply non-routine maintenance for such units. Our customers are interstate natural gas pipeline owners and operators, gas processing plant owners and operators, cement plant owners and operators and companies engaged in the process industry. For example, recently we entered into supply and construction contracts with Alliance pipeline in Western Canada for an Ormat Recovered Energy Generation power plant.

Operation and Maintenance of Power Plants. We provide operation and maintenance services for geothermal power plants owned by us and by third parties. For example, we provide operations and management services to the Orzunil project in Guatemala, in which we have a minority ownership interest.

In connection with the sale of our power units for geothermal power plants, power units for recovered energy-based power generation and remote power units and other generators, we, from time to time, enter into sales agreements for the marketing and sale of such products pursuant to which we are obligated to pay commissions to such representatives upon the sale of our products in the relevant territory covered by such agreements by such representatives or, in some cases, by other representatives in such territory.

Our manufacturing operations and products are certified ISO 9001, ISO 14001, ASME and TÜV, and we are an approved supplier to many electric utilities around the world.

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Backlog

The Company and its wholly-owned subsidiaries have a products backlog of $81.8 million as of March 15, 2006 including revenues for the period between January 1, 2006 and March 14, 2006, compared to $86.4 million for delivery as of March 15, 2005. The following is a breakdown of the products segment backlog:

Products Backlog
				Expected Completion of Contract				Sales Expected to be Recognized in 2006				Sales Expected to be Recognized in the Years Following 2006
North America
OPTI Canada Inc.*					2006				3.5
Raft River (not yet received notice to proceed)					2007				7.0				13.2
Alliance, Canada					2006				8.4
Total North America									18.9				13.2
Worldwide (Except North America)
Bongkot, Thailand					2006				0.5
UltraTech, India					2006				4.4
ICQ, Italy					2007				2.5
Bereket, Turkey					2006				2.2
Comita, Russia					2006				2.4
Sajeo, Sao Miguel, Azores					2006				18.9
Mokai 1A					2006				7.7
Management and Operation of Power Plants**					2011				1.5				8.0
Other Units					2006				1.6
Total Worldwide (Except North America)									41.7				8.0
Total Products Backlog									60.6				21.2

*	A related party

**	Unconsolidated subsidiary

We expect that our revenues from electricity for the 2006 fiscal year from our wholly owned projects will be $195 million and $18 million of revenues from electricity, which is our share in the revenues generated by our subsidiaries accounted for by the equity method.

Our Technology

Our proprietary technology covers power plants operating according to the Organic Rankine Cycle only or in combination with the Steam Rankine Cycle and Brayton Cycle, as well as integration of power plants with energy sources such as geothermal, recovered energy, biomass, solar energy and fossil fuels. Specifically, our technology involves original designs of turbines, pumps, and heat exchangers, as well as formulation of organic motive fluids. All of our motive fluids are non-ozone-depleting substances. Using advanced computerized fluid dynamics and other computer aided design, or CAD, software as well as our test facilities, we continuously seek to improve power plant components, reduce operations and maintenance costs, and increase the range of our equipment and applications. In particular, we are examining ways to increase the output of our plants by utilizing evaporative cooling, cold reinjection, performance simulation programs, and topping turbines. In the geothermal as well as the recovered energy (waste heat) area, we are examining two-level recovered energy systems and new motive fluids.

We also construct combined cycle geothermal plants in which the steam first produces power in a backpressure steam turbine and is subsequently condensed in a vaporizer of a binary plant, which produces additional power.

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In the conversion of geothermal energy into electricity, our technology has a number of advantages compared with conventional geothermal steam turbine plants. A conventional geothermal steam turbine plant consumes significant quantities of water, causing depletion of the aquifer, and also requires cooling water treatment with chemicals and thus a need for the disposition of such chemicals. A conventional geothermal steam turbine plant also creates a significant visual impact in the form of an emitted plume from the cooling tower during cold weather. By contrast, our binary and combined cycle geothermal power plants have a low profile with minimum visual impact and do not emit a plume when they use air cooled condensers. Our binary and combined cycle geothermal power plants reinject all of the geothermal fluids utilized in the respective processes into the geothermal reservoir. Consequently, such processes generally have no emissions. Accidental or fugitive emissions (that result from minor leaks) of motive fluids are within the limits defined by federal, state and local regulatory standards.

Other advantages of our technology include simplicity of operation and easy maintenance, low RPM, temperature and pressure in the Ormat Energy Converter, a high efficiency turbine and the fact that there is no contact between the turbine itself and often corrosive geothermal fluids.

We use the same elements of our technology in our recovered energy products. The heat source could be exhaust gases from a simple cycle gas turbine, low pressure steam or medium temperature liquid found in the process industry. In most cases, we attach an additional heat exchanger in which we circulate thermal oil to transfer the heat into the Ormat Energy Converter’s own vaporizer in order to provide greater operational flexibility and control. Once this stage of each recovery is completed, the rest of the operation is identical to the Ormat Energy Converter used in our geothermal power plants. The same advantages of using the Organic Rankine Cycle apply here as well. In addition, our technology allows for better load following than a conventional steam turbine can exhibit, requires no water treatment as it is air cooled, and does not require the continuous presence of a steam licensed operator on site.

More than 70 United States patents (and about 10 pending patents) cover our products (mainly power units based on the Organic Rankine Cycle) and systems (mainly geothermal power plants and industrial waste heat recovery for electricity production). The systems-related patents cover not only a particular component but rather the overall effectiveness of the plant’s systems from the ‘‘fuel’’ (i.e., geothermal fluid, waste heat, biomass or solar) to generated electricity. The duration of such patents ranges from one year to 18 years. No single patent on its own is material to our business.

The products-related patents cover components such as turbines, heat exchanges, seals and controls. The system patents cover subjects such as disposal of non-condensable gases present in geothermal fluids, power plants for very high pressure geothermal resources and use of two-phase fluids. A number of patents cover the combined cycle geothermal power plants, in which the steam first produces power in a backpressure steam turbine and is subsequently condensed in a vaporizer of a binary plant, which produces additional power.

We are also involved in developing new technology to extract heat from the earth by circulating fluid through an enhanced or man-made reservoir created in naturally low permeable or water-poor rocks. We are undertaking this development in cooperation with GeothermEx Inc., the University of Utah, Energy & Geoscience Institute, the University of Nevada-Reno and the Great Basin Center for Geothermal Energy, with funding support from the United States Department of Energy.

Competition

The power generation industry is characterized by intense competition from electric utilities, other power producers, and marketers. In recent years, the United States in particular has seen increasing competition in power sales, in part due to excess capacity in a number of U.S. markets and an emphasis on short-term markets. In the last year, competition from the wind power generation industry has increased. While the current demand for renewable energy is strong, this increased competition may contribute to a reduction in electricity prices for new renewable projects.

In the geothermal power generation sector, our main competitors in the United States are CalEnergy, Calpine (which filed for protection under Chapter 11 of the U.S. Bankruptcy Code in late

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2005), Caithness and other smaller-sized developers. Some of these companies are also active outside of the United States. Outside of the United States, aside from these companies, we may face competition from national electric utilities or state-owned oil companies.

In the products business, our main competitors are Mitsubishi, Fuji and Toshiba of Japan, GE/Nuevo Pignone, Ansaldo and Turboden of Italy, Siemens of Germany, Alstom of France and Kaluga of Russia. Recently, two new small players have been trying to penetrate the market. In the remote power unit business, we face competition from Global Thermoelectric, as well as from manufacturers of diesel generator sets.

Siemens of Germany as well as other manufacturers of conventional steam turbines are potential competitors in the recovered energy generation business; although we believe that our recovered energy generation unit has technological and economical advantages over the Siemens/Kalina technology and conventional steam technology. Recently, United Technologies announced the introduction of a small 200 kW Organic Rankine Cycle for recovered energy.

We also compete with companies engaged in the power generation business from renewable energy sources other than geothermal energy, such as wind power, solar power and hydro-electric power.

None of our competitors competes with us both in the sale of electricity and in the products business.

Customers

All of our revenues from the sale of electricity in the year ended December 31, 2005 were derived from fully-contracted energy and/or capacity payments under long-term power purchase agreements with governmental and private utility companies. Southern California Edison, Hawaii Electric Light Company and Sierra Pacific Power Company have accounted for 36.1%, 15.2% and 14.1% of revenues, respectively, for the year ended December 31, 2005. Based on publicly available information, as of December 31, 2005, the issuer ratings of Southern California Edison, Sierra Pacific Power Company and Nevada Power Company (a potential power purchaser for the Desert Peak 2 and Galena 2 projects) were Baa1 (stable outlook), Ba3 (stable outlook) and Ba3 (stable outlook), respectively, from Moody’s Investors Services and BBB+ (stable outlook), B+ (negative outlook), and B+ (negative outlook), respectively, from Standard & Poor’s Ratings Services and the issuer rating of Hawaii Electric Light Company was BBB+ (stable outlook) from Standard & Poor’s Ratings Services. SCPPA, which has purchased the power from the Gould project since the beginning of 2006, has senior unsecured debt ratings ranging from A3 to A1 from Moody’s and A to AA− from S&P, in each case with a stable ratings outlook. The credit ratings of any power purchaser may decrease from time to time. There is no publicly available information with respect to the credit rating or stability of the power purchasers under the power purchase agreements for our foreign power projects.

Our revenues from the products business were derived from contractors or owners or operators of power plants, process companies and pipelines.

Raw Materials, Suppliers and Subcontractors

In connection with our manufacturing activities, we use raw materials such as steel and aluminum. We do not rely on any one supplier for the raw materials used in our manufacturing activities, as all of such raw materials are readily available from various suppliers.

In 2005 we increased the volume of work ordered from subcontractors for some of the manufacturing for our products components and for construction activities of our power plants, which allowed us to expand our construction and development capacity on an as-needed basis. We are not dependent on any one subcontractor and expect to be able to replace any subcontractor, or assume such manufacturing and construction activities of our projects ourselves without adverse effect to our operations.

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Employees

As of December 31, 2005, we had 733 employees, of which 241 were in the United States, 337 were in Israel and 155 were located in other countries. We expect that future growth in the number of our employees will be mainly attributable to the purchase and/or development of new power plants.

None of our employees (other than the Momotombo project employees) are represented by a labor union, and we have never experienced any labor dispute, strike or work stoppage. We consider our relations with our employees to be satisfactory. We believe our future success will depend on our continuing ability to hire, integrate and retain qualified personnel.

We have no collective bargaining agreements with respect to our Israeli employees. However, by order of the Israeli Ministry of Industry, Trade and Labor the provisions of a collective bargaining agreement between the Histadrut (the General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (which includes the Industrialists Association) may apply to some of our non-managerial, finance and administrative, and sales and marketing personnel. This collective bargaining agreement principally concerns cost of living increases, length of the workday, minimum wages, insurance for work-related accidents, procedures for dismissing employees, annual and other vacation, sick pay, determination of severance pay, pension contributions and other conditions of employment. We currently provide such employees with benefits and working conditions which are at least as favorable as the conditions specified in the collective bargaining agreement.

Insurance

We maintain business interruption insurance, casualty insurance, including flood and earthquake coverage, and primary and excess liability insurance, as well as customary worker’s compensation and automobile insurance and such other insurance, if any, as is generally carried by companies engaged in similar businesses and owning similar properties in the same general areas and financed in a similar manner. To the extent any such casualty insurance covers both us and/or our projects, on the one hand, and any other person and/or plants, on the other hand, we generally have specifically designated as applicable solely to us and our projects ‘‘all risk’’ property insurance coverage in an amount based upon the estimated full replacement value of our projects (provided that earthquake and flood coverage may be subject to annual aggregate limits depending on the type and location of the project) and business interruption insurance in an amount that also varies from project to project.

We generally purchase insurance policies to cover our exposure to certain political risks involved in operating in developing countries. Political risk insurance policies are generally issued by entities which specialize in such policies, such as the Multilateral Investment Guarantee Agency (a member of the World Bank Group), and from private sector providers, such as Zurich Re, AIG and other such companies. To date all of our political risk insurance contracts are with the Multilateral Investment Guarantee Agency and with Zurich Re. Such insurance policies cover, in general, and subject to the limitations and restrictions contained therein, 80% to 90% of our revenue loss derived from a specified governmental act, such as confiscation, expropriation, riots, the inability to convert local currency into hard currency and, in certain cases, the breach of agreements. We have obtained such insurance for all of our foreign projects in operation except for the Leyte project.

Regulation of the Electric Utility Industry in the United States

The following is a summary overview of the electric utility industry and applicable federal and state regulations, and should not be considered a full statement of the law or all issues pertaining thereto.

PURPA

PURPA provides certain benefits described below, if a project is a ‘‘Qualifying Facility’’. There are two types of Qualifying Facilities: cogeneration facilities and small power production facilities. A small power production facility is a Qualifying Facility if (i) the facility does not exceed 80 megawatts, (ii) the primary energy source of the facility is biomass, waste, renewable resources, or any

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combination thereof, and 75% of the total energy input of the facility is from these sources; and (iii) the facility has filed with FERC a notice of self-certification of qualifying status, or has filed with FERC an application for FERC certification of qualifying status, that has been granted. The 80 megawatt size limitation, however, does not apply to a facility if (i) it produces electric energy solely by the use, as a primary energy input, of solar, wind, or waste resources; and (ii) an application for certification or a notice of self-certification of qualifying status of the facility was submitted to the FERC prior to December 21, 1994, and construction of the facility commenced prior to December 31, 1999.

PURPA exempted Qualifying Facilities from regulation under the Public Utility Holding Company Act of 1935 (PUHCA) and exempts Qualifying Facilities from most provisions of the Federal Power Act (FPA) and state laws relating to the financial, organization and rate regulation of electric utilities. In addition, FERC’s regulations promulgated under PURPA require that electric utilities purchase electricity generated by Qualifying Facilities at a rate based on the purchasing utility’s incremental cost of purchasing or producing energy (also known as ‘‘avoided cost’’).

Pursuant to the Energy Policy Act of 2005, FERC has recently issued a final rule that will require Qualifying Facilities to obtain market-based rate authority pursuant to the FPA for sales of energy or capacity either (i) from facilities larger than 20 MW in size; (ii) pursuant to a contract executed after March 17, 2006 that is not a contract made pursuant to a state regulatory authority’s implementation of PURPA; or (iii) not pursuant to another provision of a state regulatory authority’s implementation of PURPA. The practical effect of this final rule is to require Qualifying Facilities that are larger than 20 MW in size that seek to engage in non-PURPA sales of power (i.e. power that is sold in a manner that is not pursuant to state implementation of PURPA) to obtain market-based rate authority from FERC for these non-PURPA sales.

The Energy Policy Act of 2005 also allows FERC to terminate a utility's obligation to purchase energy from Qualifying Facilities upon a finding that Qualifying Facilities have nondiscriminatory access to either (i) independently administered, auction-based day ahead and real time markets for energy and wholesale markets for long-term sales of capacity; (ii) transmission and interconnection services provided by a FERC-approved regional transmission entity and administered under an open-access transmission tariff that affords nondiscriminatory treatment to all customers, and competitive wholesale markets that provide a meaningful opportunity to sell capacity and energy, including long and short term sales; or (iii) wholesale markets for the sale of capacity and energy that are at a minimum of comparable competitive quality as markets described in (i) and (ii) above. FERC has recently proposed a rule to implement these provisions of the Energy Policy Act of 2005. This proposed rule, if enacted, would eliminate the mandatory purchase obligation of utilities that are members of four regional transmission organizations. None of our domestic projects sells power pursuant to contracts with utilities in any of these four regional transmission organizations. The proposed rule also would create a rebuttable presumption that a utility provides nondiscriminatory access if it has an open access transmission tariff in compliance with FERC’s pro forma open access transmission tariff, which is currently under review by FERC to ensure that its provisions prevent undue discrimination in the provision of transmission service. Further, the proposed rule would provide a procedure for utilities that are not members of the four named regional transmission organizations to file to obtain relief from the mandatory purchase obligation on a service territory-wide basis, and would establish procedures for affected Qualifying Facilities to seek reinstatement of the purchase obligation. The proposed rule would protect a Qualifying Facility’s rights under any contract or obligation involving purchases or sales that are entered into after August 8, 2005 but before FERC has determined that the contracting utility is entitled to relief from the mandatory purchase obligation. The proposed rule would also protect a Qualifying Facility’s rights under any contract or obligation for the sale of energy in effect or pending approval before the appropriate state regulatory authority or non-regulated electric utility on August 8, 2005.

In addition, the Energy Policy Act of 2005 eliminates the restriction on utility ownership of a Qualifying Facility. Prior to the Energy Policy Act of 2005, electric utilities or electric utility holding

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companies could not own more than a 50% equity interest in a Qualifying Facility. Under the Energy Policy Act of 2005, electric utilities or holding companies may own up to 100% of the equity interest in a Qualifying Facility.

We expect that our projects will continue to meet all of the criteria required for Qualifying Facilities under PURPA. However, since the Heber Projects have power purchase agreements with Southern California Edison that require Qualifying Facility status to be maintained, maintaining Qualifying Facility status remains a key obligation. If any of the Heber Projects loses its Qualifying Facility status our operations could be adversely affected. Loss of Qualifying Facility status would eliminate the Heber Project’s exemption from the FPA and thus, among other things, the rates charged by the Heber Projects in the power purchase agreements with Southern California Edison and SCPPA would become subject to FERC regulation. Further, it is possible that the utilities that purchase power from the projects could successfully obtain an elimination of the mandatory-purchase obligation in their service territories. If this occurs, the Project’s existing power purchase agreements will not be affected, but the utilities will not be obligated under PURPA to renew these power purchase agreements or execute new power purchase agreements upon the existing power purchase agreements’ expiration.

PUHCA

PUHCA has been repealed, effective February 8, 2006, pursuant to the Energy Policy Act of 2005. Although PUHCA was repealed, the Energy Policy Act of 2005 created a new Public Utility Holding Company Act of 2005 (PUHCA 2005). Under PUHCA 2005, the books and records of a utility holding company, its affiliates, associate companies, and subsidiaries are subject to FERC and state commission review with respect to transactions that are subject to the jurisdiction of either FERC or the state commission or costs incurred by a jurisdictional utility in the same holding company system. If a company is a utility holding company solely with respect to Qualifying Facilities, exempt wholesale generators, or foreign utility companies, it will not be subject to review of books and records by FERC, provided that the company files an appropriate exemption form with FERC. By virtue of being Qualifying Facilities that make only wholesale sales of electricity, Qualifying Facilities already are not subject to state commissions’ rate, financial and organizational regulations and, therefore, in all likelihood would not be subject to any review of their books and records by state commissions pursuant to PUHCA 2005 as long as the Qualifying Facility is not part of a holding company system that includes a utility subject to state regulation.

FPA

Pursuant to the FPA, the FERC has exclusive rate-making jurisdiction over wholesale sales of electricity and transmission in interstate commerce. These rates may be based on a cost of service approach or may be determined on a market basis through competitive bidding or negotiation. Qualifying Facilities are generally exempt from the FPA. If any of the projects were to lose its Qualifying Facility status, such project could also become subject to the full scope of the FPA and applicable state regulations. The application of the FPA and other applicable state regulations to the projects could require our operations to comply with an increasingly complex regulatory regime that may be costly and greatly reduce our operational flexibility. Even if a project does not lose Qualifying Facility status, pursuant to a final rule issued by FERC pursuant to the Energy Policy Act of 2005, if a power purchase agreement with a project is terminated or otherwise expires, the project will become subject to rate regulation under the Federal Power Act.

If a project was to become subject to FERC's ratemaking jurisdiction under the FPA as a result of loss of Qualifying Facility status and the power purchase agreement remains in effect, the FERC may determine that the rates currently set forth in the power purchase agreement are not appropriate and may set rates that are lower than the rates currently charged. In addition, the FERC may require that the project refund amounts previously paid by the relevant power purchaser to such project. Such events would likely result in a decrease in our future revenues or in an obligation to disgorge revenues previously received from the project, either of which would have an adverse effect on our revenues.

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Moreover, the loss of the Qualifying Facility status of any of our projects selling energy to Southern California Edison could also permit Southern California Edison, pursuant to the terms of its power purchase agreement, to cease taking and paying for electricity from the relevant project and to seek refunds for past amounts paid. In addition, the loss of any such status would result in the occurrence of an event of default under the indenture for the bonds and hence would give rise to the ability of the indenture trustee to exercise remedies pursuant to the indenture and the other financing documents.

State Regulation

Our projects in California and Nevada, by virtue of being Qualifying Facilities that make only wholesale sales of electricity, are not subject to rate, financial and organizational regulations applicable to electric utilities in those states. The projects each sell or will sell their electrical output under power purchase agreements to electric utilities (Sierra Pacific Power Company, Nevada Power Company, Southern California Edison or Southern California Public Power Authority). All of the utilities except Southern California Public Power Authority are regulated by their respective state public utility commissions. Sierra Pacific Power Company and Nevada Power Company are regulated by the Public Utility Commission of Nevada. Southern California Edison and a small portion of Sierra Pacific Power Company in the Lake Tahoe area are regulated by the California Public Utility Commission.

Under Hawaii law, non-fossil generators are not subject to regulation as public utilities. Hawaii law provides that a geothermal power producer is to negotiate the rate for its output with the public utility purchaser. If such rate cannot be determined by mutual accord, the Hawaii Public Utility Commission will set a just and reasonable rate. If a non-fossil generator in Hawaii is a Qualifying Facility, federal law applies to such Qualifying Facility and the utility is required to purchase the energy and capacity at its avoided cost, the cost it would otherwise incur if it produced the energy and capacity itself or purchased it from another source. Our project in Hawaii has a long term power purchase agreement with Hawaii Electric Light Company.

Foreign Regulation of the Electric Utility Industry

The following is a summary overview of certain aspects of the electric industry in the foreign countries in which we have an operating geothermal power project and should not be considered a full statement of the laws in such countries or all of the issues pertaining thereto.

Nicaragua. In 1998 two laws were approved by Nicaraguan authorities, Law No. 272-98 and Law No. 271-98, which define the structure of the new energy sector in the country. Law No. 272-98 provides for the establishment of a National Energy Commission, which we refer to as CNE, which is responsible for setting policies, strategies and objectives for such sector and approving indicative plans therefor. Law No. 271-98 formally assigned regulatory, supervisory, inspection and oversight functions to the Nicaraguan Institute of Energy, which we refer to as INE.

The Nicaraguan energy sector has been restructured and partially privatized. Following such restructuring and privatization, the government has retained title and control of the transmission assets and has created the Empresa Estatal de Transmision (ENTRESA), which is in charge of the operation of the transmission system in the country and of the new wholesale market. As part of the recent restructuring of the energy sector, most of the distribution facilities previously owned by the Nicaraguan Electricity Company, the government-owned vertically-integrated monopoly, were transferred to two companies, Empresa Distribuidora de Electricidad del Norte (DISNORTE) and Empresa Distribuidora de Electricidad del Sur (DISSUR), which in turn were privatized and acquired by an affiliate of Union Fenosa, a large Spanish utility. Following such privatization, the power purchase agreement for our Momotombo project was assigned by the Nicaraguan Electricity Company to DISNORTE and DISSUR. A subsidiary of the Nicaraguan Electricity Company, ENTRESA, owns the transmission grid. In addition, a National Dispatch Center was created to work with ENTRESA and provide for dispatch and wholesale market administration. On October 2002, Law No.443 was enacted by the National Congress related specifically to geothermal resources for energy production. This law regulates the granting of exploration and exploitation concessions for geothermal fields. The INE adopted this law.

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Guatemala. The General Electricity Law of 1996 created a wholesale electricity market in Guatemala and established a new regulatory framework for the electricity sector. The law created a new regulatory commission, the National Electric Energy Commission (CNEE) and a new wholesale power market administrator, the Administrator of the Wholesale Market, for the regulation and administration of such sector. The CNEE functions as an independent agency under the Ministry of Energy and Mines and is in charge of regulating the electricity law, overseeing the market and setting rates for transmission services and for electricity service to medium and small customers. All distribution companies must supply electricity to such customers pursuant to long-term contracts with electricity generators. Large customers can contract directly with the distribution companies, electricity generators or power marketers, or buy energy in the spot market. Guatemala has approved a Law of Incentives for the Development of Renewable Energy Projects in order to promote the development of renewable energy projects in Guatemala. Such law provides certain benefits to companies utilizing renewable energy, including a 10-year corporate income tax exemption and a 10-year business tax exemption.

Kenya. Kenya’s Electric Power Act of 1997 restructured the electricity sector in such country. Among other things, the Act provides for the licensing of electricity power producers and public electricity suppliers or distributors. The Kenya Power and Lighting Co. Ltd. is the only licensed public electricity supplier and has a monopoly in the transmission and distribution of electricity in the country. The Act permitted Independent Power Producers (IPPs) to install power generators and sell electricity to Kenya Power and Lighting Co. Ltd., which is owned by various private, and government entities and which currently purchases energy and capacity from two other IPPs in addition to our Olkaria III project. The Act also created the Electricity Regulation Board, as an independent regulator for the electricity sector. Kenya Power and Lighting Co. Ltd.’s retail electricity rates are subject to approval by the Electricity Regulation Board.

Philippines. The Philippine’s Electric Power Industry Reform Act of 2001 created the Energy Regulatory Commission, which is an independent quasi-judicial regulatory body mandated to promote competition, encourage market development, ensure customer choice and penalize abuse of market power in the restructured electricity industry. The Energy Regulatory Commission is responsible for the enforcement of the rules and regulations governing the operations of the electricity spot market once it is established and the activities of the spot market operator and other participants to ensure a greater supply and rational pricing of electricity. In addition, the Energy Regulatory Commission determines, fixes, and approves transmission and distribution wheeling charges and retail electricity rates for the captive market of a distribution utility through a methodology that it establishes and enforces. The Energy Regulatory Commission also monitors and takes measures to penalize abuse of market power and anti-competitive or discriminatory behavior by any electric power industry participant.

Permit Status

While our power generation operations produce electricity without emissions of certain pollutants such as nitrogen oxide, and with far lower emissions of other pollutants such as carbon dioxide, some of our projects do emit air pollutants in quantities that are subject to regulation under applicable environmental air pollution laws. Such operations typically require air permits. Especially critical to our geothermal operations are those permits and standards applicable to the construction and operation of geothermal wells and brine reinjection wells. In the United States, injection wells are regulated under the federal Safe Drinking Water Act Underground Injection Control, which we refer to as UIC, program. Our injection wells typically fall into UIC Class V, one of the least regulated categories, because fluids are reinjected to enhance utilization of the geothermal resource. Our projects are required to comply with numerous domestic and foreign federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required for their operation. Some of the environmental permits and governmental approvals that have been issued to the projects contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms.

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Our operations are designed and conducted to comply with applicable permit requirements. Non-compliance with any such requirements could result in fines or other penalties. We are not aware of any non-compliance with such requirements that would be likely to result in material fines or penalties; however, the Heber 1 and 2 projects received a notice from the California Division of Oil, Gas and Geothermal Resources that the pressure levels at some of the geothermal fluid injection wells were too high, and the California Regional Water Quality Control Board has notified the Heber 1 and 2 projects that recent tests have resulted in lower-than-required survival rates for bioassay toxicity tests conducted on the cooling tower blowdown water discharged under the NPDES (National Pollutant Discharge Elimination System) permit. In order to address the pressure levels at the Heber 1 and 2 projects, the Heber 1 and 2 projects proposed the construction and operation of a pipeline to carry geothermal injection fluid to other project injection wells, which proposal has been accepted as an appropriate solution to the pressure level by the California Division of Oil, Gas and Geothermal Resources. The pipeline was completed in the first quarter of 2005. With the cooperation of the California Regional Water Quality Control Board, Colorado River Basin Region, the Heber 1 and 2 projects are also conducting more frequent monitoring and bioassays, and conducting a Toxicity Identification Evaluation (TIE) study in an effort to determine the source of the apparent cooling tower blowdown water toxicity. If the source of the toxicity is not identified, or cannot easily be corrected, the Heber 1 and 2 projects may instead seek authority to inject the cooling tower blowdown water into the geothermal injection reservoir, as do other geothermal projects in the Imperial Valley.

As of the date of this annual report, all of the material permits and approvals currently required to operate our projects have been obtained and are currently valid, except for the fact that certain permits for some of the projects are held in the name of predecessor owners and except for those permits which must be transferred or reissued to the correct entity. We believe this will occur in the ordinary course and we have already filed some of these applications. In addition, we are required to obtain permits for both the construction and operational phases of our projects under construction or enhancement. As of the date of this annual report, we have obtained and are in compliance with most of the material permits and approvals currently required for our projects that are under construction or enhancement. There are some permits that need to be obtained in the future. We believe we will be able to obtain those permits and approvals without material delay and without incurring additional material costs.

Environmental Laws and Regulations

Geothermal operations can produce significant quantities of brine and scale, which builds up on metal surfaces in our equipment with which the brine comes into contact. These waste materials, most of which are currently reinjected into the subsurface, can contain various concentrations of hazardous materials, including arsenic, lead, and naturally occurring radioactive materials. We also use various substances, including isobutene, isopentane, and industrial lubricants, that could become potential contaminants and are generally flammable. Hazardous materials are also used and generated in connection with our equipment manufacturing operations in Israel. As a result, our projects are subject to numerous domestic and foreign federal, state and local statutory and regulatory standards relating to the use, storage, fugitive emissions and disposal of hazardous substances. The cost of any remediation activities in connection with a spill or other release of such contaminants could be significant.

Although we are not aware of any mismanagement of these materials, including any mismanagement prior to the acquisition of some of our projects, that has materially impaired any of the project sites, any disposal or release of these materials onto project sites, other than by means of permitted injection wells, could result in material cleanup requirements or other responsive obligations under applicable environmental laws. We believe that at one time there may have been a gas station located on the Mammoth project site (which we lease), but because of significant surface disturbance and construction since that time further physical evaluation of the former gas station site has been impractical. We believe that, given the subsequent surface disturbance and construction activity in the vicinity of the suspected location of the service station, it is likely that the former facilities and any associated underground storage tanks would have already been encountered if they still existed.

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ITEM 1A.    RISK FACTORS

Because of the following factors, as well as other variables affecting our business, operating results or financial condition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Our financial performance depends on the successful operation of our geothermal power plants, which is subject to various operational risks.

Our financial performance depends on the successful operation of our subsidiaries’ geothermal power plants. In connection with such operations, we derived approximately 74.5 % of our total revenues for the year ended December 31, 2005 from the sale of electricity. The cost of operation and maintenance and the operating performance of our subsidiaries’ geothermal power plants may be adversely affected by a variety of factors, including some that are discussed elsewhere in these risk factors and the following:

	•	regular and unexpected maintenance and replacement expenditures;

	•	shutdowns due to the breakdown or failure of our equipment or the equipment of the transmission serving utility;

	•	labor disputes;

	•	the presence of hazardous materials on our project sites; and

	•	catastrophic events such as fires, explosions, earthquakes, landslides, floods, releases of hazardous materials, severe storms or similar occurrences affecting our projects or any of the power purchasers or other third parties providing services to our projects.

Any of these events could significantly increase the expenses incurred by our projects or reduce the overall generating capacity of our projects and could significantly reduce or entirely eliminate the revenues generated by one or more of our projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

Our exploration, development, and operation of geothermal energy resources is subject to geological risks and uncertainties, which may result in decreased performance or increased costs for our projects.

Our business involves the exploration, development and operation of geothermal energy resources. These activities are subject to uncertainties, which vary among different geothermal reservoirs and are in some respects similar to those typically associated with oil and gas exploration, development and exploitation, such as dry holes, uncontrolled releases and pressure and temperature decline, all of which can increase our operating costs and capital expenditures or reduce the efficiency of our power plants. Prior to our acquisition of the Steamboat Hills project, one of the wells related to the project experienced an uncontrolled release. In addition, the high temperature and high pressure in the Puna project’s geothermal energy resource requires special reservoir management and monitoring. Further, since the commencement of their operations, several of our projects have experienced geothermal resource cooling in the normal course of operations. Because geothermal reservoirs are complex geological structures, we can only estimate their geographic area and sustainable output. The viability of geothermal projects depends on different factors directly related to the geothermal resource, such as the heat content (the relevant composition of temperature and pressure) of the geothermal reservoir, the useful life (commercially exploitable life) of the reservoir and operational factors relating to the extraction of geothermal fluids. Our geothermal energy projects may suffer an unexpected decline in the capacity of their respective geothermal wells and are exposed to a risk of geothermal reservoirs not being sufficient for sustained generation of the electrical power capacity desired over time. In addition, we may fail to find commercially viable geothermal resources in the expected quantities and temperatures, which would adversely affect our development of geothermal power projects.

Another aspect of geothermal operations is the management and stabilization of subsurface impacts caused by fluid injection pressures. In the case of the geothermal resource supplying the

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Heber 1 project and the Heber 2 project, which we refer to collectively as the ‘‘Heber projects’’, and the Gould project (a new power plant at the site of the Heber projects consisting of two Ormat Integrated Two Level Units (ITLU)), pressure drawdown in the center of the well field has caused some localized ground subsidence, while pressure in the peripheral areas has caused localized ground inflation. Inflation and subsidence, if not controlled, can adversely affect farming operations and other infrastructure at or near the land surface. Potential costs, which cannot be estimated and may be significant, of failing to stabilize site pressures in the Heber and Gould projects’ area include repair and modification of gravity-based farm irrigation systems and municipal sewer piping and possible repair or replacement of a local road bridge spanning an irrigation canal.

Additionally, geothermally active areas, such as the areas in which our projects are located, are subject to frequent low-level seismic disturbances. Serious seismic disturbances are possible and could result in damage to our projects or equipment or degrade the quality of our geothermal resources to such an extent that we could not perform under the power purchase agreement for the affected project, which in turn could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow. If we suffer a serious seismic disturbance, our business interruption and property damage insurance may not be adequate to cover all losses sustained as a result thereof. In addition, insurance coverage may not continue to be available in the future in amounts adequate to insure against such seismic disturbances.

Our business development activities may not be successful and our projects under construction may not commence operation as scheduled.

We are currently in the process of developing and constructing a number of new power plants. Our success in developing a particular project is contingent upon, among other things, negotiation of satisfactory engineering and construction agreements and power purchase agreements, receipt of required governmental permits, obtaining adequate financing, and the timely implementation and satisfactory completion of construction. We may be unsuccessful in accomplishing any of these matters or doing so on a timely basis. Although we may attempt to minimize the financial risks attributable to the development of a project by securing a favorable power purchase agreement, obtaining all required governmental permits and approvals and arranging adequate financing prior to the commencement of construction, the development of a power project may require us to incur significant expenses for preliminary engineering, permitting and legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being financed.

Currently, we have power plants under development or construction in the United States, Kenya, Guatemala and China, and we intend to pursue the expansion of some of our existing plants and the development of other new plants. Our completion of these facilities is subject to substantial risks, including:

	•	unanticipated cost increases;

	•	shortages and inconsistent qualities of equipment, material and labor;

	•	work stoppages;

	•	inability to obtain permits and other regulatory matters;

	•	failure by key contractors and vendors to timely and properly perform;

	•	adverse environmental and geological conditions (including inclement weather conditions); and

	•	our attention to other projects;

Any one of which could give rise to delays, cost overruns, the termination of the plant expansion, construction or development or the loss (total or partial) of our interest in the project under development, construction or expansion. Currently, we have not yet obtained a construction license for the Amatitlan project in Guatemala. In addition, we have not yet obtained certain permits and governmental approvals required for the completion and successful operation of the Gould project.

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We may be unable to obtain the financing we need to pursue our growth strategy and any future financing we receive may be less favorable to us than our current financing arrangements, either of which may adversely affect our ability to expand our operations.

Our geothermal power plants generally have been financed using leveraged financing structures, consisting of non-recourse or limited recourse debt obligations. As of December 31, 2005, we had approximately $537.3 million of total consolidated indebtedness (including indebtedness to our parent company in the amount of $171.8 million), of which approximately $362.5 million represented non-recourse debt and limited recourse debt held by our subsidiaries. Each of our projects under development or construction and those projects and businesses we may seek to acquire or construct will require substantial capital investment. Our continued access to capital with acceptable terms is necessary for the success of our growth strategy. Our attempts to obtain future financings may not be successful or on favorable terms.

Market conditions and other factors may not permit future project and acquisition financings on terms similar to those our subsidiaries have previously received. Our ability to arrange for financing on a substantially non-recourse or limited recourse basis, and the costs of such financing, are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political situation in the country where the project is located and the continued existence of tax and securities laws which are conducive to raising capital. If we are not able to obtain financing for our projects on a substantially non-recourse or limited recourse basis, we may have to finance them using recourse capital such as direct equity investments, parent company loans or the incurrence of additional debt by us.

Also, in the absence of favorable financing options, we may decide not to build new plants or acquire facilities from third parties. Any of these alternatives could have a material adverse effect on our growth prospects.

Our foreign projects expose us to risks related to the application of foreign laws, taxes, economic conditions, labor supply and relations, political conditions and policies of foreign governments, any of which risks may delay or reduce our ability to profit from such projects.

We have substantial operations outside of the United States that generated revenues in the amount of $76.4 million for the year ended December 31, 2005, which represented 32.1% of our total revenues for such twelve-month period. Our foreign operations are subject to regulation by various foreign governments and regulatory authorities and are subject to the application of foreign laws. Such foreign laws or regulations may not provide for the same type of legal certainty and rights, in connection with our contractual relationships in such countries, as are afforded to our projects in the United States, which may adversely affect our ability to receive revenues or enforce our rights in connection with our foreign operations. Furthermore, existing laws or regulations may be amended or repealed, and new laws or regulations may be enacted or issued. In addition, the laws and regulations of some countries may limit our ability to hold a majority interest in some of the projects that we may develop or acquire, thus limiting our ability to control the development, construction and operation of such projects. Our foreign operations are also subject to significant political, economic and financial risks, which vary by country, and include:

	•	changes in government policies or personnel;

	•	changes in general economic conditions;

	•	restrictions on currency transfer or convertibility;

	•	changes in labor relations;

	•	political instability and civil unrest;

	•	changes in the local electricity market;

	•	breach or repudiation of important contractual undertakings by governmental entities; and

	•	expropriation and confiscation of assets and facilities.

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In particular, the Philippines is in the midst of an ongoing privatization of the electric industry, and in Guatemala the electricity sector was partially privatized, and it is currently unclear whether further privatization will occur in the future. Such developments may affect our existing Leyte and Zunil projects and the Amatitlan project (Leyte in the Philippines and Zunil and Amatitlan in Guatemala) currently under construction if, for example, they result in changes to the prevailing tariff regime or in the identity and creditworthiness of our power purchasers. In Nicaragua, Union Fenosa, one of the electric utilities, has been experiencing difficulties adjusting the tariffs charged to its customers, thus effecting Union Fenosa’s ability to pay for electricity its purchase from power generators. This may adversely affect our Momotombo project. In Kenya, the government is continuing to make an effort to deliver on campaign promises to reduce the price of electricity and is applying pressure on independent power producers, such as our Olkaria III project, to lower their tariffs. In addition, Kenya’s government is considering a further restructuring and privatization of the electricity industry and may divide Kenya Power and Lighting Co. Ltd., the power purchaser for our Olkaria III project, into separate entities and then privatize one or more of such resulting entities. A material tariff reduction or any break-up and potential privatization of Kenya Power and Lighting Co. Ltd. may adversely affect our Olkaria III project. We have recently held discussions with the Kenyan government and Kenya Power and Lighting Co. Ltd. regarding, among other things, the construction of Phase II of the Olkaria III project in Kenya. Upon implementation, we expect Phase II to add approximately 35 MW in generating capacity to the current Olkaria III project. Under existing documentation, our subsidiary was required to construct Phase II and to reach commercial operations by May 31, 2007 , in order to avoid financial penalties, or by April 17, 2008, at the latest, to avoid termination of the entire power purchase agreement. We have reached an agreement with Kenya Power and Lighting Co. Ltd., subject to execution of a definitive agreement and regulatory approval, to amend the power purchase agreement as follows. The tariff under the Phase II contract will be reduced; Kenya Power and Lighting Co. Ltd. will provide a letter of credit to secure their payment obligations; the completion date will be extended if the definitive agreements are entered into and the letter of credit is opened until April 1, 2006.

Although we generally obtain political risk insurance in connection with our foreign projects, such political risk insurance does not mitigate all of the above-mentioned risks. In addition, insurance proceeds received pursuant to our political risk insurance policies, where applicable, may not be adequate to cover all losses sustained as a result of any covered risks and may at times be pledged in favor of the project lenders as collateral. Also, insurance may not be available in the future with the scope of coverage and in amounts of coverage adequate to insure against such risks and disturbances.

Our foreign projects and foreign manufacturing operations expose us to risks related to fluctuations in currency rates, which may reduce our profits from such projects and operations.

Risks attributable to fluctuations in currency exchange rates can arise when any of our foreign subsidiaries borrow funds or incur operating or other expenses in one type of currency but receive revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary’s ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary or increase such subsidiary’s overall expenses. In addition, the imposition by foreign governments of restrictions on the transfer of foreign currency abroad, or restrictions on the conversion of local currency into foreign currency, would have an adverse effect on the operations of our foreign projects and foreign manufacturing operations, and may limit or diminish the amount of cash and income that we receive from such foreign projects and operations.

A significant portion of our net revenue is attributed to payments made by power purchasers under power purchase agreements. The failure of any such power purchaser to perform its obligations under the relevant power purchase agreement or the loss of a power purchase agreement due to a default would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

A significant portion of our net revenue is attributed to revenues derived from power purchasers under the relevant power purchase agreements. Southern California Edison, Hawaii Electric Light Company, and Sierra Pacific Power Company have accounted for 36.1%, 15.2% and 14.1%,

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respectively, of our revenues for the year ended December 31, 2005. Neither we nor any of our affiliates make any representations as to the financial condition or creditworthiness of any purchaser under a power purchase agreement, and nothing in this annual report should be construed as such a representation.

There is a risk that any one or more of the power purchasers may not fulfill their respective payment obligations under their power purchase agreements. For example, as a result of the energy crisis in California, Southern California Edison withheld payments it owed under various of its power purchase agreements with a number of power generators (such as the Ormesa, Heber, and Mammoth projects) payable for certain energy delivered between November 2000 and March 2001 under such power purchase agreements until March 2002. If any of the power purchasers fails to meet its payment obligations under its power purchase agreements, it could materially and adversely affect our business, financial condition, future results and cash flow.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison has expressed its intent not to pay the contract rate for the power supplied by the GEM 2 and GEM 3 plants to the Ormesa project. Southern California Edison contends that California ISO real-time prices should apply, while management believes that SP-15 prices quoted by NYMEX should apply. According to Southern California Edison’s estimation, the amount under dispute is approximately $2.5 million. The parties have signed an Interim Agreement; whereby Southern California Edison will continue procure the GEM 2 and GEM 3 power at the current energy rate of 5.37 Cents/kWh until May 1, 2007. In addition, a long-term power purchase agreement is expected to be entered into for the GEM 2 and GEM 3 power. The negotiations of the long-term power purchase agreement are still under way and there is no guarantee that it will be successfully completed.

Seasonal variations may cause significant fluctuations in our cash flows, which may cause the market price of our common stock to fall in certain periods.

Our results of operations are subject to seasonal variations. This is primarily because some of our domestic projects receive higher capacity payments under the relevant power purchase agreements during the summer months, and due to the generally higher short run avoided costs in effect during the summer months. Some of our other projects may experience reduced generation during warm periods due to the lower heat differential between the geothermal fluid and the ambient surroundings. Such seasonal variations could materially and adversely affect our business, financial condition, future results and cash flow. If our operating results fall below the public’s or analysts’ expectations in some future period or periods, the market price of our common stock will likely fall in such period or periods.

Pursuant to the terms of some of our power purchase agreements with investor-owned electric utilities in states that have renewable portfolio standards, the failure to supply the contracted capacity and energy thereunder may result in the imposition of penalties.

Under the Burdette (formerly Galena), Desert Peak 2, Gould and Galena 2 (formerly Desert Peak 3) power purchase agreements, we may be required to make payments to the relevant power purchaser in an amount equal to such purchaser’s replacement costs for renewable energy relating to any shortfall amount of renewable energy that we do not provide as required under the power purchase agreement and which such power purchaser is forced to obtain from an alternate source. These four power purchase agreements are expected to phase-in and commence generating revenues in 2006. When all three are generating revenues, measured against our revenues from the sale of electricity for the year ended December 31, 2005 and assuming no other changes in our revenues, the revenues from such agreements will constitute, collectively, less than 8% of our total revenues from the sale of electricity. In addition, we may be required to make payments to the relevant power purchaser in an amount equal to its replacement costs relating to any renewable energy credits we do not provide as required under the relevant power purchase agreement. We may be subject to certain penalties, and we may also be required to pay liquidated damages if certain minimum performance requirements are not met under certain of our power purchase agreements, all of which could materially and adversely affect our business, financial condition, future results and cash flow. With

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respect to certain of our power purchase agreements, we may also be required to pay liquidated damages to our power purchaser if the relevant project does not maintain availability of at least 85% during applicable peak periods. The maximum aggregate amount of such liquidated damages for the Steamboat 2 and Steamboat 3 power purchase agreements would be approximately $1.5 million for each project.

The short run avoided costs for our power purchasers may decline, which would reduce our project revenues and could materially and adversely affect our business, financial condition, future results and cash flow.

Under the power purchase agreements for our projects in California, the price that Southern California Edison pays for energy is based upon its short run avoided costs, which are the incremental costs that it would have incurred had it generated the relevant electrical energy itself or purchased such energy from others. Under settlement agreements between Southern California Edison and a number of power generators in California that are Qualifying Facilities, including our subsidiaries, the energy price component payable by Southern California Edison has been fixed through April 2007, and thereafter will be based on Southern California Edison’s short run avoided costs, as determined by the California Public Utilities Commission. These short run avoided costs may vary substantially on a monthly basis, and are expected to be based primarily on natural gas prices for gas delivered to California as well as other factors. The levels of short run avoided cost prices paid by Southern California Edison may decline following the expiration date of the settlement agreements, which in turn would reduce our project revenues derived from Southern California Edison under our power purchase agreements and could materially and adversely affect our business, financial condition, future results and cash flow.

If any of our domestic projects loses its current Qualifying Facility status under PURPA, or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded to Qualifying Facilities, our domestic operations could be adversely affected.

Most of our domestic projects are Qualifying Facilities pursuant to the Public Utility Regulatory Policies Act of 1978, as amended, which we refer to as PURPA, which largely exempts the projects from the Federal Power Act, which we refer to as FPA, the Public Utility Holding Company Act of 1935, as amended, which we refer to as PUHCA, and certain state and local laws and regulations regarding rates and financial and organizational requirements for electric utilities.

PUHCA was repealed on February 8, 2006. If any of our domestic projects were to lose its Qualifying Facility status, such project could become subject to the full scope of the FPA and applicable state regulation. The application of the FPA and other applicable state regulation to our domestic projects could require our operations to comply with an increasingly complex regulatory regime that may be costly and greatly reduce our operational flexibility.

In addition, pursuant to the FPA, the FERC has exclusive rate-making jurisdiction over wholesale sales of electricity and transmission of public utilities in interstate commerce. These rates may be based on a cost of service approach or may be determined on a market basis through competitive bidding or negotiation. Qualifying Facilities are largely exempt from the FPA. If a domestic project were to lose its Qualifying Facility status, it would become a public utility under the FPA, and the rates charged by such project pursuant to its power purchase agreements would be subject to the review and approval of the FERC. The FERC, upon such review, may determine that the rates currently set forth in such power purchase agreements are not appropriate and may set rates that are lower than the rates currently charged. In addition, the FERC may require that some or all of our domestic projects refund amounts previously paid by the relevant power purchaser to such project. Such events would likely result in a decrease in our future revenues or in an obligation to disgorge revenues previously received from our domestic projects, either of which would have an adverse effect on our revenues. Even if a project does not lose its Qualifying Facility status, pursuant to a final rule issued by FERC on February 2, 2006, if a project's power purchase agreement is terminated or otherwise expires, that project will become subject to FERC's ratemaking jurisdiction under the FPA.

Moreover, a loss of Qualifying Facility status also could permit the power purchaser, pursuant to the terms of the particular power purchase agreement, to cease taking and paying for electricity from

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the relevant project or, consistent with FERC precedent, to seek refunds of past amounts paid. This could cause the loss of some or all of our revenues payable pursuant to the related power purchase agreements, result in significant liability for refunds of past amounts paid, or otherwise impair the value of our projects. If a power purchaser were to cease taking and paying for electricity or seek to obtain refunds of past amounts paid, there can be no assurance that the costs incurred in connection with the project could be recovered through sales to other purchasers or that we would have sufficient funds to make such payments. In addition, the loss of Qualifying Facility status would be an event of default under the financing arrangements currently in place for some of our projects, which would enable the lenders to exercise their remedies and enforce the liens on the relevant project.

Pursuant to the Energy Policy Act of 2005, the FERC was also given authority to prospectively lift the mandatory obligation of a utility under PURPA to purchase the electricity from a Qualifying Facility if the utility operates in a workably competitive market. Existing power purchase agreements between a Qualifying Facility and a utility are not affected. On January 19, 2006, the FERC proposed regulations under which it would eliminate utilities' mandatory purchase obligation from Qualifying Facilities in certain regions of the country. The proposed regions do not include areas in which our domestic projects operate. However, FERC has the authority under the Energy Policy Act of 2005 to act, on a case-by-case basis, to eliminate the mandatory purchase obligation in other regions. In the proposed rulemaking, the FERC expressly noted that the California Independent System Operator (CAISO) has the right to file an application to seek relief from the mandatory purchase obligation. If the utilities in the regions in which our domestic projects operate were to be relieved of the mandatory purchase obligation, they would not be required to purchase energy from the project in the region under Federal law upon termination of the existing power purchase agreement or with respect to new projects, which could have an adverse effect on our revenues.

Our financial performance is significantly dependent on the successful operation of our projects, which is subject to changes in the legal and regulatory environment affecting our projects.

All of our projects are subject to extensive regulation and, therefore, changes in applicable laws or regulations, or interpretations of those laws and regulations, could result in increased compliance costs, the need for additional capital expenditures or the reduction of certain benefits currently available to our projects. The structure of federal and state energy regulation currently is, and may continue to be, subject to challenges, modifications, the imposition of additional regulatory requirements, and restructuring proposals. Our power purchasers or we may not be able to obtain all regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory approvals, or maintain all required regulatory approvals. In addition, the cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by changes in certain laws and regulations, including tax laws.

The federal government also encourages production of electricity from geothermal resources through certain tax subsidies. We are permitted to claim in our consolidated federal tax returns either an investment tax credit for approximately 10% of the cost of each new geothermal power plant or ‘‘production tax credits’’ of 1.9 cents a kilowatt hour on the first ten years of electricity output. (Production tax credits can only be claimed on new plants put into service between October 23, 2004 and December 31, 2005.) We are also permitted to deduct most of the cost of the power plant as ‘‘depreciation’’ over five years on an accelerated basis. The fact that the deductions are accelerated means that more of the cost is deducted in the first few years than during the remainder of the depreciation period. In addition, we have the ability to transfer the value of these tax incentives when we are not in a position to use them directly. For instance, energy credits can be transferred through lease financing, and production tax credits may be transferred by bringing in another company who can use them as a partner in the project.

President Bush has made it a central theme of his second term to simplify the U.S. tax code. Among the options that may be under consideration are replacing or supplementing the corporate income tax with a value-added-tax, stripping away many tax subsidies, and eliminating taxes on interest, dividends and other returns to capital. Significant tax reform has the potential to have a material effect on our business, financial condition, future results and cash flow. It could reduce or

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eliminate the value that geothermal companies receive from the current tax subsidies. Any restrictions or tightening of the rules for lease or partnership transactions — whether or not part of major tax reform — could also materially affect our business, financial condition, future results and cash flow.

Any such changes could significantly increase the regulatory-related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate the revenues generated by one or more of the projects, which in turn would reduce our net income and could materially and adversely affect our business, financial condition, future results and cash flow.

The costs of compliance with environmental laws and of obtaining and maintaining environmental permits and governmental approvals required for construction and/or operation, which currently are significant, may increase in the future and could materially and adversely affect our business, financial condition, future results and cash flow; any non-compliance with such laws or regulations may result in the imposition of liabilities which could materially and adversely affect our business, financial condition, future results and cash flow.

Our projects are required to comply with numerous domestic and foreign federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required for construction and/or operation. Some of the environmental permits and governmental approvals that have been issued to the projects contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. If we fail to satisfy these conditions or comply with these restrictions, or with any statutory or regulatory environmental standards, we may become subject to regulatory enforcement action and the operation of the projects could be adversely affected or be subject to fines, penalties or additional costs. In addition, we may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of the projects. As of the date of this registration statement, we have not yet obtained certain permits and government approvals required for the completion and successful operation of projects under construction or enhancement. In addition, a nearby municipality has informed our Amatitlan project that an additional building permit should be obtained from such municipality before construction commences. In what appears to be a related occurrence, a group of demonstrators from the municipality have attempted to disrupt the access road to our Amatitlan project. A separate group of demonstrators from another municipality have turned out in support of the project, and Guatemalan authorities have assisted in maintaining access to the project. Our failure to renew, maintain or obtain required permits or governmental approvals, including the permits and approvals necessary for operating projects under construction or enhancement and the Amatitlan project, could cause our operations to be limited or suspended. Environmental laws, ordinances and regulations affecting us can be subject to change and such change could result in increased compliance costs, the need for additional capital expenditures, or otherwise adversely affect us.

We could be exposed to significant liability for violations of hazardous substances laws because of the use or presence of such substances at our projects.

Our projects are subject to numerous domestic and foreign federal, regional, state and local statutory and regulatory standards relating to the use, storage and disposal of hazardous substances. We use isobutane, isopentane, industrial lubricants and other substances at our projects which are or could become classified as hazardous substances. If any hazardous substances are found to have been released into the environment at or by the projects, we could become liable for the investigation and removal of those substances, regardless of their source and time of release. If we fail to comply with these laws, ordinances or regulations (or any change thereto), we could be subject to civil or criminal liability, the imposition of liens or fines, and large expenditures to bring the projects into compliance. Furthermore, in the United States, we can be held liable for the cleanup of releases of hazardous substances at other locations where we arranged for disposal of those substances, even if we did not cause the release at that location. The cost of any remediation activities in connection with a spill or other release of such substances could be significant.

We believe that at one time there may have been a gas station located on the Mammoth project site, but because of significant surface disturbance and construction since that time further physical

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evaluation of the former gas station site has been impractical. There may be soil or groundwater contamination and related potential liabilities of which we are unaware related to this site, which may be significant and may adversely and materially affect our operations and revenues.

We may not be able to successfully integrate companies which we may acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow.

Our strategy is to continue to expand in the future, including through acquisitions. Integrating acquisitions is often costly, and we may not be able to successfully integrate our acquired companies with our existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating our acquired companies involves a number of risks that could materially and adversely affect our business, including:

	•	failure of the acquired companies to achieve the results we expect;

	•	inability to retain key personnel of the acquired companies;

	•	risks associated with unanticipated events or liabilities; and

	•	the difficulty of establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.

If any of our acquired companies suffers customer dissatisfaction or performance problems, the same could adversely affect the reputation of our group of companies and could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition, and we encounter competition from electric utilities, other power producers, and power marketers that could materially and adversely affect our business, financial condition, future results and cash flow.

The power generation industry is characterized by intense competition from electric utilities, other power producers and power marketers. In recent years, there has been increasing competition in the sale of electricity, in part due to excess capacity in a number of U.S. markets and an emphasis on short-term or ‘‘spot’’ markets, and competition has contributed to a reduction in electricity prices. For the most part, we expect that power purchasers interested in long-term arrangements will engage in ‘‘competitive bid’’ solicitations to satisfy new capacity demands. This competition could adversely affect our ability to obtain power purchase agreements and the price paid for electricity by the relevant power purchasers. There is also increasing competition between electric utilities. This competition has put pressure on electric utilities to lower their costs, including the cost of purchased electricity, and increasing competition in the future will put further pressure on power purchasers to reduce the prices at which they purchase electricity from us.

The existence of a prolonged force majeure event or a forced outage affecting a project could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

The operation of our subsidiaries' geothermal power plants is subject to a variety of risks discussed elsewhere in these risk factors, including events such as fires, explosions, earthquakes, landslides, floods, severe storms or other similar events.

If a project experiences an occurrence resulting in a force majeure event, our subsidiary owning that project would be excused from its obligations under the relevant power purchase agreement. However, the relevant power purchaser may not be required to make any capacity and/or energy payments with respect to the affected project or plant so long as the force majeure event continues and, pursuant to certain of our power purchase agreements, will have the right to prematurely terminate the power purchase agreement. Additionally, to the extent that a forced outage has occurred, the relevant power purchaser may not be required to make any capacity and/or energy payments to the affected project, and if as a result the project fails to attain certain performance requirements under certain of our power purchase agreements, the purchaser may have the right to permanently reduce the contract capacity (and, correspondingly, the amount of capacity payments due pursuant to such agreements in the future), seek refunds of certain past capacity payments, and/or

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prematurely terminate the power purchase agreement. As a consequence, we may not receive any net revenues from the affected project or plant other than the proceeds from any business interruption insurance that applies to the force majeure event or forced outage after the relevant waiting period, and may incur significant liabilities in respect of past amounts required to be refunded. Accordingly, our business, financial condition, future results and cash flows could be materially and adversely affected. Recently, due to hurricane activity, the access roads and the piping from the wells to the Zunil power plant were damaged and as a result, the project was not in operation from October 14, 2005 to March 10, 2006.

The existence of a force majeure event or a forced outage affecting the transmission system of the Imperial Irrigation District could reduce our net income and materially and adversely affect our business, financial condition, future results and cash flow.

If the transmission system of the Imperial Irrigation District experiences a force majeure event or a forced outage which prevents it from transmitting the electricity from the Heber 1 and 2 projects or the Ormesa project to the relevant power purchaser, the relevant power purchaser would not be required to make energy payments for such non-delivered electricity and may not be required to make any capacity payments with respect to the affected project so long as such force majeure event or forced outage continues. Our revenues for the year ended December 31, 2005, from the projects utilizing the Imperial Irrigation District transmission system, were approximately $85.9 million. The impact of such force majeure would depend on the duration thereof, with longer outages resulting in greater revenue loss.

Some of our leases will terminate if we do not extract geothermal resources in ‘‘commercial quantities’’, thus requiring us to enter into new leases or secure rights to alternate geothermal resources, none of which may be available on terms as favorable to us as any such terminated lease, if at all.

Most of our geothermal resource leases are for a fixed primary term, and then continue for so long as geothermal resources are extracted in ‘‘commercial quantities’’ or pursuant to other terms of extension. The land covered by some of our leases is undeveloped and has not yet produced geothermal resources in ‘‘commercial quantities’’. Leases that cover land which remains undeveloped and does not produce, or does not continue to produce, geothermal resources in commercial quantities and leases that we allow to expire, will terminate. In the event that a lease is terminated and we determine that we will need that lease once the applicable project is operating, we would need to enter into one or more new leases with the owner(s) of the premises that are the subject of the terminated lease(s) in order to develop geothermal resources from, or inject geothermal resources into, such premises or secure rights to alternate geothermal resources or lands suitable for injection, all of which may not be possible or could result in increased cost to us, which could materially and adversely affect our business, financial condition, future results and cash flow.

Our Bureau of Land Management leases may be terminated if we fail to comply with any of the provisions of the Geothermal Steam Act of 1970 or if we fail to comply with the terms or stipulations of such leases, which may materially and adversely affect our business and operations.

Pursuant to the terms of our Bureau of Land Management (which we refer to as BLM) leases, we are required to conduct our operations on BLM-leased land in a workmanlike manner and in accordance with all applicable laws and BLM directives and to take all mitigating actions required by the BLM to protect the surface of and the environment surrounding the relevant land. Additionally, certain BLM leases contain additional requirements, some of which relate to the mitigation or avoidance of disturbance of any antiquities, cultural values or threatened or endangered plants or animals, the payment of royalties for timber and the imposition of certain restrictions on residential development on the leased land. In the event of a default under any BLM lease, or the failure to comply with such requirements, or any non-compliance with any of the provisions of the Geothermal Steam Act of 1970 or regulations issued thereunder, the BLM may, 30 days after notice of default is provided to our relevant project subsidiary, suspend our operations until the requested action is taken or terminate the lease, either of which could materially and adversely affect our business, financial condition, future results and cash flow.

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Some of our leases (or subleases) could terminate if the lessor (or sublessor) under any such lease (or sublease) defaults on any debt secured by the relevant property, thus terminating our rights to access the underlying geothermal resources at that location.

The fee interest in the land which is the subject of some of our leases (or subleases) may currently be or may become subject to encumbrances securing loans from third party lenders to the lessor (or sublessor). Our rights as lessee (or sublessee) under such leases (or subleases) are or may be subject and subordinate to the rights of any such lender. Accordingly, a default by the lessor (or sublessor) under any such loan could result in a foreclosure on the underlying fee interest in the property and thereby terminate our leasehold interest and result in the shutdown of the project located on the relevant property and/or terminate our right of access to the underlying geothermal resources required for our operations.

In addition, a default by a sublessor under its lease with the owner of the property that is the subject of our sublease could result in the termination of such lease and thereby terminate our sublease interest and our right to access the underlying geothermal resources required for our operations.

Current and future urbanizing activities and related residential, commercial and industrial developments may encroach on or limit geothermal activities in the areas of our projects, thereby affecting our ability to utilize, access, inject and/or transport geothermal resources on or underneath the affected surface areas.

Current and future urbanizing activities and related residential, commercial and industrial development may encroach on or limit geothermal activities in the areas of our projects, thereby affecting our ability to utilize, access, inject and/or transport geothermal resources on or underneath the affected surface areas. In particular, the Heber projects and the Gould project rely on an area, which we refer to as the Heber Known Geothermal Resource Area or Heber KGRA, for the geothermal resource necessary to generate electricity at the Heber projects and Gould project. Imperial County has adopted a ‘‘specific plan area’’ that covers the Heber KGRA, which we refer to as the ‘‘Heber Specific Plan Area’’. The Heber Specific Plan Area allows commercial, residential, industrial and other employment oriented development in a mixed-use orientation, which currently includes geothermal uses. Several of the landowners from whom we hold geothermal leases have expressed an interest in developing their land for residential, commercial, industrial or other surface uses in accordance with the parameters of the Heber Specific Plan Area. Currently, Imperial County's Heber Specific Plan Area is coordinated with the cities of El Centro and Calexio. There has been ongoing underlying interest since the early 1990s to incorporate the community of Heber. While any incorporation process would likely take several years, if Heber were to be incorporated, the City of Heber could replace Imperial County as the governing land use authority, which, depending on its policies, could have a significant effect on land use and availability of geothermal resources.

Current and future development proposals within Imperial County and the City of Calexico, applications for annexations to the City of Calexico, and plans to expand public infrastructure may affect surface areas within the Heber KGRA, thereby limiting our ability to utilize, access, inject and/or transport the geothermal resource on or underneath the affected surface area that is necessary for the operation of our Heber projects and Gould project, which could adversely affect our operations and reduce our revenues.

Current transportation construction works and urban developments in the vicinity of our Steamboat complex of projects in Nevada may also affect future permitting for geothermal operations relating to those projects. Such works and developments include the extension of an interstate highway (to be named U.S. 580) by the Nevada Department of Transportation, the construction of a new casino hotel and other commercial or industrial developments on land in the vicinity of our Steamboat projects.

We depend on key personnel for the success of our business.

Our success is largely dependent on the skills, experience and efforts of our senior management team and other key personnel. In particular, our success depends on the continued efforts of Lucien

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Bronicki, Dita Bronicki, Hezy Ram, Nadav Amir, Yoram Bronicki and other key employees. The loss of the services of any key employee could materially harm our business, financial condition, future results and cash flow. Although to date we have been successful in retaining the services of senior management and have entered into employment agreements with Lucien Bronicki, Dita Bronicki, Hezy Ram and Yoram Bronicki, such members of our senior management may terminate their employment agreements without cause and with notice periods ranging from 90 to 180 days. We may also not be able to locate or employ on acceptable terms qualified replacements for our senior management or key employees if their services were no longer available.

Our projects have generally been financed through a combination of parent company loans and limited− or non-recourse project finance debt and lease financing. If our project subsidiaries default on their obligations under such limited− or non-recourse debt or lease financing, we may be required to make certain payments to the relevant debt holders and if the collateral supporting such leveraged financing structures is foreclosed upon, we may lose certain of our projects.

Our projects have generally been financed using a combination of parent company loans and limited or non-recourse project finance debt or lease financing. Non-recourse project finance debt or lease financing refers to financing arrangements that are repaid solely from the project’s revenues and are secured by the project’s physical assets, major contracts, cash accounts and, in many cases, our ownership interest in the project subsidiary. Limited− recourse project finance debt refers to our additional agreement, as part of the financing of a project, to provide limited financial support for the project subsidiary in the form of limited guarantees, indemnities, capital contributions and agreements to pay certain debt service deficiencies. If our project subsidiaries default on their obligations under the relevant debt documents, creditors of a limited recourse project financing will have direct recourse to us, to the extent of our limited recourse obligations, which may require us to use distributions received by us from other projects, as well as other sources of cash available to us, in order to satisfy such obligations. In addition, if our project subsidiaries default on their obligations under the relevant debt documents (or a default under such debt documents arises as a result of a cross-default to the debt documents of some of our other projects) and the creditors foreclose on the relevant collateral, we may lose our ownership interest in the relevant project subsidiary or our project subsidiary owning the project would only retain an interest in the physical assets, if any, remaining after all debts and obligations were paid in full.

Changes in costs and technology may significantly impact our business by making our power plants and products less competitive.

A basic premise of our business model is that generating baseload power at geothermal power plants achieves economies of scale and produces electricity at a competitive price. However, traditional coal-fired systems and gas-fired systems may under certain economic conditions produce electricity at lower average prices than our geothermal plants. In addition, there are other technologies that can produce electricity, most notably fossil fuel power systems, hydroelectric systems, fuel cells, microturbines, windmills and photovoltaic (solar) cells. Some of these alternative technologies currently produce electricity at a higher average price than our geothermal plants; however, research and development activities are ongoing to seek improvements in such alternate technologies and their cost of producing electricity is gradually declining. It is possible that advances will further reduce the cost of alternate methods of power generation to a level that is equal to or below that of most geothermal power generation technologies. If this were to happen, the competitive advantage of our projects may be significantly impaired.

Our expectations regarding the market potential for the development of recovered energy-based power generation may not materialize, and as a result we may not derive any significant revenues from this line of business.

We have identified recovered energy-based power generation as a significant market opportunity for us. Demand for our recovered energy-based power generation units may not materialize or grow at the levels that we expect. We currently face competition in this market from manufacturers of conventional steam turbines and may face competition from other related technologies in the future.

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If this market does not materialize at the levels that we expect, such failure may materially and adversely affect our business, financial condition, future results and cash flow.

Our intellectual property rights may not be adequate to protect our business.

Our intellectual property rights may not be adequate to protect our business. While we occasionally file patent applications, patents may not be issued on the basis of such applications or, if patents are issued, they may not be sufficiently broad to protect our technology. In addition, any patents issued to us or for which we have use rights may be challenged, invalidated or circumvented.

In order to safeguard our unpatented proprietary know-how, trade secrets and technology, we rely primarily upon trade secret protection and non-disclosure provisions in agreements with employees and others having access to confidential information. These measures may not adequately protect us from disclosure or misappropriation of our proprietary information.

Even if we adequately protect our intellectual property rights, litigation may be necessary to enforce these rights, which could result in substantial costs to us and a substantial diversion of management attention. Also, while we have attempted to ensure that our technology and the operation of our business do not infringe other parties’ patents and proprietary rights, our competitors or other parties may assert that certain aspects of our business or technology may be covered by patents held by them. Infringement or other intellectual property claims, regardless of merit or ultimate outcome, can be expensive and time-consuming and can divert management’s attention from our core business.

We are subject to risks associated with a changing economic and political environment, which may adversely affect our financial stability or the financial stability of our counterparties.

The risk of terrorist attacks in the United States or elsewhere continues to remain a potential source of disruption to the nation’s economy and financial markets in general. The availability and cost of capital for our business and that of our competitors has been adversely affected by the bankruptcy of Enron Corp. and events related to the California electric market crisis. Additionally, the recent rise in fuel costs may make it more expensive for our customers to operate their businesses. These events could constrain the capital available to our industry and could adversely affect our financial stability and the financial stability of our transaction counterparties.

Possible fluctuations in the cost of construction, raw materials and drilling may materially and adversely affect our business, financial condition, future results and cash flow.

Our manufacturing operations are dependent on the supply of various raw materials, including primarily steel and aluminum, and on the supply of various industrial equipment components that we use. We currently obtain all such materials and equipment at prevailing market prices. We are not dependent on any one supplier and do not have any long-term agreements with any of our suppliers. We have recently experienced increases in the cost of raw materials and in transportation costs. We have also experienced an increase in construction costs, which we expect may intensify due to recent hurricane activity, and an increase in drilling costs. To the extent not otherwise passed along to our customers, these and future cost increases of such raw materials and equipment could adversely affect our profit margins.

Conditions in Israel, where the majority of our senior management and all of our production and manufacturing facilities are located, may adversely affect our operations and may limit our ability to produce and sell our products or manage our projects.

Operations in Israel accounted for approximately 25.2%, 25.6% and 51% of our operating expenses in the year ended December 31, 2005, 2004 and 2003, respectively. Political, economic and security conditions in Israel directly affect our operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, and the continued state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. Since October 2000, there has been a significant increase in violence, primarily in the West Bank and Gaza Strip. As a result, negotiations between Israel and representatives of the Palestinian Authority have been sporadic and have failed to result in peace. We could be adversely

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affected by hostilities involving Israel, the interruption or curtailment of trade between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel. In addition, the sale of products manufactured in Israel may be adversely affected in certain countries by restrictive laws, policies or practices directed toward Israel or companies having operations in Israel.

In addition, some of our employees in Israel are subject to being called upon to perform military service in Israel, and their absence may have an adverse effect upon our operations. Generally, unless exempt, male adult citizens of Israel under the age of 41 are obligated to perform up to 36 days of military reserve duty annually. Additionally, all such citizens are subject to being called to active duty at any time under emergency circumstances.

These events and conditions could disrupt our operations in Israel, which could materially harm our business, financial condition, future results and cash flow.

Failure to comply with certain conditions and restrictions associated with tax benefits provided to Ormat Systems Ltd. by the Government of Israel as an ‘‘approved enterprise’’ may require us to refund such tax benefits and pay future taxes in Israel at higher rates.

Our subsidiary, Ormat Systems Ltd., which we refer to as Ormat Systems, has received ‘‘approved enterprise’’ status under Israel’s Law for Encouragement of Capital Investments, 1959, with respect to two of its investment programs. As an approved enterprise, our subsidiary is exempt from Israeli income taxes with respect to revenues derived from the approved investment program for a period of two years commencing on the year it first generates profits from the approved investment program, and thereafter such revenues are subject to a reduced Israeli income tax rate of 25% for an additional five years. These benefits are subject to certain conditions set forth in the certificate of approval from Israel’s Investment Center, which include, among other things, a requirement that Ormat Systems comply with Israeli intellectual property law, that all transactions between Ormat Systems and our affiliates be at arms length, and that there will be no change in control of, on a cumulative basis, more than 49% of Ormat Systems’ capital stock (including by way of a public or private offering) without the prior written approval of the Investment Center. If Ormat Systems does not comply with these conditions, in whole or in part, it would be required to refund the amount of tax benefits (as adjusted by the Israeli consumer price index and for accrued interest) and would no longer benefit from the reduced Israeli tax rate, which could have an adverse effect on our financial condition, future results and cash flow. If Ormat Systems distributes dividends out of revenues derived during the tax exemption period from the approved investment program, it will be subject, in the year in which such dividend is paid, to Israeli income tax on the distributed dividend.

If our parent defaults on its lease agreement with the Israel Land Administration, or is involved in a bankruptcy or similar proceeding, our rights and remedies under certain agreements pursuant to which we acquired our products business and pursuant to which we sublease our land and manufacturing facilities from our parent may be adversely affected.

We acquired our business relating to the manufacture and sale of products for electricity generation and related services from our parent, Ormat Industries. In connection with that acquisition, we entered into a sublease with Ormat Industries for the lease of the land and facilities in Yavne, Israel where our manufacturing and production operations are conducted and where our Israeli offices are located. Under the terms of our parent’s lease agreement with the Israel Land Administration, any sublease for a period of more than five years may require the prior approval of the Israel Land Administration. As a result, the initial term of our sublease with Ormat Industries is for a period of four years and eleven months beginning on July 1, 2004, extendable to twenty-five years less one day (which includes the initial term). The consent of the Israel Land Administration was obtained for a period of the shorter of (i) 25 years or (ii) the remaining period of the underlying lease agreement with the Israel Land Administration, which terminates between 2018 and 2047. If our parent was to breach its obligations to the Israel Land Administration under its lease agreement, the Israel Land Administration could terminate the lease agreement and, consequently, our sublease would terminate as well.

As part of the acquisition described in the preceding paragraph, we also entered into a patent license agreement with Ormat Industries, pursuant to which we were granted an exclusive license for

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certain patents and trademarks relating to certain technologies that are used in our business. If a bankruptcy case were commenced by or against our parent, it is possible that performance of all or part of the agreements entered into in connection with such acquisition (including the lease of land and facilities described above) could be stayed by the bankruptcy court in Israel or rejected by a liquidator appointed pursuant to the Bankruptcy Ordinance in Israel and thus not be enforceable. Any of these events could have a material and adverse effect on our business, financial condition, future results and cash flow.

We are a holding company and our revenues depend substantially on the performance of our subsidiaries and the projects they operate, most of which are subject to restrictions and taxation on dividends and distributions.

We are a holding company whose primary assets are our ownership of the equity interests in our subsidiaries. We conduct no other business and, as a result, we depend entirely upon our subsidiaries’ earnings and cash flow.

The agreements pursuant to which most of our subsidiaries have incurred debt restrict the ability of these subsidiaries to pay dividends, make distributions or otherwise transfer funds to us prior to the satisfaction of other obligations, including the payment of operating expenses, debt service and replenishment or maintenance of cash reserves. In the case of some of our projects, such as the Mammoth project, there may be certain additional restrictions on dividend distributions pursuant to our agreements with our partners. Further, if we elect to receive distributions of earnings from our foreign operations, we may incur United States taxes on account of such distributions, net of any available foreign tax credits. In all of the foreign countries where our existing projects are located, dividend payments to us are also subject to withholding taxes. Each of the events described above may reduce or eliminate the aggregate amount of revenues we can receive from our subsidiaries.

Some of our directors that also hold positions with our parent may have conflicts of interest with respect to matters involving both companies.

Three of our seven directors are directors and/or officers of Ormat Industries. These directors will have fiduciary duties to both companies and may have conflicts of interest on matters affecting both us and our parent, and in some circumstances may have interests adverse to our interests. Our Chairman, Director and Chief Technology Officer, Mr. Bronicki, is the Chairman of our parent, and our Chief Executive Officer and Director, Mrs. Bronicki, is the Chief Executive Officer of our parent.

Our controlling stockholders may take actions that conflict with your interests.

Ormat Industries holds approximately 77.2% of our common stock. Bronicki Investments Ltd. holds approximately 29.82% of outstanding shares of common stock of Ormat Industries Ltd. as of March 5, 2006 (27.50% on a fully diluted basis). Bronicki Investments Ltd. is a privately held Israeli company and is controlled by Lucien and Dita Bronicki. Because of these holdings, our parent company will be able to exercise control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and they will have significant control over our management and policies. The directors elected by these stockholders will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. For example, our controlling stockholders will be able to control the sale or other disposition of our products business to another entity or the transfer of such business outside of the State of Israel; as such action requires the affirmative vote of at least 75% of our outstanding shares.

The price of our common stock may fluctuate substantially and your investment may decline in value.

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

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	•	actual or anticipated fluctuations in our results of operations including as a result of seasonal variations in our electricity-based revenues;

	•	variance in our financial performance from the expectations of market analysts;

	•	conditions and trends in the end markets we serve and changes in the estimation of the size and growth rate of these markets;

	•	announcements of significant contracts by us or our competitors;

	•	changes in our pricing policies or the pricing policies of our competitors;

	•	loss of one or more of our significant customers;

	•	legislation;

	•	changes in market valuation or earnings of our competitors;

	•	the trading volume of our common stock; and

	•	general economic conditions.

In addition, the stock market in general, and the New York Stock Exchange and the market for energy companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources, which could materially harm our business, financial condition, future results and cash flow.

Future sales of common stock by some of our existing stockholders could cause our stock price to decline.

As of the date of this report, our parent, Ormat Industries, holds approximately 77.2% of our outstanding common stock and some of our directors, officers and employees also hold shares of our outstanding common stock. Sales of such shares in the public market, as well as shares we may issue upon exercise of outstanding options, could cause the market price of our common stock to decline. On November 10, 2004, we entered into a registration rights agreement with Ormat Industries whereby Ormat Industries may require us to register our common stock held by it or its directors, officers and employees with the Securities and Exchange Commission or to include our common stock held by it or its directors, officers and employees in an offering and sale by us.

Provisions in our charter documents and Delaware law may delay or prevent acquisition of us, which could adversely affect the value of our common stock.

Our restated certificate of incorporation and our bylaws contain provisions that could make it harder for a third party to acquire us without the consent of our Board of Directors. These provisions do not permit actions by our stockholders by written consent. In addition, these provisions include procedural requirements relating to stockholder meetings and stockholder proposals that could make stockholder actions more difficult. Our Board of Directors is classified into three classes of directors serving staggered, three-year terms and may be removed only for cause. Any vacancy on the Board of Directors may be filled only by the vote of the majority of directors then in office. Our Board of Directors has the right to issue preferred stock without stockholder approval, which could be used to institute a ‘‘poison pill’’ that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors. Delaware law also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

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The Sarbanes-Oxley Act of 2002 imposes significant regulatory, corporate and operational requirements on the Company. Failure to comply with such provisions may have significant adverse consequences to the Company

As a public company, we are subject to the Sarbanes-Oxley Act of 2002 (the SOX Act). The SOX Act contains a variety of provisions affecting public companies, including but not limited to, corporate governance requirements, our relationship with our auditors, evaluation of our internal disclosure controls and procedures and evaluation of our internal control over financial reporting. See Management's Report on Internal Control over Financial Reporting and Item 9A.—"Controls and Procedures".

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

We currently lease corporate offices at 980 Greg Street, Sparks, Nevada 89431 and at 6225 Neil Road, Reno, Nevada 89511-1136. We plan to move all of our corporate offices to the Neil Road location during 2006 and thereafter terminate the lease at 980 Greg Street. We also occupy an approximately 66,000 square meter office and manufacturing facility located in the Industrial Park of Yavne, Israel, which we sublease from Ormat Industries. See ‘‘Certain Relationships and Related Transactions’’. We also lease small offices in each of the countries in which we operate.

We believe that our current facilities are adequate for our operations as currently conducted. If additional facilities are required, we believe that we could obtain additional facilities at commercially reasonable prices.

Each of our projects is located on property leased or owned by us or one of our subsidiaries, or is a property that is subject to a concession agreement.

Information and descriptions of our plants and properties are included in Item 1, ‘‘Business’’, of this annual report.

ITEM 3.    LEGAL PROCEEDINGS

There were no material developments in any legal proceedings to which the Company is a party during the fiscal year 2005, other than as described below.

As a result of our acquisition of the Steamboat 1 and 1A plants, our subsidiary Steamboat Geothermal LLC has become a party to litigation pending in the Second Judicial District Court in Washoe County, Nevada with Geothermal Development Associates and Delphi Securities, Inc. In April 2002, these plaintiffs initiated a lawsuit against the former owner and operator of the Steamboat 1/1A project. The plaintiffs dispute amounts owed to them pursuant to an agreement, dated July 14, 1985, pursuant to which Geothermal Development Associates assigned all of its right, title, and interest in the subject geothermal leasehold property in exchange for a net operating royalty interest in the revenues of the Steamboat 1 plant. The plaintiffs allege damages based upon three separate theories: (i) that the actions of the former owner in developing the Steamboat 1A plant have decreased the output of the Steamboat 1 plant; (ii) that general, administrative, and corporate expenses included by the former owner in the calculation of the net royalty amount were overstated for the years 2000 and 2001; and (iii) that, in addition to its royalty interest in the revenues from the Steamboat 1 plant, plaintiffs are entitled to a net revenue royalty interest from the Steamboat 1A plant. The matter was originally set for a trial in September 2003, but the trial date was adjourned in order to allow the plaintiffs to obtain substitute counsel. Initial evidentiary disclosures and discovery requests had been made before the trial was adjourned. No dispositive motions are pending before the Court and the trial date has not been rescheduled. We have initiated settlement discussions with the plaintiffs. As of December 31, 2005 and January 9, 2006, Steamboat Geothermal LLC entered into a sales, settlement and release agreement and an assignment agreement, respectively, with Woodside

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Properties LLC, the assignee of 37% of Geothermal Development Associates’ right to net operating revenues, whereby Steamboat Geothermal LLC was assigned 37% of the net operating revenues of Steamboat 1 in partial settlement of the dispute with Geothermal Development Associates. As part of this litigation, we have received a letter from the plaintiffs in which they assert that, in addition to the amounts they claim are owed to them, they are also entitled to a reasonable net operating royalty payment from our Burdette project. We believe that such assertion is without merit, and that any outcome of such litigation or settlement discussions will not have a material impact on our results of operations.

In connection with the power purchase agreements for the Ormesa project, Southern California Edison has expressed its intent not to pay the contract rate for the power supplied by the GEM 2 and GEM 3 plants to the Ormesa project. Southern California Edison contends that California ISO real-time prices should apply, while management believes that SP-15 prices quoted by NYMEX should apply. According to Southern California Edison’s estimation, the amount under dispute is approximately $2.5 million. The parties have signed an interim agreement; whereby Southern California Edison will continue procure the GEM 2 and GEM 3 power at the current energy rate of 5.37 Cents/kWh until May 1, 2007. In addition, a long-term power purchase agreement is expected to be entered into for the GEM 2 and GEM 3 power. The negotiations in connection with the long-term power purchase agreement are still under way and there is no guarantee that such negotiations will be successfully completed. Management believes that such settlement agreement will not have a material financial impact on us.

We are a party in a third-party complaint filed on November 15, 2005 by Lacy M. Henry and Judy B. Henry (the Henrys) in a bankruptcy proceeding in the United States Bankruptcy Court for the Eastern District of North Carolina. The Henrys are debtors in a Chapter 11 bankruptcy filed in the Bankruptcy Court. The Henrys were the sole shareholders of MPS Generation, Inc. (MPSG). We entered into a supply contract with MPSG dated as of December 29, 2003, under which we were retained as a subcontractor to produce four waste heat energy converters for a project for which MPSG had entered into a contract with Basin Electric Power Cooperative (Basin). Basin filed a lawsuit on February 24, 2005 against, among others, MPSG and the Henrys in the United States District Court for the District of North Dakota, alleging various causes of action including breach of contract, actual and constructive fraud, and conversion, and demanding the piercing of MPSG's corporate veil to establish the personal liability of the Henrys for MPSG’s debts. On September 15, 2005, Basin filed a complaint commencing the bankruptcy proceeding, seeking a determination that the claims which Basin alleged against the Henrys in the North Dakota lawsuit were not dischargeable. On November 15, 2005, the Henrys answered Basin's complaint in the bankruptcy proceeding and also filed a third-party complaint against us, alleging that to the extent the Henrys are found personally liable to Basin for MPSG’s debts, the Henrys have claims against us for breach of contract/breach of warranty, tortious interference with contract, unfair or deceptive trade practices and fraud. The Henrys alleged damages in excess of $100 million. On December 15, 2005, we filed an answer denying the Henrys' claims and asserting counterclaims against the Henrys. We believe that we have no liability to the Henrys and intend to defend vigorously against the Henrys’ claims in the bankruptcy proceeding.

From time to time, we (including our subsidiaries) are a party to various other lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of our (and their) business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to such lawsuits, claims and proceedings, we accrue reserves in accordance with U.S. generally accepted accounting principles. We do not believe that any of these proceedings, individually or in the aggregate, would materially and adversely affect our business, financial condition, future results or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the quarter ended December 31, 2005.

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PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the New York Stock Exchange under the symbol ‘‘ORA’’. Public trading of our stock commenced on November 11, 2004. Prior to that, there was no public market for our stock. The approximate number of holders of record of our common stock was seven on March 24, 2006. On March 24, 2006, our stock’s closing price as reported on the New York Stock Exchange was $41.05 per share.

We have adopted a dividend policy pursuant to which we currently expect to distribute at least 20% of our annual profits available for distribution by way of quarterly dividends. In determining whether there are profits available for distribution, our Board of Directors will take into account our business plan and current and expected obligations, and no distribution will be made that in the judgment of our Board of Directors would prevent us from meeting such business plan or obligations.

Notwithstanding this policy, dividends will be paid only when, as and if approved by our Board of Directors out of funds legally available therefore. The actual amount and timing of dividend payments will depend upon our financial condition, results of operations, business prospects and such other matters as the board may deem relevant from time to time. Even if profits are available for the payment of dividends, the Board of Directors could determine that such profits should be retained for an extended period of time, used for working capital purposes, expansion or acquisition of businesses or any other appropriate purpose. As a holding company, we are dependent upon the earnings and cash flow of our subsidiaries in order to fund any dividend distributions and, as a result, we may not be able to pay dividends in accordance with our policy. Our Board of Directors may, from time to time, examine our dividend policy and may, in its absolute discretion, change such policy.

In fiscal year 2004, we declared, approved and authorized the payment of a dividend to our stockholders of record on October 21, 2004, related to the year 2004 profits in the aggregate amount of $2.5 million ($0.1025 per share). The dividend was paid on March 2, 2005. On March 22, 2005 we declared, approved and authorized payment of an additional dividend of $0.03 per share, based on the number of shares issued and outstanding at March 22, 2005, on account of fourth quarter profits, to all holders of our issued and outstanding shares of common stock on April 4, 2005. This additional dividend was paid on April 18, 2005. On May 10, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock on May 23, 2005, which was paid on June 6, 2005. On August 11, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock on August 22, 2005, which was paid on September 1, 2005. On November 9, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock on November 29, 2005, payable on December 6, 2005. On March 7, 2006, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock on March 28, 2006, payable on April 4, 2006.

Ormat Technologies, Inc. (ORA) – High and Low Prices for the years 2004 and 2005, and from January 1 until March 24, 2006:

				Fourth Quarter 2004*				First Quarter 2005				Second Quarter 2005				Third Quarter 2005				Fourth Quarter 2005				January 1 to March 24, 2006
High:				$	18.70			$	16.50			$	19.20			$	24.10			$	29.10			$	43.94
Low:				$	15.20			$	14.50			$	13.88			$	18.25			$	18.80			$	26.34

* Note: Our common stock began public trading on November 2004 and no prior information is therefore available.

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Equity Compensation Plan Information

For information on our equity compensation plan, refer to Item 12 ‘‘Security Ownership of Certain Beneficial Owners and Management’’.

Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

On June 30, 2004, we issued 1,160,714 shares of our common stock to Ormat Industries in connection with the conversion of a $20.0 million loan to equity. We have relied on the private placement exemption pursuant to Section 4(2) of the Securities Act of 1933, as amended, with respect to the issuance of such shares.

Registration Statement on Form S-1

On November 10, 2004, the SEC declared effective our registration statement on Form S-1 (File No. 333-117527) (Registration Statement) for our Initial Public Offering. Under the Registration Statement, we registered and sold 7,187,500 shares of our common stock. All of the 7,187,500 shares sold in that offering were sold at $15.00 per share. The offering closed on November 16, 2004. The underwriting syndicate was managed by Lehman Brothers Inc., Deutsche Bank Securities Inc., RBC Capital Markets Corporation and Wells Fargo Securities LLC.

The aggregate gross proceeds from the sale of 7,187,500 shares of common stock were $107.8 million. The aggregate net proceeds to us after the offering were $97.0 million, after deducting an aggregate of $7.5 million in underwriting discounts and commissions paid to the underwriters and $3.3 million in other expenses incurred in connection with the offering.

As of the date of this annual report, we have repaid third party loans in the amount of $26.4 million and used $70.6 million for corporate purposes, including $45.0 million for capital expenditures and $7.0 million to repay loans from our parent Ormat Industries Ltd.

In view of the above, it the Company’s belief that all proceeds in connection with the events stated above have been fully used and, therefore, that the reporting of such use in quarterly and annual reports to the Securities and Exchange Commission is hereby completed.

Registration Statement on Form S-3

On January 17, 2006, we filed a universal shelf registration statement on Form S-3, which was declared effective by the SEC on January 31, 2006. The shelf registration statement provides us with the opportunity to issue various types of securities, including debt securities, common stock, warrants and units of our company, from time to time during a period of three years, in one or more offerings up to a total dollar amount of $1 billion. As of the date of the filing of this annual report, we have not issued any securities or received any proceeds pursuant to the shelf registration.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial data for the years ended and at the dates indicated. We have derived the selected consolidated financial data for the years ended December 31, 2005, 2004 and 2003 and as of December 31, 2005 and 2004 from our audited consolidated financial statements set forth in Part II Item 8 of this annual report. We have derived the selected consolidated financial data for the years ended December 31, 2002 and 2001, and as of December 31, 2003, 2002 and 2001 from our audited consolidated financial statements not included herein.

The information set forth below should be read in conjunction with Item 7 — ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our consolidated financial statements set forth in Part II Item 8 of this annual report.

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				Year Ended December 31,
				2005				2004				2003				2002				2001
				(in thousands, except per share data)
Statements of Operations Data:
Revenues:
Electricity Segment:
Energy and capacity				$	104,975			$	100,281			$	77,752			$	65,491			$	33,956
Lease portion of energy and capacity					70,963				58,550				—				—				—
Lease income					1,431				—				—				—				—
Total Electricity Segment					177,369				158,831				77,752				65,491				33,956
Products Segment					60,623				60,399				41,688				20,138				13,959
Total revenues					237,992				219,230				119,440				85,629				47,915
Cost of revenues:
Electricity Segment:
Energy and capacity					70,328				63,300				46,726				33,482				12,536
Lease portion of energy and capacity					30,215				26,442				—				—				—
Lease expense					3,072				—				—				—				—
Total Electricity Segment					103,615				89,742				46,726				33,482				12,536
Products Segment					45,236				46,336				29,494				17,293				17,454
Total cost of revenues					148,851				136,078				76,220				50,775				29,990
Gross margin:					89,141				83,152				43,220				34,854				17,925
Operating expenses (income):
Research and development expenses					3,036				2,175				1,391				1,503				1,729
Selling and marketing expenses					7,876				7,769				7,087				6,051				6,535
General and administrative expenses					14,320				11,609				9,252				7,073				5,444
Gain on sale of geothermal resource rights					—				(845	)			—				—				—
Operating income					63,909				62,444				25,490				20,227				4,217
Other income (expense):
Interest income					4,308				1,316				607				609				1,323
Interest expense					(55,317	)			(42,785	)			(8,120	)			(6,179	)			(4,333	)
Foreign currency translation and
transaction gain (loss)					(439	)			(146	)			(316	)			(323	)			305
Other non-operating income					512				112				464				1,195				300
Income from continuing operations
before income taxes, minority
interest and equity in income of investees					12,973				20,941				18,125				15,529				1,812
Income tax provision					(4,690	)			(6,609	)			(2,506	)			(6,135	)			(3,065	)
Minority interest in earnings of subsidiaries					—				(108	)			(519	)			(1,194	)			(645	)
Equity in income of investees					6,894				3,567				559				314				166
Income (loss) from continuing operations					15,177				17,791				15,659				8,514				(1,732	)
Discontinued operations:
Loss from operations of discontinued
activities in Kazakhstan					—				—				—				(3,114	)			(4,681	)
Loss on sale of Kazakhstan operations					—				—				—				(6,444	)			—
Income (loss) before cumulative effect of
change in accounting principle					15,177				17,791				15,659				(1,044	)			(6,413	)
Cumulative effect of change in accounting principle (net of tax benefit of $125,000)					—				—				(205	)			—				—
Net income (loss)				$	15,177			$	17,791			$	15,454			$	(1,044	)		$	(6,413	)

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				Year Ended December 31,
				2005				2004				2003				2002				2001
				(in thousands, except per share data)
Basic and diluted earnings (loss) per share:
Income from continuing operations				$	0.48			$	0.72			$	0.67			$	0.37			$	(0.07	)
Loss from discontinued operations					—				—				—				(0.41	)			(0.20	)
Cumulative effect of change in accounting principle					—				—				(0.01	)			—				—
Net income (loss)				$	0.48			$	0.72			$	0.66			$	(0.04	)		$	(0.27	)
Weighted average number of shares outstanding					31,563				24,806				23,214				23,214				23,214
Balance Sheet Data (at end of year):
Cash and cash equivalents				$	26,976			$	36,750			$	8,873			$	36,684			$	13,202
Working capital (deficit)					36,616				50,341				2,677				(79,853	)			(50,459	)
Property, plant and equipment, net (including construction-in process)					620,091				527,003				379,133				180,118				153,740
Total assets					914,480				850,088				543,138				287,378				226,617
Long-term debt (including current portion)					365,539				384,515				260,488				95,807				91,321
Notes payable to Parent (including current portion)					171,805				193,852				177,004				—				—
Stockholders' equity					182,259				167,914				36,975				27,837				22,966

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our consolidated financial statements and the related notes. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements. See ‘‘Cautionary Note Regarding Forward-Looking Statements’’. You should also review Item 1A — ‘‘Risk Factors’’ for a discussion of important factors that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements.

General

Overview

We are a leading vertically integrated company engaged in the geothermal and recovered energy power business. We design, develop, build, own and operate clean, environmentally friendly geothermal power plants, and we also design, develop and build, and plan to own and operate, recovered energy-based power plants, in each case, using equipment that we design and manufacture. In addition, we sell the equipment we design and manufacture for geothermal electricity generation, recovered energy-based electricity generation, and other equipment for electricity generation to third parties. Our operations consist of two principal business segments. The first consists of the sale of electricity from our power plants, which we refer to as the Electricity Segment. The second consists of the design, manufacturing and sale of equipment for electricity generation, the installation thereof and the provision of services relating to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy power plants, which we refer to as the Products Segment.

Our Electricity Segment currently consists of our investment in power plants producing electricity from geothermal resources. It will also include our investment in power plants producing electricity from recovered energy resources. Our geothermal power plants include both power plants that we have built and power plants that we have acquired. Our Products Segment consists of the design, manufacture and sale of equipment that generates electricity, principally from geothermal and recovered energy resources, but also using other fuel sources as well. Our Products Segment also includes, to the extent requested by our customers, the installation of our equipment and other related power plant installations and the provision of services relating to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy power plants. For the year ended December 31, 2005, our Electricity Segment represented approximately 74.5% of our total revenues, while our Products Segment represented approximately 25.5% of our total revenues during such period.

In the year ended December 31, 2005, total Electricity Segment revenues from the sale of electricity by our wholly owned power plants were $177.4 million. In addition, revenues from our 50% ownership of the Mammoth Project and from our 80% ownership of the Leyte Project for the year ended December 31, 2005 were $19.2 million. Our investments in the Mammoth and Leyte projects are accounted for in our consolidated financial statements under the equity method and the revenues are not included in our consolidated revenues for the year ended December 31, 2005.

Our Electricity Segment operations are conducted in the United States and throughout the world. We have increased our net ownership interest in generating capacity by 21 MW between December 31, 2004 and December 31, 2005, of which 13MW was attributable to the construction of the Burdette geothermal power plant in Nevada and 9 MW was attributable to increased generating capacity of our existing geothermal power plants resulting from improvements to the geothermal well fields. We experienced a 1 MW reduction in generating capacity at our Momotombo project as a result of mechanical problems in one of the project’s well. Since January 1, 2001, we have completed

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various acquisitions of geothermal power plants in the United States with an aggregate acquisition cost, net of cash received, of $503.9 million. We also own or control as well as operate geothermal projects in Guatemala, Kenya, Nicaragua and the Philippines.

Our Products Segment operations are also conducted in the United States and throughout the world. For the year ended December 31, 2005, revenues attributable to our Products Segment were $60.6 million. We have identified recovered energy-based power generation as a significant market opportunity for us in the United States and throughout the world. During the year ended December 31, 2005, we entered into two supply agreements and one supply and construction agreement for recovered energy projects for an aggregate value of approximately $15.8 million.

Our Electricity Segment is characterized by relatively predictable revenues generated by our power plants pursuant to long-term power purchase agreements, with terms which are generally up to 20 years. By contrast, revenues attributable to our Products Segment, which are based on the sale of equipment and the provision of various services to our customers are far less predictable and may vary significantly from period to period. Our management assesses the performance of our two segments of operation differently. In the case of our Electricity Segment, when making decisions about potential acquisitions or the development of new projects, our management typically focuses on the internal rate of return of the relevant investment, relevant technical and geological matters and other relevant business considerations. Additionally, as part of our Electricity Segment, our management evaluates our operating projects based on the performance of such projects in terms of revenues and expenses in contrast to projects that are under development, which our management evaluates based on costs attributable to each such project. By contrast, our management evaluates the performance of our Products Segment based on the timely delivery of our products, performance quality of our products and costs actually incurred to complete customer orders as compared to the costs originally budgeted for such orders.

During the year ended December 31, 2005, our total revenues increased by 8.6% (from $219.2 to $238.0 million) over the previous year. It is important to note, however, that the year ended December 31, 2005 is the first year in which our total revenues included all revenues generated by power plants that we acquired during the twelve months preceding December 31, 2004. Accordingly, our results of operations for the various years covered by our consolidated financial statements set forth in Part II Item 8 of this annual report may not be comparable with each other or indicative of future results.

During the years ended December 31, 2005 and 2004, our U.S. projects generated 1,799,072 MWh and 1,698,879 MWh, respectively, which include our 50% share in the Mammoth project.

Trends and Uncertainties

The geothermal industry in the United States has historically experienced significant growth followed by a consolidation of owners and operators of geothermal power plants. During the 1990s, growth and development in the geothermal industry occurred primarily in foreign markets and only minimal growth and development occurred in the United States. Since 2001, there has been increased demand for energy generated from geothermal resources in the United States as production costs for electricity generated from geothermal resources have become more competitive relative to fossil fuel generation due to increasing gas prices and as a result of newly enacted legislative and regulatory incentives, such as state renewable portfolio standards. We see the increasing demand for energy generated from geothermal and other renewable resources in the United States, the rise in oil and gas prices and further introduction of renewable portfolio standards as the most significant trends affecting our industry today and in the immediate future. Our operations and the trends that from time to time impact our operations are subject to market cycles.

Although other trends, factors and uncertainties may impact our operations and financial condition, including many that we do not or cannot foresee, we believe that our results of operations and financial condition for the foreseeable future will be affected by the following trends, factors and uncertainties:

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	•	In 2005, our primary activity was the implementation of our organic growth through the construction of new projects and enhancements of several of our existing projects, as discussed elsewhere in this annual report. As a result, growth in revenues and overall generating capacity in 2005 was more moderate than the previous two years which were characterized by significant acquisitions. However, we expect that this investment in organic growth will result in a significant increase in our total generating capacity and a corresponding increase in our consolidated revenues as well as in our operating income attributable to our Electricity Segment in 2006, as compared with 2005.

	•	In the United States, we expect to continue to benefit from the increasing demand for renewable energy as a result of favorable legislation adopted by 22 states and the District of Colombia, including California, Nevada and Hawaii (where we have been the most active in our geothermal development and in which all of our U.S. projects are located). In each of these states, relevant legislation currently requires that an increasing percentage of the electricity supplied by electric utility companies operating in such states be derived from renewable energy resources until certain pre-established goals are met. We expect that the additional demand for renewable energy from utilities in such states will create additional opportunities for us to expand existing projects and build new power plants.

	•	Outside of the United States, we expect that a variety of governmental initiatives, including the award of long-term contracts to independent power generators, the creation of competitive wholesale markets for selling and trading energy, capacity and related energy products and the adoption of programs designed to encourage ‘‘clean’’ renewable and sustainable energy sources, will create new opportunities for the development of new projects as well as create additional markets for our remote power units and other products.

	•	We have identified recovered energy-based power generation as a significant market opportunity for us in the United States and throughout the world. We are initially targeting the North American market and, thereafter, we intend to leverage our success in that market in order to expand such operations throughout the world. If our expectations regarding the growth in demand for our recovered energy units are not met, we may not be able to generate the revenues we expect from such operations.

	•	We expect the revenues from our Products Segment in 2006 to be similar to the revenue level we achieved in 2005. In pursuing new orders, we participate in tenders for projects and proposals for installations and identify and monitor markets, which utilize or plan to utilize geothermal energy, and in which geothermal resources are available. Over the long-term, we intend to continue to pursue growth in our recovered energy business, and we expect that the portion of revenues from our recovered energy business as a percentage of the total revenues from our Product Segment will increase.

	•	We expect to continue to generate the majority of our revenues from our Electricity Segment through the sale of electricity from our power plants. All of our current revenues from the sale of electricity are derived from fully-contracted payments under long-term power purchase agreements.

	•	In the last year, competition from the wind power generation industry has increased. While the current demand for renewable energy is large enough that this increased competition has not impacted our ability to obtain new power purchase agreements, it may contribute to a reduction in electricity prices.

	•	The viability of the geothermal resources utilized by our power plants depends on various factors such as the heat content of the geothermal reservoir, useful life of the reservoir (the term during which such geothermal reservoir has sufficient extractable fluids for our operations) and operational factors relating to the extraction of the geothermal fluids. Our geothermal power plants may experience an unexpected decline in the capacity of their respective geothermal wells. Such factors, together with the possibility that we may fail to find commercially viable geothermal resources in the future, represent significant uncertainties we face in connection with our operations.

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	•	Our foreign operations are subject to significant political, economic and financial risks, which vary by country. Such risks include the ongoing privatization of the electricity industry in the Philippines, the partial privatization of the electricity sector in Guatemala, labor unrest and strengthening of unions in Nicaragua and the political uncertainty currently prevailing in Kenya. Although we maintain political risk insurance as an attempt to mitigate such risks, such insurance does not provide complete coverage with respect to all such risks.

	•	We have experienced recent increases in the cost of raw materials required for our equipment manufacturing activities, which we believe have resulted primarily from increased demand in the Chinese market for such raw materials, and increases in the cost to transport our products. Additionally, we have experienced an increase in drilling costs and a shortage in drilling equipment, which we believe is the result of the high oil prices resulting in increased drilling activity in the marketplace. We also have experienced, and expect to continue to experience, an increase in construction costs, particularly in the United States, due to rising prices attendant to a significant increase in activities in the construction industry, which we expect to intensify due to recent hurricane activity in the Gulf Coast and Southeastern regions of the United States. An increase in such costs may have an adverse effect on our financial condition and results of operations.

	•	The United States extended a tax subsidy and increased the amount of the tax subsidy for companies that use geothermal steam or fluid to generate electricity as part of the Energy Policy Act of 2005 that became law on August 8, 2005. The tax subsidy is a ‘‘production tax credit’’ of 1.9 cents per kWh. It may be claimed on the electricity output of new geothermal power plants put into service during a ‘‘window period’’ that runs from October 23, 2004 through December 31, 2007. The window had been scheduled to close at the end of this year, but the new act extended it. Credit may be claimed for five years on the output from any new geothermal power plants put into service during the first part of the window period from October 23, 2004 to August 8, 2005. Plants put into service during the remainder of the ‘‘window period’’ qualify for 10 years of tax credits. Production tax credits may improve our financial results. We, as the owner of any project that would be put in service during the remainder of this "window period", would have to choose between this production tax credit and a 10% investment tax credit. Some of our power purchase agreements allow the power purchaser to benefit from part of such production tax credits, if and when they become available to us.

	•	The Energy Policy Act of 2005, as mentioned above, authorizes FERC to revise PURPA so as to terminate the obligation of electric utilities to purchase the output of a Qualifying Facility if FERC finds that there is an accessible competitive market for energy and capacity from the Qualifying Facility. The legislation does not affect existing power purchase agreements. We do not expect this change in law to affect our U.S. projects significantly, as all except one of our current contracts (our Steamboat 1 project, which has a contract with Sierra Pacific Power Company that expires in 2006) are long-term. FERC has recently proposed to eliminate the utility's purchase obligation in four regions of the country. None of those regions includes a state in which our current projects operate. However, FERC has the authority under the Energy Policy Act of 2005 to act, on a case-by-case basis, to eliminate the mandatory purchase obligation in other regions. In the proposed rulemaking, FERC expressly noted that the California Independent System Operator (CAISO) has the right to file an application to seek relief from the mandatory purchase obligation. If the utilities in the regions in which our domestic projects operate were to be relieved of the mandatory purchase obligation, they would not be required to purchase energy from the project in the region under Federal law upon termination of the existing power purchase agreement, which could have an adverse effect on our revenues.

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Revenues

We generate our revenues primarily from the sale of electricity from our geothermal power plants, the design, manufacture and sale of equipment for electricity generation and the construction, installation and engineering of power plant equipment.

Revenues attributable to our Electricity Segment are relatively predictable as they are derived from the sale of electricity from our power plants pursuant to long-term power purchase agreements; however, such revenues are subject to seasonal variations, as more fully described below in the section entitled ‘‘Seasonality’’. Our power purchase agreements generally provide for the payment of capacity payments, energy payments, or both. Generally, capacity payments are payments calculated based on the amount of time that our power plants are available to generate electricity. Some of our power purchase agreements provide for bonus payments in the event that we are able to exceed certain target levels and the potential forfeiture of payments if we fail to meet minimum target levels. Energy payments, on the other hand, are payments calculated based on the amount of electrical energy delivered to the relevant power purchaser at a designated delivery point. The rates applicable to such payments are either fixed (subject, in certain cases, to certain adjustments) or are based on the relevant power purchaser’s short run avoided costs (the incremental costs that the power purchaser avoids by not having to generate such electrical energy itself or purchase it from others).

The lease income related to the Puna refinancing, which is accounted for as an operating lease transaction, is included as a separate line item in our Electricity Segment revenues (See "—Letters of Credit and Off Balance Sheet Arrangements"). We analyze such revenue on a combined basis with other revenues in our Electricity Segment for management purposes.

As required by Emerging Issues Task Force No. 01-8, Determining Whether an Arrangement Contains a Lease, we assessed all of our power purchase agreements acquired since July 1, 2003, and concluded that all such agreements related to our Heber 1 and 2, Steamboat 2/3, Steamboat Hills, and Puna projects contained a lease element requiring lease accounting. Accordingly, revenue related to the lease element of the agreements is presented as ‘‘lease portion of energy and capacity’’ revenue, with the remaining revenue related to the production and delivery of the energy presented as ‘‘energy and capacity’’ revenue in our consolidated financial statements.

As the lease revenue and the energy and capacity revenues are derived from the same arrangement and both fall within our Electricity Segment, we analyze such revenues, and related costs, on a combined basis for management purposes.

Revenues attributable to our Products Segment are generally unpredictable because larger customer orders for our products are typically a result of our participating in, and winning, tenders issued by potential customers in connection with projects they are developing. Such projects often take a long time to design and develop and are often subject to various contingencies such as the customer’s ability to raise the necessary financing for a project. As a result, we are generally unable to predict the timing of such orders for our products and may not be able to replace existing orders that we have completed with new ones. As a result, our revenues from our Products Segment fluctuate (and at times, extensively) from period to period.

The following table sets forth a breakdown of our revenues for the years indicated:

				Revenues in Thousands												% of Revenues for Period Indicated
				Year Ended December 31,												Year Ended December 31,
				2005				2004				2003				2005				2004				2003
				(in thousands)
Revenues
Electricity Segment				$	177,369			$	158,831			$	77,752				74.5	%			72.4	%			65.1	%
Products Segment					60,623				60,399				41,688				25.5				27.6				34.9
Total				$	237,992			$	219,230			$	119,440				100.0	%			100.0	%			100.0	%

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Geographical breakdown of revenues

For the years ended December 31, 2005, 2004, and 2003, respectively, 87.8%, 84.7% and 56.4% of the revenues attributable to our Electricity Segment were generated in the United States. During the past three fiscal years, the percentage of our total revenues attributable to the sale of electricity in the United States has increased significantly, as compared to the percentage of our total revenues that is attributable to the sale of electricity by our foreign projects that has declined commensurately. The revenues of our foreign projects for the years ended December 31, 2005 and 2004 also decreased due to the deconsolidation of the Leyte Project from our consolidated financial statements as of April 1, 2004. The increase in our Electricity Segment is largely attributable to our recent acquisition of various projects in the United States. The following table sets forth the geographic breakdown of the revenues attributable to our Electricity Segment for the years indicated:

				Year Ended December 31,												Year Ended December 31,
				2005				2004				2003				2005				2004				2003
				(in thousands)
United States				$	155,646			$	134,576			$	43,847				87.8	%			84.7	%			56.4	%
Foreign					21,723				24,255				33,905				12.2				15.3				43.6
Total				$	177,369			$	158,831			$	77,752				100.0	%			100.0	%			100.0	%

Historically, revenues attributable to our Products Segment, after giving effect to the elimination of intercompany transactions, have been derived primarily from outside of the United States, which is reflective of the historical demand in the United States described elsewhere in this annual report. Since 2003, we have begun to generate revenues attributable to our Products Segment in the United States as well. However, as a result of the fluctuation and unpredictability of the revenues attributable to our Products Segment and the impact that a few sales or engineering, procurement and construction (EPC) contracts can have on the geographic distribution of such revenues, the geographical distribution of such revenues may not be indicative of any developing trends or of our future results.

Seasonality

The demand for the electricity generated by our domestic projects and the prices paid for such electricity pursuant to some of our power purchase agreements are subject to seasonal variations. The demand for electricity from the Heber 1 and 2 projects, the Mammoth project and the Ormesa project is the highest in the summer months of June through September, because the power purchaser for those projects, Southern California Edison, delivers more electricity to its California markets during such period in order to meet demand for air conditioning and other energy-intensive cooling systems utilized during such summer months. The demand for electricity from the Steamboat complex and the Brady project is more balanced, consisting of both summer and winter peaks that reflect the greater temperature variations in Nevada. The demand for electricity from the Puna project is balanced due to the equatorial temperature in Hawaii (with less pronounced temperature variations during the year). In California, the capacity rates payable pursuant to the applicable power purchase agreement are higher in the summer months and as a result we receive higher revenues during such months. In contrast, there are no significant changes in prices during the year payable pursuant to our power purchase agreement for the Puna project and the Nevada projects. In the winter, due principally to the lower ambient temperature, our power plants produce more energy and as a result we receive higher energy revenues. However, the higher capacity payments payable by the power purchaser in California in the summer months as a result of the increase in demand and in prices have a more significant impact on our revenues than that of the higher energy revenues generally generated in winter due to increased efficiency, and as a result our revenues are generally higher in the summer than in the winter.

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Breakdown of Expenses

Electricity Segment

The principal expenses attributable to our operating projects include operation and maintenance expenses such as salaries, equipment expenses, costs of parts and chemicals, costs related to third-party services, lease expenses, royalties, startup and auxiliary electricity purchases, property taxes and insurance and, for the California projects, transmission charges, scheduling charges and purchases of sweet water for use in our plant cooling towers. Some of these expenses, such as parts and third-party services are not incurred on a regular basis, which results in fluctuations in our expenses and our results of operations for individual projects from quarter to quarter. The lease expense related to the Puna refinancing is included as a separate line item in our Electricity Segment cost of revenues (See ‘‘Letters of Credit and Off Balance Sheet Arrangements’’). We analyze such cost on a combined basis with other cost of revenues in our Electricity Segment for management purposes.

Payments made to government agencies and private entities as compensation for the use of the relevant geothermal resources and site leases where plants are located are included in cost of revenues.

Royalty payments are payments made as compensation for the right to use certain geothermal resources and are included as a component of cost of revenues, and are paid as a percentage of the revenues derived from the associated geothermal rights. For the year ended December 31, 2005, royalties were approximately 3.9% of the electricity revenues.

Products Segment

The principal expenses attributable to our Products Segment include materials, salaries and related employee benefits, expenses related to subcontracting activities, transportation expenses, sales commissions to sales representatives and royalties pertaining to government participation in our research and development programs at a rate of 3.5% to 5.0% of the proceeds recovered from the sale of products which were developed pursuant to such research and development programs.

Some of the principal expenses attributable to our Products Segment, such as a portion of the costs related to labor, utilities and other support services are fixed and, in order to maintain our current production and construction capability must be incurred, notwithstanding the revenues attributable to our Products Segment. As a result, the cost of revenues attributable to our Products Segment, expressed as a percentage of total revenues, fluctuates. To date, our management has made the strategic decision to maintain our production and construction capacity and, therefore, maintain the fixed cost component of the total costs attributable to our Products Segment at the current level. Another reason for such fluctuation is that in responding to bids for our products, we price our products and services in relation to existing competition and other prevailing market conditions, which may vary substantially from order to order.

Cash, Cash Equivalents and Marketable Securities

Our cash, cash equivalents and marketable securities as of December 31, 2005 decreased to $70.5 million from $125.9 million as of December 31, 2004, principally due to the combination of the repayment of long-term debt to our parent and to third parties, to fund capital expenditures and the designation to restricted cash of amounts that will be used to maintain debt service reserves, offset by an increase of $134.9 million by cash flows from operating activities (including $83.0 million as a result of the refinancing of the Puna project acquisition on May 19, 2005 and December 30, 2005).

Critical Accounting Policies

Our significant accounting policies are more fully described in Note 1 to our audited consolidated financial statements set forth in Part II Item 8 of this annual report. However, certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Such estimates are

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based on management’s historical experience, the terms of existing contracts, management’s observance of trends in the geothermal industry, information provided by our customers and information available to management from other outside sources, as appropriate. Such estimates are subject to an inherent degree of uncertainty. Our critical accounting policies include:

	•	Revenues and Cost of Revenues. Revenues related to the sale of electricity from our geothermal power plants, and capacity payments paid in connection with such sales, are recorded based upon output delivered and capacity provided by such power plants at rates specified pursuant to the relevant power purchase agreements. Lease income and lease expense are recognized ratably over the lease periods. Revenues generated from engineering and operating services and sales of products and parts are recorded once the service is provided or product delivery is made, as applicable. Revenues generated from the construction of geothermal and recovered energy power plant equipment and other equipment on behalf of third parties is recognized on the percentage completion method, which is the relationship between costs actually incurred and total estimated costs to completion. Such cost estimate is made by management in part based on prior operations and in part based on specific project characteristics and designs. If management’s estimates utilized with respect to our Products Segment of total estimated costs to completion are inaccurate, then the percentage of completion will also be inaccurate and thus lead management to over or under-estimate the gross margins for our Products Segment. Provisions for estimated losses relating to contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from the application of penalty provisions in relevant contracts and final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.

	•	Determining whether an Arrangement Contains a Lease. In May 2003, the Emerging Issues Task Force (EITF) reached consensus in EITF Issue No. 01-8, Determining Whether an Arrangement Contains a Lease, to clarify the requirements of identifying whether an arrangement contains a lease at its inception. The guidance in the consensus is designed to broaden the scope of arrangements, such as power purchase agreements, accounted for as leases. EITF Issue No. 01-8 requires both parties to an arrangement to determine whether a service contract or similar arrangement is, or includes, a lease within the scope of SFAS No. 13, Accounting for Leases. The consensus is being applied prospectively to arrangements agreed to, modified, or acquired in business combinations on or after July 1, 2003. The adoption of EITF Issue No. 01-8 effective July 1, 2003 did not have a material effect on our financial position or results of operations. The power purchase agreements acquired in connection with the acquisition of the Heber 1 and 2, Steamboat 2/3, Steamboat Hills and Puna projects contain a lease element within the scope of SFAS No. 13. Accordingly, for the year ended December 31, 2004, revenues and costs associated with the lease element of the Steamboat 2/3 power purchase agreements have been presented as ‘‘lease portion of energy and capacity’’ revenue, with the remaining revenue related to the production and delivery of the energy being presented as ‘‘energy and capacity’’ revenue in our statements of operation. As the lease portion of energy and capacity revenues and the energy and capacity revenues are derived from the same arrangement, we analyze such revenues, and related costs, on a combined basis for management purposes.

	•	Property, Plant and Equipment. Property, plant and equipment are stated at cost. All costs associated with the acquisition, development and construction of power plant facilities are capitalized. Major improvements are capitalized and repairs and maintenance (including major maintenance) costs are expensed. We capitalize interest costs as part of constructing power plant facilities. Such capitalized interest is recorded as part of the asset to which it relates. Power plants are depreciated using the straight-line method over the term of the relevant power purchase agreement. We estimate that the useful life of our power plants

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		coincides with the term of the power purchase agreement; however, it is possible that the power plants may last longer than the related power purchase agreement. We periodically re-evaluate the estimated useful life of the power plants, which may result in our revising the useful life to a longer period at a future date.

	•	Impairment of Long-lived Assets and Long-lived Assets to Be Disposed of. Long-lived assets including unconsolidated investments and power purchase agreements are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated future net undiscounted cash flows expected to be generated by the relevant asset. The significant assumptions that we use in estimating our undiscounted future cash flows include: (i) projected generating capacity of the project and rates to be received under the respective power purchase agreements, and (ii) projected operating expenses of the relevant project. If assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Our assessment regarding the existence of impairment factors is based on market conditions, operational performance and legal factors relating to our business. Our review of existing factors and the resulting appropriate carrying value of our long-lived assets are subject to judgment and estimates that management is required to make. We believe that no impairment exists for our long-lived assets; however future estimates as to the recoverability of such assets may change based on revised circumstances.

	•	Obligations Associated with the Retirement of Long-Lived Assets. Effective January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 143 of the Financial Accounting Standards Board (FASB), Accounting for Obligations Associated with the Retirement of Long-Lived Assets. Pursuant to SFAS No. 143, which was amended by FASB Interpretation (FIN) No. 47, Accounting for Conditional Retirement Obligations, an Interpretation of FASB Statement No.143, entities are required to record the fair market value of any legal liability related to the retirement of any of its assets in the period in which such liability is incurred. Our liabilities related to the retirement of our assets include our obligation to plugging wells upon termination of our operating activities, the dismantling of our geothermal power plants upon cessation of our operations and the performance of certain remedial measures related to the land on which such operations were conducted. When a new liability for an asset retirement obligation is recorded, we capitalize the costs of such liability by increasing the carrying amount of the related long-lived asset. Such liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity either settles the obligation for its recorded amount or incurs a gain or a loss with respect thereto, as applicable. We estimate the costs related to such liabilities and if such estimates are incorrect, then the capitalized costs and carrying amount of the related long-lived asset will change and as a result may affect our consolidated financial condition and results of operations.

	•	Derivative Instruments. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless such instruments are exempted from derivative treatment as a normal purchase and normal sale. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

We maintain a risk management strategy that incorporates the use of interest rate swaps and interest rate caps to minimize significant fluctuation in cash flows and/or earnings that are caused by interest rate volatility. Gain or losses on contracts that initially qualify for cash

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flow hedge accounting, net of related taxes, are included as a component of other comprehensive income or loss and are subsequently reclassified into earnings when interest on the related debt is paid. Gain or losses on contracts that are not designated to qualify as a cash flow hedge are included as a component of interest expense.

We are subject to the provisions of SFAS No. 133 Derivative Implementation Group (DIG) Issue No. C15, Normal Purchases and Normal Sales Exception for Certain Option-Type Contracts and Forward Contracts in Electricity, which expands the requirements for the normal purchase and normal sales exception to include electricity contracts entered into by a utility company when certain criteria are met. Also, pursuant to DIG Issue No. C15, contracts that have a price adjustment clause based on an index that is not directly related to the electricity generated, as defined in SFAS No. 133, do not meet the requirements for the normal purchases and normal sales exception. We have power sales agreements that qualify as derivative instruments under DIG Issue No. C15 and do not meet the exception as they have a price adjustment clause based on an index that does not directly relate to the sources of the power used to generate the electricity. Our adoption of the provisions of DIG Issue No. C15 in 2002 did not have a material impact on our consolidated financial position and results of operations. In June 2003, the FASB issued DIG Issue No. C20, Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature. DIG Issue No. C20 specified additional circumstances in which a price adjustment feature in a derivative contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under SFAS No. 133. DIG Issue No. C20 was effective as of the first day of the fiscal quarter beginning after July 10, 2003, or October 1, 2003 for us. DIG Issue No. C20 requires contracts that did not previously qualify for the normal purchases and normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortize such fair value over the remaining contract period. Upon our adoption of DIG Issue No. C20, we elected the normal purchase and normal sales scope exception under SFAS No. 133 related to our power purchase agreements. Accordingly, our power purchase agreements are exempt from derivative treatment. Such adoption did not have a material impact on our consolidated financial position and results of operations.

	•	Consolidation of Variable Interest Entities. In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB 51, as amended by FIN No. 46R in December 2003. Among other things, FIN No. 46R generally deferred the effective date of FIN No. 46 to the quarter ended March 31, 2004. The objectives of FIN No. 46R are to provide guidance on the identification of Variable Interest Entities, which we refer to as VIEs, for which control is achieved through means other than ownership of a majority of the voting interest of the entity, and how to determine which company (if any), as the primary beneficiary, should consolidate such VIE. A variable interest in a VIE, by definition, is an asset, liability, equity, contractual arrangement or other economic interest that absorbs the entity’s economic variability.

Effective as of March 31, 2004, we adopted FIN No. 46R. In connection with the adoption of FIN No. 46R, we concluded that Ormat Leyte Co., Ltd., in which we have an 80% ownership interest, should be deconsolidated. Ormat Leyte Co., Ltd.’s operating results were accounted for using the consolidated method of accounting for the three-month period ended March 31, 2004 and, effective April 1, 2004, our ownership interest in Ormat Leyte Co., Ltd. is accounted for using the equity method of accounting.

	•	Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements in accordance with SFAS No. 109, Accounting for Income Taxes, we are required to estimate our income tax in each of the jurisdictions in which we operate. This process requires us to estimate our actual current tax exposure and make an assessment of temporary differences resulting from differing treatment of items for tax and accounting purposes. Such differences result in deferred tax assets and liabilities which are included in our consolidated

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		balance sheet. We must then assess the likelihood that our net deferred tax assets will be recovered from future taxable income and, to the extent we believe that such recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase such allowance in a period, we must include an expense within the tax provision in our consolidated statement of operations. Management uses significant judgment in determining our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that we generate taxable income in a particular jurisdiction in which we operate and in which we have net operating loss carryforwards for which a deferred tax valuation allowance has been established, we may be required to adjust our valuation allowance. Realization of the deferred tax assets and investment tax credits is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that the deferred tax asset as of December 31, 2005 will be realized. We account for investment tax credits and we will account in the future, if applicable, for production tax credits as a reduction to income tax in the year in which the credits arise.

	•	Stock-Based Compensation. We account for stock-based compensation based on the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, which we refer to as APB Opinion No. 25, which states that no compensation expense is required to be recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of common stock on the relevant grant date. In the event that stock options are granted at a price that is lower than the fair market value on the relevant grant date, the difference between the fair market value of the common stock and the exercise price of the stock options is recorded as unearned compensation. Unearned compensation is amortized to compensation expense over the vesting period applicable to the stock option. We have adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as it relates to stock options granted to employees, which requires pro forma net income to be disclosed based on the fair value of the options granted at the date of the relevant grant.

	•	New Accounting Pronouncements

Share-Based Payments

In December 2004, the FASB issued the revised SFAS No. 123, Share-Based Payment, which we refer to as SFAS No. 123R and which addresses the accounting for share-based payment transactions in which a company obtains employee services in exchange for: (i) equity instruments of the company, or (ii) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R eliminates the ability to account for employee share-based payment transactions using APB Opinion No. 25, Accounting for Stock Issued to Employees, and requires instead that such transactions be accounted for using the grant date fair value based method. On April 14, 2005, the SEC adopted a new rule amending the compliance date for SFAS No. 123R. In accordance with the new rule, the accounting provision of SFAS No. 123R will be applicable to us for the fiscal year ending December 31, 2006. Early adoption of SFAS No. 123R is encouraged. SFAS No. 123R applies to all awards granted or modified after the Statement’s effective date. In addition, compensation cost for the unvested portion of previously granted awards that remain outstanding on the Statement’s effective date shall be recognized on or after the effective date, as the related services are rendered, based on the awards’ grant date fair value as previously calculated for the pro forma disclosure under SFAS No. 123.

The cumulative effect of adopting SFAS No. 123R as of its adoption date by us (January 1, 2006), based on the awards outstanding as of December 31, 2005, is immaterial. We expect that upon the adoption of SFAS No. 123R, we will apply the modified prospective application

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transition method, as permitted thereunder. Under such transition method, upon the adoption of SFAS No. 123R, our consolidated financial statements for periods prior to the effective date will not be restated.

Inventory Costs

In November 2004, the FASB issued SFAS No. 151, Inventory Costs — an amendment of ARB 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This Statement requires that those items be recognized as current period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005 (January 1, 2006 for us). The provisions of SFAS No. 151 shall be applied prospectively. We do not expect SFAS No. 151 to have a material impact on our results of operations and financial position in future periods.

Exchange of Non-monetary Assets

In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets — An Amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29, Accounting for Non-monetary Transactions. The amendments made by SFAS No. 153 are based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the exception for non-monetary exchanges of similar productive assets and replace it with a general exception for exchanges of non-monetary assets that do not have commercial substance. The provisions in SFAS No. 153 are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 (July 1, 2005 for us). Early application of SFAS No. 153 is permitted. The provisions of SFAS No. 153 shall be applied prospectively. The adoption by us of SFAS No. 153 effective July 1, 2005 did not have a material impact on our results of operations and financial position.

Accounting for Conditional Retirement Obligations

In March 2005, the FASB issued FIN No. 47, Accounting for Conditional Retirement Obligations, an Interpretation of FASB Statement No. 143, which requires companies to recognize a liability for the fair value of a legal obligation to perform asset-retirement activities that are conditional on a future event, if the amount can be reasonably estimated. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for us). Our adoption of FIN No. 47 as of December 31, 2005 did not have an impact on our results of operations and financial position.

Accounting Changes and Error Corrections

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS No. 154 also requires that a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005 (January 1, 2006 for us). We do not expect SFAS No. 154 to have a material impact on our results of operations and financial position in future periods.

Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights

In June 2005, the FASB issued EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When

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the Limited Partners Have Certain Rights. EITF Issue No. 04-5 provides guidance in determining whether a general partner controls a limited partnership and therefore should consolidate the limited partnership. EITF Issue No. 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership and that the presumption may be overcome if the limited partners have either: (i) the substantive ability to dissolve or liquidate the limited partnership or otherwise remove the general partner without cause, or (ii) substantive participating rights. The effective date for applying the guidance in EITF 04-5 was: (i) June 29, 2005 for all new limited partnerships and existing limited partnerships for which the partnership agreement was modified after that date, and (ii) no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005 (January 1, 2006 for us), for all other limited partnerships. We are currently evaluating the impact of implementing of the provisions of EITF Issue No. 04-5 related to our investment in Mammoth-Pacific, L.P.

Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 replaces SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. It also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 shall be effective for all financial instruments acquired or issued after the beginning of an entity's first year that begins after September 2006 (January 1, 2007 for us). The Company does not expect SFAS No. 155 to have a material impact on its results of operations and financial position in future periods.

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Results of Operations

Our historical operating results in dollars and as a percentage of total revenues are presented below. A comparison of the different periods described below may be of limited value, as a result of the effects on our historical operating results of each of the following: (i) our recent acquisitions and enhancements of acquired projects; and (ii) the fluctuation in revenues of our Products Segment.

				Year Ended December 31,
				2005				2004				2003
				(in thousands, except per share data)
Statements of Operations Historical Data: Revenues:
Electricity Segment				$	177,369			$	158,831			$	77,752
Products Segment					60,623				60,399				41,688
					237,992				219,230				119,440
Cost of revenues:
Electricity Segment					103,615				89,742				46,726
Products Segment					45,236				46,336				29,494
					148,851				136,078				76,220
Gross margin:
Electricity Segment					73,754				69,089				31,026
Products Segment					15,387				14,063				12,194
					89,141				83,152				43,220
Operating expenses (income):
Research and development expenses					3,036				2,175				1,391
Selling and marketing expenses					7,876				7,769				7,087
General and administrative expenses					14,320				11,609				9,252
Gain on sale of geothermal resource rights					—				(845	)			—
Operating income					63,909				62,444				25,490
Other income (expense):
Interest income					4,308				1,316				607
Interest expense					(55,317	)			(42,785	)			(8,120	)
Foreign currency translation and
transaction loss					(439	)			(146	)			(316	)
Other non-operating income					512				112				464
Income before income taxes, minority
interest and equity in income of investees					12,973				20,941				18,125
Income tax provision					(4,690	)			(6,609	)			(2,506	)
Minority interest in earnings of subsidiaries					—				(108	)			(519	)
Equity in income of investees					6,894				3,567				559
Income before cumulative effect of
change in accounting principle					15,177				17,791				15,659
Cumulative effect of change in accounting principle					—				—				(205	)
Net income				$	15,177			$	17,791			$	15,454
Basic and diluted earnings (loss) per share:
Income before cumulative effect of change in accounting principle				$	0.48			$	0.72			$	0.67
Cumulative effect of change in accounting principle					—				—				(0.01	)
Net income				$	0.48			$	0.72			$	0.66
Weighted average number of shares outstanding					31,563				24,806				23,214

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				Year Ended December 31,
				2005				2004				2003
Statements of Operations Percentage Data:
Revenues:
Electricity Segment					74.5	%			72.4	%			65.1	%
Products Segment					25.5				27.6				34.9
					100.0				100.0				100.0
Cost of revenues:
Electricity Segment					58.4				56.5				60.1
Products Segment					74.6				76.7				70.7
					62.5				62.1				63.8
Gross margin:
Electricity Segment					41.6				43.5				39.9
Products Segment					25.4				23.3				29.3
					37.5				37.9				36.2
Operating expenses (income):
Research and development expenses					1.3				1.0				1.2
Selling and marketing expenses					3.3				3.5				5.9
General and administrative expenses					6.0				5.3				7.7
Gain on sale of geothermal resource rights					—				(0.4	)			—
Operating income					26.9				28.5				21.4
Other income (expense):
Interest income					1.8				0.6				0.5
Interest expense					(23.2	)			(19.5	)			(6.8	)
Foreign currency translation and
transaction loss					(0.2	)			(0.1	)			(0.3	)
Other non-operating income					0.2				0.1				0.4
Income before income taxes, minority interest and equity in income of investees					5.5				9.6				15.2
Income tax provision					(2.0	)			(3.0	)			(2.1	)
Minority interest in earnings of subsidiaries					—				(0.1	)			(0.5	)
Equity in income of investees					2.9				1.6				0.5
Income before cumulative effect of change in accounting principle					6.4				8.1				13.1
Cumulative effect of change in accounting principle					—				—				(0.2	)
Net income					6.4	%			8.1	%			12.9	%

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Comparison of the Year Ended December 31, 2005 and the Year Ended December 31, 2004

Total Revenues

Total revenues for the year ended December 31, 2005 were $238.0 million, as compared with $219.2 million for the year ended December 31, 2004, which represented a 8.6% increase in total revenues. This increase is attributable primarily to the growth of our Electricity Segment, whose revenues in the year ended December 31, 2005 increased by 11.7% over the year ended December 31, 2004.

    Electricity Segment

				Year Ended December 31,
				2005				2004
				(in millions)
Steamboat Project				$	17.6			$	15.4
Puna Project					36.2				15.5
Steamboat Hills Project					4.2				1.8
Other Projects					119.4				126.1
Total				$	177.4			$	158.8

Revenues attributable to our Electricity Segment for the year ended December 31, 2005 were $177.4 million, as compared with $158.8 million for the year ended December 31, 2004, which represented an 11.7% increase in such revenues. This increase is primarily attributable to the inclusion for a full year of the additional revenues being generated from the Steamboat 2/3 project, which we acquired on February 11, 2004, the Steamboat Hills project, which we acquired on May 20, 2004, and the Puna project, which we acquired on June 3, 2004. In addition, revenues from the Puna project in the year ended December 31, 2005 increased by $5.2 million due to higher energy rates, by $1.1 million due to increased generating capacity and by $1.4 million due to lease income resulting from the Puna refinancing. The decrease in revenues from Other Projects is primarily due to the deconsolidation of the Leyte project as of April 1, 2004, which represented $3.1 million of our revenues in the first quarter of 2004, a $3.1 million decrease due to lower availability of the well field at the Ormesa project and a $1.9 million decrease in the Heber project primarily due to our increased use of the power generated by the project for auxiliary purposes rather than purchasing this power from a third party, and a decrease in the ‘‘adder’’, an additional energy rate, paid under the Heber 2 power purchase agreement.

    Products Segment

Revenues attributable to our Products Segment for the year ended December 31, 2005 were $60.6 million, as compared with $60.4 million for the year ended December 31, 2004, which represented a 0.4% increase in such revenues.

Total Cost of Revenues

Total cost of revenues for the year ended December 31, 2005 was $148.9 million, as compared with $136.1 million for the year ended December 31, 2004, which represented a 9.4% increase in total cost of revenues. As a percentage of total revenues, our total cost of revenues for the years ended December 31, 2005 and December 31, 2004 were 62.5% and 62.1%, respectively. The increase is principally attributable to increased costs in our Electricity Segment during the year ended December 31, 2005.

    Electricity Segment

Total cost of revenues attributable to our Electricity Segment for the year ended December 31, 2005 was $103.6 million, as compared with $89.7 million for the year ended

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December 31, 2004, which represented a 15.5% increase in cost of revenues for such segment. This increase is primarily due to the inclusion for a full year of the additional costs of revenues attributable to the Steamboat 1/1A and Steamboat 2/3 project (we acquired the Steamboat 2/3 project on February 11, 2004), the Steamboat Hills project (which we acquired on May 20, 2004) and the Puna project (which we acquired on June 3, 2004) for the year ended December 31, 2005 were $9.8 million, $3.0 million and $17.0 million, respectively, as compared with $7.7 million, $2.0 million and $6.6 million, respectively, for the year ended December 31, 2004. The remainder of the increase is mainly due to the increased costs in the amount of $3.0 million within the Ormesa project due to a significant increase in the geothermal field costs and maintenance costs of such project due to a higher-than-average rate of failure of production pumps and wells (including abandonment of one production well), which resulted in a lower availability of the well field. These costs included the replacement of a relatively large number of pumps and injection pipeline repairs. We also had increased costs in the amount of $0.8 million in the Steamboat project. The increase in total cost of revenues in our Electricity Segment was partially offset by the cancellation of accruals in the aggregate amount of $2.5 million due to the resolution of contingencies. As a percentage of total electricity revenues, the total cost of revenues attributable to our Electricity Segment for the year ended December 31, 2005 (58.4%) was higher than the percentage for the year ended December 31, 2004 (56.5%). Such increase is due in part to a lease expense in the amount of $3.1 million in the Puna project from May 19, 2005 to December 31, 2005. The increase is also attributable to the deconsolidation of the Leyte project as of April 1, 2004, whose total cost of revenues as a percentage of the project's revenues in 2004 was 46.3%, which is lower than the average cost of revenues for this segment.

    Products Segment

Total cost of revenues attributable to our Products Segment for the year ended December 31, 2005 was $45.2 million, as compared with $46.3 million for the year ended December 31, 2004, which represented a 2.4% decrease in cost of revenues related to such segment. Such $1.1 million decrease in cost of revenues during the year ended December 31, 2005 resulted from a different product mix. As a percentage of total products revenues, our total cost of revenues attributable to our Products Segment for the year ended December 31, 2005 was 74.6% and for the year ended December 31, 2004 was 76.7%.

Research and Development Expenses

Net research and development expenses for the year ended December 31, 2005 were $3.0 million, as compared with $2.2 million for the year ended December 31, 2004, which represented a 39.6 % increase in research and development expenses. Such increase reflects fluctuations in the period in which actual expenses were incurred and includes also an increase in activity related to geothermal resource drillings. Grants received from the U.S. Department of Energy are offset against the related research and development expenses. Such grants amounted to $1.3 million and $0.1 million during the years ended December 31, 2005 and 2004, respectively.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2005 were $7.9 million, as compared with $7.8 million for the year ended December 31, 2004. Selling and marketing expenses for the year ended December 31, 2005 constituted 3.3% of total revenues for such year, as compared with 3.5% for the year ended December 31, 2004. Such decrease is principally attributable to the fixed cost nature of certain of our selling and marketing expenses against a larger total revenue base.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2005 were $14.3 million, as compared with $11.6 million for the year ended December 31, 2004, which represented a 23.4% increase in general and administrative expenses. Such increase was principally attributable to an

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increase in professional services fees, additional personnel expenses and other administrative expenses, all as a result of being a public company whose shares are traded on the New York Stock Exchange. General and administrative expenses for the year ended December 31, 2005 constituted 6.0% of total revenues for such period, as compared with 5.3% for the year ended December 31, 2004. In addition, the general and administrative expenses for the year ended December 31, 2004 did not fully reflect the increase in such expenses that was required as a result of the increased activity that occurred in connection with the acquisitions made in 2004.

Interest Expense

Interest expense for the year ended December 31, 2005 was $55.3 million, as compared with $42.8 million for the year ended December 31, 2004, which represented a 29.3% increase in such interest expense. The net increase of $12.5 million was primarily due to a $16.6 million one-time charge relating to the early repayment of the Beal Bank loan, which followed the issuance of the OrCal Senior Secured Notes. The charge is comprised of an $11.5 million prepayment premium, a $4.2 million write-off of deferred financing costs and a $0.9 million loss from a hedge transaction previously included in other comprehensive loss. Without the impact of the one-time charge, interest expense decreased by $4.1 million, which resulted from (i) $3.5 million in interest capitalized to projects due to a higher volume of construction as compared with $0.6 million last year, (ii) a decrease in interest expenses of $2.2 million as a result of the repayment of the Ormesa loan on December 31, 2004, (iii) the payment of an interest expense of $1.6 million for the year ended December 31, 2004 related to the decrease in the fair value of the interest rate caps in respect of the Beal Bank financing; beginning in October 2004 the caps qualified for hedge accounting under SFAS No. 133, and as such we have recorded the decrease in the value of the caps in respect of such transactions in other comprehensive income. As a result of the repayment of the Beal Bank loan on December 8, 2005, these caps are no longer qualified for hedge accounting and for the period from December 8, 2005 to December 31, 2005, $0.3 million were included in interest expense related to the decrease in the fair value for such period. In addition, the decrease in the fair value from October 1, 2004 to December 8, 2005 in the amount of $0.9 million was included in the prepayment charge as described above, and (iv) the elimination of interest expenses of the loan from Export-Import Bank used to finance the Leyte project in the amount of $0.2 million as a result of the deconsolidation of the Leyte project in April 1, 2004 (as a result of the application of FIN No. 46R). Such decreases were offset by: a $1.9 million increase in interest expense in respect of the $190.0 million of the OFC Senior Secured Notes, a $0.9 million increase in interest payments to our parent, and a $0.8 million increase in the applicable LIBOR (London Interbank Offered Rate) rate for the Beal Bank financing.

Income Taxes

Income taxes for the year ended December 31, 2005 were $4.7 million, as compared with $6.6 million for the year ended December 31, 2004, which represented a 29.0% decrease in such income taxes. The effective tax rate for the years ended December 31, 2005 and 2004 was 36.2% and 31.6%, respectively. Our effective tax rate increased in the year ended December 31, 2005 compared with the year ended December 31, 2004 primarily due to utilization of carry-forward tax losses in Israel during the first half of 2004, for which a full valuation allowance has been recorded against deferred tax assets. No investment tax credit or production tax credits were claimed in the years ended December 31, 2005 and 2004.

During 2005, Ormat Monotombo Power Company paid the total amount of approximately $1,700 in tax penalties, due mainly to the late filings of tax withholding reports.

Equity in Income of Investees

Our participation in the income generated from our investees for the year ended December 31, 2005 was $6.9 million (net of tax expense in the amount of $1.0 million), as compared with $3.6 million (net of tax expense in the amount of $0.9 million) for the year ended

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December 31, 2004, which represented a 93.3% increase. Such increase was principally attributable to the income generated in connection with our 80% equity interest in the Leyte project, which was deconsolidated as of April 1, 2004 (as a result of the application of FIN No. 46R), which accounted for $4.9 million, and our collection of an insurance claim, that had not been insured until collected, related to that project in the second quarter of 2005. In the third quarter of 2004, the Leyte Project had a net loss as a result of equipment damage, which was recovered by insurance payments in the fourth quarter of 2004 and the second quarter of 2005.

Net Income

Net income for the year ended December 31, 2005 was $15.2 million, as compared with $17.8 million for the year ended December 31, 2004. Net income as a percentage of our total revenues for the year ended December 31, 2005 was 6.4%, as compared with 8.1% for the year ended December 31, 2004. The $2.6 million decrease in net income and the decrease in net income as a percentage of our total revenues were due to a $10.3 million after-tax impact of the one-time charge from the repayment of the Beal Bank loan. The impact of the prepayment charge was partially offset by an increase in net income principally attributable to: (i) a $6.0 million increase in gross margin, (ii) a decrease in our net interest expense of $7.1 million, (iii) a $1.9 million decrease in our income tax provision, and (iv) an increase of $3.3 million in equity in income of investees, offset by a $4.5 million increase in operating expenses. Net income excluding the after-tax impact of the prepayment charge was $25.5 million, an increase of $7.7 million or 43.2% compared with the net income for the year ended December 31, 2004.

Comparison of the Year Ended December 31, 2004 and the Year Ended December 31, 2003

Total Revenues

Total revenues for the year ended December 31, 2004 were $219.2 million, as compared with $119.4 million for the year ended December 31, 2003, which represented an 83.5% increase in total revenues. This increase is primarily attributable to additional revenues being generated from the Heber 1 and 2 projects, which we acquired in December of 2003, the Steamboat 2/3 project, which we acquired on February 13, 2004, the Steamboat Hills project, which we acquired on May 20, 2004 and the Puna project, which we acquired on June 3, 2004. Such increase in revenues was also due to an additional $18.7 million generated by our Products Segment during 2004.

    Electricity Segment

				Year ended December 31,
				2004				2003
				(in millions)
Heber 1 and 2 Projects				$	59.7			$	2.0
Steamboat Project					15.4				1.0
Puna Project					15.5				—
Steamboat Hills Project					1.8				—
Other Projects					66.4				74.8
Total				$	158.8			$	77.8

Revenues attributable to our Electricity Segment for the year ended December 31, 2004 were $158.8 million, as compared with $77.8 million for the year ended December 31, 2003, which represented a 104.3% increase in such revenues. As noted above, such increase is principally due to our acquisition activities. The decrease in revenues from other projects is due to the deconsolidation of the Leyte project as of April 1, 2004, which represented $12.6 million of our revenues for the year ended December 31, 2003, versus only $3.1 million of our revenues for the year ended December 31, 2004.

    Products Segment

Revenues attributable to our Products Segment for the year ended December 31, 2004 were $60.4 million, as compared with $41.7 million for the year ended December 31, 2003, which

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represented a 44.9% increase in such revenues. This increase resulted from added revenues of $18.7 million, principally attributable to two large geothermal projects (Mokai and Wairakei) during the year ended December 31, 2004. Such increase reflects the fluctuation of the revenues generated from our Products Segment.

Total Cost of Revenues

Total cost of revenues for the year ended December 31, 2004 was $136.1 million, as compared with $76.2 million for the year ended December 31, 2003, which represented a 78.5% increase in total cost of revenues. As a percentage of total revenues, our total cost of revenues for the year ended December 31, 2004 and the year ended December 31, 2003 were 62.1% and 63.8%, respectively.

    Electricity Segment

Total cost of revenues attributable to our Electricity Segment for the year ended December 31, 2004 was $89.7 million, as compared with $46.7 million for the year ended December 31, 2003, which represented a 92.1% increase in cost of revenues for such segment. The year ended December 31, 2004 included $35.2 million, $7.8 million, $2.0 million and $6.5 million, respectively, of cost of revenues attributable to the Heber 1 and 2 projects, the Steamboat 1/1A and Steamboat 2/3 projects, the Steamboat Hills project and the Puna project, as compared to the year ended December 31, 2003, during which such projects were not included in our results of operations (other than a minimal amount in connection with the cost of revenues for Heber 1 and 2 projects in December 2003). As a percentage of total electricity revenues, total cost of revenues attributable to our Electricity Segment for the year ended December 31, 2004 (56.5%) was slightly lower than the percentage for the year ended December 31, 2003 (60.1%) because as a percentage of revenues, total cost of revenues for our newly acquired projects were slightly lower than the projects in our portfolio prior to such acquisitions. This was offset slightly by the deconsolidation of the Leyte project as of April 1, 2004, for which the cost of revenues as a percentage of total Electricity Segment revenues for the year ended December 31, 2003, was 45.7%, which is lower than the average cost of revenues.

    Products Segment

Total cost of revenues attributable to our Products Segment for the year ended December 31, 2004 was $46.3 million, as compared with $29.5 million for the year ended December 31, 2003, which represented a 57.1% increase in cost of revenues related to such segment. Such $16.8 million increase in cost of revenues during the year ended December 31, 2004 was due to an increase in the volume of sales, as compared to the year ended December 31, 2003. As a percentage of total products revenues, our total cost of revenues attributable to our Products Segment for the year ended December 31, 2004 was 76.7% and for the year ended December 31, 2003 was 70.7%. The lower percentage of cost of revenues in 2003 resulted from the cancellation of a provision recorded in 2002 for the construction of a project following negotiations with a customer.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2004 were $2.2 million, as compared with $1.4 million for the year ended December 31, 2003, which represented a 56.4% increase in research and development expenses. Such increase does not represent any significant change in our maintaining and continuance of the development of our technologies and operations, and reflects fluctuations in the period in which actual expenses were incurred.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2004 were $7.8 million, as compared with $7.1 million for the year ended December 31, 2003, which represented a 9.6% increase due to an increase in activities. Selling and marketing expenses for the year ended December 31, 2004 constituted 3.5% of total revenues for such year, as compared with 5.9% for the year ended

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December 31, 2003. Such 2.4% decrease is principally attributable to the fixed cost nature of certain of our selling and marketing expenses as compared to a larger revenue base. The larger revenue base was principally attributable to an increase in the revenues generated by our Electricity Segment. Once a project is in operation and generates electricity, selling and marketing expenses attributable to such project are relatively insignificant.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2004 were $11.6 million, as compared with $9.3 million for the year ended December 31, 2003, which represented a 25.5% increase in general and administrative expenses. Such increase was principally attributable to an increase in professional services fees related to our business development activities in the United States. General and administrative expenses for the year ended December 31, 2004 constituted 5.3% of total revenues for such year, as compared with 7.7% for the year ended December 31, 2003. Such 2.4% decrease is attributable to the fixed cost nature of certain of our general and administrative expenses as compared to a larger revenue base.

Gain on Sale of Geothermal Resource Rights

On December 17, 2004, we sold a subsidiary that had a concession over the geothermal field relating to the San Vicente project and the Chanameca project in El Salvador to a local company for $2.4 million net of transaction costs. As a result of the sale we recognized a gain of $0.8 million.

Interest Expense

Interest expense for the year ended December 31, 2004 was $42.8 million, as compared with $8.1 million for the year ended December 31, 2003, which represented a 426.9% increase in such interest expense. Approximately $13.3 million of such increase was attributable to the interest expenses incurred by certain of our subsidiaries in connection with the Beal Bank financing (including $1.6 million of marked to market expenses relating to an interest rate cap agreement through September 30, 2004) and approximately $14.8 million of such increase was attributable to the interest expenses incurred in connection with the issuance by Ormat Funding, on February 13, 2004, of $190.0 million of Senior Secured Notes, in addition, in the year ended December 31, 2004, we incurred $0.6 million of additional amortization of deferred financing costs as a result of our early repayment of the Ormesa loan on December 31, 2004. See ‘‘—Liquidity and Capital Resources’’. The remaining $5.7 million increase was mainly attributable to an increase in parent company loans.

Income Taxes

Income taxes for the year ended December 31, 2004 were $6.6 million, as compared with $2.5 million for the year ended December 31, 2003, which represented a 163.7% increase in such income taxes. The effective tax rate for the years ended December 31, 2004 and 2003 was 31.6% and 13.8%, respectively. For the year ended December 31, 2004, our effective tax rate was reduced by approximately 2.4% as a result of lower tax rate in certain of our foreign operations (such as Nicaragua). For the year ended December 31, 2003, our effective tax rate was reduced by approximately 8.4% as a result of the application of investment tax credits. In addition, our foreign tax rates were substantially lower than our U.S. tax rates due primarily to the tax holiday in the Philippines that applied to us, and the reversal of a deferred tax valuation allowance related to the realization of net operating losses in Ormat Systems which decreased our effective tax rate by approximately 5.6%.

Equity in Income of Investees

Our participation in the income generated from our investees for the year ended December 31, 2004 was $3.6 million (net of tax expense in the amount of $0.9 million), as compared with $0.6 million for the year ended December 31, 2003, which represented a 538.1% increase. Such

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increase was principally attributable to: (i) the income generated in connection with our 50% equity interest in the Mammoth project, which was acquired in December 2003 and which accounted for $1.5 million of such income for the year ended December 31, 2004, (ii) income generated in connection with our 80% equity interest in the Ormat Leyte project which was deconsolidated as of April 1, 2004 (as a result of the application of FIN No. 46R) and which accounted for $1.5 million and (iii) $0.1 million from the increase in the profits of the Zunil project.

Net Income

Net income for the year ended December 31, 2004 was $17.8 million, as compared with $15.5 million for the year ended December 31, 2003, which represented an increase of 15.1% in our net income. Net income as a percentage of our total revenues for the year ended December 31, 2004 was 8.1%, as compared with 12.9% for the year ended December 31, 2003. Such decrease in percentage was principally attributable to an increase in our interest expenses relating to the financing of the acquisition of the Heber 1 and 2 projects and the Steamboat 2/3 project, and the refinancing of existing projects, offset by the increase in gross margin due to these projects.

Liquidity and Capital Resources

To date, our principal sources of liquidity have been derived from cash from operations, proceeds from parent company loans, third party debt in the form of borrowing under credit facilities, issuance by Ormat Funding and OrCal Geothermal of their Senior Secured Notes, project financing (including lease) and the issuance of our common stock in our initial public offering in 2004. We have utilized this cash to fund our acquisitions, develop and construct power generation plants and meet our other cash and liquidity needs. Our management believes that the outstanding cash, cash equivalents, marketable securities and cash generated from our operations will address our liquidity and other investment requirements. In addition, our shelf registration statement on Form S-3, which was declared effective on January 31, 2006, provides us with the ability to raise additional capital through the issuance of securities pursuant to the terms and conditions of the shelf registration.

Loan Agreements with our Parent

In 2003, we entered into a loan agreement with Ormat Industries Ltd. (the parent company), which was further amended on September 20, 2004. Pursuant to this loan agreement, Ormat Industries agreed to make a loan to us in one or more advances not exceeding a total aggregate amount of $150 million. The proceeds of the loan are to be used to fund our general corporate activities and investments. We are required to repay the loan and accrued interest in full and in accordance with an agreed-upon repayment schedule and in any event on or prior to June 5, 2010. Interest on the loan is calculated on the balance from the date of the receipt of each advance until the date of payment thereof at a rate per annum equal to Ormat Industries’ average effective cost of funds plus 0.3% percent in U.S. dollars, which represented a rate of 7.5% for the advances made during 2003. All computations of interest shall be made by Ormat Industries on the basis of a year consisting of 360 days. As of December 31, 2005, the outstanding balance of the loan was approximately $121.1 million compared to $143.2 million as of December 31, 2004.

In addition to the above loan, pursuant to the terms of a capital note, as further amended on September 20, 2004, Ormat Industries converted outstanding balances owed by us to Ormat Industries into a subordinated non-interest bearing loan in an amount equal to New Israeli shekels (NIS) 240.0 million ($52.1 million as of December 31, 2005, see below). At any time after November 30, 2007 upon demand by Ormat Industries, we will be required to repay the loan in full. The final maturity of the loan is December 30, 2009. In accordance with the terms of such note, we will not be required to repay any amount in excess of $50.7 million (using the exchange rate existing on the date of such note).

Third Party Debt

Our third-party debt is composed of two principal categories. The first category consists of project finance debt or acquisition financing that we or our subsidiaries have incurred for the purpose of

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developing and constructing, refinancing or acquiring our various projects. The second category consists of debt incurred by us or our subsidiaries for general corporate purposes.

OrCal Geothermal Senior Secured Notes — Non-Recourse

On December 8, 2005, OrCal Geothermal Inc, one of our subsidiaries, issued $165.0 million, 6.21% Senior Secured Notes in an offering subject to Rule 144A and Regulation S of the Securities Act of 1933, as amended, for the purpose of refinancing the acquisition cost of the Heber projects. We received net cash proceeds of approximately $161.1 million. Issuance costs of approximately $3.9 million have been included in deferred financing costs in the balance sheet as of December 31, 2005. The OrCal Senior Secured Notes have been rated BBB− by Fitch. The OrCal Senior Secured Notes have a final maturity date of December 30, 2020. Principal and interest on the OrCal Senior Secured Notes are payable in semi-annual payments that will commence on June 30, 2006. The OrCal Senior Secured Notes are collateralized by substantially all of the assets of OrCal, including OrCal and its subsidiaries’ capital stock, all real property, contractual rights, revenues and bank accounts, intercompany notes and certain insurance proceeds, and are fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OrCal. There are various restrictive covenants under the OrCal Senior Secured Notes, which include limitations on additional indebtedness and payment of dividends. As of December 31, 2005, we were in compliance with the covenants under the OrCal Senior Secured Notes.

The proceeds from this issuance were used to prepay in full OrCal’s outstanding loan with Beal Bank and to pay for transaction costs. As a result of the prepayment of the Beal Bank loan, we recorded in the fourth quarter of 2005 a net charge of approximately $10.3 million, net of related taxes of approximately $6.3 million. As of December 31, 2005, there were $165.0 million of OrCal Senior Secured Notes outstanding.

Ormat Funding Senior Secured Notes — Non-Recourse

On February 13, 2004, Ormat Funding Corp., one of our subsidiaries, issued $190.0 million, 8¼% Senior Secured Notes (OFC Senior Secured Notes) in an offering subject to Rule 144A and Regulation S of the Securities Act of 1933, as amended, for the purpose of refinancing the acquisition cost of the Brady, Ormesa and Steamboat 1/1A projects, and the financing of the acquisition cost of the Steamboat 2/3 project. The OFC Senior Secured Notes are collateralized by substantially all of the assets of Ormat Funding and fully and unconditionally guaranteed by all of the wholly owned subsidiaries of Ormat Funding, and (with certain exceptions) by all real property, contractual rights, revenues and bank accounts, intercompany notes, certain insurance policies and guarantees of Ormat Funding and its subsidiaries.

There are various restrictive covenants under the OFC Senior Secured Notes, which include limitations on additional indebtedness and payment of dividends. As of December 31, 2005, we were in compliance with the covenants under the OFC Senior Secured Notes.

A registration statement on Form S-4 relating to the OFC Senior Secured Notes was filed with and declared effective by the Securities and Exchange Commission on February 9, 2005. On March 16, 2005, we exchanged these unregistered notes for senior secured notes with substantially identical terms that have been registered under the Securities Act of 1933, as amended. As of December 31, 2005, there were $183.4 million of OFC Senior Secured Notes outstanding.

Other Limited and Non-Recourse Debt

The Bank Hapoalim project finance debt, of which $14.1 million was outstanding as of December 31, 2005, bearing an interest rate of 3-month LIBOR plus 2.375% per annum on tranche one of the loan and 3-month LIBOR plus 3.0% per annum on tranche two of the loan, and the Export-Import Bank of the United States project finance debt, of which $ 8.9 million was outstanding as of December 31, 2005, bearing an interest rate of 6.54% per annum, were entered into by our relevant subsidiaries to finance the Momotombo project and the Leyte project (which was deconsolidated as of April 1, 2004), respectively.

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New Financing of our Projects

    Financing of the Amatitlan Project

We currently intend to finance the construction cost of the Amatitlan project during 2006. In connection with such financing, we signed a mandate letter with a local bank in Guatemala to obtain a construction loan with a term of up to two-years and a 10-year term loan in the total amount of approximately $41.0 million.

    Financing of Phase II of Olkaria III Project

We are currently negotiating the financing of Phase II of Olkaria III project. In connection with such financing, we signed a mandate letter with a financial institution to arrange a long-term loan.

Full-Recourse Debt

Our full-recourse third party debt includes a $20.0 million credit facility from United Mizrahi Bank, of which we paid the outstanding balance of $20.0 million on February 10, 2005, a medium term loan from Israel’s Industrial Development Bank, in the amount of $3.3 million, which was fully repaid on March 10, 2005, and an $8 million medium term loan from Bank Hapoalim, of which $3.0 million was outstanding as of December 31, 2005, bearing an interest rate of 12-month LIBOR plus 1.7% per annum.

In connection with our acquisition through Ormat Systems Ltd. of the power generation business from our parent, we entered into certain agreements of which only those with each of Bank Hapoalim, Bank Leumi and United Mizrahi Bank remain. Under these agreements, in exchange for such banks’ release of our parent’s guarantee and a release of their security interest over the assets of our subsidiary, Ormat Systems, we and Ormat Systems have agreed to certain negative covenants, including, but not limited to, a prohibition on: (i) creating any floating charge or any permanent pledge, charge or lien over our assets without obtaining the prior written approval of the lender; (ii) guaranteeing the liabilities of any third party without obtaining the prior written approval of the lender; and (iii) selling, assigning, transferring, conveying or disposing of all or substantially all of our assets. In some cases, we and Ormat Systems have agreed to maintain certain financial ratios such as a debt service coverage ratio and a debt to equity ratio. We do not expect that these covenants or ratios, which apply to us on a consolidated basis, will materially limit our ability to execute our future business plans or our operations. The failure to perform or observe any of the covenants set forth in such agreements, subject to various cure periods, would result in the occurrence of an event of default and would enable the lenders to accelerate all amounts due under each such agreement.

We do not expect that any third party debt that we, or any of our subsidiaries, will incur in the future will be guaranteed by our parent.

Most of the loan agreements to which we or our subsidiaries are a party contain cross-default provisions with respect to other material indebtedness owed by us to any third party.

Our management believes that we are currently in compliance with our covenants with respect to our third-party debt.

On February 15, 2006, our subsidiary, Ormat Nevada Inc., entered into a $25 million credit agreement with Union Bank of California (UBOC). Under the credit agreement, Ormat Nevada can request extensions of credit in the form of loans and/or the issuance of one or more letters of credit. UBOC is currently the sole lender and issuing bank under the credit agreement, but is also designated as an administrative agent on behalf of banks that may, from time to time in the future, join the credit agreement as parties thereto. In connection with this transaction, we have entered into a guarantee in favor of the administrative agent for the benefit of the banks, pursuant to which we agreed to guarantee Ormat Nevada's obligations under the credit agreement. Ormat Nevada's obligations under the credit agreement are otherwise unsecured by any of its (or any of its subsidiaries') assets.

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Loans and draws under the letters of credit (if any) under the credit agreement will bear interest at the floating rate based on the Eurodollar plus a margin. There are various restrictive covenants under the credit agreement, which include maintaining certain levels of tangible net worth, leverage ratio, minimum coverage ratio, and a distribution coverage ratio. In addition, there are restrictions on dividend distributions in the event of a payment default or noncompliance with such ratios.

As of the date of this annual report, one letter of credit with a stated amount of $11.5 million has been issued under this credit agreement, which we used to replace restricted cash in the debt service account for the OrCal Senior Secured Notes.

Letters of Credit and Off-balance Sheet Arrangements

As described above under ‘‘Full Recourse Debt’’, on February 15, 2006, our subsidiary Ormat Nevada Inc. entered into a credit agreement with Union Bank of California.

On June 30, 2004, our subsidiary, Ormat Nevada, entered into a Letter of Credit Agreement with Hudson United Bank, pursuant to which Hudson United Bank agreed to issue one or more letters of credit in an aggregate face amount of up to $15.0 million. During 2004, two letters of credit were issued pursuant to this facility. The first was issued in favor of the trustee for the OFC Senior Secured Notes, for a face amount of $10.8 million. The second was issued in favor of Beal Bank, for a face amount of $3.6 million. Such letters of credit were issued to substitute for the cash balances in respective reserve accounts. The unrestricted cash resulting from this exchange was used for working capital and reductions of outstanding bank debt. As of December 31, 2005, such letters of credit have not been renewed by us. Under this Letter of Credit Agreement in the event that the bank is required to pay on a letter of credit drawn by the beneficiary thereof, such letter of credit converts to a loan, bearing interest at one-month LIBOR plus 4.0%, and matures on the next expiration date of the Letter of Credit Agreement. There are various restrictive covenants under the Letter of Credit Agreement, which include maintaining certain levels of tangible net worth, leverage ratio, and minimum coverage ratio. Our management believes that as of December 31, 2005 we were in compliance with our covenants.

On July 15, 2004, we entered into a reimbursement agreement with our parent, Ormat Industries, pursuant to which we agreed to reimburse Ormat Industries for any draws made on any standby letter of credit under which Ormat Industries is obligor and which is subject to the guarantee fee agreement between us and Ormat Industries (see discussion below). Interest on any amounts owing pursuant to the reimbursement agreement is paid in U.S. dollars at a rate per annum equal to Ormat Industries’ average effective cost of funds plus 0.3%, which currently amounts to 7.2%.

Some of our customers require our project subsidiaries to post letters of credit in order to guarantee their respective performance under relevant contracts. We are also required to post letters of credit to secure our obligations under various leases and licenses and may, from time to time, decide to post letters of credit in lieu of cash deposits in reserve accounts under certain financing arrangements. In addition, our subsidiary, Ormat Systems, is required from time to time to post performance letters of credit in favor of our customers with respect to orders of products.

Bank Leumi and Bank Hapoalim have issued such performance letters of credit in favor of our customers from time to time. Initially, our parent, Ormat Industries, was the obligor in respect of any reimbursement obligation on such letters of credit and we paid our parent a guarantee fee and were responsible to reimburse our parent for any draw under these letters of credit. In connection with the acquisition transaction of the power generation business by Ormat Systems from our parent, we have assumed such letters of credit and are now the direct obligor of Bank Hapoalim on such letters of credit. As of December 31, 2005, Bank Leumi and Bank Hapoalim have agreed to make available to us letters of credit totaling $19.4 million and $9.4 million, respectively. As of such date, Bank Leumi and Bank Hapoalim have issued letters of credit in the amount of $16.9 million and $8.5 million, respectively. Out of these amounts, letters of credits totaling $4.1 million and $1.0 million from Bank Leumi and Bank Hapoalim, respectively, have been obtained by our parent and issued on our behalf.

As of the date hereof, we have not had a draw presented against any letter of credit issued or provided on our behalf.

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Refinancing of the Puna Project

On May 19, 2005, our subsidiary in Hawaii, Puna Geothermal Ventures (PGV), completed a refinancing of the cost of its June 2004 acquisition of the Puna geothermal power plant located on the Big Island of Hawaii. The refinancing was concluded with financing parties by means of a leveraged lease transaction. A secondary stage of the lease transaction which refinanced two new geothermal wells that PGV drilled in the second half of 2005 (for production and injection) was completed on December 30, 2005. Pursuant to a 31-year head lease, PGV leased its geothermal power plant to the abovementioned financing parties in return for a deferred lease income in the amount of $83.0 million. Transaction costs amounted to $4.3 million. The proceeds from the refinancing will be used for future capital expenditures and for general corporate purposes.

Dividend

In accordance with our dividend policy, prior to our initial public offering in November 2004, we declared an interim dividend of $2.5 million ($0.1025 million per share) for 2004 to our parent company, Ormat Industries, which was paid on March 2, 2005. On March 22, 2005, we declared, approved and authorized the payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock as of April 4, 2005, which was paid on April 18, 2005. On May 10, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock as of May 23, 2005, which was paid on June 6, 2005. On August 11, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock as of August 22, 2005, which was paid on September 1, 2005. On November 9, 2005, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock as of November 29, 2005, which was paid December 6, 2005. On March 7, 2006, we declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock as of March 28, 2006, payable on April 4, 2006.

Historical Cash Flows

The following table sets forth the components of our cash flows for the relevant periods indicated:

				Year Ended December 31,
				2005				2004				2003
				(in thousands)
Net cash provided by operating activities				$	134,938			$	63,458			$	46,019
Net cash used in investing activities					(83,408	)			(310,583	)			(285,180	)
Net cash provided by (used in) financing activities					(61,304	)			275,002				211,350
Net increase (decrease) in cash and cash equivalents				$	(9,774	)		$	27,877			$	(27,811	)

    For the Year Ended December 31, 2005

Net cash provided by operating activities for the year ended December 31, 2005 was $134.9 million, as compared with net cash provided by operating activities of $63.5 million for the year ended December 31, 2004. Such net increase of $71.5 million resulted primarily from a prepaid lease payment of $83.0 million pursuant to the leverage lease transaction of Puna (less $3.3 million transaction costs related to such lease transaction) offset mainly by a decrease of $2.6 million in net income due to the prepayment charge relating to the Beal Bank Loan, net of an increase in the operating activities as a result of the inclusion for a full year of the additional revenues being generated from the Steamboat 2/3 project, which we acquired on February 11, 2004, the Steamboat Hills project, which we acquired on May 20, 2004, and the Puna project, which we acquired on June 3, 2004.

Net cash used in investing activities for the year ended December 31, 2005 was $83.4 million, as compared with $310.6 million used in investing activities for the year ended December 31, 2004. The

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principal factor that affected our cash flow used in investing activities during the year ended December 31, 2005 was capital expenditures of $116.7 million primarily for our power facilities under construction. Such cash used in investing activities was offset by a decrease of $45.6 million in marketable securities of which $13.7 million was allocated to restricted cash.

Net cash used in financing activities for the year ended December 31, 2005 was $61.3 million, as compared with $275.0 million provided by financing activities for the year ended December 31, 2004. The principal factors that affected the cash flow used in financing activities during the year ended December 31, 2005 were the repayment of short-term and long-term debt in the amount of $184.0 million (including the Beal Bank loan), repayment of debt to our parent in the amount of $40.2 million, and the payment of a dividend to our shareholders in the amount of $6.3 million. This decrease was partially offset by the $165.0 million in proceeds (less $3.9 million in debt issuance costs) from the issuance of OrCal Senior Secured Notes, which were used to repay the Beal Bank loan.

    For the Year Ended December 31, 2004

Net cash provided by operating activities for the year ended December 31, 2004 was $63.5 million, as compared with net cash provided by operating activities of $46.0 million for the year ended December 31, 2003. Such increase was principally attributable to the addition of cash flows from the operating activities of the Heber 1 and 2 projects, Steamboat 2/3 project, Steamboat Hills project and Puna project whose revenues during the year ended December 31, 2004 amounted to $59.7 million, $15.4 million, $15.5 million and $1.8 million, respectively.

Net cash used in investing activities for the year ended December 31, 2004 was $310.6 million, as compared with $285.2 million for the year ended December 31, 2003. The principal factors that affected the cash used in investing activities during the current year were the aggregate amount of cash paid for acquisitions, net of cash received, which, for the year ended December 31, 2004, as a result of the acquisitions of the Steamboat 2/3 project, the Puna project and the Steamboat Hills project, were equal to $82.8 million, $72.8 million and $20.3 million respectively, marketable securities of $90.9 million derived from the public offering issuance proceeds, in addition to the increase in our restricted cash and cash equivalents during such year, which was equal to $9.0 million resulting primarily from the issuance by Ormat Funding of its 8¼% Senior Secured Notes in the amount of $190.0 million. A portion of the proceeds from the issuance of such Senior Secured Notes was escrowed and reserved for additional investments for the Burdette project.

Net cash provided by financing activities for the year ended December 31, 2004 was $275.0 million, as compared with $211.4 million for the year ended December 31, 2003. The principal factors that affected the cash flow provided by financing activities during the year ended December 31, 2004 were the net proceeds from the IPO of $97.0 million, the proceeds of $190.0 million from the issuance of the OFC Senior Secured Notes in order to finance the acquisition of the Steamboat 2/3 project and to refinance the acquisition of the Ormesa, Brady, Mammoth and Steamboat 1/A projects, the proceeds from the United Mizrahi Bank loan of $20.0 million and net proceeds from parent company loans in the amount of $55.3 million.

Capital Expenditures

Our capital expenditures primarily relate to two principal components: the enhancement of our existing power plants and the development of new power plants. In addition, we have budgeted approximately $5.0 million for the next two years for investment in buildings, machinery and equipment.

To the extent not otherwise described below, we expect that the following enhancements of our existing power plants will be funded from internally generated cash or other available corporate resources, which we expect to subsequently refinance with limited or non- recourse debt at the project level. Initially, we intend to fund the construction projects described below from internally generated cash or other available corporate resources. We currently do not contemplate obtaining any new loans from our parent company.

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Mammoth Project.     Mammoth-Pacific, L.P. completed the drilling activities at the Mammoth project, which we believe will result in an increase in the output of the project by 4 MW. The new wells will be connected to the plant at some point during 2006, depending on weather conditions. We have a 50% equity holding in Mammoth-Pacific L.P.

Heber Complex. In connection with the Heber 1 and 2 projects and the Gould plant (the plant under construction in the Heber Complex), we are currently in the final stage of a program consisting of geothermal field optimization, the drilling of an additional well and the addition of OEC units at the Heber projects in order to increase the generating capacity of the Heber 1 and 2 projects by an estimated 16 MW. Equipment manufacturing and well drilling were completed and site construction is currently in progress. Out of the additional capacity, 10 MW will be sold under a new power purchase agreement with SCPPA, which was signed on December 8, 2005. The SCPPA power purchase agreement has a term of 25 years and provides for the sale and purchase of 10 MW of energy for a fixed price of $57.50/MWh, which will escalate annually at a rate of 1.5%. Out of the 10 MW, we are currently delivering 4MW and we expect to begin delivering the additional 6 MW in the second quarter of 2006. An additional 3 MW of capacity was added to the Heber Complex and replaced power for auxiliary purposes and the remaining increased capacity of 3 MW will be sold under the Heber 1 existing power purchase agreements with Southern California Edison.

Ormesa Project. In connection with the Ormesa project, we are in the process of drilling four additional wells, plan to add additional OEC units, replace existing units and convert some of the existing production wells to injection wells in order to implement an optimization plan for the well field and increase the output of the project by an estimated 10 MW. We estimate that such enhancements will be completed by the end of the fourth quarter of 2006. We are currently in negotiations with Southern California Edison for the sale of an additional 10 MW.

Desert Peak 2 Project. In connection with the Desert Peak 2 project, we have already drilled the necessary production wells and we completed the manufacturing and began construction of the associated power plant, which is expected to produce a total of approximately 15 MW and be completed during the second quarter of 2006.

Galena 2 Project (formerly Desert Peak 3 Project).     In connection with the Galena 2 project, we plan to construct a power plant in the Steamboat complex, which will supply electricity under the Galena 2 power purchase agreement. We commenced drilling of the wells. We estimate that the construction of the Galena 2 project will be completed by the end of 2006. As of December 31, 2005, approximately $4.1 million in costs had been incurred related to the Galena 2 project.

Amatitlan Project.     We commenced construction of the Amatitlan 20 MW project and it is scheduled to be completed in 2006. The municipal local authorities have claimed that a construction license is required for the project while our local counsel has advised us that no such license is required under the applicable laws and regulations. We are simultaneously proceeding to challenge the claim of the local municipal authorities and to obtain the construction license.

OREG 1 Project.     We commenced the construction of a 22 MW plant of this recovered energy project and we expect to complete such construction in 2006.

Phase II of Olkaria III Project. In connection with Phase II of Olkaria III project, we completed the drilling of the wells and are currently producing a conceptual design of the power plant of 35 MW.

OrSumas Project. This recovered energy 5 MW project is scheduled to be completed in the last quarter of 2007 or the first quarter of 2008.

Steamboat Hills. In connection with the Steamboat Hills project we plan to add 5 MW through the construction of OEC units. We expect the construction to be completed in 2006.

Puna. In connection with the Puna project, the enhancement program is currently planned and is intended to increase the output of the project by an estimated 8 MW through the construction of OEC units. We expect such enhancement program will be completed in the last quarter of 2007 or the first quarter of 2008.

Momotombo. In connection with the Momotombo project, we plan to add approximately 5 MW through wells rework during 2006.

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Imperial Valley. In connection with the Imperial Valley project, we are currently developing a 10 MW power plant, which will be located in the Heber known geothermal resource area. The construction activity is expected to include the drilling of production and injection wells and the construction of an OEC unit.

In addition to the above projects, we plan to start the construction and enhancement of additional projects for a total amount of approximately $15 million.

Below is a table, which summarizes the estimated investments for the projects listed above (in millions):

Project Name				Estimated Investment				Invested as of December 31, 2005				Balance
Mammoth				$	8.3			$	3.0			$	5.3
Heber Complex					37.2				25.6				11.6
Ormesa					44.6				8.3				36.3
Desert Peak 2					36.7				36.0				0.7
Galena 2					25.4				4.1				21.3
Amatitlan					31.0				14.9				16.1
OREG 1					36.5				13.4				23.1
OrSumas					11.0				—				11.0
Steamboat Hills					10.0				—				10.0
Puna					10.3				—				10.3
Momotombo					5.0				—				5.0
Others					15.0				—				15.0
Total				$	271.0			$	105.3			$	165.7
Phase II of Olkaria III				$60.0 to $80.0
Imperial Valley				Not yet finalized

Other than the enhancements and new projects described above, and new projects that we may develop under new bids, we do not anticipate any other material capital expenditures in the near term for any of our operating projects, other than ordinary maintenance requirements, which we typically fund with internally generated cash.

Exposure to Market Risks

One market risk to which power plants are typically exposed is the volatility of electricity prices. Our exposure to such market risk is currently limited because our long-term power purchase agreements have fixed or escalating rate provisions that limit our exposure to changes in electricity prices. However, beginning in May 2007, the energy payments under the power purchase agreements of the Heber 1 and 2 projects, the Ormesa project and the Mammoth project will be determined by reference to the relevant power purchaser’s short run avoided costs. The Puna project is currently benefiting from energy prices which are higher than the floor under the Puna power purchase agreement, as a result of the high fuel costs that impact Hawaii Electric Light Company's avoided costs. In addition, under certain of the power purchase agreements for our projects in Nevada, the price that Sierra Pacific Power Company pays for energy and capacity is based upon California-Oregon border power market pricing. We estimate that energy payments will represent approximately 75% of those projects’ revenues after 2007 and as a result, expect that there will be some volatility in the revenues received from such projects.

As of December 31, 2005, 96.8% of our consolidated long-term debt (including amounts owed to our parent) was in the form of fixed rate securities and therefore not subject to interest rate volatility risk. As of such date, 3.2% of our debt was in the form of a floating rate instrument, exposing us to changes in interest rates in connection therewith. As of December 31, 2005, $17.1 million of our debt remained subject to some floating rate risk. As such, our exposure to changes in interest rates with respect to our long-term obligations is immaterial.

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Another market risk to which we are exposed is primarily related to potential adverse changes in foreign currency exchange rates, in particular the fluctuation of the U.S. dollar versus the new Israeli shekel (NIS). Risks attributable to fluctuations in currency exchange rates can arise when any of our foreign subsidiaries borrows funds or incurs operating or other expenses in one type of currency but receives revenues in another. In such cases, an adverse change in exchange rates can reduce such subsidiary’s ability to meet its debt service obligations, reduce the amount of cash and income we receive from such foreign subsidiary or increase such subsidiary’s overall expenses. Risks attributable to fluctuations in foreign currency exchange rates can also arise when the currency-denomination of a particular contract is not the U.S. dollar. All of our power purchase agreements in the international markets are either U.S. dollar-denominated or linked to the U.S. dollar. Our construction contracts from time to time contemplate costs which are incurred in local currencies. For example, in February 2005, we signed a large contract in the amount of approximately $23.1 million for a construction of a power plant which is denominated in Euros. A substantial portion of such contract will be matched by costs denominated in Euros. The way we often mitigate such risk is to receive part of the proceeds from the sale contract in the currency in which the expenses are incurred. In the past, we have not used any material foreign currency exchange contracts or other derivative instruments to reduce our exposure to this risk. In the future, we may use such foreign currency exchange contracts and other derivative instruments to reduce our foreign currency exposure to the extent we deem such instruments to be the appropriate tool for managing such exposure. We do not believe that our exchange rate exposure has or will have a material adverse effect on our financial condition, results of operations or cash flows.

We currently maintain our surplus cash in short-term, interest-bearing bank deposits and auction rate securities, which we refer to as PARS (deposits of entities with a minimum investment grade rating of AA (by Standard & Poor’s Ratings Services).

Effects of Inflation

We do not expect that the low inflation environment of recent years in most of the countries in which we operate will continue. To address rising inflation, some of our contracts include certain mitigating factors against any inflation risk. In connection with the Electricity Segment, inflation may directly impact an expense incurred for the operation of our projects, hence increasing the overall operating cost to us. The negative impact of inflation may be partially offset by price adjustments built into some of our power purchase agreements that could be triggered upon such occurrences. Energy payments pursuant to the power purchase agreements for the Mammoth project (after April 2007), Ormesa project (after April 2007), Heber 1 and 2 projects (after April 2007) and Steamboat 1/1A project will change because of our power purchasers’ underlying short run avoided costs. To the extent that inflation causes an increase in those short run avoided costs, higher energy payments could have an offsetting impact to any inflation-driven increase in our expenses. Similarly, the energy payments pursuant to the power purchase agreements for the Brady project, Steamboat 2/3 project, the Steamboat Hills project and the Burdette project increase every year through the end of the relevant terms of such agreements, though such increases are not directly linked to the CPI. Lease payments are generally fixed, while royalty payments are generally determined as a percentage of revenues and therefore are not significantly impacted by inflation.

The recent price increase in the cost of raw materials that we use in our Products Segment has not been due to inflation, but rather to a high demand for such raw materials which we believe mainly to result from demand generated by the Chinese market. In addition, the recent increase in construction costs, which we expect may intensify due to recent hurricane activity and an increase in drilling costs, has also not been due to inflation. This increase may cause a reduction in the profitability of our Products Segment, as well as an increase in the capital costs of our projects under construction and enhancement.

Overall, we believe that the impact of inflation on our business will not be significant.

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Contractual Obligations and Commercial Commitments

The following table sets forth our material contractual obligations as of December 31, 2005, excluding interest (in thousands):

				Payment of Principal Due By Period
				Remaining Total				2006				2007				2008				2009				2010				Thereafter
Long-term non-recourse and limited recourse debt				$	14,140			$	2,888			$	2,888			$	2,888			$	2,888			$	2,588			$	—
Long-term recourse debt					3,000				1,000				1,000				1,000				—				—				—
Senior Secured Notes due 2020					348,399				23,754				25,330				25,476				20,182				20,334				233,323
Ormat Industries notes payable					171,805				31,647				31,647				31,647				67,264				9,600				—
Total				$	537,344			$	59,289			$	60,865			$	61,011			$	90,334			$	32,522			$	233,323

The following table sets forth our interest payments payable in connection with our contractual obligations as of December 31, 2005 (in thousands):

				Payment of Interest Due By Period
				Remaining Total				2006				2007				2008				2009				2010				Thereafter
Long-term non-recourse and limited recourse debt				$	2,638			$	952			$	739			$	529			$	315			$	103			$	—
Long-term recourse debt					334				167				111				56				—				—				—
Senior Secured Notes due 2020					201,185				25,675				23,370				21,554				19,924				18,483				92,179
Ormat Industries notes payable					19,265				8,326				5,944				3,549				716				730				—
Total				$	223,422			$	35,120			$	30,164			$	25,688			$	20,955			$	19,316			$	92,179

Interest on the OFC Senior Secured Notes due in 2020 is fixed at a rate of 8.25%. Interest on the OrCal Senior Secured Notes due in 2020 is fixed at a rate of 6.21%. Interest on Ormat Industries notes payable in the amount of $121.1 million is fixed at the rate of 7.50%, while a capital note in the amount of NIS 240 million ($50.7 million) is interest free. Interest on the remaining debt is variable (based primarily on changes in LIBOR rates). Accordingly, for purposes of the above calculation of interest payments pertaining to variable rate debt, the methodology used to determine future LIBOR rates was the use of Constant Maturity Swaps.

The following table sets forth our future minimum lease payments under the Puna project’s lease, as of December 31, 2005 (in thousands):

				Future Minimum Lease Payments Due By Period
				Remaining Total				2006				2007				2008				2009				2010				Thereafter
Operating lease payments				$	116,131			$	5,904			$	6,887			$	7,573			$	8,013			$	7,567			$	80,187

Concentration of Credit Risk

Our credit risk is currently concentrated with a limited number of major customers: Sierra Pacific Power Company, Southern California Edison, Hawaii Electric Light Company, PNOC-Energy Development Corporation, The Kenya Power and Lighting Co. Ltd. and two electricity distribution companies which are assignees of Empresa Nicaraguense de Electricidad. If any of these electric utilities fails to make payments under its power purchase agreements with us, such failure would have a material adverse impact on our financial condition.

Southern California Edison accounted for 36.1%, 41.4% and 26.6% of our total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively. Southern California Edison is also

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the power purchaser and revenue source for our Mammoth project, which we account for separately under the equity method of accounting.

Sierra Pacific Power Company accounted for 14.1%, 12.9% and 9.5% of our total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively.

Following the acquisition of the Puna project, Hawaii Electric Light Company has become one of our key customers, accounting for approximately 15.2% and 7.1% of our total revenues for the years ended December 31, 2005 and 2004, respectively.

PNOC-Energy Development Corporation accounted for 0%, 1.4% and 10.6% of our total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively.

The two electric distribution companies which are assignees of Empresa Nicaraguense de Electricidad accounted for 4.7%, 5.1% and 9.7% of our total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively.

The Kenya Power and Lighting Co. Ltd. accounted for 4.3%, 4.5% and 8.1% of our total revenues for the years ended December 31, 2005, 2004 and 2003, respectively.

Government Grants and Tax Benefits

Our subsidiary, Ormat Systems, has received ‘‘Approved Enterprise’’ status under Israel’s Law for Encouragement of Capital Investments, 1959, with respect to two of its investment programs. One such approval was received in 1996 and the other was received in May 2004. As an Approved Enterprise, our subsidiary is exempt from Israeli income taxes with respect to income derived from the approved investment program for a period of two years commencing on the year it first generates profits from the approved investment program, and thereafter such income is subject to reduced Israeli income tax rates of 25.0% for an additional five years. These benefits are subject to certain conditions set forth in the certificate of approval from Israel’s Investment Center including, among other things, a requirement that Ormat Systems comply with Israeli intellectual property law, that all transactions between Ormat Systems and our affiliates be at arms length, and that there will be no change in control of more than 49% of Ormat Systems’ capital stock (including by way of a public offering) on a cumulative basis without the prior written approval of Israel's Investment Center.

Prior to 2003, our research and development efforts were partially funded through grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor. We currently have no such grants available or outstanding. Under Israeli law, we are required to pay royalties to the Israeli government based on revenues derived from the sale of products developed with the assistance of such grants. The applicable royalty rate is between 3.5% to 5.0%, and the amount of royalties required to be paid are capped at the amount of the grants received (in U.S. dollars). The outstanding balance of grants provided after January 1, 1999 accrue interest at a rate equal to the 12-month LIBOR, as published on the first day of the calendar year in which the particular grant was approved. Because the royalties are payable only from revenues, if any, derived from the relevant products, we only recognize a royalty expense to the government upon delivery of the product to our customers.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to Item 7A is included in Item 7, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’, of this annual report.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements of Ormat Technologies, Inc. and Subsidiaries
Management's Report on Internal Control Over Financial Reporting				95
Report of Independent Registered Public Accounting Firm				97
Consolidated Financial Statements as of December 31, 2005, and 2004 and for Each of the Three Years in the Period Ended December 31, 2005:
Consolidated Balance Sheets				99
Consolidated Statements of Operations and Comprehensive Income				100
Consolidated Statements of Stockholders’ Equity				101
Consolidated Statements of Cash Flows				102
Notes to Consolidated Financial Statements				103
Index to Financial Statements of Ormat Leyte Co. Ltd.(1)
Report of Independent Registered Public Accounting Firm				150
Financial Statements as of December 31, 2005, and for the Year Ended December 31, 2005, including unaudited financial statements as of December 31, 2004 and for the year ended December 31, 2004:
Balance Sheet				151
Statements of Income				152
Statements of Changes in Partners' Equity				153
Statements of Cash Flows				154
Notes to Financial Statements				155

(1)	As the Company’s 80% ownership interest in Ormat Leyte Co. Ltd. is accounted for by the equity method, separate financial statements of Ormat Leyte Co. Ltd. have been included pursuant to Rule 3-09 of Regulation S-X.

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MANAGEMENT'S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING

Management's Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

The Company's internal control over financial reporting includes those policies and procedures that

(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii)	provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company; and

(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision and participation of the Chief Executive Officer and Chief Financial Officer, conducted an assessment of the Company's internal control over financial reporting as of December 31, 2005 using the criteria established in Internal Control & Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of the Company's internal control over financial reporting. Based on such assessment, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2005.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report.

Remediation of Material Weakness in Internal Control Over Financial Reporting

A material weakness is a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.

As reported in Item 4 of our quarterly reports on Forms 10-Q/A for the quarterly periods ended June 30, 2005 and September 30, 2005, the Company did not maintain effective controls over the preparation, review, presentation and disclosure of the Company's condensed consolidated statement of cash flows. Specifically, the Company lacked effective controls to ensure that cash flows from a non-routine lease transaction were accurately disclosed in the Company's interim condensed consolidated statement of cash flows. This control deficiency resulted in the restatement of the Company's interim condensed consolidated financial statements for the quarters ended June 30, 2005 and September 30, 2005 to correct the cash flow presentation of prepayments received under the lease agreement. Additionally, this control deficiency could have resulted in a misstatement of the

95

presentation of amounts in the statements of cash flows that would result in a material misstatement to the Company's interim or annual consolidated financial statements that would not be prevented or detected. Accordingly, management determined this control deficiency constituted a material weakness as of those dates.

During the fourth quarter of 2005, in connection with our remediation plan, we: (i) developed a new control to remediate the material weakness identified; (ii) obtained sufficient evidence of the design and operating effectiveness of the new control and (iii) determined the new control has been in place for a sufficient period of time to permit the assessments of its design and operating effectiveness.

Specifically, our management implemented in the fourth quarter of 2005, a control to remediate the material weakness described above, requiring transactions of a non-routine nature to be reviewed by the Chief Financial Officer, who will determine whether sufficient expertise exists within the Company to determine the appropriate accounting treatment for the transaction, or if necessary, to consult with external experts. In addition, the Company continues to support a continuing education program for management and staff related to financial accounting and reporting. Additionally, as needed, management periodically reevaluates accounting decisions for non-routine transactions based on changes in generally accepted accounting principles.

Accordingly, we have determined the remediated control was effectively designed and had demonstrated effective operation for a sufficient period of time to enable us to conclude the material weakness described above has been remediated as of December 31, 2005.

96

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Ormat Technologies, Inc.:

We have completed an integrated audit of Ormat Technologies, Inc.'s 2005 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Ormat Technologies, Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management's assessment, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control - - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

97

only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Sacramento, California
March 27, 2006

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS 

				December 31,
				2005				2004
				(in thousands)
Assets
Current assets:
Cash and cash equivalents				$	26,976			$	36,750
Marketable securities					43,560				89,166
Restricted cash, cash equivalents and marketable securities					36,732				3,676
Receivables:
Trade					33,515				26,913
Related entities					524				2,413
Other					2,629				1,816
Inventories, net					5,224				6,046
Costs and estimated earnings in excess of billings on uncompleted contracts					8,883				3,164
Deferred income taxes					1,663				1,001
Prepaid expenses and other					3,256				2,377
Total current assets					162,962				173,322
Restricted cash, cash equivalents and marketable securities					—				19,339
Unconsolidated investments					47,235				48,818
Deposits and other					13,489				13,759
Deferred income taxes					5,376				3,044
Property, plant and equipment, net					491,835				466,826
Construction-in-process					128,256				60,177
Deferred financing and lease costs, net					17,412				15,873
Intangible assets, net					47,915				48,930
Total assets				$	914,480			$	850,088
Liabilities and Stockholders' Equity
Current liabilities:
Short-term bank credit				$	3,996			$	—
Accounts payable and accrued expenses					50,048				37,565
Billings in excess of costs and estimated earnings on uncompleted contracts					12,657				6,139
Current portion of long-term debt:
Limited and non-recourse					2,888				8,295
Full recourse					1,000				24,361
Senior secured notes (non-recourse)					23,754				6,090
Due to Parent, including current portion of notes payable to Parent					32,003				40,531
Total current liabilities					126,346				122,981
Long-term debt, net of current portion:
Limited and non-recourse					11,252				159,370
Full recourse					2,000				3,000
Senior secured notes (non-recourse)					324,645				183,399
Notes payable to Parent, net of current portion					140,162				171,809
Other liabilities					1,309				1,389
Deferred lease income					81,569				—
Deferred income taxes					22,004				18,368
Liabilities for severance pay					11,409				11,129
Asset retirement obligation					11,461				10,665
Total liabilities					732,157				682,110
Minority interest in net assets of subsidiaries					64				64
Commitments and contingencies (Notes 5, 6, 11, 13, 17 and 18)
Stockholders' equity:
Common stock, par value $0.001 per share; 200,000,000 shares authorized; 31,562,496 shares issued and outstanding					31				31
Additional paid-in capital					124,008				124,008
Unearned stock-based compensation					(153	)			(244	)
Retained earnings					55,824				44,441
Accumulated other comprehensive income (loss)					2,549				(322	)
Total stockholders' equity					182,259				167,914
Total liabilities and stockholders' equity				$	914,480			$	850,088

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

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 

				Year Ended December 31,
				2005				2004				2003
				(in thousands, except per share amounts)
Revenues:
Electricity:
Energy and capacity				$	104,975			$	100,281			$	77,752
Lease portion of energy and capacity					70,963				58,550				—
Lease income					1,431				—				—
Total electricity					177,369				158,831				77,752
Products:
Related party					7,959				—				—
Other					52,664				60,399				41,688
Total products					60,623				60,399				41,688
Total revenues					237,992				219,230				119,440
Cost of revenues:
Electricity:
Energy and capacity					70,328				63,300				46,726
Lease portion of energy and capacity					30,215				26,442				—
Lease expense					3,072				—				—
Total electricity					103,615				89,742				46,726
Products					45,236				46,336				29,494
Total cost of revenues					148,851				136,078				76,220
Gross margin					89,141				83,152				43,220
Operating expenses (income):
Research and development expenses					3,036				2,175				1,391
Selling and marketing expenses					7,876				7,769				7,087
General and administrative expenses					14,320				11,609				9,252
Gain on sale of geothermal resource rights					—				(845	)			—
Operating income					63,909				62,444				25,490
Other income (expense):
Interest income					4,308				1,316				607
Interest expense:
Parent					(10,635	)			(9,723	)			(1,874	)
Other					(44,682	)			(33,062	)			(6,246	)
Foreign currency translation and transaction losses					(439	)			(146	)			(316	)
Other non-operating income					512				112				464
Income before income taxes, minority interest, and equity in income of investees					12,973				20,941				18,125
Income tax provision					(4,690	)			(6,609	)			(2,506	)
Minority interest in earnings of subsidiaries					—				(108	)			(519	)
Equity in income of investees					6,894				3,567				559
Income before cumulative effect of change in accounting principle					15,177				17,791				15,659
Cumulative effect of change in accounting principle (net of tax benefit of $125,000)					—				—				(205	)
Net income					15,177				17,791				15,454
Other comprehensive income (loss), net of related taxes:
Gain (loss) in respect of derivative instruments designated for cash flow hedge (net of related tax of $1,518,000, $(198,000) and $0, respectively)					2,295				(322	)			—
Realized loss in respect of derivative instruments (net of related related tax of $347,000)					563				—				—
Unrealized gain on marketable securities available-for-sale (net of related tax benefit of $8,000, $0 and $0, respectively)					13				—				—
Comprehensive income				$	18,048			$	17,469			$	15,454
Basic and diluted earnings per share:
Income before cumulative effect of change
in accounting principle				$	0.48			$	0.72			$	0.67
Cumulative effect of change in accounting principle					—				—				(0.01	)
Net income				$	0.48			$	0.72			$	0.66
Weighted average number of shares outstanding					31,563				24,806				23,214

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

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 

				Common Stock								Additional Paid-in Capital				Divisional Deficit				Unearned Stock-based Compensation				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
				Shares				Amount
				(in thousands)
Balance at December 31, 2002					23,214			$	23			$	6,988			$	(6,599	)		$	(111	)		$	27,536			$	—			$	27,837
Unearned stock-based compensation					—				—				14				—				(14	)			—				—				—
Amortization of unearned stock-based compensation					—				—				—				—				39				—				—				39
Distribution to Parent					—				—				—				(6,355	)			—				—				—				(6,355	)
Net income					—				—				—				1,691				—				13,763				—				15,454
Balance at December 31, 2003					23,214				23				7,002				(11,263	)			(86	)			41,299				—				36,975
Unearned stock-based compensation					—				—				52				—				(52	)			—				—				—
Amortization of unearned stock-based compensation					—				—				—				—				61				—				—				61
Conversion of note payable to Parent to equity					1,161				1				19,999				—				—				—				—				20,000
Reclassification of divisional deficit					—				—				—				10,236				(167	)			(10,069	)			—				—
Distribution to Parent for purchase of OSL (net of related tax of $3,747,000)					—				—				—				—				—				(1,053	)			—				(1,053	)
Cash dividend declared, $0.1025 per share					—				—				—				—				—				(2,500	)			—				(2,500	)
Issuance of common stock in initial public offering					7,188				7				96,955				—				—				—				—				96,962
Loss in respect of derivative instruments designated for cash flow hedge (net of related tax of $198,000)					—				—				—				—				—				—				(322	)			(322	)
Net income					—				—				—				1,027				—				16,764				—				17,791
Balance at December 31, 2004					31,563				31				124,008				—				(244	)			44,441				(322	)			167,914
Amortization of unearned stock-based compensation					—				—				—				—				91				—				—				91
Cash dividend declared, $0.12 per share					—				—				—				—				—				(3,794	)			—				(3,794	)
Net income					—				—				—				—				—				15,177				—				15,177
Other comprehensive income, net of related taxes:
Gain in respect of derivative instruments designated for cash flow hedge (net of related tax of $1,518,000)					—				—				—				—				—				—				2,295				2,295
Realized loss in respect of derivative instruments (net of related tax benefit of $347,000)					—				—				—				—				—				—				563				563
Unrealized gain on marketable securities available-for-sale (net of related tax of $8,000)					—				—				—				—				—				—				13				13
Balance at December 31, 2005					31,563			$	31			$	124,008			$	—			$	(153	)		$	55,824			$	2,549			$	182,259

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

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

				Year Ended December 31,
				2005				2004				2003
				(in thousands)
Cash flows from operating activities:
Net income				$	15,177			$	17,791			$	15,454
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization					36,006				34,695				16,619
Accretion of asset retirement obligation					774				588				231
Amortization of deferred lease income					(1,431	)			—				—
Extinguishment of deferred financing costs					4,180				776				—
Minority interest in earnings of subsidiaries					—				108				519
Equity in income of investees					(6,894	)			(3,567	)			(559	)
Distributions from unconsolidated investments					5,694				3,996				—
Realization of loss related to interest rate cap transactions					910				1,637				—
Gain on sale of geothermal resource rights					—				(845	)			—
Recovery of doubtful accounts					—				—				(234	)
Deferred income tax provision					(2,182	)			3,785				2,060
Cumulative effect of change in accounting principle					—				—				205
Changes in operating assets and liabilities, net of acquisitions:
Receivables					(7,415	)			3,004				1,343
Costs and estimated earnings in excess of billings on uncompleted contracts					(5,719	)			(1,242	)			(1,922	)
Inventories					822				(2,334	)			2,236
Prepaid expenses and other					(879	)			(334	)			32
Deposits and other					(335	)			1,576				(231	)
Accounts payable and accrued expenses					7,171				5,099				5,266
Due from/to related entities, net					1,889				(627	)			(150	)
Billings in excess of costs and estimated earnings on uncompleted contracts					6,518				(1,704	)			4,691
Other liabilities					(80	)			(80	)			—
Proceeds from operating lease transaction					83,000				—				—
Deferred lease transaction costs					(3,266	)			—				—
Liability for severance pay					998				1,136				459
Net cash provided by operating activities					134,938				63,458				46,019
Cash flows from investing activities:
Distributions from unconsolidated investments					2,844				2,500				—
Marketable securities, net					45,606				(90,916	)			—
Net change in restricted cash, cash equivalents and marketable securities					(13,696	)			(9,039	)			(2,403	)
Capital expenditures					(116,749	)			(38,122	)			(25,296	)
Decrease of cash resulting from deconsolidation of OLCL					—				(1,801	)			—
Proceeds from sale of geothermal resource rights					—				2,420				—
Increase in severance pay fund asset, net					(503	)			(463	)			(446	)
Repayment from unconsolidated investments					890				788				794
Intangible asset acquired					(1,800	)			—				—
Cash paid for acquisitions, net of cash received					—				(175,950	)			(257,829	)
Net cash used in investing activities					(83,408	)			(310,583	)			(285,180	)
Cash flows from financing activities:
Due to Parent, net					(40,175	)			50,836				(6,937	)
Proceeds from issuance of notes payable to Parent					—				—				126,339
Disributions to minority shareholders					—				—				(940	)
Proceeds from interest rate lock transactions					4,334				—				—
Proceeds from short term bank credit					3,996				—				—
Proceeds from issuance of long-term debt					165,000				210,000				178,018
Repayments of short-term and long-term debt					(183,975	)			(68,194	)			(78,336	)
Deferred debt issuance costs					(4,190	)			(10,782	)			(6,794	)
Payment for interest rate caps					—				(3,820	)			—
Proceeds from initial public offering, net of issuance costs					—				96,962				—
Cash dividends paid					(6,294	)			—				—
Net cash provided by (used in) financing activities					(61,304	)			275,002				211,350
Net increase (decrease) in cash and cash equivalents					(9,774	)			27,877				(27,811	)
Cash and cash equivalents at beginning of year					36,750				8,873				36,684
Cash and cash equivalents at end of year				$	26,976			$	36,750			$	8,873
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest				$	24,266			$	28,531			$	4,937
Income taxes				$	2,690			$	9				—
Supplemental non-cash investing and financing activities:
Increase in asset retirement cost				$	22			$	2,210			$	2,475
Increase in asset retirement obligation				$	22			$	2,210			$	2,805
Conversion of amounts due to Parent to notes payable to Parent				$	—			$	—			$	50,655
Conversion of notes payable to Parent to equity				$	—			$	20,000			$	—
Accounts payable related to purchases of property, plant and equipment				$	7,527			$	1,306			$	748
Accrued liabilities for deferred debt issuance and lease costs				$	285			$	—			$	—
Cash dividend declared				$	—			$	2,500			$	—
Business acquisition — See Note 2.

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

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Business

Ormat Technologies, Inc. (the ‘‘Company’’), a subsidiary of Ormat Industries Ltd. (the ‘‘Parent’’), is engaged in the geothermal and recovered energy business, including the supply of equipment that is manufactured by the Company and the design and construction of such power plants for projects owned by the Company or for third parties. The Company owns and operates geothermal power plants in various countries, including the United States of America (‘‘U.S.’’), Kenya, Nicaragua, the Philippines and Guatemala. The Company’s equipment manufacturing operations are located in Israel.

Most of the Company’s domestic power plant facilities are Qualifying Facilities under the Public Utility Regulatory Policies Act (‘‘PURPA’’). The power purchase agreements for certain of such facilities are dependent upon their maintaining Qualifying Facility status. Management believes that all of the facilities were in compliance with Qualifying Facility status as of December 31, 2005.

Recapitalization

On June 29, 2004, the Company amended and restated its certificate of incorporation, pursuant to which the authorized capital stock of the Company was increased from 754 shares of $1.00 par value common stock to 155,892,833 authorized shares, comprised of 150,892,833 shares of $0.001 par value common stock and 5,000,000 shares of $0.001 par value preferred stock, of which 500,000 shares have been designated as Series A Preferred Stock. The Company’s Board of Directors has the authority to issue the undesignated preferred stock in one or more series and to establish the rights, preferences, privileges and restrictions thereof. On October 21, 2004, the Company further amended and restated its certificate of incorporation, pursuant to which the authorized capital stock of the Company was increased from 150,892,833 shares of $0.001 common stock immediately following the split (see below) to 200,000,000 authorized shares of $0.001 par value common stock.

Additionally, on June 29, 2004, the issued and outstanding 151 shares of $1.00 par value common stock were divided and converted (stock split) to 23,214,281 shares of $0.001 par value common stock.

Further, on June 29, 2004, $20 million outstanding pursuant to the note payable to the Parent was converted to 1,160,714 shares of $0.001 par value common stock of the Company. Such conversion reduced the amounts payable pursuant to the Parent Loan Agreement and increased the stockholder’s equity by $20 million and no gain or loss was recognized as a result thereof.

On October 21, 2004, the Board of Directors approved a 1-for-1.325444 reverse stock split of the Company’s common stock. Accordingly, all common share and per common share amounts in these consolidated financial statements have been restated to give retroactive effect to the reverse stock split for all years presented. The par value of the common stock remained at $0.001 per share.

Cash Dividend

On October 21, 2004, the Company’s Board of Directors declared, approved and authorized the payment of a cash dividend in the aggregate amount of $2.5 million ($ 0.1025 per share). Such dividend was paid on March 2, 2005 and was presented in the balance sheet as of December 31, 2004, in the ‘‘Due to Parent’’ balance.

During the year ended December 31, 2005, the Company’s Board of Directors declared, approved and authorized the payment of cash dividends in the aggregate amount of $3.8 million ($ 0.12 per share). Such dividends were paid during the year ended December 31, 2005.

Initial Public Offering

In November 2004, the Company completed an initial public offering (‘‘IPO’’) of 7,187,500 shares of common stock. Net proceeds to the Company after deducting underwriting fees and offering related expenses, were approximately $97.0 million.

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rounding

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

Reclassification

Certain comparative figures have been reclassified to conform to the current year presentation.

Basis of presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, an 85% interest in OrYunnan Geothermal Co. Ltd. (‘‘OrYunnan’’) and an 80% interest in Ormat Leyte Co, Ltd. (‘‘OLCL’’) prior to March, 31, 2004. All intercompany accounts and transactions are eliminated.

In November 1999, the Company, through a wholly owned subsidiary, entered into an agreement with Yunnan Province Geothermal Development Co. (‘‘YPGD’’) to form OrYunnan, a limited liability joint venture, whereby the Company is to contribute, for an 85% ownership interest, $2,550,000 and YPGD is to contribute, for the remaining 15% ownership interest, $450,000. Pursuant to such agreement, 15% of the capital contribution was made in April 2000, and the remaining portion is to be paid within 60 days after the date on which a power purchase agreement is executed. OrYunnan is currently in the process of negotiating a power purchase agreement. OrYunnan was formed for the purpose of utilizing, for electric power generation, all of the geothermal resources of Teng Chong County of the Yunnan Province in the People’s Republic of China.

OLCL is a limited partnership established for the purpose of developing, financing, constructing, owning, operating, and maintaining geothermal power plants in Leyte Province, the Philippines.

The Company’s consolidated balance sheets include 100% of the assets and liabilities of OrYunnan and of OLCL prior to March 31, 2004. The unrelated entity’s 15% interests in OrYunnan, and 20% interest in OLCL prior to March 31, 2004, have been reflected as ‘‘Minority interest in net assets of subsidiaries’’ in the Company’s consolidated balance sheets and the Company’s share in earnings therefrom have been reflected on the consolidated statements of operations and comprehensive income for all years presented and have been reflected in ‘‘Minority interest in earnings of subsidiaries’’ for OLCL through March 31, 2004 and for OrYunnan for all years reported. Intercompany accounts and transactions have been eliminated in the consolidation.

The Company accounts for its interests in partnerships and companies in which it has equal to or less than a 50% ownership interest under the equity method. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings or losses of such companies. The Company’s earnings in investments accounted for under the equity method have been reflected as ‘‘Equity in income of investees’’ on the Company’s consolidated statements of operations and comprehensive income.

Adoption of FIN No. 46R

In January 2003, the Financial Accounting Standards Board (‘‘FASB’’) issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB 51 (‘‘FIN No. 46’’), and amended it by issuing FIN No. 46R in December 2003. Among other things, FIN No. 46R generally deferred the effective date of FIN No. 46 to the quarter ended March 31, 2004. The objectives of FIN No. 46R are to provide guidance on the identification of Variable Interest Entities (‘‘VIEs’’) for which control is achieved through means other than ownership of a majority of the voting interest of the entity, and how to determine which company (if any), as the primary beneficiary, should consolidate the VIE. A variable interest in a VIE, by definition, is an asset, liability, equity, contractual arrangement or other economic interest that absorbs the entity’s economic variability.

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Effective as of March 31, 2004, the Company adopted FIN No. 46R. In connection with the adoption of FIN No. 46R, the Company concluded that OLCL, in which the Company has an 80% ownership interest, should be deconsolidated. OLCL’s operating results continued to be accounted for using the consolidated method of accounting for the three month period ended March 31, 2004. Effective April 1, 2004, the Company’s ownership interest in OLCL is accounted for using the equity method of accounting. The Company’s maximum exposure to loss as a result of its involvement with OLCL is estimated to be $5.5 million, which is the Company’s net investment at December 31, 2005.

The Company also has variable interests in certain other consolidated wholly owned VIEs that will continue to be consolidated because the Company is the primary beneficiary. Further, the Company has concluded that the Company’s remaining significant equity investments do not require consolidation as they are not VIEs.

Purchase of the power generation business from the Parent

As of July 1, 2004, a wholly owned subsidiary of the Company, Ormat Systems Ltd. (‘‘OSL’’), an Israeli company, acquired from the Parent for $11 million the power generation business which includes the manufacturing and sale of energy-related products pertaining mainly to the geothermal and recovered energy industry.

The Company considers this business to be synergistic with its ownership and operation of geothermal power plants as well as to the construction of the projects (on a turnkey basis). In addition to acquiring the tangible net assets of the power generation business, OSL assumed the title and interest to: (i) certain related contracts, and (ii) liabilities and rights under agreements with employees and consultants, and obtained a perpetual license of all intellectual property pertaining to the power generation business from the Parent.

In connection with the acquisition, OSL and the Parent have entered into an agreement whereby OSL will provide to the Parent, for a monthly fee of $10,000, certain corporate administrative services, including the services of executive officers. In addition, OSL has agreed to provide the Parent with services of certain skilled engineers at OSL’s cost plus 10%, adjusted annually for changes in the Israeli Consumer Price Index. Such agreements may be terminated by either party after the initial term which ends in 2009.

Also in connection with the acquisition, OSL entered into a rental agreement with the Parent for the use of office and manufacturing facilities in Yavne, Israel, for a monthly rent of $52,000, adjusted annually for changes in the Israeli Consumer Price Index, plus tax and other costs to maintain the properties. The term of the rental agreement is 59 months and it expires in June 2009, which term has been extended by a consent of the Israeli Land Administration for a period the shorter of: (i) 25 years (including the initial term) or (ii) the remaining period of the underlying lease agreement with the Israel Land Administration (which terminates between 2018 and 2047).

The Company has recorded the purchase of the power generation business at historical net book value, and has accounted for the purchase as a transfer of assets between entities under common control in a manner similar to the pooling of interests; accordingly, all prior period consolidated financial statements of the Company have been restated to include the results of operations, financial position, and cash flows of the power generation business.

The financial statements for all years presented include the historical financial information of the Company prior to the acquisition of the power generation business, combined with the historical financial information of the acquired power generation business which was carved out of the Parent for all years presented. The difference between the assets and liabilities of the power generation business consists of accumulated retained earnings (deficit) as well as amounts due to/from Parent resulting from cash transfers. Such amounts have been aggregated and presented in the statements of

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stockholders’ equity as ‘‘divisional deficit’’ because it is not possible to distinguish the beginning balance as the records were not available to accurately break out the two components. On July 1, 2004, the effective date of the transaction, the divisional deficit was reclassified to retained earnings and unearned stock-based compensation. Retained earnings in the statements of stockholders’ equity for all years prior to the year ended December 31, 2004 represent the retained earnings of the Company prior to the acquisition of the power generation business.

The preparation of these financial statements included the use of ‘‘carve out’’ accounting procedures wherein certain assets, liabilities, revenues and expenses historically recorded or incurred at the Parent level, which were related to OSL, have been identified and allocated as appropriate to present the financial position, operating results, and cash flows of OSL for the years presented.

The statements of operations for OSL for the year ended December 31, 2003 and for the period from January 1, 2004 to June 30, 2004 were carved out using specific identification for revenues and cost of revenues, research and development expense, selling and marketing expenses, general and administrative expenses and interest income and expense. The income tax provision was recalculated based on the separate return method pursuant to Statement of Financial Accounting Standards (‘‘SFAS’’) No. 109, Accounting for Income Taxes.

Of the $11.0 million purchase price, the Company paid $4.8 million in cash and assumed $6.2 million in debt and other liabilities. The excess of the consideration paid over the historical net book value of the purchased business has been recorded as a distribution to the Parent, which reduced stockholders’ equity by approximately $4.8 million at July 1, 2004. Because the deferred income taxes at June 30, 2004 had a full valuation allowance, there was no tax effect for the difference between the book and tax basis of the purchased assets and liabilities.

Cash and cash equivalents

The Company considers all highly liquid instruments, with an original maturity of three months or less, to be cash equivalents.

Marketable securities

Marketable securities consist of debt securities (mainly auction rate securities and commercial papers). The Company accounts for such securities in accordance with Statement of Financial Accounting Standards (‘‘SFAS’’) No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of the purchase and re-evaluates such classification at each balance sheet date. At December 31, 2005 and 2004 all of the Company’s investments in marketable securities were classified as available-for-sale securities and as a result, were reported at their fair value based upon the quoted market prices of such securities at year end. Net unrealized gains or losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Net realized gains or losses are reported in interest income. The net unrealized gains or losses at December 31, 2004 are immaterial.

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The marketable securities are included in the balance sheets at December 31, 2005 and 2004, as follows:

				December 31,
				2005				2004
				(dollars in thousands)
Marketable securities				$	43,560			$	89,166
Amount presented among short-term restricted cash, cash equivalents and marketable securities					14,645				1,750
Total				$	58,205			$	90,916

The cost and the fair value of the marketable securities at December 31, 2005 were $58,224 and $58,205, respectively. The cost of the marketable securities at December 31, 2004 approximates their fair value.

Restricted cash, cash equivalents and marketable securities

Under the terms of certain long-term debt agreements, the Company is required to maintain certain debt service reserve, cash collateral and operating fund accounts that have been classified as restricted cash, cash equivalents and marketable securities. Funds that will be used to satisfy obligations due during the next twelve months are classified as current restricted cash, cash equivalents and marketable securities, with the remainder classified as non-current restricted cash, cash equivalents and marketable securities. Such amounts are invested primarily in money market accounts, auction rate securities and commercial papers with a minimum investment grade of ‘‘AA’’. Auction rate securities are classified as available-for-sale.

Certain of the restricted cash accounts can be replaced by a letter of credit, and as further described in Note 18, as of December 31, 2004, two letters of credit aggregating $14.4 million were issued by the Company to release restriction on funds that were used as collateral for OFC’s 8¼% Senior Secured Notes (the ‘‘OFC Notes’’) and loan agreement with Beal Bank, SSB (‘‘Beal Bank’’). As of December 31, 2005, such letters of credit had not been renewed by the Company.

Concentration of credit risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments, marketable securities and accounts receivable.

The Company places its temporary cash investments and marketable securities with high credit quality financial institutions located in the U.S. and in foreign countries. At December 31, 2005 and 2004, the Company had deposits totaling $9,889,000 and $30,980,000, respectively, in four and six, respectively, U.S. financial institutions that were federally insured up to $100,000 per account. At December 31, 2005 and 2004, the Company’s deposits in foreign countries of approximately $11,935,000 and $9,184,000, respectively, were not insured.

At December 31, 2005 and 2004, accounts receivable related to operations in foreign countries amounted to approximately $11,017,000 and $7,963,000, respectively. At December 31, 2005 and 2004, accounts receivable from the Company’s major customers that have generated 10% or more of its revenues (see Note 15) amounted to approximately 59% and 80% of the Company’s accounts receivable, respectively.

Southern California Edison Company (‘‘SCE’’) accounted for 36.1%, 41.4% and 26.6% of the Company’s total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively. SCE is also the power purchaser and revenue source for the Mammoth project, which is accounted for

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separately under the equity method. Sierra Pacific Power Company accounted for 14.1%, 12.9% and 9.5% of the Company’s total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively. Following the acquisition of the Puna project, Hawaii Electric Light Company has become one of the Company’s key customers, accounting for approximately 15.2% and 7.1% of our total revenues for the years ended December 31, 2005 and 2004, respectively. PNOC-Energy Development Corporation accounted for 0%, 1.4% and 10.6% of the Company’s total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively. The two electric distribution companies which are assignees of Empresa Nicaraguense de Electricidad accounted for 4.7%, 5.1% and 9.7% of the Company’s total revenues for the three years ended December 31, 2005, 2004 and 2003, respectively. The Kenya Power and Lighting Co. Ltd. accounted for 4.3%, 4.5% and 8.1% of the Company’s total revenues for the years ended December 31, 2005, 2004 and 2003, respectively.

The Company performs ongoing credit evaluations of its customers’ financial condition. The Company requires the customer in Nicaragua to provide a cash security arrangement for its payment obligations. The Company has historically been able to collect on substantially all of its receivable balances, and accordingly, no provision for doubtful accounts has been made.

Inventories

Inventories consist primarily of raw material parts and sub assemblies for power units, and are stated at the lower of cost or market value, using the moving-average cost method and are stated net of provision for slow-moving and obsolescence, which was not significant.

Deposits and other

Deposits and other consist primarily of performance bonds for construction projects, a long-term insurance contract and derivative instruments.

Property, plant and equipment

Property, plant and equipment are stated at cost. All costs associated with the acquisition, development and construction incurred as part of the construction of power plants operated by the Company are capitalized. Major improvements are capitalized and repairs and maintenance (including major maintenance) costs are expensed. Power plants operated by the Company are depreciated using the straight-line method over the term of the relevant power purchase agreement, which range from 12 to 25 years (see Note 13). The geothermal power plants in the Philippines and Nicaragua are to be fully depreciated over the period that the plants are owned by the Company. The other assets are depreciated using the straight-line method over the following estimated useful lives of the assets:

Leasehold improvements				15-20 years
Machinery and equipment — manufacturing				10 years
Machinery and equipment — computers				3-5 years
Office equipment — furniture and fixtures				5-15 years
Office equipment — other				5-10 years
Automobiles				5-7 years

The cost and accumulated depreciation of items sold or retired are removed from the accounts. Any resulting gain or loss is recognized currently and is recorded in operating income.

The Company capitalizes interest costs as part of constructing power plant facilities. Such capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Capitalized interest costs amounted to approximately $3,504,000, $628,000 and $297,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

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Asset retirement obligation

As required by SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets, which was amended by FASB Interpretation (‘‘FIN’’) No. 47, Accounting for Conditional Retirement Obligations, an Interpretation of FASB Statement No.143, the Company records the fair value of a legal liability for an asset retirement obligation in the period in which it is incurred. The Company’s legal liabilities include plugging wells and post-closure costs of geothermal power producing sites. When a new liability for asset retirement obligations is recorded, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. At retirement, an entity settles the obligation for its recorded amount or incurs a gain or loss.

Deferred financing and lease transaction costs

Deferred financing costs are amortized over the term of the related obligation using the effective interest method. Amortization of deferred financing costs is presented as interest expense in the statement of operations. Accumulated amortization related to deferred financing costs amounted to $2,422,000 and $1,708,000 at December 31, 2005 and 2004, respectively. Amortization expense for the years ended December 31, 2005, 2004 and 2003 amounted to $6,087,000, $2,705,000 and $576,000, respectively. Amortization expense for the years ended December 31, 2005 includes $4,180,000, which represent the write-off of the balance of the deferred financing costs as of the date of the repayment of the Beal Bank loan (see Note 9).

Deferred transaction costs relating to the Puna operating leases (see Note 10) in the amount of $4,333,000 are amortized, using the straight-line method over the 23-year term of the Project Lease. Amortization of deferred financing costs is presented in cost of revenues in the statement of operations. Accumulated amortization related to deferred lease costs amounted to $117,000 at December 31, 2005. Amortization expense for the year ended December 31, 2005 amounted to $117,000.

Intangible assets

Intangible assets consist of allocated acquisition costs of power purchase agreements, which are amortized over the 13 to 25-year terms of the agreements using the straight-line method.

Impairment of long-lived assets and long-lived assets to be disposed of

Long-lived assets including unconsolidated investments and power purchase agreements are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management believes that no impairment exists for long-lived assets, however, future estimates as to the recoverability of such assets may change based on revised circumstances.

Derivative instruments

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). SFAS

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No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The Company maintains a risk management strategy that incorporates the use of interest rate swaps and interest rate caps to minimize significant fluctuation in cash flows and/or earnings that are caused by interest rate volatility. Gains or losses on contracts that initially qualify for cash flow hedge accounting, net of related taxes are included as a component of other comprehensive income or loss and are subsequently reclassified into earnings when interest on the related debt is paid. Gains or losses on contracts that are not designated to qualify as a cash flow hedge are included as a component of interest expense.

The Company is subject to the provisions of SFAS No. 133 Derivative Implementation Group (‘‘DIG’’) Issue No. C15, Normal Purchases and Normal Sales Exception for Certain Option-Type Contracts and Forward Contracts in Electricity, which expands the requirements for the normal purchase and normal sales exception to include electricity contracts entered into by a utility company when certain criteria are met. Also under DIG Issue No. C15, contracts that have a price adjustment clause based on an index that is not directly related to the electricity generated, as defined in SFAS No. 133, do not meet the requirements for the normal purchases and normal sales exception. The Company has power sales agreements that qualify as derivative instruments under DIG Issue No. C15 because they have a price adjustment clause based on an index that does not directly relate to the sources of the power used to generate the electricity. In June 2003, the FASB issued DIG Issue No. C20, Scope Exceptions: Interpretation of the Meaning of Not Clearly and Closely Related in Paragraph 10(b) regarding Contracts with a Price Adjustment Feature. DIG Issue No. C20 superseded DIG Issue No. C11, Interpretation of Clearly and Closely Related in Contracts That Qualify for the Normal Purchases and Normal Sales Exception, and specified additional circumstances in which a price adjustment feature in a derivative contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under SFAS No. 133. DIG Issue No. C20 was effective as of the first day of the fiscal quarter beginning after July 10, 2003, (i.e. October 1, 2003, for the Company). In conjunction with initially applying the implementation guidance, DIG Issue No.C20 requires contracts that did not previously qualify for the normal purchases normal sales scope exception, and do qualify for the exception under DIG Issue No. C20, to freeze the fair value of the contract as of the date of the initial application, and amortize such fair value over the remaining contract period. Upon adoption of DIG Issue No. C20, the Company elected the normal purchase and normal sales scope exception under SFAS No. 133 related to its power purchase agreements. Such adoption did not have a material impact on the Company’s consolidated financial position and results of operations.

Foreign currency translation

The functional currency of all foreign entities is the reporting currency (U.S. dollar or dollar). For these entities, monetary assets and liabilities are translated at the current exchange rate, while non-monetary items are translated at historical rates. Income and expense items are translated at the average exchange rate for the year, except for depreciation, which is translated at historical rates. Translation adjustments and transaction gains or losses are included in results of operations.

Comprehensive income reporting

The Company accounts for comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive Income, which requires comprehensive income and its components to be reported when a company has items of other comprehensive income. Comprehensive income includes net

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income plus other comprehensive income, which for the Company consists of unrealized gain or loss on marketable securities available-for-sale and the mark-to-market gains or losses on derivative instruments designated for cash flow hedge.

Revenues and cost of revenues

Revenues are primarily related to: (i) sale of electricity from geothermal power plants owned and operated by the Company; and (ii) geothermal and recovered energy power plant equipment engineering, sale, construction and installation and operating services.

Revenues related to the sale of electricity from geothermal power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. As described below, for power purchase agreements (‘‘PPAs’’) acquired as part of the projects purchased since July 1, 2003 (see Note 2), revenues related to the lease element of the PPA are included as ‘‘lease portion of energy and capacity’’ revenues, with the remaining revenues related to the production and delivery of energy presented as ‘‘energy and capacity’’. Lease income and lease expense are recognized ratably over the lease periods.

Revenues from engineering, operating services, and parts and product sales are recorded upon providing the service or delivery of the products and parts. Revenues from the supply and/or construction of geothermal and recovered energy power plant equipment and other equipment on behalf of others are recognized on the percentage completion method. Revenue is based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.

In May 2003, the Emerging Issues Task Force (‘‘EITF’’) reached consensus in EITF Issue No. 01-8, Determining Whether an Arrangement Contains a Lease, to clarify the requirements of identifying whether an arrangement contains a lease at its inception. The guidance in the consensus is designed to broaden the scope of arrangements, such as power purchase agreements, accounted for as leases. EITF Issue No. 01-8 requires both parties to an arrangement to determine whether a service contract or similar arrangement is, or includes, a lease within the scope of SFAS No. 13, Accounting for Leases. The consensus is being applied prospectively to arrangements agreed to, modified, or acquired in business combinations on or after July 1, 2003. The adoption of EITF Issue No. 01-8 effective July 1, 2003 did not have a material effect on the Company’s financial position or results of operations. As further discussed in Note 13, PPAs acquired as part of the projects purchased since July 1, 2003 (Heber 1 and 2, Steamboat 2/3, Steamboat Hills, and Puna projects, see Note 2), contain lease elements within the scope of SFAS No. 13. Lease revenue related to the Heber 1 and 2 projects from the date of acquisition (December 18, 2003) to December 31, 2003 was not material.

Warranty on products sold

The Company generally provides a one-year warranty against defects in workmanship and materials related to the sale of products for electricity generation. Estimated future warranty obligations are provided by charges to operations in the period in which the related revenue is recognized. Such charges have historically been immaterial.

Research and development

Research and development costs incurred by the Company for the development of existing and new geothermal, recovered energy and remote power technologies are expensed as incurred. Grants

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ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

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received from the Office of the Chief Scientist (‘‘OCS’’) of the Israeli Government and from the U.S. Department of Energy are offset against the related research and development expenses. Such grants amounted to $1,275,000, $86,000 and $142,000 during the years ended December 31, 2005, 2004, and 2003, respectively.

Advertising expense

Advertising costs are expensed as incurred and totaled $180,000, $74,000 and $58,000 for the years ended December 31, 2005, 2004, and 2003, respectively.

Patent expense

Patents are internally developed, and therefore costs are expensed as incurred and totaled $252,000, $290,000 and $377,000 for the years ended December 31, 2005, 2004, and 2003, respectively.

Income taxes

Income taxes are accounted for using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of current and deferred tax assets and liabilities are based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The Company accounts for investment tax credits and production tax credits as a reduction to income taxes in the year in which the credit arises. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Earnings per share

Basic earnings per share is computed by dividing net income available to common stock shareholders by the weighted average number of shares of common stock outstanding for the year. The Company does not have any equity instruments that are dilutive, except for employee stock options which were granted on November 10, 2004 and on November 9, 2005 and whose dilutive effect on the net income per share for the years ended December 31, 2005 and 2004 is immaterial. The stock options granted to employees of the Company in the Parent’s stock are not dilutive to the Company’s earnings per share.

Stock-based compensation

The Company accounts for stock-based compensation based on the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (‘‘APB No. 25’’), and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, and other related interpretations which states that no compensation expense is required to be recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of common stock on the grant date. In the event that stock options are granted at a price lower than the fair market value at that date, the difference between the fair market value of the common stock and the exercise price of the stock options is recorded as unearned compensation. Unearned compensation is amortized to compensation expense over the vesting period applicable to the stock option. The Company has adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as it relates to stock options granted to employees, which requires pro forma net income and earnings per share be disclosed based on the fair value of the options granted at the date of the grant.

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The Company calculated the fair value of each option on the date of grant using the Black-Scholes option pricing model using the following assumptions:

				Year Ended December 31,
				2005				2004				2003
For stock options issued by the Company:
Risk-free interest rates					4.5	%			3.6	%			—
Expected lives (in years)					5				5				—
Dividend yield					1	%			4	%			—
Expected volatility					32	%			40	%			—
For stock options issued by the Parent:
Risk-free interest rates					—				4.7	%			4.7	%
Expected lives (in years)					—				5				5
Dividend yield					—				0	%			0	%
Expected volatility					—				28	%			31	%

Had compensation cost for the options granted to employees of the Company been determined based on the fair value method prescribed by SFAS No. 123, the Company’s pro forma net income and earnings per share would have been as follows:

				Year Ended December 31,
				2005				2004				2003
				(In thousands, except per share amounts)
Net income:
As reported				$	15,177			$	17,791			$	15,454
Add: Total stock-based employee compensation expense included in reported net income, net of tax					91				61				24
Deduct: Total stock-based employee compensation expense in respect of the Company's stock options determined under fair value based method, net of tax					(65	)			(6	)			—
Deduct: Total stock-based employee compensation expense in respect of the Parent's stock options determined under fair value based method, net of tax					(307	)			(685	)			(175	)
Pro forma net income				$	14,896			$	17,161			$	15,303
Basic and diluted earnings per share:
As reported				$	0.48			$	0.72			$	0.66
Pro forma				$	0.47			$	0.69			$	0.66

Fair value of financial instruments

The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. The marketable securities are presented at fair value. The fair value of long-term debt is estimated based on the current borrowing rates for similar issues, which approximates carrying amount for all long-term debt except for the OFC Senior Secured Notes. For the OFC Senior Secured Notes (see Note 9) such fair value amounted to $185.2 million and $191.9 million compared to carrying amount of $183.4 million and $189.5 million at December 31, 2005 and 2004, respectively.

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Accounting estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of such financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

New accounting pronouncements

SFAS No. 123 (Revised 2004) — Share-Based Payments

In December 2004, the FASB issued the revised SFAS No. 123, Share-Based Payment (‘‘SFAS No. 123R’’), which addresses the accounting for share-based payment transactions in which a company obtains employee services in exchange for: (i) equity instruments of the company, or (ii) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R eliminates the ability to account for employee share-based payment transactions using APB No. 25 and requires instead that such transactions be accounted for using the grant date fair value based method. On April 14, 2005, the Securities and Exchange Commission (‘‘SEC’’) adopted a new rule amending the compliance dates for SFAS No. 123R. In accordance with the new rule, the accounting provisions of SFAS No. 123R will be applicable to the Company for the fiscal year ending December 31, 2006. Early adoption of SFAS No. 123R is encouraged. SFAS No. 123R applies to all awards granted or modified after the Statement’s effective date. In addition, compensation cost for the unvested portion of previously granted awards that remain outstanding on the Statement’s effective date shall be recognized on or after the effective date, as the related services are rendered, based on the awards’ grant date fair value as previously calculated for the pro forma disclosure under SFAS No. 123.

The cumulative effect of adopting SFAS No. 123R as of its adoption date by the Company (January 1, 2006), based on the awards outstanding as of December 31, 2005, is immaterial. The Company expects that upon the adoption of SFAS No. 123R, it will apply the modified prospective application transition method, as permitted hereunder. Under such transition method, upon the adoption of SFAS No. 123R, the Company’s consolidated financial statements for periods prior to the effective date will not be restated.

SFAS No. 151 — Inventory Costs

In November 2004, the FASB issued SFAS No. 151, Inventory Costs — An Amendment of ARB 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This Statement requires that those items be recognized as current period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005 (January 1, 2006 for the Company). The provisions of SFAS No. 151 shall be applied prospectively. The Company does not expect SFAS No. 151 to have a material impact on its results of operations and financial position in future periods.

SFAS No. 153 — Exchange of Nonmonetary Assets

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets — An Amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29, Accounting for Nonmonetary Transactions. The amendments made by SFAS No. 153 are based on the principle that

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exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the exception for nonmonetary exchanges of similar productive assets and replace it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions in SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 (July 1, 2005 for the Company). Early application of SFAS No. 153 is permitted. The provisions of SFAS No. 153 shall be applied prospectively. The adoption by the Company of SFAS No. 153 effective July 1, 2005, did not have a material impact on its results of operations and financial position.

FIN No. 47 — Accounting for Conditional Retirement Obligations, an Interpretation of FASB Statement No. 143

In March 2005, the FASB issued FIN No. 47, Accounting for Conditional Retirement Obligations, an Interpretation of FASB Statement No. 143, which requires companies to recognize a liability for the fair value of a legal obligation to perform asset-retirement activities that are conditional on a future event, if the amount can be reasonably estimated. FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for the Company). The Company’s adoption of FIN No. 47 as of December 31, 2005 did not have an impact on its results of operations and financial positions.

SFAS No. 154 — Accounting Changes and Error Corrections

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS No. 154 also requires that a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005 (January 1, 2006 for the Company). The Company does not expect SFAS No. 154 to have a material impact on its results of operations and financial position in future periods.

EITF Issue No. 04-5 — Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights

In June 2005, the FASB issued EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights. EITF Issue No. 04-5 provides guidance in determining whether a general partner controls a limited partnership and therefore should consolidate the limited partnership. EITF Issue No. 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership and that the presumption may be overcome if the limited partners have either: (i) the substantive ability to dissolve or liquidate the limited partnership or otherwise remove the general partner without cause, or (ii) substantive participating rights. The effective date for applying the guidance in EITF No. 04-5 was: (i) June 29, 2005 for all new limited partnerships and existing limited partnerships for which the partnership agreement was modified after that date, and (ii) no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005 (January 1, 2006 for the Company), for all other limited partnerships. The Company is currently evaluating the impact of implementing of the provisions of EITF Issue No. 04-5 related to its investment in Mammoth-Pacific, L.P.

SFAS No. 155 — Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 replaces SFAS No. 133, Accounting for Derivative Instruments and Hedging

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Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. It also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 shall be effective for all financial instruments acquired or issued after the beginning of an entity's first year that begins after September 2006 (January 1, 2007 for the Company). The Company does not expect SFAS No. 155 to have a material impact on its results of operations and financial position in future periods.

NOTE 2 — BUSINESS ACQUISITIONS

Acquisitions in 2003

The Steamboat 1/1A Project

On June 30, 2003, the Company acquired from two groups of unrelated sellers, a 100% interest in Steamboat Geothermal LLC (‘‘SG’’), which owns geothermal power plants (‘‘Steamboat 1/1A’’) in Nevada. The purchase price of $1.2 million was paid in cash, of which, $2.1 million has been recorded as property, plant and equipment, less assumption of liabilities of $0.9 million. The acquisition has been accounted for under the purchase method of accounting and the acquired assets are being depreciated over their estimated useful lives of three to fifteen years. The results of operations of the Steamboat 1/1A Project have been included in the consolidated financial statements since July 1, 2003.

The Heber and Mammoth Projects

On December 18, 2003, the Company purchased certain geothermal assets from Covanta Energy Corporation (‘‘CEC’’), an unrelated entity for a total purchase price of $215.0 million, plus transaction costs of approximately $3.2 million. As further discussed in Note 9, the Company entered into a loan agreement and borrowed $154.5 million from Beal Bank, all of which was collateralized by the acquired assets described below, except for the assets related to the Company’s 50% ownership interest in Mammoth-Pacific, L.P. (‘‘Mammoth’’).

The assets purchased include: (i) a 100% ownership in Heber Geothermal Company, which owns a 38 megawatt (‘‘MW’’) geothermal power plant (‘‘Heber 1’’), located near Heber, California; (ii) a 100% ownership in Second Imperial Geothermal Company (‘‘SIGC’’), that has rights to the lessee position of a 34 MW geothermal power plant (‘‘Heber 2’’), adjacent to the Heber 1 plant; (iii) a 100% ownership in Heber Field Company, that has the rights to the geothermal resources used by Heber 1 and 2; and (iv) 50% ownership interest in Mammoth, that owns and operates three geothermal plants, with a combined generating capacity of 25 MW, located near the city of Mammoth, California.

In addition, the Company acquired all of the beneficial rights, title and interest in the Heber 2 geothermal power plant from the lessor for a purchase price of approximately $38.5 million.

The results of operations of the Heber Projects have been included in the consolidated financial statements since December 18, 2003. The results of operations of the Mammoth Project have been included in the consolidated financial statements using the equity method of accounting since December 18, 2003.

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The Steamboat 1/1A and the Heber and Mammoth projects’ asset acquisitions have been accounted for under the purchase method of accounting and the acquired assets and intangibles are being depreciated over their estimated useful lives of three to twenty years. The purchase price has been allocated based on independent valuation and management’s estimates as follows:

				Steamboat 1/1A				Heber and Mammoth Projects				Total
				(dollars in thousands)
Cash and cash equivalents				$	—			$	195			$	195
Restricted cash					—				5,959				5,959
Accounts receivable assumed					—				7,155				7,155
Property, plant and equipment					2,138				184,585				186,723
Intangibles (power purchase agreement)					—				25,273				25,273
Investment in Mammoth					—				38,632				38,632
Other assets assumed					—				270				270
Accounts payable and other liabilities assumed					(923	)			(2,559	)			(3,482	)
Asset retirement obligation					—				(2,701	)			(2,701	)
Total cash paid				$	1,215			$	256,809			$	258,024

The following unaudited pro forma financial information for the year ended December 31, 2003, assumes the Heber and Mammoth projects acquisitions occurred as of the beginning of the year, after giving effect to certain adjustments, including the amortization of intangible assets, interest expense on acquisition debt, depreciation based on the adjustments to the fair market value of the property, plant and equipment acquired, and related income tax effects. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that may occur in the future or that would have occurred had the acquisition of the Heber and Mammoth projects been affected on the dates indicated.

				Year Ended December 31, 2003
				(dollars in thousands, except per share amounts)
Revenues				$	185,571
Income before cumulative effect of accounting change					42,246
Net income					40,381
Basic and diluted earnings per share				$	1.74

Acquisitions in 2004

The Steamboat 2/3 Project and Meyberg Property

On February 11, 2004, the Company acquired 100% of the outstanding shares of capital stock of Steamboat Development Corp. (‘‘SDC’’), and certain real property (‘‘Meyberg Property’’) from an unrelated party. SDC owned certain leasehold interests as a lessee in the two Steamboat 2/3 geothermal power plants and certain related geothermal leases. On February 13, 2004, the Company acquired all of the beneficial rights, title, and interest in the Steamboat 2/3 geothermal power plants from the lessor. The Company acquired SDC and the Meyberg Property to increase its geothermal power plant operations in the U.S. The Company acquired the lessee and lessor positions of the Steamboat 2/3 geothermal power plants for a combined purchase price of approximately $82 million, plus transaction cost of approximately $0.8 million. The results of SDC’s operations have been included in the consolidated financial statements since February 11, 2004.

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The Steamboat Hills Project

On May 20, 2004, the Company completed the acquisition of 100% of the equity interests of Yankee Caithness Joint Venture, L.P. (‘‘Yankee’’), which we subsequently renamed as Steamboat Hills, from unrelated parties for a purchase price of approximately $20.3, including acquisition costs of approximately $0.1 million. Yankee owns and operates a geothermal electric generation plant, located in Steamboat Springs, Nevada. The Company purchased Yankee in order to increase its geothermal power plant operations. The results of Steamboat Hills’ operations have been included in the consolidated financial statements since May 20, 2004.

The Puna Project

On June 3, 2004, the Company completed the acquisition of 100% of the equity interests of Puna Geothermal Venture (‘‘PGV’’) from an unrelated party for a purchase price of $72.9 million, including acquisition costs of approximately $0.2 million. PGV operates a geothermal power plant (‘‘Puna Project’’) located on the Big Island of Hawaii. The Company purchased PGV in order to increase its geothermal power plant operations in the U.S. The results of PGV’s operations have been included in the consolidated financial statements since June 3, 2004.

The Puna Project was not in compliance with the threshold minimum performance requirements of its power purchase agreement at the time of the acquisition and in the year ended December 31, 2005, which non-compliance resulted in the imposition of sanctions that reduced the aggregate amounts of revenues payable to the Company from the relevant power purchaser, and amounted to $0.1 million for the year ended December 31, 2005 and $0.4 million for the period from June 3, 2004 to December 31, 2004.

The Steamboat 2/3 Project, the Meyberg Property, the Steamboat Hills Project and the Puna Project acquisitions have been accounted for under the purchase method of accounting and the acquired depreciable assets and intangibles are being depreciated over their estimated useful lives of 14 to 23 years. The purchase price (including of the lessee and lessor position in the Steamboat 2/3 Project) has been allocated based on independent valuation and management’s estimates as follows:

				Steamboat 2/3 Project and Meyberg Property				Steamboat Hills Project				Puna Project				Total
				(dollars in thousands)
Accounts receivable assumed				$	1,944			$	—			$	1,870			$	3,814
Property, plant and equipment					78,719				20,809				56,881				156,409
Intangibles (power purchase agreement)					4,499				—				14,992				19,491
Accounts payable and other liabilities assumed					(1,455	)			—				(179	)			(1,634	)
Asset retirement obligation					(941	)			(548	)			(641	)			(2,130	)
Total cash paid				$	82,766			$	20,261			$	72,923			$	175,950

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The following unaudited pro forma financial information for the years ended December 31, 2004 and 2003, assumes the Steamboat 2/3 Project and Meyberg Property, the Steamboat Hills Project and the Puna Project acquisitions occurred as of the beginning of the respective years, after giving effect to certain adjustments, including the amortization of intangible assets, interest expense on acquisition debt, depreciation based on the adjustments to the fair market value of the property, plant and equipment acquired, and related income tax effects. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that may occur in the future or that would have occurred had the acquisition of the Steamboat 2/3 Project and Meyberg Property, the Steamboat Hills Project and the Puna Project been affected on the dates indicated.

				Year Ended December 31,
				2004				2003
				(dollars in thousands, except per share amounts)
Revenues				$	231,788			$	155,900
Income before cumulative effect of accounting change					17,789				18,329
Net income					17,789				18,124
Basic and diluted earnings per share				$	0.72			$	0.78

NOTE 3 — INVENTORIES

Inventories consist of the following:

				December 31,
				2005				2004
				(dollars in thousands)
Raw materials and purchased parts for assembly				$	1,521			$	1,664
Self-manufactured assembly parts and finished products					3,703				4,382
Total				$	5,224			$	6,046

NOTE 4 — COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

				December 31,
				2005				2004
				(dollars in thousands)
Costs and estimated earnings incurred on uncompleted contracts				$	39,142			$	19,368
Less billings to date					42,916				(22,343	)
Total				$	(3,774	)		$	(2,975	)

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These amounts are included in the balance sheets under the following captions:

				December 31,
				2005				2004
				(dollars in thousands)
Costs and estimated earnings in excess of billings on uncompleted contracts				$	8,883			$	3,164
Billings in excess of costs and estimated earnings on uncompleted contracts					(12,657	)			(6,139	)
Total				$	(3,774	)		$	(2,975	)

The completion costs of the Company’s construction contracts are subject to estimation. Due to uncertainties inherent in the estimation process, it is reasonably possible that estimated contract earnings will be further revised in the near term.

NOTE 5 — UNCONSOLIDATED INVESTMENTS

Unconsolidated investments in power plant projects consist of the following:

				December 31,
				2005				2004
				(dollars in thousands)
Orzunil:
Investment				$	3,807			$	3,391
Advances					3,712				4,478
					7,519				7,869
Mammoth					34,240				36,361
OLCL					5,476				4,588
Total				$	47,235			$	48,818

From time to time, the unconsolidated power plants make distributions to their owners. Such distributions are deducted from the investments in such power plants.

The Zunil Project

The Company had as of December 31, 2005, a 21% ownership interest in Orzunil I de Electricidad, Limitada (‘‘Orzunil’’), a limited responsibility company incorporated in Guatemala and established for the purpose of the generation of power from a geothermal power plant in the Province of Quetzaltenango in Guatemala. The Company operates and maintains the geothermal power plant and the power purchaser supplies geothermal fluid to the power plant. The Company’s 21% ownership interest in Orzunil is accounted for under the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over Orzunil.

Notes receivable for cash advances to Orzunil consist of the following:

				December 31,								Interest Rate				Maturity Date
				2005				2004
				(dollars in thousands)
Subordinated				$	3,415			$	3,835			3-month LIBOR +4%				November 15, 2011
Junior subordinated					297				643			0%				see below
				$	3,712			$	4,478

All available cash after the debt service under the subordinated loan is used to repay the junior subordinated loan. Interest income received from these loans amounted to approximately $269,000, $214,000 and $270,000 during the years ended December 31, 2005, 2004 and 2003, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s equity in income of Orzunil was not significant for each of the years presented in these financial statements.

On March 13, 2006, the Company acquired an additional 50.8% ownership interest in the Zunil Project, and increased its existing 21.0% ownership interest to 71.8%. The purchase price was $14,750,000.

Due to recent hurricane activity, access roads and piping from the wells to the power plant in the Zunil Project were damaged and as a result, the Project was not in operation from October 14, 2005 to March 10, 2006. Orzunil has filed an insurance claim in respect of the damage, which is currently under discussion with the insurance company. OrZunil has already received an advance payment against the claim and believes that any final resolution of the claim will not have material impact on its results of operation.

The Mammoth Project

As discussed in Note 2, on December 18, 2003, the Company acquired a 50% interest in the Mammoth Project, which is comprised of three geothermal power plants located near the city of Mammoth, California. The purchase price was less than the underlying net equity of Mammoth by approximately $9.3 million. As such, the basis difference will be amortized over the remaining useful life of the property, plant and equipment and the power purchase agreements, which range from 12 to 17 years. Effective December 18, 2003, the Company operates and maintains the geothermal power plants under an operating and maintenance (‘‘O&M’’) agreement. The Company’s 50% ownership interest in Mammoth is accounted for under the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over Mammoth.

The condensed financial position and results of operations of Mammoth are summarized below:

				December 31,
				2005				2004
				(dollars in thousands)
Condensed balance sheets:
Current assets				$	7,430			$	11,088
Non-current assets					82,550				83,944
Current liabilities					1,114				924
Non-current liabilities					3,708				3,774
Partners' Capital					85,158				90,334

				Year Ended December 31,								Period from December 18, 2003 to December 31, 2003
				2005				2004
				(dollars in thousands)
Condensed statements of operations:
Revenues				$	15,782			$	15,815			$	672
Gross margin					4,021				3,830				252
Net income					3,824				3,521				246
Company's equity in income of Mammoth:
50% of Mammoth net income				$	1,912			$	1,761			$	123
Plus amortization of basis difference					593				593				18
					2,505				2,354				141
Less income taxes					(952	)			(894	)			—
Total				$	1,553			$	1,460			$	141

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Mammoth project sells its electrical output to Southern California Edison Company (‘‘SCE’’) under three separate power purchase agreements. Under the G-1 power purchase agreement, in certain circumstances, SCE or its affiliates has a right of first refusal to acquire the plant.

The Leyte Project (‘‘OLCL’’)

The Company holds an 80% interest in OLCL (which owns the Leyte Project), however, as further discussed in Note 1, upon the adoption of FIN No. 46R, the balance sheet of OLCL was deconsolidated as of March 31, 2004, and the income and cash flow statements have been deconsolidated effective April 1, 2004.

The condensed financial position and results of operations of OLCL are summarized below:

				December 31,
				2005				2004
				(dollars in thousands)
Condensed balance sheets:
Current assets				$	7,972			$	7,178
Non-current assets					11,267				16,864
Current liabilities					6,083				6,035
Non-current liabilities					3,810				8,889
Stockholders' equity					9,346				9,118

				Year Ended December 31, 2005				Period from April 1, 2004 to December 31, 2004
				(dollars in thousands)
Condensed statements of operations:
Revenues				$	13,134			$	8,217
Gross margin					6,246				2,592
Net income					5,271				838
Company's equity in income of OLCL:
80% of OLCL net income				$	4,217			$	670
Plus amortization of deferred revenue on intercompany profit ($2.2 million unamortized balance at December 31, 2005)					708				789
Total				$	4,925			$	1,459

OLCL’s operating results for all periods prior to March 31, 2004 have been accounted for on the consolidated method of accounting, and effective April 1, 2004, the Company’s ownership interest in OLCL is accounted for using the equity method of accounting.

In 1996, OLCL entered into a Build, Operate, and Transfer (‘‘BOT’’) agreement with PNOC-Energy Development Corporation (‘‘PNOC’’) in connection with the four geothermal power generation plants, with a total capacity of 49MW, located in Leyte, Philippines. The BOT agreement calls for OLCL to design, construct, own, and operate geothermal electricity generating plants, utilizing the geothermal resources of the Leyte Geothermal Power Optimization Project Area. During 1997, the power plants started commercial operations and began selling power to PNOC under a ten year power purchase agreement (tolling arrangement). OLCL receives capacity and energy fees from PNOC established by the BOT agreement. Fees are paid each month through the term of the BOT agreement and vary based on plant performance. OLCL owns the plants for a ten-year period ending

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September 2007, at which time they will be transferred to PNOC for no further consideration. The Company does not anticipate any material financial loss as a result of such transfer, although going forward this will reduce the Company's foreign generation capacity by 49 MW.

In connection with the construction of the four geothermal power generation plants, OLCL obtained a term loan (‘‘Term Loan’’) amounting to approximately $44.5 million from the Export-Import Bank of the government of the United States (‘‘Eximbank’’). Principal is payable in equal quarterly installments through July 2007. Interest on the Term Loan is at a fixed rate of 6.54% and is payable quarterly. The balance of the Term Loan as of December 31, 2005 and 2004 is $8,890,000 and $13,969,000, respectively. The Term Loan is collateralized by a mortgage on all real property, an assignment of revenues, and the pledge of partnership interests in OLCL. There are various covenants under the Term Loan, which include maintaining minimum levels of equity ratio, as defined, and limitations on additional indebtedness and payment of dividends. As of December 31, 2005, Management believes OLCL was in compliance with the covenants under the Term Loan.

NOTE 6 — PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, consist of the following:

				December 31,
				2005				2004
				(dollars in thousands)
Land				$	11,521			$	11,442
Leasehold improvements					966				966
Machinery and equipment					13,558				11,579
Office equipment					2,840				2,306
Automobiles					1,278				1,079
Geothermal power plants, including geothermal wells:
United States of America					471,886				420,134
Foreign countries					68,547				68,489
Asset retirement cost					9,678				9,656
					580,274				525,651
Less accumulated depreciation					(88,439	)			(58,825	)
Total				$	491,835			$	466,826

Depreciation expenses for the years ended December 31, 2005, 2004 and 2003 amount to $31,210,000, $31,729,000 and $15,519,000, respectively.

U.S. operations:

The net book value of the property, plant and equipment, including construction in process, located in the United States is approximately $514,176,000 and $444,703,000 as of December 31, 2005 and 2004, respectively.

Foreign operations:

During 1998, the Company entered into a power purchase agreement with Kenya Power and Lighting Co. Ltd. (‘‘KPLC’’). Under the agreement, the Company agreed to design, construct and operate geothermal power plants in Kenya in several phases. Upon the completion of construction of each phase, KPLC is committed to purchase the electricity generated by the power plants for a minimum of 20 years under the terms of the power purchase agreement. Phase I of the Olkaria III project has been completed and the net book value of the assets related to the generation power plant

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and the related wells amounted to approximately $30,591,000 and $32,533,000 at December 31, 2005 and 2004, respectively. As of December 31, 2005 and 2004, the Company had incurred approximately $21,555,555 and $20,890,000, respectively (included in construction-in-process), in connection with construction of Phase II of the power plant. Upon implementation, the Company expects Phase II to add 35 MW in generating capacity to the current Olkaria III project. Under existing documentation for the Olkaria III project, the Company’s subsidiary was required to construct Phase II and to reach commercial operations by May 31, 2007, in order to avoid financial penalties, or by April 17, 2008, at the latest, to avoid termination of the entire power purchase agreement. The Company has reached an agreement with KPLC, subject to execution of a definitive agreement and regulatory approval, pursuant to which the tariff of Phase II will be reduced, KPLC will be required to provide a letter of credit to secure their payment obligations, the completion date will be extended to December 2007 if the definitive agreements are entered into and the letter of credit is opened until April 1, 2006. Management believes that the project will be completed in the required timeframe. If the Company does not complete the construction of Phase II, the Company may lose some or all of its investment in the construction-in-process relating to Phase II.

In June 1999, the Company entered into an agreement with Nicaraguan Electricity Company (‘‘NEC’’) a Nicaraguan power utility, whereby the Company will rehabilitate existing wells, drill new wells, and operate the geothermal facilities. The Company owns the plants for a fifteen-year period ending in 2014, at which time they will be transferred to NEC at no cost. The Company sells the power from the facilities to two power companies who are assignees of NEC at the agreed upon price and terms of the ‘‘take or pay’’ power purchase agreement. The net book value of the assets related to the constructed plant and wells and rehabilitated existing wells amounted to approximately $21,060,000 and $23,784,000 at December 31, 2005 and 2004 respectively. Additionally, as of December 31, 2005 and 2004, the Company has incurred approximately $1,215,000 and $1,046,000, respectively, (included in construction-in-process) to drill an additional well.

The Company is engaged in the construction of several geothermal power plants in other foreign countries. At December 31, 2005 and 2004, such projects were in the various stages of construction and the related costs totaling approximately $22,367,000 and $2,781,000, respectively, have been included as construction-in-process.

NOTE 7 — INTANGIBLE ASSETS

Intangible assets consist mainly of all of the Company’s power purchase agreements acquired in business combinations and amounted to $47,915,000 (including royalty rights in the amount of $1,800,000) and $48,930,000, net of accumulated amortization of $6,248,000 and $3,449,000 as of December 31, 2005 and 2004, respectively. Amortization expense for the years ended December 31, 2005, 2004 and 2003 amount to $2,815,000, $2,523,000, and $524,000, respectively.

Estimated future amortization expense for the intangible assets as of December 31, 2005 is as follows:

Year ending December 31:				(dollars in thousands)
2006					2,819
2007					2,713
2008					2,669
2009					2,669
2010					2,669
Thereafter					34,376
Total				$	47,915

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

				December 31,
				2005				2004
				(dollars in thousands)
Trade payables				$	32,641			$	19,523
Scheduling and transmission charges					1,192				3,970
Royalties					1,143				1,604
Salaries and other payroll costs					6,512				4,967
Income tax payable					4,352				2,414
Other					4,208				5,087
Total				$	50,048			$	37,565

NOTE 9 — LONG-TERM DEBT

Long-term debt consists of notes payable under the following agreements:

				December 31,
				2005				2004
				(dollars in thousands)
Limited and non-recourse agreements:
Non-recourse agreement:
Beal Bank Credit Agreement				$	—			$	150,637
Limited recourse agreement:
Credit facility agreement					14,140				17,028
					14,140				167,665
Less current portion					(2,888	)			(8,295	)
Total				$	11,252			$	159,370
Full recourse agreements with banks:
Loan one				$	3,000			$	4,000
Loan two					—				3,333
Bridge loan					—				20,000
Other					—				28
					3,000				27,361
Less current portion					(1,000	)			(24,361	)
Total				$	2,000			$	3,000
Senior Secured Notes (non recourse):
Ormat Funding Corp.(‘‘OFC’’)				$	183,399			$	189,489
OrCal Geothermal Inc.(‘‘OrCal’’)					165,000				—
					348,399				189,489
Less current portion					(23,754	)			(6,090	)
Total				$	324,645			$	183,399

Beal Bank Credit Agreement

In December 2003, in connection with the acquisition of the CEC geothermal power plant assets (see Note 2), OrCal Geothermal Inc. (‘‘OrCal’’), a wholly owned subsidiary of the Company, entered

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into a loan agreement with Beal Bank (‘‘Beal Bank Credit Agreement’’) amounting to $154.5 million. On December 8, 2005, in connection with the issuance of the OrCal Senior Secured Notes (see below), OrCal repaid the loan in its entirety. This repayment resulted in a one-time charge to interest expense of approximately $16.6 million, comprising of: (i) prepayment premium of $11.5 million associated with payment of the Beal Bank loan, (ii) write-off of certain deferred financing costs amounting to $4.2 million associated with the incurrence of the Beal Bank loan, and (iii) loss of $0.9 million associated with the interest rate caps transaction described below. The tax effect of such one time charge is $6.3 million, bringing the net effect of it to $10.3 million.

During the second quarter of 2004, the Company entered into two separate interest rate cap agreements (‘‘Cap Transactions’’) with two different financial institutions to mitigate the interest rate risk associated with the Beal Bank Credit Agreement. Pursuant to the Cap Transactions, the Company paid an aggregate of $3,820,000 to the financial institutions. The Cap Transactions are effective as of March 30, 2007 and terminate on March 31, 2011. Pursuant to the terms of the Cap Transactions, the financial institutions providing the cap are required to pay to the Company the difference between the 3-month LIBOR rate and 6.0%, (if LIBOR is greater than 6.0%), times the notional amount, which for each of the contracts will be $67,401,000 on the effective date and reduces each payment period down to $49,633,000 upon termination. From October 1, 2004 through December 8, 2005 (the date of the repayment of the Beal Bank Loan), the Cap Transactions qualified for cash flow hedge accounting. The fair value of the Cap Transactions at December 31, 2005 and 2004 amounted to $1,034,000 and $1,663,000, respectively. The decrease in the fair value for the period from the initiation of the Cap Transactions through September 30, 2004 of $1,637,000 has been recorded in the consolidated statement of operations as interest expense, while the decrease in the fair value for the period from October 1, 2004 to December 31, 2004 of $322,000, net of related taxes of $198,000 was included as ‘‘Loss in respect of derivatives instruments designated for cash flow hedge, net of related taxes’’ under ‘‘Other comprehensive income (loss)’’. The decrease in the fair value for the period from January 1, 2005 through December 8, 2005 (the date of the repayment of the Beal Bank Loan) of $241,000, net of related taxes of $149,000 was included as ‘‘Loss in respect of derivatives instruments designated for cash flow hedge, net of related taxes’’ under ‘‘Other comprehensive income (loss)’’. As a result of the early repayment of the Beal Bank loan the aggregate amount of $563,000, net of related taxes of $347,000, which was included in ‘‘Other comprehensive income (loss)’’ has been charged to the consolidated statement of operations ($910,000 have been recorded as interest expense and $347,000 have been recorded as income tax benefit), and the decrease in the fair value for the period from December 8, 2005 through December 31,2005 of $239,000 has been recorded in the consolidated statement of operations as interest expense. The fair value of the Cap Transactions is the estimated amount that the Company would currently pay to terminate the transactions at the reporting date, taking into account current interest rates and the current creditworthiness of the counterparties to the agreements.

Credit facility agreement (the Momotombo Project)

In September 2000, Ormat Momotombo Power Company (‘‘OMPC’’), a wholly owned subsidiary of the Company, entered into a credit facility agreement with Bank Hapoalim B.M. pursuant to which OMPC executed a two-phase loan with the bank in the amounts of $11,435,000 (‘‘Phase I Loan’’) and $36,800,000 (‘‘Phase II Loan’’) (collectively the ‘‘Credit Facility Agreement’’). In March 2003, OMPC signed an amendment to the Credit Facility Agreement changing the amount of the Phase II Loan from $36,800,000 to $15,000,000. Principal and interest payments on the Phase I Loan are payable in 32 equal quarterly payments that commenced upon completion of Phase I of the project in December 2001. Interest on the Phase I Loan is variable based on 3-month LIBOR plus 2.375%. Principal and interest payments on the Phase II Loan are payable in equal 28 quarterly payments that commenced in March 2004. Interest on the Phase II Loan is variable based on 3-month LIBOR plus 3.0%, and is added to the outstanding balances of the Phase II Loan until the commencement of the

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principal and interest payments. At December 31, 2005, and 2004, $5,666,000 and $6,856,000, respectively, was outstanding under the Phase I Loan and approximately $8,474,000 and $10,172,000, respectively, was outstanding under the Phase II Loan. The Credit Facility Agreement is collateralized by liens over all real and personal property comprising the Momotombo Project and the Company’s ownership interest in OMPC. There are various restrictive covenants under the Credit Facility Agreement, which include maintaining certain levels of debt to equity ratio and debt service coverage ratio, and limitations on additional indebtedness and payment of dividends. As of December 31, 2005, management believes that the Company was in compliance with the covenants under the Credit Facility Agreement.

Loan one

In May 1998, the Company entered into an $8.0 million loan agreement, with principal payable in $1 million annual installments that commenced in May 2001, and continue through May 2008. Interest is computed at 12-month LIBOR plus 1.7%, and is payable annually.

Loan two

On March 10, 2005, the Company repaid $3.3 million that was outstanding under an original loan of $10.0 million from a bank. The loan has now been repaid in full.

Bridge loan

In June 2004, the Company entered into a $20.0 million revolving credit agreement. On February 10, 2005, the Company repaid the then outstanding balance under the agreement.

Future minimum payments

Future minimum payments under long-term obligations, excluding the senior secured notes and notes payable to Parent, as of December 31, 2005 are as follows:

Year ending December 31:				(dollars in thousands)
2006				$	3,888
2007					3,888
2008					3,888
2009					2,888
2010					2,588
Total				$	17,140

OFC Senior Secured Notes

On February 13, 2004, OFC, a wholly owned subsidiary, completed the issuance of $190.0 million, 8¼% Senior Secured Notes (the ‘‘OFC Notes’’) pursuant to an exempt offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the ‘‘OFC Offering’’), and received net cash proceeds of approximately $179.7 million after deduction of issuance costs of approximately $10.3 million, which have been included in deferred financing costs in the balance sheets. The OFC Notes have a final maturity date of December 30, 2020. Principal and interest on the OFC Notes are payable in semi-annual payments that commenced on June 30, 2004. The OFC Notes are fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OFC, and secured (with certain exceptions) by all real property, contractual rights, revenues and bank accounts, intercompany notes and certain insurance policies of OFC and its subsidiaries. There are various restrictive covenants

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under the OFC Notes, which include limitations on additional indebtedness and payment of dividends. As of December 31, 2005, management believes that OFC was in compliance with the covenants contained in the indenture governing the OFC Notes.

OFC may redeem the OFC Notes, in whole or in part, at any time at a redemption price equal to the principal amount of the OFC Notes to be redeemed plus accrued interest, premium and liquidated damages, if any, plus a ‘‘make-whole’’ premium. Upon certain events, as defined in the note agreement, OFC may be required to redeem a portion of the OFC Notes at a redemption price ranging from 100% to 101% of the principal amount of the OFC Notes being redeemed plus accrued interest, premium and liquidated damages, if any.

A registration statement on Form S-4 relating to the OFC Notes was filed with and declared effective by the SEC on February 9, 2005. Pursuant to the registration statement, OFC made an offer to the holders of the OFC Notes to exchange them for publicly registered exchange notes with substantially identical terms until March 11, 2005. On March 16, 2005 the exchange offer was completed.

As required under the terms of the OFC Notes, OFC has restricted cash account which is classified as current on the balance sheet:

Debt service reserve

OFC maintains an account with a required minimum balance, which may be funded by cash or backed by letters of credit (see below) in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the OFC Notes in the following six months. As of December 31, 2005, the balance of such account was $12.3 million in cash. As of December 31, 2004, the restricted cash accounts were funded by a letter of credit which was issued by the Company in the total amount of approximately $10.8 million (see Note 18).

Non-current restricted cash at December 31, 2005 relating to proceeds from the OFC Offering consisted of the following:

Burdette (formerly Galena) re-powering construction reserve

As required under the terms of the OFC Notes, OFC set aside approximately $25.8 million ($19.4 million at December 31, 2004) for the construction of an additional plant at the Steamboat Complex. The Company named the project as the Burdett project. The Company completed the construction at the end of 2005.

Future minimum payments under the OFC Notes, as of December 31, 2005 are as follows:

Year ending December 31:				(dollars in thousands)
2006				$9,611
2007				8,932
2008				7,835
2009				9,140
2010				10,118
Thereafter				137,763
Total				$183,399

OrCal Senior Secured Notes

On December 8, 2005, OrCal, a wholly owned subsidiary, completed the issuance of $165.0 million, 6.21% Senior Secured Notes (the ‘‘OrCal Notes’’) pursuant to an exempt offering

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under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the ‘‘OrCal Offering’’) and received net cash proceeds of approximately $161.1 million after deduction of issuance costs of approximately $3.9 million, which have been included in deferred financing costs in the balance sheet. The OrCal Notes have been rated BBB− by Fitch. The OrCal Notes have a final maturity date of December 30, 2020. Principal and interest on the OrCal Notes are payable in semi-annual payments which will commence on June 30, 2006. The OrCal Notes are collateralized by substantially all of the assets of OrCal, including OrCal and its subsidiaries’ capital stock, all real property, contractual rights, revenues and bank accounts, intercompany notes, certain insurance policies and are fully and unconditionally guaranteed by all of the wholly owned subsidiaries of OrCal. There are various restrictive covenants under the OrCal Notes, which include limitations on additional indebtedness and payment of dividends. As of December 31, 2005, management believes that OrCal was in compliance with the covenants under the OrCal Notes.

OrCal may redeem the OrCal Notes, in whole or in part, at any time at a redemption price equal to the principal amount of the OrCal Notes to be redeemed plus accrued interest, and a ‘‘make-whole’’ premium. Upon certain events, as defined in the note agreement, OrCal may be required to redeem a portion of the OrCal Notes at a redemption price of 100% of the principal amount of the OrCal Notes being redeemed plus accrued interest.

As required under the terms of the OrCal Notes, OrCal has a restricted cash account which is classified as current on the balance sheet:

Debt service reserve

OrCal maintains an account, with a required minimum balance, which may be funded by cash or backed by letters of credit in an amount sufficient to pay scheduled debt service amounts, including principal and interest, due under the terms of the OrCal Notes in the following six months. As of December 31, 2005, the balance of such account was $9.5 million in cash.

Future minimum payments under the OrCal Notes, as of December 31, 2005 are as follows:

Year ending December 31:				(dollars in thousands)
2006				$	14,143
2007					16,398
2008					17,641
2009					11,042
2010					10,216
Thereafter					95,560
Total				$	165,000

In anticipation of the OrCal Offering, on September 9, 2005, in connection with such contemplated offering, the Company entered into a rate lock agreement with a financial institution (the ‘‘counterparty’’), at a locked-in rate of 4.047%, with a notional amount of $175.0 million, which terminated on December 5, 2005. The rate lock was based on a 7-year treasury security that matures in November 2012. On December 5, 2005, the Company received from the counterparty to the rate lock agreement an amount of $4,488,000. A gain of $2,624,000, net of related taxes of $1,608,000 is recorded as ‘‘Gain in respect of derivative instruments designated for cash flow hedge, net of related taxes’’ under ‘‘Other comprehensive income (loss)’’ and is amortized over the OrCal Notes using the effective interest method. The remaining gain of $159,000, net of related taxes of $97,000 has been charged to the consolidated statement of operations ($256,000 has been recorded as interest income and $97,000 has been recorded as income tax expense).

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NOTE 10 — REFINANCING OF THE PUNA PROJECT

On May 19, 2005, the Company’s wholly owned subsidiary in Hawaii, Puna Geothermal Ventures (‘‘PGV’’) completed a refinancing of the cost of the June 2004 acquisition of the Puna geothermal power plant located on the Big Island of Hawaii (the ‘‘Puna Project’’). A secondary stage of the lease transaction which is refinancing two new geothermal wells that PGV drilled in the second half of 2005 (for production and injection) was completed on December 30, 2005. The refinancing was concluded with financing parties by means of the lease-leaseback transactions described below.

Pursuant to a 31-year head lease (the ‘‘Head Lease’’), PGV leased its geothermal power plant to an unrelated company in return for prepaid lease payments in the total amount of $83.0 million (the ‘‘Deferred Lease Income’’). The total costs of the leased assets as of December 31, 2005, amounted to $58.3 million, net of accumulated depreciation of $3.7 million. The unrelated company (the ‘‘Lessor’’) simultaneously leased-back the Puna Project to PGV under a 23-year lease (the ‘‘Project Lease’’). PGV’s rent obligations under the Project Lease will be paid solely from revenues generated by the Puna Project under a power purchase agreement that PGV has with Hawaii Electric Light Company (‘‘HELCO’’). The Head Lease and the Project Lease are non-recourse lease obligations to the Company. PGV’s rights in the geothermal resource and the related power purchase agreement have not been leased to the Lessor as part of the Head Lease but are part of the Lessor’s security package.

Neither the Head Lease nor the Project Lease meet one or more of the criteria set forth in paragraph 7 of SFAS No. 13, Accounting for Leases, for classification as capital leases and, therefore, are accounted for as operating leases. The Deferred Lease Income will be amortized, using the straight-line method, over the 31-year term of the Head Lease. Deferred transaction costs amounting to $4.3 million will be amortized, using the straight-line method, over the 23-year term of the Project Lease. The annual lease income will be $2.7 million and the annual lease expense will be $5.2 million.

Future minimum lease payments under the Project Lease, as of December 31, 2005, are as follows:

Year ending December 31:				(dollars in thousands)
2006				$5,904
2007				6,887
2008				7,573
2009				8,013
2010				7,567
Thereafter				80,187
Total				$116,131

Depository accounts

As required under the terms of the lease agreements, there are certain reserve funds that need to be managed by the indenture trustee in accordance with certain balance requirements and which are included in the balance sheet as of December 31, 2005 in restricted cash accounts and are classified as current as they are used to pay current payments.

Revenue account

PGV deposits all revenues received into the revenue account. Such amounts are used to pay operating expenses and fund the depository accounts as describe below, but the funds are only available to PGV upon submission of draw requests by PGV to the bank. As such amounts are fully restricted to use by PGV, they have been classified as current restricted assets as the amounts are used to pay current operating expenses. As of December 31, 2005, the balance of such account was $3.5 million.

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Lease rent reserve accounts

PGV maintains accounts to fund the full amount of the next rent payment according to the payment schedule. As of December 31, 2005, the balance of such accounts was $2.3 million in cash.

Well maintenance reserve account

PGV maintains a reserve account to fund well field works including the drilling of new wells. The reserve should be met on a monthly basis, in amounts equal to 1/12 of a scheduled annual contribution. As of December 31, 2005, the balance of such account was $0.5 million in cash.

Capital expenditure account

PGV maintains an account to fund its capital expenditures. Deposits to this account are at PGV’s sole discretion, but no distributions are allowed to Ormat Nevada Inc., a wholly owned subsidiary of the Company, if the balance is less than $0.5 million. As of December 31, 2005, the balance in this account was $0.

Distribution account

PGV maintains an account to deposit its remaining cash, after making all of the necessary payments and transfers as provided for in the lease agreements, in order to make distributions to Ormat Nevada Inc. The distributions are allowed only if PGV maintains various restrictive covenants under the lease agreements, which include limitations on additional indebtedness. As of December 31, 2005, the balance of such account was $6.8 million. This amount can be distributed to Ormat Nevada Inc. currently and has been classified as current restricted assets.

In anticipation of the above refinancing, on February 25, 2005, the Company entered into a treasury rate lock agreement with a financial institution, at a locked-in treasury rate of 4.31%, with a notional amount of $52.0 million, which terminated on March 31, 2005. The rate lock was based on a 10-year treasury security that matures on February 15, 2015. On March 31, 2005, the Company received from the counterparty to the rate lock agreement an amount of $658,000. This amount net of related taxes of $250,000 is recorded as ‘‘Gain in respect of derivative instruments designated for cash flow hedge, net of related taxes’’ under ‘‘Other comprehensive income (loss)’’ and is amortized over the 23-year term of the Project Lease.

On April 20, 2005, the Company entered into a new treasury rate lock agreement with the same financial institution, at a locked-in treasury rate of 4.22%, with a notional amount of $52.0 million and originally scheduled to terminate on May 2, 2005. The new rate lock agreement's termination date was extended until May 18, 2005 at a new locked-in treasury rate of 4.25%. The rate lock was based on a 10-year treasury security that matures on February 15, 2015. There was no consideration paid by either party as a result of the extension. On May 18, 2005, the Company paid the counterparty to the new rate lock agreement the amount of $762,000. This amount net of related taxes of $290,000 is recorded as ‘‘Loss in respect of derivative instruments designated for cash flow hedge, net of related taxes’’ under ‘‘Other comprehensive income (loss)’’ and is amortized over the 23-year term of the Project Lease.

NOTE 11 — ASSET RETIREMENT OBLIGATION

The Company adopted SFAS No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets, effective January 1, 2003. Under SFAS No. 143, which was amended by FIN no. 47, entities are required to record the fair value of a legal liability for an asset retirement obligation in the period in which it is incurred. On January 1, 2003, the Company recorded a cumulative effect of change in accounting principle of $205,000, net of related tax benefit of $125,000.

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The following table presents a reconciliation of the beginning and ending aggregate carrying amount of asset retirement obligation for the years presented below:

				December 31,
				2005				2004
				(dollars in thousands)
Balance at beginning of year				$	10,665			$	5,737
Change in price estimates					22				2,210
Liabilities incurred					—				2,130
Accretion expense					774				588
Total				$	11,461			$	10,665

During the fourth quarters of 2005 and 2004, the Company increased the aggregate carrying amount of its asset retirement obligation by $22,000 and $2,210,000, respectively. The net increase is a result of increased costs associated with drilling rigs, cement and cement services, general manpower, engineering fees and other outside services since the adoption of SFAS No. 143. The addition of the Gould Plant did not increase the asset retirement obligation as the new plant will use existing wells.

NOTE 12 — STOCK OPTIONS

The 2004 Incentive Compensation Plan

On October 21, 2004, the Company’s Board of Directors adopted the 2004 Incentive Compensation Plan (‘‘2004 Incentive Plan’’), which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights, stock units, performance awards, phantom stock, incentive bonuses and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the 2004 Incentive Plan, a total of 1,250,000 shares of the Company’s common stock have been reserved for issuance, all of which could be issued as options or as other forms of awards. Options granted to employees under the 2004 Incentive Plan cliff vest and are exercisable from the grant date as follows: 25% after 24 months, 25% after 36 months, and the remaining 50% after 48 months. Options granted to non-employee directors under the 2004 Incentive Plan cliff vest and are exercisable one year after the grant day. Vested shares may be exercised for up to ten years from the date of grant. On November 9, 2005, the Company filed a registration statement on Form S-8 with the SEC with respect to the shares of common stock underlying such grants.

The following table summarizes the status of the 2004 Incentive Plan as of and for the periods presented below (shares in thousands):

				Year Ended December 31, 2005								Year Ended December 31, 2004
				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price
Outstanding at beginning of year					223			$	15.00				—				—
Granted, at fair value					25				20.10				223				15.00
Exercised					—				—				—				—
Forfeited					(12	)			15.00				—				—
Outstanding at end of year					236				15.54				223				15.00
Options exercisable at end of year					15				15.00				—				—
Weighted-average fair value ofoptions granted during the year								$	6.62							$	0.96

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The following table summarizes information about stock options outstanding at December 31, 2005 (shares in thousands):

Exercise Price				Number of Sshares Outstanding				Waighted Average Remaining Contractual Life in Years				Number of Shares Exerciseble				Waighted Average Remaining Contractual Life in Years
$15.00					211				8.8				15				8.8
20.10					25				8.8				—				—
					236				8.8				15				8.8

The following table summarizes information about stock options outstanding at December 31, 2004 (shares in thousands):

Exercise Price				Number of Sshares Outstanding				Waighted Average Remaining Contractual Life in Years				Number of Shares Exerciseble				Waighted Average Remaining Contractual Life in Years
$15.00					223				9.8				—				—

The Parent’s Stock Option Plans

The Parent has four stock option plans: the 2001 Employee Stock Option Plan, the 2002 Employee Stock Option Plan, the 2003 Employee Stock Option Plan, and the 2004 Employee Stock Option Plan (collectively ‘‘the Parent’s Plans’’). Options under the 2004 Employee Stock Option Plan were granted in April 2004. Under the Parent’s Plans, employees of the Company were granted options in the Parent’s ordinary shares, which are registered and traded on the Tel-Aviv Stock Exchange Ltd. Options under the Parent’s Plans cliff vest and are exercisable from the grant date as follows: 25% after 24 months, 25% after 36 months, and the remaining 50% after 48 months. Vested shares may be exercised for up to five years from the date of grant. The maximum aggregate number of shares that may be optioned and sold under the Parent’s Plans is determined each year by the board of directors of the Parent, and is equal to the number of options granted during each plan year. None of the options are exercisable or convertible into shares of the Company.

The following table summarizes the status of the Parent’s Plans as of and for the periods presented below (shares in thousands):

				Year Ended December 31, 2005								Year Ended December 31, 2004								Year Ended December 31, 2003
				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price
Outstanding at beginning of year					2,362			$	2.32				1,930			$	1.81				1,320			$	1.86
Granted, below fair value					—				—				651				3.78				710				1.75
Exercised					(554	)			1.97				(192	)			1.97				(68	)			2.26
Forfeited					(61	)			2.62				(27	)			2.00				(32	)			2.00
Outstanding at end of year					1,747				2.42				2,362				2.32				1,930				1.81
Options exercisable at end of year					296				1.79				215				1.88				92				2.26
Weighted-average fair value of options granted during the year								$	—							$	1.73							$	0.60

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The Company recorded deferred stock compensation for options granted below fair value of $0, $52,000 and $14,000 in the years ended December 31, 2005, 2004 and 2003, respectively. These balances represent the difference between the exercise price of the options and the fair market value of the Parent’s shares on the date of grant. The deferred stock compensation is being amortized to expense over the vesting period. The amortization of deferred stock compensation for the years ended December 31, 2005, 2004 and 2003 is $91,000, $61,000 and $39,000, respectively.

The following table summarizes information about stock options outstanding at December 31, 2005 (shares in thousands):

Exercise Price				Number of Shares Outstanding				Waighted Average Remaining Contractual Life in Years				Number of Shares Exerciseble				Waighted Average Remaining Contractual Life in Years
$1.41					379				1.2				67				1.2
1.75					681				2.2				161				2.2
2.26					68				0.1				68				0.1
3.78					619				3.3				—				—
					1,747				2.3				296				1.5

The following table summarizes information about stock options outstanding at December 31, 2004 (shares in thousands):

Exercise Price				Number of Shares Outstanding				Waighted Average Remaining Contractual Life in Years				Number of Shares Exerciseble				Waighted Average Remaining Contractual Life in Years
$1.41					582				2.20				97				2.2
1.75					699				3.20				—				—
2.26					432				1.10				118				1.1
3.78					649				4.3				—				—
					2,362				2.8				215				1.6

NOTE 13 — POWER PURCHASE AGREEMENTS

U.S. operations:

The Company has various power purchase agreements in the U.S. as follows:

Southern California Edison Company (‘‘SCE’’)

The Company has two power purchase agreements (‘‘PPAs’’) with SCE related to the Ormesa Complex and two PPAs related to the Heber 1 and 2 project. The PPAs provide for the sale of capacity and energy through their respective terms, with the following expiration dates: Ormesa PPAs expiring in 2017 and 2018, and Heber 1 and 2 PPAs expiring in 2015 and 2023, respectively. Under the PPAs, the Company receives a fixed energy payment through April 30, 2007, and thereafter an energy payment based on SCE’s short-run avoided cost (‘‘SRAC’’). The PPAs provide for firm capacity and bonus payments established by the contracts and are paid to the Company each month through the contracts’ term based on plant performance. Bonus capacity payments are earned based on actual capacity available during certain peak hours. In certain circumstances, SCE or its designee has a right of first refusal to acquire the OG I and OG II power plants in the Ormesa project and the Heber 1 power plant. Upon satisfaction of certain conditions specified in the PPA and subject to receipt of requisite approvals and negotiations between the parties, the Company will have the right to demand that SCE purchase the Heber 1 power plant.

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In connection with the power purchase agreements for the Ormesa project, SCE has expressed its intent not to pay the contract rate for the power supplied by the GEM 2 and GEM 3 plants to the Ormesa project. SCE contends that California ISO real-time prices should apply, while management believes that SP-15 prices quoted by NYMEX should apply. According to Southern California Edison’s estimation, the amount under dispute is approximately $2.5 million. The parties have signed an Interim Agreement; whereby SCE will continue to procure the GEM 2 and GEM 3 power at the current energy rate of 5.37 Cents/kWh until May 1, 2007. In addition a long term PPA is expected to be entered into for the GEM 2 and GEM 3 power. The negotiations of the long term PPA are still under way and there is no guarantee that it will be successfully completed. Management believes that such settlement agreement will not have a material financial impact on the Company.

Sierra Pacific Power Company (‘‘SPPC’’) — Nevada

The Company also has seven PPAs with SPPC for operating projects; one related to the Brady Power Plant, two related to the Steamboat 1 and 1A Power Plants, one related to the Steamboat Hills Power Plant, two related to the Steamboat 2 and 3 Power Plants and one related to the Burdette Plant. The Burdette PPA provides for the sale of energy and will expire in 2026. All the other PPAs provide for the sale of energy, and for capacity for all power plants except Brady, through their respective terms, with the following expiration dates: Steamboat 1 and 1A expire in 2006 and 2018, Steamboat Hills expires in 2018, and Brady and Steamboat 2 and 3 expire in 2022. Energy payments under the Brady PPA are based on deliveries during specified winter and summer seasons for on-peak, mid-peak, and off-peak times. Energy payments under the Steamboat 1/1A PPAs are based on the monthly average of the California-Oregon Border power market pricing, which is SPPC’s adopted SRAC.

Hawaii Electric Light Company (‘‘HELCO’’)

The Company has a PPA with HELCO related to the Puna project. The PPA provides for monthly energy payments and capacity payments. The energy payments for a portion of the energy delivered are equal to the higher of the SRAC rates for energy in effect for the relevant billing period or a fixed rate. The energy payments for a smaller portion of energy to be delivered are equal to an amount based on a fuel rate and a variable operation and maintenance rate, as each are adjusted over the term of the agreement, but which rate will never go below a minimum floor. The Puna project also receives a payment for providing reactive power to HELCO.

Southern California Public Power Authority (‘‘SCPPA’’)

In December 2005, the Company signed a new 25-year PPA with SCPPA for the sale of energy from the Gould Plant in the Heber Complex (the ‘‘Gould PPA’’). Under the Gould PPA, 10 MW of power will be delivered to SCPPA for a fixed price of $57.50/MWh. This price will escalate annually at a rate of 1.5% and includes the value for the environmental attributes, known as renewable energy credits. In addition, if and when available, 30% of the production tax credits generated from the Gould Plant will be shared with SCPPA. Deliveries will begin in the first quarter of 2006.

Foreign operations:

The Company has power purchase agreements in various foreign countries as follows:

The Olkaria III Project (Kenya)

In connection with the agreement with KPLC (see Note 6), the subsidiary in Kenya, sells power to KPLC at the agreed upon price and terms of a 20-year PPA. Fees are paid each month through the term of the agreement and vary based on plant performance.

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The Momotombo Project (Nicaragua)

In connection with the agreement with NEC (see Note 6), the subsidiary in Nicaragua sells power to two assignees of NEC at the agreed upon price and terms of a ‘‘take or pay’’ power purchase agreement. Fees are paid each month through the term of the agreement and vary based on plant performance.

Additional information

Pursuant to the terms of certain of the power purchase agreements, the Company may be required to make payments to the relevant power purchaser under certain conditions, such as shortfall on delivery of renewable energy and energy credits, and not meeting certain threshold performance requirements, as defined. The amount of payment required is dependent upon the level of shortfall on delivery or performance requirements and is recorded in the period the shortfall occurs. The Brady and Steamboat 2 and 3 PPAs provide that if the project does not maintain peak period capacity values of at least 85% of those listed in each of their respective contracts, the Company will be obligated to pay liquidated damages to SPPC in amounts ranging from $1.0 million to $1.5 million. If the Ormesa and Heber 1 and 2 projects fail to meet minimum performance requirements, as defined, the respective project may be placed on probation, the capacity of the relevant plant may be permanently reduced and, in such an instance, a refund would be owed from such project to SCE. Each of the projects may also reduce the capacity of the plants upon notice to SCE and after making a specified payment to it. If the Puna project does not meet its minimum capacity performance requirement, such project will be required to pay HELCO $0.0214 per on-peak hour for each kilowatt of deficiency for the first 5 MW of deficiency and $0.0339 per on-peak hour for each kilowatt of deficiency in excess of 5 MW of deficiency. In addition, for each contract year in which the on-peak availability of the facility is less than 95%, unless the deficiency is due to a catastrophic equipment failure, the Puna project is required to pay $8,000 to HELCO for each full percentage point of the deficiency, and if such availability is less than 80%, the Puna project is required to pay $12,000 for each full percentage point of the deficiency. The Company has not and does not currently expect to be obligated to make any material payments under its power purchase agreements.

As required by EITF 01-8 (see Note 1), the Company assessed all PPAs acquired since July 1, 2003, and concluded that all such PPAs related to its Heber 1 and 2, Steamboat 2/3, Steamboat Hills, and Puna projects (see Note 2), contained a lease element requiring lease accounting. In addition, the Company assessed the Burdette PPA and concluded that such PPA also contains a lease element requiring lease accounting. Accordingly, revenue related to the lease element of the PPA is presented as ‘‘lease portion of energy and capacity’’ revenue, with the remaining revenue related to the production and delivery of the energy being presented as ‘‘energy and capacity’’ revenue in the consolidated statements of operations. Future minimum lease revenues under PPAs which contain a lease element as of December 31, 2005 were as follows:

Year ending December 31:				(dollars in thousands)
2006				$	67,125
2007					65,741
2008					62,984
2009					59,712
2010					59,653
Thereafter					678,652
Total				$	993,867

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NOTE 14 — INCOME TAXES

Income from continuing operations before provision for income taxes, minority interest, and equity in income of investees consisted of:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
U.S				$	702			$	8,436			$	2,263
Non-U.S. (foreign)					12,271				12,505				15,862
Total				$	12,973			$	20,941			$	18,125

The components of income tax expense are as follows:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
Current:
Federal				$	—			$	—			$	—
Foreign					6,872				2,824				446
					6,872				2,824				446
Deferred:
Federal					577				2,772				(1,210	)
State					132				86				432
Foreign					(2,891	)			927				2,838
					(2,182	)			3,785				2,060
				$	4,690			$	6,609			$	2,506

The significant components of the deferred income tax expense are as follows:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
Deferred tax expense (exclusive of the
effect of other components listed below)				$	(259	)		$	7,360			$	5,233
Benefit of operating loss carryforwards—US					(1,923	)			(3,575	)			(1,643	)
Utilization of operating loss carryforwards-Israel					—				796				1,019
Change in valuation allowance					—				(796	)			(1,019	)
Benefit of investment tax credits					—				—				(1,530	)
				$	(2,182	)		$	3,785			$	2,060

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The difference between the U.S. federal statutory tax rate and the Company’s effective rate are as follows:

				Year Ended December 31,
				2005				2004				2003
U.S. federal statutory tax rate					34.0	%			34.0	%			34.0	%
State income tax, net of federal benefit					0.7				0.3				1.7
Effect of foreign income tax, net					(1.5	)			(2.4	)			(7.0	)
Valuation allowance—Israel				(5.6)
Investment tax credits					—				—				(8.4	)
Other, net					3.0				(0.3	)			(0.9	)
Effective tax rate					36.2	%			31.6	%			13.8	%

The net deferred tax assets and liabilities consist of the following:

								December 31,
								2005				2004
								(dollars in thousands)
Deferred tax assets (liabilities):
Net foreign deferred taxes, primarily depreciation								$	(5,563	)		$	(8,454	)
Depreciation									(33,840	)			(20,121	)
Net operating loss carryforwards—U.S.									12,843				10,920
Lease transaction									7,457				—
Investment tax credits									1,971				1,971
Accrued liabilities and other									2,167				1,361
Total								$	(14,965	)		$	(14,323	)

Deferred taxes are included in the balance sheets as follows:

								December 31,
								2005				2004
								(dollars in thousands)
Among current assets								$	1,663			$	1,001
Among non-current assets									5,376				3,044
Among non-current liabilities									(22,004	)			(18,368	)
Total								$	(14,965	)		$	(14,323	)

Realization of the deferred tax assets and investment tax credits is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that the deferred tax asset at December 31, 2005 will be realized.

At December 31, 2005, the Company had U.S. federal net operating loss (‘‘NOL’’) carryforwards of approximately $34.6 million and state NOL carryforwards of approximately $28.4 million, available to reduce future taxable income, which expire between 2021 and 2024 for federal NOLs and between 2023 and 2024 for state NOLs. The investment tax credits in the amount of $2.0 million at December 31, 2005 carry over for 20 years until utilized and expire in 2022 and 2023.

Through June 30, 2004, the Company had net operating loss carryforwards related to its Israeli operations of approximately $14.0 million available to reduce future taxable income, which could be carried over indefinitely until utilized. However, despite the fact that the net operating losses carryforward indefinitely, there is currently uncertainty as to the Israeli tax laws related to establishing limitations on the use of net operating losses. In addition, there are uncertainties as to the ability to transfer those losses from the Parent. Due to these uncertainties, management believed that it was not

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likely that such net operating loss carryforwards will be utilized. Subsequent to July 1, 2004, it was determined that the losses could not be transferred, therefore, the deferred tax assets in respect of the Parent’s net operating loss carryforwards and the valuation allowance relating to such deferred tax assets were removed.

The total amount of undistributed earnings of foreign subsidiaries for income tax purposes was approximately $50.4 million at December 31, 2005. It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries were paid as dividends to the Company. The additional taxes on that portion of undistributed earnings which is available for dividends are not practicably determinable.

Income taxes related to foreign operations

The Philippines — From OLCL’s inception in 1996 to September 2003, OLCL, an 80% owned subsidiary (which was deconsolidated as of April 1, 2004) with operations in the Philippines, had an income tax holiday. Subsequent to September 2003, OLCL is subject to the Philippines regular corporate income tax rate of 32%. The tax holiday, assuming a tax rate of 32%, had the effect of reducing tax expense by $798,000 and increasing earnings per share by $0.03 for the year ended December 31, 2003.

Israel — The Company’s operations in Israel through OSL are taxed at the regular corporate tax rate of 36% in 2003, 35% in 2004, 34% in 2005, 31% in 2006, 29% in 2007, 27% in 2008, 26% in 2009 and 25% in 2010 and thereafter. However, under the Israeli Law for the Encouragement of Capital Investments, some of the operations of OSL have been granted ‘‘Approved Enterprise’’ status under expansion plans of 1996 and 2003, whereby income from the Approved Enterprise, which is determined as the increase of revenues in a particular year compared to those of the program’s determined base year (1995 and 2002, respectively), will be exempt from taxes for two years commencing in the first year OSL generates taxable income, which for OSL has not commenced yet, and at a reduced tax rate of 25% for the remaining five years. The Approved Enterprise status plans of 1996 and 2003 expire in 2010 and 2017, respectively.

Other significant foreign countries — The Company’s operations in Nicaragua and Kenya are taxed at the rates of 25% and 37.5%, respectively.

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NOTE 15 — BUSINESS SEGMENTS

The Company has two reporting segments that are aggregated based on similar products, market and operating factors: electricity and products segments. Such segments are managed and reported separately as each offers different products and serves different markets. The electricity segment is engaged in the sale of electricity pursuant to power purchase agreements. The products segment is engaged in the manufacture, including design and development, of turbines and power units for the supply of electrical energy and in the associated construction of power plants utilizing the power units manufactured by the Company to supply energy from geothermal fields and other alternative energy sources. Transfer prices between the operating segments were determined on current market values or cost plus markup of the seller’s business segment.

Summarized financial information concerning the Company’s reportable segments is shown in the following tables:

				Electricity				Products				Consolidated
				(dollars in thousands)
Year ended December 31, 2005:
Net revenues from external customers				$	177,369			$	60,623			$	237,992
Intersegment revenues					—				52,679				52,679
Depreciation and amortization expense					39,557				629				40,186
Operating income					56,831				7,078				63,909
Segment assets at year end*					864,968				49,512				914,480
Expenditures for long-lived assets					112,990				3,759				116,749
*   Including unconsolidated investments					47,235				—				—
Year ended December 31, 2004:
Net revenues from external customers				$	158,831			$	60,399			$	219,230
Intersegment revenues					—				13,045				13,045
Depreciation and amortization expense					34,806				665				35,471
Operating income					55,895				6,549				62,444
Segment assets at year end*					812,816				37,272				850,088
Expenditures for long-lived assets					213,255				817				214,072
*   Including unconsolidated investments					48,815				—				—
Year ended December 31, 2003:
Net revenues from external customers				$	77,752			$	41,688			$	119,440
Intersegment revenues					—				7,130				7,130
Depreciation and amortization expense					15,969				650				16,619
Operating income					20,390				5,100				25,490
Segment assets at year end*					519,173				23,965				543,138
Expenditures for long-lived assets					276,266				386				276,652
*   Including unconsolidated investments					46,760				—				—

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Reconciling information between reportable segments and the Company’s consolidated totals is shown in the following table:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
Revenues:
Total segment revenues				$	237,992			$	219,230			$	119,440
Intersegment revenues					52,679				13,045				7,130
Elimination of Intersegment revenues					(52,679	)			(13,045	)			(7,130	)
Total consolidated revenues				$	237,992			$	219,230			$	119,440
Operating income:
Operating income				$	63,909			$	62,444			$	25,490
Interest expenses, net					(51,009	)			(41,469	)			(7,513	)
Non-operating income and other, net					73				(34	)			148
Total consolidated income before income taxes, minority interest, and equity in income of investees				$	12,973			$	20,941			$	18,125

Business segments according to geographical location: The Company sells electricity and products for power plants and others, mainly to the geographical areas according to location of the customers, as detailed below. The following table presents certain data by geographic area:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
Revenues from external customers attributable to:(1)
North America				$	170,102			$	137,124			$	52,534
Pacific Rim					10,646				50,362				10,340
Latin America					13,741				13,548				25,016
Africa					10,553				10,142				12,171
Far East					1,127				4,569				17,793
Europe					31,823				3,485				1,586
Consolidated total				$	237,992			$	219,230			$	119,440

(1)	Revenues as reported in the geographic area in which they originate.

				December 31,
				2005				2004				2003
				(dollars in thousands)
Long-lived assets (primarily power plants and related
assets) located in:
North America				$	590,365			$	509,037			$	314,296
Latin America					38,682				26,938				30,778
Africa					51,311				53,423				54,911
Far East					—				571				17,433
Europe					5,060				1,837				1,563
Consolidated total				$	685,418			$	591,806			$	418,981

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The following table presents revenues from major customers:

				Year Ended December 31,
				2005								2004								2003
				Revenues				%				Revenues				%				Revenues				%
				(dollars in thousands)								(dollars in thousands)								(dollars in thousands)
Revenues from major customers:
Customer A (1)				$	85,856				36			$	90,808				41			$	32,458				27
Customer B (2)					5,281				2				31,058				14				10,318				9
Customer C (1)					—				—				3,096				1				12,620				11
Customer D (1)					11,361				5				11,886				5				11,617				10
Customer E (1)					33,583				14				28,298				13				11,389				10
Customer F (1)					36,207				15				15,470				7				—				—

(1)	Revenues reported in electricity segment.

(2)	Revenues reported in products segment.

NOTE 16 — TRANSACTIONS WITH RELATED ENTITIES

Transactions between the Company and the related entities during the years presented below and balances as of the dates presented below, other than those disclosed elsewhere in these financial statements, approximated:

				Year Ended December 31,
				2005				2004				2003
				(dollars in thousands)
Transactions
Revenues from an affiliate of the Parent				$	7,959			$	—			$	—
Property rental fee expense paid to Parent				$	627			$	627			$	627
Interest expense on note payable to Parent				$	10,635			$	9,723			$	1,874
Guarantee fees to Parent				$	204			$	548			$	709
Corporate financial, administrative and executive services provided to Parent				$	120			$	120			$	120
License fees to and services rendered by companies controlled by a shareholder of the Parent				$	162			$	—			$	—

				December 31,
				2005				2004
				(dollars in thousands)
Balances
Due from Orzunil				$	153			$	149
Due from subsidiaries of Parent				$	167			$	1,899

The Company has an agreement with the Parent whereby, for a fee, the Parent maintains certain standby letters of credit on behalf of the Company. During the years ended December 31, 2005, 2004 and 2003, the fees under the agreement totaled approximately $204,000, $548,000 and $709,000, respectively.

The current liability due to Parent at December 31, 2005 and 2004 of $356,000 and $18,484,000 respectively, represents the net obligation resulting from ongoing operations and transactions with the

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Parent and is payable from available cash flow. Interest is computed on balances greater than 60 days at LIBOR plus 1%, however not less than the change in the Israeli Consumer Price Index plus 4%, compounded quarterly, and is accrued and paid to the Parent annually.

Notes payable to Parent

In 2003, the Company entered into a loan agreement with the Parent, which was further amended on September 20, 2004 (‘‘Parent Loan Agreement’’) pursuant to which the Company may borrow from the Parent up to $150 million in one or more advances. Interest accrues on the unpaid principal of the loan amount at a rate per annum of the Parent’s average effective interest plus 0.3% (7.5% during 2004 and 2003). The principal and interest on the Parent Loan Agreement are payable in varying amounts through the loan due date of June 2010. The outstanding balance of such loan at December 31, 2005 and 2004 was $121,140,000 (including current portion of $31,647,000) and $143,187,000 (including the current portion of $22,047,000), respectively. As further discussed in Note 1, on June 29, 2004, $20.0 million outstanding under the Parent Loan Agreement was converted to 1,160,714 shares of $0.001 par value common stock of the Company.

In 2003, the Company entered into a NIS 240.0 million non-interest bearing note agreements with the Parent. Principal is payable upon demand at any time after November 2007, but no later than December 2009. The loan is subordinated to all other liabilities of the Company. In accordance with the terms of such note, the Company will not be required to repay any amount in excess of $50,665,000 (using the exchange rate existing on the date of such note). As of December 31, 2005 the ceiling of $50,665,000 is effective.

Future minimum payments under the notes payable to Parent (excluding the non-interest bearing note) as of December 31, 2004 are as follows:

Year ending December 31:				(dollars in thousands)
2006				$	31,647
2007					31,646
2008					31,647
2009					16,600
2010					9,600
				$	121,140

Reimbursement agreement

On July 15, 2004, the Company entered into a reimbursement agreement with its Parent pursuant to which the Company agreed to reimburse its Parent for: (i) any draws made on any standby letter of credits issued by the Parent for the benefit of the Company; and (ii) any payments made under any guarantee provided by the Parent for the benefit of the Company. Interest on any amounts owing pursuant to the reimbursement agreement is payable at a rate per annum equal to the Parent’s average effective cost of funds plus 0.3% in U.S. dollars (see Note 8).

Registration rights agreement

Prior to the closing of the Company’s initial public offering in November 2004, the Company and the Parent entered into a registration rights agreement pursuant to which the Parent may require the Company to register its common stock for sale on Form S-1 or Form S-3. The Company also agreed to pay all expenses that result from the registration of the Company’s common stock under the registration rights agreement, other than underwriting commissions for such shares and taxes. The Company has also agreed to indemnify the parent, its directors, officer and employees against liability that may result from their sale of the Company’s common stock, including Securities Act liabilities.

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NOTE 17 — EMPLOYEE BENEFIT PLAN

401(k) Plan

On July 1, 2002 the Company established a 401(k) Plan (the ‘‘Plan’’) for the benefit of its U.S. employees. Employees of the Company and its U.S. subsidiaries who have completed one year of service or who had one year of service upon establishment of the Plan are eligible to participate in the Plan. Contributions are made by employees through pretax deductions up to 60% of their annual salary. Contributions made by the Company are matched up to a maximum of 2% of the employee’s annual salary. The Company’s contributions to the Plan were $228,000, $185,000 and $83,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Severance plan

The Company, through OSL, provides limited non-pension benefits to all current employees in Israel who are entitled to benefits in the event of termination or retirement in accordance with the Israeli Government sponsored programs. These plans generally obligate the Company to pay one month’s salary per year of service to employees in the event of involuntary termination. There is no limit on the number of years of service in calculation of the benefit obligation. The liabilities for these plans are accounted for under the guidance of EITF Issue No. 88-1, Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan, using what is commonly referred to as the ‘‘shut down’’ method, where a company records the undiscounted obligation as if it were payable at each balance sheet date. Such liabilities have been presented on the balance sheet as ‘‘Liability for severance pay’’. The Company has an obligation to partially fund the liabilities through regular deposits in pension funds and severance pay funds. The amounts funded amounted to $10,567,000 and $10,503,000 at December 31, 2005 and 2004, of which $9,201,000 and $9,187,000 were restricted, respectively, and have been presented on the balance sheet as part of ‘‘Deposits and other’’. The severance pay liability covered by the pension funds is not reflected in the financial statements as the severance pay risks have been irrevocably transferred to the pension funds. Under the Israeli severance pay law, restricted funds may not be withdrawn or pledged until the respective severance pay obligations have been met. As allowed under the program, earnings from the investment are used to offset severance pay costs. Severance pay expenses for the years ended December 31, 2005, 2004 and 2003 were $771,000, $537,000 and $511,000, respectively, which includes losses (income) amounting to $(302,000), $(122,000) and $65,000, respectively, generated from the regular deposits and amounts accrued in severance funds.

The Company expects the severance pay contributions in 2006 to be approximately $1.0 million.

The Company expects to pay the following future benefits to its employees upon their reaching normal retirement age:

Year ending December 31:				(dollars in thousands)
2006				$706
2007				15
2008				560
2009				681
2010				38
2011-2015				2,886
				$4,886

The above amounts were determined based on the employees’ current salary rates and the number of years’ service that will have been accumulated at their retirement date. These amounts do

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not include amounts that might be paid to employees that will cease working with the Company before reaching their normal retirement age.

NOTE 18 — COMMITMENTS AND CONTINGENCIES

Geothermal resources

The Company, through its project subsidiaries in the United States, controls certain rights to geothermal fluids through certain leases with the Bureau of Land Management (‘‘BLM’’) or through private leases. Royalties on the utilization of the geothermal resources are computed and paid to the lessors as defined in the respective agreements. Royalties’ expense under the geothermal resource agreements were $6,910,000, $4,716,000 and $2,283,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Letters of credit

In the ordinary course of business with customers, vendors, and lenders, the Company is contingently liable for performance under letters of credit totaling $25.4 million and $25.8 million at December 31, 2005 and 2004, respectively (out of these amounts, letters of credit totaling $5.1 million and $25.8 million respectively, have been obtained by the Parent on behalf of the Company). Management does not expect any material losses to result from these letters of credit because performance is not expected to be required, and, therefore, is of the opinion that the fair value of these instruments is zero.

LOC Agreement

A subsidiary of the Company has a letter of credit and loan agreement (‘‘LOC Agreement’’) with Hudson United Bank (the ‘‘bank’’) pursuant to which the bank agreed to issue one or more letters of credit aggregating to $15.0 million. The LOC Agreement terminates on June 30, 2007, but is automatically extended for successive one-year periods unless notice is provided by either the Company or the bank to the contrary. In the event that the bank is required to pay on a letter of credit drawn by the beneficiary thereof, such letter of credit converts into a loan, bearing interest at 3-month LIBOR plus 4.0%, to be repaid in equal installments at the end of each of the next four quarters. There are various restrictive covenants in the LOC Agreement, which include maintaining certain levels of tangible net worth, leverage ratio, and minimum coverage ratio. At December 31, 2005, the Company was in compliance with the covenants under the LOC Agreement. At December 31, 2004, letters of credit amounting to $10.8 million were issued under the LOC Agreement, which were used to replace cash on deposit in reserve funds for the OFC Notes and the Beal Bank Credit Agreement. As of December 31, 2005, such letters of credit have not been renewed by the Company.

Restrictive covenants

The Company entered into certain agreements with Israeli Banks under which the Company and its Israeli subsidiary, Ormat Systems Ltd., have agreed to certain negative covenants, including, but not limited to, a prohibition on: (i) creating any floating charge or any permanent pledge, charge or lien over the Company’s assets without obtaining the prior written approval of the lender; (ii) guaranteeing the liabilities of any third party without obtaining the prior written approval of the lender; and (iii) selling, assigning, transferring, conveying or disposing of all or substantially all of the Company’s assets. In some cases, the Company and Ormat Systems Ltd. have agreed to maintain certain financial ratios such as a debt service coverage ratio and a debt to equity ratio. The Company does not expect that these covenants or ratios, which apply to the Company on a consolidated basis,

145

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

will materially limit its ability to execute its future business plans or operations. The failure to perform or observe any of the covenants set forth in such agreements, subject to various cure periods, would result in the occurrence of an event of default and would enable the lenders to accelerate all amounts due under each such agreement.

Grants and royalties

The Company, through OSL, has historically, through December 31, 2003, requested and received grants for research and development from the Office of the Chief Scientist of the Israeli Government. OSL is required to pay royalties to the Israeli Government at a rate of 3.5% to 5.0% of the revenues derived from products and services developed using such grants, and amounted to $1,883,000, $1,171,000 and $700,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The Company is not liable for royalties if the Company does not sell the respective products. Such royalties are capped at the amount of the grants received plus interest at LIBOR, and the cap at December 31, 2004 and 2003, amounted to $5,617,000 and $7,166,000, respectively, of which approximately $1,165,000 and $825,000 of the cap, respectively, increases based on the LIBOR rate, as defined.

In addition, OSL is obligated to pay royalties to an unaffiliated entity at 2% of its domestic sales up to a cumulative amount of $9.25 million, and royalties at a rate of 0.2% of revenues on the next $5.4 million related to a certain technology that is not currently being utilized. However, no royalties will be paid after 30 years have elapsed from the completion of the related project. OSL has not derived any revenues from this technology to date, nor have any royalties been paid to date.

Employment agreements

The Company has employment agreements with four of its senior executive officers, the terms of which expire at various times through June 2008. Such agreements provide for monthly or annual base salary amounts, as well as for bonus and other benefits. The aggregate commitment for future salaries at December 31, 2005, excluding bonuses and benefits, was approximately $1.5 million.

Such executives are also entitled to change in control payments, whereby, if within three years following the occurrence of a change in control, the Company terminates the employee or the employee terminates his or her employment for good reason, as defined, or if, within 180 days following a change in control, the employee terminates his or her employment, the Company is required to pay 24 months of such employee’s monthly base salary at the time of the change in control, plus unpaid and accrued base salary and bonuses. The aggregate of 24 months of these executive’s base salary, excluding bonuses and benefits, as of December 31, 2005 approximated $1.2 million.

Contingencies

Steamboat Geothermal LLC (‘‘SG’’), a wholly-owned indirect subsidiary, is a party to a litigation related to a dispute over amounts owed to the plaintiffs under certain operating agreements. SG has initiated settlement discussions with the plaintiff and on December 31, 2005 and January 9, 2006, it entered into a sales, settlement and release agreement and an assignment agreement, respectively, with an assignee of 37% of one of the plaintiffs’ right to net operating revenues, whereby SG was assigned such 37% of the net operating revenues of Steamboat 1 in partial settlement of the dispute with such plaintiff. The Company believes that any outcome of the dispute with regard to the remaining claims will not have a material impact on the Company’s results of operations.

The Company was a party to a third-party complaint filed on November 15, 2005 by Lacy M. Henry and Judy B. Henry (the ‘‘Henrys’’) in a bankruptcy proceeding in the United States Bankruptcy Court for the Eastern District of North Carolina. The Henrys are debtors in a Chapter 11

146

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

bankruptcy filed in the Bankruptcy Court. The Henrys were the sole shareholders of MPS Generation, Inc. (‘‘MPSG’’). The Company entered into a supply contract with MPSG dated as of December 29, 2003, under which the Company was retained as a subcontractor to produce four waste heat energy converters for a project for which MPSG had entered into a contract with Basin Electric Power Cooperative (‘‘Basin’’). Basin filed a lawsuit on February 24, 2005 against, among others, MPSG and the Henrys in the United States District Court for the District of North Dakota, alleging various causes of action including breach of contract, actual and constructive fraud, and conversion, and demanding the piercing of MPSG's corporate veil to establish the personal liability of the Henrys for MPSG’s debts. On September 15, 2005, Basin filed a complaint commencing the bankruptcy proceeding, seeking a determination that the claims which Basin alleged against the Henrys in the North Dakota lawsuit were not dischargeable. On November 15, 2005, the Henrys answered Basin's complaint in the bankruptcy proceeding and also filed a third-party complaint against the Company, alleging that to the extent the Henrys are found personally liable to Basin for MPSG’s debts, the Henrys have claims against the Company for breach of contract/breach of warranty, tortious interference with contract, unfair or deceptive trade practices and fraud. The Henrys alleged damages in excess of $100 million. On December 15, 2005, the Company filed an answer denying the Henrys' claims and asserting counterclaims against the Henrys. The Company believes that it has no liability to the Henrys and intends to defend vigorously against the Henrys’ claims in the bankruptcy proceeding. Therefore, no provision is included in the financial statements in respect of the claim.

Certain of the Company’s projects are subject to contested Federal Energy Regulatory Commission (‘‘FERC’’) rulings whereby an adverse outcome could result in a refund of a portion of previous revenues and/or a reduction in future revenues from those projects. The outcome of this matter cannot be predicted at this time.

The Company is a defendant in various other legal and regulatory proceedings in the ordinary course of business. It is the opinion of the Company’s management that the expected outcome of these matters, individually or in the aggregate, will not have a material effect on the results of operations and financial condition of the Company.

147

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

				Three Months Ended
				March 31, 2004				June 30, 2004				Sept. 30, 2004				Dec. 31, 2004				March 31, 2005				June 30, 2005				Sept. 30, 2005				Dec. 31, 2005
				(dollars in thousands, except per share amounts)
Revenues:
Electricity Segment				$	33,459			$	36,756			$	48,803			$	39,813			$	40,452			$	42,394			$	51,385			$	43,138
Products Segment					14,146				15,345				14,480				16,428				13,444				13,631				17,905				15,643
					47,605				52,101				63,283				56,241				53,896				56,025				69,290				58,781
Cost of revenues:
Electricity Segment					19,390				21,222				25,063				24,067				23,612				27,791				25,855				26,357
Products Segment					11,328				11,794				10,908				12,306				10,683				11,427				12,073				11,053
					30,718				33,016				35,971				36,373				34,295				39,218				37,928				37,410
Gross margin					16,887				19,085				27,312				19,868				19,601				16,807				31,362				21,371
Operating expenses (income):
Research and development expenses					302				900				351				622				380				714				777				1,165
Selling and marketing expenses					1,854				2,092				1,649				2,174				2,208				1,651				1,934				2,083
General and administrative expenses					2,332				2,887				2,776				3,614				3,627				2,975				3,388				4,330
Gain on sale of geothermal resource rights					—				—				—				(845	)			—				—				—				—
Operating income					12,399				13,206				22,536				14,303				13,386				11,467				25,263				13,793
Other income (expense):
Interest income					244				187				64				821				810				1,075				1,370				1,053
Interest expense					(8,523	)			(10,952	)			(11,737	)			(11,573	)			(10,298	)			(9,502	)			(9,011	)			(26,506	)
Foreign currency translation and
transaction gain (loss)					(321	)			(76	)			(192	)			443				(83	)			39				(21	)			(374	)
Other non-operating income (expense)					(24	)			169				76				(109	)			40				72				53				347
Income (loss) before income taxes, minority interest and equity in income of investees					3,775				2,534				10,747				3,885				3,855				3,151				17,654				(11,687	)
Income tax benefit (provision)					(1,479	)			(478	)			(4,197	)			(455	)			(1,480	)			(1,154	)			(6,977	)			4,921
Minority interest in earnings of subsidiaries					(108	)			—				—				—				—				—				—				—
Equity in income of investees					549				1,486				213				1,319				1,533				2,097				1,641				1,623
Net income (loss)				$	2,737			$	3,542			$	6,763			$	4,749			$	3,908			$	4,094			$	12,318			$	(5,143	)
Earnings (loss) per share — basic and diluted				$	0.12			$	0.15			$	0.28			$	0.17			$	0.12			$	0.13			$	0.39			$	(0.16	)
Weighted average number of shares					23,214				23,239				24,375				27,969				31,563				31,563				31,563				31,563

Interest expense for the three months ended December 31, 2005 include a one-time charge of approximately $16.6 million as a result of the prepayment on December 8, 2005 of the Beal Bank loan (see Note 9), comprising of: (i) prepayment premium of $11.5 million associated with payment of the Beal Bank loan, (ii) write-off of certain deferred financing costs amounting to $4.2 million associated with the incurrence of the Beal Bank loan, and (iii) loss of $0.9 million associated with the interest rate caps transaction described below. The tax effect of such one time charge is $6.3 million, bringing the net effect of it to $10.3 million.

NOTE 20 — SUBSEQUENT EVENTS

On January 25, 2006, the Company’s wholly owned subsidiary, OrSumas LLC, entered into a 20-year power purchase agreement with Puget Sound Energy (the ‘‘Utility’’) for the supply of power

148

ORMAT TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

from a Recovered Energy Generation facility, which will be located adjacent to the Sumas Compressor Station of Northwest Pipeline Inc. in Sumas, Washington State. The facility is expected to begin commercial operations in the last quarter of 2007 or the first quarter of 2008.

On January 17, 2006, the Company filed a universal shelf registration statement on Form S-3, which was declared effective by the SEC on January 31, 2006. The shelf registration statement provides the Company with the opportunity to issue various types of securities, including debt securities, common stock, warrants and units of our company, from time to time, in one or more offerings up to a total dollar amount of $1 billion. Pursuant to the shelf registration statement, the Company may periodically offer one or more of the registered securities in amounts, at prices, and on terms to be announced when, and if, the securities are offered. At the time any offering is made under the shelf registration statement, the offering specifics will be set out in a prospectus supplement.

On February 15, 2006, the Company’s subsidiary, Ormat Nevada Inc. (‘‘Ormat Nevada’’), entered into a $25 million credit agreement with Union Bank of California (‘‘UBOC’’). Under the credit agreement, Ormat Nevada can request extensions of credit in the form of loans and/or the issuance of one or more letters of credit. UBOC is currently the sole lender and issuing bank under the credit agreement, but is also designated as an administrative agent on behalf of banks that may, from time to time in the future, join the credit agreement as parties thereto. In connection with this transaction, the Company has entered into a guarantee in favor of the administrative agent for the benefit of the banks, pursuant to which the Company agreed to guarantee Ormat Nevada’s obligations under the credit agreement. Ormat Nevada's obligations under the credit agreement are otherwise unsecured by any of its (or any of its subsidiaries') assets.

There are various restrictive covenants under the credit agreement, which include maintaining certain levels of tangible net worth, leverage ratio, minimum coverage ratio, and a distribution coverage ratio. In addition, there are restrictions on dividend distributions in the event of a payment default or noncompliance with such ratios.

On March 6, 2006, one letter of credit with a stated amount of $11.5 million, which replacess restricted cash accounts, has been issued under this credit agreement.

On March 13, 2006, one of our wholly-owned subsidiaries consummated the acquisition of an additional 50.8% partnership interest in Orzunil I de Electricidad, Limitada (Orzunil), as discussed under Note 4.

On March 7, 2006, the Company's Board of Directors declared, approved and authorized payment of a quarterly dividend of $947,000 ($0.03 per share) to all holders of our issued and outstanding shares of common stock on March 28, 2006, payable on April 4, 2006.

149

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Ormat Leyte Co. Ltd.

We have audited the accompanying balance sheet of Ormat Leyte Co. Ltd. (a Philippine limited partnership) (the Partnership) as of December 31, 2005, and the related statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership's internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ormat Leyte Co. Ltd. as of December 31, 2005, and the results of its operations and its cash flows for the year ended December 31, 2005 in conformity with U.S. generally accepted accounting principles.

/s/ SyCip Gorres Velayo & Co.

A Member Practice of Ernst & Young Global

Makati City, Philippines
March 27, 2006

150

ORMAT LEYTE CO. LTD.
(A LIMITED PARTNERSHIP)

BALANCE SHEET

				December 31
				2005				2004
								(Unaudited)
Assets
Current Assets
Cash (Note 4)				$	1,316,091			$	439,393
Restricted cash (Notes 4 and 7)					3,781,222				3,981,199
Accounts receivable — net of allowance for doubtful debts of $645,047 in 2005 and $608,485 in 2004 (Note 14)					1,725,143				2,625,119
Prepaid expenses					154,950				131,842
Deferred income tax assets — net (Note 13)					994,965				32,480
Total Current Assets					7,972,371				7,210,033
Property, Plant and Equipment — net (Notes 2, 6, 7 and 14)					9,937,548				15,653,738
Deferred Income Tax Assets — net (Note 13)					587,248				—
Other Non-current Assets — net (Note 5)					741,893				1,182,857
				$	19,239,060			$	24,046,628
Liabilities and Partners' Equity
Current Liabilities
Accrued expenses (Note 12)				$	490,746			$	409,881
Income tax payable (Note 13)					512,393				543,820
Current portion of long-term loan payable (Notes 4, 6 and 7)					5,079,776				5,079,776
Total Current Liabilities					6,082,915				6,033,477
Long-term Loan Payable — net of current portion (Notes 4, 6 and 7)					3,809,828				8,889,604
Total Liabilities					9,892,743				14,923,081
Partners' Equity
Limited Partners (Notes 7 and 9)
Investment					395,000				1,297,145
Accumulated net income					6,988,589				5,910,457
					7,383,589				7,207,602
General Partner (Notes 7 and 9)
Investment					105,000				344,809
Accumulated net income					1,857,728				1,571,136
					1,962,728				1,915,945
Total Partners' Equity					9,346,317				9,123,547
				$	19,239,060			$	24,046,628

See accompanying Notes to Financial Statements.

151

ORMAT LEYTE CO. LTD.
(A LIMITED PARTNERSHIP)

STATEMENT OF INCOME

				Years Ended December 31
				2005				2004
								(Unaudited)
Operating Revenue (Notes 2 and 14)				$	13,133,937			$	10,799,895
Costs and Expenses
Costs of power plants operations (includes cost of services rendered by related parties amounting to $207,273 in 2005 and $186,000 in 2004) (Notes 6, 8, 10 and 14)					6,887,775				7,361,469
General and administrative expenses (includes cost of services rendered by a related party amounting to $87,273 in 2005 and $78,000 in 2004) (Notes 8 and 11)					256,825				212,199
					7,144,600				7,573,668
Recovery From Insurance (Note 14)					977,841				821,892
Income From Operations					6,967,178				4,048,119
Other Income (Charges)
Interest expense and finance charges (Note 7)					(752,969	)			(1,095,328	)
Amortization of capitalized credit exposure fees (Notes 5 and 7)					(459,532	)			(459,532	)
Interest income (Note 4)					126,103				34,284
Foreign exchange loss — net					(24,677	)			(32,790	)
					(1,111,075	)			(1,553,366	)
Income Before Tax					5,856,103				2,494,753
Income Tax Expense (Note 13)
Current					2,132,474				1,149,495
Deferred					(1,547,781	)			(12,325	)
					584,693				1,137,170
Net Income				$	5,271,410			$	1,357,583
Allocation of Net Income
Limited Partners				$	4,164,414			$	1,072,490
General Partner					1,106,996				285,093
				$	5,271,410			$	1,357,583

See accompanying Notes to Financial Statements.

152

ORMAT LEYTE CO. LTD.
(A Limited Partnership)

STATEMENT OF CHANGES IN PARTNERS' EQUITY

				Years Ended December 31
				2005				2004
								(Unaudited)
Limited Partners
Investment:
Balance at beginning of year				$	1,297,145			$	2,853,710
Return of equity					(902,145	)			(1,556,565	)
Balance at end of year					395,000				1,297,145
Accumulated net income:
Balance at beginning of year					5,910,457				6,028,062
Net income for the year					4,164,414				1,072,490
Income distribution					(3,086,282	)			(1,190,095	)
Balance at end of year					6,988,589				5,910,457
					7,383,589				7,207,602
General Partner
Investment:
Balance at beginning of year					344,809				758,580
Return of equity					(239,809	)			(413,771	)
Balance at end of year					105,000				344,809
Accumulated net income:
Balance at beginning of year					1,571,136				1,602,398
Net income for the year					1,106,996				285,093
Income distribution					(820,404	)			(316,355	)
Balance at end of year					1,857,728				1,571,136
					1,962,728				1,915,945
Total Partners' Equity				$	9,346,317			$	9,123,547

See accompanying Notes to Financial Statements.

153

ORMAT LEYTE CO. LTD.
(A LIMITED PARTNERSHIP)

STATEMENT OF CASH FLOWS

				Years Ended December 31
				2005				2004
								(Unaudited)
Cash Flows From Operating Activities
Net income				$	5,271,410			$	1,357,583
Adjustments for:
Depreciation					5,725,805				5,738,408
Deferred income tax					(1,547,781	)			(12,325	)
Amortization of capitalized credit exposure fees					459,532				459,532
Provision for separation benefits					30,050				30,050
Unrealized foreign exchange loss (gain) — net					7,516				(5,017	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable					934,220				(24,658	)
Input value-added tax					(20,078	)			(16,279	)
Prepaid expenses					(23,108	)			25,544
Increase (decrease) in:
Accrued expenses					34,697				68,269
Income tax payable					(49,279	)			137,982
Net cash provided by operating activities					10,822,984				7,759,089
Cash Flows From Investing Activities
Decrease in restricted cash					199,977				224,651
Acquisitions of property, plant and equipment					(9,615	)			(3,417	)
Net cash provided by investing activities					190,362				221,234
Cash Flows From Financing Activities
Repayments of loan					(5,079,776	)			(5,079,776	)
Income distributed to partners					(3,906,686	)			(1,506,450	)
Return of equity to partners					(1,141,954	)			(1,970,336	)
Net cash used in financing activities					(10,128,416	)			(8,556,562	)
Effects of Exchange Rate Changes on Cash and Cash Equivalents					(8,232	)			1,213
Net Increase (Decrease) in Cash and Cash Equivalents					876,698				(575,026	)
Cash and Cash Equivalents at Beginning of Year					439,393				1,014,419
Cash and Cash Equivalents at End of Year				$	1,316,091			$	439,393
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Income taxes				$	2,215,778			$	1,006,687
Interest and financing charges					808,187				1,152,821

See accompanying Notes to Financial Statements.

154

ORMAT LEYTE CO. LTD.
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

1.	Company Information

	a.	Background

Ormat Leyte Co. Ltd. (OLCL), a Philippine limited partnership (the Partnership), was registered with the Philippine Securities and Exchange Commission (SEC) to engage in power production. It owns and operates geothermal electricity-generating facilities in Leyte Province, Philippines for the production and sale of electricity from geothermal resources.

The partners in this Partnership are:

				Type of Partner				Percentage of Ownership
Orleyte Company — Philippine Branch (OC)				General				21.00
OC				Limited				58.97
Itochu Corporation				Limited				10.00
Electric Power Development Co., Ltd.				Limited				10.00
Ormat Philippines, Inc. — Philippine Branch (OPI)				Limited				0.03

The net income of the Partnership is allocated to the partners based on each partner's respective percentage of ownership.

OLCL is registered with the Philippine Board of Investments as an operator of power generating plants on a pioneer status under the Omnibus Investments Code of 1987 (otherwise known as Executive Order No. 226). As a registered enterprise, OLCL is entitled to certain tax and nontax incentives under the provisions of the Code subject to certain requirements under the terms of its registration. No incentive was availed by the Partnership in 2005 and 2004.

	b.	Principal Business Risks

The risks associated with the power plants include operating risks, dependence on one customer Philippine National Oil Company-Energy Development Corporation (PNOC-EDC), environmental and political risks. Operating risks include breakdown of equipment or processes and performance of the power plants below expected levels of output or efficiency (see Note 14).

There is concentration in credit risk due to dependence on one customer. If the government were to purchase PNOC-EDC's property, PNOC-EDC would remain obligated under the Build-Operate-and-Transfer (BOT) Agreement (see Note 2) to make firm payments to OLCL. Such purchase could result in PNOC-EDC being unable to fulfill its obligations under the BOT Agreement, which will have material adverse effect on OLCL's ability to service its debt requirements. OLCL controls this risk by strict monitoring procedures and continuous discussions with PNOC-EDC on matters relating to the BOT Agreement. Accounts receivable from PNOC-EDC as of December 31, 2005 and 2004 amounted to $1.73 million and $1.43 million, respectively, net of allowance for probable losses of $0.65 million and $0.61 million, respectively.

2.	BOT Agreement

On February 15, 1996, OLCL entered into an Accession Undertaking in connection with the BOT Agreement between Ormat, Inc., an affiliate company, and PNOC-EDC, a wholly owned subsidiary of Philippine National Oil Company, whereby Ormat, Inc. assigned to OLCL all its rights and benefits under the BOT Agreement. The undertaking provides that OLCL shall design, construct, own and operate four geothermal electricity-generating plants with a total contracted capacity of 50 megawatts (MW) through the utilization of the geothermal resources of the Leyte Geothermal Power Optimization Project Area (Project).

155

The BOT Agreement provides that OLCL shall own, operate and maintain the power plants for the purpose of converting the steam delivered by PNOC-EDC into electric energy required by the National Power Corporation (NPC) in accordance with the power purchase agreement between NPC and PNOC-EDC during the cooperation period. OLCL will bill PNOC-EDC for the delivery of electric power and energy the amount of Capacity Fee which is the sum of the Fixed Operating Cost Recovery (the peso portion is payable in Philippine peso and the United States (US) dollar portion is payable in US dollar), Service Fee for Return on Investment (stated in US dollar and payable either in US dollar or Philippine peso) and Capital Cost Recovery (stated and payable in US dollar); and Energy Fee computed based on an agreed formula (stated and payable in Philippine peso), until the termination of the BOT Agreement in September 2007. The day following the end of the cooperation period, title to the power plants shall be transferred to PNOC-EDC, provided that PNOC-EDC has made all payments required pursuant to the BOT Agreement.

There are four power plants in the Leyte facility namely: Mahanagdong A, Mahanagdong B, Tongonan and Malitbog. The power plants became operational on September 25, 1997, except for Malitbog which became operational on December 31, 1997. The total costs of the power plants amounted to $56.67 million.

3.	Summary of Significant Accounting Policies

Basis of Preparation

The financial statements include the financial position, results of operations and cash flows of OLCL and have been prepared in accordance with US generally accepted accounting principles.

Use of Estimates

The preparation of the financial statements in accordance with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from such estimates.

Functional Currency

The functional currency of OLCL is US dollar.

In 2004 and prior years, OLCL's books of accounts were maintained in Philippine peso (₱) and were remeasured into US dollars. The resulting translation gain or loss was credited or charged to current operations. The remeasurement method of ₱ balances to US dollar balances was as follows:

	a.	All monetary assets and liabilities denominated in ₱ were translated into US dollars using the balance sheet date exchange rate;

	b.	Non-monetary assets, such as prepaid expenses, property, plant and equipment, other non-current assets, and partners' equity - investment account carried at historical cost, were translated at historical exchange rates on transaction dates; the related expense accounts such as depreciation and amortization were also translated at historical rates; and

	c.	Other revenue, costs and expenses denominated in ₱ were translated at the average exchange rate for the month.

Since January 1, 2005, OLCL has maintained its books of accounts in US dollar consistent with its functional currency.

Accounts Receivable

Accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable.

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Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and any impairment in value. The cost of power plants consists of expenditures incurred in connection with the design and construction of the power plants. Cost also includes capitalized interests on borrowed funds used to finance the construction of the power plants during the construction period.

For the year ended December 31, 2005, there was no interest capitalized.

Depreciation of the power plants is computed on the straight-line method over a period of
10 years, which is the cooperation period stipulated in the BOT Agreement. Depreciation of the other property and equipment is computed on the straight-line method over the estimated useful lives of the assets as follows:

Transportation equipment				5 years
Furniture, fixtures and equipment				3 years

The cost of routine repairs and maintenance is charged to income as incurred; major enhancements and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to current operations.

Impairment of Long-lived Assets

Long-lived assets are accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-lived Assets. OLCL periodically evaluates its long-lived assets for events or changes in circumstances that might indicate that the carrying amount of the assets may not be recoverable. OLCL assesses the recoverability of the assets by determining whether the amortization of such long-lived assets over their estimated useful lives can be recovered through projected undiscounted future cash flows. The amount of impairment, if any, is measured based on the fair value of the assets. Based on OLCL's review, as of December 31, 2005 and 2004, no impairment of assets has occurred.

Deferred Costs

Credit exposure fees paid in relation to the term loan, included under the Other non-current assets account in the balance sheets, are deferred and amortized over the term of the loan up to 2007 using the effective interest rate method.

Cash and Cash Equivalents

OLCL considers all highly liquid investments with original maturity of three months or less at the time of purchase to be cash and cash equivalents.

Prepaid Input Value-Added Taxes

Prepaid input value-added taxes (VAT) represent VAT imposed on OLCL by its suppliers for the acquisition of goods and services required under Philippine tax laws and regulations.

The input VAT is recognized as an asset and will be claimed as tax credits. Input taxes are stated at their estimated net realizable values.

Revenue Recognition

Pursuant to Emerging Issues Task Force Issue No. 01-8, Determining Whether an Arrangement Contains a Lease, and Statement of Financial Accounting Standards (SFAS) 13, Accounting for Leases, the arrangements of the BOT Agreement should be accounted for as an operating lease. The BOT Agreement does not provide for any minimum payments.

Operating revenue consists of Capacity and Energy Fees for the energy and services supplied by OLCL to PNOC-EDC as provided for in the BOT Agreement and revenue is recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to OLCL and the amount of revenue can be reliably measured. Capacity Fee is the sum of the Fixed

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Operating Cost Recovery, Service Fee for Return on Investment and Capital Cost Recovery (see Note 2). The Capacity Fee component in OLCL's BOT Agreement with PNOC-EDC is recognized based on the generation of electricity using the agreed formula in the BOT Agreement which takes into account, among others, the nominated capacity, contracted capacity, outage hours and an agreed fixed rate per kilowatt hour. Energy Fee is recognized based on the actual delivery of electricity generated and made available to PNOC-EDC in excess of the agreed efficiency rate in converting the steam delivered by PNOC-EDC into electric energy.

Interest on cash and restricted cash is recognized as the interest accrues computed using the effective interest rate method.

Separation Benefits

OLCL accrues the cost of separation benefits that the employees are entitled to receive at the termination of the BOT Agreement computed using the projected unit credit method. These benefits are unfunded.

Borrowing Costs

Borrowing costs generally are expensed as incurred. Borrowing cost is capitalized if it is directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the assets are ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. Borrowing costs eligible for capitalization are the interest costs recognized on borrowings and other obligations.

Income Taxes

OLCL accounts for corporate income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach in determining income tax liabilities. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to the temporary differences between the financial reporting bases of assets and liabilities and their related tax bases. Deferred income tax assets and liabilities are measured using the tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided when it is more likely than not that a portion or all of the deferred income tax assets will not be realized in the future.

Foreign Currency Transactions

Transactions in foreign currencies are initially recorded in US dollars based on the exchange rates prevailing at the transactions dates. Foreign currency-denominated monetary assets and liabilities are translated to US dollars at exchange rates prevailing at balance sheet dates. Exchange gains or losses arising from the translation or settlement of foreign currency denominated monetary assets and liabilities at exchange rates different from those at which the assets and liabilities are initially recorded, are credited or charged to current operations.

Impact of Recently Issued Accounting Standards

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application of a change in accounting principles is impracticable and for reporting a change when retrospective application is impracticable. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an

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accounting change retrospectively. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. OLCL does not expect the adoption of SFAS No. 154 to have a material effect on its results of operations or financial condition.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 replaces FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133. SFAS 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. It also clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This Statement shall be effective for all financial instruments acquired or issued after the beginning of an entity's first year that begins after September 2006. OLCL does not expect the adoption of SFAS No. 155 to have a material effect on its results of operations or financial condition.

4.	Cash and Restricted Cash

Restricted cash totalling $3.78 million and $3.98 million as of December 31, 2005 and 2004, respectively, represents the cash reserves under the Credit Agreement which will be used to secure the payment of loan amortizations maturing in the succeeding two quarters (see Note 7). The balance of restricted cash is subject to distribution approvals in accordance with the Credit Agreement.

5.	Other Non-current Assets

				2005				2004
								(Unaudited)
Deferred credit exposure fees — net (Note 7)				$	689,340			$	1,148,872
Input VAT					50,528				31,960
Rental deposit					2,025				2,025
				$	741,893			$	1,182,857

6.	Property, Plant and Equipment

				2005				2004
								(Unaudited)
Power plants (Note 2)				$	56,667,169			$	56,667,169
Transportation equipment					181,120				172,408
Furniture, fixtures and equipment					75,697				74,794
					56,923,986				56,914,371
Less accumulated depreciation					46,986,438				41,260,633
				$	9,937,548			$	15,653,738

The carrying amounts of the power plants as of December 31, 2005 and 2004 were $9.90 million and $15.61 million, respectively.

Total depreciation charged to operations amounted to $5.73 million and $5.74 million in 2005 and 2004, respectively.

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Interest expense capitalized up to the completion of the power plants in 1997, net of accumulated depreciation of $1.55 million and $1.36 million, amounted to $.33 million and $.52 million as of December 31, 2005 and 2004, respectively.

All power plants are pledged to secure the payment of the long-term loan payable (see Note 7).

7.	Long-term Loan Payable

The outstanding long-term loan payable amounted to $8.89 million and $13.97 million as of December 31, 2005 and 2004, respectively. The current portion of the loan amounted to
$5.08 million as of December 31, 2005 and 2004.

Loan amortizations due for the remaining one year and nine months are as follows:

Year				Amount
2006				$5.08 million
2007 (January to September)				3.81 million

In 1998, the loan payable pertained to the construction credit facility extended by a syndicate of lenders to partially finance the cost of construction of 50 MW power plants in Leyte, Philippines.

The Export-Import Bank of the United States (Eximbank) provided a guarantee and agreed to re-finance the loan (i.e., conversion of this construction loan into a term loan upon completion of the reliability tests on the power plants) made by the lenders under the Credit Agreement.

The construction loan was converted into a term loan with Eximbank on January 21, 1999. The loan's principal balance is payable in 35 equal, successive quarterly installments of
$1.27 million starting February 1, 1999 plus interest at 6.54% a year. The principal balance is exclusive of credit exposure fees amounting to $0.69 million and $1.15 million (net of accumulated amortization of $3.19 million and $2.73 million) as of December 31, 2005 and 2004, respectively. The unamortized balance of credit exposure fees is included under the Other non-current assets account in the balance sheets (see Note 5).

The loan is collateralized by a mortgage on OLCL's power plants, assignment of revenues and pledge of partnership interests of OPI and OC in OLCL.

The loan agreement provides, among other terms and conditions, that, for as long as the loan remains outstanding, OLCL is subject to certain negative covenants requiring prior written bank approval for specified partnership acts which include, but are not limited to mortgage of properties; consolidation, merger and sale of assets; declaration or payment of partnership distributions, return of capital or redemption, retirement, purchase or acquisition of partnership interests; entering into lease-purchase and guarantee agreements; contracting indebtedness; forming or having any subsidiaries; granting of loans or advances; entering into any new management contracts; amendment of Articles of Partnership and other organization documents, i.e., changing its fiscal year and materially changing the nature of its present business; and abandonment of the Project. In addition, the agreement provides that OLCL's equity-debt ratio should not be less than 25:75 at any time.

8.	Related Party Transactions

Transactions with related parties are as follows:

	a.	Technical and managerial support services agreement with Ormat Industries Ltd. (OI), an intermediate holding Company of OC, for one year starting October 1997, renewable yearly, if not terminated prior to renewal date, until 2007, for a monthly fee of US$10,000, escalated using the indexes as defined in the agreement (see Note 10).

	b.	Operation, maintenance, general and administration support services agreement with Ormat, Inc. - Manila Branch, an affiliate company, for a monthly service fee of US$14,545 in 2005 and US$12,000 in 2004 with the same terms as the agreement with OI (see Notes 10 and 11).

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There were no outstanding amounts due to/from related parties as of December 31, 2005 and 2004.

9.	Partners' Equity

	a.	On May 16 and August 8, 2005, OLCL returned $0.85 million and $0.29 million, respectively of equity to partners, distributed in proportion to their respective contributions. On May 11, 2004, OLCL returned $1.97 million of equity to partners. The corresponding Amended Articles of Partnership covering the 2005 and 2004 return of equity to partners was approved by the SEC on June 16, 2005 and May 21, 2004, respectively.

	b.	On February 3, May 5, August 8 and October 3 2005, OLCL distributed income to the partners amounting to $0.48 million, $0.80 million, $1.42 million and $1.20 million, respectively. On February 9 and August 9, 2004, OLCL distributed income to partners amounting to $1.20 million and $0.31 million, respectively.

10.	Costs of Power Plants Operations

				2005				2004
								(Unaudited)
Depreciation (Note 6)				$	5,725,805			$	5,738,408
Insurance					292,792				328,666
Salaries and wages					222,162				219,421
Supplies and utilities					150,627				161,029
Technical and managerial services (Note 8a)					120,000				120,000
Employee benefits (Note 12)					103,620				72,046
Operations and maintenance services (Note 8b)					87,273				66,000
Outside services					57,616				42,734
Repairs and maintenance (Note 14)					47,287				536,726
Others					80,593				76,439
				$	6,887,775			$	7,361,469

11.	General and Administrative Expenses

				2005				2004
								(Unaudited)
Administrative services (Note 8b)				$	87,273			$	78,000
Professional fees					83,308				67,792
Others					86,244				66,407
				$	256,825			$	212,199

12.	Separation Benefits

OLCL has a separation benefits policy that entitles its employees to a separation pay upon the termination of the BOT Agreement, equivalent to one month of the employee's basic salary for every year of service for employees or a minimum of one and one fourth (1-1/4) month's salary for every year of service for certain qualified employees. The separation benefits are unfunded.

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Following is the movement of OLCL's separation benefits liabilities included under the Accrued expenses account in the balance sheets:

				2005				2004
								(Unaudited)
Balance at beginning of year				$	85,604			$	56,365
Separation benefits cost for the year					30,050				30,050
Foreign exchange loss (gain)					6,827				(811	)
Balance at end of year				$	122,481			$	85,604

The principal assumptions used in determining the separation benefits liabilities as follows:

				2005				2004
								(Unaudited)
Discount rate				9.04%					11.67	%
Annual salary increases				7.00% - 8.00%					5.00	%

13.	Income Taxes

	a.	Deferred income tax assets relate to the following:

				2005				2004
								(Unaudited)
Deferred income tax assets — current:
Unrealized foreign exchange loss on current portion of long-term loan				$	814,156			$	782,799
Allowance for doubtful debts					225,766				194,715
Unrealized foreign exchange losses on current monetary items				$	102,041			$	—
Accrued separation benefits and others					78,768				27,393
					1,220,731				1,004,907
Less valuation allowance					225,766				964,734
					994,965				40,173
Deferred income tax liability on unrealized foreign exchange gain on current monetary items					—				(7,693	)
Net deferred income tax assets — current				$	994,965			$	32,480
Deferred income tax assets — non-current:
Unrealized foreign exchange loss on long-term loan				$	587,248			$	1,369,898
Less valuation allowance					—				1,369,898
Net deferred income tax assets — non-current				$	587,248			$	—

In 2004, based on the then position of the tax authorities on the tax treatment of foreign exchange differentials by taxpayers adopting the use of functional currency other than the Philippine peso in financial statements, it was considered unlikely that the related temporary difference would be deductible against future taxable income. Thus, a valuation allowance was provided on the deferred income tax asset relating to unrealized foreign exchange loss on the long-term loan in 2004. However, in 2005, the tax authorities changed their earlier position which rendered the temporary difference to be deductible against future taxable profits. Consequently, the valuation allowance on the deferred income tax asset in 2004 was reversed in 2005.

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	b.	The provision for income tax — deferred consists of the following:

				2005				2004
								(Unaudited)
Decrease in valuation allowance				$	(2,108,865	)		$	(704,916	)
Net change in temporary differences					559,132				692,642
Unrealized foreign exchange loss (gain)					1,952				(51	)
				$	(1,547,781	)		$	(12,325	)

	c.	The reconciliations of the income tax expense computed by applying the statutory income tax rates to the income before income tax and the income tax expense as shown in the statements of income is summarized as follows:

				2005				2004
								(Unaudited)
Income tax at statutory income tax rates				$	1,903,233			$	798,321
Additions to (reductions in) income tax resulting from:
Changes in valuation allowance on deferred income tax assets					(2,108,865	)			(704,916	)
Effect of using the local currency for tax purposes				$	937,166			$	138,207
Change in income tax rate					(158,808	)			—
Nondeductible expenses and others					11,967				4,992
Depreciation expense related to capitalized foreign exchange losses					—				900,566
Income tax expense				$	584,693			$	1,137,170

The statutory income tax rates stood at 32% during the period up to October 31, 2005 and was increased to 35% from November 1, 2005 (Note d). The statutory income tax rate was 32% in 2004.

Computation of income tax expense is based on the books expressed in Philippine peso in accordance with Philippine' tax laws. Prior to January 1, 2005, the carrying value of OLCL's power plants in its books expressed in Philippine peso included undepreciated capitalized unrealized foreign exchange losses; the related depreciation charged to income was not considered a deductible tax item and was added back to "income tax at statutory income tax rates" in the reconciliation of income tax expense. Starting on January 1, 2005, OLCL reversed in its books expressed in Philippine peso the balance of undepreciated capitalized unrealized foreign exchange losses.

	d.	On May 24, 2005, the new Expanded Value-Added Tax (E-VAT) law was signed as Republic Act No. 9337 or the E-VAT Act of 2005. The E-VAT law took effect on November 1, 2005 following the approval on October 19, 2005 of Revenue Regulations 16-2005 which provides for the implementation of the rules and regulations of the new E-VAT law. This provides for the change in corporate income tax rate from 32% to 35% for the next three years effective on November 1, 2005, and 30% starting January 1, 2009 and thereafter, among others. OCLC's deferred income tax assets in 2005 were measured using tax rates expected to apply for the years when the deferred income tax assets are expected to be realized.

The E-VAT law also provides for the increase in the VAT rate from 10% to 12%, subject to certain conditions. The increase in VAT rate to 12% became effective on February 1, 2006.

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14.	Insurance Recovery of the Tongonan and Malitbog Plants

	a.	On July 11, 2004, the main step-up transformer of the Tongonan topping plant sustained damage, putting this plant into outage condition. Upon the insurance company's instruction, OLCL procured a temporary unit located in the Philippines and on September 19, 2004, the plant's normal operation was restored.

OLCL filed with its insurer claim for material damage on the costs incurred related to the damaged transformer in excess of $50,000 and for business interruption cover in excess of
30 days. OLCL did not recognize a receivable from the insurer as of December 31, 2004 since the insurer did not confirm the claim as of that date.

On May 26, 2005, OLCL recovered its insurance claims and credited $850,000 to the Recovery from insurance account in the 2005 statement of income.

	b.	On August 19, 2004, the generator at the Malitbog plant tripped placing the plant under the outage condition beginning that date. On January 8, 2005, the plant's normal operation resumed after the generator rotor was repaired.

OLCL filed for material damage claim on the cost of the generator repair in excess of $50,000 and for business interruption cover in excess of 30 days. OLCL recognized a receivable of $1,200,000 as of December 31, 2004 since the insurer confirmed the claim and made an interim payment in January 2005. In the 2004 statement of income, $821,892 was credited to the Recovery from insurance account for the reimbursement of loss of revenue and $378,108 was credited to Repairs and maintenance account under Costs of power plants operations for the reimbursements of repair costs.

On April 13, 2005, OLCL recovered from the insurer $1,327,841 of which $1,200,000 was applied against the receivable set up in 2004 and the excess amount of $127,841 was credited to the Recovery from insurance account in the 2005 statement of income.

15.	Fair Values of Financial Instruments

The following table sets forth the carrying values and estimated fair values of OLCL's financial instruments recognized as of December 31, 2005 and 2004:

				2005								2004
				Carrying Values				Fair Values				Carrying Values				Fair Values
				(In Thousands)								(In Thousands)
Cash				$	1,316			$	1,316			$	439			$	439
Restricted cash					3,781				3,781				3,981				3,981
Accounts receivable					1,725				1,725				2,625				2,625
Long-term debt					(8,890	)			(8,578	)			(13,969	)			(13,434	)

The carrying amount of cash and restricted cash approximates their fair values since these are available for working capital and debt service requirements. The carrying amount of accounts receivable subject to normal credit terms, approximates its fair value.

The fair value of long-term debt is based on the net present value of expected cash flows discounted using current interest rates, ranging from 3.59% to 4.44%, from similar debt with the same maturity and credit risk profile.

16.	Other Matters

	a.	Electric Power Industry Reform Act

Philippine Republic Act No. 9136, the Electric Power Industry Reform Act of 2001 (EPIRA), and the covering Implementing Rules and Regulations (IRR) provide for significant changes in the power sector, which include among others:

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	i.	The unbundling of the generation, transmission, distribution and supply, and other disposable assets of a company, including its contracts with independent power producers, and electricity rates;

	ii.	Creation of a Wholesale Electricity Spot Market; and

	iii.	Open and non-discriminatory access to transmission and distribution systems.

The law also requires public listing of not less than 15% of common shares of generation and distribution companies within five years from the effectivity of the EPIRA. It provides cross ownership restrictions between transmission and generation companies and between transmission and distribution companies, and a cap of 50% of its demand that a distribution utility is allowed to source from an associated company engaged in generation, except for contracts entered into prior to the effectivity of the EPIRA.

There are also certain sections of the EPIRA, specifically relating to generation companies, which provide for: (a) cap on the concentration of ownership to only 30% of the installed capacity of the grid and/or 25% of the national installed generating capacity; and (b) value-added tax zero-rating of sale of generated power (see Note 13).

Based on the assessment of OLCL, it has complied with the applicable provisions of the EPIRA and its IRR.

	b.	Clean Air Act

The Clean Air Act and the related IRR contain provisions that have an impact on the industry as a whole, and on OLCL in particular, that need to be complied with within 44 months from the effectivity date or by July 2004. Based on the initial assessment made on its power plants' existing facilities, OLCL believes it complies with the provisions of the Clean Air Act and the related IRR.

	c.	Pending Real Property Tax Assessment

On November 25, 2005, OLCL received a formal assessment for real property tax from the municipality of Kananga, Leyte amounting to $233,548 for the period from January 1, 2001 to October 31, 2005. According to the BOT Agreement, PNOC-EDC shall be responsible for the real property tax. On January 24, 2006, OLCL filed an appeal on the real property tax assessment with the Local Board of Assessment Appeals of the Leyte Province.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.	DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls

In connection with the preparation of this Annual Report on Form 10-K, management carried out an evaluation under the supervision and with the participation of, the Chief Executive Officer and Chief Financial Officer, as of December 31, 2005 of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. Based upon, and as of the date of this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2005 at the reasonable assurance level.

Management's Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

The Company's internal control over financial reporting includes those policies and procedures that

(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii)	provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company; and

(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision and participation of the Chief Executive Officer and Chief Financial Officer, conducted an assessment of the Company's internal control over financial reporting as of December 31, 2005 using the criteria established in Internal Control & Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of the Company's internal control over financial reporting. Based on such assessment, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2005.

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Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report.

Remediation of Material Weakness in Internal Control Over Financial Reporting

A material weakness is a control deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.

As reported in Item 4 of our quarterly reports on Forms 10-Q/A for the quarterly periods ended June 30, 2005 and September 30, 2005, the Company did not maintain effective controls over the preparation, review, presentation and disclosure of the Company's condensed consolidated statement of cash flows. Specifically, the Company lacked effective controls to ensure that cash flows from a non-routine lease transaction were accurately disclosed in the Company's interim condensed consolidated statement of cash flows. This control deficiency resulted in the restatement of the Company's interim condensed consolidated financial statements for the quarters ended June 30, 2005 and September 30, 2005 to correct the cash flow presentation of prepayments received under the lease agreement. Additionally, this control deficiency could have resulted in a misstatement of the presentation of amounts in the statements of cash flows that would result in a material misstatement to the Company's interim or annual consolidated financial statements that would not be prevented or detected. Accordingly, management determined this control deficiency constituted a material weakness as of those dates.

During the fourth quarter of 2005, in connection with our remediation plan, we: (i) developed a new control to remediate the material weakness identified; (ii) obtained sufficient evidence of the design and operating effectiveness of the new control and (iii) determined the new control has been in place for a sufficient period of time to permit the assessments of its design and operating effectiveness.

Specifically, our management implemented in the fourth quarter of 2005, a control to remediate the material weakness described above, requiring transactions of a non-routine nature to be reviewed by the Chief Financial Officer, who will determine whether sufficient expertise exists within the Company to determine the appropriate accounting treatment for the transaction, or if necessary, to consult with external experts. In addition, the Company continues to support a continuing education program for management and staff related to financial accounting and reporting. Additionally, as needed, management periodically reevaluates accounting decisions for non-routine transactions based on changes in generally accepted accounting principles.

Accordingly, we have determined the remediated control was effectively designed and had demonstrated effective operation for a sufficient period of time to enable us to conclude the material weakness described above has been remediated as of December 31, 2005.

Changes in Internal Control Over Financial Reporting

Other than the remediation discussed above, no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred during the fiscal quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.	OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item in addition to that below is incorporated by reference herein from the Company’s definitive 2006 Proxy Statement.

Directors and Executive Officers Information

The following table sets forth the name, age and positions of our directors, executive officers and persons who are executive officers of certain of our subsidiaries who perform policy making functions for us:

Name				Age				Position
Lucien Bronicki				71				Chairman of the Board of Directors;(3)
Yehudit ‘‘Dita’’ Bronicki				64				Chief Executive Officer; President; Director(2)
Yoram Bronicki				39				Chief Operating Officer — North America; Director (1)
Joseph Tenne				50				Chief Financial Officer*(4)
Nadav Amir				55				Executive Vice President — Engineering*
Hezy Ram				56				Executive Vice President — Business Development, North America**
Zvi Reiss				55				Executive Vice President — Project Management*
Joseph Shiloah				60				Executive Vice President — Marketing and Sales, Rest of the World*
Aaron Choresh				60				Vice President — Operations Rest of the World and Product Support*
Zvi Krieger				50				Vice President — Geothermal Engineering*
Etty Rosner				50				Vice President — Contract Administrator; Corporate Secretary*
Connie Stechman				50				Vice President
Independent Directors:
Dan Falk				61				Independent Director (3)
Jacob J. Worenklein				57				Independent Director (2)
Roger W. Gale				59				Independent Director (1)***
Elon Kohlberg				60				Independent Director (2)***

*	Performs the functions described in the table, but is employed by Ormat Systems.

**	Performs the functions described in the table, but is employed by Ormat Nevada.

***	As of October 26, 2005.

(1)	Denotes Class I Director — Term expiring at 2008 Annual Shareholders Meeting.

(2)	Denotes Class II Director — Term expiring at 2006 Annual Shareholders Meeting.

(3)	Denotes Class III Director — Term expiring at 2007 Annual Shareholders Meeting.

(4)	Mr. Tenne was appointed Chief Financial Officer effective March 9, 2005.

Lucien Bronicki. Lucien Bronicki is the Chairman of our Board of Directors, a position he has held since our inception in 1994, and is also our Chief Technology Officer, effective as of July 1, 2004. Mr. Bronicki co-founded Ormat Turbines Ltd. in 1965 and is the Chairman of the Board of Directors of Ormat Industries, the publicly-traded successor to Ormat Turbines Ltd., and various of its subsidiaries. Since 1999, Mr. Bronicki has been the Chairman of the Board of Directors of OPTI Canada Inc. From 1992 to 2006, Mr. Bronicki was the Chairman of the Board of Directors of Bet Shemesh Engines, a manufacturer of jet engines, and from 1997 to 2006, Mr. Bronicki was the

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Chairman of the Board of Bet Shemesh Holdings. Mr. Bronicki was also the Chairman of the Board of Directors of Orad Hi-Tec Systems Ltd., a manufacturer of image processing systems, until the end of 2005, and was the Co-Chairman of Orbotech Ltd., a NASDAQ-listed manufacturer of equipment for inspecting and imaging circuit boards and display panels. Mr. Bronicki has worked in the power industry since 1958. He is a member of the Executive Council of the Weizmann Institute of Science and was the Chairman of the Israeli Committee of the World Energy Council. Yehudit Bronicki and Lucien Bronicki are married. Mr. Bronicki obtained a postgraduate degree in Nuclear Engineering from Conservatoire National des Arts et Metiers, a Master of Science in Physics from Universite de Paris and a Master of Science in Mechanical Engineering from Ecole Nationale Superieure d’Ingenieurs Arts et Metiers. In the year 2005, he received a Ph.D. Honoris Causa from the Weizmann Institute of Science.

Yehudit ‘‘Dita’’ Bronicki. Yehudit ‘‘Dita’’ Bronicki is our Chief Executive Officer, effective as of July 1, 2004, and is also a member of our Board of Directors and our President, positions she has held since our inception in 1994. She was our Secretary from 1994 through November 2004. Mrs. Bronicki is also the President of Ormat Systems, effective as of July 1, 2004. Mrs. Bronicki was also a co-founder of Ormat Turbines Ltd. and is a member of the Board of Directors and the General Manager (a CEO-equivalent position) of Ormat Industries Ltd., the publicly-traded successor to Ormat Turbines Ltd., and various of its subsidiaries. From 1992 to June of 2005, Mrs. Bronicki was a director of Bet Shemesh Engines. In addition, Mrs. Bronicki was a member of the Board of Directors of OPTI Canada Inc. until May of 2005, and is a member of the Board of Orbotech Ltd., a NASDAQ-listed manufacturer of equipment for inspecting and imaging circuit boards and display panels. From 1994 to 2001, Mrs. Bronicki was on the Advisory Board of the Bank of Israel. Mrs. Bronicki has worked in the power industry since 1965. Yehudit Bronicki and Lucien Bronicki are married. Mrs. Bronicki obtained a Bachelor of Arts in Social Sciences from Hebrew University in 1965.

Yoram Bronicki. Yoram Bronicki is our Chief Operating Officer, North America, effective as of July 1, 2004. Mr. Bronicki is also a member of the Board of Directors of Ormat Industries Ltd., a position he has held since 2001, and a member of the Board of Directors of OPTI Canada Inc. Mr. Bronicki was appointed a director of the Company as of November 12, 2004. From 2001 to 2004, Mr. Bronicki was Vice President of OPTI Canada Inc.; from 1999 to 2001, he was Project Manager of Ormat Industries and Ormat International; from 1996 to 1999, he was Project Manager of Ormat Industries; and from 1995 to 1996, he was Project Engineer of Ormat Industries. Mr. Bronicki is the son of Lucien and Yehudit Bronicki. Mr. Bronicki obtained a Bachelor of Science in Mechanical Engineering from Tel Aviv University in 1989 and a Certificate from the Technion Institute of Management Senior Executives Program.

Joseph Tenne.    Effective March 9, 2005, Mr. Joseph Tenne was appointed Chief Financial Officer of the Company. From 2003 to 2004, Mr. Tenne was the Chief Financial Officer of Treofan Germany GmbH & Co. KG, a German company. From 1997 until 2003, Mr. Tenne was a partner in Kesselman & Kesselman, Certified Public Accountants in Israel (a member firm of PricewaterhouseCoopers International Limited). Since January 8, 2006, Mr. Tenne has also been the Chief Financial Officer of Ormat Industries Ltd. Mr. Tenne is a member of the board of directors of AudioCodes Ltd., a NASDAQ-listed company. Mr. Tenne obtained a Master of Business Administration from Tel Aviv University in 1987 and a Bachelor of Arts in Accounting and Economics from Tel Aviv University in 1981. Mr. Tenne is a Certified Public Accountant in Israel.

Nadav Amir. Nadav Amir performs the function of our Executive Vice President of Engineering, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Amir was Executive Vice President of Engineering of Ormat Industries; from 1993 to 2001, he was Vice President of Engineering of Ormat Industries; from 1988 to 1993, he was Manager of Engineering of Ormat Industries; from 1984 to 1988, he was Manager of Product Engineering of Ormat Industries; and from 1983 to 1984, he was Manager of Research and Development of Ormat Industries. Mr. Amir obtained a Bachelor of Science in Aeronautical Engineering from Technion Haifa in 1972.

Yeheskel (Hezy) Ram. Hezy Ram performs the function of our Executive Vice President of Business Development, North America, a position he has held since January 1, 2004. From 1999

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through December 31, 2003, Mr. Ram was Vice President of Business Development of Ormat Industries. Mr. Ram obtained a Master of Business Administration from Hebrew University in 1978, a Master of Science in Mechanical Engineering from Ben Gurion University in 1977 and a Bachelor of Science in Mechanical Engineering from Ben Gurion University in 1975.

Zvi Reiss. Zvi Reiss performs the function of our Executive Vice President of Project Management, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Reiss was the Executive Vice President of Project Management of Ormat Industries; from 1995 to 2000, he was Vice President of Project Management of Ormat Industries and, from 1993 to 1994, he was Director of Projects of Ormat Industries. Mr. Reiss obtained a Bachelor of Science in Mechanical Engineering from Ben Gurion University in 1975.

Joseph Shiloah. Joseph Shiloah performs the function of our Executive Vice President of Marketing and Sales, Rest of the World, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Shiloah was the Executive Vice President of Marketing and Sales at Ormat Industries; from 1989 to 2000, he was Vice President of Marketing and Sales of Ormat Industries; from 1983 to 1989, he was Vice President of Special Projects of Ormat Turbines Ltd.; from 1984 to 1989, he was Operating Manager of the Solar Pond project of Solmat Systems Ltd., a subsidiary of Ormat Turbines Ltd.; and from 1981 to 1983, he was Project Administrator of the Solar Pond power plant project of Ormat Turbines Ltd. and Solmat Systems Ltd. Mr. Shiloah obtained a Bachelor of Arts in Economics from Hebrew University in 1972.

Aaron Choresh. Aaron Choresh performs the function of our Vice President of Operations Rest of the World and Product Support, effective as of July 1, 2004. From 1999 through June 30, 2004, Mr. Choresh was the Vice President of Operations and Product Support of Ormat Industries; from 1993 to 1998, he was the Director of Operations and Product Support of Ormat Industries; from 1991 to 1992, he was Manager of Project Engineering and Product Support; and from 1989 to 1990, he was Manager of Project Engineering of Ormat Industries. Mr. Choresh obtained a Bachelor of Science in Electrical Engineering from Technion Haifa in 1982.

Zvi Krieger. Zvi Krieger performs the function of our Vice President of Geothermal Engineering, effective as of July 1, 2004. From 2001 through June 30, 2004, Mr. Krieger was the Vice President of Geothermal Engineering of Ormat Industries. Mr. Krieger has been with Ormat Industries since 1981 and served as Application Engineer, Manager of System Engineering, Director of New Technologies Business Development and Vice President of Geothermal Engineering. Mr. Krieger obtained a Bachelor of Science in Mechanical Engineering from the Technion, Israel Institute of Technology in 1980.

Etty Rosner. Etty Rosner performs the function of our Corporate Secretary, effective as of October 21, 2004. Ms. Rosner is also the Corporate Secretary of Ormat Industries, a position she has held since 1991, and Vice President of Contract Management of Ormat Industries, a position she has held since 1999. From 1991 to 1999, Ms. Rosner was Contract Administrator Manager and Corporate Secretary and from 1981 to 1991, she was the Manager of the Export Department and Office Administrative Manager. Ms. Rosner obtained a Diploma in General Management from Tel Aviv University in 1990.

Connie Stechman. Connie Stechman is our Vice President, a position she has held since our inception in 1994. Prior to joining Ormat Technologies, Inc., Ms. Stechman worked for an international public accounting firm. Ms. Stechman is a Certified Public Accountant and obtained a Bachelor of Science in Business and Concentration Accounting from California State University, Sacramento, in 1977.

Dan Falk. Dan Falk was appointed as a director of Ormat Technologies, Inc. as of November 12, 2004. Mr. Falk is also a member of the Board of Directors of Orbotech Ltd., Nice Systems Ltd., Attunity Ltd., ClickSoftware Technologies Ltd., Jacada Ltd and Nova Measuring Instruments Ltd., all NASDAQ publicly traded companies. In addition, Mr. Falk serves as a member of the Board of Directors of the following public non-US companies: Plostopil Ltd., Orad Hi-Tech Systems Ltd., Dmatek Ltd. and Poalim Ventures I Ltd. From 2001 to 2004, Mr. Falk was a business

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consultant to several public and private companies. From 1999 to 2000, Mr. Falk was Chief Operating Officer and Chief Executive Officer of Sapiens International NV. From 1995 to 1999, Mr. Falk was an Executive Vice President of Orbotech Ltd. From 1985 to 1995, Mr. Falk was Vice President of Finance and Chief Financial Officer of Orbot Systems Ltd. and of Orbotech Ltd. Mr. Falk obtained a Master of Business Administration from Hebrew University in 1972 and a Bachelor of Arts in Economics and Political Science from Hebrew University in 1968. Mr. Falk is the Chair ofthe Company’s Audit Committee. The Board of the Company has determined that Mr. Falk qualifies as an Audit Committee ‘‘financial expert’’ under Section 407 of the Sarbanes-Oxley Act of 2002 and Item 401(h) of Regulation S-K, and is ‘‘independent’’ as that term is used in Item 7(d)(3)(IV) of Schedule 14A under the Securities Exchange Act of 1934.

Jacob J. Worenklein. Jacob Worenklein was appointed a director of Ormat Technologies, Inc. as of November 12, 2004. Mr. Worenklein is also President and Chief Executive Officer of US Power Generating Company. From 1998 to 2003, he was Managing Director and Global Head of Project and Sectorial Finance for Societe Generale and, from 1996 to 1998, he was Managing Director and Head of Project Finance, Export Finance and Commodities for the Americas, for Societe Generale. Prior to joining Societe Generale in 1996, Mr. Worenklein was Managing Director and Global Head of Project Finance at Lehman Brothers and prior thereto was a partner and member of the executive committee of the law firm of Milbank, Tweed, Hadley & McCloy LLP, where he founded and headed the firm’s power and project finance practice. Mr. Worenklein served as Adjunct Professor of Finance at New York University and is a trustee of the Committee for Economic Development and a member of the Council on Foreign Relations. He is a member of the Board of Directors and Audit Committee of CDC Globeleq, an affiliate of the UK’s Commonwealth Development Corporation. Mr. Worenklein obtained a Bachelor of Arts from Columbia College in 1970 and a Juris Doctor and Master of Business Administration from New York University in 1973.

Roger W. Gale, Ph.D. Roger W. Gale was appointed director and member of the Audit Committee by the Company’s Board on October 26, 2005, to fill the vacancy caused by the resignation of Edward Muller. Between 1988 and 2000, Dr. Gale was the CEO of Washington International Energy Group (sold to PHB Hagler Bailly in 1999). In 2000, as PHB was sold to PA Consulting, Dr. Gale held several positions at PA Consulting until 2001, at which time he joined GF Energy LLC as a Partner and CEO, a position he still holds at present. In addition, Dr. Gale served as Board member of the US Energy Association and the Consumer Energy Council of America, two not-for-profit organizations. On December 1, 2005, he became a member of the Board of Directors of Adams Express and Petroleum & Resource Corp. He served on the Audit Committee of Constellation Holdings and on the parent board of Constellation Energy Group. Dr. Gale has a Ph.D. in political science from the University of California, Berkeley.

Elon Kohlberg, Ph.D. Elon Kohlberg is a professor of Business Administration at Harvard Business School, a position he has held since 1976. Dr. Kohlberg holds Bachelor and Master of Science degrees, as well as a Ph.D. degree in Mathematics, from the Hebrew University of Jerusalem. He has been a member of the Board of Directors of Teva North America since 1990 and of Medinol Ltd. since 2003. Dr. Kohlberg is the Chairman and founder of Digi-Block, Inc.

Audit Committee

We are a listed issuer, as defined in Sec. 240.10A-3 of Regulation S-K, and have a separately designated audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, composed of independent directors as required by Section 303A.07 of the NYSE Listed Company Manual. The members of such committee are Dan Falk (Chair), Jacob Worenklein and Roger W. Gale, who are also independent directors of our company, as defined in Section 303A.02 of the NYSE Listed Company Manual.

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ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated by reference herein from the Company’s definitive 2006 Proxy Statement.

ITEM 12.	SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this item is incorporated by reference herein from the Company’s definitive 2006 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this item is incorporated by reference herein from the Company’s definitive 2006 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this item is incorporated by reference herein from the Company’s definitive 2006 Proxy Statement.

PART IV

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1)   List of Financial Statements

See Index to Financial Statements in Item 8 of this annual report.

(2)   List of Financial Statement Schedules

All applicable schedule information is included in our Financial Statements in Item 8 of this annual report.

(b)	EXHIBIT INDEX

Exhibit No.				Document
3.1				Second Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
3.2				Second Amended and Restated By-laws, incorporated by reference to Exhibit 3.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
4.1				Form of Common Share Stock Certificate, incorporated by reference to Exhibit 4.1 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
4.2				Form of Preferred Share Stock Certificate, incorporated by reference to Exhibit 4.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
4.3				Form of Rights Agreement by and between Ormat Technologies, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.

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Exhibit No.				Document
4.4				Indenture for Senior Debt Securities, dated as of January 16, 2006, between Ormat Technologies, Inc. and Union Bank of California, incorporated by reference to Exhibit 4.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-3 (File No. 333-131064) to the Securities and Exchange Commission on January 26, 2006.
4.5				Indenture for Subordinated Debt Securities, dated as of January 16, 2006, between Ormat Technologies, Inc. and Union Bank of California, incorporated by reference to Exhibit 4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-3 (File No. 333-131064) to the Securities and Exchange Commission on January 26, 2006.
10.1				Financing Agreements
10.1.3				Credit Facility Agreement, dated September 5, 2000, between Ormat Momotombo Power Company and Bank Hapoalim B.M., incorporated by reference to Exhibit 10.1.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.5				Credit Agreement, dated as of December 18, 2003, among OrCal Geothermal Inc. and Beal Bank, S.S.B. and the financial institutions party thereto from time to time, incorporated by reference to Exhibit 10.1.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.6				Credit Agreement, dated May 13, 1996, between Ormat-Leyte and Export-Import Bank of the United States, incorporated by reference to Exhibit 10.1.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.7				Indenture, dated February 13, 2004, among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California, incorporated by reference to Exhibit 10.1.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.8				First Supplemental Indenture, dated May 14, 2004, among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California, incorporated by reference to Exhibit 10.1.8 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.9				Loan Agreement, dated October 1, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.9 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.10				Amendment No. 1 to Loan Agreement, dated September 20, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.10 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.11				Capital Note, dated December 22, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

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Exhibit No.				Document
10.1.12				Amendment to Capital Note, dated September 20, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.12 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.13				Guarantee Fee Agreement, dated January 1, 1999, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.14				Reimbursement Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.14 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.15				Services Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd., incorporated by reference to Exhibit 10.1.15 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.16				Letter of Credit and Loan Agreement, dated June 30, 2004, by and between Ormat Nevada, Inc., and Hudson United Bank, incorporated by reference to Exhibit 10.1.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.1.17				First Amendment to Letter of Credit and Loan Agreement, dated June 30, 2004, by and between Ormat Nevada, Inc., and Hudson United Bank, incorporated by reference to Exhibit 10.1.17 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.1.18				Subordination Agreement, dated June 30, 2004, by and between Ormat Technologies, Inc. and Hudson United Bank, incorporated by reference to Exhibit 10.1.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.2				Purchase Agreements incorporated by reference to Exhibit 10.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.2.1				Purchase and Sale Agreement, dated April 22, 2004, by and among Constellation Power, Inc. and Cosi Puna, Inc. and ORNI 8 LLC and Ormat Nevada, Inc., incorporated by reference to Exhibit 10.2.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.2.2				Purchase Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd., incorporated by reference to Exhibit 10.2.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3				Power Purchase Agreements incorporated by reference to Exhibit 10.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

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Exhibit No.				Document
10.3.1				Power Purchase Contract, dated July 18, 1984, between Southern California Edison Company and Republic Geothermal, Inc., incorporated by reference to Exhibit 10.3.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.2				Amendment No. 1, to the Power Purchase Contract, dated December 23, 1988, between Southern California Edison Company and Ormesa Geothermal, incorporated by reference to Exhibit 10.3.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.3				Power Purchase Contract, dated June 13, 1984, between Southern California Edison Company and Ormat Systems, Inc., incorporated by reference to Exhibit 10.3.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.4				Power Purchase and Sales Agreement, dated as of August 26, 1983, between Chevron U.S.A. Inc. and Southern California Edison Company, incorporated by reference to Exhibit 10.3.4 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.5				Amendment No. 1, to Power Purchase and Sale Agreement, dated as of December 11, 1984, between Chevron U.S.A. Inc., HGC and Southern California Edison Company, incorporated by reference to Exhibit 10.3.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.6				Settlement Agreement and Amendment No. 2, to Power Purchase Contract, dated August 7, 1995, between HGC and Southern California Edison Company, incorporated by reference to Exhibit 10.3.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.7				Power Purchase Contract dated, April 16, 1985, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.8				Amendment No. 1, dated as of October 23, 1987, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.8 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.9				Amendment No. 2, dated as of July 27, 1990, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.9 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.10				Amendment No. 3, dated as of November 24, 1992, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.10 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

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Exhibit No.				Document
10.3.11				Amended and Restated Power Purchase and Sales Agreement, dated December 2, 1986, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.12				Amendment No. 1, to Amended and Restated Power Purchase and Sale Agreement, dated May 18, 1990, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.12 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.13				Power Purchase Contract, dated April 15, 1985, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.14				Amendment No. 1, dated as of October 27, 1989, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.14 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.15				Amendment No. 2, dated as of December 20, 1989, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.15 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.16				Power Purchase Contract, dated April 16, 1985, between Southern California Edison Company and Santa Fe Geothermal, Inc., incorporated by reference to Exhibit 10.3.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.17				Amendment No. 1, to Power Purchase Contract, dated October 25, 1985, between Southern California Edison Company and Mammoth Pacific, incorporated by reference to Exhibit 10.3.17 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.18				Amendment No. 2, to Power Purchase Contract, dated December 20, 1989, between Southern California Edison Company and Pacific Lighting Energy Systems, incorporated by reference to Exhibit 10.3.18 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.19				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Mammoth Pacific, incorporated by reference to Exhibit 10.3.19 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.20				Interconnection Facilities Agreement, dated October 13, 1985, by and between Southern California Edison Company and Mammoth Pacific (II), incorporated by reference to Exhibit 10.3.20 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

176

Exhibit No.				Document
10.3.21				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Pacific Lighting Energy Systems, incorporated by reference to Exhibit 10.3.21 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.22				Interconnection Agreement, dated August 12, 1985, by and between Southern California Edison Company and Heber Geothermal Company incorporated by reference to Exhibit 10.3.22 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.23				Plant Connection Agreement for the Heber Geothermal Plant No. 1, dated, July 31, 1985, by and between Imperial Irrigation District and Heber Geothermal Company incorporated by reference to Exhibit 10.3.23 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.24				Plant Connection Agreement for the Second Imperial Geothermal Company Power Plant No. 1, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company incorporated by reference to Exhibit 10.3.24 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.25				IID-SIGC Transmission Service Agreement for Alternative Resources, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company incorporated by reference to Exhibit 10.3.25 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.26				Plant Connection Agreement for the Ormesa Geothermal Plant, dated October 1, 1985, by and between Imperial Irrigation District and Ormesa Geothermal incorporated by reference to Exhibit 10.3.26 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.27				Plant Connection Agreement for the Ormesa IE Geothermal Plant, dated, October 21, 1988, by and between Imperial Irrigation District and Ormesa IE incorporated by reference to Exhibit 10.3.27 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.28				Plant Connection Agreement for the Ormesa IH Geothermal Plant, dated, October 3, 1989, by and between Imperial Irrigation District and Ormesa IH incorporated by reference to Exhibit 10.3.28 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.29				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.29 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

177

Exhibit No.				Document
10.3.30				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.30 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.31				Transmission Service Agreement for the Ormesa I, Ormesa IE and Ormesa IH Geothermal Power Plants, dated, October 3, 1989, between Imperial Irrigation District and Ormesa Geothermal incorporated by reference to Exhibit 10.3.31 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.32				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.32 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.33				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.33 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.34				IID-Edison Transmission Service Agreement for Alternative Resources, dated, September 26, 1985, by and between Imperial Irrigation District and Southern California Edison Company incorporated by reference to Exhibit 10.3.34 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.35				Plant Amendment No. 1, to IID-Edison Transmission Service Agreement for Alternative Resources, dated, August 25, 1987, by and between Imperial Irrigation District and Southern California Edison Company incorporated by reference to Exhibit 10.3.35 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.36				Leyte Optimization Project BOT Agreement, dated August 4, 1995, by and between PNOC-Energy Development Corporation and Ormat Inc. incorporated by reference to Exhibit 10.3.36 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.37				First Amendment to Leyte Optimization Project BOT Agreement, dated February 29, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd. incorporated by reference to Exhibit 10.3.37 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.38				Second Amendment to Leyte Optimization Project BOT Agreement, dated April 1, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd. incorporated by reference to Exhibit 10.3.38 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

178

Exhibit No.				Document
10.3.39				Agreement Addressing Renewable Energy Pricing and Payment Issues, dated June 15, 2001, by and between Second Imperial Geothermal Company QFID No. 3021 and Southern California Edison Company incorporated by reference to Exhibit 10.3.39 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.40				Amendment No. 1 to Agreement Addressing Renewable Energy Pricing and Payment Issues, dated November 30, 2001, by and between Second Imperial Geothermal Company QFID No. 3021 and Southern California Edison Company incorporated by reference to Exhibit 10.3.40 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.41				Agreement Addressing Renewable Energy Pricing and Payment Issues, dated June 15, 2001, by and between Heber Geothermal Company QFID No. 3001 and Southern California Edison Company incorporated by reference to Exhibit 10.3.41 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.42				Amendment No. 1 to Agreement Addressing Renewable Energy Pricing and Payment Issues, dated November 30, 2001, by and between Heber Geothermal Company QFID No. 3001 and Southern California Edison Company incorporated by reference to Exhibit 10.3.42 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.43				Energy Services Agreement, dated February 2003, by and between Imperial Irrigation District and ORMESA, LLC incorporated by reference to Exhibit 10.3.43 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.44				Purchase Power Contract, dated March 24, 1986, by and between Hawaii Electric Light Company and Thermal Power Company incorporated by reference to Exhibit 10.3.44 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.45				Firm Capacity Amendment to Purchase Power Contract, dated July 28, 1989, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.45 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.46				Amendment to Purchase Power Contract, dated October 19, 1993, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.46 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.47				Third Amendment to the Purchase Power Contract, dated March 7, 1995, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.47 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

179

Exhibit No.				Document
10.3.48				Performance Agreement and Fourth Amendment to the Purchase Power Contract, dated February 12, 1996, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.48 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.49				Agreement to Design 69 KV Transmission Lines, a Substation at Pohoiki, Modifications to Substations at Puna and Kaumana, and a Temporary 34.5 Facility to Interconnect PGV’s Geothermal Electric Plant with HELCO’s System Grid (Phase II and III), dated June 7, 1990, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.49 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4				Leases incorporated by reference to Exhibit 10.4 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.1				Ormesa BLM Geothermal Resources Lease CA 966 incorporated by reference to Exhibit 10.4.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.2				Ormesa BLM License for Electric Power Plant Site CA 24678 incorporated by reference to Exhibit 10.4.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.3				Geothermal Resources Mining Lease, dated February 20, 1981, by and between the State of Hawaii, as Lessor, and Kapoho Land Partnership, as Lessee incorporated by reference to Exhibit 10.4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.4				Geothermal Lease Agreement, dated October 20, 1975, by and between Ruth Walker Cox and Betty M. Smith, as Lessor, and Gulf Oil Corporation, as Lessee incorporated by reference to Exhibit 10.4.4 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.5				Geothermal Lease Agreement, dated August 1, 1976, by and between Southern Pacific Land Company, as Lessor, and Phillips Petroleum Company, as Lessee incorporated by reference to Exhibit 10.4.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.6				Geothermal Resources Lease, dated November 18, 1983, by and between Sierra Pacific Power Company, as Lessor, and Geothermal Development Associates, as Lessee incorporated by reference to Exhibit 10.4.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.7				Lease Agreement, dated November 1, 1969, by and between Chrisman B. Jackson and Sharon Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.7 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

180

Exhibit No.				Document
10.4.8				Lease Agreement, dated September 22, 1976, by and between El Toro Land & Cattle Co., as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.8 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.9				Lease Agreement, dated February 17, 1977, by and between Joseph L. Holtz, as Lessor, and Chevron U.S.A. Inc., as Lessee incorporated by reference to Exhibit 10.4.9 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.10				Lease Agreement, dated March 11, 1964, by and between John D. Jackson and Frances Jones Jackson, also known as Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.10 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.11				Lease Agreement, dated February 16, 1964, by and between John D. Jackson, conservator for the estate of Aphia Jackson Wallan, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.11 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.12				Lease Agreement, dated March 17, 1964, by and between Helen S. Fugate, a widow, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.12 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.13				Lease Agreement, dated February 16, 1964, by and between John D. Jackson and Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.14				Lease Agreement, dated February 20, 1964, by and between John A. Straub and Edith D. Straub, also known as John A. Straub and Edythe D. Straub, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.14 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.15				Lease Agreement, dated July 1, 1971, by and between Marie L. Gisler and Harry R. Gisler, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.15 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.16				Lease Agreement, dated February 28, 1964, by and between Gus Kurupas and Guadalupe Kurupas, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.16 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.17				Lease Agreement, dated April 7, 1972, by and between Nowlin Partnership, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.17 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

181

Exhibit No.				Document
10.4.18				Geothermal Lease Agreement, dated July 18, 1979, by and between Charles K. Corfman, an unmarried man as his sole and separate property, and Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.18 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.19				Lease Agreement, dated January 1, 1972, by and between Holly Oberly Thomson, also known as Holly F. Oberly Thomson, also known as Holly Felicia Thomson, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.19 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.20				Lease Agreement, dated June 14, 1971, by and between Fitzhugh Lee Brewer, Jr., a married man as his separate property, Donna Hawk, a married woman as her separate property, and Ted Draper and Helen Draper, husband and wife, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.20 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.21				Lease Agreement, dated May 13, 1971, by and between Mathew J. La Brucherie and Jane E. La Brucherie, husband and wife, and Robert T. O’Dell and Phyllis M. O’Dell, husband and wife, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.21 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.22				Lease Agreement, dated June 2, 1971, by and between Dorothy Gisler, a widow, Joan C. Hill, and Jean C. Browning, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.22 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.23				Geothermal Lease Agreement, dated February 15, 1977, by and between Walter J. Holtz, as Lessor, and Magma Energy Inc., as Lessee incorporated by reference to Exhibit 10.4.23 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.24				Geothermal Lease, dated August 31, 1983, by and between Magma Energy Inc., as Lessor, and Holt Geothermal Company, as Lessee incorporated by reference to Exhibit 10.4.24 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.25				Unprotected Lease Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. incorporated by reference to Exhibit 10.4.25 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.26				Geothermal Resources Lease, dated June 27, 1988, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.26 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

182

Exhibit No.				Document
10.4.27				Amendment to Geothermal Resources Lease, dated January, 1992, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.27 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.28				Second Amendment to Geothermal Resources Lease, dated June 25, 1993, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc. and its Assignee, Steamboat Development Corp., as Lessee incorporated by reference to Exhibit 10.4.28 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.29				Geothermal Resources Sublease, dated May 31, 1991, by and between Fleetwood Corporation, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.29 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.30				KLP Lease and Agreement, dated March 1, 1981, by and between Kapoho Land Partnership, as Lessor, and Thermal Power Company, as Lessee incorporated by reference to Exhibit 10.4.30 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.31				Amendment to KLP Lease and Agreement, dated July 9, 1990, by and between Kapoho Land Partnership, as Lessor, and Puna Geothermal Venture, as Lessee incorporated by reference to Exhibit 10.4.31 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.32				Second Amendment to KLP Lease and Agreement, dated December 31, 1996, by and between Kapoho Land Partnership, as Lessor, and Puna Geothermal Venture, as Lessee incorporated by reference to Exhibit 10.4.32 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.33				Participation Agreement, dated May 18, 2005, by and among Puna Geothermal Venture, SE Puna, L.L.C., Wilmington Trust Company, S.E. Puna Lease, L.L.C., AIG Annuity Insurance Company, American General Life Insurance Company, Allstate Life Insurance Company and Union Bank of California, incorporated by reference to Exhibit 10.4.33 to Ormat Technologies, Inc. Quarterly Report on Form 10-Q/A to the Securities and Exchange Commission on December 22, 2005.
10.4.34				Project Lease Agreement, dated May 18, 2005, by and between SE Puna, L.L.C. and Puna Geothermal Venture, incorporated by reference to Exhibit 10.4.34 to Ormat Technologies, Inc. Quarterly Report on Form 10-Q/A to the Securities and Exchange Commission on December 22, 2005.
10.5				General incorporated by reference to Exhibit 10.5 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

183

Exhibit No.				Document
10.5.1				Engineering, Procurement and Construction Contract, dated August 23, 2002, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc incorporated by reference to Exhibit 10.5.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.2				Amendment No. 1, to Engineering, Procurement and Construction Contract, dated, 2003, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc. incorporated by reference to Exhibit 10.5.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.5.3				Engineering, Procurement and Construction Contract, dated 2003, by and between Contact Energy Limited and Ormat Pacific Inc. incorporated by reference to Exhibit 10.5.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.4				Patent License Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. incorporated by reference to Exhibit 10.5.4 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.5				Form of Registration Rights Agreement by and between Ormat Technologies, Inc. and Ormat Industries Ltd. incorporated by reference to Exhibit 10.5.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.6.1				Ormat Technologies, Inc. 2004 Incentive Compensation Plan incorporated by reference to Exhibit 10.6.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.6.2				Form of Incentive Stock Option Agreement incorporated by reference to Exhibit 10.6.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.6.3				Form of Nonqualified Stock Option Agreement incorporated by reference to Exhibit 10.6.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.7				Form of Executive Employment Agreement of Lucien Bronicki incorporated by reference to Exhibit 10.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.8				Form of Executive Employment Agreement of Yehudit Bronicki incorporated by reference to Exhibit 10.8 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.9				Form of Executive Employment Agreement of Yoram Bronicki incorporated by reference to Exhibit 10.9 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

184

Exhibit No.				Document
10.10.1				Form of Executive Employment Agreement of Hezy Ram incorporated by reference to Exhibit 10.10.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.10.2				Amendment No. 1 to Form of Executive Employment Agreement of Hezy Ram incorporated by reference to Exhibit 10.10.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.11				Form of Indemnification Agreement incorporated by reference to Exhibit 10.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.12				Note Purchase Agreement, dated December 2, 2005, among Lehman Brothers Inc., OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company, filed herewith.
10.13				Indenture dated as of December 8, 2005 among OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company and Union Bank of California, filed herewith.
10.14				Guarantee dated as of December 8, 2005 among OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company, filed herewith.
10.15				Note Purchase Agreement, dated February 6, 2004, among Lehman Brothers Inc., Ormat Funding Corp., Brady Power Partners, Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC and ORNI 7 LLC, filed herewith.
21.1				Subsidiaries of Ormat Technologies, Inc., filed herewith.
23.1				Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, filed herewith.
23.2				Consent of SyCip Gorres Velayo & Co., Independent Registered Public Accounting Firm, filed herewith.
31.1				Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2				Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1				Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2				Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
99.1				Material terms with respect to BLM geothermal resources leases incorporated by reference to Exhibit 99.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
99.2				Material terms with respect to BLM site leases incorporated by reference to Exhibit 99.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

185

Exhibit No.				Document
99.3				Material terms with respect to agreements addressing renewable energy pricing and payment issues incorporated by reference to Exhibit 99.3 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
99.4				Summary of Non-Employee Director Compensation and benefits, incorporated by reference to Exhibit 99.4 to Ormat Technologies, Inc.’s Form 10-K to the Securities and Exchange Commission on March 28, 2005.

186

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.

ORMAT TECHNOLOGIES, INC.

Date: March 27, 2006

By:

/s/   YEHUDIT BRONICKI

Name: Yehudit Bronicki Title: Chief Executive Officer, President and Director

Pursuant to the requirement of the Securities Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant in the capacities indicated, on March 27, 2006.

Signature		Capacity
/s/ YEHUDIT BRONICKI		Chief Executive Officer, President and Director (Principal Executive Officer)
Yehudit Bronicki
/s/ JOSEPH TENNE		Chief Financial Officer (Principal Financial and Accounting Officer)
Joseph Tenne
/s/ LUCIEN Y. BRONICKI		Chairman of the Board of Directors and Chief Technology Officer
Lucien Y. Bronicki
/s/ YORAM BRONICKI		Chief Operating Officer — North America and Director
Yoram Bronicki
/s/ DAN FALK		Director
Dan Falk

187

(c)	EXHIBIT INDEX

Exhibit No.				Document
3.1				Second Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
3.2				Second Amended and Restated By-laws, incorporated by reference to Exhibit 3.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
4.1				Form of Common Share Stock Certificate, incorporated by reference to Exhibit 4.1 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
4.2				Form of Preferred Share Stock Certificate, incorporated by reference to Exhibit 4.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
4.3				Form of Rights Agreement by and between Ormat Technologies, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
4.4				Indenture for Senior Debt Securities, dated as of January 16, 2006, between Ormat Technologies, Inc. and Union Bank of California, incorporated by reference to Exhibit 4.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-3 (File No. 333-131064) to the Securities and Exchange Commission on January 26, 2006.
4.5				Indenture for Subordinated Debt Securities, dated as of January 16, 2006, between Ormat Technologies, Inc. and Union Bank of California, incorporated by reference to Exhibit 4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-3 (File No. 333-131064) to the Securities and Exchange Commission on January 26, 2006.
10.1				Financing Agreements
10.1.3				Credit Facility Agreement, dated September 5, 2000, between Ormat Momotombo Power Company and Bank Hapoalim B.M., incorporated by reference to Exhibit 10.1.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.5				Credit Agreement, dated as of December 18, 2003, among OrCal Geothermal Inc. and Beal Bank, S.S.B. and the financial institutions party thereto from time to time, incorporated by reference to Exhibit 10.1.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.6				Credit Agreement, dated May 13, 1996, between Ormat-Leyte and Export-Import Bank of the United States, incorporated by reference to Exhibit 10.1.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.7				Indenture, dated February 13, 2004, among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California, incorporated by reference to Exhibit 10.1.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

188

Exhibit No.				Document
10.1.8				First Supplemental Indenture, dated May 14, 2004, among Ormat Funding Corp., Brady Power Partners, Steamboat Development Corp., Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC, ORNI 7 LLC, Ormesa LLC and Union Bank of California, incorporated by reference to Exhibit 10.1.8 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.9				Loan Agreement, dated October 1, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.9 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.10				Amendment No. 1 to Loan Agreement, dated September 20, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.10 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.11				Capital Note, dated December 22, 2003, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.12				Amendment to Capital Note, dated September 20, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.12 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.13				Guarantee Fee Agreement, dated January 1, 1999, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.14				Reimbursement Agreement, dated July 15, 2004, by and between Ormat Technologies, Inc. and Ormat Industries Ltd., incorporated by reference to Exhibit 10.1.14 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.15				Services Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd., incorporated by reference to Exhibit 10.1.15 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.1.16				Letter of Credit and Loan Agreement, dated June 30, 2004, by and between Ormat Nevada, Inc., and Hudson United Bank, incorporated by reference to Exhibit 10.1.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.1.17				First Amendment to Letter of Credit and Loan Agreement, dated June 30, 2004, by and between Ormat Nevada, Inc., and Hudson United Bank, incorporated by reference to Exhibit 10.1.17 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.

189

Exhibit No.				Document
10.1.18				Subordination Agreement, dated June 30, 2004, by and between Ormat Technologies, Inc. and Hudson United Bank, incorporated by reference to Exhibit 10.1.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.2				Purchase Agreements incorporated by reference to Exhibit 10.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.2.1				Purchase and Sale Agreement, dated April 22, 2004, by and among Constellation Power, Inc. and Cosi Puna, Inc. and ORNI 8 LLC and Ormat Nevada, Inc., incorporated by reference to Exhibit 10.2.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.2.2				Purchase Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd., incorporated by reference to Exhibit 10.2.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3				Power Purchase Agreements incorporated by reference to Exhibit 10.2to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.1				Power Purchase Contract, dated July 18, 1984, between Southern California Edison Company and Republic Geothermal, Inc., incorporated by reference to Exhibit 10.3.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.2				Amendment No. 1, to the Power Purchase Contract, dated December 23, 1988, between Southern California Edison Company and Ormesa Geothermal, incorporated by reference to Exhibit 10.3.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.3				Power Purchase Contract, dated June 13, 1984, between Southern California Edison Company and Ormat Systems, Inc., incorporated by reference to Exhibit 10.3.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.4				Power Purchase and Sales Agreement, dated as of August 26, 1983, between Chevron U.S.A. Inc. and Southern California Edison Company, incorporated by reference to Exhibit 10.3.4 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.5				Amendment No. 1, to Power Purchase and Sale Agreement, dated as of December 11, 1984, between Chevron U.S.A. Inc., HGC and Southern California Edison Company, incorporated by reference to Exhibit 10.3.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.6				Settlement Agreement and Amendment No. 2, to Power Purchase Contract, dated August 7, 1995, between HGC and Southern California Edison Company, incorporated by reference to Exhibit 10.3.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

190

Exhibit No.				Document
10.3.7				Power Purchase Contract dated, April 16, 1985, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.8				Amendment No. 1, dated as of October 23, 1987, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.8 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.9				Amendment No. 2, dated as of July 27, 1990, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.9 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.10				Amendment No. 3, dated as of November 24, 1992, between Southern California Edison Company and Second Imperial Geothermal Company, incorporated by reference to Exhibit 10.3.10 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.11				Amended and Restated Power Purchase and Sales Agreement, dated December 2, 1986, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.12				Amendment No. 1, to Amended and Restated Power Purchase and Sale Agreement, dated May 18, 1990, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.12 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.13				Power Purchase Contract, dated April 15, 1985, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.14				Amendment No. 1, dated as of October 27, 1989, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.14 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.15				Amendment No. 2, dated as of December 20, 1989, between Mammoth Pacific and Southern California Edison Company, incorporated by reference to Exhibit 10.3.15 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.16				Power Purchase Contract, dated April 16, 1985, between Southern California Edison Company and Santa Fe Geothermal, Inc., incorporated by reference to Exhibit 10.3.16 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

191

Exhibit No.				Document
10.3.17				Amendment No. 1, to Power Purchase Contract, dated October 25, 1985, between Southern California Edison Company and Mammoth Pacific, incorporated by reference to Exhibit 10.3.17 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.18				Amendment No. 2, to Power Purchase Contract, dated December 20, 1989, between Southern California Edison Company and Pacific Lighting Energy Systems, incorporated by reference to Exhibit 10.3.18 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.19				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Mammoth Pacific, incorporated by reference to Exhibit 10.3.19 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.20				Interconnection Facilities Agreement, dated October 13, 1985, by and between Southern California Edison Company and Mammoth Pacific (II), incorporated by reference to Exhibit 10.3.20 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.21				Interconnection Facilities Agreement, dated October 20, 1989, by and between Southern California Edison Company and Pacific Lighting Energy Systems, incorporated by reference to Exhibit 10.3.21 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.22				Interconnection Agreement, dated August 12, 1985, by and between Southern California Edison Company and Heber Geothermal Company incorporated by reference to Exhibit 10.3.22 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.23				Plant Connection Agreement for the Heber Geothermal Plant No. 1, dated, July 31, 1985, by and between Imperial Irrigation District and Heber Geothermal Company incorporated by reference to Exhibit 10.3.23 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.24				Plant Connection Agreement for the Second Imperial Geothermal Company Power Plant No. 1, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company incorporated by reference to Exhibit 10.3.24 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.25				IID-SIGC Transmission Service Agreement for Alternative Resources, dated, October 27, 1992, by and between Imperial Irrigation District and Second Imperial Geothermal Company incorporated by reference to Exhibit 10.3.25 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

192

Exhibit No.				Document
10.3.26				Plant Connection Agreement for the Ormesa Geothermal Plant, dated October 1, 1985, by and between Imperial Irrigation District and Ormesa Geothermal incorporated by reference to Exhibit 10.3.26 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.27				Plant Connection Agreement for the Ormesa IE Geothermal Plant, dated, October 21, 1988, by and between Imperial Irrigation District and Ormesa IE incorporated by reference to Exhibit 10.3.27 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.28				Plant Connection Agreement for the Ormesa IH Geothermal Plant, dated, October 3, 1989, by and between Imperial Irrigation District and Ormesa IH incorporated by reference to Exhibit 10.3.28 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.29				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.29 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.30				Plant Connection Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.30 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.31				Transmission Service Agreement for the Ormesa I, Ormesa IE and Ormesa IH Geothermal Power Plants, dated, October 3, 1989, between Imperial Irrigation District and Ormesa Geothermal incorporated by reference to Exhibit 10.3.31 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.32				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 2, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.32 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.33				Transmission Service Agreement for the Geo East Mesa Limited Partnership Unit No. 3, dated, March 21, 1989, by and between Imperial Irrigation District and Geo East Mesa Limited Partnership incorporated by reference to Exhibit 10.3.33 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.34				IID-Edison Transmission Service Agreement for Alternative Resources, dated, September 26, 1985, by and between Imperial Irrigation District and Southern California Edison Company incorporated by reference to Exhibit 10.3.34 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

193

Exhibit No.				Document
10.3.35				Plant Amendment No. 1, to IID-Edison Transmission Service Agreement for Alternative Resources, dated, August 25, 1987, by and between Imperial Irrigation District and Southern California Edison Company incorporated by reference to Exhibit 10.3.35 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.36				Leyte Optimization Project BOT Agreement, dated August 4, 1995, by and between PNOC-Energy Development Corporation and Ormat Inc. incorporated by reference to Exhibit 10.3.36 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.37				First Amendment to Leyte Optimization Project BOT Agreement, dated February 29, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd. incorporated by reference to Exhibit 10.3.37 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.38				Second Amendment to Leyte Optimization Project BOT Agreement, dated April 1, 1996, by and between PNOC-Energy Development Corporation and Ormat Leyte Co. Ltd. incorporated by reference to Exhibit 10.3.38 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.3.39				Agreement Addressing Renewable Energy Pricing and Payment Issues, dated June 15, 2001, by and between Second Imperial Geothermal Company QFID No. 3021 and Southern California Edison Company incorporated by reference to Exhibit 10.3.39 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.40				Amendment No. 1 to Agreement Addressing Renewable Energy Pricing and Payment Issues, dated November 30, 2001, by and between Second Imperial Geothermal Company QFID No. 3021 and Southern California Edison Company incorporated by reference to Exhibit 10.3.40 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.41				Agreement Addressing Renewable Energy Pricing and Payment Issues, dated June 15, 2001, by and between Heber Geothermal Company QFID No. 3001 and Southern California Edison Company incorporated by reference to Exhibit 10.3.41 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.42				Amendment No. 1 to Agreement Addressing Renewable Energy Pricing and Payment Issues, dated November 30, 2001, by and between Heber Geothermal Company QFID No. 3001 and Southern California Edison Company incorporated by reference to Exhibit 10.3.42 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.43				Energy Services Agreement, dated February 2003, by and between Imperial Irrigation District and ORMESA, LLC incorporated by reference to Exhibit 10.3.43 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

194

Exhibit No.				Document
10.3.44				Purchase Power Contract, dated March 24, 1986, by and between Hawaii Electric Light Company and Thermal Power Company incorporated by reference to Exhibit 10.3.44 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.45				Firm Capacity Amendment to Purchase Power Contract, dated July 28, 1989, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.45 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.46				Amendment to Purchase Power Contract, dated October 19, 1993, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.46 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.47				Third Amendment to the Purchase Power Contract, dated March 7, 1995, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.47 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.48				Performance Agreement and Fourth Amendment to the Purchase Power Contract, dated February 12, 1996, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.48 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.3.49				Agreement to Design 69 KV Transmission Lines, a Substation at Pohoiki, Modifications to Substations at Puna and Kaumana, and a Temporary 34.5 Facility to Interconnect PGV’s Geothermal Electric Plant with HELCO’s System Grid (Phase II and III), dated June 7, 1990, by and between Hawaii Electric Light Company and Puna Geothermal Venture incorporated by reference to Exhibit 10.3.49 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4				Leases incorporated by reference to Exhibit 10.4 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.1				Ormesa BLM Geothermal Resources Lease CA 966 incorporated by reference to Exhibit 10.4.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.2				Ormesa BLM License for Electric Power Plant Site CA 24678 incorporated by reference to Exhibit 10.4.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.3				Geothermal Resources Mining Lease, dated February 20, 1981, by and between the State of Hawaii, as Lessor, and Kapoho Land Partnership, as Lessee incorporated by reference to Exhibit 10.4.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

195

Exhibit No.				Document
10.4.4				Geothermal Lease Agreement, dated October 20, 1975, by and between Ruth Walker Cox and Betty M. Smith, as Lessor, and Gulf Oil Corporation, as Lessee incorporated by reference to Exhibit 10.4.4 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.5				Geothermal Lease Agreement, dated August 1, 1976, by and between Southern Pacific Land Company, as Lessor, and Phillips Petroleum Company, as Lessee incorporated by reference to Exhibit 10.4.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.6				Geothermal Resources Lease, dated November 18, 1983, by and between Sierra Pacific Power Company, as Lessor, and Geothermal Development Associates, as Lessee incorporated by reference to Exhibit 10.4.6 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.7				Lease Agreement, dated November 1, 1969, by and between Chrisman B. Jackson and Sharon Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.7 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.8				Lease Agreement, dated September 22, 1976, by and between El Toro Land & Cattle Co., as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.8 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.9				Lease Agreement, dated February 17, 1977, by and between Joseph L. Holtz, as Lessor, and Chevron U.S.A. Inc., as Lessee incorporated by reference to Exhibit 10.4.9 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.10				Lease Agreement, dated March 11, 1964, by and between John D. Jackson and Frances Jones Jackson, also known as Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.10 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.11				Lease Agreement, dated February 16, 1964, by and between John D. Jackson, conservator for the estate of Aphia Jackson Wallan, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.11 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.12				Lease Agreement, dated March 17, 1964, by and between Helen S. Fugate, a widow, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.12 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

196

Exhibit No.				Document
10.4.13				Lease Agreement, dated February 16, 1964, by and between John D. Jackson and Frances J. Jackson, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.13 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.14				Lease Agreement, dated February 20, 1964, by and between John A. Straub and Edith D. Straub, also known as John A. Straub and Edythe D. Straub, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.14 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.15				Lease Agreement, dated July 1, 1971, by and between Marie L. Gisler and Harry R. Gisler, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.15 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.16				Lease Agreement, dated February 28, 1964, by and between Gus Kurupas and Guadalupe Kurupas, husband and wife, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.16 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.17				Lease Agreement, dated April 7, 1972, by and between Nowlin Partnership, as Lessor, and Standard Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.17 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.18				Geothermal Lease Agreement, dated July 18, 1979, by and between Charles K. Corfman, an unmarried man as his sole and separate property, and Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.18 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.19				Lease Agreement, dated January 1, 1972, by and between Holly Oberly Thomson, also known as Holly F. Oberly Thomson, also known as Holly Felicia Thomson, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.19 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.20				Lease Agreement, dated June 14, 1971, by and between Fitzhugh Lee Brewer, Jr., a married man as his separate property, Donna Hawk, a married woman as her separate property, and Ted Draper and Helen Draper, husband and wife, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.20 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.21				Lease Agreement, dated May 13, 1971, by and between Mathew J. La Brucherie and Jane E. La Brucherie, husband and wife, and Robert T. O’Dell and Phyllis M. O’Dell, husband and wife, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.21 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.

197

Exhibit No.				Document
10.4.22				Lease Agreement, dated June 2, 1971, by and between Dorothy Gisler, a widow, Joan C. Hill, and Jean C. Browning, as Lessor, and Union Oil Company of California, as Lessee incorporated by reference to Exhibit 10.4.22 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.23				Geothermal Lease Agreement, dated February 15, 1977, by and between Walter J. Holtz, as Lessor, and Magma Energy Inc., as Lessee incorporated by reference to Exhibit 10.4.23 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.24				Geothermal Lease, dated August 31, 1983, by and between Magma Energy Inc., as Lessor, and Holt Geothermal Company, as Lessee incorporated by reference to Exhibit 10.4.24 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.25				Unprotected Lease Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. incorporated by reference to Exhibit 10.4.25 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.4.26				Geothermal Resources Lease, dated June 27, 1988, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.26 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.27				Amendment to Geothermal Resources Lease, dated January, 1992, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.27 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.28				Second Amendment to Geothermal Resources Lease, dated June 25, 1993, by and between Bernice Guisti, Judith Harvey and Karen Thompson, Trustees and Beneficiaries of the Guisti Trust, as Lessor, and Far West Capital, Inc. and its Assignee, Steamboat Development Corp., as Lessee incorporated by reference to Exhibit 10.4.28 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.29				Geothermal Resources Sublease, dated May 31, 1991, by and between Fleetwood Corporation, as Lessor, and Far West Capital, Inc., as Lessee incorporated by reference to Exhibit 10.4.29 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.30				KLP Lease and Agreement, dated March 1, 1981, by and between Kapoho Land Partnership, as Lessor, and Thermal Power Company, as Lessee incorporated by reference to Exhibit 10.4.30 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.

198

Exhibit No.				Document
10.4.31				Amendment to KLP Lease and Agreement, dated July 9, 1990, by and between Kapoho Land Partnership, as Lessor, and Puna Geothermal Venture, as Lessee incorporated by reference to Exhibit 10.4.31 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.32				Second Amendment to KLP Lease and Agreement, dated December 31, 1996, by and between Kapoho Land Partnership, as Lessor, and Puna Geothermal Venture, as Lessee incorporated by reference to Exhibit 10.4.32 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.4.33				Participation Agreement, dated May 18, 2005, by and among Puna Geothermal Venture, SE Puna, L.L.C., Wilmington Trust Company, S.E. Puna Lease, L.L.C., AIG Annuity Insurance Company, American General Life Insurance Company, Allstate Life Insurance Company and Union Bank of California, incorporated by reference to Exhibit 10.4.33 to Ormat Technologies, Inc. Quarterly Report on Form 10-Q/A to the Securities and Exchange Commission on December 22, 2005.
10.4.34				Project Lease Agreement, dated May 18, 2005, by and between SE Puna, L.L.C. and Puna Geothermal Venture, incorporated by reference to Exhibit 10.4.34 to Ormat Technologies, Inc. Quarterly Report on Form 10-Q/A to the Securities and Exchange Commission on December 22, 2005.
10.5				General incorporated by reference to Exhibit 10.5 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.5.1				Engineering, Procurement and Construction Contract, dated August 23, 2002, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc incorporated by reference to Exhibit 10.5.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.2				Amendment No. 1, to Engineering, Procurement and Construction Contract, dated, 2003, by and between Tuaropaki Power Company Limited and Ormat Pacific Inc. incorporated by reference to Exhibit 10.5.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
10.5.3				Engineering, Procurement and Construction Contract, dated 2003, by and between Contact Energy Limited and Ormat Pacific Inc. incorporated by reference to Exhibit 10.5.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.4				Patent License Agreement, dated July 15, 2004, by and between Ormat Industries Ltd. and Ormat Systems Ltd. incorporated by reference to Exhibit 10.5.4 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.5.5				Form of Registration Rights Agreement by and between Ormat Technologies, Inc. and Ormat Industries Ltd. incorporated by reference to Exhibit 10.5.5 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.

199

Exhibit No.				Document
10.6.1				Ormat Technologies, Inc. 2004 Incentive Compensation Plan incorporated by reference to Exhibit 10.6.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.6.2				Form of Incentive Stock Option Agreement incorporated by reference to Exhibit 10.6.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.6.3				Form of Nonqualified Stock Option Agreement incorporated by reference to Exhibit 10.6.3 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 22, 2004.
10.7				Form of Executive Employment Agreement of Lucien Bronicki incorporated by reference to Exhibit 10.7 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.8				Form of Executive Employment Agreement of Yehudit Bronicki incorporated by reference to Exhibit 10.8 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.9				Form of Executive Employment Agreement of Yoram Bronicki incorporated by reference to Exhibit 10.9 to Ormat Technologies, Inc. Registration Statement Amendment No. 1 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on September 28, 2004.
10.10.1				Form of Executive Employment Agreement of Hezy Ram incorporated by reference to Exhibit 10.10.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.10.2				Amendment No. 1 to Form of Executive Employment Agreement of Hezy Ram incorporated by reference to Exhibit 10.10.2 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.11				Form of Indemnification Agreement incorporated by reference to Exhibit 10.11 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
10.12				Note Purchase Agreement, dated December 2, 2005, among Lehman Brothers Inc., OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company, filed herewith.
10.13				Indenture dated as of December 8, 2005 among OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company and Union Bank of California, filed herewith.
10.14				Guarantee dated as of December 8, 2005 among OrCal Geothermal Inc., OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company and Heber Geothermal Company, filed herewith.
10.15				Note Purchase Agreement, dated February 6, 2004, among Lehman Brothers Inc., Ormat Funding Corp., Brady Power Partners, Steamboat Geothermal LLC, OrMammoth Inc., ORNI 1 LLC, ORNI 2 LLC and ORNI 7 LLC, filed herewith.

200

Exhibit No.				Document
21.1				Subsidiaries of Ormat Technologies, Inc., filed herewith.
23.1				Consent of PricewaterhouseCoopers, LLP, Independent Registered Public Accounting Firm, filed herewith.
23.2				Consent of SyCip Gorres Velayo & Co., Independent Registered Public Accounting Firm, filed herewith.
31.1				Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2				Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1				Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2				Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
99.1				Material terms with respect to BLM geothermal resources leases incorporated by reference to Exhibit 99.1 to Ormat Technologies, Inc. Registration Statement Amendment No. 2 on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on October 20, 2004.
99.2				Material terms with respect to BLM site leases incorporated by reference to Exhibit 99.2 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
99.3				Material terms with respect to agreements addressing renewable energy pricing and payment issues incorporated by reference to Exhibit 99.3 to Ormat Technologies, Inc. Registration Statement on Form S-1 (File No. 333-117527) to the Securities and Exchange Commission on July 20, 2004.
99.4				Summary of Non-Employee Director Compensation and Benefits, incorporated by reference to Exhibit 99.4 to Ormat Technologies, Inc.’s Form 10-K to the Securities and Exchange Commission on March 28, 2005.

201

EX-10.13

                                 EXHIBIT 10.13

                                                                  EXECUTION COPY

- --------------------------------------------------------------------------------

                             ORCAL GEOTHERMAL INC.,
                                 AS THE ISSUER,

                                 ORHEBER 1 INC.,
                                 ORHEBER 2 INC.,
                       SECOND IMPERIAL GEOTHERMAL COMPANY,
                              HEBER FIELD COMPANY,
                            HEBER GEOTHERMAL COMPANY,
                                 AS GUARANTORS,

                                    INDENTURE

                          DATED AS OF DECEMBER 8, 2005

                         UNION BANK OF CALIFORNIA, N.A.,
                                   AS TRUSTEE

- --------------------------------------------------------------------------------



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.....................     1
     Section 1.01    Definitions.........................................     1
     Section 1.02    Other Definitions...................................    25
     Section 1.03    Trust Indenture Act Provisions......................    25
     Section 1.04    Rules of Construction...............................    25

ARTICLE II THE SENIOR SECURED NOTES......................................    26
     Section 2.01    Form Generally......................................    26
     Section 2.02    Legends on Restricted Notes.........................    28
     Section 2.03    Amount of Senior Secured Notes......................    28
     Section 2.04    Denominations.......................................    30
     Section 2.05    Execution, Authentication, Delivery and Dating......    30
     Section 2.06    Temporary Senior Secured Notes......................    31
     Section 2.07    Registration, Registration of Transfer and
                     Exchange............................................    32
     Section 2.08    Mutilated, Destroyed, Lost and Stolen Senior
                     Secured Notes.......................................    38
     Section 2.09    Payments; Interest Rights Preserved.................    39
     Section 2.10    Persons Deemed Owners...............................    40
     Section 2.11    Cancellation........................................    40
     Section 2.12    Computation of Interest.............................    41
     Section 2.13    Certification Forms.................................    41
     Section 2.14    CUSIP Numbers.......................................    41

ARTICLE III REDEMPTION AND PREPAYMENT....................................    41
     Section 3.01    Notices to Trustee..................................    41
     Section 3.02    Selection of Senior Secured Notes to Be Redeemed....    42
     Section 3.03    Notice of Redemption................................    42
     Section 3.04    Effect of Notice of Redemption......................    43
     Section 3.05    Deposit of Redemption Price.........................    43
     Section 3.06    Senior Secured Notes Redeemed in Part...............    44
     Section 3.07    Optional Redemption.................................    44
     Section 3.08    Mandatory Redemption................................    44

ARTICLE IV COVENANTS.....................................................    46
     Section 4.01    Payment of Senior Secured Notes.....................    46
     Section 4.02    Maintenance of Office or Agency.....................    46
     Section 4.03    Reporting Requirements..............................    47
     Section 4.04    Delivery of Notices to Trustee......................    49
     Section 4.05    Stay, Extension and Usury Laws......................    49
     Section 4.06    Restrictions on Sale of Assets......................    49
     Section 4.07    Insurance...........................................    49



                                                                            Page
                                                                            ----
     Section 4.08    Governmental Approvals; Title.......................    51
     Section 4.09    Limitation on Nature of Business....................    51
     Section 4.10    Prohibition on Merger or Other Fundamental Changes..    51
     Section 4.11    Restricted Payments.................................    52
     Section 4.12    Revenue Account; Debt Service Reserve Account.......    52
     Section 4.13    Transactions with Affiliates........................    52
     Section 4.14    Exercise of Rights..................................    53
     Section 4.15    Termination or Amendment to Material Project
                     Documents...........................................    53
     Section 4.16    Additional Project Documents........................    54
     Section 4.17    Performance of Project Documents....................    54
     Section 4.18    Limitations on Indebtedness.........................    55
     Section 4.19    Limitation on Indebtedness of Subsidiaries..........    57
     Section 4.20    Limitations on Guarantees...........................    57
     Section 4.21    Prohibitions on Other Obligations or Assignments....    57
     Section 4.22    Books and Records, Inspection.......................    57
     Section 4.23    Maintenance of Existence............................    57
     Section 4.24    Additional Documents; Filings and Recordings........    58
     Section 4.25    Dividend and Other Payment Restrictions
                     Affecting Subsidiaries..............................    58
     Section 4.26    Budget; Major Maintenance Expenditures..............    59
     Section 4.27    Limitation on Liens.................................    59
     Section 4.28    Compliance With Laws................................    59
     Section 4.29    Operation and Maintenance...........................    59
     Section 4.30    Additional Subsidiaries; Bank Accounts..............    59
     Section 4.31    Maintenance of Water Supply; Access Rights..........    60
     Section 4.32    No Abandonment......................................    60
     Section 4.33    Consents to Assignment of Additional
                     Project Documents...................................    60
     Section 4.34    Loans...............................................    60
     Section 4.35    Amendments to Organizational Documents..............    60
     Section 4.36    Removal of Independent Consultants..................    60
     Section 4.37    Payments for Consent................................    61
     Section 4.38    Limitation on Issuance and Sale of Capital
                     Stock of Subsidiaries...............................    61
     Section 4.39    Maintenance of Qualifying Facility Status...........    61
     Section 4.40    Payment of taxes and claims.........................    61
     Section 4.41    Preservation of Liens...............................    62
     Section 4.42    Title Report........................................    62
     Section 4.43    Additional Capacity.................................    62
     Section 4.44    Use of Proceeds.....................................    63
     Section 4.45    Fitch Rating........................................    63

ARTICLE V DEFAULTS AND REMEDIES..........................................    63
     Section 5.01    Events of Default...................................    63
     Section 5.02    Enforcement of Remedies.............................    66
     Section 5.03    Other Remedies......................................    68
     Section 5.04    Waiver of Past Defaults.............................    68
     Section 5.05    Control by Majority.................................    68


                                      -ii-



                                                                            Page
                                                                            ----
     Section 5.06    Limitation on Suits.................................    69
     Section 5.07    Rights of Holders of Senior Secured Notes to
                     Receive Payment.....................................    69
     Section 5.08    Collection Suit by Trustee..........................    69
     Section 5.09    Trustee May File Proofs of Claim....................    70
     Section 5.10    Priorities..........................................    70
     Section 5.11    Undertaking for Costs...............................    71

ARTICLE VI TRUSTEE.......................................................    71
     Section 6.01    Duties of Trustee...................................    71
     Section 6.02    Rights of Trustee...................................    72
     Section 6.03    Individual Rights of Trustee........................    73
     Section 6.04    Trustee's Disclaimer................................    73
     Section 6.05    Notice of Defaults..................................    74
     Section 6.06    Reports by Trustee to Holders of the Senior
                     Secured Notes.......................................    74
     Section 6.07    Compensation and Indemnity..........................    74
     Section 6.08    Replacement of Trustee..............................    76
     Section 6.09    Successor Trustee by Merger, etc....................    77
     Section 6.10    Eligibility; Disqualification.......................    77
     Section 6.11    Preferential Collection of Claims Against
                     the Issuer..........................................    77
     Section 6.12    Receipt of Documents................................    77

ARTICLE VII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.....................    78
     Section 7.01    Option to Effect Legal Defeasance or Covenant
                     Defeasance..........................................    78
     Section 7.02    Legal Defeasance and Discharge......................    78
     Section 7.03    Covenant Defeasance.................................    78
     Section 7.04    Conditions to Legal or Covenant Defeasance..........    79
     Section 7.05    Deposited Money and Government Securities to be
                     Held in Trust; Other Miscellaneous Provisions.......    80
     Section 7.06    Repayment to Issuer.................................    81
     Section 7.07    Reinstatement.......................................    81

ARTICLE VIII AMENDMENT, SUPPLEMENT AND WAIVER............................    82
     Section 8.01    Without Consent of Holders of Senior Secured Notes..    82
     Section 8.02    With Consent of Holders of Senior Secured Notes.....    82
     Section 8.03    Revocation and Effect of Consents...................    84
     Section 8.04    Notation on or Exchange of Senior Secured Notes.....    85
     Section 8.05    Trustee to Sign Amendments, etc.....................    85
     Section 8.06    Execution of Supplemental Indentures................    85
     Section 8.07    Effect of Supplemental Indentures...................    85
     Section 8.08    Conformity with Trust Indenture Act.................    85
     Section 8.09    Reference in Senior Secured Notes to Supplemental
                     Indentures..........................................    85

ARTICLE IX GUARANTEE.....................................................    86
     Section 9.01    Agreement to Guarantee..............................    86
     Section 9.02    Execution and Delivery of Guarantee.................    87


                                      -iii-



                                                                            Page
                                                                            ----
     Section 9.03    Waivers by Guarantors...............................    88
     Section 9.04    Guarantors May Consolidate, etc. on Certain Terms...    90
     Section 9.05    Covenants of the Guarantors.........................    90

ARTICLE X MISCELLANEOUS..................................................    91
     Section 10.01   Trust Indenture Act Controls........................    91
     Section 10.02   Notices.............................................    91
     Section 10.03   Communication by Holders of Senior Secured Notes
                     with Other Holders of Senior Secured Notes .........    92
     Section 10.04   Certificate and Opinion as to Conditions Precedent..    92
     Section 10.05   Statements Required in Certificate or Opinion.......    92
     Section 10.06   Rules by Trustee and Agents.........................    93
     Section 10.07   No Personal Liability of Directors, Officers,
                     Employees and Stockholders..........................    93
     Section 10.08   Senior Secured Notes Owned by the Issuer or
                     Affiliates Deemed Not Outstanding...................    93
     Section 10.09   Governing Law.......................................    94
     Section 10.10   Right to Set-Off....................................    94
     Section 10.11   Submission to Jurisdiction..........................    94
     Section 10.12   Waiver of Jury Trial................................    94
     Section 10.13   No Adverse Interpretation of Other Agreements.......    95
     Section 10.14   Successors..........................................    95
     Section 10.15   Severability........................................    95
     Section 10.16   Counterpart Originals...............................    95
     Section 10.17   Table of Contents, Headings, etc....................    95

SCHEDULES

Schedule A: MATERIAL REAL PROPERTY INTERESTS
Schedule B: GOVERNMENTAL APPROVALS TO BE OBTAINED

EXHIBITS

Exhibit A-1: FORM OF SENIOR SECURED NOTE
Exhibit A-2: FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B:   FORM OF CERTIFICATE OF TRANSFER
Exhibit C:   FORM OF CERTIFICATE OF EXCHANGE
Exhibit D:   SUBORDINATION PROVISIONS
Exhibit E-1: FORM OF FEE DEED OF TRUST
Exhibit E-2: FORM OF FEE AND LEASEHOLD DEED OF TRUST
Exhibit F:   FORM OF GUARANTEE
Exhibit G:   FORM OF SUPPLEMENTAL INDENTURE


                                      -iv-



          INDENTURE, dated as of December 8, 2005, among OrCal Geothermal Inc.,
a Delaware corporation (including its successors and permitted assigns, the
"Issuer"), OrHeber 1 Inc., a Delaware corporation ("OrHeber 1"), OrHeber 2 Inc.,
a Delaware corporation ("OrHeber 2"), Second Imperial Geothermal Company, a
California limited partnership ("Second Imperial Geothermal"), Heber Field
Company, a California general partnership ("Heber Field"), Heber Geothermal
Company, a California general partnership ("Heber Geothermal") and Union Bank of
California, N.A., a national banking association, as trustee (the "Trustee").

          The Issuer, the Guarantors (as defined below) and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders of the Initial Notes and any Additional Notes (as defined below):

                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE

          Section 1.01 Definitions.

          "Acceptable Letter of Credit" means one or more irrevocable standby
letters of credit available for the purpose of drawing in accordance with the
Depositary Agreement, and any extensions thereof or any substitute letter of
credit therefor in the stated amount contained in such extension or substitute,
subject to the limitations set forth in, and permitting draws thereon as
contemplated by the Depositary Agreement, (i) issued to the Depositary (for the
benefit of the Secured Parties entitled to the benefits of the applicable
Account) by a commercial bank having a long-term unsecured senior debt rating of
at least Investment Grade, (ii) payable in immediately available U.S. Dollar
funds on any Business Day, (iii) with a minimum term of at least one year, (iv)
providing for the amount thereof to be available to the Depositary in multiple
drawings conditioned only upon presentation of sight drafts accompanied by the
applicable certificate in the form attached to such letter of credit, (v)
transferable to any successor Depositary, the Collateral Agent or a successor
Collateral Agent (or if not transferable provides for the amount thereof to be
drawn upon by the Depositary upon appointment of a successor Depositary or
Collateral Agent), (vi) governed by the laws of the State of New York or
California, (vii) does not constitute Indebtedness (directly or indirectly) of
the Issuer or any of its Subsidiaries, and is not secured by a Lien on any of
the properties of the Issuer or any of its Subsidiaries, and the Issuer
certifies to such in an Officer's Certificate and (viii) which provides that it
may be drawn not more than thirty days prior to its expiration in the entire
amount then available to be drawn if the issuing bank does not provide a written
extension of the same to the Depositary at least 30 days prior to its then
scheduled expiration date.

          "Accounts" means the accounts established pursuant to the Depositary
Agreement.



          "Additional Notes" means any Senior Secured Notes (other than Initial
Notes), if any, issued under this Indenture in accordance with Sections 2.03 and
2.05 hereof.

          "Additional Project Document" means any contract or agreement entered
into after the Closing Date in respect of the ownership, construction,
operation, maintenance, modification or administration of a Project that is
material to the Issuer or one or more of the Projects, other than a Financing
Document. The replacement of a Project Document that is not a Material Project
Document shall be deemed not to be an Additional Project Document.

          "Administrative Costs" means all of the Issuer's obligations, now or
hereafter existing, to pay administrative fees, costs and expenses to any
trustee or agent of the Holders of the Senior Secured Notes or any Permitted
Additional Senior Lender, including the Collateral Agent, the Intercreditor
Agent, the Depositary, and the Trustee (including, without limitation, the
reasonable fees and expenses of counsel, agents and experts).

          "Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

          "Agent" means any Registrar, Paying Agent or co-registrar.

          "Agent Member" has the meaning set forth in Section 2.07(c)(v)(B) of
this Indenture.

          "Applicable Law" means any constitution, statute, law, rule,
regulation, ordinance, judgment, order, decree or Governmental Approval, or any
published directive or requirement which has the force of law, or other
governmental restriction which has the force of law, or any determination by, or
interpretation of any of the foregoing by, any judicial authority, applicable to
and/or binding on a given Person or any Project, as the context may require,
whether in effect as of the Closing Date or thereafter and in each case as
amended, modified and/or supplemented.

          "Auditors" has the meaning specified in Section 4.03(b).

          "Authentication Order" means a written order or request signed in the
name of the Issuer by the President, a Vice President, the Treasurer or the
Assistant Treasurer, and delivered to the Trustee.

          "Authorized Officer" or "Authorized Representative" of any Person
means the individual or individuals authorized to act on behalf of such Person
by the Board of Directors, managing member, management committee, board of
control or any other governing body of such Person as designated from time to
time in a certificate of such Person with specimen signatures.


                                       -2-



          "Board of Directors" means:

          (1) with respect to a corporation, the board of directors of the
     corporation or any committee thereof duly authorized to act on behalf of
     such board;

          (2) with respect to a partnership, the board of directors of the
     general partner of the partnership or any committee or person duly
     authorized and empowered to take action on behalf of such partnership by
     the partnership agreement of such partnership;

          (3) with respect to a limited liability company, the managing member
     or members or any controlling committee of managing members thereof; and

          (4) with respect to any other Person, the board or committee of such
     Person serving a similar function.

          "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.

          "Business Day" means any day other than a Saturday or Sunday or other
day on which banks in New York, New York are authorized or required by law or
executive order to remain closed.

          "Capital Expenditures" means any expenses that are capitalized on the
Issuer's balance sheet in accordance with GAAP.

          "Capital Stock" means:

          (1) in the case of a corporation, corporate stock;

          (2) in the case of an association or business entity, any and all
     shares, interests, participations, rights or other equivalents (however
     designated) of corporate stock;

          (3) in the case of a partnership or limited liability company,
     partnership interests (whether general or limited) or membership interests;
     and

          (4) any other interest or participation that confers on a Person the
     right to receive a share of the profits and losses of, or distributions of
     assets of, the issuing Person including all warrants, options or other
     rights to acquire any of the foregoing, but excluding from all of the
     foregoing any debt securities convertible into or exchangeable for Capital
     Stock, whether or not such debt securities include any right of
     participation with Capital Stock.

          "Cash Flow Available for Debt Service" means, for any period, (a) all
revenues (including interest and the proceeds of any business interruption
insurance but excluding any other insurance proceeds and any other similar
non-recurring receipts) received in such period and deposited in the Revenue
Account, less (b) the sum of (x) Operating and Maintenance


                                       -3-



Expenses for such period plus (y) Administrative Costs payable to the Trustee,
the Collateral Agent, the Depositary, the Intercreditor Agent and any other
trustee or agent of the Secured Parties for such period, all as computed on a
cash basis.

          "Certificated Note" means a certificated Senior Secured Note
registered in the name of the Holder thereof and issued in accordance with
Section 2.07 hereof, substantially in the form of Exhibit A-1/A-2 hereto except
that such Senior Secured Note shall not bear the Global Note Legend and shall
not have the "Schedule of Exchanges of Interests in the Global Note" attached
thereto.

          "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the Issuer's and/or the Issuer's Subsidiaries' assets,
taken as a whole; (ii) the adoption of a plan relating to the Issuer's
liquidation or dissolution; (iii) the consummation of any transaction or series
of related transactions (including, without limitation, any merger or
consolidation) the result of which is that any Person other than Ormat Nevada or
a Related Party, becomes the "beneficial owner" (as such term is defined Rule
13d-3 and Rule 13d-5 under the Exchange Act) directly or indirectly, of 50% or
more of the Issuer's voting power; (iv) the consummation of any transactions or
series of related transactions the result of which is that Ormat Nevada and the
Related Parties cease to collectively own, directly or indirectly, more than 50%
of the Issuer's economic or voting interest; or (v) the sale of the Capital
Stock of any Subsidiary of the Issuer (other than as permitted herein);
provided, however, that notwithstanding the foregoing, a Change of Control will
not be deemed to have occurred if (x) prior to giving effect to the reduction in
Ormat Nevada's and/or the Related Parties' collective voting or economic
interests in the Issuer, such reduction has been approved by Holders of at least
66?% of the Senior Secured Notes or (y) prior to giving effect to any other
Person becoming the beneficial owner of 50% or more of the Issuer's voting power
pursuant to clause (iii) hereof, the transaction resulting in such change in
beneficial ownership is approved by Holders of at least 66?% of the Senior
Secured Notes.

          "Clearstream" means Citibank, N.A., as operator of Clearstream
Banking, S.A.

          "Closing Date" means December 8, 2005.

          "Code" means the U.S. Internal Revenue Code of 1986, as amended.

          "Collateral" means all collateral pledged, or in respect of which a
lien is granted, pursuant to this Indenture or the Security Documents.

          "Collateral Agency Agreement" means that certain Collateral Agency
Agreement, dated as of December 8, 2005, among the Issuer, each of the
Guarantors, the Collateral Agent, the Trustee, the Depositary and the
Intercreditor Agent.

          "Collateral Agent" means Union Bank of California, N.A., a national
banking association organized under the laws of the United States, as collateral
agent for the benefit of the Secured Parties, together with its successors and
assigns.


                                       -4-



          "Collection Expenses" means all reasonable out-of-pocket costs or
expenses (if any) and, if applicable, reasonable transaction costs, incurred by
the Issuer in connection with the collection, enforcement, negotiation,
consummation, settlement, proceedings, administration or other activity related
to the receipt and/or collection of the relevant proceeds, as applicable.

          "Control Agreements" means (i) each Control Agreement executed and
delivered by the Collateral Agent, the Issuer, certain of the Issuer's
Subsidiaries and the bank or institution where the Issuer's or its relevant
Subsidiary's checking accounts permitted to be established under this Indenture
and the Depositary Agreement are held and (ii) each Control Agreement executed
and delivered by the Collateral Agent, the Issuer and certain of the Issuer's
Subsidiaries in connection with the Security Documents.

          "Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Issuer.

          "Custodian" means, initially, the Trustee, and its successors and
assigns or any other custodian performing similar functions.

          "Debt Service Coverage Ratio" means, for any period, the ratio of (i)
the sum of all Cash Flow Available for Debt Service for such period to (ii) the
aggregate payments of scheduled or accelerated (in accordance with the terms of
the Financing Documents) principal, interest and premium, if any, required to be
made under this Indenture and the other Financing Documents and in connection
with all other Permitted Indebtedness (other than Subordinated Debt) for such
period.

          "Debt Service Reserve Account" means the account of such name created
under the Depositary Agreement.

          "Debt Service Reserve Letter of Credit" means an Acceptable Letter of
Credit that has been delivered and may be drawn in accordance with Section 3.4
of the Depositary Agreement.

          "Debt Service Reserve Requirement" means, as of any date of
calculation, an amount equal to the projected principal and interest that will
be due on the Senior Secured Notes during the succeeding six-month period.


                                       -5-



          "Deeds of Trust" means, collectively, (i) that certain Deed of Trust,
Assignment of Rents, Security Agreement, and Fixture Filing, dated as of the
Closing Date, executed by Second Imperial Geothermal, as grantor, for the
benefit of the Collateral Agent, as beneficiary, (ii) that certain Deed of
Trust, Assignment of Rents, Security Agreement, and Fixture Filing, dated as of
the Closing Date, executed by Heber Field, as grantor, for the benefit of the
Collateral Agent, as beneficiary and (iii) that certain Deed of Trust,
Assignment of Rents, Security Agreement, and Fixture Filing, dated as of the
Closing Date, executed by Heber Geothermal, as grantor, for the benefit of the
Collateral Agent, as beneficiary.

          "Default" means an event or condition that, with the giving of notice
or lapse of time, or any combination thereof, would become an Event of Default.

          "Depositary" means Union Bank of California, N.A., a national banking
association organized under the laws of the United States, as Depositary under
the Depositary Agreement, together with its successors and assigns.

          "Depositary Agreement" means the Deposit and Disbursement Agreement,
dated as of the Closing Date, among the Issuer, each of the Guarantors, the
Collateral Agent, the Depositary and the Securities Intermediary.

          "Depository" means, with respect to the Senior Secured Notes issuable
or issued in whole or in part in global form, DTC, and any and all successors
thereto appointed as depository hereunder and having become such pursuant to the
applicable provision of this Indenture.

          "Distribution Account" means the account bearing such title and
created under the Depositary Agreement.

          "Distribution Conditions" has the meaning set forth in Section 3.6(b)
of the Depositary Agreement.

          "Distribution Date" means any Business Day on or within 60 days
following a Scheduled Payment Date, on which the Issuer may make a Restricted
Payment in accordance with the terms of this Indenture and the Depositary
Agreement.

          "Distribution Suspense Account" means the account bearing such title
and created under the Depositary Agreement.

          "Dollars" and "$" means lawful money of the United States.

          "DTC" means The Depository Trust Company.

          "Eligible Letter of Credit Provider" means a U.S. commercial bank(s)
or financial institution(s) or a U.S. branch of a foreign commercial bank(s) or
financial institution(s) with an Investment Grade rating (provided that any such
rating shall not be based solely on such bank's or financial institution's
foreign currency rating at such time).


                                       -6-



          "Eminent Domain Proceeds" means all amounts and proceeds (including
instruments) received by the Issuer or any Guarantor in respect of any Event of
Eminent Domain.

          "Euroclear" means Euroclear Bank S.A./N.V., as operator of the
Euroclear system.

          "Event of Abandonment" means, with respect to a Plant, the suspension
or cessation for a period of at least 120 consecutive days of all or
substantially all of the operational and maintenance activities at such Plant;
provided, however, that any such suspension or cessation that arises from an
Event of Loss, a requirement of law, an event of force majeure, curtailment or
failure to be dispatched, or other bona fide business reasons shall not
constitute an Event of Abandonment, in each case, so long as the Issuer or the
Issuer's applicable Subsidiaries are taking commercially reasonable actions to
overcome or mitigate the effects of the cause of suspension or cessation so that
maintenance and/or operations, as the case may be, can be resumed. Any period of
cessation or suspension shall end on the date that operation and maintenance
activities of a substantial nature are resumed.

          "Event of Default" means the occurrence of any of the events set forth
under Section 5.01 hereof.

          "Event of Eminent Domain" means any compulsory transfer or taking or
transfer under threat of compulsory transfer or taking of any material part of
the Collateral or a Project by any Governmental Authority.

          "Event of Loss" means an event which causes all or a portion of the
Project to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Event of Eminent Domain or a Title Event.

          "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.

          "Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal fund transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Trustee from three federal funds brokers of
recognized standing selected by it.

          "FERC" means the Federal Energy Regulatory Commission and any
successor agency thereto.

          "Final Maturity Date" means the latest stated maturity date of any of
the Senior Secured Notes.


                                       -7-



          "Financing Documents" means this Indenture, the Senior Secured Notes,
the Note Purchase Agreement, the Security Documents, the Guarantees, the Letters
of Credit, the Production Tax Credit Agreement, the Subordinated Loan Agreement
and any other credit or security agreement executed by a Financing Entity in
respect of a Project.

          "Financing Entity" means the Issuer, the Guarantors and Ormat Nevada.

          "Fitch" means Fitch Ratings Ltd., its successors and assigns.

          "Fluid Supply Agreements" means the Heber 1 Fluid Supply Agreement and
the Heber 2 Fluid Supply Agreement.

          "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect as of the relevant date of determination.

          "Generating Capacity" means the net amount of electrical energy
available for sale under each Project's relevant power purchase agreement.

          "Geothermal Consultant" means Geothermex, Inc. or another widely
recognized independent geothermal engineering firm retained by the Issuer as
Geothermal Consultant.

          "Geothermal Consultant's Report" means the report, dated November
2005, of the Geothermal Consultant prepared in connection with the Offering and
attached to the Offering Memorandum as Annex B.

          "Geothermal Resource" means the aggregate of any and all geothermal
resources owned, leased or otherwise held by the Issuer or any Guarantor, used
in connection with the operation of the Projects, which such geothermal
resources are identified as the "Heber geothermal field" in the Geothermal
Consultant's Report.

          "Global Note Legend" means the legend set forth in Exhibit A-1/A-2
hereto.

          "Global Note" means a Senior Secured Note that evidences all or part
of the Senior Secured Notes and bears the appropriate legend set forth in
Exhibit A-1/A-2 (or such legend as may be contemplated by Section 2.02 for such
Senior Secured Notes).

          "Gould Plant Connection Agreements" means those certain
Interconnection and Operating Agreements, dated December 8, 2005 and December 8,
2005, respectively, between OrHeber 2 and Imperial Irrigation District.

          "Gould Plant" means two geothermal power generating plants located in
Imperial County, California, and having a Generating Capacity of approximately
10 MW.


                                       -8-



          "Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.

          "Governmental Approvals" means all governmental approvals,
authorizations, consents, decrees, permits, waivers, privileges and filings with
or from all Governmental Authorities required to be obtained or made for the
ownership, construction, operation and maintenance of a Project.

          "Governmental Authority" means the government of any federal, state,
municipal or other political subdivision in which the Projects are located, and
any other government or political subdivision thereof exercising jurisdiction
over the Projects or any of their assets or any party to any of the Project
Documents, including all agencies and instrumentalities of such governments and
political subdivisions.

          "Guarantee" means each guarantee by a Guarantor of the Issuer's
obligations under the Financing Documents pursuant to Article IX or another
writing pursuant to which a Guarantor agrees to be bound by the terms applicable
to Guarantors set forth in Article IX.

          "Guarantor" means each of OrHeber 1, OrHeber 2, Second Imperial
Geothermal, Heber Field, Heber Geothermal and their respective successors and
assigns.

          "Hazardous Substance" means any substance, pollutant or contaminant
now or hereafter included in such (or any similar) term under any state, federal
or local ordinance, statute, law or regulation now in effect or hereafter
enacted or amended.

          "Heber 1 Fluid Supply Agreement" means that certain Geothermal Sales
Agreement, dated December 18, 1991, between U.S. Trust Company of California,
N.A. and Heber Geothermal, as amended by that certain First Amendment to
Geothermal Sales Agreement, dated January 20, 1993, as further amended by that
certain Second Amendment to Geothermal Sales Agreement, dated September 4, 1996
and as assumed by Heber Field pursuant to the Ownership Interest Purchase
Agreement, dated as of November 21, 2003, among OrHeber 1, OrHeber 2, OrHeber 3
Inc., OrMammoth Inc., Covanta Heber Field Energy, Inc., Heber Field Energy II,
Inc., ERC Energy, Inc., ERC Energy II, Inc., Heber Loan Partners, Covanta Power
Pacific, Inc., Pacific Geothermal Co., Mammoth Geothermal Co., Amor 14
Corporation, Covanta SIGC Energy II, Inc., Covanta Energy Americas, Inc., and
Covanta Energy Corporation.

          "Heber 1 Plant" means one geothermal power generating plant located in
Imperial County, California and having a Generating Capacity of 38 MW.

          "Heber 1 Plant Connection Agreement" means that certain Plant
Connection Agreement, dated July 31, 1985, between Heber Geothermal and Imperial
Irrigation District.

          "Heber 1 Power Purchase Agreement" means that certain Power Purchase
and Sales Agreement, dated August 26, 1983, between Southern California Edison
Company and Chevron U.S.A. Inc., as assigned by Chevron U.S.A. to Heber
Geothermal under that certain


                                       -9-



Assignment and Assumption Agreement, dated August 26, 1983, as amended by that
certain Amendment No. 1 to Power Purchase and Sales Agreement, dated December
11, 1984, and as further amended by that certain Settlement Agreement and
Amendment No. 2 to Power Purchase Contract, dated August 7, 1995.

          "Heber 1 Water Supply Agreement" means that certain Water Supply
Agreement, dated August 16, 1994, between Imperial Irrigation District and Heber
Geothermal.

          "Heber 2 Fluid Supply Agreement" means that certain Fluid Supply
Agreement, dated January 30, 2004, between Heber Field and Second Imperial
Geothermal.

          "Heber 2 Plant" means one geothermal power generating plant located in
Imperial County, California and having a Generating Capacity of 34 MW.

          "Heber 2 Plant Connection Agreement" means that certain Plant
Connection Agreement, dated October 27, 1992, between Second Imperial Geothermal
and Imperial Irrigation District.

          "Heber 2 Power Purchase Agreement" means that certain Power Purchase
Contract, dated April 16, 1985, between Southern California Edison Company and
Second Imperial Geothermal, as amended by that certain Amendment No. 1 to Power
Purchase Contract, dated October 23, 1987, as further amended by that certain
Amendment No. 2 to Power Purchase Contract, dated July 27, 1990, and as further
amended by that certain Amendment No. 3 to Power Purchase Contract, dated
November 24, 1992.

          "Heber 2 Water Supply Agreement" means that certain Water Supply
Agreement, dated October 27, 1992, between Imperial Irrigation District and
Second Imperial Geothermal.

          "Heber Field" means Heber Field Company, a general partnership
organized and existing under the laws of the State of California, its successors
and assigns.

          "Heber Geothermal" means Heber Geothermal Company, a general
partnership organized and existing under the laws of the State of California,
its successors and assigns.

          "Holder" means a Person in whose name a Senior Secured Note is
registered in the register maintained pursuant to Section 2.07(a).

          "IID Water Supply Agreements" means the Heber 1 Water Supply Agreement
and the Heber 2 Water Supply Agreement.

          "Indebtedness" of any Person means, at any date, without duplication:

          (i) all obligations of such Person for borrowed money;


                                      -10-



          (ii) all obligations of such Person evidenced by bonds, debentures,
     notes or other similar instruments (excluding "deposit only" endorsements
     on checks payable to the order of such Person);

          (iii) all obligations of such Person to pay the deferred purchase
     price of property or services (except accounts payable and similar
     obligations arising in the ordinary course of business);

          (iv) all obligations of such Person as lessee under capital leases to
     the extent required to be capitalized on the books of such Person in
     accordance with GAAP;

          (v) all obligations of such Person under conditional sale or other
     title retention agreements relating to property or assets purchased by such
     Person;

          (vi) all Indebtedness of others secured by (or for which the holder of
     such indebtedness has an existing right, contingent or otherwise, to be
     secured by) any Lien on property owned or acquired by such Person, whether
     or not the obligations secured thereby have been assumed;

          (vii) all obligations of such Person in respect of interest rate
     swaps, collars or caps and other interest rate protection arrangements,
     foreign currency exchange agreements, commodity exchange, commodity future,
     commodity forward or commodity option agreements, or other interest or
     exchange rate or commodity hedging arrangements;

          (viii) all obligations of such Person as an account party in respect
     of letters of credit and bankers' acceptances; and

          (ix) all obligations of others of the type referred to in clauses (i)
     through (viii) above guaranteed by such Person, whether or not secured by a
     Lien or other security interest on any asset of such Person.

          "Indenture" means this Indenture, as amended, modified and/or
supplemented from time to time.

          "Independent Accountants" means PricewaterhouseCoopers LLP, a limited
liability partnership organized and existing under the laws of the State of
Delaware, its successors and assigns.

          "Independent Consultants" means the Independent Engineer, the
Insurance Consultant, the Geothermal Consultant and the Independent Energy
Market Consultant.

          "Independent Energy Market Consultant" means DAI Management
Consultants, Inc, or another widely recognized independent energy consulting
firm retained as Independent Energy Market Consultant by the Issuer.


                                      -11-



          "Independent Engineer" means Stone & Webster Management Consultants,
Inc., or another widely recognized independent engineering firm retained as
Independent Engineer by the Issuer.

          "Initial Notes" means $165,000,000 in aggregate principal amount of
6.21% Senior Secured Notes due 2020 issued under this Indenture and a First
Series Supplemental Indenture dated the date hereof on the Closing Date.

          "Initial Purchaser" means Lehman Brothers Inc.

          "Insurance Consultant" means Moore-McNeil LLC, or its successors;
provided that such successor is another nationally recognized independent
insurance consultant.

          "Intercreditor Agent" means, initially, Union Bank of California,
N.A., a national banking association organized and existing under the laws of
the United States, and any Person appointed as a substitute or replacement
Intercreditor Agent under the Intercreditor Agreement.

          "Intercreditor Agreement" means the Intercreditor Agreement, dated as
of December 8, 2005, among the Issuer, the Trustee, the Collateral Agent, the
Intercreditor Agent, the Depositary and any other Secured Party that becomes a
party thereto pursuant to the terms thereof.

          "Interest Payment Date" means each June 30 and December 30 commencing
June 30, 2006 and concluding on the Final Maturity Date.

          "Investment Grade" means a rating of "Baa3" or better by Moody's and
"BBB-" or better by S&P (or an equivalent rating by another nationally
recognized credit rating agency if one or more of such corporations are not in
the business of rating long-term obligations of commercial banks at the time of
issuance); provided, that such rating is not on review for possible downgrade or
on negative watch by any such agency.

          "Investments" means, with respect to any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Capital Stock or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.

          "Letter of Credit" means the Debt Service Reserve Letter of Credit.

          "Lien" means any mortgage, pledge, hypothecation, assignment,
mandatory deposit arrangement, encumbrance, security interest, charge, lien
(statutory or other), preference, priority or other collateral agency agreement
of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially


                                      -12-



the same effect as any of the foregoing and the filing of any financing
statement or similar instrument under the Uniform Commercial Code or comparable
law of any jurisdiction, domestic or foreign.

          "Loss Proceeds" means all proceeds from an Event of Loss received by
the Issuer or any Guarantor, including, without limitation, insurance proceeds
or other amounts actually received, except proceeds of business interruption
insurance.

          "Major Maintenance Expenditures" means Capital Expenditures or other
major maintenance expenses to be incurred by the Issuer or any of its
Subsidiaries (other than any operating costs or expenses included in the
Issuer's annual Operating Budget pursuant to Section 4.26(a))

          "Major Maintenance Expenditure Amount" has the meaning set forth in
Section 4.26 of this Indenture.

          "Make-Whole Premium" means, with respect to any Senior Secured Note,
an amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Senior Secured
Note over the amount of such Called Principal; provided that the Make-Whole
Premium may in no event be less than zero. For the purposes of determining the
Make-Whole Premium, the following terms have the following meanings:

               "Called Principal" means, with respect to any Senior Secured
     Note, the principal of such Senior Secured Note that is to be redeemed.

               "Discounted Value" means, with respect to the Called Principal of
     any Senior Secured Note, the amount obtained by discounting all Remaining
     Scheduled Payments with respect to such Called Principal from their
     respective scheduled due dates to the Settlement Date with respect to such
     Called Principal, in accordance with accepted financial practice and at a
     discount factor (applied on the same periodic basis as that on which
     interest on such notes is payable) equal to the Reinvestment Yield with
     respect to such Called Principal.

               "Reinvestment Yield" means, with respect to the Called Principal
     of any Senior Secured Note, 0.50% over the yield to maturity implied by (a)
     the yields reported, as of 10:00 a.m. (New York City time) on the second
     Business Day preceding the Settlement Date with respect to such Called
     Principal, on the display designated as "Page PX1" on the Bloomberg
     Financial Markets Service (or such other display as may replace Page PX1 on
     the Bloomberg Financial Markets Service) for actively traded U.S. Treasury
     securities having a maturity equal to the Remaining Average Life of such
     Called Principal as of such Settlement Date, or (b) if such yields are not
     reported as of such time or the yields reported as of such time are not
     ascertainable, the Treasury Constant Maturity Series Yields reported, for
     the latest day for which such yields have been so reported as of the second
     Business Day preceding the Settlement Date with respect to such Called
     Principal, in U.S. Federal Reserve Statistical Release H.15 (519)


                                      -13-



     (or any comparable successor publication) for actively traded U.S. Treasury
     securities having a constant maturity equal to the Remaining Average Life
     of such Called Principal as of such Settlement Date. Such implied yield
     will be determined, if necessary, by (i) converting U.S. Treasury bill
     quotations to note-equivalent yields in accordance with accepted financial
     practice and (ii) interpolating linearly between (x) the actively traded
     U.S. Treasury security with the duration closest to and greater than the
     Remaining Average Life of such Called Principal and (y) the actively traded
     U.S. Treasury security with the duration closest to and less than the
     Remaining Average Life of such Called Principal.

               "Remaining Average Life" means, with respect to any Called
     Principal, the number of years (calculated to the nearest one-twelfth year)
     obtained by dividing (a) such Called Principal into (b) the sum of the
     products obtained by multiplying (i) the principal component of each
     Remaining Scheduled Payment with respect to such Called Principal by (ii)
     the number of years (calculated to the nearest one-twelfth year) that will
     elapse between the Settlement Date with respect to such Called Principal
     and the scheduled due date of such Remaining Scheduled Payment.

               "Remaining Scheduled Payments" means, with respect to the Called
     Principal of any Senior Secured Note, all payments of such Called Principal
     and interest thereon that would be due after the Settlement Date with
     respect to such Called Principal if no payment of such Called Principal
     were made prior to its scheduled due date; provided that if such Settlement
     Date is not a date on which interest payments are due to be made under the
     terms of the notes, then the amount of the next succeeding scheduled
     interest payment will be reduced by the amount of interest accrued to such
     Settlement Date and required to be paid on such Settlement Date.

               "Settlement Date" means, with respect to the Called Principal of
     any Senior Secured Note, the date on which such Called Principal is to be
     redeemed.

          "Material Adverse Effect" means a material adverse effect on (i) the
Issuer's or any of the Issuer's Subsidiaries' results of operations or financial
condition (taken as a whole), (ii) the validity or priority of the Liens on the
Collateral or Guarantees, (iii) the Issuer's or any of the Issuer's
Subsidiaries' ability (taken as a whole) to observe and perform any of the
Issuer's or any of the Issuer's Subsidiaries' material obligations under the
Transaction Documents to which the Issuer or any of the Issuer's Subsidiaries is
a party or (iv) the ability of the Trustee or the Collateral Agent to enforce
any of the payment or other material obligations of the Issuer, any Guarantor or
Ormat Nevada under the Financing Documents to which the Issuer, the Guarantors
or Ormat Nevada are parties, as the case may be.

          "Material Real Property Interests" means the real property interests
listed on Schedule A hereto.

          "Material Project Documents" means the Power Purchase Agreements, the
Operation and Maintenance Agreement, the Transmission Service Agreement, the
Material


                                      -14-



Real Property Interests, the IID Water Supply Agreements, the Fluid Supply
Agreements, the Plant Connection Agreements and any Additional Project Document.

          "Megawatt" or "MW" means one million watts.

          "Moody's" means Moody's Investors Service, Inc., its successors and
assigns.

          "Net Available Amount" means, with respect to any proceeds, such
proceeds net of the related Collection Expenses.

          "Note Purchase Agreement" means the Note Purchase Agreement among the
Issuer, the Guarantors and the Initial Purchaser for the sale and purchase of
the Initial Notes.

          "Offering" means the offering of the Senior Secured Notes described
herein.

          "Offering Memorandum" means that certain offering memorandum, dated
December 2, 2005, relating to the offer of the Initial Notes for sale.

          "Officer's Certificate" means a certificate signed by the Issuer's
Authorized Representative.

          "Operating and Maintenance Expenses" means, for any period, all
amounts disbursed by or on behalf of the Issuer or any Subsidiary of the Issuer
in such period for operation, maintenance, administration, repair (other than
repair done in response to a casualty event), or improvement of a Project,
including, without limitation, premiums on insurance policies, property and
other taxes, litigation expenses and costs, payments under leases, royalty and
other land use agreements, and fees, expenses, and any other payments required
under the Project Documents; provided, "Operating and Maintenance Expenses"
shall not include (i) any payment made in respect of the Financing Documents or
with respect to any Indebtedness, (ii) any payment or dividends or other
distributions to Ormat Nevada or any of the Issuer's other Affiliates other than
payments under the Project Documents or (iii) any tax paid or payable by any of
the Issuer's direct or indirect equity owners with respect to the Issuer's
income or receipts.

          "Operating Budget" means the annual budget of Operating and
Maintenance Expenses for the Projects, as prepared in good faith by the Issuer
for each of the Issuer's fiscal years, or part thereof, showing such costs by
category.

          "Operating Subsidiaries" means all of the Issuer's Subsidiaries.

          "Operation and Maintenance Agreement" means that certain Amended and
Restated Operation and Maintenance Agreement, dated December 8, 2005, among
Heber Field, Heber Geothermal, Second Imperial Geothermal, OrHeber 2 and Ormat
Nevada.

          "Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Issuer, any
Affiliate of the Issuer or the Trustee.


                                      -15-



          "Organizational Documents" means as to any Person, the articles of
incorporation, by laws, partnership agreement, limited liability company
agreement, operating agreement or other organizational or governing documents of
such Person.

          "OrHeber 1" means OrHeber 1 Inc., a corporation organized and existing
under the laws of the State of Delaware, its successors and assigns.

          "OrHeber 2" means OrHeber 2 Inc., a corporation organized and existing
under the laws of the State of Delaware, its successors and assigns.

          "OrHeber 2 Power Purchase Agreement" means that certain Long-Term
Power Purchase Agreement, dated December 8, 2005, between OrHeber 2 and Southern
California Public Power Authority.

          "Ormat Industries" means Ormat Industries Ltd., a corporation
organized and existing under the laws of Israel, its successors and assigns.

          "Ormat Nevada" means Ormat Nevada Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns.

          "Ormat Technologies" means Ormat Technologies, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and assigns.

          "Outstanding" in connection with the Senior Secured Notes, means, as
of the time in question, all Senior Secured Notes authenticated and delivered
under this Indenture, except (i) Senior Secured Notes theretofore canceled or
required to be canceled under this Indenture; (ii) Senior Secured Notes for
which provision for payment shall have been made in accordance with this
Indenture; and (iii) Senior Secured Notes in substitution for which other Senior
Secured Notes have been authenticated and delivered pursuant to this Indenture.

          "Overdue Principal" means, as of any Payment Date, all principal of
any Senior Secured Note which has become due and payable and not been punctually
paid or duly provided for when and as due and payable, whether as a result of
insufficient available funds or otherwise.

          "Paying Agent" has the meaning set forth in Section 2.07(a) of this
Indenture.

          "Payment Date" means any Interest Payment Date or Principal Payment
Date.

          "Permitted Additional Senior Lender" means a holder of any Senior
Secured Obligations other than the Senior Secured Notes.

          "Permitted Indebtedness" has the meaning set forth in Section 4.18 of
this Indenture.

          "Permitted Investments" means an investment in any of the following:
(i) direct obligations of the Department of the Treasury of the United States of
America; (ii) obligations


                                      -16-



of any federal agencies which obligations are backed by the full faith and
credit of the United States of America; (iii) commercial paper rated in any one
of the two highest rating categories by Moody's or S& P; (iv) investment
agreements with banks (foreign and domestic), broker/dealers, and other
financial institutions rated at the time of bid in any one of the three highest
rating categories by Moody's and S& P; (v) repurchase agreements with banks
(foreign and domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating categories by Moody's
and S&P, provided, that (1) collateral is limited to the securities specified in
clauses (i) and (ii) above, (2) the margin levels for collateral must be
maintained at a minimum of 102% including principal and interest, (3) the
Collateral Agent shall have a first priority perfected security interest in the
collateral, (4) the collateral will be delivered to a third party custodian,
designated by the Issuer, acting for the benefit of the Collateral Agent and all
fees and expenses related to collateral custody will be the responsibility of
the Issuer, (5) the collateral must have been or will be acquired at the market
price and marked to market at least weekly and collateral level shortfalls cured
within 24 hours and (6) unlimited right of substitution of collateral is
allowed; provided, that substitution collateral must be permitted collateral
substituted at a current market price and substitution fees of the custodian
shall be paid by the Issuer; (vi) forward purchase agreements delivering
securities specified in clauses (i) and (iii) above with banks (foreign and
domestic), broker/dealers, and other financial institutions maintaining a
long-term rating on the day of bid no lower than investment grade by both S&P
and Moody's (such rating may be at either the parent or Subsidiary level); and
(vii) money market funds rated "AAAm" or "AAAm-G" or better by S&P.

          "Permitted Liens" means (a) the rights and interests of the Collateral
Agent and any other Secured Party as provided in the Financing Documents; (b)
Liens for any tax, either secured by a bond or other reasonable security or not
yet due or being contested in good faith and by appropriate proceedings, so long
as (i) such proceedings shall not involve any substantial danger of the sale,
forfeiture or loss of the Projects, the Plants, the sites of the Project or any
easements that are material to the ownership, operation or maintenance of the
Projects, as the case may be, title thereto or any interest therein and shall
not interfere in any material respect with the use of any Project, any Plant,
any Project sites or any easements that are material to the ownership, operation
or maintenance of the Projects, (ii) a bond or other reasonable security has
been posted or provided in such manner and amount as to assure that any taxes
determined to be due will be promptly paid in full when such contest is
determined or (iii) adequate reserves have been provided therefor to the extent
required by and in accordance with GAAP; (c) materialmen's, mechanics',
workers', repairmen's, employees' or other like Liens, arising in the ordinary
course of business or in connection with the development, construction,
operation and/or maintenance of any Project, either for amounts not yet due or
for amounts being contested in good faith and by appropriate proceedings so long
as (i) the Issuer reasonably determines that such proceedings shall not involve
any substantial danger of the sale, forfeiture or loss of any Project, any
Plant, any Project sites or any easements that are material to the ownership,
operation or maintenance of the Projects, as the case may be, title thereto or
any interest therein and shall not interfere in any material respect with the
use or disposition of any Project, any Plant, any Project sites or any easements
that are material to the ownership, operation or maintenance of the Projects, or
(ii) a bond or adequate cash reserves have been provided therefor to the extent
required by and in accordance with GAAP; (d) Liens


                                      -17-



arising out of judgments or awards so long as enforcement of such Lien has been
stayed and an appeal or proceeding for review is being prosecuted in good faith
and for the payment of which adequate reserves, bonds or other reasonable
security have been provided or are fully covered by insurance; (e) Title
Exceptions as reflected in the Title Policy other than delinquent taxes and
monetary liens which are to be paid on the Closing Date; (f) Liens, deposits or
pledges to secure statutory obligations; (g) Liens, deposits or pledges to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or for purposes of like general nature in the
ordinary course of its business, not to exceed $5 million in the aggregate at
any time, and with any such Lien to be released as promptly as practicable; (h)
other Liens incident to the ordinary course of business that are not incurred in
connection with the obtaining of any loan, advance or credit and that do not in
the aggregate materially impair the use of the Issuer's or the Issuer's
Subsidiaries' property or assets or the value of such property or assets for the
purposes of such business; (i) involuntary Liens as contemplated by the
Financing Documents and the Project Documents (including a lien of an attachment
or execution) securing a charge or obligation on any of the Issuer's property,
either real or personal, whether now or hereafter owned, in the aggregate sum of
less than $3 million; and (j) servitudes, easements, rights-of-way,
restrictions, minor defects or irregularities in title and such other
encumbrances or charges against real property or interests therein as of a
nature generally existing with respect to properties of similar character and
which do not in a material way interfere with the value or use thereof or the
Issuer's business.

          "Person" means any individual, sole proprietorship, corporation,
partnership, joint venture, limited liability partnership, limited liability
company, trust, unincorporated association, institution, Governmental Authority
or any other entity.

          "Place of Payment" when used with respect to the Senior Secured Notes,
means the office or agency maintained pursuant to Section 4.02.

          "Plant Connection Agreements" means the Heber 1 Plant Connection
Agreement, the Heber 2 Plant Connection Agreement and the Gould Plant Connection
Agreements.

          "Plants" means the Heber 1 Plant, the Heber 2 Plant, the Gould Plant
or any other geothermal power generating plant located in Imperial County,
California and constructed in accordance with Section 4.43 hereof.

          "Pledge and Security Agreements" means each of the Pledge and Security
Agreements, to be executed by the Issuer, each of the Guarantors and the
Collateral Agent.

          "Power Purchase Agreements" means the Heber 1 Power Purchase
Agreement, the Heber 2 Power Purchase Agreement and the OrHeber 2 Power Purchase
Agreement.

          "Predecessor Notes" with respect to any particular Senior Secured
Note, means any previous Senior Secured Note evidencing all or a portion of the
same debt as that evidenced by such particular Senior Secured Note; for the
purposes of this definition, any Senior Secured Note authenticated and delivered
pursuant to Section 2.08 in lieu of a lost, destroyed or stolen


                                      -18-



Senior Secured Note shall be deemed to evidence the same debt as the lost,
destroyed or stolen Senior Secured Note.

          "Principal Payment Date" when used with respect to any Senior Secured
Obligations means the date on which all or a portion of the principal of such
Senior Secured Obligations become due and payable as provided in this Indenture
or any other agreement governing such Senior Secured Obligations, whether on a
scheduled date for payment of principal, on a Redemption Date, the Final
Maturity Date, a date of declaration of acceleration, or otherwise.

          "Private Placement Legend" means the legend referenced in Section 2.02
to be placed on all Senior Secured Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.

          "Production Tax Credit Agreement" means that certain Production Tax
Credit Agreement, dated December 8, 2005, among the Issuer, Ormat Technologies
and the Collateral Agent.

          "Project" means each Plant together with the related Project
Documents, Governmental Approvals relating to the Plant or Project Documents,
and any other item relating to the Plant, including any improvements to, and the
operation of the Plant and all activities related thereto.

          "Project Documents" means the Material Project Documents and any
additional agreements relating to the Projects.

          "Projections" means certain projections at the Closing Date of the
Projects' revenues and the costs associated therewith prepared by the
Independent Engineer.

          "Prudent Industry Practices" means, at a particular time, (i) any of
the practices, methods and acts engaged in or approved by a significant portion
of the electricity generating industry operating in the United States at such
time, or (ii) with respect to any matter to which clause (i) does not apply, any
of the practices, methods and acts which, in the exercise of reasonable judgment
at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition. "Prudent Industry Practice" is not intended
to be limited to the optimum practice, method or act to the exclusion of all
others, but rather to be a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers' warranties and the
requirements of any Governmental Authority of competent jurisdiction.

          "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

          "Qualifying Facility" means a facility which is a qualifying facility
within the meaning of the Public Utility Regulatory Policies Act of 1978 (and
all rules and regulations adopted thereunder) and which meets the criteria
defined in Title 18, Code of Federal Regulations, Sections 292.201 through
292.207.


                                      -19-



          "Redemption Account" means the account bearing such title and created
under the Depositary Agreement.

          "Redemption Date" means the date on which the Issuer redeems or is
required to redeem any Senior Secured Notes in accordance with this Indenture.

          "Registrar" has the meaning specified in Section 2.07(a).

          "Regular Record Date" for the interest or principal payable on any
Payment Date on the Senior Secured Notes means the date specified for that
purpose as contemplated by Section 2.09 (whether or not a Business Day).

          "Regulation S" means Regulation S under the Securities Act.

          "Regulation S Global Note" means the Temporary Regulation S Global
Note or the Regulation S Unrestricted Global Note, as applicable.

          "Regulation S Unrestricted Global Note" has the meaning specified in
Section 2.01.

          "Related Party" means (a) Ormat Industries and Ormat Technologies, (b)
any direct or indirect controlling stockholder or controlling member or a more
than 50% owned subsidiary of Ormat Nevada or (c) any trust, corporation,
partnership, limited liability company or other entity, of which the
beneficiaries, stockholders, partners, members or Persons holding more than a
50% controlling interest are Ormat Nevada and/or such other Persons referred to
in the immediately preceding clause (a) or (b).

          "Renewable Energy Credits" means all renewable energy credits, offsets
or other benefits allocated, assigned or otherwise awarded or certified to the
Issuer or any of the Issuer's Subsidiaries by any Governmental Authority in
connection with any of the Projects; provided, that the foregoing shall not
include any federal, state, and/or local production tax credits and/or
investment tax credits specific to investments in renewable energy production
and delivery facilities (if any) or any environmental credits, offsets, or other
similar benefits allocated, assigned or otherwise awarded to the Issuer or any
of the Issuer's Subsidiaries by any Governmental Authority or received in any
other manner based in whole or in part on the fact that any of the Projects
constitutes a "renewable energy system" (as defined under any Applicable Law) or
the like, including emissions credits or allowances, such as credits available
because such Project does not produce carbon dioxide or other emissions when
generating electric energy.

          "Required Holders" means, at any time, Persons that at such time hold
not less than 51% in aggregate principal amount of the Outstanding Senior
Secured Notes.

          "Responsible Officer" means, with respect to knowledge of any default
under this Indenture, the chairman, president, chief financial officer, chief
operating officer or any plant manager (with respect to such plant manager's
responsibilities at any Project) of the Issuer


                                      -20-



or Ormat Nevada, or other officer of the Issuer who in the normal performance of
his or her managerial duties would have knowledge of the subject matter relating
to such default.

          "Responsible Trust Officer" means, when used with respect to the
Trustee, the Depositary, the Collateral Agent or the Intercreditor Agent, the
chief executive officer, president, chief financial officer, general counsel,
principal accounting officer, treasurer, assistant treasurer or any vice
president of the Trustee, the Depositary, the Collateral Agent or the
Intercreditor Agent (or any successor group of the Trustee, Depositary,
Collateral Agent or Intercreditor Agent, as applicable), or any other officer of
the Trustee, the Depositary, the Collateral Agent or the Intercreditor Agent
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

          "Restoration Sub-Account" means one or more accounts bearing such
title and created under the Depositary Agreement in connection with an Event of
Loss or Event of Eminent Domain.

          "Restricted Global Note" has the meaning set forth in Section 2.01
hereto.

          "Restricted Note" has the meaning specified in Section 2.02.

          "Restricted Payment" means, with respect to any Person, (i) the
declaration and payment of distributions, dividends or any other payment made in
cash, property, obligations or other notes, (ii) any payment of the principal
of, or interest or premium, if any, on, any Subordinated Debt, (iii) the making
of any loans or advances to any Affiliate (other than Permitted Indebtedness),
(iv) any purchase, redemption, acquisition or retirement for value (including,
without limitation in connection with any merger or consolidation of the Issuer)
of any of the Issuer's Capital Stock or (v) any Investment in any Person other
than a Guarantor (other than Permitted Investments made in accordance with the
provisions herein); provided, however, that the term "Restricted Payments" shall
not include (x) proceeds of the offering of the Initial Notes in the amount of
$160,645,387.05 utilized to repay, in full, the Issuer's outstanding loan with
Beal Bank S.S.B., (y) cash released from any Account as a result of the
provision of an Acceptable Letter of Credit as provided for in the Financing
Documents or (z) payments made to any Affiliate of such Person for goods and
services purchased or procured in accordance with the terms of this Indenture.

          "Restricted Period" has the meaning set forth in Section 2.01.

          "Revenue Account" means the account bearing such title and created
under the Depositary Agreement.

          "Rule 903" means Rule 903 promulgated under the Securities Act.

          "Rule 904" means Rule 904 promulgated under the Securities Act.

          "Rule 144" means Rule 144 promulgated under the Securities Act.


                                      -21-



          "Rule 144A" means Rule 144A promulgated under the Securities Act.

          "Rule 144A Global Note" means restricted, permanent global notes in
fully registered form issued to qualified institutional buyers under Rule 144A.

          "S&P" means Standard & Poor's Rating Services, its successors and
assigns.

          "Scheduled Payment Date" means each June 30 and December 30,
commencing on June 30, 2006 and ending on December 30, 2020.

          "SEC" means the United States Securities and Exchange Commission.

          "Second Imperial Geothermal" means Second Imperial Geothermal Company,
a limited partnership organized and existing under the laws of the State of
California, its successors and assigns.

          "Secured Parties" means the Trustee, the Holders, the Collateral
Agent, the Depositary, the Intercreditor Agent and the Holders of additional
Permitted Indebtedness (other than Permitted Indebtedness of the type described
in clause (v) or (vi) in the definition thereof), in each case to the extent
such party (or an agent on such party's behalf) is or becomes a party to the
Collateral Agency Agreement and the Intercreditor Agreement.

          "Securities Act" means the United States Securities Act of 1933, as
amended.

          "Securities Intermediary" means Union Bank of California, N.A., until
a successor replaces it in accordance with the applicable provisions of the
Depositary Agreement and thereafter means the successor serving thereunder in
such capacity.

          "Security Documents" means, collectively, the Depositary Agreement,
the Deeds of Trust, the Collateral Agency Agreement, the Pledge and Security
Agreements, the Intercreditor Agreement, the Control Agreements, the Third Party
Consents and any other document providing for any lien of the Secured Parties,
pledge, encumbrance, mortgage or security interest on any or all of the Issuer's
assets or the ownership interests thereof or the Issuer's Subsidiaries' assets
and the ownership interests thereof.

          "Senior Secured Notes" means the Initial Notes and, unless the context
otherwise requires, the Additional Notes.

          "Senior Secured Obligations" means, collectively, without duplication:
(i) all of the Issuer's Indebtedness, financial liabilities and obligations, of
whatsoever nature and however evidenced (including, but not limited to,
principal, interest, premium, fees, reimbursement obligations, penalties,
indemnities and legal and other expenses, whether due after acceleration or
otherwise) to the Secured Parties in their capacity as such under the applicable
Financing Document or any other agreement, document or instrument evidencing,
securing or relating to such Indebtedness, financial liabilities or obligations,
in each case, direct or indirect, primary or secondary, fixed or contingent, now
or hereafter arising out of or relating to any such agreements; (ii) any and all
sums advanced by the Collateral Agent in order to


                                      -22-



preserve the Collateral or preserve its security interest in the Collateral; and
(iii) in the event of any proceeding for the collection or enforcement of the
obligations described in clauses (i) and (ii) above, after an Event of Default
has occurred and is continuing and unwaived, the expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, or of any exercise by the Collateral Agent of its rights under
the Security Documents, together with reasonable attorneys' fees and court
costs.

          "Series Supplemental Indenture" means an indenture supplemental to
this Indenture entered into by the Issuer, the Trustee and the Guarantors, if
applicable, for the purpose of establishing, in accordance with this Indenture,
the title, form and terms of Senior Secured Notes of any series.

          "Special Record Date" for the payment of any Overdue Interest or
Overdue Principal means a date fixed by the Trustee pursuant to Section 2.09.

          "Subordinated Debt" means Indebtedness incurred pursuant to a
Subordinated Loan Agreement.

          "Subordinated Loan Agreement" means a binding agreement providing
nonrecourse, unsecured debt financing to the Issuer on the terms and conditions
set forth in Exhibit D to this Indenture.

          "Subsidiary" means, with respect to any specified Person:

          (1) any corporation, association or other business entity of which
     more than 50% of the total voting power of shares of Capital Stock entitled
     (without regard to the occurrence of any contingency and after giving
     effect to any voting agreement or stockholders' agreement that effectively
     transfers voting power) to vote in the election of directors, managers or
     trustees of the corporation, association or other business entity is at the
     time owned or controlled, directly or indirectly, by that Person or one or
     more of the other Subsidiaries of that Person (or a combination thereof);
     and

          (2) any partnership (a) the sole general partner or the managing
     general partner of which is such Person or a Subsidiary of such Person or
     (b) the only general partners of which are that Person or one or more
     Subsidiaries of that Person (or any combination thereof).

          "Third Party Consents" means each consent to assignment, among certain
counterparties to a Material Project Document, the Issuer and/or the Issuer's
applicable Subsidiary and the Collateral Agent.

          "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.

          "Title Event" means the existence of any defect of title or Lien or
encumbrance on a Project (other than Permitted Liens) in effect on the Closing
Date that entitles the


                                      -23-



Collateral Agent to make a claim under the policy or policies of title insurance
required pursuant to the Financing Documents.

          "Title Event Proceeds" means all amounts and proceeds (including
instruments) in respect of any Title Event.

          "Title Exceptions" means the exceptions to title set forth in the
title policy referred to in Section 4.42.

          "Title Policy" means the mortgagee title insurance policy delivered by
a title company of national standing or its Affiliates insuring to the Lien of
the Deeds of Trust.

          "Transaction Documents" means the Project Documents and the Financing
Documents.

          "Transmission Service Agreement" means that certain Transmission
Service Agreement for Alternative Resources, dated October 27, 1992, between
Imperial Irrigation District and Second Imperial Geothermal.

          "Trustee" means Union Bank of California, N.A., a national banking
association organized and existing under the laws of the United States, until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter means the successor serving thereunder in such
capacity.

          "Unrestricted Global Note" means a permanent global Senior Secured
Note in the form of Exhibit A-1 attached hereto that bears the Global Note
Legend and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing Senior Secured Notes that do not bear
the Private Placement Legend.

          "U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.

          "Wholly Owned Subsidiary" of any specified Person means a Subsidiary
of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) will at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.


                                      -24-



          Section 1.02 Other Definitions.

Term                                      Defined in Section
- ----                                      ------------------
"Affiliate Transaction" ...............          4.13
"Applicable Procedures" ...............      2.07(c)(v)(B)
"Checking Account".....................          4.30
"Covenant Defeasance"..................          7.03
"Debtor Relief Law"....................          5.01
"Issuer"...............................        Preamble
"Legal Defeasance".....................          7.02
"Overdue Interest".....................          2.09
"Temporary Regulation S Global Note"...          2.01
"Transfer" ............................         2.07(b)
"Trustee"..............................        Preamble

          Section 1.03 Trust Indenture Act Provisions.

          Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.

          The following TIA terms used in this Indenture have the following
meanings:

          "indenture securities" means the Senior Secured Notes;

          "indenture security holder" means a Holder of a Senior Secured Note;

          "indenture to be qualified" means this Indenture;

          "indenture trustee" or "institutional trustee" means the Trustee; and

          "obligor" on the Senior Secured Notes means the Issuer and any
successor obligor upon the Senior Secured Notes.

          All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute

or defined by SEC rule under the TIA have the meanings so assigned to them.

          Section 1.04 Rules of Construction.

          Unless the context otherwise requires:

          (a) a term has the meaning assigned to it;


                                      -25-



          (b) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with GAAP;

          (c) "or" is not exclusive;

          (d) words in the singular include the plural, and in the plural
     include the singular;

          (e) references to a Person shall include such Person's permitted
     successors and assigns;

          (f) provisions apply to successive events and transactions;

          (g) unless otherwise expressly specified, any agreement, contract or
     document defined or referred to herein shall mean such agreement, contract
     or document as in effect as of the date hereof, as the same may thereafter
     be amended, supplemented and/or otherwise modified from time to time in
     accordance with the terms of this Indenture and the other Transaction
     Documents and shall include any agreement, contract or document in
     substitution or replacement of any of the foregoing entered into in
     accordance with the terms of this Indenture and the other Transaction
     Documents; and

          (h) references to sections of or rules under the Securities Act shall
     be deemed to include substitute, replacement or successor sections or rules
     adopted by the SEC from time to time.

                                   ARTICLE II

                            THE SENIOR SECURED NOTES

          Section 2.01 Form Generally.

          The Senior Secured Notes of each series shall be in substantially the
form set forth in Exhibit A-1/A-2 or in such other form as shall, subject to
Section 2.03 and Section 2.05, be established by or pursuant to one or more
Series Supplemental Indentures relating to the Senior Secured Notes of such
series, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depository therefor or as may, consistently herewith, be
determined by the officers executing such Senior Secured Notes as evidenced by
their execution thereof.

          The Certificated Notes shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the Authorized Officers executing such Certificated Notes, as evidenced by
their execution of such Certificated Notes.


                                      -26-



          Restricted Notes shall bear the applicable legends as set forth in
Exhibit A-1/A-2 and as provided in Section 2.02.

          Senior Secured Notes offered and sold in their initial distribution in
reliance on Rule 144A shall be issued in the form of one or more Global Notes
(each a "Restricted Global Note") in definitive, fully registered form without
interest coupons, substantially in the form set forth in Exhibit A-1, or in such
other form as shall, subject to Section 2.03 and Section 2.05, be established by
or pursuant to one or more Series Supplemental Indentures with respect to such
Restricted Global Notes, with such applicable legends as are provided for in
Exhibit A-1. Such Global Notes shall be registered in the name of the Depository
for such Global Notes or its nominee and deposited with the Trustee, at the
Corporate Trust Office of the Trustee, as custodian for such Depository, duly
executed on behalf of the Issuer and authenticated by the Trustee as herein
provided. The aggregate principal amount of any Restricted Global Note may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository for such Global Note, as provided in
Section 2.07, which adjustments shall be conclusive as to the aggregate
principal amount of any such Global Notes. Except as agreed by the Issuer, no
Restricted Global Note shall be issued except as provided in this paragraph to
evidence Senior Secured Notes offered and sold in their initial distribution in
reliance on Rule 144A.

          Senior Secured Notes offered and sold in their initial distribution in
reliance on Regulation S shall be issued initially in the form of one or more
temporary Global Notes (a "Temporary Regulation S Global Note") in definitive,
fully registered form without interest coupons, substantially in the form set
forth in Exhibit A-2, or in such other form as shall, subject to Section 2.03
and Section 2.05, be established by or pursuant to one or more Series
Supplemental Indentures with respect to such Temporary Regulation S Global
Notes, with such applicable legends as are provided for in Exhibit A-2. Such
Temporary Regulation S Global Notes shall be registered in the name of the
Depository for such Global Notes or its nominee and deposited with the Trustee,
at the Corporate Trust Office of the Trustee, as custodian for such Depository,
duly executed by the Issuer and authenticated by the Trustee as herein provided,
for credit to the respective accounts of beneficial owners of such Global Notes
(or to such other accounts as they may direct) at Euroclear or Clearstream.
Beneficial interests in any Temporary Regulation S Global Note may be held only
through Euroclear or Clearstream. Within a reasonable period of time after the
expiration of the Restricted Period (as defined below), any Temporary Regulation
S Global Note will be exchanged for a permanent Regulation S Global Note (the
"Regulation S Unrestricted Global Note," and together with the Temporary
Regulation S Global Note, the "Regulation S Global Note") substantially in the
form set forth in Exhibit A-1 with such applicable legends as are provided for
in Exhibit A-1, but without the Restricted Notes legend set forth in Exhibit
A-1, upon delivery to the Depository of certification of non-United States
ownership and compliance with Regulation S. The Regulation S Unrestricted Global
Note will be deposited with the Trustee at the Corporate Trust Office of the
Trustee, as custodian for the Depository and registered in the name of the
nominee of the Depository. Clearstream and Euroclear will hold beneficial
interests in the Regulation S Unrestricted Global Note on behalf of their
participants through their respective depositories, which in turn will hold such
beneficial interests in the Regulation S Unrestricted Global Note in
participants' securities accounts in the depositories' names on the books of the


                                      -27-



Depository. The aggregate principal amount of any Temporary Regulation S Global
Note and any Regulation S Unrestricted Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository for such Global Note, as provided in Section 2.07,
which adjustments shall be conclusive as to the aggregate principal amount of
any such Global Note. As used herein, the term "Restricted Period", with respect
to Global Notes offered and sold in reliance on Regulation S, means the period
of 40 consecutive days beginning on and including the later of (i) the day on
which the Senior Secured Notes are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S (according
to a written notice to the Issuer and the Trustee by the underwriter(s), if any,
of the offering of such Senior Secured Notes) and (ii) the date of the closing
of the offering of such Senior Secured Notes. Except as agreed by the Issuer, no
Temporary Regulation S Global Note or Regulation S Unrestricted Global Note
shall be issued except as provided in this paragraph to evidence such Senior
Secured Notes offered and sold in their initial distribution in reliance on
Regulation S.

          Section 2.02 Legends on Restricted Notes.

          All Senior Secured Notes issued pursuant to this Indenture (including
Senior Secured Notes issued upon registration of transfer, in exchange for or in
lieu of such Senior Secured Notes) shall be "Restricted Notes" and shall bear
the applicable legend(s) setting forth restrictions on transfer provided in
Exhibit A-1/A-2 (the "Private Placement Legend"); provided, however, that the
term "Restricted Notes" shall not include (i) Temporary Regulation S Global
Notes or Regulation S Unrestricted Global Notes, (ii) Senior Secured Notes as to
which such restrictive legend(s) shall have been removed pursuant to Section
2.07 and (iii) Senior Secured Notes issued upon registration of transfer of, in
exchange for, or in lieu of, Senior Secured Notes that are not Restricted Notes.

          Section 2.03 Amount of Senior Secured Notes.

          The aggregate principal amount of Senior Secured Notes which may be
outstanding at any time is unlimited, subject to compliance with Section 4.18
hereof.

          The Senior Secured Notes may be issued in one or more series. There
shall be established in one or more Series Supplemental Indentures, prior to the
issuance of Senior Secured Notes of any series:

          (a) the title of the Senior Secured Notes of such series (which shall
     distinguish the Senior Secured Notes of such series from all other Senior
     Secured Notes) and the form or forms of Senior Secured Notes of such
     series;

          (b) any limit upon the aggregate principal amount of the Senior
     Secured Notes of such series that may be authenticated and delivered under
     this Indenture (except for Senior Secured Notes authenticated and delivered
     upon registration of transfer of, or in exchange for, or in lieu of, other
     Senior Secured Notes of such series pursuant to Sections 2.06, 2.07, 2.08,
     3.06 or 8.09 and except for Senior Secured Notes


                                      -28-



     that, pursuant to the last paragraph of Section 2.05, are deemed never to
     have been authenticated and delivered hereunder);

          (c) the date or dates on which the principal of the Senior Secured
     Notes of such series is payable, the amounts of principal payable on such
     date or dates and the Regular Record Date for the determination of Holders
     to whom principal is payable; and the date or dates on or as of which the
     Senior Secured Notes of such series shall be dated, if other than as
     provided in Section 2.05;

          (d) the rate or rates at which the Senior Secured Notes of such series
     shall bear interest, or the method by which such rate or rates shall be
     determined, the date or dates from which such interest shall accrue, the
     interest payment dates on which such interest shall be payable and the
     Regular Record Date for the determination of Holders to whom interest is
     payable; and the basis of computation of interest, if other than as
     provided in Section 2.12;

          (e) if other than as provided in Section 4.02, the place or places
     where (i) the principal of and interest on Senior Secured Notes of such
     series shall be payable, (ii) Senior Secured Notes of such series may be
     surrendered for registration of transfer or exchange and (iii) notices and
     demands to or upon the Issuer in respect of the Senior Secured Notes of
     such series and this Indenture may be served;

          (f) the price or prices at which, the period or periods within which
     and the terms and conditions upon which Senior Secured Notes of such series
     may be redeemed, in whole or in part, at the option of the Issuer;

          (g) the obligation, if any, of the Issuer to redeem, purchase or repay
     Senior Secured Notes of such series pursuant to any sinking fund or
     analogous provision or at the option of a Holder thereof and the price or
     prices at which and the periods or periods within which and the terms and
     conditions upon which Senior Secured Notes of such series shall be
     redeemed, purchased or repaid, in whole or in part, pursuant to such
     obligations;

          (h) if other than minimum denominations of $1,000 and any integral
     multiple of $1,000 in excess thereof, the denominations in which Senior
     Secured Notes of such series shall be issuable;

          (i) the restrictions or limitations, if any, on the transfer or
     exchange of the Senior Secured Notes of such series;

          (j) the obligation, if any, of the Issuer to file a registration
     statement with respect to the Senior Secured Notes of such series or to
     exchange the Senior Secured Notes of such series for Senior Secured Notes
     registered pursuant to the Securities Act;

          (k) any other terms of such series (which terms shall not be
     inconsistent with the provisions of this Indenture);


                                      -29-



          (l) any trustees, authenticating or paying agents, warrant agents,
     transfer agents or registrars with respect to the Senior Secured Notes of
     such series;

          (m) the issue price, the issue date and the CUSIP number of the Senior
     Secured Notes of such series; provided, however, that no Senior Secured
     Notes of a particular series may be issued at a price that would cause such
     Senior Secured Notes of such series to have "original issue discount"
     within the meaning of Section 1273 of the Code; and

          (o) the use of proceeds of the Senior Secured Note of the relevant
     series.

     The Initial Notes and any Additional Notes will be treated as a single
class for all purposes of this Indenture, except as otherwise provided
hereunder.

          Section 2.04 Denominations.

          The Senior Secured Notes shall be issuable only in registered form
without coupons and in denominations of $1,000 and any integral multiple of
$1,000 in excess thereof. Any repayments (either scheduled or pursuant to any
redemption) of any Senior Secured Note shall be made only in the denomination or
integral multiple thereof set forth above.

          Section 2.05 Execution, Authentication, Delivery and Dating.

          The Senior Secured Notes shall be executed on behalf of the Issuer by
an Authorized Representative of the Issuer. The signature of any of these
officers on the Senior Secured Notes may be manual or facsimile.

          Senior Secured Notes bearing the manual or facsimile signature of
individuals who were at the time of execution the Authorized Representative of
the Issuer shall bind the Issuer, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and
delivery of such Senior Secured Notes or did not hold such offices at the date
of such Senior Secured Notes.

          At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Senior Secured Notes (with Guarantees
endorsed thereon), if applicable, of any series executed by the Issuer to the
Trustee for authentication, together with a Authentication Order for the
authentication and delivery of such Senior Secured Notes, and the Trustee in
accordance with the Authentication Order shall authenticate and deliver such
Senior Secured Notes. The Trustee shall authenticate and deliver: (i) on the
Closing Date, an aggregate principal amount of $165,000,000 6.21% Senior Secured
Notes Due 2020 and (ii) Additional Notes for an original issue in an aggregate
principal amount specified in an Authentication Order pursuant to this Section
2.05, in each case upon an Authentication Order of the Issuer signed by an
Authorized Officer of the Issuer. Such order will specify the amount of the
Senior Secured Notes to be authenticated and the date on which the original
issue of the Senior Secured Notes is to be authenticated. If the form or terms
of the Senior Secured Notes have been established by or pursuant to a
Supplemental Indenture as permitted by Section 2.01 in authenticating such
Senior Secured Notes, and accepting any additional responsibilities under


                                      -30-



this Indenture in relation to such Senior Secured Notes, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating,

          (a) that such form has been established in conformity with the
     provisions of this Indenture;

          (b) that such terms have been established in conformity with the
     provisions of this Indenture; and

          (c) that such Senior Secured Notes, when authenticated and delivered
     by the Trustee and issued by the Issuer in the manner and subject to any
     conditions specified in such Opinion of Counsel, will constitute valid and
     legally binding obligations of the Issuer, enforceable against the Issuer
     in accordance with their terms (subject to customary qualifications or
     exceptions).

          The Trustee shall not be required to authenticate such Senior Secured
Notes if the issue of such Senior Secured Notes pursuant to this Indenture will
adversely affect the Trustee's own rights, duties or immunities under the Senior
Secured Notes and this Indenture or otherwise in a manner which is not
reasonably acceptable to the Trustee.

          Except as otherwise provided in the Series Supplemental Indenture
relating to the Senior Secured Notes of a series, each Senior Secured Note of
such series shall be dated the date of its authentication.

          No Senior Secured Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Senior Secured Note a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature of an Authorized
Officer, and such certificate upon any Senior Secured Note shall be conclusive
evidence, and the only evidence, that such Senior Secured Note has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Senior Secured Note shall have been authenticated and delivered hereunder but
never issued and sold by the Issuer, and the Issuer shall deliver such Senior
Secured Note to the Trustee for cancellation as provided in Section 2.11, for
all purposes of this Indenture such Senior Secured Note shall be deemed never to
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.

          Section 2.06 Temporary Senior Secured Notes.

          Pending the preparation of definitive Senior Secured Notes, the Issuer
may execute, and upon Authentication Order the Trustee shall authenticate and
deliver, temporary Senior Secured Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Senior Secured Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers of the Issuer executing the
same may determine, as evidenced by their execution of such Senior Secured
Notes.


                                      -31-



          If temporary Senior Secured Notes are issued, the Issuer will cause
definitive Senior Secured Notes to be prepared without unreasonable delay. After
the preparation of definitive Senior Secured Notes, the temporary Senior Secured
Notes shall be exchangeable for definitive Senior Secured Notes upon surrender
of the temporary Senior Secured Notes at the office or agency of the Issuer in a
Place of Payment, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Senior Secured Notes, the Issuer shall execute and
the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Senior Secured Notes of any authorized denominations and of like
tenor and aggregate principal amount. Until so exchanged, the temporary Senior
Secured Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Senior Secured Notes.

          Section 2.07 Registration, Registration of Transfer and Exchange.

          (a) General. The Issuer shall cause to be kept at the Corporate Trust
Office of the Trustee a register in which, subject to such reasonable
regulations as it may prescribe, the Issuer shall provide for the registration
of Senior Secured Notes and for transfers of Senior Secured Notes. The Trustee
is hereby appointed "Registrar" for the purpose of registering Senior Secured
Notes and transfers of Senior Secured Notes as herein provided. The Issuer also
shall cause to be kept an office or agency where Senior Secured Notes may be
presented for payment ("Paying Agent") and where notices and demands to or upon
the Issuer in respect of the Senior Secured Notes may be served.

          Notwithstanding anything to the contrary set forth herein, the Trustee
shall not be required and shall have no obligation to monitor compliance with
any federal or state securities laws.

          Upon surrender for registration of transfer of any Senior Secured Note
at the office or agency of the Issuer in a Place of Payment, the Issuer shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Senior Secured Notes, of
any authorized denominations and of like tenor and aggregate principal amount.

          At the option of the Holder, Senior Secured Notes may be exchanged for
other Senior Secured Notes, of any authorized denominations and of like tenor
and aggregate principal amount, upon surrender of the Senior Secured Notes to be
exchanged at such office or agency. Whenever any Senior Secured Notes are so
surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Senior Secured Notes which the Holder making the
exchange is entitled to receive.

          All Senior Secured Notes issued upon any registration of transfer or
exchange of Senior Secured Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under this Indenture
as the Senior Secured Notes surrendered upon such registration of transfer or
exchange.


                                      -32-



          Every Senior Secured Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Issuer and the Registrar duly
executed by the Holder thereof or his attorney duly authorized in writing.

          No service charge shall be made for any registration of transfer or
exchange of Senior Secured Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Senior Secured
Notes, other than exchanges pursuant to Section 2.06 or Section 3.06 not
involving any transfer.

          If the Senior Secured Notes are to be redeemed in part, the Issuer
shall not be required (A) to issue, register the transfer of, or exchange, any
Senior Secured Notes during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of any such Senior
Secured Notes selected for redemption under Section 3.03 and ending at the close
of business on the day of such mailing or (B) to register the transfer of or
exchange any Senior Secured Note so selected for redemption in whole or in part,
except the unredeemed portion of any Senior Secured Note being redeemed in part.

          (b) Restricted Notes. Every Restricted Note shall be subject to the
restrictions on offers, Transfers and exchanges provided in the applicable
legend(s) required to be set forth on the face of each Restricted Note pursuant
to Exhibit A-1/A-2 and Section 2.02, unless such restrictions on Transfer shall
be waived by the written consent of the Issuer, and the Holder of each
Restricted Note, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on Transfer. Whenever any Restricted Note is presented or
surrendered for registration of Transfer or for exchange for a Senior Secured
Note registered in a name other than that of the Holder, such Restricted Note
must be accompanied by an appropriately completed certificate in substantially
the form set forth in Exhibit B, in the case of Transfer, or, in the case of any
exchange, Exhibit C or as contemplated by Section 2.13(c) (which may be attached
to or set forth in the Restricted Note), appropriately completed, dated the date
of such surrender and signed by the Holder of such Restricted Note, as to
compliance with such restrictions on Transfer, unless the Issuer shall have
notified the Trustee in writing pursuant to this Section 2.07 that there is an
effective registration statement under the Securities Act with respect to such
Restricted Note. The Registrar shall not be required to accept for such
registration of Transfer or exchange any Restricted Note not so accompanied by a
properly completed certificate.

          Except as otherwise provided in the preceding paragraph, if Senior
Secured Notes are issued upon the Transfer, exchange or replacement of Senior
Secured Notes bearing a legend or legends setting forth restrictions on
Transfer, or if a request is made to remove such legend(s) on a Senior Secured
Note, the Senior Secured Notes so issued shall bear such legend(s) or such
legend(s) shall not be removed, as the case may be, unless the transferor
delivers to the Issuer such satisfactory evidence (which may include an opinion
of independent counsel experienced in matters of United States securities law as
may be reasonably satisfactory to the Issuer), as may be reasonably required by
the Issuer, that neither such legend(s) nor the restrictions on Transfer set
forth therein are required to ensure that Transfers thereof comply


                                      -33-



with the provisions of Rule 144A or Rule 144 or Regulation S or that such Senior
Secured Notes are not restricted securities within the meaning of Rule 144. Upon
provision of such satisfactory evidence to the Issuer, the Trustee, at the
written direction of the Issuer set forth in an Officer's Certificate of the
Issuer, shall authenticate and deliver a Senior Secured Note that does not bear
such legend(s). In the absence of bad faith on its part, the Trustee may
conclusively rely upon such direction of the Issuer in authenticating and
delivering a Senior Secured Note that does not bear such legend(s).

          As used in this Section 2.07(b), the term "Transfer" encompasses any
sale, pledge or other transfer of any Senior Secured Notes referred to herein.

          (c) Global Notes. This Section 2.07(c) shall apply to Global Notes.

          (i) Each Global Note authenticated under this Indenture shall be
     registered in the name of the Depository designated for such Global Note or
     a nominee thereof and delivered to such Depository or a nominee thereof or
     custodian therefor, and each such Global Note shall constitute a single
     Global Note for all purposes of this Indenture. The Senior Secured Notes
     may be represented by one or more Global Notes, and such Global Notes may
     be Restricted Global Notes, Temporary Regulation S Global Notes or
     Regulation S Unrestricted Global Notes, or any combination thereof.

          (ii) Notwithstanding any other provision in this Indenture, no Global
     Note may be exchanged in whole or in part for Senior Secured Notes
     registered, and no transfer of a Global Note in whole or in part may be
     made, in the name of any Person other than the Depository for such Global
     Note or a nominee thereof unless (A) such Depository (1) has notified the
     Issuer that it is unwilling or unable to continue as Depository for such
     Global Note or (2) has ceased to be a clearing agency registered under the
     Exchange Act, and, in either case, a successor Depository is not appointed
     within 90 days thereof, (B) the Issuer executes and delivers to the Trustee
     a Authentication Order providing that such Global Note shall be so
     transferable, registrable and exchangeable, or (C) there shall have
     occurred and be continuing an Event of Default with respect to the Global
     Notes. Any Global Note exchanged pursuant to subclause (A) above shall be
     so exchanged in whole and not in part and any Global Note exchanged
     pursuant to subclause (B) or (C) above may be exchanged in whole or from
     time to time in part as directed by the Depository for such Global Note.
     Notwithstanding any other provision in this Indenture, a Global Note to
     which the restriction set forth in the second preceding sentence shall have
     ceased to apply may be transferred only to, and may be registered and
     exchanged for Senior Secured Notes registered only in the name or names of,
     such Person or Persons as the Depository for such Global Note shall have
     directed and no transfer thereof other than such a transfer may be
     registered.

          (iii) Subject to clause (ii) above, any exchange of a Global Note for
     other Senior Secured Notes may be made in whole or in part, and all Senior
     Secured Notes issued in exchange for a Global Note or any portion thereof
     shall be registered in such name or names as the Depository for such Global
     Note shall direct.


                                      -34-



          (iv) Every Senior Secured Note authenticated and delivered upon
     registration of transfer of, or in exchange for or in lieu of, a Global
     Note or any portion thereof, whether pursuant to this Section 2.07, Section
     2.06, 2.09 or 3.06 or otherwise shall be authenticated and delivered in the
     form of, and shall be, a Global Note, unless such Senior Secured Note is
     registered in the name of a Person other than the Depository for such
     Global Note or a nominee thereof.

          (v) Notwithstanding any other provision of this Indenture or of the
     Senior Secured Notes, transfers of interests in a Global Note of the kind
     described in Section 2.01 and in subclauses (B), (C), (D) and (E) of this
     clause (v) below shall be made only in accordance with this clause (v), and
     all transfers of an interest in a Temporary Regulation S Global Note shall
     comply with subclause (F) of this clause (v). The provisions of this clause
     (v) providing for transfers of Senior Secured Notes or beneficial interests
     in Global Notes to Persons who wish to take delivery in the form of
     beneficial interests in a Restricted Global Note, Temporary Regulation S
     Global Note or Regulation S Unrestricted Global Note shall only apply if
     there is a Restricted Global Note, Temporary Regulation S Global Note or
     Regulation S Unrestricted Global Note, as the case may be.

               (A) Transfer of Global Note. A Global Note may not be
          transferred, in whole or in part to any Person other than the
          Depository or a nominee thereof, and no such transfer to any such
          other Person may be registered; provided that this subclause (A) shall
          not prohibit any transfer of a Senior Secured Note that is issued in
          exchange for a Global Note but is not itself a Global Note. No
          transfer of a Senior Secured Note to any Person shall be effective
          under this Indenture or the Senior Secured Notes unless and until such
          Senior Secured Note has been registered in the name of such Person.
          Nothing in this Section 2.07 shall prohibit or render ineffective any
          transfer of a beneficial interest in a Global Note effected in
          accordance with the other provisions of this Section 2.07(c)(v).

               (B) Restricted Global Note to Regulation S Global Note. If the
          holder of a beneficial interest in a Restricted Global Note wishes at
          any time to transfer such interest to a person who wishes to take
          delivery thereof in the form of a beneficial interest in a Regulation
          S Global Note, such transfer may be effected, subject to the rules and
          procedures of the Depository for such Global Note, Euroclear and
          Clearstream, in each case to the extent applicable (the "Applicable
          Procedures"), only in accordance with the provisions of this Section
          2.07(c)(v)(B). Upon receipt by the Trustee, as Registrar, at the
          Corporate Trust Office of (1) written instructions given in accordance
          with the Applicable Procedures from a member of, or participant in,
          the Depository for such Restricted Global Note (each, an "Agent
          Member") directing the Trustee to credit or cause to be credited to a
          specified Agent Member's account a beneficial interest in a Regulation
          S Global Note in a principal amount equal to that of the beneficial
          interest in the Restricted Global Note to be so transferred, (2) a
          written order given in accordance with the Applicable Procedures
          containing information regarding the account of the Agent Member (and
          the Euroclear or


                                      -35-



          Clearstream account, as the case may be) to be credited with, and the
          account of the Agent Member to be debited for, such beneficial
          interest and (3) an appropriately completed certificate in
          substantially the form set forth in or contemplated by Section 2.13(a)
          given by the holder of such beneficial interest, the Trustee, as
          Registrar, shall instruct the Depository for such Notes to reduce the
          principal amount of the Restricted Global Note, and to increase the
          principal amount of the Regulation S Global Note, by the principal
          amount of the beneficial interest in the Restricted Global Note to be
          so transferred, and to credit or cause to be credited to the account
          of the Person specified in such instructions (which shall be the Agent
          Member for Euroclear or Clearstream or both, as the case may be) a
          beneficial interest in the Regulation S Global Note having a principal
          amount equal to the amount by which the principal amount of the
          Restricted Global Note was reduced upon such transfer.

               (C) Regulation S Global Note to Restricted Global Note. If the
          holder of a beneficial interest in a Regulation S Global Note wishes
          at any time to transfer such interest to a Person who wishes to take
          delivery thereof in the form of a beneficial interest in a Restricted
          Global Note, such transfer may be effected, subject to the Applicable
          Procedures, only in accordance with this Section 2.07(c)(v)(C). Upon
          receipt by the Trustee, as Registrar, at the Corporate Trust Office of
          (1) written instructions given in accordance with the Applicable
          Procedures from an Agent Member directing the Trustee, as Registrar,
          to credit or cause to be credited to a specified Agent Member's
          account a beneficial interest in the Restricted Global Note equal to
          that of the beneficial interest in the Regulation S Global Note to be
          so transferred, (2) a written order given in accordance with the
          Applicable Procedures containing information regarding the account of
          the Agent Member to be credited with, and the account of the Agent
          Member (or, if such account is held for Euroclear or Clearstream, the
          Euroclear or Clearstream account, as the case may be) to be debited
          for, such beneficial interest and (3) with respect to a transfer of a
          beneficial interest in the Regulation S Global Note, an appropriately
          completed certificate in substantially the form set forth in or
          contemplated by Section 2.13(b) given by the holder of such beneficial
          interest, the Trustee, as Registrar, shall instruct the Depository for
          such Regulation S Global Note to reduce the principal amount of the
          Regulation S Global Note and to increase the principal amount of the
          Restricted Global Note, by the principal amount of the beneficial
          interest in the Regulation S Global Note to be so transferred, and to
          credit or cause to be credited to the account of the Person specified
          in such instructions a beneficial interest in the Restricted Global
          Note having a principal amount equal to the amount by which the
          principal amount of the Regulation S Global Note was reduced upon such
          transfer.

               (D) Restricted Note (other than a Restricted Global Note) to
          Global Note. If the Holder of a Restricted Note (other than a
          Restricted Global Note) wishes at any time to transfer such Restricted
          Note to a Person who wishes to take delivery thereof in the form of a
          beneficial interest in a Restricted Global


                                      -36-



          Note or an Unrestricted Global Note, such transfer may be effected,
          subject to the Applicable Procedures, only in accordance with this
          Section 2.07(c)(v)(D). Upon receipt by the Trustee, as Registrar, at
          the Corporate Trust Office of (1) the Restricted Note to be
          transferred, (2) written instructions given in accordance with the
          Applicable Procedures from an Agent Member directing the Trustee to
          credit or cause to be credited to a specified Agent Member's account a
          beneficial interest in the Restricted Global Note or the Unrestricted
          Global Note, as the case may be, in a principal amount equal to the
          principal amount of the Restricted Note to be so transferred, (3) a
          written order given in accordance with the Applicable Procedures
          containing information regarding the account of the Agent Member (and,
          in the case of any transfer pursuant to Regulation S, the Euroclear or
          Clearstream account for which such Agent Member's account is held or,
          if such account is held for Euroclear or Clearstream, the Euroclear or
          Clearstream account, as the case may be) to be credited with such
          beneficial interest and (4) an appropriately completed certificate in
          substantially the form set forth in or contemplated by Section 2.13(c)
          (which may be attached to or set forth in the Restricted Note), the
          Trustee, as Registrar, shall cancel the Restricted Note, the Issuer
          shall execute, and the Trustee shall authenticate and deliver, a new
          Definitive Note for the principal amount, if any, of the Restricted
          Note not so transferred, registered in the name of the Holder
          transferring such Restricted Note, and the Trustee shall instruct the
          Depository for such Notes to increase the principal amount of the
          Restricted Global Note or the Unrestricted Global Note, as the case
          may be, by the principal amount of the Restricted Note so transferred,
          and to credit or cause to be credited to the account of the Person
          specified in such instructions (which, in the case of any increase of
          the principal amount of an Unrestricted Global Note as the result of a
          transfer pursuant to Regulation S, shall be the Agent Member for
          Euroclear or Clearstream or both, as the case may be) a corresponding
          principal amount of the Restricted Global Note or the Unrestricted
          Global Note. The transfer of a Restricted Note to a Person who wishes
          to take delivery thereof in the form of a beneficial interest in an
          Unrestricted Global Note may be effected only in accordance with
          Regulation S or Rule 144A (as evidenced by the certificate delivered
          pursuant to Section 2.13(c)).

               (E) Other Exchanges. In the event that a Global Note or any
          portion thereof is exchanged for Senior Secured Notes other than
          Global Notes, the Trustee, as Registrar, shall instruct the Depository
          for the Global Note to reduce the principal amount of the Global Note
          by the principal amount of the Notes other than Global Notes issued
          upon such exchange. Such other Notes may in turn be exchanged (on
          transfer or otherwise) for beneficial interests in a Global Note (if
          any are then outstanding) only in accordance with such procedures,
          which shall be substantially consistent with the provisions of
          subclauses (A) through (D) above (including the certification
          requirements intended to insure that transfers of beneficial interests
          in a Global Note comply with Rule 144A, Rule 144 or Regulation S, as
          the case may be) and any other procedures as may be from time to time
          adopted by the Issuer and the Trustee.


                                      -37-



               (F) Interests in Temporary Regulation S Global Note to be Held
          Through Euroclear or Clearstream. Until the termination of the
          Restricted Period with respect to Senior Secured Notes represented by
          a Temporary Regulation S Global Note, interests in any Temporary
          Regulation S Global Note may be held only through Agent Members acting
          for and on behalf of Euroclear and Clearstream, provided that this
          subclause (F) shall not prohibit any transfer in accordance with
          subclause (D) of this Section 2.07(c)(v).

          Section 2.08 Mutilated, Destroyed, Lost and Stolen Senior Secured
Notes.

          If any mutilated Senior Secured Note is surrendered to the Trustee,
the Issuer shall execute and, upon the Issuer's written request, the Trustee
shall authenticate and deliver a new definitive Senior Secured Note, of like
tenor and aggregate principal amount and equal face amount of principal,
registered in the same manner, dated the date of its authentication and bearing
interest from the date to which interest has been paid on such Senior Secured
Note, in exchange and substitution for such Senior Secured Note (upon surrender
and cancellation thereof); provided, that the applicant for such new Senior
Secured Note shall furnish to the Issuer and to the Trustee such reasonable bond
or indemnity as may be required by them to save each of them harmless.

          If there shall be delivered to the Issuer and the Trustee (a) evidence
to their satisfaction of the destruction, loss or theft of any Senior Secured
Note and (b) such bond or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Issuer or the Trustee that such Senior Secured Note has been acquired by a
bona fide purchaser, the Issuer shall execute and, upon the Issuer's request,
the Trustee shall authenticate and deliver a new definitive Senior Secured Note,
of like tenor and aggregate principal amount and equal face amount of principal
registered in the same manner, dated the date of its authentication and bearing
interest from the date to which interest has been paid on such Senior Secured
Note, in lieu of and substitution for such Senior Secured Note.

          In case any such mutilated, destroyed, lost or stolen Senior Secured
Note has become or is about to become due and payable, the Issuer in its
discretion may, instead of issuing a new Senior Secured Note, pay such Senior
Secured Note (without surrender thereof, except in the case of a mutilated
Senior Secured Note) if the applicant for such payment shall furnish to the
Issuer and the Trustee such reasonable bond or indemnity as they may require to
save each of them harmless, and in case of destruction, loss or theft, evidence
to the satisfaction of the Issuer and the Trustee of the destruction, loss or
theft of such Senior Secured Note.

          Upon the issuance of any new Senior Secured Note under this Section
2.08, the Issuer may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

          Every new Senior Secured Note issued pursuant to this Section 2.08 in
lieu of any destroyed, lost or stolen Senior Secured Note shall constitute an
original additional


                                      -38-



contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Senior Secured Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Senior Secured Notes duly issued hereunder.

          The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Senior Secured
Notes.

          Section 2.09 Payments; Interest Rights Preserved.

          Interest on any Senior Secured Note which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Senior Secured Note (or one or more Predecessor
Senior Secured Notes) is registered at the close of business on the Regular
Record Date for such interest.

          Any interest on any Senior Secured Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Overdue Interest") shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date by virtue of having been such Holder, and such
Overdue Interest may be paid by the Issuer, at its election in each case, as
provided in clause (a) or (b) below:

          (a) The Issuer may elect to make payment of any Overdue Interest to
     the Persons in whose names the Senior Secured Notes (or their respective
     Predecessor Notes) are registered at the close of business on a Special
     Record Date for the payment of such Overdue Interest, which shall be set in
     the following manner. The Issuer shall notify the Trustee in writing of the
     amount of Overdue Interest proposed to be paid on each Senior Secured Note
     and the date of the proposed payment, and at the same time the Issuer shall
     deposit with the Trustee an amount of money equal to the aggregate amount
     proposed to be paid in respect of such Overdue Interest or shall make
     arrangements satisfactory to the Trustee for such deposit prior to the date
     of the proposed payment, such money when deposited to be held in trust for
     the benefit of the Persons entitled to such Overdue Interest as in this
     clause (a) provided. Thereupon, the Issuer shall fix a Special Record Date
     for the payment of such Overdue Interest which shall be not more than 15
     days and not less than 10 days prior to the date of the proposed payment
     and not less than 10 days after the receipt by the Trustee of the notice of
     the proposed payment. The Trustee shall promptly, in the name and at the
     expense of the Issuer, mail a written notice of the proposed payment of
     such Overdue Interest and the Special Record Date therefor to be given to
     each Holder of Senior Secured Notes, not less than 10 days prior to such
     Special Record Date. Notice of the proposed payment of such Overdue
     Interest and the Special Record Date therefor having been so mailed, such
     Overdue Interest shall be paid to the Persons in whose names the Senior
     Secured Notes (or their respective Predecessor Notes) are registered at the
     close of business on such Special Record Date and shall no longer be
     payable pursuant to the following clause (b).


                                      -39-



          (b) The Issuer may make payment of any Overdue Interest on the Senior
     Secured Notes in any other lawful manner not inconsistent with the
     requirements of any securities exchange on which such Senior Secured Notes
     may be listed, and upon such notice as may be required by such exchange,
     if, after notice given by the Issuer to the Trustee of the proposed payment
     pursuant to this clause (b), such manner of payment shall be deemed
     practicable by the Trustee.

          Subject to the foregoing provisions of this Section 2.09, each Senior
Secured Note delivered under this Indenture upon registration of transfer of, or
in exchange for, or in lieu of, any other Senior Secured Note shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Senior Secured Note.

          All payments of principal, premium, if any, and interest on Senior
Secured Notes will be made by check or, with respect to Senior Secured Notes the
Holders of which own at least $1.0 million of Senior Secured Notes and have
provided the Issuer with wire transfer instructions, will be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Unless such designation is revoked in writing, any designation made by
such Holder with respect to such Senior Secured Notes will remain in effect with
respect to any future payments with respect to such Senior Secured Notes payable
to such Holder. The Issuer will indemnify and hold the Trustee and the Paying
Agent harmless against any loss, liability or expense (including attorneys'
fees) resulting from any act or omission to act on the part of the Trustee, the
Paying Agent or any such Holder in connection with any such designation or which
the Paying Agent or Trustee may incur as a result of making any payment in
accordance with any such designation.

          All payments of principal and premium, if any, on the Senior Secured
Notes shall be made upon presentation and surrender thereof at the office or
agency of the Issuer maintained for such purpose in the Borough of Manhattan,
The City of New York.

          Section 2.10 Persons Deemed Owners.

          Prior to due presentment of a Senior Secured Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee
shall treat the Person in whose name such Senior Secured Note is registered as
the owner of such Senior Secured Note for the purpose of receiving payment of
principal of and any premium and (subject to Section 2.09) any interest on such
Senior Secured Note and for all other purposes whatsoever, whether or not such
Senior Secured Note be overdue, and neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee shall be affected by notice to the contrary.

          Section 2.11 Cancellation.

          All Senior Secured Notes surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Issuer may at any time deliver to the Trustee for cancellation any
Senior Secured Notes previously authenticated and delivered hereunder which the
Issuer may have acquired in any manner whatsoever, and may deliver to


                                      -40-



the Trustee (or to any other Person for delivery to the Trustee for
cancellation) any Senior Secured Notes previously authenticated hereunder which
the Issuer has not issued and sold, and all Senior Secured Notes so delivered
shall be promptly canceled by the Trustee. No Senior Secured Notes shall be
authenticated in lieu of or in exchange for any Senior Secured Notes canceled as
provided in this Section 2.11, except as expressly permitted by this Indenture.
All canceled Senior Secured Notes held by the Trustee shall be disposed of as
directed by an Authentication Order.

          Section 2.12 Computation of Interest.

          Except as otherwise provided in the Series Supplemental Indenture
relating to the Senior Secured Notes of a series, interest on the Senior Secured
Notes of such series shall be computed on the basis of a 360-day year comprised
of twelve 30-day months.

          Section 2.13 Certification Forms.

          (a) Whenever any certification is to be given by a beneficial owner of
a portion of a Restricted Global Note pursuant to Section 2.07(c)(v)(B) in
connection with the initial transfer of a beneficial interest in a Restricted
Global Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in a Regulation S Global Note, such certification shall be
provided substantially in the form set forth in Exhibit C hereto.

          (b) Whenever any certification is to be given by a beneficial owner of
a portion of a Regulation S Global Note pursuant to Section 2.07(c)(v)(C) in
connection with the initial transfer of a beneficial interest in the Regulation
S Global Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Restricted Global Note, such certification shall be
provided substantially in the form set forth in Exhibit C hereto.

          (c) Whenever any certification is to be given by a beneficial owner of
a Restricted Note or Holder of a Restricted Note (other than a Restricted Global
Note) pursuant to Section 2.07(b) in connection with the transfer or exchange of
a Restricted Note, such certification shall be provided substantially in the
form set forth in Exhibit B (which may be attached to or set forth on the
Restricted Note).

          Section 2.14 CUSIP Numbers.

          The Issuer in issuing the Senior Secured Notes may use "CUSIP" or
"ISIN" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" or "ISIN" numbers in notices of redemption as a convenience to Holders;
provided, that the Trustee shall assume no responsibility for the accuracy of
such numbers and any such redemption shall not be affected by any defect in or
omission of such numbers.

                                   ARTICLE III

                            REDEMPTION AND PREPAYMENT

          Section 3.01 Notices to Trustee.


                                      -41-



          If the Issuer elects to redeem Senior Secured Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee and Paying Agent, at least 30 days but not more than 60 days before a
redemption date, an Officers' Certificate setting forth (i) the clause of this
Indenture pursuant to which the redemption shall occur, (ii) the Redemption
Date, (iii) the principal amount of Senior Secured Notes to be redeemed and (iv)
the redemption price.

          Section 3.02 Selection of Senior Secured Notes to Be Redeemed.

          If less than all of the Senior Secured Notes are to be redeemed at any
time, selection of Senior Secured Notes for redemption will be made by the
Trustee on a pro rata basis; provided, that no Senior Secured Notes of $1,000 or
less will be redeemed in part. Notices of redemption will be mailed by first
class mail at least 30 but not more than 60 days before the Redemption Date to
each Holder of Senior Secured Notes to be redeemed at its registered address.
Notices of redemption may not be conditional. If any Senior Secured Note is to
be redeemed in part only, the notice of redemption that relates to such Senior
Secured Note will state the portion of the principal amount thereof to be
redeemed. A new Senior Secured Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Senior Secured Note. Senior Secured Notes called
for redemption become due on the date fixed for redemption. Unless the Issuer
defaults in payment of the redemption price, interest will cease to accrue on
Senior Secured Notes or portions of them called for redemption on and after the
Redemption Date.

          The Trustee shall promptly notify the Issuer in writing of the Senior
Secured Notes selected for redemption and, in the case of any Senior Secured
Note selected for partial redemption, the principal amount thereof to be
redeemed. Senior Secured Notes and portions of Senior Secured Notes selected
shall be in denominations of $1,000 and integral multiples of $1,000; except
that if all of the Senior Secured Notes of a Holder are to be redeemed, the
entire outstanding amount of Senior Secured Notes held by such Holder, even if
not a multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Senior Secured Notes called
for redemption also apply to portions of Senior Secured Notes called for
redemption.

          Section 3.03 Notice of Redemption.

          At least 30 days but not more than 60 days before a Redemption Date,
the Issuer shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Senior Secured Notes are to be redeemed at its
registered address.

          The notice shall identify the Senior Secured Notes to be redeemed and
shall state:

          (a) the Redemption Date;

          (b) the redemption price;


                                      -42-



          (c) if any Senior Secured Note is being redeemed in part, the portion
     of the principal amount of such Senior Secured Note to be redeemed and
     that, after the redemption date upon surrender of such Senior Secured Note,
     a new Senior Secured Note or Senior Secured Notes in principal amount equal
     to the unredeemed portion shall be issued upon cancellation of the original
     Senior Secured Note;

          (d) the name, address and telephone number of the Paying Agent;

          (e) that Senior Secured Notes called for redemption must be
     surrendered to the Paying Agent to collect the redemption price;

          (f) that, unless the Issuer defaults in making such redemption
     payment, interest on Senior Secured Notes called for redemption ceases to
     accrue on and after the Redemption Date;

          (g) the paragraph of the Senior Secured Notes and/or Section of this
     Indenture pursuant to which the Senior Secured Notes called for redemption
     are being redeemed; and

          (h) the CUSIP number (provided that the Issuer may state that no
     representation is made as to the correctness or accuracy of the CUSIP
     number, if any, listed in such notice or printed on the Senior Secured
     Notes).

          At the Issuer's request, the Trustee or the Paying Agent shall give
the notice of redemption in the Issuer's name and at its expense; provided,
however, that the Issuer shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.

          Section 3.04 Effect of Notice of Redemption.

          Once notice of redemption is mailed in accordance with Section 3.03
hereof, Senior Secured Notes called for redemption become irrevocably due and
payable on the Redemption Date at the redemption price. A notice of redemption
may not be conditional.

          Section 3.05 Deposit of Redemption Price.

          One Business Day prior to the Redemption Date, the Issuer shall
deposit with the Trustee or with the Paying Agent (other than the Issuer or an
Affiliate of the Issuer) money sufficient to pay the redemption price of and
accrued interest on, and premium, if any, on, all Senior Secured Notes to be
redeemed on that date. The Trustee or the Paying Agent shall promptly return to
the Issuer any money deposited with the Trustee or the Paying Agent by the
Issuer in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Senior Secured Notes to be redeemed.

          If the Issuer complies with the provisions of the preceding paragraph
and the other provisions of this Article III, on and after the Redemption Date,
interest shall cease to


                                      -43-



accrue on the Senior Secured Notes or the portions of Senior Secured Notes
actually redeemed. If a Senior Secured Note is redeemed on or after an interest
record date but on or prior to the related Interest Payment Date, then any
accrued and unpaid interest shall be paid to the Person in whose name such
Senior Secured Note was registered at the close of business on such record date.
If any Senior Secured Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Issuer to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the
Redemption Date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate and in the
manner provided in the Senior Secured Notes and in Section 4.01 hereof.

          Section 3.06 Senior Secured Notes Redeemed in Part.

          Upon surrender of a Senior Secured Note that is redeemed in part, the
Issuer shall issue and, upon the Issuer's written request, the Trustee shall
authenticate for the Holder at the expense of the Issuer a new Senior Secured
Note equal in principal amount to the unredeemed portion of the Senior Secured
Note surrendered.

          Section 3.07 Optional Redemption.

          (a) The Senior Secured Notes shall be redeemable at the Issuer's
option at any time and from time to time, in whole or in part, upon not less
than 30 nor more than 60 days' notice to the Trustee and each Holder of Senior
Secured Notes, at a redemption price equal to the outstanding principal amount
thereof plus accrued interest, plus the Make-Whole Premium, such redemption
price to be set forth in the notice to the Trustee. In no event shall the sum of
the redemption price plus the Make-Whole Premium ever be less than 100% of the
Senior Secured Notes being redeemed plus accrued and unpaid interest thereon to
the Redemption Date. Unless the Issuer defaults in payment of the redemption
price, on and after the Redemption Date interest shall cease to accrue on the
Senior Secured Notes or portions thereof actually redeemed.

          (b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.

          Section 3.08 Mandatory Redemption.

          (a) If the Issuer or any Subsidiary receives more than $5.0 million of
Loss Proceeds or Eminent Domain Proceeds because of an Event of Loss or an Event
of Eminent Domain and:

          (i) the Issuer determines that all or such portion of the applicable
     Plant cannot be rebuilt, repaired or restored to permit operations on a
     commercially reasonable basis, or the Issuer determines not to rebuild,
     repair or restore the applicable Plant or such portion; or

          (ii) only a portion of the applicable Plant is capable of being
     rebuilt, repaired or restored on a commercially reasonable basis and the
     Issuer determines to so rebuild, repair or restore;


                                      -44-



then, the Issuer shall use the Net Available Amount of such proceeds to redeem
the Senior Secured Notes, in whole or in part, at a redemption price equal to
the principal amount of the Senior Secured Notes being redeemed plus accrued and
unpaid interest to the Redemption Date and, to the extent required, to prepay
its other Senior Secured Obligations, except as set forth in the immediately
following paragraph; provided that, in the case of clause (ii) above, the Issuer
shall use only the amount of such Loss Proceeds or Eminent Domain Proceeds not
used to rebuild, repair or restore such Plant for such redemption, except as set
forth in the immediately following paragraph.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Loss Proceeds or Eminent Domain Proceeds or has less than $5.0 million remaining
after rebuilding, repairing or restoring a portion of the applicable Plant
because of an Event of Loss or Event of Eminent Domain the Issuer will cause
such amounts to be deposited into the Revenue Account.

          (b) If the Issuer or any Subsidiary (i) receives more than $5.0
million of Title Event Proceeds in connection with a Title Event and is unable
to remedy the Title Event, or (ii) has more than $5.0 million of Title Event
Proceeds remaining after remedying the Title Event, the Issuer will have to use
the Net Available Amount of such proceeds, to the extent not used to cure the
Title Event, on a pro rata basis to redeem the Senior Secured Notes at a
redemption price equal to the principal amount of the Senior Secured Notes being
redeemed plus accrued and unpaid interest to the Redemption Date and, to the
extent required, to prepay its other Senior Secured Obligations.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Title Event Proceeds in connection with a Title Event or has less than $5.0
million remaining after remedying a Title Event the Issuer will cause such
amounts to be deposited into the Revenue Account and such amounts will not be
required to be used to redeem the Senior Secured Notes.

          (c) In the event that any Senior Secured Obligations (other than the
Senior Secured Notes) are required to be redeemed before their scheduled
maturity date pursuant to documents governing such Senior Secured Obligations
for any reason not otherwise giving rise to a redemption of the Senior Secured
Notes, the Issuer shall offer to repurchase the Senior Secured Notes on a pro
rata basis with the other Senior Secured Obligations as are required to be
redeemed at a redemption price equal to the principal amount of the Senior
Secured Notes the Issuer offers to repurchase plus accrued and unpaid interest
to the Redemption Date, but without any premium.

          Other than as specifically provided in this Section 3.08, any purchase
or redemption pursuant to this Section 3.08 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.


                                      -45-



                                   ARTICLE IV

                                    COVENANTS

          The Issuer and each of the Issuer's Subsidiaries shall be subject to
the following covenants.

          Section 4.01 Payment of Senior Secured Notes.

          The Issuer shall pay or cause to be paid the principal of, premium, if
any, and interest on the Senior Secured Notes on the dates and in the manner
provided on Exhibits A-1 and A-2 attached hereto including the Schedule of
Principal Payments set forth on Schedule I attached thereto. Principal, premium,
if any, and interest shall be considered paid on the date due if the Paying
Agent, if other than the Issuer or a Subsidiary or an Affiliate thereof, holds
as of 10:00 a.m. Eastern Time on the due date money deposited by the Issuer in
immediately available funds and designated for and sufficient to pay all
principal, interest and premium, if any, then due.

          The Issuer shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Senior
Secured Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.

          Section 4.02 Maintenance of Office or Agency.

          The Issuer shall maintain in the Borough of Manhattan, the City of New
York, and in such other places, if any, as shall be specified for the Senior
Secured Notes of any series in the related Series Supplemental Indenture an
office or agency (which may be an office of the Trustee or an affiliate of the
Trustee, Registrar or co-registrar) where Senior Secured Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuer in respect of the Senior Secured Notes and this
Indenture may be served. The Issuer shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuer shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.

          The Issuer may also from time to time designate one or more other
offices or agencies where the Senior Secured Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Issuer of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York for such purposes. The Issuer
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.


                                      -46-



          The Issuer hereby designates the Corporate Trust Office of the Trustee
as the initial office or agency of the Issuer where the Senior Secured Notes may
be presented or surrendered in accordance with the foregoing.

          Section 4.03 Reporting Requirements.

          The Issuer shall deliver to the Trustee and the Collateral Agent (and,
upon request of a Holder (or owner of a beneficial interest in a Global Note) or
Fitch, shall deliver directly to such Holder (or owner of a beneficial interest
in a Global Note) and/or Fitch (which request may indicate that it is a
continuing request for such information until further notice from such Holder
(or such owner of a beneficial interest in a Global Note) or Fitch to the
contrary):

          (a) As soon as available but, in any event, within 60 days after the
     close of each of the first three quarterly accounting periods in each
     fiscal year (commencing with the quarter ending March 31, 2006), a complete
     unaudited consolidated balance sheet of the Issuer and its Subsidiaries as
     at the end of such quarterly period with related statements of income and
     capital and statements of cash flows for such quarterly period and for the
     elapsed portion of the fiscal year ended with the last day of such
     quarterly period, prepared in accordance with GAAP (but without footnotes),
     consistently applied and setting forth comparative unaudited figures for
     the related periods in the prior fiscal year, all of which shall be
     accompanied by a certificate of an Authorized Representative of the Issuer
     to the effect that such financial statements present fairly the financial
     condition and results of operation of the Issuer on the dates and for the
     periods indicated, subject to normal year-end audit adjustments;

          (b) As soon as available but, in any event, within 120 days after the
     close of each fiscal year (commencing with the fiscal year ended December
     31, 2005), the following: (i) a consolidated balance sheet of the Issuer
     and its Subsidiaries as at the end of such fiscal year with the related
     statements of income and capital and statements of cash flows for such
     fiscal year, in each case setting forth comparative figures for the
     preceding fiscal year and certified by the Independent Accountants or a
     nationally recognized independent accounting firm (the "Auditors") (all
     such statements being in agreement with the Issuer's books of account and
     prepared in accordance with GAAP, consistently applied); and (ii) a report
     or other written communication from the Auditors indicating whether, in the
     course of their regular audit of the consolidated financial statements of
     the Issuer, the Auditors obtained actual knowledge of any Default or Event
     of Default which has occurred and is continuing (and, in the event the
     Auditors obtained any such actual knowledge, indicating the nature of such
     Default or Event of Default);

          (c) At the time of the delivery of the financial statements provided
     for in clause (a) or (b) immediately above, a certificate of an Authorized
     Officer of the Issuer to the effect that, to such Authorized Officer's
     actual knowledge, (i) no Default or Event of Default has occurred and is
     continuing or, if any Default or Event of Default has occurred and is
     continuing, specifying the nature and extent thereof and what action the


                                      -47-



     Issuer or any Guarantor is taking or proposes to take in response thereto
     and (ii) such Person is in compliance with all of its material obligations
     under the terms of the Financing Documents to which it is a party or, if
     not, specifying the nature and extent thereof and what action the Issuer or
     any Guarantor is taking or proposes to take in response thereto;

          (d) (i) promptly, but in all cases within three Business Days after
     the Issuer or any Guarantor obtains actual knowledge thereof, notice of any
     event which constitutes a Default or an Event of Default, specifying the
     nature of such Default or Event of Default and any steps that the Issuer or
     any such Guarantor is taking or proposes to take to remedy the same, and
     (ii) promptly, and in any event within 3 Business Days after the Issuer or
     any Guarantor obtains actual knowledge thereof, notice of:

               (A) any litigation, arbitration or governmental proceeding (other
          than any governmental proceeding in the ordinary course of business)
          pending (x) against the Issuer or any Guarantor or (y) with respect to
          any Transaction Document to which the Issuer or such Guarantor is a
          party or, to the actual knowledge of the Issuer or any Guarantor,
          which, in either case, individually or in the aggregate could
          reasonably be expected to result in a Material Adverse Effect;

               (B) the occurrence and continuance of any Event of Loss, Event of
          Eminent Domain or Title Event that could reasonably be expected to
          give rise to Loss Proceeds, Eminent Domain Proceeds or Title Event
          Proceeds, as applicable, in an amount in excess of $5.0 million;

               (C) any change in the Authorized Representatives of the Issuer or
          any Guarantor, accompanied by certified specimen signatures of any
          Authorized Representatives so appointed;

               (D) any report, notice or correspondence received or initiated by
          the Issuer or any Guarantor relating to any Governmental Approval or
          any other license or authorization necessary for the performance by
          the Issuer or any Guarantor of its obligations under the Transaction
          Documents, which report, notice, correspondence and other document is
          received or initiated other than in the ordinary course of business
          and which could reasonably be expected to result in a Material Adverse
          Effect; or

               (E) any downgrade in the credit rating of any provider of an
          Acceptable Letter of Credit below Investment Grade.

          In addition, the Issuer and the Guarantors agree that they shall
furnish to the Holders and to prospective investors, upon the request of such
Holders, the information required to be delivered pursuant to Rule 144(d)(4)
under the Securities Act so long as the Senior Secured Notes are not freely
transferable under the Securities Act.


                                      -48-



          Notwithstanding the foregoing, the Issuer shall not be required to
present financial information (i) for itself or any Subsidiary for any period
prior to September 30, 2005 that is not presented in the Offering Memorandum or
(ii) pursuant to Rule 3-16 of Regulation S-X.

          The receipt by the Trustee of any such reports and documents pursuant
to this Section 4.03 shall not constitute notice or constructive notice of any
information contained in such documents or determinable from information
contained in such documents, including the Issuer's compliance with any
covenants hereunder (as to which the Trustee is entitled to rely exclusively on
an Officers' Certificate).

          Section 4.04 Delivery of Notices to Trustee.

          The Issuer shall, and shall cause each of its Subsidiaries to, so long
as any of the Senior Secured Notes are outstanding, deliver to the Trustee, the
Collateral Agent and the Intercreditor Agent, forthwith upon any officer
becoming aware of any Default, Event of Default, Event of Loss, Event of Eminent
Domain or Title Event or, an Officers' Certificate specifying with particularity
any such Default, Event of Default, Event of Loss, Event of Eminent Domain or
Title Event and, if applicable, what action the Issuer is taking or proposes to
take with respect thereto.

          Section 4.05 Stay, Extension and Usury Laws.

          The Issuer covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of its obligations under this Indenture and the Senior Secured
Notes; and the Issuer (to the extent it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the execution
of every such power as though no such law has been enacted.

          Section 4.06 Restrictions on Sale of Assets.

          The Issuer shall not, nor shall the Issuer permit any of its
Subsidiaries to, sell, lease (as lessor) or transfer (as transferor) any
property or assets, other than to the Issuer or a Guarantor, except for property
or assets which are worn out, obsolete or no longer useful or necessary in
connection with the operation of a Project as certified by the Issuer.

          The Collateral Agent shall be obligated to release the Lien of the
Security Documents upon the Issuer's transfer of any property or assets in
compliance with this covenant and receipt by the Collateral Agent of an
Officer's Certificate stating that such transfer is in compliance with this
covenant.

          Section 4.07 Insurance.


                                      -49-



          (a) The Issuer shall, and shall cause each of its Subsidiaries to,
maintain or cause to be maintained business interruption insurance, property
"all risk" insurance, including flood, earthquake, volcano and windstorm
coverage, and general liability insurance and erection "all risk" insurance (if
applicable), as well as customary worker's compensation (upon hiring of
employees) and automobile insurance and such other insurance, if any, as is
generally carried by companies engaged in similar businesses and owning similar
properties in the same general areas and financed in a similar manner. The
Issuer shall not be required to obtain any insurance that the Insurance
Consultant determines would not be reasonable under the circumstances and that
is not available on commercially reasonable terms. To the extent any such
insurance covers both the Issuer, its Subsidiaries and/or a Project, on the one
hand, and any other owner and/or plant, on the other hand, the Issuer shall
ensure that it has specifically designated as applicable solely to it, its
Subsidiaries and the Projects "all risk" property insurance coverage in an
amount based upon the estimated full replacement value of the Plants (provided
that earthquake, flood, volcano and windstorm coverages may be subject to a
limit with respect to the Issuer and its Subsidiaries' facilities of not less
than $10 million per occurrence and on an annual aggregate basis) and business
interruption insurance in an amount of not less than the maximum fixed expenses
projected over any four month period during the succeeding twelve month period
(including, without limitation, debt service expenses).

          (b) The Issuer shall, on an annual basis until such time as the
insurance coverage described in clause (i) below shall be consistent with the
insurance coverage described in clause (ii) below, (i) request that the
Insurance Consultant review the earthquake, flood, volcano and windstorm
coverages under the Issuer's policy, and if such coverages (x) are available
with annual aggregate limits above the Issuer's then current limits on
commercially reasonable terms and (y) are generally carried by companies engaged
in similar businesses and owning similar properties in the same general areas
and financed in a similar manner, then the Issuer shall increase its coverages
accordingly, and (ii) upon such increase, deliver to the Trustee a certificate
from the Insurance Consultant stating the results of its review and confirming
that the Issuer's policy has been amended to address the changes, if any,
required under clause (i) above.

          (c) To the extent the Issuer's business interruption insurance or
casualty insurance covers both the Issuer, its Subsidiaries and/or a Project, on
the one hand, and any other owner and/or plant, on the other hand, and a claim
is submitted pursuant to an event occurring at another plant or to another
project owner, the Issuer shall ensure that any sub-limits or other coverages
that are reduced or otherwise effected by such event are, promptly, but in no
event later than 10 Business Days following such event, re-instated for the
Projects to the levels of such sub-limits or coverages prior to the occurrence
of such event and subject to (a) above.

          (d) The Issuer shall, and the Issuer shall cause each of its
Subsidiaries to, cause the Collateral Agent to be named as loss payee and/or as
an additional insured, as appropriate; all insurance policies shall provide for
at least 30 days' written notice to the Collateral Agent of a cancellation
(except cancellation due to failure to pay premiums, if any, which may be on no
less than 10 days prior written notice to the Collateral Agent) or reduction in
the amount of coverage or of a material change in coverage.


                                      -50-



          Section 4.08 Governmental Approvals; Title.

          The Issuer shall, and shall cause each of its Subsidiaries to, at all
times (a) obtain and maintain in full force and effect the Governmental
Approvals and other consents and approvals required at any time in connection
with the Issuer's business, including, without limitation, the operation of the
Gould Plant, except for such Governmental Approvals and other consents and
approvals listed on Schedule B hereto, which the Issuer shall, or shall cause
its relevant Subsidiary to, use all reasonable efforts to obtain within a
reasonable time-period following the Closing Date but in any event prior to the
date such Governmental Approvals, consents or approvals are required to be
obtained by Applicable Law and (b) preserve and maintain good and valid title to
the Issuer's properties and assets (subject to no Liens other than Permitted
Liens), except in each case where the failure to do so in clause (a) or (b)
could not reasonably be expected to have a Material Adverse Effect.

          Section 4.09 Limitation on Nature of Business.

          The Issuer shall not, and shall not permit or cause any of its
Subsidiaries to, engage or enter into any business other than, directly or
indirectly the ownership, operation and maintenance of the Projects and
activities incidental thereto.

          Section 4.10 Prohibition on Merger or Other Fundamental Changes.

          The Issuer shall not, nor shall it permit any of its Subsidiaries to,
enter into any transaction of merger or consolidation, sell all or substantially
all of its or their respective assets to any other Person, change its or their
respective forms of organization or its or their respective businesses,
liquidate or dissolve its or their self (or suffer any liquidation or
dissolution) or discontinue its or their respective businesses and shall not,
nor shall it permit any of its Subsidiaries to, purchase or otherwise acquire
all or substantially all of the assets of any other Person; provided that the
Issuer may, and may permit its Subsidiaries to, enter into a merger,
consolidation or sale of all or substantially all of their assets to or into the
Issuer or another Guarantor so long as:

     (i)   all Governmental Approvals required in order to consummate such
           merger, consolidation or sale or required in respect of the continued
           operation of the affected Projects following such merger,
           consolidation or sale shall have been obtained prior to or
           concurrently with the consummation of such merger;

     (ii)  the Collateral, after giving effect to such merger, consolidation or
           sale, shall continue to have the same priority and perfection as
           immediately preceding such merger, consolidation or sale;

     (iii) (y) the Issuer or the relevant Guarantor(s) shall not, prior to or
           immediately after giving effect to such merger, consolidation or sale
           be subject to any proceedings under any applicable liquidation,
           conservatorship, bankruptcy, moratorium, arrangement, adjustment,
           insolvency, reorganization or similar laws or (z) such merger,
           consolidation or sale could not reasonably be expected to have a
           Material


                                      -51-



           Adverse Effect; provided that for purposes of this clause (z), the
           definition of "Material Adverse Effect" shall be deemed not to have
           the text "(taken as a whole)" set forth therein; and

     (iv)  the Issuer shall have delivered a certificate to the Collateral Agent
           certifying as to the matters described in clauses (i), (ii) and (iii)
           above.

          Section 4.11 Restricted Payments.

          The Issuer shall not, nor shall it permit or cause any of its
Subsidiaries to, make any Restricted Payments, except (i) if the Issuer meets
the Distribution Conditions set forth in Section 3.6(b) of the Depositary
Agreement and has satisfied Sections 3.06 (d) and (e) thereof, if applicable,
and (ii) Restricted Payments made by any of its Subsidiaries; provided, that
such Restricted Payments in the case of clause (ii) are made to the Issuer or a
Guarantor.

          Section 4.12 Revenue Account; Debt Service Reserve Account.

          (a)The Issuer shall, and it shall cause each of its Subsidiaries to,
take all actions as may be necessary to cause all revenues actually received by
them from the Projects or otherwise to be deposited in the Revenue Account to
the extent required by the Depositary Agreement. The Issuer shall, and shall
cause its Subsidiaries to (x) provide irrevocable written instruction to each
power purchaser related to a Project, to pay all revenues paid under power
purchase agreements with respect to the Projects directly into the Revenue
Account, (y) use commercially reasonable efforts to arrange for all other
revenues to be paid directly into the Revenue Account and (z) cause any other
revenues received by the Issuer or any of its Subsidiaries to be promptly paid
into the Revenue Account.

          (b) On or prior to the Closing Date, the Issuer shall, and it shall
cause each of its Subsidiaries to, take all actions as may be necessary to cause
any and all amounts on deposit in the "OrCal Geothermal Debt Service Reserve
Account" and the "OrCal Geothermal O&M Account" (as such accounts are defined in
the Depositary Agreement, dated as of December 18, 2003, among the Issuer, the
Guarantors thereto, Beal Bank, S.S.B. as administrative agent and Hudson United
Bank as depositary agent), if any, to be transferred to the Debt Service Reserve
Account, as required pursuant to the Depositary Agreement.

          Section 4.13 Transactions with Affiliates.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
respective properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any of its respective
Affiliates (each, an "Affiliate Transaction"), unless:

          (a) the Affiliate Transaction is on terms that are at arm's length and
     no less favorable to the Issuer or the relevant Subsidiary, at the relevant
     time that any such Affiliate Transaction is consummated, than those that
     would have been obtained in a


                                      -52-



     comparable transaction by the Issuer or such Subsidiary with an unrelated
     Person at such time; and

          (b) the Issuer delivers to the Trustee:

               (i) with respect to any Affiliate Transaction or series of
          related Affiliate Transactions involving aggregate consideration in
          excess of $5 million, a resolution of the Board of Directors set forth
          in an Officers' Certificate certifying that such Affiliate Transaction
          complies with this covenant and that such Affiliate Transaction has
          been approved by a majority of the Board of Directors; and

               (ii) with respect to any Affiliate Transaction or series of
          related Affiliate Transactions involving aggregate consideration in
          excess of $25 million, a positive opinion as to the fairness to the
          Issuer of such Affiliate Transaction from a financial point of view
          issued by an accounting, appraisal or investment banking firm of
          national standing. The Trustee shall have no obligation to review the
          fairness opinion, but shall hold such opinion for the benefit of the
          Holders.

          The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of the prior paragraph:

          (a) transactions between or among the Issuer and/or its Wholly-Owned
     Subsidiaries permitted pursuant to the terms hereof;

          (b) Restricted Payments that do not violate the provisions of Section
     4.11 of this Indenture; and

          (c) transactions pursuant to the Operation and Maintenance Agreement.

          Section 4.14 Exercise of Rights.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
exercise, or fail to exercise, its or their respective rights under the Project
Documents in a manner which could reasonably be expected to result in a Material
Adverse Effect with respect to the Issuer or the applicable Subsidiary. The
Issuer shall, and shall cause each of its Subsidiaries to, diligently pursue all
rights to distributions or dividends and Loss Event Proceeds, Eminent Domain
Proceeds and Title Proceeds upon the occurrence of a Loss Event, an Event of
Eminent Domain or a Title Event, as the case may be.

          Section 4.15 Termination or Amendment to Material Project Documents.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
terminate, amend in any material adverse respect, replace, modify in any
material adverse respect or assign, other than pursuant to the Security
Documents (or consent to any of the foregoing) any of the Material Project
Documents to which the Issuer or they are a party, provided that the


                                      -53-



Issuer may permit the relevant Subsidiary to terminate any Material Project
Document solely in connection with (i) the consolidation of any two or more
Material Project Documents of the same type and scope with the same
counterparties into one replacement Material Project Document with the same
counterparties, type and scope and (ii) as necessary in connection with a
merger, consolidation or sale permitted pursuant to Section 4.10 herein, so long
as, in the case of both (i) and (ii):

     (i)   the Issuer, its relevant Subsidiary or, following a merger or
           consolidation of or into the Issuer or one of the Guarantors, the
           relevant successor company has executed and delivered a replacement
           agreement substantially in the form of the Material Project Document
           that was so terminated, with all of the material terms remaining the
           same or being more favorable to the Issuer or to the relevant
           Guarantor or successor company;

     (ii)  all Governmental Approvals related to such termination and such
           replacement agreement shall have been obtained prior to such
           termination;

     (iii) the Collateral, after giving effect to such termination and
           replacement, shall maintain the same perfection and priority as it
           had prior to giving effect to such termination, and the Issuer or the
           relevant Guarantor or successor corporation, shall have granted a
           first priority security interest in such replacement agreement for
           the Collateral Agent, on behalf of the Secured Parties;

     (iv)  such replacement agreement is included in the definition of Material
           Project Document herein; and

     (v)   the Issuer shall have delivered a certificate to the Collateral Agent
           certifying as to the matters set forth in clauses (i), (ii), (iii)
           and (iv) above.

          Section 4.16 Additional Project Documents.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
enter into any Additional Project Documents (a) if entering into such document
could reasonably be expected to result in a Material Adverse Effect, provided,
however, that nothing in the foregoing is intended to preclude the Issuer or any
of its Subsidiaries from entering into agreements to sell Renewable Energy
Credits in connection with any Project as contemplated by the terms of the
Project Documents or required by Applicable Law or (b) if entering into any such
Additional Project Document constituting power purchase agreements, fuel supply
and transportation agreements, transmission agreements and other agreements,
contracts or other arrangements for the purchase of fuel for, or the sale of
electricity from, the Project results in the breach of, or conflict with the
terms of, any then-existing power purchase agreement.

          Nothing in the preceding paragraph is intended to preclude any
Guarantor from entering into a replacement Material Project Document as and to
the extent permitted pursuant to Sections 4.10 and 4.15 herein.

          Section 4.17 Performance of Project Documents.


                                      -54-



          The Issuer shall, and shall cause each of its Subsidiaries to, perform
and observe their respective covenants and obligations under all of the Project
Documents, except where the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.

          Section 4.18 Limitations on Indebtedness.

          The Issuer shall not create, incur or suffer to exist any Indebtedness
except the following Indebtedness (collectively, "Permitted Indebtedness"):

          (a) Indebtedness represented by the Senior Secured Notes to be issued
     on the Closing Date;

          (b) Indebtedness incurred by the Issuer to finance Capital
     Expenditures to a Project that are required by law or the terms of the
     Project Documents; provided, that:

               (i) the Issuer shall have delivered a certificate to the
          Collateral Agent certifying that no Default or Event of Default has
          occurred and is continuing at the time such Indebtedness is proposed
          to be incurred or would result from the incurrence of such additional
          Indebtedness;

               (ii) the Issuer and the Independent Engineer shall each have
          delivered a certificate to the Collateral Agent certifying that the
          Capital Expenditures to be financed with such Indebtedness conform to
          such legal or Project Document requirements; and

               (iii) either:

                    (A) the Issuer and the Independent Engineer shall each have
               delivered a certificate to the Collateral Agent certifying that
               after giving effect to the incurrence of such additional
               Indebtedness, the minimum projected Debt Service Coverage Ratio
               for each twelve-month period (each such period taken as a single
               accounting period) commencing on the Scheduled Payment Date
               immediately succeeding the date on which such additional
               Indebtedness is incurred through the Final Maturity Date (or,
               with respect to Indebtedness incurred within the twelve months
               immediately prior to the Final Maturity Date, for a period
               commencing on the first day of the month immediately following
               the month in which such incurrence of Indebtedness occurs and
               ending on the Final Maturity Date), will not be less than 1.40 to
               1.0; or

                    (B) the Issuer shall have delivered to the Collateral Agent
               a letter from Fitch confirming that, after giving effect to the
               incurrence of such Indebtedness, there will be no downgrade of
               the then-applicable ratings of the Senior Secured Notes;

          (c) Indebtedness incurred by the Issuer to finance discretionary
     Capital


                                      -55-



     Expenditures with respect to a Project, provided, that:

               (i) the Issuer shall have delivered a certificate to the
          Collateral Agent certifying that no Default or Event of Default has
          occurred and is continuing at the time such Indebtedness is proposed
          to be incurred or would result from the incurrence of such additional
          Indebtedness;

               (ii) the Issuer and the Independent Engineer shall each have
          delivered a certificate to the Collateral Agent certifying that (1)
          the minimum projected Debt Service Coverage Ratio for each
          twelve-month period (each such period taken as a single accounting
          period) commencing on the Scheduled Payment Date immediately
          succeeding the date on which such additional Indebtedness is incurred
          through the Final Maturity Date (or, with respect to Indebtedness
          incurred within the twelve months immediately prior to the Final
          Maturity Date, for a period commencing on the first day of the month
          immediately following the month in which such incurrence of
          Indebtedness occurs and ending on the Final Maturity Date) and (2) the
          average projected Debt Service Coverage Ratio for each twelve-month
          period (each such period taken as a single accounting period)
          commencing on the Scheduled Payment Date immediately succeeding the
          date on which such additional Indebtedness is incurred through the
          Final Maturity Date (or, with respect to Indebtedness incurred within
          the twelve months immediately prior to the Final Maturity Date, for a
          period commencing on the first day of the month immediately following
          the month in which such incurrence of Indebtedness occurs and ending
          on the Final Maturity Date), equal or exceed the projected Debt
          Service Coverage Ratio for the corresponding twelve-month periods, as
          the case may be, immediately prior to the incurrence of such
          additional Indebtedness and the financing of any such Capital
          Expenditures; and

               (iii) the Issuer shall have delivered to the Collateral Agent a
          letter from Fitch confirming that, after giving effect of the
          incurrence of such Indebtedness, there will be no downgrade of the
          then-applicable ratings of the Senior Secured Notes;

          (d) additional Indebtedness incurred by the Issuer to finance Capital
     Expenditures, Major Maintenance Expenditures or working capital at the
     Projects not to exceed an aggregate principal amount outstanding at any
     time of $10 million; so long as, the Issuer shall have obtained from Fitch
     a letter confirming that, after giving effect of the incurrence of such
     Indebtedness, there will be no downgrade of the then-applicable ratings of
     the Senior Secured Notes;

          (e) Subordinated Debt; and

          (f) Indebtedness incurred by the Issuer in order to refinance existing
     Indebtedness incurred pursuant to clause (b), (c) or (d) above, provided,
     (1) such refinancing Indebtedness has an average life equal to or greater
     than the average life of


                                      -56-



     the Indebtedness being refinanced, (2) the aggregate amount of such
     refinancing Indebtedness does not exceed the principal amount of the
     Indebtedness being refinanced and (3) to the extent that the original
     incurrence of the refinanced Indebtedness was subject to certain conditions
     and requirements pursuant to this Indenture, such refinancing Indebtedness
     shall comply with all of the conditions and requirements applicable to the
     refinanced Indebtedness.

          Section 4.19 Limitation on Indebtedness of Subsidiaries.

          The Issuer shall not permit any of its Subsidiaries to create, incur
or suffer to exist any Indebtedness other than (i) Indebtedness owed to the
Issuer represented by an intercompany note that has been pledged as part of the
Collateral securing the Senior Secured Notes, the subordination terms of which
are substantially consistent with the terms and conditions set forth in Exhibit
D and (ii) Indebtedness represented by the Guarantees.

          Section 4.20 Limitations on Guarantees.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
contingently or otherwise, be or become liable in connection with any Guarantee,
except for (i) endorsements and similar obligations in the ordinary course of
business and (ii) Guarantees of the Senior Secured Notes.

          Section 4.21 Prohibitions on Other Obligations or Assignments.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
assign any of its or its Subsidiaries' respective rights or obligations under
any Financing Document.

          Section 4.22 Books and Records, Inspection.

          The Issuer shall, and shall cause each of its Subsidiaries to,
maintain books and records in accordance with GAAP and provide the Trustee, the
Collateral Agent and the Independent Engineer with reasonable inspection rights
with respect to the Projects and such books and records.

          Section 4.23 Maintenance of Existence.

          The Issuer shall, and shall cause each of its Subsidiaries to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its and their (i) existence and good standing under the laws of their
respective states of organization, in accordance with their organizational
documents (as the same may be amended from time to time), (ii) qualification to
do business in each jurisdiction in which the character of the properties owned
or leased by it or in which the transaction of its business as conducted or
proposed to be conducted makes such qualification necessary and (iii) powers,
rights (charter and statutory), privileges, licenses and franchises with respect
to the Projects except where the failure to maintain any of the foregoing in
clause (iii) could not reasonably be expected to have a Material Adverse Effect.


                                      -57-



          Section 4.24 Additional Documents; Filings and Recordings.

          The Issuer shall, and shall cause each of its Subsidiaries to, execute
and deliver, as requested by the Trustee or the Collateral Agent, such other
documents as shall reasonably be necessary or advisable in order to effect or
protect the rights and remedies of the Trustee or the Collateral Agent, as the
case may be, granted or provided for by the Security Documents to which the
Issuer is a party and to consummate the transactions contemplated therein. The
Issuer shall, at its own expense, take all reasonable actions (a) that are
requested by the Trustee or the Collateral Agent, or (b) that an Authorized
Officer of the Issuer has actual knowledge are necessary as a legal matter, to
establish, maintain and perfect the first priority security interests of Trustee
and the Collateral Agent in the Collateral, subject to Permitted Liens. Without
limiting the generality of the foregoing, the Issuer shall execute or cause to
be executed and shall file or cause to be filed such financing statements,
continuation statements, and fixture filings and such mortgages, or deeds of
trust in all places necessary or advisable to establish, maintain and perfect
the Liens purported to be provided for in the Security Documents, subject to
Permitted Liens.

          Section 4.25 Dividend and Other Payment Restrictions Affecting
Subsidiaries.

          The Issuer shall not, nor shall it permit any of its Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any of its Subsidiaries
to:

          (a) pay dividends or make any other distributions on its Capital Stock
     to the Issuer or any of its Subsidiaries, or with respect to any other
     interest or participation in, or measured by, its profits, or pay any
     Indebtedness owed to the Issuer or any of its Subsidiaries;

          (b) make loans or advances to the Issuer or any of its Subsidiaries;
     or

          (c) transfer any of its properties or assets to the Issuer or any of
     its Subsidiaries.

          However, the preceding restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:

          (a) any of the Financing Documents;

          (b) Applicable Law;

          (c) customary non-assignment provisions in contracts, agreements,
     leases, permits or licenses entered into or issued in the ordinary course
     of business and consistent with past practices;

          (d) purchase money obligations for property acquired in the ordinary
     course of business and Capital Lease Obligations that impose restrictions
     on the property


                                      -58-



     purchased or leased of the nature described in clauses (a) and (c) of the
     preceding paragraph;

          (e) Indebtedness incurred pursuant to clause (f) of the definition of
     Permitted Indebtedness; provided, that the restrictions contained in the
     agreements governing such Indebtedness are not materially more restrictive,
     taken as a whole, than those contained in the agreements governing the
     Indebtedness being refinanced; and

          (f) Liens securing Indebtedness otherwise permitted to be incurred
     under Section 4.27 that limit the right of the debtor to dispose of the
     assets subject to such Liens or to use the proceeds of any such
     disposition.

          Section 4.26 Budget; Major Maintenance Expenditures.

          The Issuer shall deliver to the Trustee, the Collateral Agent and the
Independent Engineer at least 30 days prior to the beginning of each fiscal year
of the Issuer, at its own expense, (a) an annual Operating Budget and (b) a
certificate setting forth the estimated amount of any Major Maintenance
Expenditures anticipated to be incurred during such fiscal year (the "Major
Maintenance Expenditure Amount").

          Section 4.27 Limitation on Liens.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
grant, create, incur or suffer to exist any Liens upon any of its or their
assets, except for the Permitted Liens.

          Section 4.28 Compliance With Laws.

          The Issuer shall, and shall cause each of its Subsidiaries to, comply
with all applicable laws and Governmental Approvals, except where non-compliance
could not reasonably be expected to have a Material Adverse Effect.

          Section 4.29 Operation and Maintenance.

          The Issuer shall, and shall cause each of its Subsidiaries to, at all
times maintain and operate each Project in compliance with Prudent Industry
Practices.

          Section 4.30 Additional Subsidiaries; Bank Accounts.

          The Issuer shall own at all times, directly or indirectly, 100% of the
issued and outstanding Capital Stock of each of its Subsidiaries. The Issuer
shall not, and shall not permit any of its Subsidiaries to, acquire or create
any additional Subsidiaries. The Issuer shall not, and shall not permit any of
its Subsidiaries to, establish or maintain any bank account other than the
Accounts, and not more than four checking accounts (each, a "Checking Account"),
provided, that the Secured Parties shall have a perfected security interest in
such Checking Accounts pursuant to an agreement which is reasonably satisfactory
to the Collateral Agent.


                                      -59-



          Section 4.31 Maintenance of Water Supply; Access Rights.

          The Issuer shall, and shall cause its Subsidiaries to, at all times
maintain in full force and effect the agreements and other arrangements to
ensure that (i) the Projects have a constant and continuous supply of water to
the extent necessary to permit the operation of the Projects at levels
contemplated in the Projections and (ii) the Projects have such real estate
rights as may be necessary to ensure the ingress to and egress from each of the
Projects.

          Section 4.32 No Abandonment.

          The Issuer shall, and shall cause its Subsidiaries not to permit the
occurrence of any Event of Abandonment. Section 4.33 Consents to Assignment of
Additional Project Documents. The Issuer shall, and shall cause its Subsidiaries
to (a), to the extent not previously provided, obtain from Southern California
Edison all executed Third Party Consents related to any Material Project
Agreement to which it is a party in connection with the Projects within 90 days
following the Closing Date, and (b) if the Issuer or any of its Subsidiaries
enters into any Additional Project Document, use commercially reasonable efforts
to obtain from the counterparty to such Additional Project Document executed
Third Party Consents.

          Section 4.34 Loans.

          The Issuer shall not, and shall not permit its Subsidiaries to, make
any loan or advance (other than a loan or advance to a Guarantor that
constitutes Indebtedness owed to the Issuer and that is represented by an
intercompany note that has been pledged as part of the Collateral securing the
Senior Secured Notes, the subordination terms of which are substantially
consistent with the terms and conditions set forth in Exhibit D); provided,
however, the Issuer may make and direct the investment of funds on deposit in
the accounts in Permitted Investments in accordance with the terms of the
Financing Documents.

          Section 4.35 Amendments to Organizational Documents.

          The Issuer shall not, and shall cause its Subsidiaries not to, amend,
modify or supplement its or their Organizational Documents except such
amendments that (i) could not reasonably be expected to result in a Material
Adverse Effect and (ii) could not reasonably be expected to adversely affect any
provisions of such organizational documents that relate to the bankruptcy
remoteness of the Issuer.

          Section 4.36 Removal of Independent Consultants.

          The Issuer shall not remove or otherwise replace any of the
Independent Consultants; provided, that any Independent Consultant may be
replaced or removed by the Issuer at any time (i) in the event that any such
Independent Consultant shall have become incapable of acting or performing its
services, or otherwise fails to perform its function as the


                                      -60-



Independent Consultant in the manner contemplated by this Indenture and the
other Financing Documents, or shall have been adjudged bankrupt or insolvent, or
a receiver of such Independent Consultant or of its property shall have been
appointed, or any public office shall have taken control or charge of such
Independent Consultant or its property or affairs for the purpose of
rehabilitation, conservation or liquidation at any time or (ii) so long as the
Issuer shall have certified to the Trustee (which certification shall have been
delivered by an Authorized Representative of the Issuer) that the replacement
Independent Consultant being retained to perform the services of the removed or
replaced Independent Consultant is properly qualified to perform such services
at least to the same degree, extent and quality as the replaced or removed
Independent Consultant and the same could not reasonably be expected to
materially adversely affect the rights of the Holders.

          Section 4.37 Payments for Consent.

          The Issuer shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of Senior Secured Obligations for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of any
Financing Document unless such consideration is offered to be paid and is paid
to all Holders of Senior Secured Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

          Section 4.38 Limitation on Issuance and Sale of Capital Stock of
Subsidiaries.

          The Issuer shall not permit any of its Subsidiaries to transfer,
convey, sell or otherwise dispose of Capital Stock in any of its Subsidiaries to
any Person, other than the Issuer or one of the Guarantors in accordance with
Section 4.10 herein; provided that the Collateral, after giving effect to such
transfer, conveyance, sale or disposition shall continue to have the same
priority and perfection following such transfer, conveyance, sale or
disposition.

          Section 4.39 Maintenance of Qualifying Facility Status.

          The Issuer shall, and shall cause each of its Operating Subsidiaries
to, operate and maintain each Plant as a Qualifying Facility.

          Section 4.40 Payment of taxes and claims.

          The Issuer shall and shall cause each of its Subsidiaries to pay and
discharge (a) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties before
they shall become delinquent, (b) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, could reasonably be expected to give
rise to a Lien upon any of its properties; and (c) except as prohibited under
the Financing Documents, all of its other Indebtedness as it shall become due;
provided, however, neither the Issuer nor its Subsidiaries shall be required to
pay any such tax, assessment, charge, levy, claim or Indebtedness which is being
contested in good faith by appropriate proceedings, as to which adequate
reserves have been established in accordance with GAAP, unless the failure to
make such payment (i) could reasonably be expected to give


                                      -61-



rise to an immediate right to foreclose on a Lien securing such amounts or (ii)
could reasonably be expected to have a Material Adverse Effect.

          Section 4.41 Preservation of Liens.

          The Issuer shall take all actions and shall cause it Subsidiaries to
take all actions necessary to preserve the validity, perfection and priority of
the Liens and security interests in the Collateral created pursuant to the
Security Documents.

          Section 4.42 Title Report.

          In connection with the Material Real Property Interests, the Issuer
shall provide to the Collateral Agent a title report and title policy, including
endorsements, or title opinion in form and substance satisfactory to the
Collateral Agent and in connection with the Deeds of Trust, evidence that the
Deeds of Trust have been filed for recording; provided, that such title policies
may contain a survey exception.

          Section 4.43 Additional Capacity.

          The Issuer shall not, and shall not permit its Subsidiaries to, use or
permit any Person to use any portion of the Geothermal Resource for purposes
other than the operation and maintenance of the Projects unless:

          (i) such use is in connection with the operation and maintenance of a
     new Project (other than the Heber 1 Project, the Heber 2 Project and the
     Gould Project) that is constructed following the Closing Date on the site
     of any of the Projects existing on the Closing Date and owned by the Issuer
     or any of its Subsidiaries;

          (ii) (a) construction of such new Project commences prior to the
     two-year anniversary of the Closing Date and is completed within two years
     following the commencement of construction, and the Generating Capacity of
     such new Project, when taken together with the aggregate Generating
     Capacity of all of the other Projects, shall not exceed 109 MW, or (b) to
     the extent that such new Project is to be constructed following the
     two-year anniversary of the Closing Date, prior to the occurrence of any
     such construction, the Geothermal Consultant shall have delivered a
     certificate to the Trustee certifying that the generation of any proposed
     capacity by the new Project will have no adverse effect on the Geothermal
     Resource such that the Projects would be unable to generate electricity
     through the Final Maturity Date at the same levels as immediately prior to
     the generation of such proposed additional capacity;

          (iii) any revenues received in connection with the operation of such
     new Project shall be deposited into the Revenue Account in accordance with
     Section 4.12 herein and in accordance with the Depositary Agreement;

          (iv) all costs associated with the construction of such new Project
     shall have been funded by capital contributions or Subordinated Debt from
     Ormat Nevada only and the Collateral Agent shall have received a Lien on
     all of the assets of such new Project


                                      -62-



     in accordance with the Security Documents and all Material Project
     Documents related thereto;

          (v) all necessary Governmental Approvals required to be obtained in
     connection with the ownership, construction, operation and maintenance of
     such new Project shall have been obtained in accordance with requirements
     of Applicable Law;

          (vi) the construction and operation of such new Project shall not (a)
     conflict with or cause a default under any Material Project Document
     (including with respect to such new Project), (b) conflict with or cause a
     violation of any Applicable Law or (c) conflict with or cause a breach of
     or default under any Governmental Approvals and other consents and
     approvals required in connection with the Issuer's business (including with
     respect to such new Project); and

          (vii) the Issuer shall have delivered a certificate to the Collateral
     Agent certifying as to the matters described in clauses (i) through (vi)
     above.

          Section 4.44 Use of Proceeds.

          The Issuer shall not use the proceeds of the Initial Notes for any
purpose other than to (i) repay, in full, the Issuer's outstanding loan with
Beal Bank S.S.B, (ii) fund the Debt Service Reserve Account and (iii) pay the
costs, fees and expenses incurred in connection with the issuance of the Initial
Notes.

          Section 4.45 Fitch Rating.

          The Issuer, so long as any Initial Notes shall remain Outstanding,
shall maintain a rating of the Initial Notes by Fitch.

                                    ARTICLE V

                              DEFAULTS AND REMEDIES

          Section 5.01 Events of Default.

The following events constitute an "Event of Default" under this Indenture:

          (a) (1) the failure to pay or cause to be paid any principal on the
     Senior Secured Notes after the same becomes due and payable or (2) the
     failure to pay or cause to be paid any interest, premium, if any, fees or
     any other obligations on the Senior Secured Notes for five or more days
     after the same becomes due and payable, whether, with respect to each of
     sub-clauses (1) and (2), by scheduled maturity or required prepayment or by
     acceleration or otherwise;

          (b) any representation or warranty made by the Issuer, any Subsidiary
     or Ormat Nevada under any Financing Document shall prove to have been
     untrue or misleading as of the time made, confirmed or furnished and the
     fact, event or


                                      -63-



     circumstance that gave rise to such inaccuracy has had or could reasonably
     be expected to result in a Material Adverse Effect and such fact, event or
     circumstance shall continue to be uncured for 30 or more days from the date
     a Responsible Officer of the Issuer, such Subsidiary or Ormat Nevada, as
     the case may be, obtains knowledge thereof; provided, that if the Issuer,
     such Subsidiary or Ormat Nevada, as the case may be, commences efforts to
     cure such fact, event or circumstance within such 30-day period, the
     Issuer, such Subsidiary or Ormat Nevada, as the case may be, may continue
     to effect such cure and such misrepresentation will not be deemed an Event
     of Default for an additional 90 days so long as the Issuer, such Subsidiary
     or Ormat Nevada, as the case may be, is diligently pursuing such cure;

          (c) the failure by the Issuer or any Subsidiary to perform or observe
     any covenant contained in Sections 4.06, 4.07, 4.09, 4.10, 4.11, 4.15,
     4.16, 4.18, 4.19, 4.20, 4.23, 4.27 and 4.32 and such failure shall continue
     uncured for 30 or more days after a Responsible Officer of the Issuer, any
     Subsidiary or Ormat Nevada, as the case may be, obtains knowledge thereof;

          (d) the failure by the Issuer, any Subsidiary or Ormat Nevada to
     perform or observe any of the other covenants in the Financing Documents
     that the Issuer, such Subsidiary or Ormat Nevada is a party to (other than
     such failures described in clause (a) or (c) above) and such failure shall
     continue uncured for 30 or more days after a Responsible Officer of the
     Issuer, any Subsidiary or Ormat Nevada, as the case may be, obtains
     knowledge thereof; provided that if the Issuer, any Subsidiary or Ormat
     Nevada, as the case may be, commence efforts to cure such default within
     such 30-day period, the Issuer, any Subsidiary or Ormat Nevada, as the case
     may be, may continue to effect such cure of the default and such default
     will not be deemed an Event of Default for an additional 90 days so long as
     the Issuer, any Subsidiary or Ormat Nevada, as the case may be, is
     diligently pursuing such cure; provided further that any failure by the
     Issuer to comply with its obligations pursuant to Section 4.45 resulting
     solely from the termination of the rating of the Initial Notes by Fitch for
     reasons not otherwise, in part or in whole, attributable to the Issuer, the
     Guarantor or any Affiliate thereof, shall not constitute an Event of
     Default hereunder;

          (e) the Issuer or any Subsidiary of the Issuer:

               (i) admits in writing its inability, or is generally unable, to
          pay its debts as the debts become due or makes a general assignment
          for the benefit of creditors; or

               (ii) commences any case, proceeding or other action seeking
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any applicable liquidation,
          conservatorship, bankruptcy, moratorium, arrangement, adjustment,
          insolvency, reorganization or similar laws affecting the rights or
          remedies of creditors generally, as in effect from time to time
          (collectively, "Debtor Relief Law"); or


                                      -64-



               (iii) in any involuntary case, proceeding or other action
          commenced against it which seeks to have an order for relief
          (injunctive or otherwise) entered against it, as debtor, or seeks
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any Debtor Relief Law, (A) fails
          to obtain a dismissal of such case, proceeding or other action within
          ninety (90) days of its commencement, or (B) converts the case from
          one chapter of the Bankruptcy Reform Act of 1978, as amended, to
          another chapter, or (C) is the subject of an order for relief that
          remains unstayed and in effect for a period of ninety (90) days; or

               (iv) has a trustee, receiver, custodian or other official
          appointed for or to take possession of all or any part of its property
          or has any court take jurisdiction of any of its property, which
          action remains undismissed for a period of ninety (90) days;

          (f) the entry of one or more final and non-appealable judgment or
     judgments for the payment of money in excess of $10.0 million (exclusive of
     judgment amounts covered by insurance) against the Issuer or any
     Subsidiary, which remain unpaid or unstayed for a period of 60 or more
     consecutive days;

          (g) an event of default under any Permitted Indebtedness (other than
     Indebtedness referred to in clause (a) above) that results in Indebtedness
     in excess of $10.0 million becoming due and payable prior to its stated
     maturity;

          (h) any Governmental Approval required for the operation of any
     Project or any material portion thereof owned by the Issuer or any
     Subsidiary is revoked, terminated, withdrawn or ceases to be in full force
     and effect if such revocation, termination, withdrawal or cessation has had
     or could reasonably be expected to have a Material Adverse Effect and such
     revocation, termination, withdrawal or cessation is not cured within 60
     days following the occurrence thereof;

          (i) any Material Project Document or Third Party Consent or any
     material provision thereof (i) ceases to be valid and binding and in full
     force and effect prior to its stated expiration date other than as a result
     of an amendment or termination permitted under this Indenture or (ii) a
     party thereto fails to perform or observe any of its covenants or
     obligations thereunder or makes any material misrepresentation thereunder
     and such event has had or could reasonably be expected to have a Material
     Adverse Effect; provided, that, in any such event no such event shall be an
     Event of Default if within 180 days from the occurrence of any such event,
     (a) such Material Project Document or Third Party Consent or material
     provision thereof is reinstated as a valid and binding agreement among the
     parties thereto, (b) any breaching party resumes performance and otherwise
     cures such misrepresentation or failure to perform or observe its covenants
     or obligations under the Material Project Documents or Third Party Consents
     or (c) in the case of Material Project Documents, the Issuer enters into


                                      -65-



     an Additional Project Document in replacement thereof, as permitted under
     this Indenture;

          (j) any of the Security Documents or any other Financing Document
     ceases to be in full force and effect or any Lien granted therein ceases to
     be a valid and perfected Lien in favor of the Secured Parties on the
     Collateral described therein with the priority purported to be created
     thereby; provided, however, that the Issuer shall have 10 days after a
     Responsible Officer of the Issuer, any Subsidiary or Ormat Nevada, as the
     case may be, obtains knowledge thereof to cure any such cessation or to
     furnish to the Trustee, the Collateral Agent or the Depositary all
     documents or instruments required to cure any such cessation;

          (k) the occurrence of a Change of Control; or

          (l) the failure of Ormat Technologies to make all payment, when due,
     pursuant to the Production Tax Credit Agreement.

          Section 5.02 Enforcement of Remedies.

          (a) If one or more Events of Default have occurred and are continuing,
then, subject to the terms of the Intercreditor Agreement:

          (i) in the case of an Event of Default described in clause (e) above
     with respect to the Issuer, the entire outstanding principal amount of the
     Senior Secured Notes, all interest accrued and unpaid thereon, and all
     premium, if any, and other amounts payable under this Indenture, if any,
     shall automatically become due and payable without presentment, demand,
     protest or notice of any kind; or

          (ii) in the case of an Event of Default described in:

               (A) clause (a) above, upon the written direction of the Holders
          of no less than 25% in aggregate principal amount of the Outstanding
          Senior Secured Notes, the Trustee shall declare the outstanding
          principal amount of the Senior Secured Notes to be accelerated and due
          and payable and all interest accrued and unpaid thereon, and all
          premium, if any, and other amounts payable under this Indenture, if
          any, to be due and payable; or

               (B) clause (b), (c), (d), (e) (with respect to the Subsidiaries),
          (f), (g), (h), (i), (j), (k) or (l) above, upon the written direction
          of the Required Holders, the Trustee shall declare the outstanding
          principal amount of the Senior Secured Notes to be accelerated and due
          and payable and all interest accrued and unpaid thereon, and all
          premium, if any, and other amounts payable under this Indenture, if
          any, to be due and payable.

          (b) At any time after the principal of the Senior Secured Notes has
become due and payable upon a declared acceleration, and before any judgment or
decree for the


                                      -66-



payment of the money so due, or any portion thereof, has been entered, the
Required Holders, by written notice to the Issuer and the Trustee, shall rescind
and annul such declaration and its consequences if:

          (i) there has been paid to or deposited with the Trustee a sum
     sufficient to pay:

               (A) all overdue interest on the Senior Secured Notes,

               (B) the principal of and premium, if any, on any Senior Secured
          Notes that have become due (including overdue principal) other than by
          such declaration of acceleration and interest thereon at the
          respective rates provided in the Senior Secured Notes for overdue
          principal;

               (C) to the extent that payment of such interest is lawful,
          interest upon overdue interest at the respective rates provided in the
          Senior Secured Notes for overdue interest; and

               (D) all sums paid or advanced by the Trustee and the Collateral
          Agent and the reasonable compensation, expenses, disbursements, and
          advances of the Trustee, the Depositary, the Collateral Agent and
          their respective agents and counsel; and

          (ii) all Events of Default, other than the nonpayment of the principal
     of the Senior Secured Notes that has become due solely by such
     acceleration, have been cured or waived in accordance with this Indenture.

          (c) If an Event of Default has occurred and is continuing and an
acceleration has occurred, the Trustee may (as the Required Holders request)
direct the Collateral Agent to take possession of any or all of the Collateral
or to exercise any or all other rights of the Secured Parties under the Security
Documents.

          If an Event of Default occurs and is continuing and is actually known
to a Responsible Officer of the Trustee, the Trustee will mail to each Holder
notice of the Event of Default within 30 days after obtaining such knowledge.
Except in the case of an Event of Default in payment of principal of, interest
or premium, if any, on any Senior Secured Note, the Trustee may withhold the
notice to the Holders if the Trustee in good faith determines that withholding
the notice is in the interest of the Holders.

          If an Event of Default relating to failure to pay amounts owed on the
Senior Secured Notes has occurred and is continuing, the Trustee may declare the
principal amount of the Outstanding Senior Secured Notes, all interest accrued
and unpaid thereon, and all premium, if any, and other amounts payable under the
Senior Secured Notes and this Indenture, if any, to be due and payable
notwithstanding the absence of written direction from Holders of at least 25% in
aggregate principal amount of the Outstanding Senior Secured Notes directing the
Trustee in writing to accelerate the principal maturity of the Senior Secured
Notes, unless the Required Holders direct the Trustee not to accelerate the
maturity of such Senior Secured


                                      -67-



Notes, if in the good faith exercise of its discretion the Trustee determines
that such action is necessary to protect the interests of the Holders.

          In addition, if one or more of the Events of Default referred to in
clause (a)(ii)(B) of this Section 5.02 has occurred and is continuing, the
Trustee may declare the entire principal amount of the Outstanding Senior
Secured Notes, all interest accrued and unpaid thereon, and all premium, if any,
and other amounts payable under the Senior Secured Notes and this Indenture, if
any, to be due and payable notwithstanding the absence of written direction from
the Required Holders directing the Trustee to accelerate the maturity of the
Senior Secured Notes, unless the Required Holders direct the Trustee not to
accelerate the maturity of the Senior Secured Notes, if in the good faith
exercise of its discretion the Trustee determines that such action is necessary
to protect the interests of the Holders.

          Section 5.03 Other Remedies.

          If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, interest and
premium, if any, on the Senior Secured Notes or to enforce the performance of
any provision of the Senior Secured Notes or this Indenture.

          The Trustee may maintain a proceeding even if it does not possess any
of the Senior Secured Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Senior Secured Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.

          Section 5.04 Waiver of Past Defaults.

          Required Holders by notice to the Trustee may on behalf of the Holders
of all of the Senior Secured Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium, if any, or interest on, the Senior
Secured Notes; provided, however, that the Required Holders may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.

          Section 5.05 Control by Majority.

          The Required Holders have the right to direct the time, place and
method of conducting any proceeding for any right or remedy available to the
Trustee or exercising any trust or power conferred on the Trustee in this
Indenture.


                                      -68-



          Section 5.06 Limitation on Suits.

          A Holder of a Senior Secured Note may pursue a remedy with respect to
this Indenture or the Senior Secured Notes only if:

          (a) the Holder of a Senior Secured Note gives to the Trustee written
     notice of a continuing Event of Default;

          (b) the Holders of at least 25% in aggregate principal amount of the
     then outstanding Senior Secured Notes make a written request to the Trustee
     to pursue the remedy;

          (c) such Holder of a Senior Secured Note or Holders of Senior Secured
     Notes offer and, if requested, provide to the Trustee indemnity
     satisfactory to the Trustee against any loss, liability or expense;

          (d) the Trustee does not comply with the request within 60 days after
     receipt of the request and the offer and, if requested, the provision of
     indemnity;

          (e) during such 60-day period the Holders of a majority in principal
     amount of the then outstanding Senior Secured Notes do not give the Trustee
     a direction inconsistent with the request; and

          (f) the pursuit of such remedy is not prohibited by the Intercreditor
     Agreement.

          A Holder of a Senior Secured Note may not use this Indenture to
prejudice the rights of another Holder of a Senior Secured Note or to obtain a
preference or priority over another Holder of a Senior Secured Note.

          Section 5.07 Rights of Holders of Senior Secured Notes to Receive
Payment.

          Notwithstanding any other provision of this Indenture, the right of
any Holder of a Senior Secured Note to receive payment of principal, premium, if
any, and interest on the Senior Secured Notes, on or after the respective due
dates expressed in the Senior Secured Notes (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.

          Section 5.08 Collection Suit by Trustee.

          If an Event of Default specified in Section 5.01(a) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuer for the whole amount of principal
of, premium, if any, and interest remaining unpaid on the Senior Secured Notes
and interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of


                                      -69-



collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.

          Section 5.09 Trustee May File Proofs of Claim.

          Subject to the terms of the Intercreditor Agreement, the Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Holders of the Senior Secured Notes
allowed in any judicial proceedings relative to the Issuer (or any other obligor
upon the Senior Secured Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 6.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Senior Secured Notes or the rights of any Holder, or
to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.

          Section 5.10 Priorities.

          If the Trustee collects any money pursuant to this Article, it shall
be applied, subject to the Intercreditor Agreement and the Collateral Agency
Agreement, to amounts owed with respect to all Senior Secured Notes and will be
applied ratably to the Holders of Senior Secured Notes in the following order
from time to time (to the extent such order does not conflict with Section 5 of
the Collateral Agency Agreement), on the date or dates fixed by the Trustee: (i)
first, to the payment of all amounts due to the Trustee or any predecessor
Trustee under this Indenture; (ii) second; (A) in case the unpaid principal
amount of the Outstanding Senior Secured Notes has not become due, to the
payment of any overdue interest, (B) in case the unpaid principal amount of a
portion of the Outstanding Senior Secured Notes has become due, first to the
payment of accrued interest on all Outstanding Senior Secured Notes for overdue
principal, premium, if any, and overdue interest, and next to the payment of the
overdue principal on all Senior Secured Notes or (C) in case the unpaid
principal amount of all the Outstanding Senior Secured Notes has become due,
first to the payment of the whole amount then due and unpaid upon the
Outstanding Senior Secured Notes for principal, premium, if any, and interest,
together with interest for overdue principal, premium, if any, and


                                      -70-



overdue interest; and (iii) third, in case the unpaid principal amount of all
the Outstanding Senior Secured Notes has become due, and all of the outstanding
principal, premium, if any, interest and other amounts owed in connection with
the Senior Secured Notes have been fully paid, any surplus then remaining will
be paid to the Issuer, or to whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may direct.

          The Trustee may fix a record date and payment date for any payment to
Holders of Senior Secured Notes pursuant to this Section 5.10.

          Section 5.11 Undertaking for Costs.

          In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Senior Secured Note pursuant to Section 5.07 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Senior Secured Notes.

                                   ARTICLE VI

                                     TRUSTEE

          Section 6.01 Duties of Trustee.

          (a) If an Event of Default actually known to a Responsible Trust
Officer has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.

          (b) Except during the continuance of an Event of Default:

          (i) the duties of the Trustee shall be determined solely by the
     express provisions of this Indenture and the Trustee need perform only
     those duties that are specifically set forth in this Indenture and no
     others, and no implied covenants or obligations shall be read into this
     Indenture against the Trustee; and

          (ii) in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture. However,
     the Trustee shall examine the certificates and opinions to determine
     whether or not they conform to the requirements of this Indenture.


                                      -71-



          (c) The Trustee may not be relieved from liabilities for its own
grossly negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

          (i) this paragraph does not limit the effect of paragraph (b) of this
     Section;

          (ii) the Trustee shall not be liable for any error of judgment made in
     good faith by a Responsible Trust Officer, unless it is proved that the
     Trustee was grossly negligent in ascertaining the pertinent facts; and

          (iii) the Trustee shall not be liable with respect to any action it
     takes or omits to take in good faith in accordance with a direction
     received by it pursuant to Section 6.05 hereof.

          (d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.

          (e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.

          (f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

          Section 6.02 Rights of Trustee.

          (a) The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.

          (b) Before the Trustee acts or refrains from acting, it may require
and shall be entitled to an Officer's Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and the advice, promptly confirmed in
writing thereafter, of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.

          (c) The Trustee may act through its attorneys, custodians, nominees
and agents and shall not be responsible for the misconduct or negligence of any
agent, attorney, custodian or nominee appointed with due care.


                                      -72-



          (d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.

          (e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuer shall be sufficient if
signed by an Officer of the Issuer.

          (f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.

          (g) In no event shall the Trustee be required to take notice of any
default or breach hereof or any Event of Default hereunder, except for Events of
Default specified in Section 5.01(a) hereof, unless and until the Trustee shall
have received from a Holder or from the Issuer express written notice of the
circumstances constituting the breach, default or Event of Default and stating
that said circumstances constitute an Event of Default hereunder.

          (h) If the Trustee is acting as Paying Agent, Registrar, Collateral
Agent, Depositary, Securities Intermediary or Intercreditor Agent hereunder, the
rights and protections afforded to the Trustee pursuant to this Article VI
(other than the Trustee's right to require, and entitlement to, an Opinion of
Counsel pursuant to Section 6.02(b) hereof) will also be afforded to such Paying
Agent, Registrar, Collateral Agent, Depositary, Securities Intermediary and
Intercreditor Agent.

          Section 6.03 Individual Rights of Trustee.

          The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Secured Notes and may otherwise deal with the Issuer
or any Affiliate of the Issuer with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 6.10 and 6.11 hereof.

          Section 6.04 Trustee's Disclaimer.

          The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Secured Notes, it
shall not be accountable for the Issuer's use of the proceeds from the Senior
Secured Notes or any money paid to the Issuer or upon the Issuer's direction
under any provision of this Indenture, it shall not be responsible for the use
or application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Security Documents, the Senior Secured Notes or any other
document in connection with the sale of the Senior Secured Notes or pursuant to
this Indenture other than its certificate of authentication.


                                      -73-



          The Trustee makes no representations as to and shall not be
responsible for the existence, genuineness, value, sufficiency or condition of
any of the Collateral or as to the security afforded or intended to be afforded
thereby, hereby or by any Security Document, or for the validity, perfection,
priority or enforceability of the Liens or security interests in any of the
Collateral created or intended to be created by any of the Security Documents,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder, except to the extent such action or omission
constitutes gross negligence or willful misconduct on the part of the Trustee,
for the validity of the title of the Issuer to the Collateral, for insuring the
Collateral or for the payment of taxes, charges, assessments or Liens upon the
Collateral or otherwise as to the maintenance of the Collateral.

          References to the Trustee in this Section 6.04 shall include the
Trustee in its role as a Collateral Agent.

          Section 6.05 Notice of Defaults.

          If a Default or Event of Default occurs and is continuing and if it is
actually known to a Responsible Trust Officer, or if appropriate notice is
provided in writing in accordance with Section 6.02(g), as applicable, the
Trustee shall mail to Holders of Senior Secured Notes a notice of the Default or
Event of Default within 30 days after it occurs. Except in the case of a Default
or Event of Default in payment of principal of, premium, if any, or interest on
any Senior Secured Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Trust Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Senior Secured
Notes.

          Section 6.06 Reports by Trustee to Holders of the Senior Secured
Notes.

          (a) Within 60 days after each May 15 beginning with the May 15
following the date hereof, and for so long as any Senior Secured Notes remain
outstanding, the Trustee shall mail to the Holders of the Senior Secured Notes a
brief report dated as of such reporting date that complies with TIA Section
313(a) (but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).

          (b) A copy of each report at the time of its mailing to the Holders of
Senior Secured Notes shall be mailed to the Issuer and filed with the SEC and
each stock exchange on which the Senior Secured Notes are listed in accordance
with TIA Section 313(d). The Issuer shall promptly notify the Trustee in writing
when the Senior Secured Notes are listed on any stock exchange.

          Section 6.07 Compensation and Indemnity.

          (a) The Issuer shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder as is
now or hereafter agreed to in writing by the Issuer and the Trustee. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse


                                      -74-



the Trustee promptly upon request for all reasonable and properly documented
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable and
properly documented fees, disbursements and expenses of the Trustee's agents and
counsel.

          (b) The Issuer shall indemnify the Trustee against any and all losses,
liabilities, damages or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture and the
other Financing Documents, including the costs and expenses of enforcing this
Indenture against the Issuer (including this Section 6.07) and defending itself
against any claim (whether asserted by the Issuer or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder or in connection with the storage, use, presence,
disposal or release of any Hazardous Substance on, under or about any properties
encumbered by the Deeds of Trust, except to the extent any such loss, liability
or expense may be attributable to its gross negligence or bad faith. The Trustee
shall notify the Issuer promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of
its obligations hereunder. The Issuer shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel
(reasonably acceptable to the Issuer) and the Issuer shall pay the reasonable
fees and expenses of such counsel. The Issuer need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.

          (c) The obligations of the Issuer under this Section 6.07 shall
survive the satisfaction and discharge of this Indenture.

          (d) To secure the Issuer's payment obligations in this Section, the
Trustee shall have a Lien prior to the Senior Secured Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal, interest and premium, if any, on particular Senior Secured Notes.

          (e) When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 5.01(e) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

          (f) The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.

          (g) The provisions of this Section 6.07 shall extend to the Trustee
acting in the capacities of Paying Agent and Registrar, Collateral Agent,
Depositary, Securities Intermediary and Intercreditor Agent under this Indenture
and the other Financing Documents; provided, that nothing contained herein or in
any such other Financing Document shall allow duplicate recoveries by any such
entity in any one capacity for the same occurrence or cause of action.


                                      -75-



          Section 6.08 Replacement of Trustee.

          (a) A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.

          (b) The Trustee may resign in writing at any time and be discharged
from the trust hereby created by giving thirty (30) days written notice to the
Issuer. The Required Holders may remove the Trustee by so notifying the Trustee
and the Issuer in writing. The Issuer may remove the Trustee if:

          (i) the Trustee fails to meet the eligibility criteria set forth in
     this Indenture;

          (ii) the Trustee is adjudged a bankrupt or an insolvent or an order
     for relief is entered with respect to the Trustee under any bankruptcy law;

          (iii) no Default or Event of Default on the Issuer's part has occurred
     and is continuing and the Trustee has failed to observe or perform any of
     its material obligations under the Financing Documents;

          (iv) a custodian or public officer takes charge of the Trustee or its
     property; or

          (v) the Trustee becomes incapable of acting.

          (c) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Secured Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Issuer.

          (d) The Issuer shall give notice of each resignation and removal of
the Trustee and each appointment of a successor to all Holders.

          (e) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, or
the Holders of Senior Secured Notes of at least 10% in principal amount of the
then outstanding Senior Secured Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

          (f) If the Trustee, after written request by any Holder of a Senior
Secured Note who has been a Holder of a Senior Secured Note for at least six
months, fails to comply with Section 6.10, such Holder of a Senior Secured Note
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

          (g) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and


                                      -76-



duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders of the Senior Secured Notes. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, provided all sums owing to the Trustee hereunder have been
paid and subject to the Lien provided for in Section 6.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 6.08, the
Issuer's obligations under Section 6.07 hereof shall continue for the benefit of
the retiring Trustee.

          (h) If a Trustee is removed with or without cause, all fees and
expenses (including the reasonable fees and expenses of counsel) of the Trustee
incurred in the administration of the trust or in performing of the duties
hereunder shall be paid to the Trustee.

          Section 6.09 Successor Trustee by Merger, etc.

          If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.

          Section 6.10 Eligibility; Disqualification.

          There will at all times be a Trustee under this Indenture, which shall
be a corporation having either (a) a combined capital and surplus of at least
$50.0 million, or (b) a combined capital and surplus of at least $10.0 million
and being a Wholly-Owned Subsidiary of a corporation having a combined capital
and surplus of at least $50.0 million, in each case subject to supervision or
examination by a federal or state or District of Columbia authority and having a
corporate trust office in New York, New York, to the extent there is such an
institution eligible and willing to serve.

          This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).

          Section 6.11 Preferential Collection of Claims Against the Issuer.

          The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

          Section 6.12 Receipt of Documents.

          In no event shall receipt by the Trustee of financial and other
reports from the Issuer as provided in this Indenture, review of which could
lead to the conclusion that an Event of Default exists hereunder, result,
without further action, in the occurrence of an Event of Default, or impose upon
the Trustee the obligation to review and examine the same, it being understood
that all such information shall be received by the Trustee as repository for
said information and documents with no obligation on the part of the Trustee to
review the same.


                                      -77-



                                  ARTICLE VII

                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

          Section 7.01 Option to Effect Legal Defeasance or Covenant Defeasance.

          The Issuer may, at its option evidenced by a resolution set forth in
an Officers' Certificate, at any time, elect to have either Section 7.02 or 7.03
hereof be applied to all outstanding Senior Secured Notes and all obligations of
the Guarantors with respect to their Guarantees upon compliance with the
conditions set forth below in this Article VII.

          Section 7.02 Legal Defeasance and Discharge.

          Upon the Issuer's exercise under Section 7.01 hereof of the option
applicable to this Section 7.02, the Issuer shall, subject to the satisfaction
of the conditions set forth in Section 7.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Senior Secured
Notes and the Guarantors shall be deemed to be discharged from all of their
obligations with respect to their Guarantees and the Collateral Agent shall
release all of its liens on the Collateral other than pursuant to Section
7.04(a) hereof, on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Issuer shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Senior Secured Notes and the Guarantees, which
shall thereafter be deemed to be "outstanding" only for the purposes of Section
7.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Senior Secured
Notes, the Guarantees and this Indenture (and the Trustee, on demand of and at
the expense of the Issuer, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Senior Secured Notes to receive payments in respect of the principal of, or
interest or premium, if any, on such Senior Secured Notes when such payments are
due from the trust referred to below, (b) the Issuer's obligations with respect
to the Senior Secured Notes concerning issuing temporary Senior Secured Notes,
registration of Senior Secured Notes, replacing mutilated, destroyed, lost or
stolen Senior Secured Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties and immunities of the trustee, and the Issuer's and the
Guarantors' obligations in connection therewith, and (d) this Article VII.
Subject to compliance with this Article VII, the Issuer may exercise its option
under this Section 7.02 notwithstanding the prior exercise of its option under
Section 7.03 hereof.

          Section 7.03 Covenant Defeasance.

          Upon the Issuer's exercise under Section 7.01 hereof of the option
applicable to this Section 7.03, the Issuer shall and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 7.04 hereof,
be released from their obligations under any of the covenants contained in this
Indenture other than under Sections 4.01, 4.02, 4.03, 4.05 and clauses (i) and
(ii) of Section 4.23 hereof with respect to the outstanding Senior Secured Notes


                                      -78-



and may terminate the Liens of the Security Documents on the Collateral to the
extent that such Liens run to the benefit of the Trustee, the Holders or other
agents under any of the Security Documents on and after the date the conditions
set forth in Section 7.04 are satisfied (hereinafter, "Covenant Defeasance"),
and the Senior Secured Notes and all obligations of the Guarantors with respect
to the Guarantees shall thereafter be deemed not "outstanding" for the purposes
of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Secured Notes and all obligations of the Guarantors
with respect to the Guarantees shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Senior Secured Notes, the Issuer and the Guarantors may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 5.01 hereof, but, except as specified above, the
remainder of this Indenture and such Senior Secured Notes shall be unaffected
thereby. In addition, upon the Issuer's exercise under Section 7.01 hereof of
the option applicable to this Section 7.03 hereof, subject to the satisfaction
of the conditions set forth in Section 7.04 hereof, Sections 5.01(b) through
5.01(d) and Sections 5.01(g) through 5.01(l) hereof shall not constitute Events
of Default.

          Section 7.04 Conditions to Legal or Covenant Defeasance.

          The following shall be the conditions to the application of either
Section 7.02 or 7.03 hereof to the outstanding Senior Secured Notes:

          In order to exercise either Legal Defeasance or Covenant Defeasance:

          (a) the Issuer must irrevocably deposit with the Trustee, in trust,
     for the benefit of the Holders, cash in United States dollars, non-callable
     Government Securities, or a combination thereof, in such amounts as shall
     be sufficient, in the opinion of a nationally recognized firm of
     independent public accountants, to pay the principal of, premium, if any,
     and interest on the outstanding Senior Secured Notes on the stated date for
     payment thereof or on the applicable Redemption Date, as the case may be,
     and the Issuer must specify whether the Senior Secured Notes are being
     defeased to maturity or to a particular redemption date;

          (b) in the case of an election under Section 7.02 hereof, the Issuer
     shall have delivered to the Trustee an Opinion of Counsel in the United
     States reasonably acceptable to the Trustee confirming that (A) the Issuer
     has received from, or there has been published by, the Internal Revenue
     Service a ruling or (B) since the date hereof, there has been a change in
     the applicable federal income tax law, in either case to the effect that,
     and based thereon such Opinion of Counsel shall confirm that, the Holders
     of the outstanding Senior Secured Notes will not recognize income, gain or
     loss for federal income tax purposes as a result of such Legal Defeasance
     and will be subject to federal


                                      -79-



     income tax on the same amounts, in the same manner and at the same times as
     would have been the case if such Legal Defeasance had not occurred;

          (c) in the case of an election under Section 7.03 hereof, the Issuer
     shall have delivered to the Trustee an Opinion of Counsel in the United
     States reasonably acceptable to the Trustee confirming that the Holders of
     the outstanding Senior Secured Notes will not recognize income, gain or
     loss for federal income tax purposes as a result of such Covenant
     Defeasance and will be subject to federal income tax on the same amounts,
     in the same manner and at the same times as would have been the case if
     such Covenant Defeasance had not occurred;

          (d) no Default or Event of Default shall have occurred and be
     continuing on the date of such deposit (other than a Default or Event of
     Default resulting from the incurrence of Indebtedness all or a portion of
     the proceeds of which will be used to defease the Senior Secured Notes
     pursuant to this Article 7 concurrently with such incurrence);

          (e) such Legal Defeasance or Covenant Defeasance shall not result in a
     breach or violation of, or constitute a default under, any material
     agreement or instrument (other than this Indenture) to which the Issuer is
     a party or by which the Issuer is bound;

          (f) the Issuer shall have delivered to the Trustee an Officers'
     Certificate stating that the deposit was not made by the Issuer with the
     intent of preferring the Holders over any other creditors of the Issuer or
     with the intent of defeating, hindering, delaying or defrauding any other
     creditors of the Issuer; and

          (g) the Issuer shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent provided for or relating to the Legal Defeasance or the Covenant
     Defeasance have been complied with.

          Section 7.05 Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.

          Subject to Section 7.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 7.05, the
"Trustee") pursuant to Section 7.04 hereof in respect of the outstanding Senior
Secured Notes shall be held in trust and applied by the Trustee, in accordance
with the provisions of such Senior Secured Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Issuer
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Senior Secured Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.

          The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 7.04 hereof or the principal and
interest received in respect


                                      -80-



thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Senior Secured Notes.

          Anything in this Article VII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon the request of
the Issuer any money or non-callable Government Securities held by it as
provided in Section 7.04 hereof which, in the opinion of a nationally recognized
investment bank or firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 7.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.

          Section 7.06 Repayment to Issuer.

          Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuer, in trust for the payment of the principal of, premium, if any, or
interest on any Senior Secured Note and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Issuer on its request or (if then held by the Issuer) shall
be discharged from such trust; and the Holder of such Senior Secured Note shall
thereafter, as a secured creditor, look only to the Issuer for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Issuer as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Issuer cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Issuer.

          Section 7.07 Reinstatement.

          If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 7.02 or
7.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuer's obligations under this Indenture and the Senior
Secured Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 7.02 or 7.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 7.02 or
7.03 hereof, as the case may be; provided, however, that, if the Issuer makes
any payment of principal of, premium, if any, or interest on any Senior Secured
Note following the reinstatement of its obligations, the Issuer shall be
subrogated to the rights of the Holders of such Senior Secured Notes to receive
such payment from the money held by the Trustee or Paying Agent.


                                      -81-



                                  ARTICLE VIII

                        AMENDMENT, SUPPLEMENT AND WAIVER

          Section 8.01 Without Consent of Holders of Senior Secured Notes.

          Notwithstanding Section 8.02 of this Indenture, the Issuer and the
Trustee may amend or supplement this Indenture and any of the other Financing
Documents without the consent of any Holder of a Senior Secured Note:

          (a) to cure any ambiguity, defect or inconsistency;

          (b) to add additional covenants of the Issuer or its Subsidiaries, to
     surrender rights conferred upon the Issuer or its Subsidiaries, or to
     confer additional benefits upon the Holders;

          (c) to increase the assets securing the Issuer's obligations under
     this Indenture;

          (d) to allow any Subsidiary to execute a supplemental indenture,
     Series Supplemental Indenture and/or Guarantee with respect to the Senior
     Secured Notes;

          (e) to comply with requirements of the SEC in order to effect or
     maintain the qualification of this Indenture under the Trust Indenture Act;

          (f) to make any change not inconsistent with the terms of this
     Indenture that does not adversely affect the legal rights thereunder of any
     Holder of the Senior Secured Notes; or

          (g) to establish the form and terms of the Senior Secured Notes of any
     series permitted by Sections 2.01 and 2.03.

          Upon the request of the Issuer accompanied by a resolution of the
Issuer's Board of Directors authorizing the execution of any such amended or
supplemental Indenture or amendments to the other Financing Documents, and upon
receipt by the Trustee of the documents described in Section 6.02 hereof, the
Trustee and the Collateral Agent shall join with the Issuer in the execution of
any amended or supplemental indenture and any amendment to any of the other
Financing Documents authorized or permitted by the terms of this Indenture and
to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee and the Collateral Agent shall not be obligated to
enter into such amended or supplemental Indenture or amendments to the Financing
Documents that affects its own rights, duties, immunities, or indemnities under
this Indenture or otherwise.

          Section 8.02 With Consent of Holders of Senior Secured Notes.

          Except as provided below in this Section 8.02, the Issuer and the
Trustee may amend or supplement this Indenture (including Section 4.23 hereof)
and the other Financing


                                      -82-



Documents with the consent of the Required Holders voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Senior Secured Notes), and, subject to Sections 5.04
and 5.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Senior Secured Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the other Financing Documents may be waived with the consent of the
Required Holders voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the Senior
Secured Notes); provided, however, that if there shall be Senior Secured Notes
of more than one series Outstanding hereunder and if a proposed supplemental
indenture shall directly affect the rights of the Holders of one or more, but
less than all, of such series, then the consent only of the Holders of not less
than a majority in aggregate principal amount of the Outstanding Senior Secured
Notes of all series so directly affected, considered as one class, shall be
required. Section 2.08 hereof shall determine which Senior Secured Notes are
considered to be "outstanding" for purposes of this Section 8.02.

          Upon the request of the Issuer accompanied by a resolution of the
Issuer's Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Senior Secured
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 6.02 hereof, the Trustee shall join with the Issuer in the execution
of such amended or supplemental Indenture and amendments to the other Financing
Documents unless such amended or supplemental Indenture or amendments to the
Financing Documents directly affects the Trustee's own rights, duties,
immunities or indemnities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture or such amendments.

          It shall not be necessary for the consent of the Holders of Senior
Secured Notes under this Section 8.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.

          After an amendment, supplement or waiver under this Section becomes
effective, the Issuer shall mail to the Holders of Senior Secured Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver or amendments to the Financing Documents.
Subject to Sections 5.04 and 5.07 hereof, the Required Holders may waive
compliance in a particular instance by the Issuer with any provision of this
Indenture or the Senior Secured Notes. However, without the consent of all
Holders of Outstanding Senior Secured Notes directly affected thereby, an
amendment or waiver under this Section 8.02 may not (with respect to any such
Senior Secured Notes held by a non-consenting Holder):

          (a) modify the principal, interest or premium, if any, payable upon
     the Senior Secured Notes;


                                      -83-



          (b) modify the dates on which principal, interest and premium, if any,
     on any Senior Secured Notes are paid;

          (c) release any Guarantor from its obligations under a Guarantee;

          (d) modify the dates of maturity of any Senior Secured Notes; and

          (e) make any change in the preceding procedures for amendment,
     supplement or waiver.

          This Indenture and the other Security Documents may be amended or
supplemented to provide for the release of Collateral, by the Issuer and the
Trustee, with the consent of Holders of not less than 66?% of the Outstanding
Senior Secured Notes.

          A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Senior Secured Notes, or which
modifies the rights of the Holders of Senior Secured Notes of such series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Senior Secured Notes of any other
series.

          Upon the request of the Issuer accompanied by a resolution of the
Issuer's Board of Directors authorizing the execution of any such amended or
supplemental indenture or amendments to the other Financing Documents, and upon
receipt by the Trustee of the documents described in Section 6.02 hereof, the
Trustee and the Collateral Agent shall join with the Issuer in the execution of
any amended or supplemental indenture and any amendment to any of the other
Financing Documents authorized or permitted by the terms of this Indenture and
to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee and the Collateral Agent shall not be obligated to
enter into such amended or supplemental Indenture or amendments to the Financing
Documents that affects its own rights, duties, immunities, or indemnities under
this Indenture or otherwise.

          It shall not be necessary for any act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such act shall approve the substance thereof.

          Section 8.03 Revocation and Effect of Consents.

          Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Senior Secured Note is a continuing consent by the Holder
of a Senior Secured Note and every subsequent Holder of a Senior Secured Note or
portion of a Senior Secured Note that evidences the same debt as the consenting
Holder's Senior Secured Note, even if notation of the consent is not made on any
Senior Secured Note. However, any such Holder of a Senior Secured Note or
subsequent Holder of a Senior Secured Note may revoke the consent as to its
Senior Secured Note if the Trustee receives written notice of revocation before
the date the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.


                                      -84-



          Section 8.04 Notation on or Exchange of Senior Secured Notes.

          The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Secured Note thereafter authenticated. The
Issuer in exchange for all Senior Secured Notes may issue and the Trustee shall,
upon receipt of an Authentication Order, authenticate new Senior Secured Notes
that reflect the amendment, supplement or waiver.

          Failure to make the appropriate notation or issue a new Senior Secured
Note shall not affect the validity and effect of such amendment, supplement or
waiver.

          Section 8.05 Trustee to Sign Amendments, etc.

          The Trustee and the Collateral Agent shall sign any amended or
supplemental indenture and amendments to the other Financing Documents
authorized pursuant to this Article VIII if the amendment or supplement does not
adversely affect the rights, duties, liabilities, immunities or indemnities of
the Trustee or the Collateral Agent. The Issuer may not sign an amendment or
supplemental indenture until its shareholders approve it. In executing any
amended or supplemental indenture or amendments to the other Financing
Documents, the Trustee and the Collateral Agent shall be entitled to receive and
(subject to Section 6.01 hereof) shall be fully protected in relying upon, in
addition to the documents required by Section 10.04 hereof, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such amended
or supplemental indenture or amendment to the other Financing Documents is
authorized or permitted by this Indenture.

          Section 8.06 Execution of Supplemental Indentures.

          In executing, or accepting the additional trusts created by any Series
Supplemental Indenture or other supplemental indenture permitted by this Article
VIII or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Sections 6.01 and 6.02)
shall be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture.

          Section 8.07 Effect of Supplemental Indentures.

          Upon the execution of any supplemental indenture under this Article
VIII, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Senior Secured Notes theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.

          Section 8.08 Conformity with Trust Indenture Act.

          Every supplemental indenture executed pursuant to this Article VIII
shall conform to the requirements of the Trust Indenture Act as then in effect.

          Section 8.09 Reference in Senior Secured Notes to Supplemental
Indentures.


                                      -85-



          Senior Secured Notes authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article VIII may, and shall if
required by the Issuer, bear a notation in form approved by the Issuer as to any
matter provided for in such supplemental indenture; and, in such case, suitable
notation may be made upon Outstanding Senior Secured Notes after proper
presentation and demand. If the Issuer shall so determine, new Senior Secured
Notes so modified as to conform, in the opinion of the Issuer and the Trustee,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Senior Secured Notes.

                                   ARTICLE IX

                                    GUARANTEE

          Section 9.01 Agreement to Guarantee.

          (a) Each of the Guarantors, hereby jointly and severally with all of
the other Guarantors, unconditionally guarantees to each Holder of a Senior
Secured Note authenticated and delivered by the Trustee and to the Trustee and
its successors and assigns, regardless of the validity and enforceability of
this Indenture, the Senior Secured Notes or the other Senior Secured Obligations
of the Issuer under this Indenture or the Senior Secured Notes, that:

          (i) the principal of, interest and premium, if any, on the Senior
     Secured Notes will be promptly paid in full when due, whether at maturity,
     by acceleration, redemption or otherwise, and interest on the overdue
     principal of, interest and premium, if any, on the Senior Secured Notes, to
     the extent lawful, and all other Senior Secured Obligations of the Issuer
     to the Holders or the Trustee under this Indenture or the Senior Secured
     Notes will be promptly paid in full, all in accordance with the terms
     hereof or thereof; and

          (ii) in case of any extension of time for payment or renewal of any
     Senior Secured Note or any of such other Senior Secured Obligations, that
     the same will be promptly paid in full when due in accordance with the
     terms of the extension or renewal, whether at stated maturity, by
     acceleration or otherwise.

          (b) Notwithstanding the foregoing, in the event that this Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Guarantors under this Indenture will be reduced to the maximum amount
permissible under such fraudulent conveyance or similar law.

          (c) Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors will be jointly
and severally obligated to pay, perform or cause the performance of the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not a
guarantee of collection.


                                      -86-



          Section 9.02 Execution and Delivery of Guarantee.

          (a) To evidence its Guarantee set forth in this Indenture, each
Guarantor hereby agrees that a notation of such Guarantee substantially in the
form attached as Exhibit F to this Indenture will be endorsed by an Authorized
Officer of such Guarantor on each Senior Secured Note authenticated and
delivered by the Trustee on or after the date hereof.

          (b) Notwithstanding the foregoing, each Guarantor hereby agrees that
its Guarantee set forth herein will remain in full force and effect
notwithstanding any failure to endorse on each Senior Secured Note a notation of
such Guarantee.

          (c) If an Authorized Officer whose signature is on this Indenture or
on a Guarantee no longer holds that office at the time the Trustee authenticates
the Senior Secured Note on which a Guarantee is endorsed, the Guarantee will be
valid nevertheless.

          (d) The delivery of any Senior Secured Note by the Trustee, after the
authentication thereof under this Indenture, will constitute due delivery of the
Guarantee set forth in this Indenture on behalf of each Guarantor.

          (e) Each Guarantor hereby agrees that its Senior Secured Obligations
hereunder will be unconditional, regardless of the validity, regularity or
enforceability of the Senior Secured Note or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Senior
Secured Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Issuer, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.

          (f) If any Holder or the Trustee is required by any court or otherwise
to return to the Issuer or any Guarantor, or any custodian, Trustee, liquidator
or other similar official acting in relation to either the Issuer or such
Guarantor, any amount paid by either to the Trustee or such Holder, the
Guarantee made pursuant to this Indenture, to the extent theretofore discharged,
will be reinstated in full force and effect.

          (g) Each Guarantor agrees that it will not be entitled to exercise any
right of subrogation in relation to the Holders in respect of any Senior Secured
Notes guaranteed hereby until payment in full of all Senior Secured Notes
guaranteed hereby. Each Guarantor further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand:

          (i) the maturity of the Senior Secured Notes guaranteed hereby may be
     accelerated as provided in Article V hereof for the purposes of the
     Guarantee made pursuant to this Indenture, notwithstanding any stay,
     injunction or other prohibition preventing such acceleration in respect of
     the Senior Secured Notes guaranteed hereby; and

          (ii) in the event of any declaration of acceleration of such Senior
     Secured Notes as provided in Article V hereof, such Senior Secured Notes
     (whether or not due


                                      -87-



     and payable) will forthwith become due and payable by such Guarantor for
     the purpose of the Guarantee made pursuant to this Indenture.

          (h) Each Guarantor will have the right to seek contribution from any
other non-paying Guarantor so long as the exercise of such right does not impair
the rights of the Holders or the Trustee under the Guarantee made pursuant to
this Indenture.

          Section 9.03 Waivers by Guarantors.

          (a) Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of the
existence, creation or incurrence of any new or additional liability to which it
may apply, and waives promptness, diligence, presentment, demand of payment,
demand for performance, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Collateral Agent or any other
Secured Party against, and any other notice to, any party liable thereon
(including such Guarantor, any other Guarantor, or the Issuer) and each
Guarantor further hereby waives any and all notice of the creation, renewal,
extension or accrual of any of the Senior Secured Obligations and notice or
proof of reliance by any Secured Party upon this Guaranty, and the Senior
Secured Obligations shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended, modified, supplemented or
waived, in reliance upon this Guaranty.

          (b) Each Guarantor waives, to the fullest extent permitted by law, any
right to require the Secured Parties to: (i) proceed against the Issuer, any
other Guarantor, or any other party; (ii) proceed against or exhaust any
security held from the Issuer, any other Guarantor, or any other party; or (iii)
pursue any other remedy in the Secured Parties' power whatsoever. Each Guarantor
waives any defense based on or arising out of any defense of the Issuer, any
other Guarantor, or any other party other than (x) the payment in full in cash
of the Senior Secured Obligations or (y) to the extent permitted pursuant to the
relevant Financing Documents, the legal defeasance of the Senior Secured
Obligations in full in accordance with the express terms and conditions of the
related Financing Documents, including, without limitation, any defense based on
or arising out of the disability of the Issuer, any other Guarantor, or any
other party, or the unenforceability of the Senior Secured Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
the Issuer or any other Guarantor other than (x) the payment in full in cash of
the Senior Secured Obligations or (y) to the extent permitted pursuant to the
relevant Financing Documents, the legal defeasance of the Senior Secured
Obligations in full in accordance with the express terms and conditions of the
related Financing Documents. The Secured Parties may, at their election,
foreclose on any collateral serving as security held by the Collateral Agent or
the other Secured Parties by one or more judicial or nonjudicial sales, whether
or not every aspect of any such sale is commercially reasonable (to the extent
such sale is permitted by applicable law), or exercise any other right or remedy
the Secured Parties may have against the Issuer, any other Guarantor or any
other party, or any security, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Senior Secured
Obligations have been paid in full in cash. Each Guarantor waives any defense
arising out of any such election by the Secured Parties, even though such
election operates to impair or extinguish any right of reimbursement,


                                      -88-



contribution, indemnification or subrogation or other right or remedy of such
Guarantor against the Issuer, any other Guarantor, or any other party or any
security.

          (c) Each Guarantor has knowledge and assumes all responsibility for
being and keeping itself informed of the Issuer's and each other Guarantor's
financial condition, affairs and assets, and of all other circumstances bearing
upon the risk of nonpayment of the Senior Secured Obligations and the nature,
scope and extent of the risks which such Guarantor assumes and incurs hereunder,
and has adequate means to obtain from the Issuer and each other Guarantor on an
ongoing basis information relating thereto and the Issuer's and each other
Guarantor's ability to pay and perform its respective Senior Secured
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed for so long as any Guarantee is in effect. Each Guarantor
acknowledges and agrees that (x) the Secured Parties shall have no obligation to
investigate the financial condition or affairs of the Issuer or any other
Guarantor for the benefit of such Guarantor nor to advise such Guarantor of any
fact respecting, or any change in, the financial condition, assets or affairs of
the Issuer or any other Guarantor that might become known to any Secured Party
at any time, whether or not such Secured Party knows or believes or has reason
to know or believe that any such fact or change is unknown to such Guarantor, or
might (or does) increase the risk of such Guarantor as guarantor hereunder, or
might (or would) affect the willingness of such Guarantor to continue as a
guarantor of the Senior Secured Obligations hereunder and (y) the Secured
Parties shall have no duty to advise any Guarantor of information known to them
regarding any of the aforementioned circumstances or risks.

          (d) Each Guarantor hereby acknowledges and affirms that it understands
that to the extent the Senior Secured Obligations are secured by real property
located in the State of California, such Guarantor shall be liable for the full
amount of the liability hereunder notwithstanding foreclosure on such real
property by trustee sale or any other reason impairing such Guarantor's or any
Secured Party's right to proceed against the Issuer or any other Guarantor of
the Senior Secured Obligations.

          (e) Each Guarantor hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. Each Guarantor hereby further waives,
to the fullest extent permitted by applicable law, without limiting the
generality of the foregoing or any other provision hereof, all rights and
benefits which might otherwise be available to such Guarantor under Sections
2809, 2810, 2815, 2819, 2821, 2839, 2845, 2846, 2847, 2848, 2849, 2850, 2899 and
3433 of the California Civil Code.

          (f) Each Guarantor waives its rights of subrogation and reimbursement
and any other rights and defenses available to such Guarantor by reason of
Sections 2787 to 2855, inclusive, of the California Civil Code, including,
without limitation, (1) any defenses such Guarantor may have to this Guaranty by
reason of an election of remedies by the Secured Parties and (2) any rights or
defenses such Guarantor may have by reason of protection afforded to the Issuer
pursuant to the antideficiency or other laws of California limiting or
discharging the Issuer's indebtedness, including, without limitation, Section
580a, 580b, 580d and 726 of


                                      -89-



the California Code of Civil Procedure. In furtherance of such provisions, each
Guarantor hereby waives all rights and defenses arising out of an election of
remedies of the Secured Parties, even though that election of remedies, such as
a nonjudicial foreclosure destroys such Guarantor's rights of subrogation and
reimbursement against the Issuer by the operation of Section 580d of the
California Code of Civil Procedure or otherwise.

          (g) Each Guarantor hereby acknowledges and agrees that no Secured
Party nor any other Person shall be under any obligation (a) to marshal any
assets in favor of such Guarantor or in payment of any or all of the liabilities
of any Guarantor under the Financing Documents or the obligation of such
Guarantor hereunder or (b) to pursue any other remedy that such Guarantor may or
may not be able to pursue itself any right to which such Guarantor hereby
waives.

          (h) Each Guarantor warrants and agrees that each of the waivers set
forth in Section 9.03 is made with full knowledge of its significance and
consequences and that if any of such waivers are determined to be contrary to
any applicable law or public policy, such waivers shall be effective only to the
maximum extent permitted by applicable law.

          Each Guarantor warrants and agrees that each of the waivers set forth
above is made with full knowledge of its significance and consequences and that
if any of such waivers are determined to be contrary to any applicable law or
public policy, such waivers shall be effective only to the maximum extent
permitted by law.

          Section 9.04 Guarantors May Consolidate, etc. on Certain Terms.

          (a) Except as set forth in Article IV, and notwithstanding Section
9.04(b) hereof, nothing contained in this Indenture or in the Senior Secured
Notes will prevent any consolidation or merger of any Guarantor with or into the
Issuer or any other Guarantor or will prevent any transfer, sale or conveyance
of the property of any Guarantor as an entirety or substantially as an entirety
to the Issuer or any other Guarantor pursuant to Section 4.10 hereof.

          (b) No Guarantor may sell or otherwise dispose of all or substantially
all of its assets to, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person, other than the Issuer
or another Guarantor pursuant to Section 4.10 hereof.

          Section 9.05 Covenants of the Guarantors.

          Each Guarantor agrees that to the extent the Issuer has agreed to
cause a Subsidiary to take certain actions, or to prohibit, prevent, or
otherwise limit the ability of a Subsidiary to take certain actions, that such
agreement shall constitute a direct obligation of each Guarantor. Nothing in
this Section 9.05 shall be construed to permit any Guarantor to incur
Indebtedness permitted to be incurred by the Issuer pursuant to Section 4.18
hereof.


                                      -90-



                                   ARTICLE X

                                  MISCELLANEOUS

          Section 10.01 Trust Indenture Act Controls.

          If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.

          Section 10.02 Notices.

          Any notice or communication by the Issuer or the Trustee to the others
is duly given if in writing and delivered in Person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:

          If to the Issuer or the Guarantors:

          OrCal Geothermal Inc.
          980 Greg Street
          Sparks, Nevada 89431
          Tel.: (775) 356-9029
          Fax: (775) 356-9039
          Attention: President

          with a copy to:
          Chadbourne & Parke LLP
          1200 New Hampshire Avenue, N.W.
          Washington, D.C. 20036
          Tel.: (202) 974-5623
          Fax: (202) 974-5602
          Attention: Noam Ayali, Esq.

          If to the Trustee:

          Union Bank of California, N.A.
          350 California Street, 11th Floor
          San Francisco, CA 94104
          Tel.: (415) 273-2519
          Fax: (415) 273-2492
          Attention: Corporate Trust Department

          The Issuer or the Trustee, by notice to the other, may designate
additional or different addresses for subsequent notices or communications.

          All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five


                                      -91-



Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.

          Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.

          If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.

          If the Issuer mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.

          Section 10.03 Communication by Holders of Senior Secured Notes with
Other Holders of Senior Secured Notes.

          Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Secured
Notes. The Issuer, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).

          Section 10.04 Certificate and Opinion as to Conditions Precedent.

          Upon any request or application by the Issuer to the Trustee to take
any action under this Indenture, the Issuer shall furnish to the Trustee:

          (a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and

          (b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.

          Section 10.05 Statements Required in Certificate or Opinion.

          Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:

          (a) a statement that the Person making such certificate or opinion has
     read such covenant or condition;


                                      -92-



          (b) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (c) a statement that, in the opinion of such Person, he or she has
     made such examination or investigation as is necessary to enable him to
     express an informed opinion as to whether or not such covenant or condition
     has been satisfied; and

          (d) a statement as to whether or not, in the opinion of such Person,
     such condition or covenant has been satisfied.

          Section 10.06 Rules by Trustee and Agents.

          The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

          Section 10.07 No Personal Liability of Directors, Officers, Employees
and Stockholders.

          No past, present or future stockholder, director, officer, employee,
organizer, manager or agent of the Issuer or any Affiliate of any such party
(other than the Issuer), as such, shall have any liability for any obligations
of the Issuer under the Senior Secured Notes, this Indenture, any Financing
Document or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Secured Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Secured Notes.

          Section 10.08 Senior Secured Notes Owned by the Issuer or Affiliates
Deemed Not Outstanding.

          In determining whether the Holders of the requisite aggregate
principal amount of Senior Secured Notes have concurred in any request, demand,
authorization, direction, notice, consent and waiver or other act under this
Indenture, Senior Secured Notes which are owned by the Issuer, any Guarantor, or
any member of the Issuer or such other Guarantor or any Affiliate of any of the
foregoing shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination except that for the purposes of determining whether
the Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent and waiver or other act, only Senior
Secured Notes for which a Responsible Officer of the Trustee has received
written notice of such ownership as conclusively evidenced by the register kept
by the Registrar shall be so disregarded. The Issuer shall furnish the Trustee,
upon its reasonable request, with a list of such Affiliates. Senior Secured
Notes so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of this Section 10.08, if the pledgee shall
establish to the satisfaction of the Trustee that the pledgee has the right to
vote such Senior Secured Notes and that the pledgee is not an Affiliate of the
Issuer. In case of a dispute as to such right, any decision by the Trustee,
taken upon the advice of counsel, shall be full protection to the Trustee.


                                      -93-



          Section 10.09 Governing Law.

          THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE SENIOR SECURED NOTES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

          Section 10.10 Right to Set-Off.

          AT ANY TIME THAT THE NOTES OR ANY OTHER SENIOR SECURED OBLIGATION
SHALL BE SECURED BY REAL PROPERTY LOCATED IN CALIFORNIA, NO HOLDER OR THE
SECURED PARTIES SHALL EXERCISE A RIGHT OF SETOFF, LIEN OR COUNTERCLAIM OR TAKE
ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCE ANY
PROVISION OF THIS INDENTURE OR ANY NOTE UNLESS IT IS TAKEN WITH THE CONSENT OF
THE REQUIRED HOLDERS, OR APPROVED IN WRITING BY THE SECURED PARTIES, IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO CALIFORNIA CODE OF
CIVIL PROCEDURE SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR
OTHERWISE) AFFECT OR IMPAIR THE VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE
COLLATERAL GRANTED TO THE SECURED PARTIES PURSUANT TO THE SECURITY DOCUMENTS OR
THE ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS HEREUNDER, AND ANY
ATTEMPTED EXERCISE BY ANY HOLDER OR THE SECURED PARTIES OF ANY SUCH RIGHT
WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED HOLDERS OR THE SECURED PARTIES
SHALL BE NULL AND VOID. THIS SECTION 10.10 SHALL BE SOLELY FOR THE BENEFIT OF
EACH OF THE HOLDERS AND THE SECURED PARTIES HEREUNDER.

          Section 10.11 Submission to Jurisdiction.

          The Issuer and the Guarantors hereby submit to the nonexclusive
jurisdiction of the New York State Courts and the federal courts sitting in the
State of New York for the purposes of all legal proceedings arising out of or
relating to this Indenture or the transactions contemplated hereby. The Issuer
and Guarantors hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such court has been brought in an inconvenient
forum.

          Section 10.12 Waiver of Jury Trial.

          EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE
TRANSACTIONS CONTEMPLATED


                                      -94-



HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER THIS INDENTURE
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

          Section 10.13 No Adverse Interpretation of Other Agreements.

          This Indenture may not be used to interpret any other indenture, loan
or Indebtedness agreement of the Issuer or its Subsidiaries or of any other
Person. Any such indenture, loan or Indebtedness agreement may not be used to
interpret this Indenture.

          Section 10.14 Successors.

          All agreements of the Issuer in this Indenture and the Senior Secured
Notes shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.

          Section 10.15 Severability.

          In case any provision in this Indenture or in the Senior Secured Notes
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

          Section 10.16 Counterpart Originals.

          The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.

          Section 10.17 Table of Contents, Headings, etc.

          The Table of Contents, and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.

                         [Signatures on following page]


                                      -95-



     IN WITNESS WHEREOF, the parties hereto have each caused this Indenture to
be executed by their duly authorized officers and attested on the date first
above written.

                                        ORCAL GEOTHERMAL INC.,
                                           as Issuer


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        ORHEBER 1 INC.,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        ORHEBER 2 INC.,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        SECOND IMPERIAL GEOTHERMAL COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                      -96-



                                        HEBER FIELD COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        HEBER GEOTHERMAL COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                      -97-



                                        UNION BANK OF CALIFORNIA, N.A.,
                                           as Trustee


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                      -98-



                                   Schedule A

                        Material Real Property Interests

     A.   GEOTHERMAL AND SUBSURFACE LEASES(1)

     1.   Lease, dated February 16, 1964, executed by John D. Jackson and
          Frances J. Jackson, husband and wife, as lessor, and Standard Oil
          Company of California, a corporation, as lessee, recorded October 7,
          1964 as Instrument No. 87 in Book 1193, Page 298.

     2.   Lease, dated March 11, 1964, executed by John D. Jackson and Frances
          Jones Jackson, also known as Frances J. Jackson, husband and wife, as
          lessor, and Standard Oil Company of California, a corporation as
          lessee, recorded October 7, 1964 as Instrument No. 54 in Book 1193,
          Page 33.

     3.   Lease, dated March 11, 1964, executed by John D. Jackson and Frances
          Jones Jackson, also known as Frances J. Jackson, husband and wife, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 54 in Book 1193,
          Page 33.

     4.   Lease, dated February 17, 1971, executed by William D. Osborne, a
          married man as his sole and separate property, as lessor, and Union
          Oil Company of California, a California corporation, as lessee,
          recorded March 12, 1971 as Instrument No. 59 in Book 1305, Page 1110,
          and re-recorded March 19, 1971 as Instrument No. 77 in Book 1306, Page
          308.

     5.   Lease, dated June 2, 1971, executed by Dorothy Gisler, a widow, Joan
          C. Hill and Jean C. Browning, as lessors, and Union Oil Company of
          California, a corporation, as lessee, recorded June 16, 1971 as
          Instrument No. 41 in Book 1311, Page 163.

     6.   Lease, dated February 28, 1964, executed by Gus Kurupas and Guadalupe
          Kurupas, husband and wife, as lessor, and Standard Oil Company of
          California, a corporation, as lessee, recorded October 7, 1964 as
          Instrument No. 66 in Book 1193, Page 129.

     7.   Lease, dated November 1, 1974, executed by Teresa Salazar, as lessor,
          and Standard Oil Company of California, a corporation, as lessee,
          recorded June 16, 1975 as Instrument No. 2 in Book 1375, Page 1539.

     8.   Lease, dated November 1, 1974, executed by Fidencio Chapa and Aurora
          Chapa, his wife, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded May 29, 1975 as Instrument No. 96 in
          Book 1375, Page 355.

- ----------
(1) In each case, as and to the extent amended by certain lease amendments
and/or such other recorded or unrecorded documents, all as more fully set forth
in the title policy to be delivered at the Closing Date pursuant to Section 8(j)
of the Note Purchase Agreement of which this Annex A forms a part.


                                      -99-



     9.   Lease, dated November 1, 1974, executed by Raymond C. Hester and Nelma
          L. Hester, his wife, as lessor, and Standard Oil Company of
          California, a corporation, as lessee, recorded May 29, 1975 as
          Instrument No. 100 in Book 1375, Page 363.

     10.  Lease, dated November 1, 1974, executed by David F. Perillo, a single
          man, as lessor, and Standard Oil Company of California, a corporation,
          as lessee, recorded May 29, 1975 as Instrument No. 105 in Book 1375,
          Page 373.

     11.  Lease, dated November 1, 1974, executed by Rosa Fernandez, a widow, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded May 29, 1975 as Instrument No. 59 in Book 1375, Page
          281.

     12.  Lease, dated May 1, 1969, executed by Jesus F. Martinez and Consuelo
          C. Martinez, husband and wife, as lessors, and Standard Oil Company of
          California, a corporation, as lessee, recorded June 3, 1969 as
          Instrument No. 33 in Book 1279, Page 69.

     13.  Lease, dated November 1, 1974, executed by Domingo Borjon, George
          Borjon, and Esperanza Borjon, as lessor, and Standard Oil Company of
          California, a corporation, as lessee, recorded May 29, 1975 as
          Instrument No. 62 in Book 1375, Page 287.

     14.  Lease, dated November 1, 1974, executed by Salome Tabarez, a single
          man, as lessor, and Standard Oil Company of California, a corporation,
          as lessee, recorded May 29, 1975 as Instrument No. 25 in Book 1375,
          Page 213.

     15.  Lease, dated November 1, 1974, executed by Leo Ochoa and Ernestina
          Ochoa, his wife, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded May 20, 1975 as Instrument No. 56 in
          Book 1374, Page 1658.

     16.  Lease, dated November 1, 1974, executed by Juan M. Topete and Maria
          Topete, his wife, as lessors, and Standard Oil Company of California,
          a corporation, as lessee, recorded May 20, 1975 as Instrument No. 51
          in Book 1374, Page 1648.

     17.  Lease, dated November 1, 1974, executed by Refugio Avilez, Jr. and
          Gloria Avilez, his wife, as lessors, and Standard Oil Company of
          California, a corporation, as lessee, recorded May 29, 1975 as
          Instrument No. 31 in Book 1375, Page 225.

     18.  Lease, dated November 1, 1974, executed by Leo Ochoa and Ernestina
          Ochoa, his wife, as lessor and Standard Oil Company of California, a
          corporation, as lessee, recorded May 20, 1975 as Instrument No. 56 in
          Book 1374, Page 1658.

     19.  Lease, dated November 1, 1974, executed by David Gonzalez Garcia and
          Theresa Garcia, his wife, as lessor, and Standard Oil Company of
          California, a corporation, as lessee, recorded May 29, 1975 as
          Instrument No. 78 in Book 1375, Page 319.

     20.  Lease, dated November 1, 1974, executed by Arturo G. Tabarez, a single
          man, as lessor


                                      -100-



          and Standard Oil Company of California, a corporation, as lessee,
          recorded May 29, 1975 as Instrument No. 26 in Book 1375, Page 215.

     21.  Lease, dated November 1, 1974, executed by Mohammed Khan and Alicia
          Khan, his wife, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded May 28, 1975 as Instrument No. 12 in
          Book 1375, Page 131.

     22.  Lease, dated November 1, 1974, executed by Victoriano Tabarez and
          Eleanor S. Tabarez, his wife, as lessor, and Standard Oil Company of
          California, a corporation, as lessee, recorded May 20, 1975 as
          Instrument No. 57 in Book 1374, Page 1660.

     23.  Lease, dated May 5, 1969, executed by Bogart Conner and Emelia G.
          Conner, husband and wife, as lessors, and Standard Oil Company of
          California, a corporation, as lessee, recorded June 13, 1969 as
          Instrument No. 31 in Book 1279, Page 711.

     24.  Lease, dated May 16, 1969, executed by Emiliano Gomez Rodriquez and M.
          Arcadia Sanchez G., also known as M. Arcadia Sanchez G. de Rodriquez,
          husband and wife, as lessors, and Standard Oil Company of California,
          a corporation, as lessee, recorded June 30, 1969 as Instrument No. 24
          in Book 1280, Page 330.

     25.  Lease, dated May 13, 1971, executed by El Toro Land & Cattle Company,
          a corporation, as lessor, and Union Oil Company of California, a
          corporation, as lessee, recorded June 11, 1971 as Instrument No. 33 in
          Book 1310, Page 1105.

     26.  Lease, dated May 6, 1969, executed by Wilbur James Hester, a married
          man, as lessor, and Standard Oil Company of California, a corporation,
          as lessee, recorded June 13, 1969 as Instrument No. 25 in Book 1279,
          Page 677.

     27.  Lease, dated July 18, 1979, executed by Charles K. Corfman, an
          unmarried man as his sole and separate property, as lessor, and Union
          Oil Company of California, a corporation, as lessee, recorded July 26,
          1979 as Instrument No. 42 in Book 1437, Page 1048.

     28.  Lease, dated May 19, 1987, executed by The County of Imperial, as
          lessor, and Chevron Geothermal Company of California, as lessee,
          recorded January 20, 1989 as Instrument No. 89-00926 in Book 1617,
          Page 1504.

     29.  Lease, dated February 16, 1964, executed by John D. Jackson,
          Conservator for the Estate of Aphia Jackson Wallan, as lessor, and
          Standard Oil Company of California, a corporation, as lessee, recorded
          October 7, 1964 as Instrument No. 63 in Book 1193, Page 106.

     30.  Lease, dated November 1, 1969, executed by Chrisman B. Jackson and
          Sharon Jackson, husband and wife, as lessor, and Standard Oil Company
          of California, a corporation, as lessee, recorded December 5, 1969 as
          Instrument No. 5 in Book 1286, Page 643.


                                      -101-



     31.  Lease, dated February 20, 1964, executed by John A. Straub and Edith
          D. Straub, also known as John A. Straub and Edythe D. Straub, husband
          and wife, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded October 7, 1964 as Instrument No. 59
          in Book 1193, Page 74.

     32.  Lease, dated March 28, 1964, executed by Lloyd K. Williamson, Robert
          C. Williamson, Neva M. Smith, also known as Neva Williamson Smith, all
          married persons as their sole and separate property, as lessors, and
          Standard Oil Company of California, a corporation, as lessee, recorded
          October 7, 1964 as Instrument No. 75 in Book 1193, Page 203.

     33.  Lease, dated March 5, 1964, executed by Edith B. Beyschlag, a widow,
          as lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 70 in Book 1193,
          Page 165.

     34.  Lease, dated May 13, 1971, executed by Mathew J. La Brucherie and Jane
          E. La Brucherie, husband and wife, as to an undivided 1/2 interest and
          Robert T. O'Dell and Phyllis M. O'Dell, husband and wife, as to an
          undivided 1/2 interest, as lessors, and Union Oil Company of
          California, a California corporation, as lessee, recorded July 1, 1971
          as Instrument No. 44 in Book 1311, Page 996.

     35.  Lease, dated September 22, 1976, executed by El Toro Land and Cattle
          Co., a corporation, as lessor, and Standard Oil Company of California,
          a corporation, as lessee, recorded December 30, 1976 as Instrument No.
          68 in Book 1396, Page 218.

     36.  Lease, dated April 7, 1972, executed by Nowlin Partnership, a general
          partnership, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded May 4, 1972 as Instrument No. 21 in
          Book 1327, Page 157.

     37.  Lease, dated March 17, 1964, executed by Helen S. Fugate, a widow, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 55 in Book 1193,
          Page 42.

     38.  Lease, dated March 17, 1964, executed by Helen S. Fugate, a widow, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 55 in Book 1193,
          Page 42.

     39.  Lease, dated March 17, 1964, executed by Helen S. Fugate, a widow, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 55 in Book 1193,
          Page 42.

     40.  Lease, dated February 17, 1977, executed by Joseph L. Holtz, as
          lessor, and Chevron U.S.A., Inc., a corporation, as lessee, recorded
          May 18, 1977 as Instrument No. 17 in Book 1401, Page 925.


                                      -102-



     41.  Lease, dated January 1, 1972, executed by Holly Oberly Thomson, also
          known as Holly F. Oberly Thomson, also known as Holly Felicia Thomson,
          as lessor, and Union Oil Company of California, a California
          corporation, as lessee, recorded April 11, 1972 as Instrument No. 88
          in Book 1325, Page 1037.

     42.  Lease, dated February 17, 1977, executed by Joseph L. Holtz, as
          lessor, and Chevron U.S.A., Inc., a corporation, as lessee, recorded
          May 18, 1977 as Instrument No. 16 in Book 1401, Page 923.

     43.  Lease, dated May 10, 1969, executed by Stanley A. Scaroni, Executor
          for the Estate of May Scaroni, deceased, as lessor, and Standard Oil
          Company of California, a corporation, as lessee, recorded June 3, 1969
          as Instrument No. 37 in Book 1279, Page 93.

     44.  Lease, dated May 10, 1969, executed by Stanley A. Scaroni and Valerie
          Scaroni, husband and wife, as lessors, and Standard Oil Company of
          California, a corporation, as lessee, recorded June 13, 1969 as
          Instrument No. 27 in Book 1279, Page 688.

     45.  Lease, dated June 14, 1971, executed by Fitzhugh Lee Brewer, Jr., a
          married man as his separate property, Donna Hawk, a married woman as
          her separate property, and Ted Draper and Helen Draper, husband and
          wife, as lessors, and Union Oil Company of California, a California
          corporation, as lessee, recorded July 21, 1971 as Instrument No. 57 in
          Book 1312, Page 949.

     46.  Lease, dated March 5, 1964, executed by Edith B. Beyschlag, a widow,
          also known as Edith R. Bridenbaugh, as lessor, and Standard Oil
          Company of California, a corporation, as lessee, recorded October 7,
          1964 as Instrument No. 82 in Book 1193, Page 258.

     47.  Lease, dated March 7, 1964, executed by John W. Bridenbaugh, also
          known as J.W. Bridenbaugh, and Helen C. Bridenbaugh, husband and wife,
          as lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 40 in Book 1192,
          Page 1169.

     48.  Lease, dated February 29, 1964, executed by Chester E. Horton and
          Lillie W. Horton, his wife, recorded October 7, 1964 as Instrument No.
          53 in Book 1193, Page 24.

     49.  Lease, dated May 1, 1979, executed by Luman Grover Ferrell, Jr., also
          known as Luman Grover Ferrell, a married man, Alice Adrienne Ferrell
          Compton, also known as Alice Ferrell Compton, who acquired title as
          Alice Adrian Ferrell, a married woman, and James Gordon Ferrell, also
          known as Gordon Ferrell, an unmarried man, as lessor, and Chevron
          U.S.A., Inc., a California corporation, as lessee, recorded July 2,
          1989 as Instrument No. 26 in Book 1436, Page 293.

     50.  Lease, dated March 4, 1971, executed by Laura Elizabeth Coughlin, as
          lessor, and


                                      -103-



          Standard Oil Company of California, a corporation, as lessee, recorded
          March 31, 1971 as Instrument No. 42 in Book 1306, Page 1094.

     51.  Lease, dated January 1, 1972, executed by Walter J. Thomson Co. Ltd.,
          as lessor, and Union Oil Company of California, a corporation, as
          lessee, recorded April 11, 1972 as Instrument No. 86 in Book 1325,
          Page 1033.

     52.  Lease, dated March 5, 1964, executed by Edith B. Beyschlag, Guardian
          of the Estate of Carol Ann Beyschlag, a minor, as lessor, and Standard
          Oil Company of California, a corporation, as lessee, recorded October
          7, 1964 as Instrument No. 85 in Book 1193, Page 282.

     53.  Lease, dated March 5, 1964, executed by Edith B. Beyschlag, a widow,
          as lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 69 in Book 1193,
          Page 156.

     54.  Lease, dated March 5, 1964, executed by Edith B. Beyschlag, a widow,
          as lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 69 in Book 1193,
          Page 156.

     55.  Lease, dated May 1, 1969, executed by Clarence J. Peavey and Sylvia M.
          Peavey, husband and wife; and Robert M. Lemon and Mary Lemon, husband
          and wife, all as tenants in common, as lessors, and Standard Oil
          Company of California, a corporation, as lessee, recorded January 26,
          1970 as Instrument No. 5 in Book 1288, Page 582.

     56.  Lease, dated May 2, 1969, executed by Violet I. McCollough, a widow,
          as lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded May 29, 1969 as Instrument No. 25 in Book 1278, Page
          1024.

     57.  Lease, dated June 20, 1969, executed by William Glen Simmons and
          Myrtle C. Simmons, husband and wife, as lessor, and Standard Oil
          Company of California, a corporation, as lessee, recorded July 24,
          1969 as Instrument No. 21 in Book 1281, Page 377.

     58.  Lease, dated May 9, 1969, executed by L. G. Ferrell and Pauline
          Whitsitt Ferrell, husband and wife, recorded June 13, 1969 as
          Instrument No. 20 in Book 1279, Page 648.

     59.  Lease, dated March 10, 1971, executed by Rachel J. Callens, as lessor,
          and Magma Energy, Inc., a corporation, as lessee, recorded August 4,
          1971 as Instrument No. 32 in Book 1313, Page 764.

     60.  Lease, dated February 15, 1977, executed by Walter J. Holtz, as
          lessor, and Magma Energy, Inc., as lessee, recorded April 29, 1977 as
          Instrument No. 69 in Book 1400, Page 1487.


                                      -104-



     61.  Lease, dated October 1, 1972, executed by Wertheimer Cattle Company,
          Inc., as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded July 24, 1973 as Instrument No. 26 in
          Book 1350, Page 756.

     62.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessor, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     63.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     64.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     65.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     66.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     67.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     68.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     69.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     70.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     71.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.


                                      -105-



     72.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     73.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     74.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     75.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     76.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     77.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     78.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     79.  Lease, dated May 8, 1969, executed by Minnie O. Hester, a widow, as
          lessor and Standard Oil Company of California, a corporation, as
          lessee, recorded June 18, 1969 as Instrument No. 13 in Book 1279, Page
          951.

     80.  Lease, dated May 8, 1969, executed by Margie E. Parks, a married woman
          as her sole and separate property, as lessor, and Standard Oil Company
          of California, a corporation, as lessee, recorded June 13, 1969 as
          Instrument No. 32 in Book 1279, Page 718.

     81.  Lease, dated November 1, 1974, executed by Leonard Rauch and Amparo
          Rauch, his wife, as lessor, and Standard Oil Company of California, a
          corporation, as lessee, recorded May 29, 1975 as Instrument No. 44 in
          Book 1375, Page 251.

     82.  Lease, dated August 11, 1964, executed by Evelyn Strickler Campbell,
          an unmarried woman, as lessor, and Standard Oil Company of California,
          a corporation, as lessee, recorded November 19, 1964 as Instrument No.
          121 in Book 1196, Page 241.

     83.  Lease, dated February 20, 1964, executed by John A. Straub and Edith
          D. Straub, also


                                      -106-



          known as John A. Straub and Edythe D. Straub, husband and wife, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded October 7, 1964 as Instrument No. 59 in Book 1193,
          page 74.

     84.  Lease, dated November 1, 1974, executed by Esther F. Quirarte, as
          lessor, and Standard Oil Company of California, a corporation, as
          lessee, recorded June 16, 1975 as Instrument No. 3 in Book 1375, Page
          1541.

     85.  Lease, dated November 15, 1977, executed by Southern Pacific
          Transportation Company as lessor, and Chevron U.S.A., Inc., a
          corporation, as lessee, recorded December 20, 1977 as Instrument No. 8
          in Book 1410, Page 534.

     86.  Lease,dated October 28, 1977, executed by John T. McCabe and Patricia
          L. McCabe, his wife, as lessor, and Chevron U.S.A., Inc., a
          corporation, as lessee, recorded January 11, 1978 as Instrument No. 16
          in Book 1410, Page 1788.

     87.  Lease, dated August 1, 1988, executed by Wilbur-Ellis Company, a
          corporation, as lessor, and Chevron Geothermal Company of California,
          as lessee, recorded December 5, 1988 as Instrument No. 88-19340 in
          Book 1615, Page 661.

     88.  Lease, dated November 1, 1991, executed by Elvira M. Celaya, a widow,
          as lessor, and U.S. Trust Company of California, N.A., a national
          banking association, not in its individual capacity, but solely as
          Owner Trustee under that certain Trust Agreement dated as of December
          18, 1991, between Aircraft Services Corporation, a Nevada corporation,
          as beneficiary, and U.S. Trust Company of California, N.A., as lessee,
          recorded November 18, 1992 as Instrument No. 92025288 in Book 1716,
          Page 248.

     89.  Lease, dated May 19, 1987, executed by the County of Imperial, as
          lessor, and Chevron Geothermal Company of California, a corporation,
          as lessee, recorded January 20, 1989 as Instrument No. 89-00926 in
          Book 1617, Page 1504.

     90.  Geothermal Resource Lease, Serial Number CA 9062, effective as of
          March 1, 1981, between the United States of America, as lessor, and
          Chevron U.S.A., Inc., as lessee, as received and filed in the Office
          of the Bureau of Land Management in Sacramento, California, on
          February 2, 1981, recorded November 18, 1992 at Instrument No.
          92-25290 in Book 1716, Page 256.

     91.  Lease, dated October 18, 1983, executed by Tom G. Kurupas and Eleanor
          B. Kurupas, as lessor, and Chevron Geothermal Company of California, a
          corporation, as lessee, recorded December 16, 1983 as Instrument No.
          35 in Book 1513, Page 925.

     92.  Lease, dated December 31, 1980, executed by Mario Saikhon and Dora
          Saikhon, as lessor, and Chevron U.S.A. Inc., a corporation, as lessee,
          recorded July 21, 1981 as Instrument No. 26 in Book 1472, Page 673.

     93.  Lease, dated April 1, 1987, executed by Walter J. Holtz and Toni F.
          Holtz, as lessor, and


                                      -107-



          Chevron Geothermal Company of California, a corporation, as lessee,
          recorded August 12, 1988 as Instrument No. 88-12964 in Book 1608, Page
          1252.

     94.  Lease, dated March 1, 1985, executed by Timothy J. LaBrucherie and
          Mary K. LaBrucherie, as lessor, and Chevron Geothermal Company of
          California, a corporation, as lessee, recorded May 13, 1985 as
          Instrument No. 19 in Book 1540, Page 1217.


                                      -108-



     B.   EASEMENTS(2)

     1.   Easement, dated July 1, 1984, executed by John D. Jackson, as
          Conservator of the Estate of Aphia Jackson Wallan, Conservatee, as
          grantor, in favor of Chevron Geothermal Company of California, a
          corporation, as grantee, recorded December 5, 1988 as Instrument No.
          88-19345 in Book 1615, Page 683.

     2.   Easement, dated July 25, 1985, executed by John D. Jackson, Sr. and
          Frances J. Jackson, as grantor, in favor of Chevron Geothermal Company
          of California, a Delaware corporation, as grantee, recorded April 21,
          1986 as Instrument No. 86-05398 in Book 1557, Page 1689; as corrected
          by that certain easement dated December 18, 1991 executed by Chrisman
          B. Jackson, as Conservator of the Estate of Aphia Jackson Wallan, as
          grantor, in favor of U.S. Trust Company of California, N.A., not in
          its individual capacity but solely as owner trustee under that certain
          Trust Agreement dated as of December 18, 1991 by and between Aircraft
          Services Corporation, a Nevada corporation, and U.S. Trust Company of
          California, N.A., as grantee, recorded May 24, 1993 as Instrument No.
          93011844 in Book 1733, Page 1218.

     3.   Easement, dated September 16, 1985, executed by Tom G. Kurupas and
          Eleanor B. Kurupas, as grantor, in favor of Chevron Geothermal Company
          of California, a Delaware corporation, as grantee, recorded February
          11, 1986 as Instrument No. 86-01878 in Book 1554, Page 701.

     4.   Easement, dated August 8, 1985, executed by John D. Jackson, Sr.,
          Conservator for the Estate of Alphia Jackson Wallan, as grantor, in
          favor of Chevron Geothermal Company of California, a Delaware
          corporation, as grantee, recorded April 21, 1986 as Instrument No.
          86-05400 in Book 1557, Page 1698.

     5.   Easement, dated August 8, 1985, executed by John D. Jackson, Sr.,
          Conservator for the Estate of Alphia Jackson Wallan, as grantor, in
          favor of Chevron Geothermal Company of California, a Delaware
          corporation, as grantee, recorded February 11, 1986 as Instrument No.
          86-01876 in Book 1554, Page 695.

     6.   Easement, dated September 18, 1984, executed by the County of
          Imperial, as grantor, in favor of Chevron Geothermal Company of
          California, a corporation, as grantee, recorded November 9, 1984 as
          Instrument No. 16 in Book 1532, Page 46.

     7.   Easement, dated April 28, 1987, executed by the County of Imperial, as
          grantor, in favor of Chevron Geothermal Company of California, a
          corporation, as grantee, recorded December 2, 1988 as Instrument No.
          88-19273 in Book 1615, Page 470.

     8.   Easement, dated September 20, 1985, executed by Matthew J. LaBrucherie
          and Jane E.

- ----------
(2) In each case, as and to the extent amended by certain lease amendments
and/or such other recorded or unrecorded documents, all as more fully set forth
in the title policy to be delivered at the Closing Date pursuant to Section 8(j)
of the Note Purchase Agreement of which this Annex A forms a part.


                                      -109-



          LaBrucherie, as grantor, in favor of Chevron Geothermal Company of
          California, a corporation, as grantee, recorded February 11, 1986 as
          Instrument No. 86-01877 in Book 1554, Page 698.

     9.   Easement, dated August 4, 1987, executed by John D. Jackson, Sr.,
          Conservator of the Estate of Aphia Jackson Wallan, as grantor, in
          favor of Chevron Geothermal Company of California, a Delaware
          corporation, as grantee, recorded September 2, 1988 as Instrument No.
          88-14187 in Book 1609, Page 1678.

     10.  Easement, dated September 1, 1984, executed by Joseph L. Holtz, as
          grantor, in favor of Chevron Geothermal Company of California, a
          corporation, as grantee, recorded March 14, 1986 as Instrument No.
          86-03598 in Book 1556, Page 89.

     11.  Easement, dated August 8, 1993, executed by Chester E. Horton, Jr. and
          Douglas W. Horton, as Successor Co-Trustees of the Chester E. Horton,
          Sr. and Lillie W. Horton 1970 Trust, as grantors, in favor of U.S.
          Trust Company of California, N.A., not in its individual capacity but
          solely as owner trustee under that certain Trust Agreement dated as of
          December 18, 1991 by and between Aircraft Services Corporation, a
          Nevada corporation, and U.S. Trust Company of California, N.A., as
          grantee, recorded August 31, 1993 as Instrument No. 93020795 in Book
          1743, Page 1043.

     12.  Easement, dated July 25, 1985, executed by Edward Johnson and Mary
          Johnson, husband and wife, Robert T. O'Dell and Phyllis M. O'Dell,
          husband and wife, Matthew J. LaBrucherie and Jane E. LaBrucherie,
          husband and wife, Timothy J. LaBrucherie, Peter Edward LaBrucherie and
          Timothy J. LaBrucherie, Trustees for Susanne LaBrucherie Enis,
          collectively as grantor, in favor of Chevron Geothermal Company of
          California, a Delaware corporation, as grantee, recorded February 11,
          1986 as Instrument No. 86-01875 in Book 1554, Page 690 and re-recorded
          April 21, 1986 as Instrument No. 86-05399 in Book 1557, Page 1693.

     13.  Easement, dated September 10, 1985, executed by Heber Geothermal
          Company, a partnership, as grantor, in favor of Chevron Geothermal
          Company of California, a corporation, as grantee, recorded December
          30, 1985 as Instrument No. 47 in Book 1552, Page 426.

     14.  Easement, dated December 18, 1991, executed by Heber Geothermal
          Company, a California general partnership, as grantor, in favor of
          U.S. Trust Company of California, N.A., not in its individual capacity
          but solely as owner trustee under that certain Trust Agreement dated
          as of December 18, 1991 by and between Aircraft Services Corporation,
          a Nevada corporation, and U.S. Trust Company of California, N.A., as
          grantee, recorded April 21, 1993 as Instrument No. 93008852 in Book
          1730, Page 432.

     15.  Easement, dated July 16, 1984, executed by Norman E. Wallace and
          Norman E. Wallace, Trustee, as grantor, in favor of Chevron Geothermal
          Company of California, a corporation, as grantee, recorded August 13,
          1984 as Instrument No. 12 in Book 1527,


                                      -110-



          Page 171.

     16.  Easement, dated February 20, 2004, executed by Second Imperial
          Geothermal Company, a California limited partnership, as grantor, in
          favor of Heber Field Company, a California general partnership, as
          grantee, recorded February 25, 2004 as Instrument No. 2004-05352 in
          Book 2282, Page 410.

     17.  Easement, dated April 21, 1993, executed by Calafia Company, a
          corporation, and San Diego Gas & Electric Company, a corporation,
          together as grantor, in favor of U.S. Trust Company of California,
          N.A., not in its individual capacity but solely as owner trustee under
          that certain Trust Agreement dated as of December 18, 1991 between
          Aircraft Services Corporation, a Nevada corporation, and U.S. Trust
          Company of California, N.A., as grantee, recorded June 29, 1993 as
          Instrument No. 93014792 in Book 1737, Page 20.

     18.  Easement, dated February 20, 2004, executed by Heber Field Company, a
          California general partnership, as grantor, in favor of Second
          Imperial Geothermal Company, a California limited partnership, as
          grantee, recorded February 25, 2004 as Instrument No. 2004-05352 in
          Book 2282, Page 410.

     19.  Easement, dated March 20, 1986, executed by Walter J. Holtz, as
          grantor, in favor of Chevron Geothermal Company of California, a
          Delaware corporation, as grantee, recorded April 7, 1986 as Instrument
          No. 86-04654 in Book 1557, Page 277.

     20.  Easement, dated November 19, 1987, executed by Walter J. Holtz and
          Toni F. Holtz, as grantor, in favor of Chevron Geothermal Company of
          California, a corporation, as grantee, recorded February 17, 1988 as
          Instrument No. 88-02436 in Book 1598, Page 74.

     21.  Easement interest created by that certain deed, dated May 20, 1982,
          executed by Southern California Edison Company, as grantor, in favor
          of Chevron Geothermal Company of California, a corporation, as
          grantee, recorded February 15, 1983 in Book 1497, Page 722 as
          Instrument No. 32.

     22.  Grant of Easements by and between Second Imperial Geothermal Company,
          as grantor, and Heber Field Company, as grantee, recorded February 25,
          2004 as Instrument No. 2004-005352, in Book 2282, Page 410.

     23.  Short Form Pipeline Easement Agreement by and between Nowlin
          Partnership, as grantor, and Heber Field Company, as grantee, recorded
          August 19, 2004 as Instrument No. 2004-26715, in Book 2335, Page 1499.

     24.  Short Form Pipeline Easement Agreement by and between Stephen J. Holtz
          and Ramona T. Holtz, trustees of the Stephen J. Holtz Revocable 1981
          Trust dated March 17, 1981, as grantor, and Heber Field Company, as
          grantee, recorded September 9, 2005


                                      -111-



          as Instrument No. 2005-036851.


                                      -112-



     C.   FEE PARCELS

(i)  FEE PARCEL 1

          Parcel A:

          That portion of the East Half of Tract 45, Township 16 South, Range 14
          East, S. B. B. & M., in an unincorporated area of the County of
          Imperial, State of California, according to the Official Plat thereof,
          lying easterly of the east line of the Southern Pacific Railroad
          Company right of way, described as follows:

          Beginning at the intersection of the northerly line of said Tract 45
          and said easterly line of the Southern Pacific Railroad Company right
          of way, as said intersection is shown on Record of Survey filed in
          Book 6, Pages 32 and 33 of records of survey in the office of the
          County Recorder of said County; thence South 18 degrees, 48 minutes
          and 34 seconds East 46.49 feet, measured along said easterly line to a
          found one inch iron pipe with tag stamped RCE 13484 and being the True
          Point of Beginning of this description; thence continuing South 18
          degrees, 48 minutes and 34 seconds East 1053.83 feet to a found one
          inch iron pipe with tag stamped RCE 13484; thence North 71 degrees, 10
          minutes and 23 seconds East 345.93 feet to a found one inch iron pipe
          with tag stamped RCE 13484; thence North 18 degrees, 48 minutes and 21
          seconds West 195.71 feet to the beginning of a tangent curve, concave
          southwesterly and having a radius of 70 feet; thence northwesterly
          along said curve, through a central angle of 45 degrees, an arc
          distance of 54.97 feet; thence North 63 degrees, 48 minutes and 21
          seconds West 70.71 feet to the beginning of a tangent curve, concave
          northeasterly and having a radius of 70 feet; thence northwesterly
          along said curve, through a central angle of 45 degrees, an arc
          distance of 54.97 feet; thence North 18 degrees, 48 minutes and 21
          seconds West 96.37 feet to the beginning of a tangent curve, concave
          southeasterly and having a radius of 70 feet; thence northerly and
          northeasterly along said curve, through a central angle 45 degrees, an
          arc distance of 54.97 feet; thence North 26 degrees, 11 minutes and 39
          seconds East 70.71 feet to the beginning of a tangent curve, concave
          northwesterly and having a radius of 70 feet; thence northeasterly
          along said curve, through a central angle of 45 degrees, an arc
          distance of 54.97 feet; thence North 18 degrees, 48 minutes and 21
          seconds West 96.37 feet to the beginning of a tangent curve, concave
          southeasterly and having a radius of 70 feet; thence northerly and
          northeasterly along said curve, through a central angle of 45 degrees,
          an arc distance of 54.97 feet; thence North 26 degrees, 11 minutes and
          39 seconds East 70.71 feet to the beginning of a tangent curve,
          concave northwesterly and having a radius of 70 feet; thence
          northeasterly along said curve, through a central angle of 45 degrees,
          an arc distance of 54.97 feet; thence North 18 degrees, 48 minutes and
          21 seconds West 187.71 feet to a found one inch iron pipe with tag
          stamped RCE 28447; thence North 89 degrees, 57 minutes and 59 seconds
          West 57.77 feet; thence North 45 degree, 02 minutes and 12 seconds
          West 56.64 feet; thence North 0 degrees, 01 minute East 109.76 feet to
          a found one inch iron pipe with tag stamped RCE 28447; thence South 89
          degrees, 58 minutes and 30 seconds West along a line that is parallel
          with and 44 feet southerly, measured at right angles from said
          northerly line of Tract 45, distance of 318.67 feet to the true point
          of beginning.


                                      -113-



          Excepting therefrom all uranium, thorium and other fissionable
          materials, geothermal rights including water, brine, steam, salt and
          chemicals, all oil, gas petroleum, asphaltum and other hydrocarbon
          substances and other minerals and mineral ores of every kind and
          character, whether similar to these herein specified or not, within or
          underlying, or which may be produced from the hereinbefore described
          land, together with the right to use that portion only of said land
          which underlies a plane parallel to and five hundred (500) feet below
          the present surface of said land for the purpose of prospecting for,
          developing and/or extracting said uranium, thorium and other
          fissionable materials, water, brine, steam, salt, chemicals, oil, gas,
          petroleum, asphaltum and other mineral or hydrocarbon substances from
          said land as reserved by El Toro Land and Cattle Co., a corporation,
          by deed recorded April 21, 1980 in Book 1450, Page 478 of Official
          Records, it being expressly understood and agreed that said El Toro
          Land and Cattle Co., its successors and assigns, shall have no right
          to enter upon the surface of said land, or to use said land or any
          portion thereof to said depth of five hundred (500) feet, for any
          purpose whatsoever.

          Parcel B:

          That portion of the East Half of Tract 45, Township 16 South, Range 14
          East, S. B. B. & M., in an unincorporated area of the County of
          Imperial, State of California, according to the Official Plat thereof,
          lying easterly of the east line of the Southern Pacific Railroad
          Company right of way, described as follows:

          Beginning at a found one inch iron pipe with tag stamped RCE 28447, at
          the easterly terminus of that certain course in Parcel 1 described as
          having a bearing and distance of "South 89 degrees, 58 minutes and 30
          seconds West along a line that is parallel with and 44 feet southerly,
          measured at right angles from said northerly line of tract 45, a
          distance of 318.67 feet" in that certain grant deed to Chevron
          Geothermal Company of California, recorded February 15, 1983 in Book
          1497, Page 722 of Official Records, in the office of the County
          Recorder of said Imperial County; thence along the easterly boundary
          line of said Parcel 1, South 00 degrees, 01 minute and 00 seconds West
          109.76 feet; thence South 45 degrees, 02 minutes and 12 seconds East
          56.64 feet; thence South 89 degrees, 57 minutes and 59 seconds East
          57.77 feet to a found one inch iron pipe with tag stamped RCE 28447;
          thence leaving said easterly boundary line and along the northerly
          prolongation of that certain course described as North 18 degrees, 48
          minutes and 21 seconds West 187.71 feet; in said Parcel 1, North 18
          degrees, 48 minutes and 21 seconds West 65.24 feet; thence North 00
          degrees, 00 minutes and 01 second East 97.09 feet to a line that is
          parallel with and 35.00 feet southerly, measured at right angles from
          the northerly line of said Tract 45, said last mentioned parallel line
          also being the southerly line of the road easement described and
          designated as Parcel 2 in said certain grant deed; thence along said
          last mentioned parallel line, South 89 degrees, 58 minutes and 30
          seconds West 76.79 feet; thence South 00 degrees, 01 minute and 00
          seconds West 9.00 feet to the point of beginning.

          Excepting therefrom all uranium, thorium and other fissionable
          materials, geothermal rights including water, brine, steam, salt and
          chemicals, all oil, gas, petroleum, asphaltum and


                                      -114-



          other hydrocarbon substances and other minerals and mineral ores of
          every kind and character, whether similar to these herein specified or
          not, within or underlying, or which may be produced from the
          hereinbefore described land, together with the right to use that
          portion only of said land which underlies a plane parallel to and five
          hundred (500) feet below the present surface of said land for the
          purpose of prospecting for, developing and/or extracting said uranium,
          thorium and other fissionable materials, water, brine, steam, salt,
          chemicals, oil, gas, petroleum, asphaltum and other mineral or
          hydrocarbon substances from said land as reserved by El Toro Land and
          Cattle Co., a corporation, by deed recorded April 21, 1980 in Book
          1450, Page 478 of Official Records, it being expressly understood and
          agreed that said El Toro Land and Cattle Co., its successors and
          assigns, shall have no right to enter upon the surface of said land,
          or to use said land or any portion thereof to said depth of five
          hundred (500) feet, for any purpose whatsoever.

     FEE PARCEL 2

          That portion of the East Half of Tract 45, Township 16 South, Range 14
          East, S. B. B. & M., in an unincorporated area of the County of
          Imperial, State of California, according to the Official Plat thereof,
          lying easterly of the east line of the Southern Pacific Railroad
          Company right of way as same was located April 17, 1913.

          Excepting therefrom the east 30 feet as conveyed to Imperial County by
          deed recorded in Book 470, Page 507 of Official Records.

          Also excepting therefrom that portion of said land described as
          follows:

          Beginning at the intersection of the northerly line of said Tract 45
          and said easterly line of the Southern Pacific Railroad Company right
          of way, as said intersection is shown on Record of Survey filed in
          Book 6, Pages 32 and 33 of Record of Survey in the office of the
          County Recorder of said County; thence South 18 degrees, 48 minutes
          and 34 seconds East 46.49 feet, measured along said easterly line to a
          found one inch iron pipe with tag stamped RCE 13484 and being the True
          Point of Beginning of the description; thence continuing South 18
          degrees, 48 minutes and 34 seconds East 1053.83 feet to a found one
          inch iron pipe with tag stamped RCE 13484; thence North 71 degrees, 10
          minutes and 23 seconds East 345.93 feet to a found one inch iron pipe
          with tag stamped RCE 28447; thence North 18 degrees, 48 minutes and 21
          seconds West 195.71 feet to the beginning of a tangent curve, concave
          southwesterly and having a radius of 70 feet; thence northwesterly
          along said curve, through a central angle of 45 degrees, an arc
          distance of 54.97 feet; thence North 63 degrees, 48 minutes and 21
          seconds West 70.71 feet to the beginning of a tangent curve, concave
          northeasterly and having a radius of 70 feet; thence northwesterly
          along said curve, through a central angle of 45 degrees, an arc
          distance of 54.97; thence North 18 degrees, 48 minutes and 21 seconds
          West 96.37 feet to the beginning of a tangent curve, concave
          southeasterly and having a radius of 70 feet; thence northerly and
          northeasterly along said curve, through a central angle of 45 degrees,
          an arc distance of 54.97 feet; thence North 26 degrees, 11 minutes and
          39 seconds East 70.71 feet to the beginning of a tangent curve,
          concave northwesterly and having a radius of 70.00 feet; thence
          northeasterly along said


                                      -115-



          curve, through a central angle of 45 degrees, an arc distance of 54.97
          feet; thence North 18 degrees, 48 minutes and 21 seconds West 187.71
          feet to a found one inch iron pipe with tag stamped RCE 28447; thence
          continuing North 18 degrees, 48 minutes and 21 seconds West 65.24
          feet; thence North 00 degrees, 00 minutes and 01 second East 97.09
          feet to a line that is parallel with and 35.00 feet southerly,
          measured at right angles from the northerly line of Tract 45, said
          last mentioned parallel line also being the southerly line of the road
          easement described and designated as Parcel 2 in that certain Grant
          Deed to Chevron Geothermal Company of California, recorded February
          15, 1983 in Book 1497, Page 722 of Official Records, in the office of
          the County Recorder of said Imperial County; thence along said last
          mentioned parallel line, South 89 degrees, 58 minutes and 30 seconds
          West 76.79 feet; thence South 00 degrees, 01 minute and 00 seconds
          West 9.00 feet to a one inch iron pipe with tag stamped RCE 28447, in
          a line that is parallel with and 44 feet southerly measured at right
          angles form said northerly line of Tract 45; thence South 89 degrees,
          58 minutes and 30 seconds West, along said last mentioned parallel
          line a distance of 318.67 feet to the true point of beginning.

          Excepting therefrom all uranium, thorium and other fissionable
          materials, geothermal rights including water, brine, steam, salt and
          chemicals, all oil, gas, petroleum, asphaltum and other hydrocarbon
          substances and other minerals and mineral ores of every kind and
          character, whether similar to these herein specified or not, within or
          underlying, or which may be produced from the hereinbefore described
          land, together with the right to use that portion only of said land
          which underlies a plane parallel to and five hundred (500) feet below
          the present surface of said land for the purpose of prospecting for,
          developing and/or extracting said uranium, thorium and other
          fissionable materials, water, brine, steam, salt, chemicals, oil, gas,
          petroleum, asphaltum and other mineral or hydrocarbon substances from
          said land as reserved by El Toro Land and Cattle Co., a corporation,
          by deed recorded April 21, 1980 in Book 1450, Page 478 of Official
          Records, it being expressly understood and agreed that said El Toro
          Land and Cattle Co., its successors and assigns, shall have no right
          to enter upon the surface of said land, or to use said land or any
          portion thereof to said depth of five hundred (500) feet, for any
          purpose whatsoever.

(ii) FEE PARCEL 3

          Parcel 2 of Parcel Map No. M-1106, in an unincorporated area of the
          County of Imperial, State of California, according to map filed
          November 28, 1978 in Book 4, Page 63 of Parcel Maps in the office of
          the County Recorder of Imperial County.

          Excepting therefrom minerals, either in solid or liquid form,
          geothermal steam, naturally heated water, and thermal energy below a
          depth of 500 feet from the surface of said land, without the right of
          surface entry, as reserved by Norman E. Wallace and Norman E. Wallace,
          trustee of the testamentary trust of Helen S. Fugate, deceased, in
          grant deed recorded September 26, 1979 as Instrument No. 4 in Book
          1441, Page 935 of Official Records.


                                      -116-



(iii) FEE PARCEL 4

          Parcel 4 of Parcel Map No. M-1106, in an unincorporated area of the
          County of Imperial, State of California, according to map filed
          November 28, 1978 in Book 4, Page 63 of Parcel Maps in the office of
          the County Recorder of Imperial County.

          Excepting therefrom minerals, either in solid or liquid form,
          geothermal steam, naturally heated water, and thermal energy below a
          depth of 500 feet from the surface of said land.

          The foregoing was conveyed to Second Imperial Geothermal Company, a
          California limited partnership, by grant deed recorded November 25,
          1992 as Instrument No. 92026084 in Book 1716, Page 1469 of Official
          Records.


                                      -117-



                                                                      Schedule B

                      Governmental Approvals to be Obtained

                                 HEBER 1 PROJECT

GOVERNMENTAL AUTHORITY   APPROVAL                      COMMENT
- ----------------------   --------                      -------
1. ICAPCD                Title V Permit Modification   Application has been
                                                       filed. Facility may
                                                       decide to drop out of
                                                       Title V program instead
                                                       of obtaining Title V
                                                       amendment. If so, a
                                                       non-Title V Permit to
                                                       Construct and Permit to
                                                       Operate will be required.

2. ICAPCD                Permit to Operate 1641B       Two Cell Cooling Tower

                               HEBER FIELD COMPANY

GOVERNMENTAL AUTHORITY   APPROVAL                      COMMENT
- ----------------------   --------                      -------
1. ICAPCD                Permits to Construct and      For Heber 1 cooling tower
                         Operate (or amendment(s) to   discharge injection
                         existing PTOs)

2. DOGGR                 Permit(s) to drill, modify    For Heber 1 cooling tower
                         and/or operate injection      discharge injection
                         well(s)

                                 HEBER 2 PROJECT

GOVERNMENTAL AUTHORITY   APPROVAL                      COMMENT
- ----------------------   --------                      -------
1. ICAPCD                Authority to Construct        Application Filed 5/24/05
                         2217B

2. ICAPCD                Permit to Operate 2217B

3. ICAPCD                Permit to Operate 2231A       To add production well
                                                       P-12

                                  GOULD PROJECT

GOVERNMENTAL AUTHORITY   APPROVAL                      COMMENT
- ----------------------   --------                      -------
1. FERC                  Qualifying Facility
                         Self-Certification


                                      -118-



                                   EXHIBIT A-1

                          (Face of Senior Secured Note)

                              [GLOBAL NOTE LEGEND]

          [INCLUDE IF SENIOR SECURED NOTE IS A GLOBAL NOTE - UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO ORCAL GEOTHERMAL INC. (THE "ISSUER")
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          THIS SENIOR SECURED NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SENIOR SECURED NOTE REGISTERED IN THE NAME OF ANY PERSON
OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.07 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.07 OF THE INDENTURE. BENEFICIAL INTERESTS IN THIS GLOBAL NOTE
MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.07 OF THE INDENTURE.]

                            [RESTRICTED NOTES LEGEND]

          [INCLUDE IF NOTE IS A RESTRICTED NOTE OR A TEMPORARY REGULATION S
GLOBAL NOTE (UNLESS, PURSUANT TO SECTION 2.07, THE ISSUER DETERMINES THAT THE
LEGEND MAY BE REMOVED) - THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN



                                                                     Exhibit A-1
                                                                          Page 2


EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (5)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (BASED UPON AN OPINION OF COUNSEL IF ORCAL GEOTHERMAL INC. SO
REQUESTS) OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE
STATES OF THE UNITES STATES.

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THE ISSUER MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]



                                                                     Exhibit A-1
                                                                          Page 3


================================================================================

                                   CUSIP/CINS:

                      [___]% Senior Secured Notes due [___]

No. ____                                                           $____________

                              ORCAL GEOTHERMAL INC.

promises to pay to Cede & Co., or registered assigns, the principal sum of
________________ Dollars in installments on the dates and in the amounts as set
forth in Schedule I attached hereto and made part hereof.

Interest Payment Dates:

Record Dates:

                                        DATED:

                                        ORCAL GEOTHERMAL INC.


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

This is one of the [Global Notes] [Certificated Notes] referred to
_____________________ in the within-mentioned Indenture and [___] Series
Supplemental Indenture:

[_____],
as Trustee


By:
    -------------------------------
    Name:

================================================================================



                                                                     Exhibit A-1
                                                                          Page 4


                                 (Back of Note)

                    [___]% Senior Secured Notes due [_______]

          Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.

          1. Interest. OrCal Geothermal Inc., a Delaware corporation (the
"Issuer"), promises to pay interest on the outstanding principal amount of this
Senior Secured Note at [___]% per annum from the date of issuance until the
Final Maturity Date. The Issuer shall pay interest pro rata semi-annually in
arrears on [_____] and [_____] of each year (the "Interest Payment Date"), or if
any such day is not a Business Day, on the next succeeding Business Day.
Interest on the Senior Secured Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided, that if there is no existing Default in the
payment of interest, and if this Senior Secured Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be [_____].
The Issuer shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.

          2. Method of Payment. The Issuer will pay interest and payments of
principal in accordance with Schedule I attached hereto on the Senior Secured
Notes (except defaulted interest) to the Persons who are registered Holders of
Senior Secured Notes at the close of business on the [_____] or [_____] next
preceding the Interest Payment Date, even if such Senior Secured Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Senior Secured Notes will be payable as to principal, premium, if
any, and interest at the office or agency of the Issuer maintained for such
purpose within or without the City and State of New York, or, at the option of
the Issuer, payment of interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of, interest and premium, if any, on all Global Notes and all other
Senior Secured Notes the Holders of which own at least $1.0 million of Senior
Secured Notes and have provided wire transfer instructions to the Issuer or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.



                                                                     Exhibit A-1
                                                                          Page 5


          3. Paying Agent and Registrar. Initially, [__________] will act as
Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar
without notice to any Holder. The Issuer or any of its Subsidiaries may act in
any such capacity.

          4. Indenture; [___] Series Supplemental Indenture. The Issuer issued
the Senior Secured Notes under an Indenture, dated as of December 8, 2005, and a
[___] Series Supplemental Indenture, dated as of [___], each among the Issuer,
OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field
Company, Heber Geothermal Company and Union Bank of California, N.A., as
Trustee. The terms of the Senior Secured Notes include those stated in the
Indenture and [___] Series Supplemental Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb). The Senior Secured Notes are subject to all such
terms, and Holders are referred to the Indenture and [___] Series Supplemental
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Secured Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.

          5. Optional Redemption. (a) The Senior Secured Notes shall be
redeemable at the option of the Issuer at any time and from time to time, in
whole or in part, upon not less than 30 nor more than 60 days' notice to the
Trustee and each Holder of Senior Secured Notes, at a redemption price equal to
the outstanding principal amount thereof plus accrued interest, plus the
Make-Whole Premium, such redemption price to be set forth in the notice to the
Trustee. In no event shall the sum of the redemption price plus the Make-Whole
Premium ever be less than 100% of the Senior Secured Notes being redeemed plus
accrued and unpaid interest thereon to the Redemption Date. Unless the Issuer
defaults in payment of the redemption price, on and after the Redemption Date
interest shall cease to accrue on the Senior Secured Notes or portions thereof
actually redeemed.

          (b) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.

          6. Mandatory Redemption. (a) If the Issuer or any Subsidiary receives
more than $5.0 million of Loss Proceeds or Eminent Domain Proceeds because of an
Event of Loss or an Event of Eminent Domain and:

          (i) the Issuer determines that all or such portion of the applicable
     Plant cannot be rebuilt, repaired or restored to permit operations on a
     commercially reasonable basis, or the Issuer determines not to rebuild,
     repair or restore the applicable Plant or such portion; or

          (ii) only a portion of the applicable Plant is capable of being
     rebuilt, repaired or restored on a commercially reasonable basis and the
     Issuer determines to so rebuild, repair or restore;



                                                                     Exhibit A-1
                                                                          Page 6


then, the Issuer shall use the Net Available Amount of such proceeds to redeem
the Senior Secured Notes, in whole or in part, at a redemption price equal to
the principal amount of the Senior Secured Notes being redeemed plus accrued and
unpaid interest to the Redemption Date and, to the extent required, to prepay
its other Senior Secured Obligations, except as set forth in the immediately
following paragraph; provided that, in the case of clause (ii) above, the Issuer
shall use only the amount of such Loss Proceeds or Eminent Domain Proceeds not
used to rebuild, repair or restore such Plant for such redemption, except as set
forth in the immediately following paragraph.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Loss Proceeds or Eminent Domain Proceeds or has less than $5.0 million remaining
after rebuilding, repairing or restoring a portion of the applicable Plant
because of an Event of Loss or Event of Eminent Domain the Issuer will cause
such amounts to be deposited into the Revenue Account.

          (b) If the Issuer or any Subsidiary (i) receives more than $5.0
million of Title Event Proceeds in connection with a Title Event and is unable
to remedy the Title Event, or (ii) has more than $5.0 million of Title Event
Proceeds remaining after remedying the Title Event, the Issuer will have to use
the Net Available Amount of such proceeds, to the extent not used to cure the
Title Event, on a pro rata basis to redeem the Senior Secured Notes at a
redemption price equal to the principal amount of the Senior Secured Notes being
redeemed plus accrued and unpaid interest to the Redemption Date and, to the
extent required, to prepay its other Senior Secured Obligations.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Title Event Proceeds in connection with a Title Event or has less than $5.0
million remaining after remedying a Title Event the Issuer will cause such
amounts to be deposited into the Revenue Account and such amounts will not be
required to be used to redeem the Senior Secured Notes.

          (c) In the event that any Senior Secured Obligations (other than the
Senior Secured Notes) are required to be redeemed before their scheduled
maturity date pursuant to documents governing such Senior Secured Obligations
for any reason not otherwise giving rise to a redemption of the Senior Secured
Notes, the Issuer shall offer to repurchase the Senior Secured Notes on a pro
rata basis with the other Senior Secured Obligations as are required to be
redeemed at a redemption price equal to the principal amount of the Senior
Secured Notes the Issuer offers to repurchase plus accrued and unpaid interest
to the Redemption Date, but without any premium.

          Other than as specifically provided in this subparagraph 6, any
purchase or redemption pursuant to this subparagraph 6 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 of the Indenture.

          7. Notice of Redemption. At least 30 days but not more than 60 days
before a Redemption Date, the Issuer shall mail or cause to be mailed, by first
class mail, a notice of



                                                                     Exhibit A-1
                                                                          Page 7


redemption to each Holder whose Senior Secured Notes are to be redeemed at its
registered address.

          The notice shall identify the Senior Secured Notes to be redeemed and
shall state:

          (a) the Redemption Date;

          (b) the redemption price;

          (c) if any Senior Secured Note is being redeemed in part, the portion
     of the principal amount of such Senior Secured Note to be redeemed and
     that, after the redemption date upon surrender of such Senior Secured Note,
     a new Senior Secured Note or Senior Secured Notes in principal amount equal
     to the unredeemed portion shall be issued upon cancellation of the original
     Senior Secured Note;

          (d) the name, address and telephone number of the Paying Agent;

          (e) that Senior Secured Notes called for redemption must be
     surrendered to the Paying Agent to collect the redemption price;

          (f) that, unless the Issuer defaults in making such redemption
     payment, interest on the Senior Secured Notes called for redemption ceases
     to accrue on and after the Redemption Date;

          (g) the paragraph of the Senior Secured Notes and/or Section of the
     Indenture pursuant to which the Senior Secured Notes called for redemption
     are being redeemed; and

          (h) the CUSIP number (provided that the Issuer may state that no
     representation is made as to the correctness or accuracy of the CUSIP
     number, if any, listed in such notice or printed on the Senior Secured
     Notes).

          At the Issuer's request, the Trustee or the Paying Agent shall give
the notice of redemption in the Issuer's name and at its expense; provided,
however, that the Issuer shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.

          8. Denominations, Transfer, Exchange. The Senior Secured Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The transfer of Senior Secured Notes may
be registered and Senior Secured Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer need not exchange or register the
transfer of any Senior



                                                                     Exhibit A-1
                                                                          Page 8


Secured Note or portion of a Senior Secured Note selected for redemption, except
for the unredeemed portion of any Senior Secured Note being redeemed in part.
Also, the Issuer need not exchange or register the transfer of any Senior
Secured Notes for a period of 15 days before a selection of Senior Secured Notes
to be redeemed or during the period between a record date and the corresponding
Interest Payment Date.

          9. Persons Deemed Owners. The registered Holder of a Senior Secured
Note may be treated as its owner for all purposes.

          10. Amendment, Supplement and Waiver. The Issuer and the Trustee may
amend or supplement the Indenture and any of the other Financing Documents
without the consent of the Holders:

          (a) to cure any ambiguity, defect or inconsistency;

          (b) to add additional covenants of the Issuer or its Subsidiaries, to
     surrender rights conferred upon the Issuer or its Subsidiaries, or to
     confer additional benefits upon the Holders;

          (c) to increase the assets securing the Issuer's obligations under the
     Indenture;

          (d) to allow any Subsidiary to execute a supplemental indenture,
     Series Supplemental Indenture and/or Guarantee with respect to the Senior
     Secured Notes;

          (e) to comply with requirements of the SEC in order to effect or
     maintain the qualification of the Indenture under the Trust Indenture Act;

          (f) to make any change not inconsistent with the terms of the
     Indenture that does not adversely affect the legal rights thereunder of any
     Holder of the Senior Secured Notes; or

          (g) to establish the form and terms of the Senior Secured Notes of any
     series permitted by Sections 2.01 and 2.03 of the Indenture.

          The Indenture and the other Financing Documents may be otherwise
amended or supplemented by the Issuer and the Trustee, with the consent of the
Required Holders; provided that no such amendment or supplement may, without the
consent of all Holders of Outstanding Senior Secured Notes affected thereby:

          (a) modify the principal, interest or premium, if any, payable upon
     the Senior Secured Notes;

          (b) modify the dates on which principal, interest and premium, if any,
     on any Senior Secured Notes are paid;



                                                                     Exhibit A-1
                                                                          Page 9


          (c) release any Guarantor from its obligations under a Guarantee;

          (d) modify the dates of maturity of any Senior Secured Notes; and

          (e) make any change in the preceding procedures for amendment,
     supplement or waiver.

          The Indenture and the other Security Documents may be amended or
supplemented to provide for the release of Collateral, by the Issuer and the
Trustee, with the consent of Holders of not less than 66?% of the Outstanding
Senior Secured Notes.

          11. Defaults and Remedies. The following events constitute an Event of
Default under the Indenture:

          (a) (1) the failure to pay or cause to be paid any principal on the
     Senior Secured Notes after the same becomes due and payable or (2) the
     failure to pay or cause to be paid any interest, premium, if any, fees or
     any other obligations on the Senior Secured Notes for five or more days
     after the same becomes due and payable, whether, with respect to each of
     sub-clauses (1) and (2), by scheduled maturity or required prepayment or by
     acceleration or otherwise;

          (b) any representation or warranty made by the Issuer, any Subsidiary
     or Ormat Nevada under any Financing Document shall prove to have been
     untrue or misleading as of the time made, confirmed or furnished and the
     fact, event or circumstance that gave rise to such inaccuracy has had or
     could reasonably be expected to result in a Material Adverse Effect and
     such fact, event or circumstance shall continue to be uncured for 30 or
     more days from the date a Responsible Officer of the Issuer, such
     Subsidiary or Ormat Nevada, as the case may be, obtains knowledge thereof;
     provided, that if the Issuer, such Subsidiary or Ormat Nevada, as the case
     may be, commences efforts to cure such fact, event or circumstance within
     such 30-day period, the Issuer, such Subsidiary or Ormat Nevada, as the
     case may be, may continue to effect such cure and such misrepresentation
     will not be deemed an Event of Default for an additional 90 days so long as
     the Issuer, such Subsidiary or Ormat Nevada, as the case may be, is
     diligently pursuing such cure;

          (c) the failure by the Issuer or any Subsidiary to perform or observe
     any covenant contained in Sections 4.06, 4.07, 4.09, 4.10, 4.11, 4.15,
     4.16, 4.18, 4.19, 4.20, 4.23, 4.27 and 4.32 of the Indenture and such
     failure shall continue uncured for 30 or more days after a Responsible
     Officer of the Issuer, any Subsidiary or Ormat Nevada, as the case may be,
     obtains knowledge thereof;

          (d) the failure by the Issuer, any Subsidiary or Ormat Nevada to
     perform or observe any of the other covenants in the Financing Documents
     that the Issuer, such Subsidiary or Ormat Nevada is a party to (other than
     such failures described in clause (a) or (c) above) and such failure shall
     continue uncured for 30 or more days after a



                                                                     Exhibit A-1
                                                                         Page 10


     Responsible Officer of the Issuer, any Subsidiary or Ormat Nevada, as the
     case may be, obtains knowledge thereof; provided that if the Issuer, any
     Subsidiary or Ormat Nevada, as the case may be, commence efforts to cure
     such default within such 30-day period, the Issuer, any Subsidiary or Ormat
     Nevada, as the case may be, may continue to effect such cure of the default
     and such default will not be deemed an Event of Default for an additional
     90 days so long as the Issuer, any Subsidiary or Ormat Nevada, as the case
     may be, is diligently pursuing such cure;

          (e) the Issuer or any Subsidiary of the Issuer:

               (i) admits in writing its inability, or is generally unable, to
          pay its debts as the debts become due or makes a general assignment
          for the benefit of creditors; or

               (ii) commences any case, proceeding or other action seeking
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any applicable liquidation,
          conservatorship, bankruptcy, moratorium, arrangement, adjustment,
          insolvency, reorganization or similar laws affecting the rights or
          remedies of creditors generally, as in effect from time to time
          (collectively, "Debtor Relief Law"); or

               (iii) in any involuntary case, proceeding or other action
          commenced against it which seeks to have an order for relief
          (injunctive or otherwise) entered against it, as debtor, or seeks
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any Debtor Relief Law, (A) fails
          to obtain a dismissal of such case, proceeding or other action within
          ninety (90) days of its commencement, or (B) converts the case from
          one chapter of the Bankruptcy Reform Act of 1978, as amended, to
          another chapter, or (C) is the subject of an order for relief that
          remains unstayed and in effect for a period of ninety (90) days; or

               (iv) has a trustee, receiver, custodian or other official
          appointed for or to take possession of all or any part of its property
          or has any court take jurisdiction of any of its property, which
          action remains undismissed for a period of ninety (90) days;

               (v) the entry of one or more final and non-appealable judgment or
          judgments for the payment of money in excess of $10.0 million
          (exclusive of judgment amounts covered by insurance) against the
          Issuer or any Subsidiary, which remain unpaid or unstayed for a period
          of 60 or more consecutive days;



                                                                     Exhibit A-1
                                                                         Page 11


               (vi) an event of default under any Permitted Indebtedness (other
          than Indebtedness referred to in clause (a) above) that results in
          Indebtedness in excess of $10.0 million becoming due and payable prior
          to its stated maturity;

               (vii) any Governmental Approval required for the operation of any
          Project or any material portion thereof owned by the Issuer or any
          Subsidiary is revoked, terminated, withdrawn or ceases to be in full
          force and effect if such revocation, termination, withdrawal or
          cessation has had or could reasonably be expected to have a Material
          Adverse Effect and such revocation, termination, withdrawal or
          cessation is not cured within 60 days following the occurrence
          thereof;

               (viii) any Material Project Document or Third Party Consent or
          any material provision thereof (i) ceases to be valid and binding and
          in full force and effect prior to its stated maturity date other than
          as a result of an amendment or termination permitted under the
          Indenture or (ii) a party thereto fails to perform or observe any of
          its covenants or obligations thereunder or makes any material
          misrepresentation thereunder and such event has had or could
          reasonably be expected to have a Material Adverse Effect; provided,
          that, in any such event no such event shall be an Event of Default if
          within 180 days from the occurrence of any such event, (a) such
          Material Project Document or Third Party Consent or material provision
          thereof is reinstated as a valid and binding agreement among the
          parties thereto, (b) any breaching party resumes performance and
          otherwise cures such misrepresentation or failure to perform or
          observe its covenants or obligations under the Material Project
          Documents or Third Party Consents or (c) in the case of Material
          Project Documents, the Issuer enters into an Additional Project
          Document in replacement thereof, as permitted under the Indenture;

               (ix) any of the Security Documents or any other Financing
          Document ceases to be in full force and effect or any Lien granted
          therein ceases to be a valid and perfected Lien in favor of the
          Secured Parties on the Collateral described therein with the priority
          purported to be created thereby; provided, however, that the Issuer
          shall have 10 days after a Responsible Officer of the Issuer, any
          Subsidiary or Ormat Nevada, as the case may be, obtains knowledge
          thereof to cure any such cessation or to furnish to the Trustee, the
          Collateral Agent or the Depositary all documents or instruments
          required to cure any such cessation;

               (x) the occurrence of a Change of Control; or



                                                                     Exhibit A-1
                                                                         Page 12


               (xi) the failure of Ormat Technologies to make all payments, when
          due, pursuant to the Production Tax Credit Agreement.

          If an Event of Default relating to failure to pay amounts owed on the
Senior Secured Notes has occurred and is continuing, the Trustee may declare the
principal amount of the Outstanding Senior Secured Notes, all interest accrued
and unpaid thereon, and all premium, if any, and other amounts payable under the
Senior Secured Notes and the Indenture, if any, to be due and payable
notwithstanding the absence of written direction from Holders of at least 25% in
aggregate principal amount of the Outstanding Senior Secured Notes directing the
Trustee in writing to accelerate the principal maturity of the Senior Secured
Notes, unless the Required Holders direct the Trustee not to accelerate the
maturity of such Senior Secured Notes, if in the good faith exercise of its
discretion the Trustee determines that such action is necessary to protect the
interests of the Holders. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
Outstanding Senior Secured Notes will become due and payable immediately.

          12. Trustee Dealings with Issuer. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not the Trustee.

          13. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee, organizer, manager or agent of the
Issuer or any Affiliate of any such party (other than the Issuer), as such,
shall have any liability for any obligations of the Issuer under the Senior
Secured Notes, the Indenture, any Financing Document or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
by accepting a Senior Secured Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Secured Notes.

          14. Senior Secured Notes Owned by the Issuer or Affiliates Deemed Not
Outstanding. In determining whether the Holders of the requisite aggregate
principal amount of Senior Secured Notes have concurred in any request, demand,
authorization, direction, notice, consent and waiver or other act under this
Indenture, Senior Secured Notes which are owned by the Issuer, any Guarantor, or
any member of the Issuer or such other Guarantor or any Affiliate of any of the
foregoing shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination except that for the purposes of determining whether
the Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent and waiver or other act, only Senior
Secured Notes for which a Responsible Officer of the Trustee has received
written notice of such ownership as conclusively evidenced by the register kept
by the Registrar shall be so disregarded. The Issuer shall furnish the Trustee,
upon its reasonable request, with a list of such Affiliates. Senior Secured
Notes so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of Section 10.08 of the Indenture, if the pledgee
shall establish to the satisfaction of the Trustee that the pledgee has the
right to vote such Senior Secured Notes and that the pledgee is not an Affiliate
of the Issuer. In case of a



                                                                     Exhibit A-1
                                                                         Page 13


dispute as to such right, any decision by the Trustee, taken upon the advice of
counsel, shall be full protection to the Trustee.

          15. Authentication. This Senior Secured Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

          16. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

          17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Senior Secured Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Secured Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.

          The Issuer will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:

          OrCal Geothermal Inc.
          980 Greg Street
          Sparks, Nevada 89431
          Tel.: (775) 356-9029
          Fax: (775) 356-9039
          Attention: President



                                                                     Exhibit A-1
                                                                         Page 14


                                 Assignment Form

To assign this Senior Secured Note, fill in the form below: (I) or (we) assign
and transfer this Senior Secured Note to ___________________________________

(Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________
(Print or type assignee's name, address and zip code)

and irrevocably appoint ________________________________________________________
to transfer this Senior Secured Note on the books of the Issuer. The agent may
substitute another to act for him.


Date:                                   Your Signature:
                                                        ------------------------
                                                        (Sign exactly as your
                                                        name appears on the
                                                        Senior Secured Note)

                                        Tax Identification No: _________________


Signature Guarantee.

Medallion No.:

Notice: Signature must be guaranteed by a member firm of the STAMP, SEMP or MSP
signature guaranty medallion program



                                                                     Exhibit A-1
                                                                         Page 15


              SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

          The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Certificated Note, or exchanges of a part of
another Global Note or Certificated Note for an interest in this Global Note,
have been made:



               Amount of          Amount of      Principal Amount     Signature of
              decrease in        increase in      of this Global       authorized
           Principal Amount   Principal Amount    Note following       officer of
 Date of        of this            of this         such decrease    Trustee or Note
Exchange      Global Note        Global Note       (or increase)       Custodian
- --------   ----------------   ----------------   ----------------   ---------------






                                                                     Exhibit A-1
                                                                         Page 16


                                                                      SCHEDULE I

                         SCHEDULE OF PRINCIPAL PAYMENTS

     The principal of the Senior Secured Notes will be payable in semi-annual
installments, commencing as follows:

SCHEDULED PAYMENT DATE   PRINCIPAL AMOUNT PAYABLE
- ----------------------   ------------------------



                                                                     Exhibit A-2
                                                                          Page 1


                                   EXHIBIT A-2

                  (Face of Regulation S Temporary Global Note)

                              [GLOBAL NOTE LEGEND]

          [INCLUDE IF SENIOR SECURED NOTE IS A GLOBAL NOTE - UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO ORCAL GEOTHERMAL INC. (THE "ISSUER")
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          THIS SENIOR SECURED NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SENIOR SECURED NOTE REGISTERED IN THE NAME OF ANY PERSON
OTHER THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.07 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.07 OF THE INDENTURE. BENEFICIAL INTERESTS IN THIS GLOBAL NOTE
MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.07 OF THE INDENTURE.]

                            [RESTRICTED NOTES LEGEND]

          [INCLUDE IF NOTE IS A RESTRICTED NOTE OR A TEMPORARY REGULATION S
GLOBAL NOTE (UNLESS, PURSUANT TO SECTION 2.07, THE ISSUER DETERMINES THAT THE
LEGEND MAY BE REMOVED) - THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN
INSTITUTIONAL "ACCREDITED



                                                                     Exhibit A-2
                                                                          Page 2


INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT, IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, (5) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF
COUNSEL IF ORCAL GEOTHERMAL INC. SO REQUESTS) OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
APPLICABLE BLUE SKY LAWS OF THE STATES OF THE UNITES STATES.

     IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE
SUCH CERTIFICATES AND OTHER INFORMATION AS THE ISSUER MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]

THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.



                                                                     Exhibit A-2
                                                                          Page 3


================================================================================

               CUSIP/CINS:

                      [__] % Senior Secured Notes due [___]

No. __                                                               $__________

                              ORCAL GEOTHERMAL INC.

promises to pay to Cede & Co., or registered assigns, the principal sum of
______________ Dollars in installments on the dates and in the amounts as set
forth in Schedule I attached hereto and made part hereof.

Interest Payment Dates:

Record Dates:

                                        DATED:

                                        ORCAL GEOTHERMAL INC.


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

This is one of the Global Notes referred to

in the within-mentioned Indenture and [__] Series Supplemental Indenture:

[___],

as Trustee


By:
    ---------------------------------
    Name:

================================================================================



                                                                     Exhibit A-2
                                                                          Page 4


                  (Back of Regulation S Temporary Global Note)

                      [__]% Senior Secured Notes due [___]

          Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.

          1. Interest. OrCal Geothermal Inc., a Delaware corporation (the
"Issuer"), promises to pay interest on the outstanding principal amount of this
Senior Secured Note at [__]% per annum from the date of issuance until the Final
Maturity Date. The Issuer shall pay interest pro rata semi-annually in arrears
on [___] and [___] of each year (the "Interest Payment Date"), or if any such
day is not a Business Day, on the next succeeding Business Day. Interest on the
Senior Secured Notes will accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided, that if there is no existing Default in the payment of
interest, and if this Senior Secured Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be [___]. The Issuer shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

          2. Method of Payment. The Issuer will pay interest and payments of
principal in accordance with Schedule I attached hereto on the Senior Secured
Notes (except defaulted interest) to the Persons who are registered Holders of
Senior Secured Notes at the close of business on the [___] or [___] next
preceding the Interest Payment Date, even if such Senior Secured Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Senior Secured Notes will be payable as to principal, premium, if
any, and interest at the office or agency of the Issuer maintained for such
purpose within or without the City and State of New York, or, at the option of
the Issuer, payment of interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, and provided that payment
by wire transfer of immediately available funds will be required with respect to
principal of, interest and premium, if any, on all Global Notes and all other
Senior Secured Notes the Holders of which own at least $1.0 million of Senior
Secured Notes and have provided wire transfer instructions to the Issuer or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.



                                                                     Exhibit A-2
                                                                          Page 5


          3. Paying Agent and Registrar. Initially, [______] will act as Paying
Agent and Registrar. The Issuer may change any Paying Agent or Registrar without
notice to any Holder. The Issuer or any of its Subsidiaries may act in any such
capacity.

          4. Indenture; [__] Series Supplemental Indenture. The Issuer issued
the Senior Secured Notes under an Indenture, dated as of December 8, 2005, and a
[__] Series Supplemental Indenture, dated as of [__], each among the Issuer,
OrHeber 1 Inc., OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field
Company, Heber Geothermal Company and Union Bank of California, N.A., as
Trustee. The terms of the Senior Secured Notes include those stated in the
Indenture and [__] Series Supplemental Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code Sections 77aaa-77bbbb). The Senior Secured Notes are subject to all such
terms, and Holders are referred to the Indenture and [__] Series Supplemental
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Secured Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.

          5. Optional Redemption. (a) The Senior Secured Notes shall be
redeemable at the option of the Issuer at any time and from time to time, in
whole or in part, upon not less than 30 nor more than 60 days' notice to the
Trustee and each Holder of Senior Secured Notes, at a redemption price equal to
the outstanding principal amount thereof plus accrued interest, plus the
Make-Whole Premium, such redemption price to be set forth in the notice to the
Trustee. In no event shall the sum of the redemption price plus the Make-Whole
Premium ever be less than 100% of the Senior Secured Notes being redeemed plus
accrued and unpaid interest thereon to the Redemption Date. Unless the Issuer
defaults in payment of the redemption price, on and after the Redemption Date
interest shall cease to accrue on the Senior Secured Notes or portions thereof
actually redeemed.

          (b) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.

          6. Mandatory Redemption. (a) If the Issuer or any Subsidiary receives
more than $5.0 million of Loss Proceeds or Eminent Domain Proceeds because of an
Event of Loss or an Event of Eminent Domain and:

          (i) the Issuer determines that all or such portion of the applicable
Plant cannot be rebuilt, repaired or restored to permit operations on a
commercially reasonable basis, or the Issuer determines not to rebuild, repair
or restore the applicable Plant or such portion; or

          (ii) only a portion of the applicable Plant is capable of being
rebuilt, repaired or restored on a commercially reasonable basis and the Issuer
determines to so rebuild, repair or restore;



                                                                     Exhibit A-2
                                                                          Page 6


then, the Issuer shall use the Net Available Amount of such proceeds to redeem
the Senior Secured Notes, in whole or in part, at a redemption price equal to
the principal amount of the Senior Secured Notes being redeemed plus accrued and
unpaid interest to the Redemption Date and, to the extent required, to prepay
its other Senior Secured Obligations, except as set forth in the immediately
following paragraph; provided that, in the case of clause (ii) above, the Issuer
shall use only the amount of such Loss Proceeds or Eminent Domain Proceeds not
used to rebuild, repair or restore such Plant for such redemption, except as set
forth in the immediately following paragraph.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Loss Proceeds or Eminent Domain Proceeds or has less than $5.0 million remaining
after rebuilding, repairing or restoring a portion of the applicable Plant
because of an Event of Loss or Event of Eminent Domain the Issuer will cause
such amounts to be deposited into the Revenue Account.

          (b) If the Issuer or any Subsidiary (i) receives more than $5.0
million of Title Event Proceeds in connection with a Title Event and is unable
to remedy the Title Event, or (ii) has more than $5.0 million of Title Event
Proceeds remaining after remedying the Title Event, the Issuer will have to use
the Net Available Amount of such proceeds, to the extent not used to cure the
Title Event, on a pro rata basis to redeem the Senior Secured Notes at a
redemption price equal to the principal amount of the Senior Secured Notes being
redeemed plus accrued and unpaid interest to the Redemption Date and, to the
extent required, to prepay its other Senior Secured Obligations.

          If the Issuer or any Subsidiary receives less than $5.0 million of
Title Event Proceeds in connection with a Title Event or has less than $5.0
million remaining after remedying a Title Event the Issuer will cause such
amounts to be deposited into the Revenue Account and such amounts will not be
required to be used to redeem the Senior Secured Notes.

          (c) In the event that any Senior Secured Obligations (other than the
Senior Secured Notes) are required to be redeemed before their scheduled
maturity date pursuant to documents governing such Senior Secured Obligations
for any reason not otherwise giving rise to a redemption of the Senior Secured
Notes, the Issuer shall offer to repurchase the Senior Secured Notes on a pro
rata basis with the other Senior Secured Obligations as are required to be
redeemed at a redemption price equal to the principal amount of the Senior
Secured Notes the Issuer offers to repurchase plus accrued and unpaid interest
to the Redemption Date, but without any premium.

          Other than as specifically provided in this subparagraph 6, any
purchase or redemption pursuant to this subparagraph 6 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 of the Indenture.

          7. Notice of Redemption. At least 30 days but not more than 60 days
before a Redemption Date, the Issuer shall mail or cause to be mailed, by first
class mail, a notice of



                                                                     Exhibit A-2
                                                                          Page 7


redemption to each Holder whose Senior Secured Notes are to be redeemed at its
registered address.

          The notice shall identify the Senior Secured Notes to be redeemed and
shall state:

          (a) the Redemption Date;

          (b) the redemption price;

          (c) if any Senior Secured Note is being redeemed in part, the portion
     of the principal amount of such Senior Secured Note to be redeemed and
     that, after the redemption date upon surrender of such Senior Secured Note,
     a new Senior Secured Note or Senior Secured Notes in principal amount equal
     to the unredeemed portion shall be issued upon cancellation of the original
     Senior Secured Note;

          (d) the name, address and telephone number of the Paying Agent;

          (e) that Senior Secured Notes called for redemption must be
     surrendered to the Paying Agent to collect the redemption price;

          (f) that, unless the Issuer defaults in making such redemption
     payment, interest on the Senior Secured Notes called for redemption ceases
     to accrue on and after the Redemption Date;

          (g) the paragraph of the Senior Secured Notes and/or Section of the
     Indenture pursuant to which the Senior Secured Notes called for redemption
     are being redeemed; and

          (h) the CUSIP number (provided that the Issuer may state that no
     representation is made as to the correctness or accuracy of the CUSIP
     number, if any, listed in such notice or printed on the Senior Secured
     Notes).

          At the Issuer's request, the Trustee or the Paying Agent shall give
the notice of redemption in the Issuer's name and at its expense; provided,
however, that the Issuer shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.

          8. Denominations, Transfer, Exchange. The Senior Secured Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The transfer of Senior Secured Notes may
be registered and Senior Secured Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or



                                                                     Exhibit A-2
                                                                          Page 8


permitted by the Indenture. The Issuer need not exchange or register the
transfer of any Senior Secured Note or portion of a Senior Secured Note selected
for redemption, except for the unredeemed portion of any Senior Secured Note
being redeemed in part. Also, the Issuer need not exchange or register the
transfer of any Senior Secured Notes for a period of 15 days before a selection
of Senior Secured Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.

          9. Persons Deemed Owners. The registered Holder of a Senior Secured
Note may be treated as its owner for all purposes.

          10. Amendment, Supplement and Waiver. The Issuer and the Trustee may
amend or supplement the Indenture and any of the other Financing Documents
without the consent of the Holders:

          (a) to cure any ambiguity, defect or inconsistency;

          (b) to add additional covenants of the Issuer or its Subsidiaries, to
     surrender rights conferred upon the Issuer or its Subsidiaries, or to
     confer additional benefits upon the Holders;

          (c) to increase the assets securing the Issuer's obligations under the
     Indenture;

          (d) to allow any Subsidiary to execute a supplemental indenture,
     Series Supplemental Indenture and/or Guarantee with respect to the Senior
     Secured Notes;

          (e) to comply with requirements of the SEC in order to effect or
     maintain the qualification of the Indenture under the Trust Indenture Act;

          (f) to make any change not inconsistent with the terms of the
     Indenture that does not adversely affect the legal rights thereunder of any
     Holder of the Senior Secured Notes; or

          (g) to establish the form and terms of the Senior Secured Notes of any
     series permitted by Sections 2.01 and 2.03 of the Indenture.

          The Indenture and the other Financing Documents may be otherwise
amended or supplemented by the Issuer and the Trustee, with the consent of the
Required Holders; provided that no such amendment or supplement may, without the
consent of all Holders of Outstanding Senior Secured Notes affected thereby:

          (a) modify the principal, interest or premium, if any, payable upon
     the Senior Secured Notes;



                                                                     Exhibit A-2
                                                                          Page 9


          (b) modify the dates on which principal, interest and premium, if any,
     on any Senior Secured Notes are paid;

          (c) release any Guarantor from its obligations under a Guarantee;

          (d) modify the dates of maturity of any Senior Secured Notes; and

          (e) make changes in the procedures for amendment, supplement or
     waiver.

          The Indenture and the other Security Documents may be amended or
supplemented to provide for the release of Collateral, by the Issuer and the
Trustee, with the consent of Holders of not less than 66?% of the Outstanding
Senior Secured Notes.

          11. Defaults and Remedies. The following events constitute an Event of
Default under the Indenture:

          (a) (1) the failure to pay or cause to be paid any principal on the
     Senior Secured Notes after the same becomes due and payable or (2) the
     failure to pay or cause to be paid any interest, premium, if any, fees or
     any other obligations on the Senior Secured Notes for five or more days
     after the same becomes due and payable, whether, with respect to each of
     sub-clauses (1) and (2), by scheduled maturity or required prepayment or by
     acceleration or otherwise;

          (b) any representation or warranty made by the Issuer, any Subsidiary
     or Ormat Nevada under any Financing Document shall prove to have been
     untrue or misleading as of the time made, confirmed or furnished and the
     fact, event or circumstance that gave rise to such inaccuracy has had or
     could reasonably be expected to result in a Material Adverse Effect and
     such fact, event or circumstance shall continue to be uncured for 30 or
     more days from the date a Responsible Officer of the Issuer, such
     Subsidiary or Ormat Nevada, as the case may be, obtains knowledge thereof;
     provided, that if the Issuer, such Subsidiary or Ormat Nevada, as the case
     may be, commences efforts to cure such fact, event or circumstance within
     such 30-day period, the Issuer, such Subsidiary or Ormat Nevada, as the
     case may be, may continue to effect such cure and such misrepresentation
     will not be deemed an Event of Default for an additional 90 days so long as
     the Issuer, such Subsidiary or Ormat Nevada, as the case may be, is
     diligently pursuing such cure;

          (c) the failure by the Issuer or any Subsidiary to perform or observe
     any covenant contained in Sections 4.06, 4.07, 4.09, 4.10, 4.11, 4.15,
     4.16, 4.18, 4.19, 4.20, 4.23, 4.27 and 4.32 of the Indenture and such
     failure shall continue uncured for 30 or more days after a Responsible
     Officer of the Issuer, any Subsidiary or Ormat Nevada, as the case may be,
     obtains knowledge thereof;

          (d) the failure by the Issuer, any Subsidiary or Ormat Nevada to
     perform or



                                                                     Exhibit A-2
                                                                         Page 10


     observe any of the other covenants in the Financing Documents that the
     Issuer, such Subsidiary or Ormat Nevada is a party to (other than such
     failures described in clause (a) or (c) above) and such failure shall
     continue uncured for 30 or more days after a Responsible Officer of the
     Issuer, any Subsidiary or Ormat Nevada, as the case may be, obtains
     knowledge thereof; provided that if the Issuer, any Subsidiary or Ormat
     Nevada, as the case may be, commence efforts to cure such default within
     such 30-day period, the Issuer, any Subsidiary or Ormat Nevada, as the case
     may be, may continue to effect such cure of the default and such default
     will not be deemed an Event of Default for an additional 90 days so long as
     the Issuer, any Subsidiary or Ormat Nevada, as the case may be, is
     diligently pursuing such cure;

          (e) the Issuer or any Subsidiary of the Issuer:

               (i) admits in writing its inability, or is generally unable, to
          pay its debts as the debts become due or makes a general assignment
          for the benefit of creditors; or

               (ii) commences any case, proceeding or other action seeking
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any applicable liquidation,
          conservatorship, bankruptcy, moratorium, arrangement, adjustment,
          insolvency, reorganization or similar laws affecting the rights or
          remedies of creditors generally, as in effect from time to time
          (collectively, "Debtor Relief Law"); or

               (iii) in any involuntary case, proceeding or other action
          commenced against it which seeks to have an order for relief
          (injunctive or otherwise) entered against it, as debtor, or seeks
          reorganization, arrangement, adjustment, liquidation, dissolution or
          composition of it or its debts under any Debtor Relief Law, (A) fails
          to obtain a dismissal of such case, proceeding or other action within
          ninety (90) days of its commencement, or (B) converts the case from
          one chapter of the Bankruptcy Reform Act of 1978, as amended, to
          another chapter, or (C) is the subject of an order for relief that
          remains unstayed and in effect for a period of ninety (90) days; or

               (iv) has a trustee, receiver, custodian or other official
          appointed for or to take possession of all or any part of its property
          or has any court take jurisdiction of any of its property, which
          action remains undismissed for a period of ninety (90) days;

               (v) the entry of one or more final and non-appealable judgment or
          judgments for the payment of money in excess of $10.0 million
          (exclusive of



                                                                     Exhibit A-2
                                                                         Page 11


          judgment amounts covered by insurance) against the Issuer or any
          Subsidiary, which remain unpaid or unstayed for a period of 60 or more
          consecutive days;

               (vi) an event of default under any Permitted Indebtedness (other
          than Indebtedness referred to in clause (a) above) that results in
          Indebtedness in excess of $10.0 million becoming due and payable prior
          to its stated maturity;

               (vii) any Governmental Approval required for the operation of any
          Project or any material portion thereof owned by the Issuer or any
          Subsidiary is revoked, terminated, withdrawn or ceases to be in full
          force and effect if such revocation, termination, withdrawal or
          cessation has had or could reasonably be expected to have a Material
          Adverse Effect and such revocation, termination, withdrawal or
          cessation is not cured within 60 days following the occurrence
          thereof;

               (viii) any Material Project Document or Third Party Consent or
          any material provision thereof (i) ceases to be valid and binding and
          in full force and effect prior to its stated maturity date other than
          as a result of an amendment or termination permitted under the
          Indenture or (ii) a party thereto fails to perform or observe any of
          its covenants or obligations thereunder or makes any material
          misrepresentation thereunder and such event has had or could
          reasonably be expected to have a Material Adverse Effect; provided,
          that, in any such event no such event shall be an Event of Default if
          within 180 days from the occurrence of any such event, (a) such
          Material Project Document or Third Party Consent or material provision
          thereof is reinstated as a valid and binding agreement among the
          parties thereto, (b) any breaching party resumes performance and
          otherwise cures such misrepresentation or failure to perform or
          observe its covenants or obligations under the Material Project
          Documents or Third Party Consents or (c) in the case of Material
          Project Documents, the Issuer enters into an Additional Project
          Document in replacement thereof, as permitted under the Indenture;

               (ix) any of the Security Documents or any other Financing
          Document ceases to be in full force and effect or any Lien granted
          therein ceases to be a valid and perfected Lien in favor of the
          Secured Parties on the Collateral described therein with the priority
          purported to be created thereby; provided, however, that the Issuer
          shall have 10 days after a Responsible Officer of the Issuer, any
          Subsidiary or Ormat Nevada, as the case may be, obtains knowledge
          thereof to cure any such cessation or to furnish to the Trustee, the
          Collateral Agent or the Depositary all documents or instruments
          required to cure any such cessation;

               (x) the occurrence of a Change of Control; or



                                                                     Exhibit A-2
                                                                         Page 12


               (xi) the failure of Ormat Technologies to make all payments, when
          due, pursuant to the Production Tax Credit Agreement.

          If an Event of Default relating to failure to pay amounts owed on the
Senior Secured Notes has occurred and is continuing, the Trustee may declare the
principal amount of the Outstanding Senior Secured Notes, all interest accrued
and unpaid thereon, and all premium, if any, and other amounts payable under the
Senior Secured Notes and the Indenture, if any, to be due and payable
notwithstanding the absence of written direction from Holders of at least 25% in
aggregate principal amount of the Outstanding Senior Secured Notes directing the
Trustee in writing to accelerate the principal maturity of the Senior Secured
Notes, unless the Required Holders direct the Trustee not to accelerate the
maturity of such Senior Secured Notes, if in the good faith exercise of its
discretion the Trustee determines that such action is necessary to protect the
interests of the Holders. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
Outstanding Senior Secured Notes will become due and payable immediately.

          12. Trustee Dealings with Issuer. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not the Trustee.

          13. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee, organizer, manager or agent of the
Issuer or any Affiliate of any such party (other than the Issuer), as such,
shall have any liability for any obligations of the Issuer under the Senior
Secured Notes, the Indenture, any Financing Document or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
by accepting a Senior Secured Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Secured Notes.

          14. Senior Secured Notes Owned by the Issuer or Affiliates Deemed Not
Outstanding. In determining whether the Holders of the requisite aggregate
principal amount of Senior Secured Notes have concurred in any request, demand,
authorization, direction, notice, consent and waiver or other act under this
Indenture, Senior Secured Notes which are owned by the Issuer, any Guarantor, or
any member of the Issuer or such other Guarantor or any Affiliate of any of the
foregoing shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination except that for the purposes of determining whether
the Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent and waiver or other act, only Senior
Secured Notes for which a Responsible Officer of the Trustee has received
written notice of such ownership as conclusively evidenced by the register kept
by the Registrar shall be so disregarded. The Issuer shall furnish the Trustee,
upon its reasonable request, with a list of such Affiliates. Senior Secured
Notes so owned which have been pledged in good faith may be regarded as
Outstanding for the purposes of Section 10.08 of the Indenture, if the pledgee
shall establish to the satisfaction of the Trustee that the pledgee has the
right to vote such Senior Secured Notes and that the pledgee is not an Affiliate
of the Issuer. In case of a



                                                                     Exhibit A-2
                                                                         Page 13


dispute as to such right, any decision by the Trustee, taken upon the advice of
counsel, shall be full protection to the Trustee.

          15. Authentication. This Senior Secured Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

          16. Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

          17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Senior Secured Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Secured Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.

          The Issuer will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:

          OrCal Geothermal Inc.
          980 Greg Street
          Sparks, Nevada 89431
          Tel.: (775) 356-9029
          Fax: (775) 356-9039
          Attention: President



                                                                     Exhibit A-2
                                                                         Page 14


                                 Assignment Form

To assign this Senior Secured Note, fill in the form below: (I) or (we) assign
and transfer this Senior Secured Note to

(Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)

and irrevocably appoint ________________________________________________________
to transfer this Senior Secured Note on the books of the Issuer. The agent may
substitute another to act for him.


Date:                              Your Signature:
                                                   -----------------------------
                                                   (Sign exactly as your name
                                                   appears on the Senior Secured
                                                   Note)

                                   Tax Identification No: ______________________


Signature Guarantee.

Medallion No.:

Notice: Signature must be guaranteed by a member firm of the STAMP, SEMP or MSP
signature guaranty medallion program.



                                                                     Exhibit A-2
                                                                         Page 15


           SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE

          The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:



               Amount of          Amount of      Principal Amount    Signature of
              decrease in        increase in      of this Global      authorized
           Principal Amount   Principal Amount    Note following      officer of
 Date of        of this            of this         such decrease      Trustee or
Exchange      Global Note        Global Note       (or increase)    Note Custodian
- --------   ----------------   ----------------   ----------------   --------------






                                                                     Exhibit A-2
                                                                         Page 16


                                                                      SCHEDULE I

                         SCHEDULE OF PRINCIPAL PAYMENTS

          The principal of the Senior Secured Notes will be payable in
semi-annual installments, commencing as follows:

SCHEDULED PAYMENT DATE   PRINCIPAL AMOUNT PAYABLE
- ----------------------   ------------------------



                                    EXHIBIT B

                         FORM OF CERTIFICATE OF TRANSFER

OrCal Geothermal Inc.
980 Greg Street
Sparks, Nevada 89431
Tel.: (775) 356-9029
Fax: (775) 356-9039
Attention: President

Union Bank of California, N.A.
350 California Street, 11th Floor
San Francisco, CA 94104
Tel.: (415) 273-2519
Fax: (415) 273-2492
Attention: Corporate Trust Department

Re: 6.21% Senior Secured Notes Due December 30, 2020

          Reference is hereby made to the Indenture, dated as of December 8,
2005 (the "Indenture"), among OrCal Geothermal Inc., as issuer, OrHeber 1 Inc.,
OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company, Heber
Geothermal Company, as guarantors, and Union Bank of California, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.

          ______________, (the "Transferor") owns and proposes to transfer the
Senior Secured Note [s] or interest in such Senior Secured Note [s] specified in
Annex A hereto, in the principal amount of $___________ in such Senior Secured
Note [s] or interests (the "Transfer"), to __________ (the "Transferee"), as
further specified in Annex A hereto. In connection with the Transfer, the
Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
GLOBAL NOTE OR A CERTIFICATED NOTE PURSUANT TO RULE 144A. The Transfer is being
effected pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Certificated
Note is being transferred to a Person that the Transferor reasonably believed
and believes is purchasing the beneficial interest or Certificated Note for its
own account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Certificated Note will be
subject to the



                                                                       Exhibit B
                                                                          Page 2


restrictions on transfer enumerated in the Private Placement Legend printed on
the Global Note and/or the Certificated Note and in the Indenture and the
Securities Act.

2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
CERTIFICATED NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Certificated Note and in the
Indenture and the Securities Act.

3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE CERTIFICATED NOTE OR A CERTIFICATED NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):

          (a)  such Transfer is being effected pursuant to and in accordance
               with Rule 144 under the Securities Act;

                                       or

          (b)  such Transfer is being effected to the Issuer or a subsidiary
               thereof;

                                       or

          (c)  such Transfer is being effected pursuant to an effective
               registration statement under the Securities Act and in compliance
               with the prospectus delivery requirements of the Securities Act.



                                                                       Exhibit B
                                                                          Page 3


                                       or

          (d)  such Transfer is being effected to an Institutional Accredited
               Investor and pursuant to an exemption from the registration
               requirements of the Securities Act other than Rule 144A, Rule 144
               or Rule 904, and the Transferor hereby further certifies that it
               has not engaged in any general solicitation within the meaning of
               Regulation D under the Securities Act and the Transfer complies
               with the transfer restrictions applicable to beneficial interests
               in a Restricted Global Note or Restricted Definitive Notes and
               the requirements of the exemption claimed, which certification is
               supported by (1) a certificate executed by the Transferee
               certifying that such Transferee is an Institutional Accredited
               Investor and (2) if such Transfer is in respect of a principal
               amount of Senior Secured Notes at the time of transfer of less
               than $250,000, an Opinion of Counsel provided by the Transferor
               or the Transferee (a copy of which the Transferor has attached to
               this certification), to the effect that such Transfer is in
               compliance with the Securities Act. Upon consummation of the
               proposed transfer in accordance with the terms of the Indenture,
               the transferred beneficial interest or Definitive Note will be
               subject to the restrictions on transfer enumerated in the Private
               Placement Legend printed on the Definitive Note and/or the
               Definitive Notes and in the Indenture and the Securities Act.

4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Certificated Note.

     (a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Certificated
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Certificated Notes and in the Indenture.

     (b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will no longer be



                                                                       Exhibit B
                                                                          Page 4


subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Certificated Notes
and in the Indenture.

     (c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Certificated Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Certificated Notes and in the Indenture.

          This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.

                                        ________________________________________
                                               [Insert Name of Transferor]


                                        BY:
                                            ------------------------------------
                                            Name:
                                            Title:

Dated: ________, ____



                       ANNEX A TO CERTIFICATE OF TRANSFER

1.   The Transferor owns and proposes to transfer the following:

                            [CHECK ONE OF (a) OR (b)]

     (a)  o    a beneficial interest in the:

          (i)     [_] Global Note (CUSIP _____), or

          (ii)    [_] Regulation S Global Note (CUSIP _____), or

          (iii)   [_] Certificated Note (Number _____); or

     (b)  o a Restricted Certificated Note.

2.   After the Transfer, the Transferee will hold:

                                   [CHECK ONE]

     (a)  o    a beneficial interest in the:

          (i)     [_] Global Note (CUSIP _____), or

          (ii)    [_] Regulation S Global Note (CUSIP _____), or

          (iii)   [_] Certificated Note (CUSIP _____); or

          (iv)    [_] Unrestricted Global Note (CUSIP _____); or

     (b)  o    a Restricted Certificated Note; or

     (c)  o    an Unrestricted Certificated Note, in accordance with the terms
               of the Indenture.



                                    EXHIBIT C

                         FORM OF CERTIFICATE OF EXCHANGE

OrCal Geothermal Inc.
980 Greg Street
Sparks, Nevada 89431
Tel.: (775) 356-9029
Fax: (775) 356-9039
Attention: President

Union Bank of California, N.A.
350 California Street, 11th Floor
San Francisco, CA 94104
Tel.: (415) 273-2519
Fax: (415) 273-2492
Attention: Corporate Trust Department

Re: 6.21% Senior Secured Notes Due December 30, 2020

                                (CUSIP _________)

          Reference is hereby made to the Indenture, dated as of December 8,
2005 (the "Indenture"), among OrCal Geothermal Inc., as issuer, OrHeber 1 Inc.,
OrHeber 2 Inc., Second Imperial Geothermal Company, Heber Field Company, Heber
Geothermal Company, as guarantors, and Union Bank of California, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.

          ____________, (the "Owner") owns and proposes to exchange the Senior
Secured Note [s] or interest in such Senior Secured Note [s] specified herein,
in the principal amount of $____________ in such Senior Secured Note [s] or
interests (the "Exchange"). In connection with the Exchange, the Owner hereby
certifies that:

1. Exchange of Restricted Certificated Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Certificated Notes or Beneficial
Interests in an Unrestricted Global Note

     (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities



                                                                       Exhibit C
                                                                          Page 2


Act"), (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the beneficial interest in an Unrestricted Global
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.

     (b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED CERTIFICATED NOTE. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Certificated Note, the Owner hereby certifies (i) the Certificated
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Certificated Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.

     (c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Certificated Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Certificated Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.

     (d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTE TO
UNRESTRICTED CERTIFICATED NOTE. In connection with the Owner's Exchange of a
Restricted Certificated Note for an Unrestricted Certificated Note, the Owner
hereby certifies (i) the Unrestricted Certificated Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted
Certificated Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Certificated Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.

2. Exchange of Restricted Certificated Notes or Beneficial Interests in
Restricted Global Notes for Restricted Certificated Notes or Beneficial
Interests in Restricted Global Notes.

     (a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED CERTIFICATED NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Certificated Note with an equal principal



                                                                       Exhibit C
                                                                          Page 3


amount, the Owner hereby certifies that the Restricted Certificated Note is
being acquired for the Owner's own account without transfer. Upon consummation
of the proposed Exchange in accordance with the terms of the Indenture, the
Restricted Certificated Note issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Certificated Note and in the Indenture and the Securities Act.

     (b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED CERTIFICATED NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE OR CERTIFICATED NOTE. In
connection with the Exchange of the Owner's Restricted Certificated Note for a
beneficial interest in the [CHECK ONE] [_] "Global Note", [_] "Regulation S
Global Note", [_] "Certificated Note" with an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with the
terms of the Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Note and in the Indenture and the Securities Act



                                                                       Exhibit C
                                                                          Page 4


          This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.

                                        ________________________________________
                                                 [Insert Name of Owner]


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

Dated: __________, ____



                                    EXHIBIT D

                            SUBORDINATION PROVISIONS

          Section 1. Definitions and Rules of Interpretation. The following
terms shall have the following meanings:

1.1  "Pledge Agreement" means that Pledge and Security agreement, dated as of
     [________], between the Subordinated Lender and the Collateral Agent, with
     respect to certain collateral described therein granted by the Subordinated
     Lender in favor of the Collateral Agent for the benefit of the Secured
     Parties.

1.2  "Subordinated Debt" shall mean any Indebtedness of the Issuer incurred
     pursuant to the Subordinated Loan Agreement.

1.3  "Subordinated Lender" shall mean [Insert name of Lender].

          Section 2. Ranking of Senior Secured Obligations

2.1  Until the earlier of (x) the payment in full in cash of the Senior Secured
     Obligations or (y) to the extent permitted under the relevant Financing
     Documents, the legal defeasance of the Senior Secured Obligations in full
     in accordance with the express terms and conditions of the related
     Financing Documents, (i) the Subordinated Lender and the Issuer hereby
     agree that all Subordinated Debt is and shall be subordinated in right of
     payment and liquidation in relation to all Senior Secured Obligations to
     the extent and in the manner hereinafter set forth, (ii) except as provided
     in Section 2.2 hereof, no payments or other distributions whatsoever in
     respect of any part of the Subordinated Debt shall be made nor shall any
     property or assets of the Issuer or any of its Subsidiaries be applied to
     the purchase or other acquisition or retirement of any part of the
     Subordinated Debt, and (iii) except to the extent and in the manner
     provided herein, the Subordinated Lender agrees that it will not ask,
     demand, sue for, or take or receive from or for the account of the Issuer
     (whether directly or indirectly), by set-off or in any other manner, the
     Subordinated Debt, or any security therefor, except with the prior written
     consent of each of the Secured Parties.

2.2  Notwithstanding the restrictions set forth in Section 2.1 above, but
     without limitation to the rights of the Secured Parties under the terms of
     the Financing Documents, until the earlier of (x) the payment in full in
     cash of the Senior Secured Obligations or (y) to the extent permitted
     pursuant to the relevant Financing Documents, the legal defeasance of the
     Senior Secured Obligations in full in accordance with the express terms and
     conditions of the related Financing Documents, the Issuer may make
     repayments of principal of, other prepayments of principal of, and payments
     of interest on, and other amounts owing in respect of, the Subordinated
     Debt solely out of and to the extent of any



                                                                       Exhibit D
                                                                          Page 2


     funds permitted to be paid to the Issuer out of the Distribution Account in
     accordance with the provisions of the Depositary Agreement.

2.3  Payments of the Subordinated Debt not payable by reason of Section 2.2
     above shall be deferred until the date on which such payment may be made in
     accordance with the terms hereof; provided that, in the event that the
     payment of the Subordinated Debt is so deferred or the conditions to
     payment have not been satisfied in accordance with the terms hereof, such
     delay in payment shall not constitute a default in respect of the
     Subordinated Debt.

          Section 3. No Payment in Certain Circumstances. Until the earlier of
(x) the payment in full in cash of the Senior Secured Obligations or (y) to the
extent permitted pursuant to the relevant Financing Documents, the legal
defeasance of the Senior Secured Obligations in full in accordance with the
express terms and conditions of the related Financing Documents, and without
limitation to the rights of the Secured Parties under the terms of the Financing
Documents:

3.1  upon any distribution or application of the assets of the Issuer in
     connection with any liquidation, dissolution or other proceeding for the
     winding up of the Issuer (whether partial or complete) or any proceeding
     for insolvency or bankruptcy (whether voluntary or involuntary) or any
     receivership, reorganization or other similar case or proceeding in
     connection therewith, or any assignment for the benefit of creditors or
     arrangement with creditors, whether or not pursuant to the insolvency,
     bankruptcy or similar laws of any jurisdiction, or the sale of all or
     substantially all of the assets of the Issuer or any other marshalling of
     assets and liabilities of the Issuer:

     3.1.1 the Senior Secured Obligations shall first be irrevocably and
           indefeasibly paid in full to the Secured Parties before the
           Subordinated Lender shall be entitled to receive any payment on
           account of the Subordinated Debt or any other interests in the Issuer
           arising from the Subordinated Debt whether in cash, securities or
           other assets; and

     3.1.2 any payment or distribution of assets of the Issuer of any kind or
           character in respect of the Subordinated Debt to which the
           Subordinated Lender would be entitled if the Subordinated Debt were
           not subordinated pursuant to the terms hereof shall be made by the
           trustee, liquidator or agent or other Person making such payment or
           distribution, directly to the Secured Parties until the Senior
           Secured Obligations are irrevocably and indefeasibly paid in full and
           in cash and the Subordinated Lender irrevocably authorizes and
           empowers the Collateral Agent, acting for and on behalf of the
           Secured Parties, to receive and collect on its behalf any and all
           such payments or distributions;

3.2  without limitation to the foregoing, in the event any of the Distribution
     Conditions (as defined in the Depositary Agreement) are not satisfied, then
     no payment of principal, interest or other amounts owing shall be made by
     the Issuer on or in respect of the



                                                                       Exhibit D
                                                                          Page 3


     Subordinated Debt, and the Subordinated Lender agrees that it will not ask,
     demand, sue for, take or receive from or for the account of the Issuer
     (whether directly or indirectly), by set-off or in any other manner, or
     retain payment (in whole or in part) of, the Subordinated Debt, or any
     security therefor, until payments are permitted to be made out of the
     Distribution Account in accordance with the provisions of the Depositary
     Agreement;

3.3  if, for any reason whatsoever and whether pursuant to a bankruptcy,
     liquidation or similar proceeding or otherwise, the Issuer shall make or
     the Subordinated Lender shall receive any payment or distribution of any
     kind or character, whether in cash, securities or other property, on
     account or in respect of the Subordinated Debt in contravention of any of
     the terms set forth herein, the Subordinated Lender shall hold any such
     payment or distribution in trust for the benefit of the Secured Parties,
     promptly notify the Collateral Agent of the receipt of such payment or
     distribution and promptly pay over or deliver such distribution or payment
     to the Collateral Agent, or to any other Person nominated by the Collateral
     Agent, to hold for the account of the Secured Parties. In the event of
     failure of the Subordinated Lender to make any such endorsement or
     assignment, the Collateral Agent is irrevocably authorized by the
     Subordinated Lender to make the same; provided, however, that nothing in
     this sentence shall be deemed to restrict any rights of the Secured Parties
     to enforce in any manner provided under applicable law the obligation of
     the Subordinated Lender to make any such endorsement or assignment; and

3.4  notwithstanding any provision to the contrary herein or in any other
     Financing Document, no payment or delivery shall be made to the
     Subordinated Lender in payment of, or in satisfaction for, any amount owed
     to it under the Subordinated Loan Agreement, of securities or other Senior
     Secured Obligations which are issued upon any merger, consolidation, sale,
     lease, transfer or other disposal by any Person succeeding to the Issuer or
     acquiring the Issuer's property and assets, unless such securities or
     Senior Secured Obligations are pledged in favor of the Secured Parties and
     subordinate and junior at least to the extent provided herein to the
     irrevocable and indefeasible payment in full in cash (or, to the extent
     permitted pursuant to the relevant Financing Agreements, legal defeasance
     in full in accordance with the express terms and conditions of the related
     Financing Documents) of all Senior Secured Obligations and to the payment
     of any stock or Senior Secured Obligations which are issued in exchange or
     substitution for any such Senior Secured Obligations.

          Section 4. Authorizations to Collateral Agent. Until the earlier of
(x) the payment in full in cash of the Senior Secured Obligations or (y) to the
extent permitted pursuant to the relevant Financing Agreements, the legal
defeasance of the Senior Secured Obligations in full in accordance with the
express terms and conditions of the related Financing Documents, and without
limitation to the rights of the Secured Parties under the terms of the Financing
Documents, the Subordinated Lender (i) irrevocably authorizes and empowers
(without imposing any obligation on) the Collateral Agent to claim, enforce,
demand, sue for, collect and receive all payments and distributions on or in
respect of the Subordinated Debt which are required to be paid or delivered to
any Secured Party, as provided herein, and to file and prove all claims



                                                                       Exhibit D
                                                                          Page 4


therefor, give receipts and take all such other action, in the name of the
Subordinated Lender or otherwise, necessary or appropriate for the enforcement
of these subordination provisions, (ii) irrevocably authorizes and empowers
(without imposing any obligation on) the Collateral Agent to vote the
Subordinated Debt in favor of or in opposition to any matter which may come
before any meeting of creditors of the Issuer generally or in connection with,
or in anticipation of, any insolvency or bankruptcy case or proceeding, or any
proceeding under any laws relating to the relief of debtors, readjustment of
indebtedness, arrangements, reorganizations, compositions or extensions relative
to the Issuer, and (iii) agrees to execute and deliver to the Collateral Agent
all such further instruments confirming the above authorization, and all such
powers of attorney, proofs of claim, assignments of claim and other instruments,
and to take all such other action, as may be necessary or as may be reasonably
requested by any Secured Party in order to enable the Collateral Agent to
accomplish the foregoing.

          Section 5. Non-Impairment. None of the Senior Secured Obligations of
the Issuer shall be impaired by the Secured Parties:

5.1  agreeing with the Issuer, the Subordinated Lender or any other Person as to
     any amendment, variation, assignment, novation, extension or departure
     (however substantial or material) of, to or from any Transaction Document
     (including changing the manner, place or terms of payment of or extending
     the time of payment of, or renewing or altering, the Senior Secured
     Obligations, or otherwise amending or supplementing in any manner the
     Senior Secured Obligations or any instrument evidencing the same or any
     agreement under which the Senior Secured Obligations are outstanding, or
     any Financing Document) so that any such amendment, variation, assignment,
     novation or departure shall, whatever its nature, be binding upon the
     Subordinated Lender in all circumstances;

5.2  releasing, granting any time, any indulgence or any waiver of any kind to,
     or composition with, the Issuer, the Subordinated Lender or any other
     Person (including, without limitation, the waiver of any preconditions for
     drawing under, or of any breach of, the Financing Documents or the exercise
     or the failure to exercise any rights against the Issuer and any other
     Person), or entering into any transaction or arrangements whatsoever with
     or in relation to the Issuer, the Subordinated Lender and/or any other
     Person;

5.3  taking, accepting, varying, dealing with, exchanging, renewing, enforcing,
     failing to enforce, take up or perfect, abstaining from enforcing,
     surrendering or releasing any security, right of recourse, set-off or
     combination or other right, remedy or interest held by the Secured Parties
     in connection with the Senior Secured Obligations or any part thereof, or
     acting in relation to the Transaction Documents in such manner as it thinks
     fit;

5.4  failing to present or observe any formality or other requirement in respect
     of any instrument or any failure to realize the full value of any security;



                                                                       Exhibit D
                                                                          Page 5


5.5  claiming, proving for, accepting or transferring any payment in respect of
     the Senior Secured Obligations in any composition by, or winding up of, the
     Issuer, the Subordinated Lender and/or any other Person or abstaining from
     so claiming, proving for, accepting or transferring; or

5.6  actually or purportedly assigning all or any portion of the Senior Secured
     Obligations to any other Person.

To the fullest extent permitted by applicable law, no change of law or
circumstances shall release or diminish any of the Subordinated Lender's
liabilities, agreements or duties hereunder, affect the provisions set forth
herein in any way, or afford the Subordinated Lenders any recourse against any
of the Secured Parties.

          Section 6. Benefit of Subordination Provisions. These subordination
provisions are intended solely to define the relative rights of the Secured
Parties, the Subordinated Lender, and their respective successors and permitted
assigns. Nothing contained in this Agreement is intended to or shall impair, as
between the Issuer, its creditors (other than the Secured Parties) and the
Subordinated Lender, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Subordinated Lender the principal of and interest
on the Subordinated Debt as and when the same shall become due and payable in
accordance with, and subject to, the terms of this Agreement and the
Subordinated Loan Agreement (as modified hereby), or to affect the relative
rights of the Subordinated Lender and the creditors of the Issuer (other than
the Secured Parties).

          Section 7. Reinstatement. If any payment to any of the Secured Parties
by the Issuer or any other Person in respect of any of the Senior Secured
Obligations is held to constitute a preference or a voidable transfer under
applicable law, or if for any other reason any Secured Party is required to
refund such payment to the Issuer or to such Person or to pay the amount thereof
to any other Person, such payment to such Secured Party shall not constitute a
release of any of the Subordinated Lender from any of its liability hereunder,
and the Subordinated Lender agrees and acknowledges that the provisions set
forth herein shall continue to be effective or shall be reinstated, as the case
may be, to the extent of any such payment or payments.

          Section 8. Restrictions on Transfers. The Subordinated Lender may
transfer (by sale, novation or otherwise) any of its rights or obligations under
the Subordinated Debt and under these subordination provisions unless (i) such
transfer is in connection with a transfer of all or a portion of its respective
interest in the Subordinated Debt as expressly permitted under the Financing
Documents and (ii) the transferee of such interest first agrees in writing to be
bound by the terms of this Agreement applicable to the transferor of such
interest and executes an instrument to that effect.

          Section 9. Affirmative Covenants of the Subordinated Lender. The
Subordinated Lender shall:

9.1  until the earlier of (x) the payment in full in cash of the Senior Secured
     Obligations or (y) to the extend permitted by the relevant Financing
     Documents, the legal defeasance



                                                                       Exhibit D
                                                                          Page 6


     of the Senior Secured Obligations in full in accordance with the express
     terms and conditions of the related Financing Documents, promptly deliver
     to the Collateral Agent copies of each amendment or modification to any
     agreement relating to the Subordinated Debt agreed to which the
     Subordinated Lender is a party (so long as such amendment or modification
     does not purport to share or modify any of the terms hereof);

9.2  until the earlier of (x) the payment in full in cash of Senior Secured
     Obligations or (y) to the extent permitted by the relevant Financing
     Documents, the legal defeasance of the Senior Secured Obligations in full
     in accordance with the express terms and conditions of the related
     Financing Documents, cause to be clearly inserted in any instrument which
     at any time evidences any part of the Subordinated Debt owing to the
     Subordinated Lender a statement to the effect that the payment thereof is
     subordinated in accordance with the terms of this Agreement;

9.3  cause its right to receive any payment in respect of the Subordinated Debt
     to be subject to the Liens created by the Security Documents and, if
     required by applicable law, cause any agreement or instrument evidencing
     such right to be registered or filed with the appropriate Governmental
     Authorities in order to perfect such Liens created by the Security
     Documents and cause any instrument which at any time evidences any part of
     the Subordinated Debt owing to the Subordinated Lender and any proceeds
     deriving therefrom to be pledged in favor of the Secured Parties and, to
     the extent evidenced by a note, an original of such instrument shall be
     delivered to the order of the Collateral Agent with appropriate
     endorsements thereto executed in blank; and

9.4  at its own cost, file all documents or instruments necessary or advisable
     and do all things as any Secured Party may reasonably request in order to
     carry out more effectively the intent and purpose of these subordination
     provisions.

          Section 10. Negative Covenants of the Subordinated Lender. Until the
earlier of (x) the payment in full in cash of the Senior Secured Obligations or
(y) to the extent permitted by the relevant Financing Documents, the legal
defeasance of the Senior Secured Obligations in full in accordance with the
express terms and conditions of the related Financing Documents, the
Subordinated Lender shall not:

10.1 create, agree to create or permit to exist, any Lien, whether arising by
     statute, in law or equity or by contract (howsoever ranking in point of
     priority) of any nature whatsoever in, over or affecting the Subordinated
     Debt owing to the Subordinated Lender, other than pursuant to the Security
     Documents and those contemplated hereunder;

10.2 without the prior written consent of the Collateral Agent (acting on
     instructions from the Secured Parties), sue for payment of, or accelerate
     the maturity of, or initiate any proceedings or take any other actions to
     enforce any of the Subordinated Debt owing to the Subordinated Lender;



                                                                       Exhibit D
                                                                          Page 7


10.3 whether by set-off, counter-claim or otherwise, reduce any amount owing by
     the Subordinated Lender to the Issuer by an amount payable by the Issuer or
     any Affiliate or other Person to the Subordinated Lender in respect of the
     Subordinated Debt;

10.4 initiate, support, permit or join any creditor in bringing any proceeding
     against the Issuer under any bankruptcy, insolvency, reorganization,
     receivership or similar law of any jurisdiction (to recover all or any part
     of the Subordinated Debt or any other liability owed to the Subordinated
     Lender), except at the written request of the Collateral Agent; provided
     that if any Secured Party initiates or joins such a proceeding, the
     Subordinated Lender may request that the Collateral Agent file a proof of
     claim on the Subordinated Lender's behalf, and if the Collateral Agent
     fails within a reasonable time period, taking into account any statutory or
     other deadlines, following such a request to file such a claim and furnish
     a copy thereof to the Subordinated Lender, the Subordinated Lender may
     proceed to file a proof of claim with respect to the Subordinated Debt, so
     long as the Collateral Agent retains all of its rights hereunder, including
     its authority to vote the Subordinated Debt in such a proceeding in
     accordance with Section 4 herein and none of the Secured Parties' right in
     such a proceeding are diminished in any way.

10.5 permit to subsist or receive any guarantee or other assurance against loss
     in respect of all or any part of the Subordinated Debt owing to the
     Subordinated Lender (other than those guarantees and/or assurances against
     loss that the Subordinated Lender would normally acquire in the ordinary
     course of business, based upon its exercise of prudent business judgment,
     including, but not limited to political risk insurance, currency and
     interest rate hedging agreements, and other similar instruments; provided
     that such guarantees and/or assurances do not give rise to any direct or
     indirect recourse against the Issuer by the providers of such guarantees
     and/or assurances) or accept, or otherwise take, any collateral security
     for such Subordinated Debt or commence enforcement proceedings with respect
     to, or against, any collateral security for such Subordinated Debt;

10.6 subordinate all or any part of the Subordinated Debt owing to the
     Subordinated Lender or the proceeds thereof to any sums owing by the Issuer
     to any Persons other than the Secured Parties; or

10.7 take or omit to take any action whereby the subordination hereunder of all
     or any part of the Subordinated Debt may be impaired.

          Section 11. Security Interest. (a) The Subordinated Lender hereby
acknowledges and agrees that it shall have delivered to the Collateral Agent the
Pledge Agreement in respect of such Subordinated Debt, and the Subordinated
Lender hereby acknowledges that it has assigned and granted to the Collateral
Agent, for the benefit of the Secured Parties, a first priority Lien on such
Subordinated Debt and, to the extend applicable, any subordinated note
evidencing such Subordinated Debt, as collateral security for the payment and
performance when due of the Senior Secured Obligations.



                                                                       Exhibit D
                                                                          Page 8


          (b) The Subordinated Lender hereby acknowledges and agrees that upon
the conversion of any Subordinated Debt into equity pursuant to Section 12
below, the Subordinated Lender will either (i) confirm in writing to the
Collateral Agent that such equity interests are subject to a first priority Lien
in favor of the Collateral Agent, for the benefit of the Secured Parties,
pursuant to the Pledge Agreement or (ii) provide to the Collateral Agent a
pledge agreement in substantially the same form as the Pledge Agreement pursuant
to which the Subordinated Lender will grant a first priority Lien in such equity
interests in favor of the Collateral Agent, for the benefit of the Secured
Parties.

          Section 12. Conversion of Subordinated Debt. Upon the commencement of
the Collateral Agent's exercise of remedies following an Event of Default
pursuant to Section 5.2 of the Indenture, including the foreclosure on any
Collateral, the Subordinated Lender and the Issuer shall, at the request of the
Collateral Agent, immediately cause all Subordinated Debt then outstanding to be
converted into equity of the Issuer.

          Section 13. Legend. The Subordinated Loan Agreement shall bear a
legend (or otherwise include notice provisions satisfactory to the Collateral
Agent) providing that payment of the Subordinated Debt hereunder have been
subordinated to prior payment of the Senior Secured Obligation in the manner and
to the extent set forth in this Agreement.

          Section 14. Waiver of Subrogation.

14.1 Notwithstanding anything to the contrary herein or in any other Financing
     Document, until the earlier of (x) the payment in full in cash of the
     Senior Secured Obligations or (y) to the extent permitted pursuant to the
     relevant Financing Documents, the legal defeasance of the Senior Secured
     Obligations in full in accordance with the express terms and conditions of
     the related Financing Documents, the Subordinated Lender irrevocably waives
     any claim or other rights which it may now have or hereafter acquire
     against the Issuer that arise from the existence or performance of its
     obligations hereunder including any and all rights of subrogation,
     reimbursement, exoneration, contribution, indemnification, any right to
     participate in any claim or remedy of the Secured Parties against the
     Issuer, or any security which the Secured Parties may now have or hereafter
     acquire, by any payment made hereunder or otherwise, including the right to
     take or receive from the Issuer, directly or indirectly, in cash or other
     property or by set-off or in any other manner, payment or security on
     account of such claim or other rights.

14.2 For the purposes of such waiver of subrogation, any payments or
     distributions to the Secured Parties of any cash, property or securities to
     which the Subordinated Lender would be entitled except for these provisions
     shall, as between the Issuer and the Subordinated Lender and their
     respective other creditors, be deemed to be a payment by the Issuer to or
     on account of the Senior Secured Obligations.

14.3 Subject to and solely after the earlier of (x) the payment in full in cash
     of the Senior Secured Obligations or (y) to the extent permitted pursuant
     to the relevant Financing Documents, the legal defeasance of the Senior
     Secured Obligations in full in



                                                                       Exhibit D
                                                                          Page 9


     accordance with the express terms and conditions of the related Financing
     Documents, the Subordinate Lender, to the extent of any payments made to it
     prior to such date and paid over to the Secured Parties in accordance with
     the terms of this Agreement, shall be subrogated to the rights of the
     Secured Parties to receive payments or distributions of cash, property or
     securities of the Issuer applicable to the Senior Secured Obligations until
     all amounts owing on the Senior Secured Obligations shall be paid in full,
     it being understood that the provisions of this Agreement are intended
     solely for the purpose of defining the relative rights of the Subordinated
     Lender and the Secured Parties; provided that such rights of subrogation
     shall be nonexclusive, and shall be shared with any other subordinated
     creditor of the Issuer which has entered into an agreement with the
     Collateral Agent providing similar rights of subrogation.

          Section 15. Exercise of Powers.

15.1 The Collateral Agent shall be entitled to exercise its rights and powers
     under these subordination provisions in such a manner and at such times as
     the Secured Parties in their absolute discretion may determine in
     accordance with, and subject to the terms and conditions of, the Financing
     Documents. None of the Secured Parties or the Collateral Agent shall be
     liable for any losses arising in connection with the exercise of or failure
     to exercise any of its rights, powers and discretions hereunder.

15.2 The Subordinated Lender alone shall be responsible for their contracts,
     engagements, acts, omissions, defaults and losses and for liabilities
     incurred by them.



                                   EXHIBIT E-1

                           FORM OF DEED OF TRUST (FEE)




                                   EXHIBIT E-1


                           FORM OF DEED OF TRUST (FEE)


                                    Agreement

         NOW, THEREFORE, to secure the prompt and complete payment and
performance when due, by acceleration or otherwise, of the Senior Secured Notes
and all other Senior Secured Obligations of the Note Issuer and the Guarantors
(including Trustor) to Beneficiary and the other Secured Parties pursuant to the
Indenture and the other Financing Documents (collectively, the "Secured
Obligations"), Trustor, intending to be legally bound, does hereby grant,
bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, set over and
confirm unto Trustee in trust for Beneficiary as set forth in this Deed of
Trust, with power of sale and right of entry and possession, for the benefit of
Beneficiary and the other Secured Parties, all of Trustor's estate, right,
title, interest, property, claim and demand, now or hereafter arising, in and to
the following property and rights (collectively, the "Mortgaged Property"):

                  (a) all of that real property located in the County of
         _________, State of ________, described on Exhibit A hereto
         (collectively, the "Site");

                  (b) any and all easements, leases, licenses, option rights,
         rights-of-way and other rights used in connection with the Site or as a
         means of access thereto, all easements for ingress and egress and
         easements for water, transmission lines, telephone lines, natural gas
         and sewage pipelines, and all other such rights running in favor of
         Trustor, or appurtenant to the Site, and any and all sidewalks, alleys,
         strips and gores of land adjacent thereto or used in connection
         therewith, together with all and singular the tenements, hereditaments
         and appurtenances thereto, and with any land lying within the
         right-of-way of any streets, open or proposed, adjoining the same
         (collectively, the "Easements"; and the Site and the Easements
         collectively referred to herein as the "Real Property");

                  (c) all buildings, structures, fixtures and other improvements
         now or hereafter erected on the Real Property, including the Project
         (collectively, the "Improvements");

                  (d) all machinery, apparatus, equipment, fittings, fixtures,
         boilers, turbines and other articles of personal property, including
         all goods and all goods which become fixtures, now owned or hereafter
         acquired by Trustor and now or hereafter located on, attached to or
         used in the operation of or in connection with the Real Property or the
         Improvements, and all replacements thereof, additions thereto and
         substitutions therefor, to the fullest extent permitted by applicable
         law (all of the foregoing being hereinafter collectively called the
         "Equipment");




                                                                     Exhibit E-1
                                                                          Page 2


                  (e) all inventory, raw materials, work in process and other
         materials used or consumed in the construction, operation or
         maintenance of, or now or hereafter located on or used in connection
         with, the Real Property, the Improvements or the Equipment, (including
         fuel and fuel deposits, now or hereafter located on the Real Property
         or elsewhere or otherwise owned by Trustor) (the above items, together
         with the Equipment, being hereinafter collectively called the "Tangible
         Collateral");

                  (f) all rights, powers, privileges and other benefits of
         Trustor (to the extent assignable) now or hereafter obtained by Trustor
         from any Governmental Authority, including Governmental Approvals
         issued in the name of Trustor and governmental actions relating to (i)
         the ownership, operation, management and use of the Real Property,
         Improvements, Equipment or Tangible Collateral, (ii) the development
         and financing of the Project, the Improvements and the Equipment, and
         (iii) any improvements, modifications or additions thereto;

                  (g) all the lands and interests in lands, tenements and
         hereditaments hereafter acquired by Trustor in connection with or
         appurtenant to the Real Property or any other property or rights
         subject to the lien hereof, including all interests of Trustor, whether
         as lessor or lessee, in any leases of land hereafter made and all
         rights of Trustor thereunder;

                  (h) any and all other property in any way associated or used
         in connection with or appurtenant to the Real Property, Improvements,
         Equipment or Tangible Collateral that may from time to time, by
         delivery or by writing of any kind, be subjected to the lien hereof by
         Trustor or by anyone on its behalf or with its consent, or which may
         come into the possession or be subject to the control of Trustee or
         Beneficiary pursuant to this Deed of Trust, being hereby assigned to
         Beneficiary and subjected or added to the lien or estate created by
         this Deed of Trust forthwith upon the acquisition thereof by Trustor,
         as fully as if such property were now owned by Trustor and were
         specifically described in this Deed of Trust and subjected to the lien
         and security interest hereof; and each of Trustee and Beneficiary is
         hereby authorized to receive any and all such property as and for
         additional security hereunder;

                  (i) any and all contract rights, general intangibles, chattel
         paper, instruments, notes, letters of credit, insurance policies,
         insurance and condemnation awards and proceeds (including title
         insurance proceeds), warranties, trademarks, trade names, improvement
         plans and specifications (in each case whether existing now or in the
         future), relating to or otherwise arising in connection with the
         Mortgaged Property; and

                  (j) all the remainder or remainders, reversion or reversions,
         rents, revenues, issues, profits, royalties, income and other benefits
         derived from any of the foregoing, all of which are hereby assigned to
         Beneficiary, who is hereby authorized to collect and receive the same,
         to give proper receipts and acquittances therefor and to apply the same
         in accordance with the provisions of this Deed of Trust.

         TO HAVE AND TO HOLD the said Mortgaged Property, whether now owned or
held or hereafter acquired, unto Beneficiary, its successors and assigns,
pursuant to the provisions of this Deed of Trust.





                                                                     Exhibit E-1
                                                                          Page 3


         IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security
interest or estate created by this Deed of Trust to secure the payment of the
Secured Obligations, both present and future, shall be first, prior and superior
to any Lien, security interest, reservation of title or other interest
heretofore, contemporaneously or subsequently suffered or granted by Trustor,
its legal representatives, successors or assigns, except only those, if any,
expressly hereinafter referred to and that the Mortgaged Property is to be held,
dealt with and disposed of by Beneficiary, upon and subject to the terms,
covenants, conditions, uses and agreements set forth in this Deed of Trust. If,
notwithstanding any provisions in this Deed of Trust to the contrary,
enforcement of the liability of Trustor hereunder for the full amount of the
Secured Obligations would be an unlawful or voidable transfer under any
applicable fraudulent conveyance or fraudulent transfer law or any comparable
law, then the liability of Trustor hereunder shall be reduced to the highest
amount for which such liability may then be enforced without giving rise to an
unlawful or voidable transfer under any such law.

         PROVIDED ALWAYS, that upon payment in full of the Secured Obligations
in accordance with the terms and provisions hereof and of the other Financing
Documents and the observance and performance by Trustor of its covenants and
agreements set forth herein and therein, then this Deed of Trust and the estate
hereby and therein granted shall cease and be void and shall be reconveyed as
provided herein below.

                                   ARTICLE 1
                                  DEFINITIONS

                1.1 Defined Terms. Each capitalized term used herein and not
otherwise defined herein shall have the meaning assigned to such term (whether
directly or by reference to another agreement or document) in Article I of the
Indenture. Any term defined by reference to an agreement, instrument or other
document shall have the meaning so assigned to it whether or not such document
is in effect. In addition, for purposes of this Deed of Trust, the following
definitions shall apply:

         "Indenture" has the meaning ascribed to it in the Recitals.

         "Counterparty" has the meaning ascribed to it in Section 5.17 below.

         "Easements" has the meaning ascribed to it in the Granting Clauses.

         "Equipment" has the meaning ascribed to it in the Granting Clauses.

         "Improvements" has the meaning ascribed to it in the Granting Clauses.

         "Leases" has the meaning ascribed to it in Section 2.4 below.

         "Mortgaged Property" has the meaning ascribed to it in the Granting
Clauses.

         "Proceeds" has the meaning assigned to it under the UCC (as defined in
Section 2.14.1 below) and, in any event, shall include, (i) any and all proceeds
of any insurance (including, property casualty and title insurance), indemnity,
warranty or guaranty payable from time to time with respect to any of the
Mortgaged Property; (ii) any and all proceeds in the form of accounts (as





                                                                     Exhibit E-1
                                                                          Page 4


such term is defined in the UCC), security deposits, tax escrows (if any), down
payments (to the extent the same may be pledged under applicable law),
collections, contract rights, documents, instruments, letters of credit, chattel
paper, liens and security instruments, guaranties or general intangibles
relating in whole or in part to the Mortgaged Property and all rights and
remedies of whatever kind or nature Trustor may hold or acquire for the purpose
of securing or enforcing any obligation due Trustor thereunder.

         "Project" means an approximately ___ MW geothermal electric power
project located in Heber, California and owned by Trustor.

         "Real Property" has the meaning ascribed to it in the Granting Clauses.

         "Rents" has the meaning ascribed to it in Section 2.4 below.

         "Secured Obligations" has the meaning ascribed to it in the Granting
Clauses.

         "Site" has the meaning ascribed to it in the Granting Clauses.

         "Tangible Collateral" has the meaning ascribed to it in the Granting
Clauses.

         "UCC Collateral" has the meaning given ascribed in Section 2.14.1
below.

                1.2 Accounting Terms. As used herein and in any certificate or
other document made or delivered pursuant hereto, accounting terms not defined
herein shall have the respective meanings given to them under GAAP.

                1.3 The Rules of Construction. The rules of construction as set
forth in the Indenture shall govern the terms, conditions and provisions hereof.
In the event of any conflict between those set forth in this Deed of Trust and
the Indenture, the latter shall be deemed controlling and shall preempt the
former.

                                   ARTICLE 2
                        GENERAL COVENANTS AND PROVISIONS

                2.1 Trustor Performance of Financing Documents. Trustor shall
perform, observe and comply with each and every provision hereof, and with each
and every provision contained in the Financing Documents, and shall promptly pay
to Beneficiary, when payment shall become due under the Indenture, the principal
with interest thereon and all other sums required to be paid by Trustor under
this Deed of Trust and the other Financing Documents at the time and in the
manner provided in the Financing Documents. If enforcement of the liability of
Trustor under this Deed of Trust for the full amount of the Secured Obligations
would be an unlawful or voidable transfer under any fraudulent conveyance or
fraudulent transfer law or any comparable law, then the liability of Trustor
hereunder shall be reduced to the highest amount for which such liability may
then be enforced without giving rise to an unlawful or voidable transfer under
any such law.

                2.2 General Representations, Covenants and Warranties. Trustor
represents, covenants and warrants that as of the date hereof: (a) Trustor has
good, marketable, valid and legal (i) fee simple title to the Site and the
Improvements and (ii) interest in the rights granted pursuant to





                                                                     Exhibit E-1
                                                                          Page 5


the Easements, in each case free and clear of all Liens except for the Title
Exceptions or Permitted Liens (as applicable under Section 4.08 under the
Indenture); (b) Trustor has good, marketable, valid and legal title to all other
Mortgaged Property, free and clear of all Liens other than Permitted Liens; (c)
Trustor has the full power and authority to encumber the Mortgaged Property in
the manner set forth herein; (d) the Title Exceptions relating to the Mortgaged
Property do not, in the aggregate, materially and adversely affect the value,
operations or use of the Project; and (e) the Mortgaged Property includes all of
Trustor's material real property interests (including fee, leasehold and
easement interests).

                2.3 Insurance; Application of Insurance Proceeds; Application of
Eminent Domain Proceeds.

                2.3.1 Trustor shall at its sole expense obtain for, deliver to,
assign and maintain for the benefit of Beneficiary, during the term of this Deed
of Trust, insurance policies insuring the Mortgaged Property (to the extent
insurable) and liability insurance policies, all in accordance with the
requirements of Sections 4.07 and 4.42 of the Indenture. Trustor shall pay
promptly when due any premiums on such insurance policies and on any renewals
thereof. In the event of the foreclosure of this Deed of Trust or any other
transfer of the Mortgaged Property in extinguishment of the indebtedness and
other sums secured hereby, all right, title and interest of Trustor in and to
all casualty insurance policies, and renewals thereof then in force, shall pass
to the purchaser or grantee in connection therewith.

                2.3.2 All Loss Proceeds and Eminent Domain Proceeds shall be
paid or shall be applied in accordance with the provisions of the Financing
Documents.

                2.4 Assignment of Rents. Trustor unconditionally and absolutely
assigns to Beneficiary all of Trustor's right, title and interest in and to: all
leases, subleases, occupancy agreements, licenses, rental contracts and other
similar agreements now or hereafter existing relating to the use or occupancy of
the Mortgaged Property, together with all guarantees, modifications, extensions
and renewals thereof (the "Leases"); and all rents, issues, profits, income and
proceeds due or to become due from tenants of the Mortgaged Property, including
rentals and all other payments of any kind under any leases now existing or
hereafter entered into, together with all deposits (including security deposits)
of tenants thereunder ("Rents") effective to create a present security interest
in existing Leases and Rents under California Civil Code Section 2938. Subject
to the provisions herein below, Beneficiary shall have the right, power and
authority to: notify any person that the Leases have been assigned to
Beneficiary and that all Rents and other obligations are to be paid directly to
Beneficiary, whether or not Beneficiary has commenced or completed foreclosure
or taken possession of the Mortgaged Property; settle compromise, release,
extend the time of payment of, and make allowances, adjustments and discounts of
any Rents or other obligations under the Leases; enforce payment of Rents and
other rights under the Leases, prosecute any action or proceeding, and defend
against any claim with respect to Rents and Leases; enter upon, take possession
of and operate the Mortgaged Property; lease all or any part of the Mortgaged
Property; perform any and all obligations of Trustor under the Leases and
exercise any and all rights of Trustor therein contained to the full extent of
Trustor's rights and obligations thereunder, with or without the bringing of any
action or the appointment of a receiver; or while any Event of Default exists,
exercise any or all remedies provided in Article 3 hereof, including the right
to have a receiver appointed and any other rights and remedies under California
Civil Code Section 2938;




                                                                     Exhibit E-1
                                                                          Page 6


provided, however, that this assignment shall not impose upon Beneficiary any
duty to produce Rents, nor shall it cause Beneficiary to be (i) a "mortgagee in
possession" for any purpose; (ii) responsible for performing any obligations of
the lessor, licensor or other counterparty under any Lease; or (iii) be
responsible for waste committed by lessees or any other parties, for any
dangerous or defective condition in the Mortgaged Property, or for any
negligence in the management, upkeep, repair or control of the Mortgaged
Property. At Beneficiary's request, Trustor shall deliver a copy of this Deed of
Trust to each tenant under a Lease. Trustor irrevocably directs any tenant,
without any requirement for notice to or consent by Trustor, to comply with all
demands of Beneficiary under this Section 2.4 and to turn over to Beneficiary on
demand all Rents which it owes under a Lease. Beneficiary shall have the right,
but not the obligation, to use and apply all Rents received hereunder in such
order and such manner as Beneficiary may determine in accordance with the
Indenture. Notwithstanding the foregoing, Trustor is entitled to collect and
receive the Rents and to retain, use and enjoy such Rents until such time as the
Beneficiary provides notice to the contrary upon the occurrence of any Event of
Default, in which case Trustor shall immediately, without any further act or
request on part of Beneficiary, turn over to Beneficiary all Rents which it
receives. Trustor shall apply any Rents which it receives to the payment due
under the Secured Obligations, taxes, assessments, water charges, sewer rents
and other governmental charges levied, assessed or imposed against the Mortgaged
Property, insurance premiums, and other obligations of lessor under the Leases
before using such proceeds for any other purpose.

                2.5 [Intentionally Omitted].

                2.6 Indemnification. Trustor hereby indemnifies Beneficiary
against, and holds harmless Beneficiary from, all losses, damages, liabilities,
claims, causes of action, judgments, court costs, attorneys' fees and other
legal expenses, costs of inspection and other expenses that either may suffer or
incur: (i) by reason of this Deed of Trust; (ii) by reason of the execution of
this trust or in performance of any act required or permitted hereunder or by an
Applicable Law, including the disclosure or non-disclosure of any facts relating
to the Mortgaged Property, or any part thereof, incidental to a judicial or
non-judicial sale; or (iii) as a result of any failure of Trustor to perform its
obligations. The above obligation of Trustor to indemnify and hold harmless
Beneficiary shall survive the release and cancellation of the Secured
Obligations and the release and reconveyance or partial release and reconveyance
of this Deed of Trust.

                2.7 Beneficiary Assumes No Secured Obligations. It is expressly
agreed that, anything herein contained to the contrary notwithstanding, except
as may otherwise be provided in the Financing Documents, Trustor shall remain
obligated under all agreements which are included in the definition of
"Mortgaged Property" and shall perform all of its obligations thereunder in
accordance with the provisions thereof, and neither Beneficiary nor any of the
Noteholders shall have any obligation or liability with respect to such
obligations of Trustor, nor shall Beneficiary or any of the Noteholders be
required or obligated in any manner to perform or fulfill any obligations or
duties of Trustor under such agreements, or to make any payment or to make any
inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim or take any action to collect or enforce the payment
of any amounts which have been assigned to Beneficiary hereunder or to which
Beneficiary or the Noteholders may be entitled at any time or times.

                2.8 Further Assurances. Trustor shall, from time to time, at its
expense, promptly execute and deliver all further instruments and documents, and
take all further action, that may be




                                                                     Exhibit E-1
                                                                          Page 7


necessary or that Trustee or Beneficiary may reasonably request, in order to
perfect, continue and protect the lien and security interest granted or
purported to be granted hereby and to enable Beneficiary to obtain the full
benefits of the lien and security interest granted or intended to be granted
hereby. Trustor shall keep the Mortgaged Property free and clear of all Liens,
other than Permitted Liens. Without limiting the generality of the foregoing,
Trustor shall execute and record or file this Deed of Trust and each amendment
hereto, and such financing or continuation statements, or amendments thereto,
and such other instruments, endorsements or notices, as may be necessary, or as
Beneficiary or Trustee may reasonably request, in order to perfect and preserve
the lien and security interest granted or purported to be granted hereby.
Trustor hereby authorizes Beneficiary to file one or more financing statements
or continuation statements, and amendments thereto, relative to all or any part
of the Mortgaged Property necessary to preserve or protect the lien and security
interest granted hereby without the signature of Trustor where permitted by law.

     2.9 Acts of Trustor. Except as provided in or permitted by the Financing
Documents, Trustor hereby represents and warrants that it has not mortgaged,
hypothecated, assigned or pledged and hereby covenants that it will not
mortgage, hypothecate, assign or pledge, so long as this Deed of Trust shall
remain in effect, any of its right, title or interest in and to the Mortgaged
Property or any part thereof, to anyone other than Beneficiary.

     2.10 After-Acquired Property. Subject to the terms of this paragraph, any
and all of the Mortgaged Property which is hereafter acquired shall immediately,
without any further conveyance, assignment or act on the part of Trustor or
Beneficiary, become and be subject to the lien and security interest of this
Deed of Trust as fully and completely as though specifically described herein,
but nothing contained in this Section 2.10 shall be deemed to modify or change
the obligations of Trustor under Section 2.8 hereof. If and whenever from time
to time Trustor shall hereafter acquire any real property or interest therein
which constitutes or is intended to constitute part of the Mortgaged Property
hereunder, Trustor shall promptly give notice thereof to Beneficiary and Trustor
shall forthwith execute, acknowledge and deliver to Beneficiary a supplement to
this Deed of Trust in form and substance reasonably satisfactory to Beneficiary
subjecting the property so acquired to the lien of this Deed of Trust. At the
same time, if Beneficiary so requests, Trustor shall deliver to Beneficiary
either (i) an endorsement to the lender's policy of title insurance issued to
Beneficiary insuring the lien of this Deed of Trust, or (ii) a new lender's
title policy (which shall include tie in coverage relating to the lender's
policy described in (i), above), in each case which shall insure to Beneficiary
in form and substance reasonably satisfactory to Beneficiary that the lien of
this Deed of Trust as insured under such title insurance policy or policies
encumbers such later acquired property and that Trustor's title to such property
meets all of the applicable requirements of the Financing Documents with respect
to title to Trustor's real property interests.

     2.11 Mortgaged Property.

                2.11.1 Trustor shall observe all applicable covenants, easements
and other restrictions of record with respect to the Site, the Easements or to
any other part of the Mortgaged Property, in all material respects.

                2.11.2 If any action or proceeding shall be instituted to evict
Trustor or to recover possession of the Mortgaged Property or any part thereof
or interest therein from Trustor or any action or proceeding otherwise affecting
the Mortgaged Property or this Deed of Trust




                                                                     Exhibit E-1
                                                                          Page 8



shall be instituted, then Trustor shall, immediately after receipt, deliver to
Beneficiary a true and complete copy of each petition, summons, complaint,
notice of motion, order to show cause and all other pleadings and papers,
however designated, served in any such action or proceeding.

                2.11.3 The lien of this Deed of Trust shall attach to all of
Trustor's rights and remedies at any time arising under or pursuant to section
365(h) of the Bankruptcy Law, including all of Trustor's rights to remain in
possession of the Mortgaged Property.

                2.11.4 Trustor shall, after obtaining knowledge thereof,
promptly notify Beneficiary of any filing by or against the lessor or other
party with an interest in the Mortgaged Property of a petition under the
Bankruptcy Law. Trustor shall promptly deliver to Beneficiary, following
receipt, copies of any and all notices, summonses, pleadings, applications and
other documents received by Trustor in connection with any such petition and any
proceedings relating thereto.

                2.11.5 Trustor shall cause the Mortgaged Property to be
maintained in accordance with Prudent Industry Practices and will not commit or
suffer to be committed any waste of the Mortgaged Property. Except in accordance
with the Financing Documents, the Real Property shall not be removed, demolished
or materially altered (except for normal replacement of the Equipment), without
the consent of Beneficiary. Trustor will not, without obtaining the prior
consent of Beneficiary, initiate, join in or consent to any private restrictive
covenant, zoning ordinance, or other public or private restrictions, limiting or
affecting the uses which may be made of the Mortgaged Property or any part
thereof.

                2.11.6 No part of the Mortgaged Property shall in any manner be
further encumbered (other than with Permitted Liens), sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold, transferred,
assigned or conveyed, except in accordance with the terms of the Indenture,
without the prior consent of Beneficiary, which consent in any and all
circumstances may be withheld in the sole and absolute discretion of
Beneficiary. The provisions of the foregoing sentence of this paragraph shall
apply to each and every such further encumbrance, sale, transfer, assignment or
conveyance, regardless of whether or not Beneficiary has consented to, or waived
by its action or inaction its rights hereunder with respect to, any such
previous further encumbrance, sale, transfer, assignment or conveyance, and,
irrespective of whether such further encumbrance, sale, transfer, assignment or
conveyance is voluntary, by reason of operation of law or is otherwise made.

     2.12 Power of Attorney. Trustor does hereby irrevocably constitute and
appoint Beneficiary, its true and lawful attorney (which appointment is coupled
with an interest), with full power of substitution, for Trustor and in the name,
place and stead of Trustor or in Beneficiary's own name, for so long as any of
the Secured Obligations are outstanding, to ask, demand, collect, receive,
receipt for and sue for any and all rents, income and other sums which are
assigned hereunder with full power to endorse the name of Trustor on all
instruments given in payment or in part payment thereof, to settle, adjust or
compromise any claims thereunder as fully as Trustor itself could do and in its
discretion file any claim or take any action or proceeding, either in its own
name or in the name of Trustor or otherwise, which Beneficiary may deem
necessary or appropriate to protect and preserve the right, title and interest
of Beneficiary in and to such rents, income and other sums and the security
intended to be afforded hereby; provided that Beneficiary shall not exercise
such rights unless an Event of Default has occurred and is continuing.




                                                                     Exhibit E-1
                                                                          Page 9



     2.13 Covenant to Pay. If an Event of Default has occurred and is continuing
and such Event of Default could reasonably be expected to materially and
adversely affect Beneficiary's interest hereunder in the Mortgaged Property or
result in personal injury, then Beneficiary, among its other rights and
remedies, shall have the right, but not the obligation, to pay, observe or
perform the same, in whole or in part, and with such modifications as
Beneficiary reasonably shall deem advisable. To the extent provided in the
Financing Documents, all sums, including reasonable attorneys' fees, so expended
or incurred by Beneficiary by reason of the default of Trustor, or by reason of
the bankruptcy or insolvency of Trustor, as well as, without limitation, sums
expended or incurred to sustain the lien or estate of this Deed of Trust or its
priority, or to protect or enforce any rights of Beneficiary hereunder, or to
recover any of the Secured Obligations, or to complete construction of the
Project for which the Financing Documents are intended as financing, or for
repairs, maintenance, alterations, replacements or improvements thereto or for
the protection thereof, or for real estate taxes or other governmental
assessments or charges against any part of the Mortgaged Property, or premiums
for insurance of the Mortgaged Property, shall be entitled to the benefit of the
lien on the Mortgaged Property as of the date of the recording of this Deed of
Trust, shall be deemed to be added to and be part of the Secured Obligations
secured hereby, and shall be repaid by Trustor as provided in the Financing
Documents.

     2.14 Security Agreement.

                2.14.1 This Deed of Trust shall also be a security agreement
between Trustor and Beneficiary covering the Mortgaged Property constituting
personal property or fixtures (hereinafter collectively called "UCC Collateral")
governed by the California Uniform Commercial Code ("UCC") as the same may be
more specifically set forth in any financing statement delivered in connection
with this Deed of Trust, and as further security for the payment and performance
of the Secured Obligations, Trustor hereby grants to Beneficiary a security
interest in such portion of the Mortgaged Property to the full extent that the
Mortgaged Property may be subject to the UCC. In addition to Beneficiary's other
rights hereunder, Beneficiary shall have all rights of a secured party under the
UCC. Trustor shall execute and deliver to Beneficiary all financing statements
and such further assurances that may be reasonably required by Beneficiary to
establish, create, perfect (to the extent the same can be achieved by the filing
of a financing statement) and maintain the validity and priority of
Beneficiary's security interests, and Trustor shall bear all reasonable costs
thereof, including all UCC searches. Except as otherwise provided in the
Financing Documents, if Beneficiary should dispose of any of the Mortgaged
Property comprising the UCC Collateral pursuant to the UCC, ten (10) days' prior
written notice by Beneficiary to Trustor shall be deemed to be reasonable
notice; provided, however, Beneficiary may dispose of such property in
accordance with the foreclosure procedures of this Deed of Trust in lieu of
proceeding under the UCC. Beneficiary may from time to time execute and deliver
at Trustor's expense, all continuation statements, termination statements,
amendments, partial releases, or other instruments relating to all financing
statements by and between Trustor and Beneficiary. Except as otherwise provided
in the Financing Documents, if an Event of Default shall occur and is
continuing, (a) Beneficiary, in addition to any other rights and remedies which
it may have, may exercise immediately and without demand to the extent permitted
by law, any and all rights and remedies granted to a secured party under the UCC
including the right to take possession of the UCC Collateral or any part
thereof, and to take such other measures as Beneficiary may deem necessary for
the care, protection and preservation of such collateral and (b) upon request or
demand of Beneficiary, Trustor shall at its




                                                                     Exhibit E-1
                                                                         Page 10


expense, assemble the UCC Collateral and make it available to Beneficiary at a
convenient place acceptable to Beneficiary. Trustor shall pay to Beneficiary on
demand, any and all expenses, including reasonable attorneys' fees and
disbursements incurred or paid by Beneficiary in protecting the interest in the
UCC Collateral and in enforcing the rights hereunder with respect to such UCC
Collateral.

                2.14.2 Trustor and the Beneficiary agree, to the extent
permitted by law, that: (i) this Deed of Trust upon recording or registration in
the real estate records of the proper office shall constitute a financing
statement filed as a "fixture filing" within the meaning of Sections 9334 and
9502 of the UCC; (ii) all or a part of the Mortgaged Property are or are to
become fixtures; and (iii) the addresses of Trustor and Beneficiary are as set
forth in the preamble of this Deed of Trust.

                                   ARTICLE 3
                                    REMEDIES

                3.1 Acceleration of Maturity. If an Event of Default occurs and
is continuing, Beneficiary may, at the election of the Required Holders (except
that such acceleration shall be automatic if the Event of Default is occuring
under Section 5.01(c) of the Indenture), declare the Secured Obligations to be
due and payable immediately, and upon such declaration such principal and
interest and other sums shall immediately become due and payable without demand,
presentment, notice or other requirements of any kind (all of which Trustor
waives).

                3.2 Due-On Clause. If (a) the Mortgaged Property is assigned in
violation of Section 4.06 of the Indenture, or (b) there is a change of control
in violation of Section 5.01(k) of the Indenture, then Beneficiary may, at the
election of the Required Holders, declare the Secured Obligations to be due and
payable immediately, and upon such declaration such principal and interest and
other sums shall immediately become due and payable without demand, presentment,
notice or other requirements of any kind (all of which Trustor waives).
Beneficiary's consent to any assignment or change of control shall not be deemed
to be a waiver of Beneficiary's right to require its consent to any future
assignment or change of control in accordance with the terms of the Indenture.

                3.3 Protective Advances. If an Event of Default shall have
occurred and is continuing, then without thereby limiting Beneficiary's other
rights or remedies, waiving or releasing any of Trustor's obligations, or
imposing any obligation on Beneficiary, Beneficiary may, at the election of the
Required Holders, either advance any amount owing or perform any or all actions
that Beneficiary considers necessary or appropriate to cure such default. No
sums advanced or performance rendered by Beneficiary shall cure, or be deemed a
waiver of any Event of Default.

                3.4 Institution of Equity Proceedings. If an Event of Default
occurs and is continuing, Beneficiary may, at the election of the Required
Holders, institute an action, suit or proceeding in equity for specific
performance of this Deed of Trust, the Indenture or any other Financing
Document, all of which shall be specifically enforceable by injunction or other
equitable remedy.

                3.5 Beneficiary's Power of Enforcement.




                                                                     Exhibit E-1
                                                                         Page 11


     3.5.1 If an Event of Default occurs and is continuing, Beneficiary, at the
election of the Required Holders, shall be entitled to prepare and record on its
own behalf, or to deliver to Trustee for recording, if appropriate, written
declaration of default and demand for sale and written notice of breach and
election to sell (or other statutory notice) to cause the Mortgaged Property to
be sold either by judicial action or power of sale in accordance with the laws
of the State of California to satisfy the obligations hereof, and in the case of
delivery to Trustee, Trustee shall cause said notice to be filed for record.

     3.5.2 After the lapse of such time as may then be required by law following
the recordation of said notice of breach and election to sell, and notice of
sale having been given as then required by law, Trustee without demand on
Trustor, may sell the Mortgaged Property or any portion thereof at the time and
place fixed by it in said notice, either as a whole or in separate parcels, and
in such order as it may determine, at public auction to the highest bidder, of
cash in lawful money of the United States payable at the time of sale. Trustee
may, for any cause it deems expedient, postpone the sale of all or any portion
of said property until it shall be completed and, in every case, notice of
postponement shall be given by public announcement thereof at the time and place
last appointed for the sale and from time to time thereafter Trustee may
postpone such sale by public announcement at the time fixed by the preceding
postponement; provided that Trustee shall give Trustor notice of such
postponement to the extent required by law. Trustee shall execute and deliver to
the purchaser its deed, bill of sale, or other instrument conveying said
property so sold, but without any covenant or warranty, express or implied. The
recitals in such instrument of conveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Beneficiary,
may bid at the sale.

     3.5.3 If any Event of Default occurs and is continuing, Beneficiary may, at
the election of the Required Holders, to the extent permitted by law, either
with or without entry or taking possession of the Mortgaged Property, and
without regard to whether or not the indebtedness and other sums secured hereby
shall be due and without prejudice to the right of Beneficiary thereafter to
bring an action or proceeding to foreclose or any other action for any other
Event of Default existing at the time such earlier action was commenced, proceed
by any appropriate action or proceeding: (1) to enforce payment of the Secured
Obligations, to the extent permitted by law, or the performance of any term
hereof or any other right; (2) to foreclose this Deed of Trust in any manner
provided by law for the foreclosure of mortgages or deeds of trust on real
property and to sell, as an entirety or in separate lots or parcels, the
Mortgaged Property or any portion thereof pursuant to the laws of the State of
California or under the judgment or decree of a court or courts of competent
jurisdiction, and Beneficiary shall be entitled to recover in any such
proceeding all costs and expenses incident thereto, including reasonable
attorneys' fees in such amount as shall be awarded by the court; (3) to exercise
any or all of the rights and remedies available to it under the Financing
Documents; and (4) to pursue any other remedy available to it. Beneficiary shall
take action either by such proceedings or by the exercise of its powers with
respect to entry or taking possession, or both, as Beneficiary may determine.

     3.5.4 The remedies described in this Section 3.5 may be exercised with
respect to all or any portion of the UCC Collateral, either simultaneously with
the sale of any real property encumbered hereby or independent thereof.
Beneficiary shall at any time be permitted to proceed with respect to all or any
portion of the UCC Collateral in any manner permitted by the




                                                                     Exhibit E-1
                                                                         Page 12


UCC. Trustor agrees that Beneficiary's inclusion of all or any portion of the
UCC Collateral in a sale or other remedy exercised with respect to the real
property encumbered hereby, as permitted by the UCC, is a commercially
reasonable disposition of such property.

     3.5.5 Where the Mortgaged Property consists of real property and personal
property, any reinstatement of the Secured Obligations, following the occurrence
of an Event of Default and an election by the Beneficiary, at the direction of
the Required Holders, to accelerate the maturity of the Secured Obligations,
which is made by Trustor or any other person or entity permitted to exercise the
right of reinstatement under Section 2924c of the California Civil Code or any
successor statute, shall, in accordance with the terms of UCC Section 9604, not
prohibit the Beneficiary from conducting a sale or other disposition of any
personal property or from otherwise proceeding against or continuing to proceed
against any personal property in any manner permitted by the UCC; nor shall any
such reinstatement invalidate, rescind or otherwise affect any sale, disposition
or other proceeding held, conducted or instituted with respect to any personal
property prior to such reinstatement. Any sums paid to Beneficiary, in effecting
any reinstatement pursuant to Section 2924c of the California Civil Code shall
be applied to the Secured Obligations and to Beneficiary's and Trustee's
reasonable costs and expenses in the manner required by Section 2924c.

                3.6 Beneficiary's Right to Enter and Take Possession, Operate
and Apply Income.

     3.6.1 If an Event of Default occurs and is continuing, Trustor, upon demand
of Beneficiary, at the election of the Required Holders, shall forthwith
surrender to Beneficiary the actual possession and, if and to the extent
permitted by law, Beneficiary itself, or by such officers or agents as it may
appoint, may enter and take possession of all of the Mortgaged Property,
including the Tangible Collateral, without liability for trespass, damages or
otherwise, and may exclude Trustor and its agents and employees wholly therefrom
and may have joint access with Trustor to the books, papers and accounts of
Trustor.

     3.6.2 If an Event of Default has occurred and is continuing and Trustor
shall for any reason fail to surrender or deliver the Mortgaged Property or any
part thereof after Beneficiary's demand, Beneficiary may obtain a judgment or
decree conferring on Beneficiary or Trustee the right to immediate possession or
requiring Trustor to deliver immediate possession of all or part of such
property to Beneficiary or Trustee and Trustor hereby specifically consents to
the entry of such judgment or decree. Trustor shall pay to Beneficiary or
Trustee, upon demand, all costs and expenses of obtaining such judgment or
decree and reasonable compensation to Beneficiary or Trustee, their attorneys
and agents, and all such costs, expenses and compensation shall, until paid, be
secured by the lien of this Deed of Trust.

     3.6.3 Upon every such entering upon or taking of possession, Beneficiary or
Trustee may hold, store, use, operate, manage and control the Mortgaged Property
and conduct the business thereof, and, from time to time in its sole and
absolute discretion and without being under any duty to so act:

     3.6.3.1 make all necessary and proper maintenance, repairs, renewals and
replacements thereto and




                                                                     Exhibit E-1
                                                                         Page 13


thereon, and all necessary additions, betterments and improvements thereto and
thereon and purchase or otherwise acquire fixtures, personalty and other
property in connection therewith;

     3.6.3.2 insure or keep the Mortgaged Property insured;

     3.6.3.3 manage and operate the Mortgaged Property and exercise all the
rights and powers of Trustor in their name or otherwise with respect to the
same;

     3.6.3.4 enter into agreements with others to exercise the powers herein
granted Beneficiary or Trustee, all as Beneficiary or Trustee from time to time
may determine; and shall apply the monies so received by Beneficiary or Trustee
in such priority as provided by the Financing Documents to (i) the payment of
interest and principal due and payable to the Beneficiary, (ii) the deposits for
taxes and assessments and insurance premiums due, (iii) the cost of insurance,
taxes, assessments and other proper charges upon the Mortgaged Property or any
part thereof, (iv) the compensation, expenses and disbursements of the agents,
attorneys and other representatives of Beneficiary or Trustee as allowed under
this Deed of Trust, and (v) any other charges or costs required to be paid by
Trustor under the terms of the Financing Documents; or

     3.6.3.5 rent or sublet the Mortgaged Property or any portion thereof for
any purpose permitted by this Deed of Trust.

     Beneficiary or Trustee shall surrender possession of the Mortgaged Property
to Trustor (x) as may be required by law or court order, or (y) when all amounts
under any of the terms of the Financing Documents, including this Deed of Trust,
shall have been paid current and all Events of Default have been cured or
waived. The same right of taking possession, however, shall exist if any
subsequent Event of Default shall occur and be continuing.

                3.7 Separate Sales. To the extent permitted by Applicable Law,
the Mortgaged Property may be sold in one or more parcels and in such manner and
order as Trustee, in his sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.

                3.8 Waiver of Appraisement, Moratorium, Valuation, Stay,
Extension and Redemption Laws. Trustor agrees to the full extent permitted by
law that if an Event of Default occurs and is continuing, neither Trustor nor
anyone claiming through or under it shall or will set up, claim or seek to take
advantage of any appraisement, moratorium, valuation, stay, extension or
redemption laws now or hereafter in force, in order to prevent or hinder the
enforcement or foreclosure of this Deed of Trust or the absolute sale of the
Mortgaged Property or any portion thereof or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and
Trustor for itself and all who may at any time claim through or under it, hereby
waives, to the full extent that it may lawfully so do, the benefit of all such
laws, and any and all right to have the assets comprising the Mortgaged Property
marshalled upon any foreclosure of the lien hereof and agrees that Trustee or
any court having jurisdiction to foreclose such lien may sell the Mortgaged
Property in part or as an entirety.

                3.9 Receiver. If an Event of Default occurs and is continuing,
Beneficiary, to the extent permitted by law, and without regard to the value,
adequacy or occupancy of the security for





                                                                     Exhibit E-1
                                                                         Page 14


the indebtedness and other sums secured hereby, shall be entitled as a matter of
right if it so elects to the appointment of a receiver to enter upon and take
possession of the Mortgaged Property and to collect all earnings, revenues and
receipts and apply the same as the court may direct, and such receiver may be
appointed by any court of competent jurisdiction upon application by
Beneficiary. To the extent permitted by Applicable Law, Beneficiary may have a
receiver appointed without notice to Trustor or any third party, and Beneficiary
may waive any requirement that the receiver post a bond. To the extent permitted
by Applicable Law, Beneficiary shall have the power to designate and select the
Person who shall serve as the receiver and to negotiate all terms and conditions
under which such receiver shall serve. To the extent permitted by Applicable
Law, any receiver appointed on Beneficiary's behalf may be an Affiliate of
Beneficiary. The reasonable expenses, including receiver's fees, reasonable
attorneys' fees, costs and agents' compensation, incurred pursuant to the powers
herein contained shall be secured by this Deed of Trust. The right to enter and
take possession of and to manage and operate the Mortgaged Property and to
collect all earnings, revenues and receipts, whether by a receiver or otherwise,
shall be cumulative to any other right or remedy available to Beneficiary under
this Deed of Trust, the other Financing Documents or otherwise available to
Beneficiary and may be exercised concurrently therewith or independently
thereof, but such rights shall be exercised in a manner which is otherwise in
accordance with and consistent with the Financing Documents. Beneficiary shall
be liable to account only for such earnings, revenues and receipts (including
security deposits) actually received by Beneficiary, whether received pursuant
to this section or any other provision hereof. Notwithstanding the appointment
of any receiver or other custodian, Beneficiary shall be entitled as pledgee to
the possession and control of any cash, deposits, or instruments at the time
held by, or payable or deliverable under the terms of this Deed of Trust to,
Beneficiary.

                3.10 Suits to Protect the Mortgaged Property. Beneficiary shall
have the power and authority to institute and maintain any suits and proceedings
as Beneficiary, in its sole and absolute discretion, may deem advisable (a) to
prevent any impairment of the Mortgaged Property by any acts which may be
unlawful or in violation of this Deed of Trust, (b) to preserve or protect its
interest in the Mortgaged Property, or (c) to restrain the enforcement of or
compliance with any legislation, Applicable Law or Governmental Approval that
may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order might impair the security
hereunder or be prejudicial to Beneficiary's interest.

                3.11 Proofs of Claim. In the case of any receivership,
insolvency, Bankruptcy Event, reorganization, arrangement, adjustment,
composition or other judicial proceedings affecting Trustor, any Affiliate or
any guarantor, co-maker or endorser of any of Trustor's obligations, its
creditors or its property, Beneficiary, to the extent permitted by law, shall be
entitled to file such proofs of claim or other documents as it may deem be
necessary or advisable in order to have its claims allowed in such proceedings
for the entire amount due and payable by Trustor under the Financing Documents,
at the date of the institution of such proceedings, and for any additional
amounts which may become due and payable by Trustor after such date.

                3.12 Trustor to Pay Amounts Secured Hereby on Any Default in
Payment; Application of Monies by Beneficiary.

     3.12.1 In case of a foreclosure sale of all or any part of the Mortgaged
Property and of the application of the proceeds of sale to the payment of the
sums secured hereby, to the extent




                                                                     Exhibit E-1
                                                                         Page 15


permitted by law, Beneficiary shall be entitled to enforce payment from Trustor
of any additional amounts then remaining due and unpaid and to recover judgment
against Trustor for any portion thereof remaining unpaid, with interest at the
interest rate on the Notes. The sale of a part of the Subject Property shall not
exhaust the power of sale, but sales may be made from time to time until the
Secured Obligations are paid and performed in full.

     3.12.2 Trustor hereby agrees to the extent permitted by law, that no
recovery of any such judgment by Beneficiary or other action by Beneficiary and
no attachment or levy of any execution upon any of the Mortgaged Property or any
other property shall in any way affect the Lien and security interest of this
Deed of Trust upon the Mortgaged Property or any part thereof or any Lien,
rights, powers or remedies of Beneficiary hereunder, but such Lien, rights,
powers and remedies shall continue unimpaired as before.

     3.12.3 The provisions of this Section 3.12 shall not be deemed to limit or
otherwise modify the provisions of any guaranty of the Secured Obligations.

                3.13 Delay or Omission; No Waiver. No delay or omission of
Beneficiary to exercise any right, power or remedy upon any Event of Default
shall exhaust or impair any such right, power or remedy or shall be construed to
waive any such Event of Default or to constitute acquiescence therein. Every
right, power and remedy given to Beneficiary whether contained herein or in the
other Financing Documents or otherwise available to Beneficiary may be exercised
from time to time and as often as may be deemed expedient by Beneficiary.

                3.14 No Waiver of One Default to Affect Another. No waiver of
any Event of Default hereunder shall extend to or affect any subsequent or any
other Event of Default then existing, or impair any rights, powers or remedies
consequent thereon. If Beneficiary (a) grants forbearance or an extension of
time for the payment of any sums secured hereby; (b) takes other or additional
security for the payment thereof; (c) waives or does not exercise any right
granted in this Deed of Trust or any other Financing Document; (d) releases any
part of the Mortgaged Property from the lien or security interest of this Deed
of Trust or any other instrument securing the Secured Obligations; (e) consents
to the filing of any map, plat or replat of the Real Property or any part
thereof; (f) consents to the granting of any easement on the Real Property; or
(g) makes or consents to any agreement changing the terms of this Deed of Trust
or any other Financing Document subordinating the lien or any charge hereof, no
such act or omission shall release, discharge, modify, change or affect the
liability under this Deed of Trust or any other Financing Document or otherwise
of Trustor, or any subsequent purchaser of the Mortgaged Property or any part
thereof or any maker, co-signer, surety or guarantor with respect to any other
matters not addressed by such act or omission. No such act or omission shall
preclude Beneficiary from exercising any right, power or privilege herein
granted or intended to be granted in case of any Event of Default then existing
or of any subsequent Event of Default, nor, except as otherwise expressly
provided in an instrument or instruments executed by Beneficiary, shall the lien
or security interest of this Deed of Trust be altered thereby, except to the
extent expressly provided in such acts or omissions. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Mortgaged
Property, Beneficiary, without notice to any person, firm or corporation, is
hereby authorized and empowered to deal with any such vendee or transferee with
reference to the Mortgaged Property or the indebtedness secured hereby, or with
reference to any of the terms or conditions hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way




                                                                     Exhibit E-1
                                                                         Page 16


releasing or discharging any of the liabilities or undertakings hereunder, or
waiving its right to declare such sale or transfer an Event of Default as
provided herein. Notwithstanding anything to the contrary contained in this Deed
of Trust or any other Financing Document, (i) in the case of any non-monetary
Event of Default, Beneficiary may continue to accept payments due hereunder
without thereby waiving the existence of such or any other Event of Default and
(ii) in the case of any monetary Event of Default, Beneficiary may accept
partial payments of any sums due hereunder without thereby waiving the existence
of such Event of Default if the partial payment is not sufficient to completely
cure such Event of Default.

                3.15 Discontinuance of Proceedings; Position of Parties
Restored. If Beneficiary shall have proceeded to enforce any right or remedy
under this Deed of Trust by foreclosure, entry of judgment or otherwise and such
proceedings shall have been discontinued or abandoned for any reason, or such
proceedings shall have resulted in a final determination adverse to Beneficiary,
then and in every such case Trustor and Beneficiary shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceedings had occurred or had been
taken.

                3.16 Remedies Cumulative. Subject to the provisions of Section
5.14 hereof, no right, power or remedy, including remedies with respect to any
security for the Secured Obligations, conferred upon or reserved to Beneficiary
by this Deed of Trust or any other Financing Document is exclusive of any other
right, power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder or under any other Financing Document, now or hereafter
existing at law, in equity or by statute, and Beneficiary shall be entitled to
resort to such rights, powers, remedies or security as Beneficiary shall in its
sole and absolute discretion deem advisable.

                3.17 Interest After Event of Default. If an Event of Default
shall have occurred and is continuing, all sums outstanding and unpaid under the
Financing Documents, including this Deed of Trust, shall, at Beneficiary's
option, bear interest at the interest rate on the Note until such Event of
Default has been cured. Trustor's obligation to pay such interest shall be
secured by this Deed of Trust.

                3.18 Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Trustee and Beneficiary as part of the
foreclosure costs. In the event of foreclosure of the lien hereof, there shall
be allowed and included as additional indebtedness all reasonable expenditures
and expenses which may be paid or incurred by or on behalf of Beneficiary for
attorneys' fees, appraisers' fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be estimated as
to items to be expended after foreclosure sale or entry of the decree) of
procuring all such abstracts of title, title searches and examinations, title
insurance policies and guarantees, and similar data and assurances with respect
to title as Beneficiary may deem reasonably necessary either to prosecute such
suit or to evidence to a bidder at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Mortgaged Property
or any portion thereof. All expenditures and expenses of the nature in this
section mentioned, and such expenses and fees as may be incurred in the
protection of the Mortgaged Property and the maintenance of the lien and
security interest of this Deed of Trust, including the reasonable fees of any
attorney employed by Beneficiary in any litigation or proceeding affecting




                                                                     Exhibit E-1
                                                                         Page 17


this Deed of Trust or any other Financing Document, the Mortgaged Property or
any portion thereof, including civil, probate, appellate and bankruptcy
proceedings, or in preparation for the commencement or defense of any proceeding
or threatened suit or proceeding, shall be immediately due and payable by
Trustor, with interest thereon at the interest rate on the Note, and shall be
secured by this Deed of Trust. Trustee waives its right to any statutory fee in
connection with any judicial or nonjudicial foreclosure of the lien hereof and
agrees to accept a reasonable fee for such services.

                3.19 Deficiency Judgments. Subject to Section 6.07 of the
Indenture, if after foreclosure of this Deed of Trust or Trustee's sale
hereunder, there shall remain any deficiency with respect to any amounts payable
under the Financing Documents, including hereunder, or any amounts secured
hereby, and Beneficiary shall institute any proceedings to recover such
deficiency or deficiencies, all such amounts shall continue to bear interest at
the interest rate on the Notes. Subject to Section 6.07 of the Indenture,
Trustor waives any defense to Beneficiary's recovery against Trustor of any
deficiency after any foreclosure sale of the Mortgaged Property. Subject to
Section 6.07 of the Indenture, to the extent permitted by law, Trustor expressly
waives any defense or benefits that may be derived from any statute granting
Trustor any defense to any such recovery by Beneficiary. Subject to Section 6.07
of the Indenture, in addition, Beneficiary and Trustee shall be entitled to
recovery of all of their reasonable costs and expenditures (including any court
imposed costs) in connection with such proceedings, including their reasonable
attorneys' fees, appraisal fees and the other costs, fees and expenditures
referred to in Section 3.18 above. This provision shall survive any foreclosure
or sale of the Mortgaged Property, any portion thereof or the extinguishment of
the lien hereof.

                3.20 WAIVER OF JURY TRIAL. BENEFICIARY AND TRUSTOR EACH WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
DEED OF TRUST, THE INDENTURE OR ANY OTHER FINANCING DOCUMENT. ANY SUCH DISPUTES
SHALL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

                3.21 Exculpation of Beneficiary. The acceptance by Beneficiary
of the assignment contained herein with all of the rights, powers, privileges
and authority created hereby shall not, prior to entry upon and taking
possession of the Mortgaged Property by Beneficiary, be deemed or construed to
make Beneficiary a "mortgagee in possession"; nor thereafter or at any time or
in any event obligate Beneficiary to appear in or defend any action or
proceeding relating to the Mortgaged Property, nor shall Beneficiary, prior to
such entry and taking, be liable in any way for any injury or damage to person
or property sustained by any Person in or about the Mortgaged Property.

                                   ARTICLE 4
                     RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
                      OTHER PROVISIONS RELATING TO TRUSTEE

         Notwithstanding anything to the contrary in this Deed of Trust, Trustor
and Beneficiary agree as follows:




                                                                     Exhibit E-1
                                                                         Page 18


                4.1 Exercise of Remedies by Trustee. To the extent that this
Deed of Trust and applicable law authorizes or empowers Beneficiary to exercise
any remedies set forth in Article 3 hereof or otherwise, or perform any acts in
connection therewith, Trustee (but not to the exclusion of Beneficiary unless so
required under the law of the State of California) shall have the power to
exercise any or all such remedies, and to perform any acts provided for in this
Deed of Trust in connection therewith, all for the benefit of Beneficiary and on
Beneficiary's behalf in accordance with applicable law of the State of
California. In connection therewith, Trustee: (a) shall not exercise, or waive
the exercise of, any Beneficiary's remedies (other than any rights of Trustee to
any indemnity or reimbursement), except at Beneficiary's request, and (b) shall
exercise, or waive the exercise of, any or all of Beneficiary's remedies at
Beneficiary's request, and in accordance with Beneficiary's directions as to the
manner of such exercise or waiver. Trustee may, however, decline to follow
Beneficiary's request or direction if Trustee shall be advised by counsel that
the action or proceeding, or manner thereof, so directed may not lawfully be
taken or waived.

                4.2 Rights and Privileges of Trustee. To the extent that this
Deed of Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary
for any expenditures Beneficiary may incur, Trustee shall be entitled to the
same indemnity and the same rights to reimbursement of expenses as Beneficiary,
subject to such limitations and conditions as would apply in the case of
Beneficiary. To the extent that this Deed of Trust negates or limits
Beneficiary's liability as to any matter, Trustee shall be entitled to the same
negation or limitation of liability. To the extent that Trustor, pursuant to
this Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any
purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be
entitled to act on Trustor's behalf without joinder or confirmation by the
other.

                4.3 Resignation or Replacement of Trustee. Trustee may resign by
an instrument in writing addressed to Beneficiary, and Trustee may be removed at
any time with or without cause (i.e., in Beneficiary's sole and absolute
discretion) by an instrument in writing executed by Beneficiary. In case of the
death, resignation, removal or disqualification of Trustee or if for any reason
Beneficiary shall deem it desirable to appoint a substitute, successor or
replacement Trustee to act instead of Trustee originally named (or in place of
any substitute, successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a successor,
substitute or replacement Trustee, and, if preferred, several substitute
trustees in succession, without any formality other than appointment and
designation in writing executed by Beneficiary, which instrument shall be
recorded if required by the law of the State of California. The law of the State
of California shall govern the qualifications of any Trustee. The authority
conferred upon Trustee by this Deed of Trust shall automatically extend to any
and all other successor, substitute and replacement Trustee(s) successively
until the Secured Obligations have been paid in full or the Mortgaged Property
has been sold hereunder or released in accordance with the provisions of the
Financing Documents. Beneficiary's written appointment and designation of any
Trustee shall be full evidence of Beneficiary's right and authority to make the
same and of all facts therein recited. No confirmation, authorization, approval
or other action by Trustor shall be required in connection with any resignation
or other replacement of Trustee.

                4.4 Authority of Beneficiary. If Beneficiary is a banking
corporation, state banking corporation or a national banking association and the
instrument of appointment of any successor or replacement Trustee is executed on
Beneficiary's behalf by an officer of such corporation, state banking
corporation or national banking association, then such appointment may be
executed by




                                                                     Exhibit E-1
                                                                         Page 19


any authorized officer or agent of Beneficiary and such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any superior
officer of Beneficiary.

                4.5 Effect of Appointment of Successor Trustee. Upon the
appointment and designation of any successor, substitute or replacement Trustee,
Trustee's entire estate and title in the Mortgaged Property shall vest in the
designated successor, substitute or replacement Trustee. Such successor,
substitute or replacement Trustee shall thereupon succeed to and shall hold,
possess and execute all the rights, powers, privileges, immunities and duties
herein conferred upon Trustee. All references herein to Trustee shall be deemed
to refer to Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting hereunder.

                4.6 Confirmation of Transfer and Succession. Any new Trustee
appointed pursuant to any of the provisions hereof shall, without any further
act, deed or conveyance, become vested with all the estates, properties, rights,
powers and trusts of his predecessor in the rights hereunder with like effect as
if originally named as Trustee herein; but nevertheless, upon the written
request of Beneficiary or of any successor, substitute or replacement Trustee,
any former Trustee ceasing to act shall execute and deliver an instrument
transferring to such successor, substitute or replacement Trustee all of the
right, title, estate and interest in the Mortgaged Property of Trustee so
ceasing to act, together with all the rights, powers, privileges, immunities and
duties herein conferred upon Trustee, and shall duly assign, transfer and
deliver all properties and monies held by said Trustee hereunder to said
successor, substitute or replacement Trustee.

                4.7 Exculpation. Trustee shall not be liable for any error of
judgment or act done by Trustee in good faith, or otherwise be responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence, willful misconduct or knowing violation of law. Trustee shall not be
personally liable in case of entry by it, or anyone entering by virtue of the
powers herein granted it, upon the Mortgaged Property for debts contracted or
liability or damages incurred in the management or operation of the Mortgaged
Property. Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
it hereunder, believed by it in good faith to be genuine. All monies received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other monies (except to the extent required by law). Trustee
shall be under no liability for interest on any monies received by it hereunder.

                4.8 Endorsement and Execution of Documents. Upon Beneficiary's
written request, Trustee shall, without liability or notice to Trustor, execute,
consent to, or join in any instrument or agreement in connection with or
necessary to effectuate the purposes of the Financing Documents. Trustor hereby
irrevocably designates Trustee as its attorney in fact to execute, acknowledge
and deliver, on Trustor's behalf and in Trustor's name, all instruments or
agreements necessary to implement any provision(s) of this Deed of Trust or to
further perfect the lien created by this Deed of Trust on the Mortgaged
Property. This power of attorney shall be deemed to be coupled with an interest
and shall survive any disability of Trustor.




                                                                     Exhibit E-1
                                                                         Page 20


                4.9 Multiple Trustees. If Beneficiary appoints multiple
trustees, then any Trustee, individually, may exercise all powers granted to
Trustee under this instrument, without the need for action by any other
Trustee(s).

                4.10 No Required Action. Trustee shall not be required to take
any action under this Deed of Trust or to institute, appear in or defend any
action, suit or other proceeding in connection therewith where in its opinion
such action will be likely to involve it in expense or liability, unless
requested so to do by a written instrument signed by Beneficiary and, if Trustee
so requests, unless Trustee is tendered security and indemnity satisfactory to
it against any and all costs, expense and liabilities arising therefrom. Trustee
shall not be responsible for the execution, acknowledgment or validity of the
Financing Documents, or for the proper authorization thereof, or for the
sufficiency of the lien and security interest purported to be created hereby,
and makes no representation in respect thereof or in respect of the rights,
remedies and recourses of Beneficiary.

                4.11 Terms of Trustee's Acceptance. Trustee accepts the trust
created by this Deed of Trust upon the following terms and conditions:

     (a) Trustee may exercise any of its powers through appointment of
attorney(s) in fact or agents.

     (b) Trustee shall be under no obligation to take any action upon any Event
of Default unless furnished security or indemnity, in form satisfactory to
Trustee, against costs, expenses, and liabilities that Trustee may incur.

     (c) Trustor shall reimburse Trustee, as part of the Secured Obligations
secured hereunder, for all reasonable disbursements and expenses (including
reasonable legal fees and expenses) incurred by reason of or arising from an
Event of Default and as provided for in this Deed of Trust, including any of the
foregoing incurred in Trustee's administering and executing the trust created by
this Deed of Trust and performing Trustee's duties and exercising Trustee's
powers under this Deed of Trust.

                                    ARTICLE 5
                                     GENERAL

                5.1 Discharge. When all of the Secured Obligations shall have
been indefeasibly paid in full in cash, then this Deed of Trust and the lien and
security interest created hereby shall be of no further force and effect,
Trustor shall be released from the covenants, agreements and obligations of
Trustor contained in this Deed of Trust and all right, title and interest in and
to the Mortgaged Property shall revert to Trustor. Beneficiary and Trustee, at
the request and the expense of Trustor, shall promptly execute a deed of
reconveyance and such other documents as may be reasonably requested by Trustor
to evidence the discharge and satisfaction of this Deed of Trust and the release
of Trustor from its obligations hereunder.

                5.2 No Waiver. The exercise of the privileges granted in this
Deed of Trust or in any other agreement to perform Trustor's obligations under
the agreements which constitute the Mortgaged Property shall in no event be
considered or constitute a waiver of any right which Beneficiary may have at any
time, after an Event of Default shall have occurred and be continuing, to
declare the Secured Obligations to be immediately due and payable. No delay or
omission to




                                                                     Exhibit E-1
                                                                         Page 21


exercise any right, remedy or power accruing upon any default shall impair any
such right, remedy or power or shall be construed to be a waiver of any such
default or acquiescence therein; and every such right, remedy and power may be
exercised from time to time and as often as may be deemed expedient.

                5.3 Extension, Rearrangement or Renewal of Secured Obligations.
It is expressly agreed that any of the Secured Obligations at any time secured
hereby may be from time to time extended for any period, or with the consent of
Trustor rearranged or renewed, and that any part of the security herein
described, or any other security for the Secured Obligations, may be waived or
released, without altering, varying or diminishing the force, effect or lien or
security interest of this Deed of Trust; and the lien and security interest
granted by this Deed of Trust shall continue as a prior lien and security
interest on all of the Mortgaged Property not expressly so released, until the
Secured Obligations are fully paid and this Deed of Trust is terminated in
accordance with the provisions hereof; and no other security now existing or
hereafter taken to secure the payment of the Secured Obligations or any part
thereof or the performance of any obligation or liability of Trustor whatever
shall in any manner impair or affect the security given by this Deed of Trust;
and all security for the payment of the Secured Obligations or any part thereof
and the performance of any obligation or liability shall be taken, considered
and held as cumulative.

                5.4 Forcible Detainer. Trustor agrees for itself and all Persons
claiming by, through or under it, that subsequent to foreclosure hereunder in
accordance with this Deed of Trust and applicable law if Trustor shall hold
possession of the Mortgaged Property or any part thereof, Trustor or the Persons
so holding possession shall be guilty of trespass; and any such Person
(including Trustor) failing or refusing to surrender possession upon demand
shall be guilty of forcible detainer and shall be liable to Beneficiary or any
purchaser in foreclosure, as applicable, for reasonable rental on said premises,
and shall be subject to eviction and removal in accordance with law.

                5.5 Waiver of Stay or Extension. To the extent permitted to be
waived by law, Trustor shall not at any time insist upon or plead or in any
manner whatever claim the benefit or advantage of any stay, extension or
moratorium law now or at any time hereafter in force in any locality where the
Mortgaged Property or any part thereof may or shall be situated, nor shall
Trustor claim any benefit or advantage from any law now or hereafter in force
providing for the valuation or appraisement of the Mortgaged Property or any
part thereof prior to any sale thereof to be made pursuant to any provision of
this Deed of Trust or to a decree of any court of competent jurisdiction, nor
after any such sale shall Trustor claim or exercise any right conferred by any
law now or at any time hereafter in force to redeem the Mortgaged Property so
sold or any part thereof; and Trustor hereby expressly waives all benefit or
advantage of any such law or laws and the appraisement of the Mortgaged Property
or any part thereof, and covenants that Trustor shall not hinder or delay the
execution of any power herein granted and delegated to Beneficiary but that
Trustor shall permit the execution of every such power as though no such law had
been made.

                5.6 Notices. Except where certified or registered mail notice is
required by applicable law, any notice to Trustor or Beneficiary required or
permitted hereunder shall be deemed to be given when given in the manner
prescribed in Section 10.02 of the Indenture. All notices to Trustee required or
permitted hereunder shall be deemed given when given in the manner prescribed in
Section 10.02 of the Indenture to the following address:





                                                                     Exhibit E-1
                                                                         Page 22


                     First American Title Insurance Company
                     633 Third Avenue, 16th Floor
                     New York, New York 10017
                     Attn: Phil Salomon
                     Facsimile No.: (212) 331-5159

                5.7 Severability. All rights, powers and remedies provided
herein may be exercised only to the extent that the exercise thereof does not
violate any applicable law, and are intended to be limited to the extent
necessary so that they will not render this Deed of Trust invalid, unenforceable
or not entitled to be recorded, registered or filed under any applicable law. In
the event any term or provision contained in this Deed of Trust is in conflict,
or may hereafter be held to be in conflict, with the laws of the State of
California or of the United States of America, this Deed of Trust shall be
affected only as to such particular term or provision, and shall in all other
respects remain in full force and effect.

                5.8 Application of Payments. In the event that any part of the
Secured Obligations cannot lawfully be secured hereby, or in the event that the
lien and security interest hereof cannot be lawfully enforced to pay any part of
the Secured Obligations, or in the event that the lien or security interest
created by this Deed of Trust shall be invalid or unenforceable as to any part
of the Secured Obligations, then all payments on the Secured Obligations shall
be deemed to have been first applied to the complete payment and liquidation of
that part of the Secured Obligations which is not secured by this Deed of Trust
and the unsecured portion of the Secured Obligations shall be completely paid
and liquidated prior to the payment and liquidation of the remaining secured
portion of the Secured Obligations.

                5.9 Governing Law. THIS DEED OF TRUST IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

                5.10 Entire Agreement. THIS WRITTEN AGREEMENT, THE INDENTURE AND
THE OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.

AS OF THE DATE HEREOF, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

         ---------------------------                 ---------------------------
         TRUSTOR                                     BENEFICIARY


                5.11 Amendments. This Deed of Trust may be amended, supplemented
or otherwise modified only by an instrument in writing signed by Trustor and
Beneficiary.

                5.12 Successors and Assigns. All terms of this Deed of Trust
shall run with the land and bind each of Trustor and Beneficiary and their
respective successors and assigns, and all Persons claiming under or through
Trustor or Beneficiary, as the case may be, or any such successor




                                                                     Exhibit E-1
                                                                         Page 23


or assign, and shall inure to the benefit of Beneficiary and Trustor, and their
respective successors and assigns.

                5.13 Renewal, Etc. Beneficiary may at any time and from time to
time renew or extend this Deed of Trust, or alter or modify the same in any way,
or waive any of the terms, covenants or conditions hereof in whole or in part
and may release any portion of the Mortgaged Property or any other security, and
grant such extensions and indulgences in relation to the Secured Obligations as
Beneficiary may determine, without the consent of any junior lienor or
encumbrancer and without any obligation to give notice of any kind thereto and
without in any manner affecting the priority of the lien and security interest
hereof on any part of the Mortgaged Property; provided that nothing in this
Section 5.13 shall grant Beneficiary the right to alter or modify the Deed of
Trust without the consent of the Trustor unless otherwise specifically permitted
in this Deed of Trust.

                5.14 Liability. Notwithstanding any provision in this Deed of
Trust to the contrary, recourse against the Trustor and its Affiliates,
stockholders, officers, members, directors and employees under this Deed of
Trust shall be limited to the extent provided in Section 10.07 of the Indenture.

                5.15 Severability. The Financing Documents are intended to be
performed in accordance with, and only to the extent permitted by, all
Applicable Laws and Governmental Approvals. If any provision of any of the
Financing Documents or the application thereof to any person or circumstance
shall, for any reason and to any extent, be invalid or unenforceable, neither
the remainder of the instrument in which such provision is contained, nor the
application of such provision to other persons or circumstances, nor the other
instruments referred to hereinabove, shall be affected thereby, but rather shall
be enforceable to the greatest extent permitted by law.

                5.16 Waiver. To the extent permitted by law, Trustor waives and
releases any rights or defenses which Trustor might otherwise have (i) under
California Code of Civil Procedure Sections 726, 725a, 580a, 580b, 580c and 580d
and California Civil Code Section 2889, which statutes might otherwise limit or
condition Beneficiary's exercise of certain of Beneficiary's rights and remedies
in connection with the enforcement of obligations secured by a lien on real
property or (ii) under any laws now existing or hereafter enacted providing for
any appraisal before sale of a portion of the Mortgaged Property and (iii) to
all rights of redemption, valuation, appraisal, stay of execution, notice of
election to mature or to declare due the Secured Obligations and marshalling in
the event of the foreclosure of the liens created under this Deed of Trust or
the exercise of the power of sale granted hereunder. To the extent, if any,
which such laws may be applicable and to the extent permitted by law, Trustor
waives and releases any right or defense which Trustor might otherwise have
under such provisions and under any other law of any applicable jurisdiction
which might limit or restrict the effectiveness or scope of any of Trustor's
waivers or releases hereunder.

                5.17 Additional Waivers. To the extent that Trustor is
considered the guarantor of any obligations of any party under the Financing
Documents (other than Trustor) or its successors and assigns (the
"Counterparty"), then Trustor, to the extent permitted under applicable law,
hereby waives the following:

     (a) any and all benefits, rights and defenses it may have to subrogation,
reimbursement, indemnification, and contribution and any other rights and
defenses that are or




                                                                     Exhibit E-1
                                                                         Page 24


may become available to Trustor by reason of California Civil Code Sections 2787
to 2855, inclusive;

     (b) any and all benefits, rights and defenses it may have because the
Counterparty's debt may be secured by real property. This means, among other
things: (i) Beneficiary may collect from Trustor without first foreclosing on
any real or personal property collateral pledged by the Counterparty, (ii) if
Beneficiary forecloses on any real property collateral pledged by the
Counterparty, then (A) the amount of the debt may be reduced only by the price
for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (B) Beneficiary may collect
from Trustor even if Beneficiary, by foreclosing on the real property
collateral, has destroyed any right Trustor may have to collect from the
Counterparty. This is an unconditional and irrevocable waiver of any rights and
defenses Trustor may have because the Counterparty's debt is secured by real
property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure; and

(c) any and all benefits, rights and defenses it may have arising out of an
election of remedies by Beneficiary, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Trustor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.

                5.18 Release of Collateral.

     5.18.1 Notwithstanding any provision herein to the contrary, the Mortgaged
Property or any part thereof shall be released from the security interest
created by this Deed of Trust at any time or from time to time upon the request
of each of Beneficiary and Trustor; provided that the requirements of the
Financing Documents have been satisfied. Upon satisfaction of such requirements,
a Responsible Officer of Beneficiary shall instruct the Trustee to promptly
execute, deliver and acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Mortgaged
Property permitted to be released pursuant to this Deed of Trust.

     5.18.2 Beneficiary may instruct the Trustee to release Mortgaged Property
from the security interest created hereunder upon the sale or disposition of
such Mortgaged Property pursuant to Beneficiary's powers, rights and duties with
respect to remedies provided herein.

                5.19 Indenture Controls. In the event of any conflict between
any terms and provisions set forth in this Deed of Trust and those set forth in
the Indenture, the terms and provisions of the Indenture shall supersede and
control the terms and provisions of this Deed of Trust.

                5.20 Time of the Essence. Trustor acknowledges that time is of
the essence in performing all of Trustor's obligations set forth herein.

                5.21 Counterpart Execution. This Deed of Trust may be executed
by the parties hereto in any number of counterparts (and be each of the parties
hereof on separate counterparts),




                                                                     Exhibit E-1
                                                                         Page 25


each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]








                                                                     Exhibit E-1
                                                                         Page 26



         IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly
executed and delivered as of the day and year first above written.

                                                 -------------------------------


                                                 By:____________________________
                                                    Name:
                                                    Title:



STATE OF _____________________)
                              )      ss.
COUNTY OF ____________________)

                On _____________________, 2005, before me,
__________________________, a notary public in and for said State, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

                WITNESS my hand and official seal.




Signature _________________________________
                                                                          (Seal)







                                   EXHIBIT E-2

                    FORM OF DEED OF TRUST (FEE AND LEASEHOLD)




                                   EXHIBIT E-2
                                   -----------

                    FORM OF DEED OF TRUST (FEE AND LEASEHOLD)


                                    Agreement
                                    ---------

         NOW, THEREFORE, to secure the prompt and complete payment and
performance when due, by acceleration or otherwise, of the Senior Secured Notes
and all other Senior Secured Obligations of the Note Issuer and the Guarantors
(including Trustor) to Beneficiary and the other Secured Parties pursuant to the
Indenture and the other Financing Documents (collectively, the "Secured
Obligations"), Trustor, intending to be legally bound, does hereby grant,
bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, set over and
confirm unto Trustee in trust for Beneficiary as set forth in this Deed of
Trust, with power of sale and right of entry and possession, for the benefit of
Beneficiary and the other Secured Parties, all of Trustor's estate, right,
title, interest, property, claim and demand, now or hereafter arising, in and to
the following property and rights (collectively, the "Mortgaged Property"):

                  (a) all of that real property located in the County of
         ___________, State of ____________, described on Exhibit A-1 hereto
         (collectively, the "Fee Site");

                  (b) Trustor's interest under each of the Leases listed on
         Exhibit A-2 hereto (collectively, as modified, supplemented or amended
         from time to time, the "Surface and Geothermal Leases") and the
         leasehold estate created thereby in and to the lands and premises more
         particularly described therein (collectively, the "Leasehold Site", and
         together with the Fee Site, the "Site"));

                  (c) any and all easements, leases, licenses, option rights,
         rights-of-way and other rights used in connection with the Site or as a
         means of access thereto (including all rights of Trustor to exercise
         any election or option, to make any determination or to give any
         notice, consent, waiver or approval, or to take any other action under
         the Surface and Geothermal Leases), all easements for ingress and
         egress and easements for water, transmission lines, telephone lines,
         natural gas and sewage pipelines, and all other such rights running in
         favor of Trustor, or appurtenant to the Site or arising under the
         Surface and Geothermal Leases, and any and all sidewalks, alleys,
         strips and gores of land adjacent thereto or used in connection
         therewith, together with all and singular the tenements, hereditaments
         and appurtenances thereto, and with any land lying within the
         right-of-way of any streets, open or proposed, adjoining the same
         (including the easements, leases, licenses and other instruments
         described in Exhibit B hereto) (collectively, the "Easements"; and the
         Site and the Easements collectively referred to herein as the "Real
         Property");

                  (d) all buildings, structures, fixtures and other improvements
         now or hereafter erected on the Real Property, including the Project
         (collectively, the "Improvements");


                                                                     Exhibit E-2
                                                                          Page 2

                  (e) all machinery, apparatus, equipment, fittings, fixtures,
         boilers, turbines and other articles of personal property, including
         all goods and all goods which become fixtures, now owned or hereafter
         acquired by Trustor and now or hereafter located on, attached to or
         used in the operation of or in connection with the Real Property or the
         Improvements, and all replacements thereof, additions thereto and
         substitutions therefor, to the fullest extent permitted by applicable
         law (all of the foregoing being hereinafter collectively called the
         "Equipment");

                  (f) all inventory, raw materials, work in process and other
         materials used or consumed in the construction, operation or
         maintenance of, or now or hereafter located on or used in connection
         with, the Real Property, the Improvements or the Equipment, (including
         fuel and fuel deposits, now or hereafter located on the Real Property
         or elsewhere or otherwise owned by Trustor) (the above items, together
         with the Equipment, being hereinafter collectively called the "Tangible
         Collateral");

                  (g) all rights, powers, privileges and other benefits of
         Trustor (to the extent assignable) now or hereafter obtained by Trustor
         under the Surface and Geothermal Leases or from any Governmental
         Authority, including Governmental Approvals issued in the name of
         Trustor and governmental actions relating to (i) the ownership,
         operation, management and use of the Real Property, Improvements,
         Equipment or Tangible Collateral, (ii) the development and financing of
         the Project, the Improvements and the Equipment, and (iii) any
         improvements, modifications or additions thereto;

                  (h) any right of Trustor to elect to terminate the Surface and
         Geothermal Leases or remain in possession of the Real Property pursuant
         to 11 U.S.C. section 365(h) or any similar provision of applicable law
         and any possessory rights of Trustor in the Real Property pursuant to
         11 U.S.C. section 365(h) or any other similar provision of applicable
         law;

                  (i) all the lands and interests in lands, tenements and
         hereditaments hereafter acquired by Trustor in connection with or
         appurtenant to the Real Property or any other property or rights
         subject to the lien hereof, including all interests of Trustor, whether
         as lessor or lessee, in any leases of land hereafter made and all
         rights of Trustor thereunder;

                  (j) any and all other property in any way associated or used
         in connection with or appurtenant to the Real Property, Improvements,
         Equipment or Tangible Collateral that may from time to time, by
         delivery or by writing of any kind, be subjected to the lien hereof by
         Trustor or by anyone on its behalf or with its consent, or which may
         come into the possession or be subject to the control of Trustee or
         Beneficiary pursuant to this Deed of Trust, being hereby assigned to
         Beneficiary and subjected or added to the lien or estate created by
         this Deed of Trust forthwith upon the acquisition thereof by Trustor,
         as fully as if such property were now owned by Trustor and were
         specifically described in this Deed of Trust and subjected to the lien
         and security interest hereof; and each of Trustee and Beneficiary is
         hereby authorized to receive any and all such property as and for
         additional security hereunder;

                                       2


                                                                     Exhibit E-2
                                                                          Page 3

                  (k) any and all contract rights, general intangibles, chattel
         paper, instruments, notes, letters of credit, insurance policies,
         insurance and condemnation awards and proceeds (including title
         insurance proceeds), warranties, trademarks, trade names, improvement
         plans and specifications (in each case whether existing now or in the
         future), relating to or otherwise arising in connection with the
         Mortgaged Property; and

                  (l) all the remainder or remainders, reversion or reversions,
         rents, revenues, issues, profits, royalties, income and other benefits
         derived from any of the foregoing, all of which are hereby assigned to
         Beneficiary, who is hereby authorized to collect and receive the same,
         to give proper receipts and acquittances therefor and to apply the same
         in accordance with the provisions of this Deed of Trust.

         TO HAVE AND TO HOLD the said Mortgaged Property, whether now owned or
held or hereafter acquired, unto Beneficiary, its successors and assigns,
pursuant to the provisions of this Deed of Trust.

         IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security
interest or estate created by this Deed of Trust to secure the payment of the
Secured Obligations, both present and future, shall be first, prior and superior
to any Lien, security interest, reservation of title or other interest
heretofore, contemporaneously or subsequently suffered or granted by Trustor,
its legal representatives, successors or assigns, except only those, if any,
expressly hereinafter referred to and that the Mortgaged Property is to be held,
dealt with and disposed of by Beneficiary, upon and subject to the terms,
covenants, conditions, uses and agreements set forth in this Deed of Trust. If,
notwithstanding any provisions in this Deed of Trust to the contrary,
enforcement of the liability of Trustor hereunder for the full amount of the
Secured Obligations would be an unlawful or voidable transfer under any
applicable fraudulent conveyance or fraudulent transfer law or any comparable
law, then the liability of Trustor hereunder shall be reduced to the highest
amount for which such liability may then be enforced without giving rise to an
unlawful or voidable transfer under any such law.

         PROVIDED ALWAYS, that upon payment in full of the Secured Obligations
in accordance with the terms and provisions hereof and of the other Financing
Documents and the observance and performance by Trustor of its covenants and
agreements set forth herein and therein, then this Deed of Trust and the estate
hereby and therein granted shall cease and be void and shall be reconveyed as
provided herein below.

                                    ARTICLE 1

                                   DEFINITIONS

         1.1 Defined Terms. Each capitalized term used herein and not otherwise
defined herein shall have the meaning assigned to such term (whether directly or
by reference to another agreement or document) in Article I of the Indenture.
Any term defined by reference to an agreement, instrument or other document
shall have the meaning so assigned to it whether or not such document is in
effect. In addition, for purposes of this Deed of Trust, the following
definitions shall apply:

         "Counterparty" has the meaning ascribed to it in Section 5.17 below.

                                       3


                                                                     Exhibit E-2
                                                                          Page 4


         "Easements" has the meaning ascribed to it in the Granting Clauses.

         "Equipment" has the meaning ascribed to it in the Granting Clauses.

         "Fee Site" has the meaning ascribed to it in the Granting Clauses.

         "Improvements" has the meaning ascribed to it in the Granting Clauses.

         "Indenture" has the meaning ascribed to it in the Recitals.

         "Leasehold Site" has the meaning ascribed to it in the Granting
Clauses.

         "Leases" has the meaning ascribed to it in Section 2.4 below.

         "Mortgaged Property" has the meaning ascribed to it in the Granting
Clauses.

         "Proceeds" has the meaning assigned to it under the UCC (as defined in
Section 2.14.1 below) and, in any event, shall include, (i) any and all proceeds
of any insurance (including, property casualty and title insurance), indemnity,
warranty or guaranty payable from time to time with respect to any of the
Mortgaged Property; (ii) any and all proceeds in the form of accounts (as such
term is defined in the UCC), security deposits, tax escrows (if any), down
payments (to the extent the same may be pledged under applicable law),
collections, contract rights, documents, instruments, letters of credit, chattel
paper, liens and security instruments, guaranties or general intangibles
relating in whole or in part to the Mortgaged Property and all rights and
remedies of whatever kind or nature Trustor may hold or acquire for the purpose
of securing or enforcing any obligation due Trustor thereunder.

         "Project" means a geothermal fluid facility located in Heber,
California and owned by Trustor.

         "Real Property" has the meaning ascribed to it in the Granting Clauses.

         "Rents" has the meaning ascribed to it in Section 2.4 below.

         "Secured Obligations" has the meaning ascribed to it in the Granting
Clauses.

         "Site" has the meaning ascribed to it in the Granting Clauses.

         "Surface and Geothermal Leases" has the meaning ascribed to it in the
Granting Clauses.

         "Tangible Collateral" has the meaning ascribed to it in the Granting
Clauses.

         "UCC Collateral" has the meaning given ascribed in Section 2.14.1
below.

         1.2 Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not defined herein
shall have the respective meanings given to them under GAAP.

         1.3 The Rules of Construction. The rules of construction as set forth
in the Indenture shall govern the terms, conditions and provisions hereof. In
the event of any conflict between those set forth in this Deed of Trust and the
Indenture, the latter shall be deemed controlling and shall preempt the former.

                                       4


                                                                     Exhibit E-2
                                                                          Page 5


                                   ARTICLE 2

                        GENERAL COVENANTS AND PROVISIONS

         2.1 Trustor Performance of Financing Documents Trustor shall perform,
observe and comply with each and every provision hereof, and with each and every
provision contained in the Financing Documents, and shall promptly pay to
Beneficiary, when payment shall become due under the Indenture, the principal
with interest thereon and all other sums required to be paid by Trustor under
this Deed of Trust and the other Financing Documents at the time and in the
manner provided in the Financing Documents. If enforcement of the liability of
Trustor under this Deed of Trust for the full amount of the Secured Obligations
would be an unlawful or voidable transfer under any fraudulent conveyance or
fraudulent transfer law or any comparable law, then the liability of Trustor
hereunder shall be reduced to the highest amount for which such liability may
then be enforced without giving rise to an unlawful or voidable transfer under
any such law.

         2.2 General Representations, Covenants and Warranties. Trustor
represents, covenants and warrants that as of the date hereof: (a) Trustor has
good, marketable, valid and legal (i) fee simple title to the Fee Site and the
Improvements located thereon; (ii) leasehold interests in the Leasehold Site and
Improvements located thereon and (iii) interest in the rights granted pursuant
to the Easements, in each case free and clear of all Liens except for the Title
Exceptions or Permitted Liens (as applicable under Section 4.08 under the
Indenture); (b) Trustor has good, marketable, valid and legal title to all other
Mortgaged Property, free and clear of all Liens other than Permitted Liens; (c)
Trustor has the full power and authority to encumber the Mortgaged Property in
the manner set forth herein; (d) the Title Exceptions relating to the Mortgaged
Property do not, in the aggregate, materially and adversely affect the value,
operations or use of the Project; and (e) the Mortgaged Property includes all of
Trustor's material real property interests (including fee, leasehold and
easement interests).

         2.3 Insurance; Application of Insurance Proceeds; Application of
Eminent Domain Proceeds.

         2.3.1 Trustor shall at its sole expense obtain for, deliver to, assign
and maintain for the benefit of Beneficiary, during the term of this Deed of
Trust, insurance policies insuring the Mortgaged Property (to the extent
insurable) and liability insurance policies, all in accordance with the
requirements of Sections 4.07 and 4.42 of the Indenture. Trustor shall pay
promptly when due any premiums on such insurance policies and on any renewals
thereof. In the event of the foreclosure of this Deed of Trust or any other
transfer of the Mortgaged Property in extinguishment of the indebtedness and
other sums secured hereby, all right, title and interest of Trustor in and to
all casualty insurance policies, and renewals thereof then in force, shall pass
to the purchaser or grantee in connection therewith.

         2.3.2 All Loss Proceeds and Eminent Domain Proceeds shall be paid or
shall be applied in accordance with the provisions of the Financing Documents.

                                       5


                                                                     Exhibit E-2
                                                                          Page 6

         2.4 Assignment of Rents. Trustor unconditionally and absolutely assigns
to Beneficiary all of Trustor's right, title and interest in and to: all leases,
subleases, occupancy agreements, licenses, rental contracts and other similar
agreements now or hereafter existing relating to the use or occupancy of the
Mortgaged Property, together with all guarantees, modifications, extensions and
renewals thereof (the "Leases"); and all rents, issues, profits, income and
proceeds due or to become due from tenants of the Mortgaged Property, including
rentals and all other payments of any kind under any leases now existing or
hereafter entered into, together with all deposits (including security deposits)
of tenants thereunder ("Rents") effective to create a present security interest
in existing Leases and Rents under California Civil Code Section 2938. Subject
to the provisions herein below, Beneficiary shall have the right, power and
authority to: notify any person that the Leases have been assigned to
Beneficiary and that all Rents and other obligations are to be paid directly to
Beneficiary, whether or not Beneficiary has commenced or completed foreclosure
or taken possession of the Mortgaged Property; settle compromise, release,
extend the time of payment of, and make allowances, adjustments and discounts of
any Rents or other obligations under the Leases; enforce payment of Rents and
other rights under the Leases, prosecute any action or proceeding, and defend
against any claim with respect to Rents and Leases; enter upon, take possession
of and operate the Mortgaged Property; lease all or any part of the Mortgaged
Property; perform any and all obligations of Trustor under the Leases and
exercise any and all rights of Trustor therein contained to the full extent of
Trustor's rights and obligations thereunder, with or without the bringing of any
action or the appointment of a receiver; or while any Event of Default exists,
exercise any or all remedies provided in Article 3 hereof, including the right
to have a receiver appointed and any other rights and remedies under California
Civil Code Section 2938; provided, however, that this assignment shall not
impose upon Beneficiary any duty to produce Rents, nor shall it cause
Beneficiary to be (i) a "mortgagee in possession" for any purpose; (ii)
responsible for performing any obligations of the lessor, licensor or other
counterparty under any Lease; or (iii) be responsible for waste committed by
lessees or any other parties, for any dangerous or defective condition in the
Mortgaged Property, or for any negligence in the management, upkeep, repair or
control of the Mortgaged Property. At Beneficiary's request, Trustor shall
deliver a copy of this Deed of Trust to each tenant under a Lease. Trustor
irrevocably directs any tenant, without any requirement for notice to or consent
by Trustor, to comply with all demands of Beneficiary under this Section 2.4 and
to turn over to Beneficiary on demand all Rents which it owes under a Lease.
Beneficiary shall have the right, but not the obligation, to use and apply all
Rents received hereunder in such order and such manner as Beneficiary may
determine in accordance with the Indenture. Notwithstanding the foregoing,
Trustor is entitled to collect and receive the Rents and to retain, use and
enjoy such Rents until such time as the Beneficiary provides notice to the
contrary upon the occurrence of any Event of Default, in which case Trustor
shall immediately, without any further act or request on part of Beneficiary,
turn over to Beneficiary all Rents which it receives. Trustor shall apply any
Rents which it receives to the payment due under the Secured Obligations, taxes,
assessments, water charges, sewer rents and other governmental charges levied,
assessed or imposed against the Mortgaged Property, insurance premiums, and
other obligations of lessor under the Leases before using such proceeds for any
other purpose.

         2.5 Rejection of Surface and Geothermal Leases by Lessor. If the lessor
under a Surface and Geothermal Lease rejects or disaffirms such Surface and
Geothermal Lease or purports or seeks to disaffirm the Surface and Geothermal
Lease pursuant to any Bankruptcy Law, then:

                                       6


                                                                     Exhibit E-2
                                                                          Page 7

         2.5.1 To the extent permitted by Applicable Law or Governmental
Approvals, Trustor shall remain in possession of the Real Property demised under
such Surface and Geothermal Lease and shall perform all acts reasonably
necessary for Trustor to remain in such possession for the unexpired term of
such Surface and Geothermal Lease (including all renewals), whether the then
existing terms and provisions of such Surface and Geothermal Lease require such
acts or otherwise; and

         2.5.2 All the terms and provisions of this Deed of Trust and the lien
created by this Deed of Trust shall remain in full force and effect and shall
extend automatically to all of Trustor's rights and remedies arising at any time
under, or pursuant to, Section 365(h) of the Bankruptcy Law, including all of
Trustor's rights to remain in possession of the Real Property.

         2.6 Indemnification. Trustor hereby indemnifies Beneficiary against,
and holds harmless Beneficiary from, all losses, damages, liabilities, claims,
causes of action, judgments, court costs, attorneys' fees and other legal
expenses, costs of inspection and other expenses that either may suffer or
incur: (i) by reason of this Deed of Trust; (ii) by reason of the execution of
this trust or in performance of any act required or permitted hereunder or by an
Applicable Law, including the disclosure or non-disclosure of any facts relating
to the Mortgaged Property, or any part thereof, incidental to a judicial or
non-judicial sale; or (iii) as a result of any failure of Trustor to perform its
obligations. The above obligation of Trustor to indemnify and hold harmless
Beneficiary shall survive the release and cancellation of the Secured
Obligations and the release and reconveyance or partial release and reconveyance
of this Deed of Trust.

         2.7 Beneficiary Assumes No Secured Obligations. It is expressly agreed
that, anything herein contained to the contrary notwithstanding, except as may
otherwise be provided in the Financing Documents, Trustor shall remain obligated
under all agreements which are included in the definition of "Mortgaged
Property" and shall perform all of its obligations thereunder in accordance with
the provisions thereof, and neither Beneficiary nor any of the Noteholders shall
have any obligation or liability with respect to such obligations of Trustor,
nor shall Beneficiary or any of the Noteholders be required or obligated in any
manner to perform or fulfill any obligations or duties of Trustor under such
agreements, or to make any payment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or
take any action to collect or enforce the payment of any amounts which have been
assigned to Beneficiary hereunder or to which Beneficiary or the Noteholders may
be entitled at any time or times.

         2.8 Further Assurances. Trustor shall, from time to time, at its
expense, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or that Trustee or Beneficiary
may reasonably request, in order to perfect, continue and protect the lien and
security interest granted or purported to be granted hereby and to enable
Beneficiary to obtain the full benefits of the lien and security interest
granted or intended to be granted hereby. Trustor shall keep the Mortgaged
Property free and clear of all Liens, other than Permitted Liens. Without
limiting the generality of the foregoing, Trustor shall execute and record or
file this Deed of Trust and each amendment hereto, and such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsements or notices, as may be necessary, or as Beneficiary or Trustee may
reasonably request, in order to perfect and preserve the lien and security
interest granted or purported to be granted hereby. Trustor hereby authorizes
Beneficiary to file one or more financing statements or continuation statements,
and

                                       7


                                                                     Exhibit E-2
                                                                          Page 8

amendments thereto, relative to all or any part of the Mortgaged Property
necessary to preserve or protect the lien and security interest granted hereby
without the signature of Trustor where permitted by law.

         2.9 Acts of Trustor. Except as provided in or permitted by the
Financing Documents, Trustor hereby represents and warrants that it has not
mortgaged, hypothecated, assigned or pledged and hereby covenants that it will
not mortgage, hypothecate, assign or pledge, so long as this Deed of Trust shall
remain in effect, any of its right, title or interest in and to the Mortgaged
Property or any part thereof, to anyone other than Beneficiary.

         2.10 After-Acquired Property. Subject to the terms of this paragraph,
any and all of the Mortgaged Property which is hereafter acquired shall
immediately, without any further conveyance, assignment or act on the part of
Trustor or Beneficiary, become and be subject to the lien and security interest
of this Deed of Trust as fully and completely as though specifically described
herein, but nothing contained in this Section 2.10 shall be deemed to modify or
change the obligations of Trustor under Section 2.8 hereof. If and whenever from
time to time Trustor shall hereafter acquire any real property or interest
therein which constitutes or is intended to constitute part of the Mortgaged
Property hereunder, Trustor shall promptly give notice thereof to Beneficiary
and Trustor shall forthwith execute, acknowledge and deliver to Beneficiary a
supplement to this Deed of Trust in form and substance reasonably satisfactory
to Beneficiary subjecting the property so acquired to the lien of this Deed of
Trust. At the same time, if Beneficiary so requests, Trustor shall deliver to
Beneficiary either (i) an endorsement to the lender's policy of title insurance
issued to Beneficiary insuring the lien of this Deed of Trust, or (ii) a new
lender's title policy (which shall include tie in coverage relating to the
lender's policy described in (i), above), in each case which shall insure to
Beneficiary in form and substance reasonably satisfactory to Beneficiary that
the lien of this Deed of Trust as insured under such title insurance policy or
policies encumbers such later acquired property and that Trustor's title to such
property meets all of the applicable requirements of the Financing Documents
with respect to title to Trustor's real property interests.

         2.11 Mortgaged Property.

         2.11.1 Trustor shall pay or cause to be paid all rent and other charges
required under the Surface and Geothermal Leases as and when the same are due
and shall promptly and faithfully perform or cause to be performed all other
material terms, obligations, covenants, conditions, agreements, indemnities and
liabilities of Trustor under the Surface and Geothermal Leases. Trustor shall
observe all applicable covenants, easements and other restrictions of record
with respect to the Site, the Easements or to any other part of the Mortgaged
Property, in all material respects.

         2.11.2 Trustor shall maintain in full force and effect, perform its
obligations under, preserve, protect and defend the material rights of Trustor
under and take all reasonable action necessary to prevent termination (except by
expiration in accordance with its terms) of each and every Surface and
Geothermal Lease, including prosecution of suits to enforce any material rights
of Trustor thereunder and enforcement of any material claims with respect
thereto. Trustor does hereby authorize and irrevocably appoint and constitute
Beneficiary as its true and lawful attorney-in-fact, which appointment is
coupled with an interest, in its name, place and stead, to take any and all
actions deemed necessary or desirable by Beneficiary to perform and

                                                                     Exhibit E-2
                                                                          Page 9

comply with all the obligations of Trustor under the Surface and Geothermal
Leases, and to do and take upon the occurrence and during continuation of an
Event of Default, but without any obligation so to do or take, any action which
Beneficiary deems reasonably necessary to prevent or cure any default by Trustor
under the Surface and Geothermal Leases, to enter into and upon the Real
Property and Improvements or any part thereof as provided in the Credit
Documents in order to prevent or cure any default of Trustor pursuant thereto,
to the end that the rights of Trustor in and to the leasehold estates created by
the Surface and Geothermal Leases shall be kept free from default.

         2.11.3 Trustor shall not surrender its leasehold estates and interests
under the Surface and Geothermal Leases or modify, change, supplement, alter or
amend the Surface and Geothermal Leases or affirmatively waive any provisions
thereof, either orally or in writing, except as permitted in the Financing
Documents, and any attempt on the part of Trustor to do any of the foregoing
without the written consent of Beneficiary shall be null and void.

         2.11.4 If any action or proceeding shall be instituted to evict Trustor
or to recover possession of the Mortgaged Property or any part thereof or
interest therein from Trustor or any action or proceeding otherwise affecting
the Mortgaged Property or this Deed of Trust shall be instituted, then Trustor
shall, immediately after receipt, deliver to Beneficiary a true and complete
copy of each petition, summons, complaint, notice of motion, order to show cause
and all other pleadings and papers, however designated, served in any such
action or proceeding.

         2.11.5 Trustor covenants and agrees that the fee title to the Real
Property and Improvements and the leasehold estates created under the Surface
and Geothermal Leases shall not merge but shall always remain separate and
distinct, notwithstanding the union of said estates either in Trustor or a third
party by purchase or otherwise and, in case Trustor acquires the fee title or
any other estate, title or interest in and to the Real Property and
Improvements, the lien of this Deed of Trust shall, without further conveyance,
simultaneously with such acquisition, be spread to cover and attach to such
acquired estate and as so spread and attached shall be prior to the lien of any
mortgage placed on the acquired estate after the date of this Deed of Trust.

         2.11.6 No release or forbearance of any of Trustor's obligations under
the Surface and Geothermal Leases by the lessor thereunder, shall release
Trustor from any of its obligations under this Deed of Trust.

         2.11.7 Trustor shall, within ten (10) days after written demand from
Beneficiary, deliver to Beneficiary proof of payment of all items that are
required to be paid by Trustor under the Surface and Geothermal Leases,
including rent, taxes, operating expenses and other charges.

         2.11.8 The lien of this Deed of Trust shall attach to all of Trustor's
rights and remedies at any time arising under or pursuant to section 365(h) of
the Bankruptcy Law, including all of Trustor's rights to remain in possession of
the Mortgaged Property. Trustor shall not elect to treat any of the Surface and
Geothermal Leases as terminated under section 365(h)(l) of the Bankruptcy Law,
and any such election shall be void.

         2.11.8.1 If pursuant to section 365(h) of the Bankruptcy Law, Trustor
shall seek to offset against the rent reserved in any of the Surface and
Geothermal Leases the amount of any

                                       9


                                                                     Exhibit E-2
                                                                         Page 10

damages caused by the nonperformance by the lessor or any other party of any of
their respective obligations thereunder after the rejection by the lessor or
such other party of such Surface and Geothermal Lease under the Bankruptcy Law,
then Trustor shall, prior to effecting such offset, notify Beneficiary of its
intent to do so, setting forth the amount proposed to be so offset and the basis
therefor. Beneficiary shall have the right to object to all or any part of such
offset that, in the reasonable judgment of Beneficiary, would constitute a
breach of such Surface and Geothermal Lease, and in the event of such objection,
Trustor shall not effect any offset of the amounts found objectionable by
Beneficiary. Neither Beneficiary's failure to object as aforesaid nor any
objection relating to such offset shall constitute an approval of any such
offset by Beneficiary.

         2.11.8.2 If any action, proceeding, motion or notice shall be commenced
or filed in respect of the lessor under any of the Surface and Geothermal Leases
or any other party or in respect of such Surface and Geothermal Leases in
connection with any case under the Bankruptcy Law, then Beneficiary shall have
the option to intervene in any such litigation with counsel of Beneficiary's
choice. Beneficiary may proceed in its own name in connection with any such
litigation, and Trustor agrees to execute any and all powers, authorizations,
consents or other documents required by Beneficiary in connection therewith.

         2.11.8.3 Trustor shall, after obtaining knowledge thereof, promptly
notify Beneficiary of any filing by or against the lessor or other party with an
interest in the Mortgaged Property of a petition under the Bankruptcy Law.
Trustor shall promptly deliver to Beneficiary, following receipt, copies of any
and all notices, summonses, pleadings, applications and other documents received
by Trustor in connection with any such petition and any proceedings relating
thereto.

         2.11.8.4 If there shall be filed by or against Trustor a petition under
the Bankruptcy Law, and Trustor, as lessee under the Surface and Geothermal
Leases, shall determine to reject any of the Surface and Geothermal Leases
pursuant to section 365(a) of the Bankruptcy Law, then Trustor shall give
Beneficiary a notice of the date on which Trustor shall apply to the bankruptcy
court for authority to reject such Surface and Geothermal Lease (such notice to
be no later than twenty (20) days prior to such date). Beneficiary shall have
the right, but not the obligation, to serve upon Trustor at any time prior to
the date on which Trustor shall so apply to the bankruptcy court a notice
stating that Beneficiary demands that Trustor assume and assign such Surface and
Geothermal Lease to Beneficiary pursuant to section 365 of the Bankruptcy Law.
If Beneficiary shall serve upon Trustor the notice described in the preceding
sentence, to the extent permitted by Applicable Law, Trustor shall not seek to
reject such Surface and Geothermal Lease and shall comply with the demand
provided for in the preceding sentence. In addition, effective upon the entry of
an order for relief with respect to Trustor under the Bankruptcy Law, Trustor
hereby assigns and transfers to Beneficiary a nonexclusive right to apply to the
bankruptcy court under section 365(d)(4) of the Bankruptcy Law for an order
extending the period during which such Surface and Geothermal Lease may be
rejected or assumed; and shall (a) promptly notify Beneficiary of any default by
Trustor in the performance or observance of any of the terms, covenants or
conditions on the part of Trustor to be performed or observed under such Surface
and Geothermal Lease and of the giving of any written notice by the lessor
thereunder to Trustor of any such default, and (b) promptly cause a copy of each
written notice given to Trustor by the lessor under such Surface and Geothermal
Lease to be delivered to Beneficiary. Beneficiary may rely on any notice
received by it from any such lessor of any default by Trustor under such

                                       10


                                                                     Exhibit E-2
                                                                         Page 11

Surface and Geothermal Lease and may take such action as may be permitted by
Applicable Law to cure such default even though the existence of such default or
the nature thereof shall be questioned or denied by Trustor or by any Person on
its behalf.

         2.11.9 Trustor shall cause the Mortgaged Property to be maintained in
accordance with Prudent Industry Practices and will not commit or suffer to be
committed any waste of the Mortgaged Property. Except in accordance with the
Financing Documents, the Real Property shall not be removed, demolished or
materially altered (except for normal replacement of the Equipment), without the
consent of Beneficiary. Trustor will not, without obtaining the prior consent of
Beneficiary, initiate, join in or consent to any private restrictive covenant,
zoning ordinance, or other public or private restrictions, limiting or affecting
the uses which may be made of the Mortgaged Property or any part thereof.

         2.11.10 No part of the Mortgaged Property shall in any manner be
further encumbered (other than with Permitted Liens), sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold, transferred,
assigned or conveyed, except in accordance with the terms of the Indenture,
without the prior consent of Beneficiary, which consent in any and all
circumstances may be withheld in the sole and absolute discretion of
Beneficiary. The provisions of the foregoing sentence of this paragraph shall
apply to each and every such further encumbrance, sale, transfer, assignment or
conveyance, regardless of whether or not Beneficiary has consented to, or waived
by its action or inaction its rights hereunder with respect to, any such
previous further encumbrance, sale, transfer, assignment or conveyance, and,
irrespective of whether such further encumbrance, sale, transfer, assignment or
conveyance is voluntary, by reason of operation of law or is otherwise made.

         2.12 Power of Attorney. Trustor does hereby irrevocably constitute and
appoint Beneficiary, its true and lawful attorney (which appointment is coupled
with an interest), with full power of substitution, for Trustor and in the name,
place and stead of Trustor or in Beneficiary's own name, for so long as any of
the Secured Obligations are outstanding, to ask, demand, collect, receive,
receipt for and sue for any and all rents, income and other sums which are
assigned hereunder with full power to endorse the name of Trustor on all
instruments given in payment or in part payment thereof, to settle, adjust or
compromise any claims thereunder as fully as Trustor itself could do and in its
discretion file any claim or take any action or proceeding, either in its own
name or in the name of Trustor or otherwise, which Beneficiary may deem
necessary or appropriate to protect and preserve the right, title and interest
of Beneficiary in and to such rents, income and other sums and the security
intended to be afforded hereby; provided that Beneficiary shall not exercise
such rights unless an Event of Default has occurred and is continuing.

         2.13 Covenant to Pay. If an Event of Default has occurred and is
continuing and such Event of Default could reasonably be expected to materially
and adversely affect Beneficiary's interest hereunder in the Mortgaged Property
or result in personal injury, then Beneficiary, among its other rights and
remedies, shall have the right, but not the obligation, to pay, observe or
perform the same, in whole or in part, and with such modifications as
Beneficiary reasonably shall deem advisable. To the extent provided in the
Financing Documents, all sums, including reasonable attorneys' fees, so expended
or incurred by Beneficiary by reason of the default of Trustor, or by reason of
the bankruptcy or insolvency of Trustor, as well as, without limitation,

                                       11


                                                                     Exhibit E-2
                                                                         Page 12

sums expended or incurred to sustain the lien or estate of this Deed of Trust or
its priority, or to protect or enforce any rights of Beneficiary hereunder, or
to recover any of the Secured Obligations, or to complete construction of the
Project for which the Financing Documents are intended as financing, or for
repairs, maintenance, alterations, replacements or improvements thereto or for
the protection thereof, or for real estate taxes or other governmental
assessments or charges against any part of the Mortgaged Property, or premiums
for insurance of the Mortgaged Property, shall be entitled to the benefit of the
lien on the Mortgaged Property as of the date of the recording of this Deed of
Trust, shall be deemed to be added to and be part of the Secured Obligations
secured hereby, and shall be repaid by Trustor as provided in the Financing
Documents.











                                       12


                                                                     Exhibit E-2
                                                                         Page 13

         2.14 Security Agreement.

         2.14.1 This Deed of Trust shall also be a security agreement between
Trustor and Beneficiary covering the Mortgaged Property constituting personal
property or fixtures (hereinafter collectively called "UCC Collateral") governed
by the California Uniform Commercial Code ("UCC") as the same may be more
specifically set forth in any financing statement delivered in connection with
this Deed of Trust, and as further security for the payment and performance of
the Secured Obligations, Trustor hereby grants to Beneficiary a security
interest in such portion of the Mortgaged Property to the full extent that the
Mortgaged Property may be subject to the UCC. In addition to Beneficiary's other
rights hereunder, Beneficiary shall have all rights of a secured party under the
UCC. Trustor shall execute and deliver to Beneficiary all financing statements
and such further assurances that may be reasonably required by Beneficiary to
establish, create, perfect (to the extent the same can be achieved by the filing
of a financing statement) and maintain the validity and priority of
Beneficiary's security interests, and Trustor shall bear all reasonable costs
thereof, including all UCC searches. Except as otherwise provided in the
Financing Documents, if Beneficiary should dispose of any of the Mortgaged
Property comprising the UCC Collateral pursuant to the UCC, ten (10) days' prior
written notice by Beneficiary to Trustor shall be deemed to be reasonable
notice; provided, however, Beneficiary may dispose of such property in
accordance with the foreclosure procedures of this Deed of Trust in lieu of
proceeding under the UCC. Beneficiary may from time to time execute and deliver
at Trustor's expense, all continuation statements, termination statements,
amendments, partial releases, or other instruments relating to all financing
statements by and between Trustor and Beneficiary. Except as otherwise provided
in the Financing Documents, if an Event of Default shall occur and is
continuing, (a) Beneficiary, in addition to any other rights and remedies which
it may have, may exercise immediately and without demand to the extent permitted
by law, any and all rights and remedies granted to a secured party under the UCC
including the right to take possession of the UCC Collateral or any part
thereof, and to take such other measures as Beneficiary may deem necessary for
the care, protection and preservation of such collateral and (b) upon request or
demand of Beneficiary, Trustor shall at its expense, assemble the UCC Collateral
and make it available to Beneficiary at a convenient place acceptable to
Beneficiary. Trustor shall pay to Beneficiary on demand, any and all expenses,
including reasonable attorneys' fees and disbursements incurred or paid by
Beneficiary in protecting the interest in the UCC Collateral and in enforcing
the rights hereunder with respect to such UCC Collateral.

         2.14.2 Trustor and the Beneficiary agree, to the extent permitted by
law, that: (i) this Deed of Trust upon recording or registration in the real
estate records of the proper office shall constitute a financing statement filed
as a "fixture filing" within the meaning of Sections 9334 and 9502 of the UCC;
(ii) all or a part of the Mortgaged Property are or are to become fixtures; and
(iii) the addresses of Trustor and Beneficiary are as set forth in the preamble
of this Deed of Trust.

                                       13


                                                                     Exhibit E-2
                                                                         Page 14

                                    ARTICLE 3

                                    REMEDIES

         3.1 Acceleration of Maturity. If an Event of Default occurs and is
continuing, Beneficiary may, at the election of the Required Holders (except
that such acceleration shall be automatic if the Event of Default is occuring
under Section 5.01(c) of the Indenture), declare the Secured Obligations to be
due and payable immediately, and upon such declaration such principal and
interest and other sums shall immediately become due and payable without demand,
presentment, notice or other requirements of any kind (all of which Trustor
waives).

         3.2 Due-On Clause. If (a) the Mortgaged Property is assigned in
violation of Section 4.06 of the Indenture, or (b) there is a change of control
in violation of Section 5.01(k) of the Indenture, then Beneficiary may, at the
election of the Required Holders, declare the Secured Obligations to be due and
payable immediately, and upon such declaration such principal and interest and
other sums shall immediately become due and payable without demand, presentment,
notice or other requirements of any kind (all of which Trustor waives).
Beneficiary's consent to any assignment or change of control shall not be deemed
to be a waiver of Beneficiary's right to require its consent to any future
assignment or change of control in accordance with the terms of the Indenture.

         3.3 Protective Advances. If an Event of Default shall have occurred and
is continuing, then without thereby limiting Beneficiary's other rights or
remedies, waiving or releasing any of Trustor's obligations, or imposing any
obligation on Beneficiary, Beneficiary may, at the election of the Required
Holders, either advance any amount owing or perform any or all actions that
Beneficiary considers necessary or appropriate to cure such default. No sums
advanced or performance rendered by Beneficiary shall cure, or be deemed a
waiver of any Event of Default.

         3.4 Institution of Equity Proceedings. If an Event of Default occurs
and is continuing, Beneficiary may, at the election of the Required Holders,
institute an action, suit or proceeding in equity for specific performance of
this Deed of Trust, the Indenture or any other Financing Document, all of which
shall be specifically enforceable by injunction or other equitable remedy.

         3.5 Beneficiary's Power of Enforcement.

         3.5.1 If an Event of Default occurs and is continuing, Beneficiary, at
the election of the Required Holders, shall be entitled to prepare and record on
its own behalf, or to deliver to Trustee for recording, if appropriate, written
declaration of default and demand for sale and written notice of breach and
election to sell (or other statutory notice) to cause the Mortgaged Property to
be sold either by judicial action or power of sale in accordance with the laws
of the State of California to satisfy the obligations hereof, and in the case of
delivery to Trustee, Trustee shall cause said notice to be filed for record.

         3.5.2 After the lapse of such time as may then be required by law
following the recordation of said notice of breach and election to sell, and
notice of sale having been given as then required by law, Trustee without demand
on Trustor, may sell the Mortgaged Property or any portion thereof at the time
and place fixed by it in said notice, either as a whole or in separate parcels,
and in such order as it may determine, at public auction to the highest bidder,
of cash in lawful money of the United States payable at the time of sale.
Trustee may, for any

                                       14


                                                                     Exhibit E-2
                                                                         Page 15

cause it deems expedient, postpone the sale of all or any portion of said
property until it shall be completed and, in every case, notice of postponement
shall be given by public announcement thereof at the time and place last
appointed for the sale and from time to time thereafter Trustee may postpone
such sale by public announcement at the time fixed by the preceding
postponement; provided that Trustee shall give Trustor notice of such
postponement to the extent required by law. Trustee shall execute and deliver to
the purchaser its deed, bill of sale, or other instrument conveying said
property so sold, but without any covenant or warranty, express or implied. The
recitals in such instrument of conveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Beneficiary,
may bid at the sale.

         3.5.3 If any Event of Default occurs and is continuing, Beneficiary
may, at the election of the Required Holders, to the extent permitted by law,
either with or without entry or taking possession of the Mortgaged Property, and
without regard to whether or not the indebtedness and other sums secured hereby
shall be due and without prejudice to the right of Beneficiary thereafter to
bring an action or proceeding to foreclose or any other action for any other
Event of Default existing at the time such earlier action was commenced, proceed
by any appropriate action or proceeding: (1) to enforce payment of the Secured
Obligations, to the extent permitted by law, or the performance of any term
hereof or any other right; (2) to foreclose this Deed of Trust in any manner
provided by law for the foreclosure of mortgages or deeds of trust on real
property and to sell, as an entirety or in separate lots or parcels, the
Mortgaged Property or any portion thereof pursuant to the laws of the State of
California or under the judgment or decree of a court or courts of competent
jurisdiction, and Beneficiary shall be entitled to recover in any such
proceeding all costs and expenses incident thereto, including reasonable
attorneys' fees in such amount as shall be awarded by the court; (3) to exercise
any or all of the rights and remedies available to it under the Financing
Documents; and (4) to pursue any other remedy available to it. Beneficiary shall
take action either by such proceedings or by the exercise of its powers with
respect to entry or taking possession, or both, as Beneficiary may determine.

         3.5.4 The remedies described in this Section 3.5 may be exercised with
respect to all or any portion of the UCC Collateral, either simultaneously with
the sale of any real property encumbered hereby or independent thereof.
Beneficiary shall at any time be permitted to proceed with respect to all or any
portion of the UCC Collateral in any manner permitted by the UCC. Trustor agrees
that Beneficiary's inclusion of all or any portion of the UCC Collateral in a
sale or other remedy exercised with respect to the real property encumbered
hereby, as permitted by the UCC, is a commercially reasonable disposition of
such property.

         3.5.5 Where the Mortgaged Property consists of real property and
personal property, any reinstatement of the Secured Obligations, following the
occurrence of an Event of Default and an election by the Beneficiary, at the
direction of the Required Holders, to accelerate the maturity of the Secured
Obligations, which is made by Trustor or any other person or entity permitted to
exercise the right of reinstatement under Section 2924c of the California Civil
Code or any successor statute, shall, in accordance with the terms of UCC
Section 9604, not prohibit the Beneficiary from conducting a sale or other
disposition of any personal property or from otherwise proceeding against or
continuing to proceed against any personal property in any manner permitted by
the UCC; nor shall any such reinstatement invalidate, rescind or otherwise
affect any sale, disposition or other proceeding held, conducted or instituted
with respect to any

                                       15

                                                                     Exhibit E-2
                                                                         Page 16

personal property prior to such reinstatement. Any sums paid to Beneficiary, in
effecting any reinstatement pursuant to Section 2924c of the California Civil
Code shall be applied to the Secured Obligations and to Beneficiary's and
Trustee's reasonable costs and expenses in the manner required by Section 2924c.

         3.6 Beneficiary's Right to Enter and Take Possession, Operate and Apply
Income.

         3.6.1 If an Event of Default occurs and is continuing, Trustor, upon
demand of Beneficiary, at the election of the Required Holders, shall forthwith
surrender to Beneficiary the actual possession and, if and to the extent
permitted by law, Beneficiary itself, or by such officers or agents as it may
appoint, may enter and take possession of all of the Mortgaged Property,
including the Tangible Collateral, without liability for trespass, damages or
otherwise, and may exclude Trustor and its agents and employees wholly therefrom
and may have joint access with Trustor to the books, papers and accounts of
Trustor.

         3.6.2 If an Event of Default has occurred and is continuing and Trustor
shall for any reason fail to surrender or deliver the Mortgaged Property or any
part thereof after Beneficiary's demand, Beneficiary may obtain a judgment or
decree conferring on Beneficiary or Trustee the right to immediate possession or
requiring Trustor to deliver immediate possession of all or part of such
property to Beneficiary or Trustee and Trustor hereby specifically consents to
the entry of such judgment or decree. Trustor shall pay to Beneficiary or
Trustee, upon demand, all costs and expenses of obtaining such judgment or
decree and reasonable compensation to Beneficiary or Trustee, their attorneys
and agents, and all such costs, expenses and compensation shall, until paid, be
secured by the lien of this Deed of Trust.

         3.6.3 Upon every such entering upon or taking of possession,
Beneficiary or Trustee may hold, store, use, operate, manage and control the
Mortgaged Property and conduct the business thereof, and, from time to time in
its sole and absolute discretion and without being under any duty to so act:

         3.6.3.1 make all necessary and proper maintenance, repairs, renewals
and replacements thereto and thereon, and all necessary additions, betterments
and improvements thereto and thereon and purchase or otherwise acquire fixtures,
personalty and other property in connection therewith;

         3.6.3.2 insure or keep the Mortgaged Property insured;

         3.6.3.3 manage and operate the Mortgaged Property and exercise all the
rights and powers of Trustor in their name or otherwise with respect to the
same;

         3.6.3.4 enter into agreements with others to exercise the powers herein
granted Beneficiary or Trustee, all as Beneficiary or Trustee from time to time
may determine; and shall apply the monies so received by Beneficiary or Trustee
in such priority as provided by the Financing Documents to (i) the payment of
interest and principal due and payable to the Beneficiary, (ii) the deposits for
taxes and assessments and insurance premiums due, (iii) the cost of insurance,
taxes, assessments and other proper charges upon the Mortgaged Property or any
part thereof, (iv) the compensation, expenses and disbursements of the agents,
attorneys and

                                       16

                                                                     Exhibit E-2
                                                                         Page 17

other representatives of Beneficiary or Trustee as allowed under this Deed of
Trust, and (v) any other charges or costs required to be paid by Trustor under
the terms of the Financing Documents; or

         3.6.3.5 rent or sublet the Mortgaged Property or any portion thereof
for any purpose permitted by this Deed of Trust.

Beneficiary or Trustee shall surrender possession of the Mortgaged Property to
Trustor (x) as may be required by law or court order, or (y) when all amounts
under any of the terms of the Financing Documents, including this Deed of Trust,
shall have been paid current and all Events of Default have been cured or
waived. The same right of taking possession, however, shall exist if any
subsequent Event of Default shall occur and be continuing.

         3.7 Separate Sales. To the extent permitted by Applicable Law, the
Mortgaged Property may be sold in one or more parcels and in such manner and
order as Trustee, in his sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.

         3.8 Waiver of Appraisement, Moratorium, Valuation, Stay, Extension and
Redemption Laws. Trustor agrees to the full extent permitted by law that if an
Event of Default occurs and is continuing, neither Trustor nor anyone claiming
through or under it shall or will set up, claim or seek to take advantage of any
appraisement, moratorium, valuation, stay, extension or redemption laws now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Deed of Trust or the absolute sale of the Mortgaged Property or any
portion thereof or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereof, and Trustor for itself
and all who may at any time claim through or under it, hereby waives, to the
full extent that it may lawfully so do, the benefit of all such laws, and any
and all right to have the assets comprising the Mortgaged Property marshalled
upon any foreclosure of the lien hereof and agrees that Trustee or any court
having jurisdiction to foreclose such lien may sell the Mortgaged Property in
part or as an entirety.

         3.9 Receiver. If an Event of Default occurs and is continuing,
Beneficiary, to the extent permitted by law, and without regard to the value,
adequacy or occupancy of the security for the indebtedness and other sums
secured hereby, shall be entitled as a matter of right if it so elects to the
appointment of a receiver to enter upon and take possession of the Mortgaged
Property and to collect all earnings, revenues and receipts and apply the same
as the court may direct, and such receiver may be appointed by any court of
competent jurisdiction upon application by Beneficiary. To the extent permitted
by Applicable Law, Beneficiary may have a receiver appointed without notice to
Trustor or any third party, and Beneficiary may waive any requirement that the
receiver post a bond. To the extent permitted by Applicable Law, Beneficiary
shall have the power to designate and select the Person who shall serve as the
receiver and to negotiate all terms and conditions under which such receiver
shall serve. To the extent permitted by Applicable Law, any receiver appointed
on Beneficiary's behalf may be an Affiliate of Beneficiary. The reasonable
expenses, including receiver's fees, reasonable attorneys' fees, costs and
agents' compensation, incurred pursuant to the powers herein contained shall be
secured by this Deed of Trust. The right to enter and take possession of and to
manage and operate the Mortgaged Property and to collect all earnings, revenues
and receipts, whether by a receiver or otherwise, shall be cumulative to any
other right or remedy available to

                                       17

                                                                     Exhibit E-2
                                                                         Page 18

Beneficiary under this Deed of Trust, the other Financing Documents or otherwise
available to Beneficiary and may be exercised concurrently therewith or
independently thereof, but such rights shall be exercised in a manner which is
otherwise in accordance with and consistent with the Financing Documents.
Beneficiary shall be liable to account only for such earnings, revenues and
receipts (including security deposits) actually received by Beneficiary, whether
received pursuant to this section or any other provision hereof. Notwithstanding
the appointment of any receiver or other custodian, Beneficiary shall be
entitled as pledgee to the possession and control of any cash, deposits, or
instruments at the time held by, or payable or deliverable under the terms of
this Deed of Trust to, Beneficiary.

         3.10 Suits to Protect the Mortgaged Property. Beneficiary shall have
the power and authority to institute and maintain any suits and proceedings as
Beneficiary, in its sole and absolute discretion, may deem advisable (a) to
prevent any impairment of the Mortgaged Property by any acts which may be
unlawful or in violation of this Deed of Trust, (b) to preserve or protect its
interest in the Mortgaged Property, or (c) to restrain the enforcement of or
compliance with any legislation, Applicable Law or Governmental Approval that
may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order might impair the security
hereunder or be prejudicial to Beneficiary's interest.

         3.11 Proofs of Claim. In the case of any receivership, insolvency,
Bankruptcy Event, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Trustor, any Affiliate or any guarantor, co-maker
or endorser of any of Trustor's obligations, its creditors or its property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim or other documents as it may deem be necessary or advisable in
order to have its claims allowed in such proceedings for the entire amount due
and payable by Trustor under the Financing Documents, at the date of the
institution of such proceedings, and for any additional amounts which may become
due and payable by Trustor after such date.

         3.12 Trustor to Pay Amounts Secured Hereby on Any Default in Payment;
Application of Monies by Beneficiary.

         3.12.1 In case of a foreclosure sale of all or any part of the
Mortgaged Property and of the application of the proceeds of sale to the payment
of the sums secured hereby, to the extent permitted by law, Beneficiary shall be
entitled to enforce payment from Trustor of any additional amounts then
remaining due and unpaid and to recover judgment against Trustor for any portion
thereof remaining unpaid, with interest at the interest rate on the Notes. The
sale of a part of the Subject Property shall not exhaust the power of sale, but
sales may be made from time to time until the Secured Obligations are paid and
performed in full.

         3.12.2 Trustor hereby agrees to the extent permitted by law, that no
recovery of any such judgment by Beneficiary or other action by Beneficiary and
no attachment or levy of any execution upon any of the Mortgaged Property or any
other property shall in any way affect the Lien and security interest of this
Deed of Trust upon the Mortgaged Property or any part thereof or any Lien,
rights, powers or remedies of Beneficiary hereunder, but such Lien, rights,
powers and remedies shall continue unimpaired as before.

         3.12.3 The provisions of this Section 3.12 shall not be deemed to limit
or otherwise modify the provisions of any guaranty of the Secured Obligations.

                                       18

                                                                     Exhibit E-2
                                                                         Page 19

         3.13 Delay or Omission; No Waiver. No delay or omission of Beneficiary
to exercise any right, power or remedy upon any Event of Default shall exhaust
or impair any such right, power or remedy or shall be construed to waive any
such Event of Default or to constitute acquiescence therein. Every right, power
and remedy given to Beneficiary whether contained herein or in the other
Financing Documents or otherwise available to Beneficiary may be exercised from
time to time and as often as may be deemed expedient by Beneficiary.

         3.14 No Waiver of One Default to Affect Another. No waiver of any Event
of Default hereunder shall extend to or affect any subsequent or any other Event
of Default then existing, or impair any rights, powers or remedies consequent
thereon. If Beneficiary (a) grants forbearance or an extension of time for the
payment of any sums secured hereby; (b) takes other or additional security for
the payment thereof; (c) waives or does not exercise any right granted in this
Deed of Trust or any other Financing Document; (d) releases any part of the
Mortgaged Property from the lien or security interest of this Deed of Trust or
any other instrument securing the Secured Obligations; (e) consents to the
filing of any map, plat or replat of the Real Property or any part thereof; (f)
consents to the granting of any easement on the Real Property; or (g) makes or
consents to any agreement changing the terms of this Deed of Trust or any other
Financing Document subordinating the lien or any charge hereof, no such act or
omission shall release, discharge, modify, change or affect the liability under
this Deed of Trust or any other Financing Document or otherwise of Trustor, or
any subsequent purchaser of the Mortgaged Property or any part thereof or any
maker, co-signer, surety or guarantor with respect to any other matters not
addressed by such act or omission. No such act or omission shall preclude
Beneficiary from exercising any right, power or privilege herein granted or
intended to be granted in case of any Event of Default then existing or of any
subsequent Event of Default, nor, except as otherwise expressly provided in an
instrument or instruments executed by Beneficiary, shall the lien or security
interest of this Deed of Trust be altered thereby, except to the extent
expressly provided in such acts or omissions. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Mortgaged
Property, Beneficiary, without notice to any person, firm or corporation, is
hereby authorized and empowered to deal with any such vendee or transferee with
reference to the Mortgaged Property or the indebtedness secured hereby, or with
reference to any of the terms or conditions hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any of the liabilities or undertakings hereunder, or
waiving its right to declare such sale or transfer an Event of Default as
provided herein. Notwithstanding anything to the contrary contained in this Deed
of Trust or any other Financing Document, (i) in the case of any non-monetary
Event of Default, Beneficiary may continue to accept payments due hereunder
without thereby waiving the existence of such or any other Event of Default and
(ii) in the case of any monetary Event of Default, Beneficiary may accept
partial payments of any sums due hereunder without thereby waiving the existence
of such Event of Default if the partial payment is not sufficient to completely
cure such Event of Default.

         3.15 Discontinuance of Proceedings; Position of Parties Restored. If
Beneficiary shall have proceeded to enforce any right or remedy under this Deed
of Trust by foreclosure, entry of judgment or otherwise and such proceedings
shall have been discontinued or abandoned for any reason, or such proceedings
shall have resulted in a final determination adverse to Beneficiary, then and in
every such case Trustor and Beneficiary shall be restored to their former
positions

                                       19

                                                                     Exhibit E-2
                                                                         Page 20

and rights hereunder, and all rights, powers and remedies of Beneficiary shall
continue as if no such proceedings had occurred or had been taken.

         3.16 Remedies Cumulative. Subject to the provisions of Section 5.14
hereof, no right, power or remedy, including remedies with respect to any
security for the Secured Obligations, conferred upon or reserved to Beneficiary
by this Deed of Trust or any other Financing Document is exclusive of any other
right, power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder or under any other Financing Document, now or hereafter
existing at law, in equity or by statute, and Beneficiary shall be entitled to
resort to such rights, powers, remedies or security as Beneficiary shall in its
sole and absolute discretion deem advisable.

         3.17 Interest After Event of Default. If an Event of Default shall have
occurred and is continuing, all sums outstanding and unpaid under the Financing
Documents, including this Deed of Trust, shall, at Beneficiary's option, bear
interest at the interest rate on the Note until such Event of Default has been
cured. Trustor's obligation to pay such interest shall be secured by this Deed
of Trust.

         3.18 Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Trustee and Beneficiary as part of the
foreclosure costs. In the event of foreclosure of the lien hereof, there shall
be allowed and included as additional indebtedness all reasonable expenditures
and expenses which may be paid or incurred by or on behalf of Beneficiary for
attorneys' fees, appraisers' fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be estimated as
to items to be expended after foreclosure sale or entry of the decree) of
procuring all such abstracts of title, title searches and examinations, title
insurance policies and guarantees, and similar data and assurances with respect
to title as Beneficiary may deem reasonably necessary either to prosecute such
suit or to evidence to a bidder at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Mortgaged Property
or any portion thereof. All expenditures and expenses of the nature in this
section mentioned, and such expenses and fees as may be incurred in the
protection of the Mortgaged Property and the maintenance of the lien and
security interest of this Deed of Trust, including the reasonable fees of any
attorney employed by Beneficiary in any litigation or proceeding affecting this
Deed of Trust or any other Financing Document, the Mortgaged Property or any
portion thereof, including civil, probate, appellate and bankruptcy proceedings,
or in preparation for the commencement or defense of any proceeding or
threatened suit or proceeding, shall be immediately due and payable by Trustor,
with interest thereon at the interest rate on the Note, and shall be secured by
this Deed of Trust. Trustee waives its right to any statutory fee in connection
with any judicial or nonjudicial foreclosure of the lien hereof and agrees to
accept a reasonable fee for such services.

         3.19 Deficiency Judgments. Subject to Section 6.07 of the Indenture, if
after foreclosure of this Deed of Trust or Trustee's sale hereunder, there shall
remain any deficiency with respect to any amounts payable under the Financing
Documents, including hereunder, or any amounts secured hereby, and Beneficiary
shall institute any proceedings to recover such deficiency or deficiencies, all
such amounts shall continue to bear interest at the interest rate on the Notes.
Subject to Section 6.07 of the Indenture, Trustor waives any defense to
Beneficiary's recovery against Trustor of any deficiency after any foreclosure
sale of the Mortgaged Property. Subject

                                       20

                                                                     Exhibit E-2
                                                                         Page 21

to Section 6.07 of the Indenture, to the extent permitted by law, Trustor
expressly waives any defense or benefits that may be derived from any statute
granting Trustor any defense to any such recovery by Beneficiary. Subject to
Section 6.07 of the Indenture, in addition, Beneficiary and Trustee shall be
entitled to recovery of all of their reasonable costs and expenditures
(including any court imposed costs) in connection with such proceedings,
including their reasonable attorneys' fees, appraisal fees and the other costs,
fees and expenditures referred to in Section 3.18 above. This provision shall
survive any foreclosure or sale of the Mortgaged Property, any portion thereof
or the extinguishment of the lien hereof.

         3.20 WAIVER OF JURY TRIAL. BENEFICIARY AND TRUSTOR EACH WAIVE ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
DEED OF TRUST, THE INDENTURE OR ANY OTHER FINANCING DOCUMENT. ANY SUCH DISPUTES
SHALL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

         3.21 Exculpation of Beneficiary. The acceptance by Beneficiary of the
assignment contained herein with all of the rights, powers, privileges and
authority created hereby shall not, prior to entry upon and taking possession of
the Mortgaged Property by Beneficiary, be deemed or construed to make
Beneficiary a "mortgagee in possession"; nor thereafter or at any time or in any
event obligate Beneficiary to appear in or defend any action or proceeding
relating to the Mortgaged Property, nor shall Beneficiary, prior to such entry
and taking, be liable in any way for any injury or damage to person or property
sustained by any Person in or about the Mortgaged Property.


                                   ARTICLE 4

                     RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
                      OTHER PROVISIONS RELATING TO TRUSTEE

Notwithstanding anything to the contrary in this Deed of Trust, Trustor and
Beneficiary agree as follows:

         4.1 Exercise of Remedies by Trustee. To the extent that this Deed of
Trust and applicable law authorizes or empowers Beneficiary to exercise any
remedies set forth in Article 3 hereof or otherwise, or perform any acts in
connection therewith, Trustee (but not to the exclusion of Beneficiary unless so
required under the law of the State of California) shall have the power to
exercise any or all such remedies, and to perform any acts provided for in this
Deed of Trust in connection therewith, all for the benefit of Beneficiary and on
Beneficiary's behalf in accordance with applicable law of the State of
California. In connection therewith, Trustee: (a) shall not exercise, or waive
the exercise of, any Beneficiary's remedies (other than any rights of Trustee to
any indemnity or reimbursement), except at Beneficiary's request, and (b) shall
exercise, or waive the exercise of, any or all of Beneficiary's remedies at
Beneficiary's request, and in accordance with Beneficiary's directions as to the
manner of such exercise or waiver. Trustee may, however, decline to follow
Beneficiary's request or direction if Trustee shall be

                                       21

                                                                     Exhibit E-2
                                                                         Page 22

advised by counsel that the action or proceeding, or manner thereof, so directed
may not lawfully be taken or waived.

         4.2 Rights and Privileges of Trustee. To the extent that this Deed of
Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary for any
expenditures Beneficiary may incur, Trustee shall be entitled to the same
indemnity and the same rights to reimbursement of expenses as Beneficiary,
subject to such limitations and conditions as would apply in the case of
Beneficiary. To the extent that this Deed of Trust negates or limits
Beneficiary's liability as to any matter, Trustee shall be entitled to the same
negation or limitation of liability. To the extent that Trustor, pursuant to
this Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any
purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be
entitled to act on Trustor's behalf without joinder or confirmation by the
other.

         4.3 Resignation or Replacement of Trustee. Trustee may resign by an
instrument in writing addressed to Beneficiary, and Trustee may be removed at
any time with or without cause (i.e., in Beneficiary's sole and absolute
discretion) by an instrument in writing executed by Beneficiary. In case of the
death, resignation, removal or disqualification of Trustee or if for any reason
Beneficiary shall deem it desirable to appoint a substitute, successor or
replacement Trustee to act instead of Trustee originally named (or in place of
any substitute, successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a successor,
substitute or replacement Trustee, and, if preferred, several substitute
trustees in succession, without any formality other than appointment and
designation in writing executed by Beneficiary, which instrument shall be
recorded if required by the law of the State of California. The law of the State
of California shall govern the qualifications of any Trustee. The authority
conferred upon Trustee by this Deed of Trust shall automatically extend to any
and all other successor, substitute and replacement Trustee(s) successively
until the Secured Obligations have been paid in full or the Mortgaged Property
has been sold hereunder or released in accordance with the provisions of the
Financing Documents. Beneficiary's written appointment and designation of any
Trustee shall be full evidence of Beneficiary's right and authority to make the
same and of all facts therein recited. No confirmation, authorization, approval
or other action by Trustor shall be required in connection with any resignation
or other replacement of Trustee.

         4.4 Authority of Beneficiary. If Beneficiary is a banking corporation,
state banking corporation or a national banking association and the instrument
of appointment of any successor or replacement Trustee is executed on
Beneficiary's behalf by an officer of such corporation, state banking
corporation or national banking association, then such appointment may be
executed by any authorized officer or agent of Beneficiary and such appointment
shall be conclusively presumed to be executed with authority and shall be valid
and sufficient without proof of any action by the board of directors or any
superior officer of Beneficiary.

         4.5 Effect of Appointment of Successor Trustee. Upon the appointment
and designation of any successor, substitute or replacement Trustee, Trustee's
entire estate and title in the Mortgaged Property shall vest in the designated
successor, substitute or replacement Trustee. Such successor, substitute or
replacement Trustee shall thereupon succeed to and shall hold, possess and
execute all the rights, powers, privileges, immunities and duties herein
conferred upon Trustee. All references herein to Trustee shall be deemed to
refer to Trustee (including any

                                       22

                                                                     Exhibit E-2
                                                                         Page 23

successor or substitute appointed and designated as herein provided) from time
to time acting hereunder.

         4.6 Confirmation of Transfer and Succession. Any new Trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed or
conveyance, become vested with all the estates, properties, rights, powers and
trusts of his predecessor in the rights hereunder with like effect as if
originally named as Trustee herein; but nevertheless, upon the written request
of Beneficiary or of any successor, substitute or replacement Trustee, any
former Trustee ceasing to act shall execute and deliver an instrument
transferring to such successor, substitute or replacement Trustee all of the
right, title, estate and interest in the Mortgaged Property of Trustee so
ceasing to act, together with all the rights, powers, privileges, immunities and
duties herein conferred upon Trustee, and shall duly assign, transfer and
deliver all properties and monies held by said Trustee hereunder to said
successor, substitute or replacement Trustee.

         4.7 Exculpation. Trustee shall not be liable for any error of judgment
or act done by Trustee in good faith, or otherwise be responsible or accountable
under any circumstances whatsoever, except for Trustee's gross negligence,
willful misconduct or knowing violation of law. Trustee shall not be personally
liable in case of entry by it, or anyone entering by virtue of the powers herein
granted it, upon the Mortgaged Property for debts contracted or liability or
damages incurred in the management or operation of the Mortgaged Property.
Trustee shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by it
hereunder, believed by it in good faith to be genuine. All monies received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other monies (except to the extent required by law). Trustee
shall be under no liability for interest on any monies received by it hereunder.

         4.8 Endorsement and Execution of Documents. Upon Beneficiary's written
request, Trustee shall, without liability or notice to Trustor, execute, consent
to, or join in any instrument or agreement in connection with or necessary to
effectuate the purposes of the Financing Documents. Trustor hereby irrevocably
designates Trustee as its attorney in fact to execute, acknowledge and deliver,
on Trustor's behalf and in Trustor's name, all instruments or agreements
necessary to implement any provision(s) of this Deed of Trust or to further
perfect the lien created by this Deed of Trust on the Mortgaged Property. This
power of attorney shall be deemed to be coupled with an interest and shall
survive any disability of Trustor.

         4.9 Multiple Trustees. If Beneficiary appoints multiple trustees, then
any Trustee, individually, may exercise all powers granted to Trustee under this
instrument, without the need for action by any other Trustee(s).

         4.10 No Required Action. Trustee shall not be required to take any
action under this Deed of Trust or to institute, appear in or defend any action,
suit or other proceeding in connection therewith where in its opinion such
action will be likely to involve it in expense or liability, unless requested so
to do by a written instrument signed by Beneficiary and, if Trustee so requests,
unless Trustee is tendered security and indemnity satisfactory to it against any
and all costs, expense and liabilities arising therefrom. Trustee shall not be
responsible for the execution, acknowledgment or validity of the Financing
Documents, or for the proper authorization thereof, or for the sufficiency of
the lien and security interest purported to be

                                       23

                                                                     Exhibit E-2
                                                                         Page 24

created hereby, and makes no representation in respect thereof or in respect of
the rights, remedies and recourses of Beneficiary.

         4.11 Terms of Trustee's Acceptance. Trustee accepts the trust created
by this Deed of Trust upon the following terms and conditions:

         (a) Trustee may exercise any of its powers through appointment of
attorney(s) in fact or agents.

         (b) Trustee shall be under no obligation to take any action upon any
Event of Default unless furnished security or indemnity, in form satisfactory to
Trustee, against costs, expenses, and liabilities that Trustee may incur.

         (c) Trustor shall reimburse Trustee, as part of the Secured Obligations
secured hereunder, for all reasonable disbursements and expenses (including
reasonable legal fees and expenses) incurred by reason of or arising from an
Event of Default and as provided for in this Deed of Trust, including any of the
foregoing incurred in Trustee's administering and executing the trust created by
this Deed of Trust and performing Trustee's duties and exercising Trustee's
powers under this Deed of Trust.

                                    ARTICLE 5

                                     GENERAL

         5.1 Discharge. When all of the Secured Obligations shall have been
indefeasibly paid in full in cash, then this Deed of Trust and the lien and
security interest created hereby shall be of no further force and effect,
Trustor shall be released from the covenants, agreements and obligations of
Trustor contained in this Deed of Trust and all right, title and interest in and
to the Mortgaged Property shall revert to Trustor. Beneficiary and Trustee, at
the request and the expense of Trustor, shall promptly execute a deed of
reconveyance and such other documents as may be reasonably requested by Trustor
to evidence the discharge and satisfaction of this Deed of Trust and the release
of Trustor from its obligations hereunder.

         5.2 No Waiver. The exercise of the privileges granted in this Deed of
Trust or in any other agreement to perform Trustor's obligations under the
agreements which constitute the Mortgaged Property shall in no event be
considered or constitute a waiver of any right which Beneficiary may have at any
time, after an Event of Default shall have occurred and be continuing, to
declare the Secured Obligations to be immediately due and payable. No delay or
omission to exercise any right, remedy or power accruing upon any default shall
impair any such right, remedy or power or shall be construed to be a waiver of
any such default or acquiescence therein; and every such right, remedy and power
may be exercised from time to time and as often as may be deemed expedient.

         5.3 Extension, Rearrangement or Renewal of Secured Obligations. It is
expressly agreed that any of the Secured Obligations at any time secured hereby
may be from time to time extended for any period, or with the consent of Trustor
rearranged or renewed, and that any part of the security herein described, or
any other security for the Secured Obligations, may be waived or released,
without altering, varying or diminishing the force, effect or lien or security
interest of this Deed of Trust; and the lien and security interest granted by
this Deed of Trust

                                       24

                                                                     Exhibit E-2
                                                                         Page 25

shall continue as a prior lien and security interest on all of the Mortgaged
Property not expressly so released, until the Secured Obligations are fully paid
and this Deed of Trust is terminated in accordance with the provisions hereof;
and no other security now existing or hereafter taken to secure the payment of
the Secured Obligations or any part thereof or the performance of any obligation
or liability of Trustor whatever shall in any manner impair or affect the
security given by this Deed of Trust; and all security for the payment of the
Secured Obligations or any part thereof and the performance of any obligation or
liability shall be taken, considered and held as cumulative.

         5.4 Forcible Detainer. Trustor agrees for itself and all Persons
claiming by, through or under it, that subsequent to foreclosure hereunder in
accordance with this Deed of Trust and applicable law if Trustor shall hold
possession of the Mortgaged Property or any part thereof, Trustor or the Persons
so holding possession shall be guilty of trespass; and any such Person
(including Trustor) failing or refusing to surrender possession upon demand
shall be guilty of forcible detainer and shall be liable to Beneficiary or any
purchaser in foreclosure, as applicable, for reasonable rental on said premises,
and shall be subject to eviction and removal in accordance with law.

         5.5 Waiver of Stay or Extension. To the extent permitted to be waived
by law, Trustor shall not at any time insist upon or plead or in any manner
whatever claim the benefit or advantage of any stay, extension or moratorium law
now or at any time hereafter in force in any locality where the Mortgaged
Property or any part thereof may or shall be situated, nor shall Trustor claim
any benefit or advantage from any law now or hereafter in force providing for
the valuation or appraisement of the Mortgaged Property or any part thereof
prior to any sale thereof to be made pursuant to any provision of this Deed of
Trust or to a decree of any court of competent jurisdiction, nor after any such
sale shall Trustor claim or exercise any right conferred by any law now or at
any time hereafter in force to redeem the Mortgaged Property so sold or any part
thereof; and Trustor hereby expressly waives all benefit or advantage of any
such law or laws and the appraisement of the Mortgaged Property or any part
thereof, and covenants that Trustor shall not hinder or delay the execution of
any power herein granted and delegated to Beneficiary but that Trustor shall
permit the execution of every such power as though no such law had been made.

         5.6 Notices. Except where certified or registered mail notice is
required by applicable law, any notice to Trustor or Beneficiary required or
permitted hereunder shall be deemed to be given when given in the manner
prescribed in Section 10.02 of the Indenture. All notices to Trustee required or
permitted hereunder shall be deemed given when given in the manner prescribed in
Section 10.02 of the Indenture to the following address:

                      First American Title Insurance Company
                      633 Third Avenue, 16th Floor
                      New York, New York 10017
                      Attn: Phil Salomon
                      Facsimile No.: (212) 331-5159

         5.7 Severability. All rights, powers and remedies provided herein may
be exercised only to the extent that the exercise thereof does not violate any
applicable law, and are intended to be limited to the extent necessary so that
they will not render this Deed of Trust invalid, unenforceable or not entitled
to be recorded, registered or filed under any applicable law. In the

                                       25

                                                                     Exhibit E-2
                                                                         Page 26

event any term or provision contained in this Deed of Trust is in conflict, or
may hereafter be held to be in conflict, with the laws of the State of
California or of the United States of America, this Deed of Trust shall be
affected only as to such particular term or provision, and shall in all other
respects remain in full force and effect.

         5.8 Application of Payments. In the event that any part of the Secured
Obligations cannot lawfully be secured hereby, or in the event that the lien and
security interest hereof cannot be lawfully enforced to pay any part of the
Secured Obligations, or in the event that the lien or security interest created
by this Deed of Trust shall be invalid or unenforceable as to any part of the
Secured Obligations, then all payments on the Secured Obligations shall be
deemed to have been first applied to the complete payment and liquidation of
that part of the Secured Obligations which is not secured by this Deed of Trust
and the unsecured portion of the Secured Obligations shall be completely paid
and liquidated prior to the payment and liquidation of the remaining secured
portion of the Secured Obligations.

         5.9 Governing Law. THIS DEED OF TRUST IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

         5.10 Entire Agreement. THIS WRITTEN AGREEMENT, THE INDENTURE AND THE
OTHER FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.

AS OF THE DATE HEREOF, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.


         -----------------------------          ------------------------------
         TRUSTOR                                BENEFICIARY

         5.11 Amendments. This Deed of Trust may be amended, supplemented or
otherwise modified only by an instrument in writing signed by Trustor and
Beneficiary.

         5.12 Successors and Assigns. All terms of this Deed of Trust shall run
with the land and bind each of Trustor and Beneficiary and their respective
successors and assigns, and all Persons claiming under or through Trustor or
Beneficiary, as the case may be, or any such successor or assign, and shall
inure to the benefit of Beneficiary and Trustor, and their respective successors
and assigns.

         5.13 Renewal, Etc. Beneficiary may at any time and from time to time
renew or extend this Deed of Trust, or alter or modify the same in any way, or
waive any of the terms, covenants or conditions hereof in whole or in part and
may release any portion of the Mortgaged Property or any other security, and
grant such extensions and indulgences in relation to the Secured Obligations as
Beneficiary may determine, without the consent of any junior lienor or
encumbrancer and without any obligation to give notice of any kind thereto and
without in any manner affecting the priority of the lien and security interest
hereof on any part of the Mortgaged Property; provided that nothing in this
Section 5.13 shall grant Beneficiary the right to alter or modify the Deed of
Trust without the consent of the Trustor unless otherwise specifically permitted
in this Deed of Trust.

                                       26

                                                                     Exhibit E-2
                                                                         Page 27

         5.14 Liability. Notwithstanding any provision in this Deed of Trust to
the contrary, recourse against the Trustor and its Affiliates, stockholders,
officers, members, directors and employees under this Deed of Trust shall be
limited to the extent provided in Section 10.07 of the Indenture.

         5.15 Severability. The Financing Documents are intended to be performed
in accordance with, and only to the extent permitted by, all Applicable Laws and
Governmental Approvals. If any provision of any of the Financing Documents or
the application thereof to any person or circumstance shall, for any reason and
to any extent, be invalid or unenforceable, neither the remainder of the
instrument in which such provision is contained, nor the application of such
provision to other persons or circumstances, nor the other instruments referred
to hereinabove, shall be affected thereby, but rather shall be enforceable to
the greatest extent permitted by law.

         5.16 Waiver. To the extent permitted by law, Trustor waives and
releases any rights or defenses which Trustor might otherwise have (i) under
California Code of Civil Procedure Sections 726, 725a, 580a, 580b, 580c and 580d
and California Civil Code Section 2889, which statutes might otherwise limit or
condition Beneficiary's exercise of certain of Beneficiary's rights and remedies
in connection with the enforcement of obligations secured by a lien on real
property or (ii) under any laws now existing or hereafter enacted providing for
any appraisal before sale of a portion of the Mortgaged Property and (iii) to
all rights of redemption, valuation, appraisal, stay of execution, notice of
election to mature or to declare due the Secured Obligations and marshalling in
the event of the foreclosure of the liens created under this Deed of Trust or
the exercise of the power of sale granted hereunder. To the extent, if any,
which such laws may be applicable and to the extent permitted by law, Trustor
waives and releases any right or defense which Trustor might otherwise have
under such provisions and under any other law of any applicable jurisdiction
which might limit or restrict the effectiveness or scope of any of Trustor's
waivers or releases hereunder.

         5.17 Additional Waivers. To the extent that Trustor is considered the
guarantor of any obligations of any party under the Financing Documents (other
than Trustor) or its successors and assigns (the "Counterparty"), then Trustor,
to the extent permitted under applicable law, hereby waives the following:

         (a) any and all benefits, rights and defenses it may have to
subrogation, reimbursement, indemnification, and contribution and any other
rights and defenses that are or may become available to Trustor by reason of
California Civil Code Sections 2787 to 2855, inclusive;

         (b) any and all benefits, rights and defenses it may have because the
Counterparty's debt may be secured by real property. This means, among other
things: (i) Beneficiary may collect from Trustor without first foreclosing on
any real or personal property collateral pledged by the Counterparty, (ii) if
Beneficiary forecloses on any real property collateral pledged by the
Counterparty, then (A) the amount of the debt may be reduced only by the price
for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price, and (B) Beneficiary may collect
from Trustor even if Beneficiary, by foreclosing on the real property
collateral, has destroyed any right Trustor may have to collect from the
Counterparty. This is an unconditional and irrevocable waiver of any rights and
defenses Trustor may have because the Counterparty's debt is secured by real
property. These rights and defenses include,

                                       27

                                                                     Exhibit E-2
                                                                         Page 28

but are not limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure; and

         (c) any and all benefits, rights and defenses it may have arising out
of an election of remedies by Beneficiary, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed Trustor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise.

         5.18 Release of Collateral.

         5.18.1 Notwithstanding any provision herein to the contrary, the
Mortgaged Property or any part thereof shall be released from the security
interest created by this Deed of Trust at any time or from time to time upon the
request of each of Beneficiary and Trustor; provided that the requirements of
the Financing Documents have been satisfied. Upon satisfaction of such
requirements, a Responsible Officer of Beneficiary shall instruct the Trustee to
promptly execute, deliver and acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Mortgaged
Property permitted to be released pursuant to this Deed of Trust.

         5.18.2 Beneficiary may instruct the Trustee to release Mortgaged
Property from the security interest created hereunder upon the sale or
disposition of such Mortgaged Property pursuant to Beneficiary's powers, rights
and duties with respect to remedies provided herein.

         5.19 Indenture Controls. In the event of any conflict between any terms
and provisions set forth in this Deed of Trust and those set forth in the
Indenture, the terms and provisions of the Indenture shall supersede and control
the terms and provisions of this Deed of Trust.

         5.20 Time of the Essence. Trustor acknowledges that time is of the
essence in performing all of Trustor's obligations set forth herein.

         5.21 Counterpart Execution. This Deed of Trust may be executed by the
parties hereto in any number of counterparts (and be each of the parties hereof
on separate counterparts), each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       28

                                                                     Exhibit E-2
                                                                         Page 29


         IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly
executed and delivered as of the day and year first above written.


                                    ----------------------------------


                                    By: _____________________________________
                                        Name:
                                        Title:


STATE OF ___________________________)
                                    ) ss.
COUNTY OF __________________________)


         On _____________________, 2005, before me, __________________________,
a notary public in and for said State, personally appeared ___________________
____________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.

         WITNESS my hand and official seal.


Signature ___________________________________
                                                                          (Seal)

                                       29






                                    EXHIBIT F

                                FORM OF GUARANTEE

     For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, dated as of December 8, 2005 (the "Indenture"),
among OrCal Geothermal Inc., the Guarantors listed on the signature page
thereto, and Union Bank of California, N.A., as trustee (the "Trustee"), (a) the
due and punctual payment of the principal of, premium, if any, and interest on
the Senior Secured Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest
on overdue principal, premium, if any, and, to the extent permitted by law,
interest, and the due and punctual performance of all other obligations of the
Issuer to the Holders or the Trustee all in accordance with the terms of the
Indenture and (b) in case of any extension of time of payment or renewal of any
Senior Secured Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Senior Secured Notes and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article IX of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee. Each Holder of a Senior Secured Note, by
accepting the same, (a) agrees to and shall be bound by such provisions and (b)
appoints the Trustee attorney-in-fact of such Holder for such purpose.

                                        [NAME OF GUARANTOR(S)]


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:



                                    EXHIBIT G

                         [FORM OF SUPPLEMENTAL INDENTURE
                    TO BE DELIVERED BY SUBSEQUENT GUARANTORS]

     SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
______________, among ________________ (the "Guarantor"), a subsidiary of
______________ (or its permitted successor), a _______ corporation (the
"Issuer"), the Issuer, the other Guarantors (as defined in the Indenture
referred to herein) and ____________, as trustee under the Indenture referred to
below (the "Trustee").

                                   WITNESSETH

     WHEREAS, the Issuer and the Guarantors have heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of December 8,
2005, providing for the issuance of 6.21% Senior Secured Notes due 2020 (the
"Senior Secured Notes");

     WHEREAS, the Indenture provides that under certain circumstances the
Guarantor shall execute and deliver to the Trustee a supplemental indenture
pursuant to which the Guarantor shall unconditionally guarantee all of the
Issuer's obligations under the Senior Secured Notes and the Indenture on the
terms and conditions set forth herein (the "Guarantee"); and

     WHEREAS, pursuant to Article VIII of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Senior Secured Notes as follows:

     1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meaning assigned to them in the Indenture.

     2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees as follows:

          (a) Along with all Guarantors named in the Indenture, to jointly and
     severally, unconditionally Guarantee to each Holder of a Senior Secured
     Note authenticated and delivered by the Trustee and to the Trustee and its
     successors and assigns, the Senior Secured Notes or the obligations of the
     Issuer hereunder or thereunder, that:

               (i) the principal of, premium, if any, and interest on the Senior
          Secured Notes will be promptly paid in full when due, whether at
          maturity, by acceleration, redemption or otherwise, and interest on
          the overdue principal of, premium, if any, and, to the extent
          permitted by law, interest, and all other



                                                                       Exhibit G
                                                                          Page 2


          obligations of the Issuer to the Holders or the Trustee hereunder or
          thereunder will be promptly paid in full or performed, all in
          accordance with the terms hereof and thereof; and

               (ii) in case of any extension of time of payment or renewal of
          any Senior Secured Notes or any of such other obligations, that same
          will be promptly paid in full when due or performed in accordance with
          the terms of the extension or renewal, whether at stated maturity, by
          acceleration or otherwise.

          (b) The obligations hereunder shall be unconditional, irrespective of
     the validity, regularity or enforceability of the Senior Secured Notes or
     the Indenture, the absence of any action to enforce the same, any waiver or
     consent by any Holder of the Senior Secured Notes with respect to any
     provisions hereof or thereof, the recovery of any judgment against the
     Issuer, any action to enforce the same or any other circumstance which
     might otherwise constitute a legal or equitable discharge or defense of a
     Guarantor.

          (c) The following is hereby waived: diligence, presentment, demand of
     payment, filing of claims with a court in the event of insolvency or
     bankruptcy of the Issuer, any right to require a proceeding first against
     the Issuer, protest, notice and all demands whatsoever.

          (d) This Guarantee shall not be discharged except by complete
     performance of the obligations contained in the Senior Secured Notes and
     the Indenture, and the Guarantor accepts all obligations of a Guarantor
     under the Indenture.

          (e) If any Holder or the Trustee is required by any court or otherwise
     to return to the Issuer, the Guarantors, or any Custodian, Trustee,
     liquidator or other similar official acting in relation to either the
     Issuer or the Guarantors, any amount paid by either to the Trustee or such
     Holder, this Guarantee, to the extent theretofore discharged, shall be
     reinstated in full force and effect.

          (f) The Guarantor shall not be entitled to any right of subrogation in
     relation to the Holders in respect of any obligations guaranteed hereby
     until payment in full of all obligations guaranteed hereby.

          (g) As between the Guarantors, on the one hand, and the Holders and
     the Trustee, on the other hand, (x) the maturity of the obligations
     guaranteed hereby may be accelerated as provided in Article V of the
     Indenture for the purposes of this Guarantee, notwithstanding any stay,
     injunction or other prohibition preventing such acceleration in respect of
     the obligations guaranteed hereby, and (y) in the event of any declaration
     of acceleration of such obligations as provided in Article V of the
     Indenture, such obligations (whether or not due and payable) shall
     forthwith become due and payable by the Guarantors for the purpose of this
     Guarantee.



                                                                       Exhibit G
                                                                          Page 3


          (h) The Guarantors shall have the right to seek contribution from any
     non-paying Guarantor so long as the exercise of such right does not impair
     the rights of the Holders under the Guarantee.

          (i) After giving effect to any maximum amount and any other contingent
     and fixed liabilities that are relevant under any applicable Bankruptcy or
     fraudulent conveyance laws, and after giving effect to any collections
     from, rights to receive contribution from or payments made by or on behalf
     of any other Guarantor in respect of the obligations of such other
     Guarantor under Article IX of the Indenture, this new Guarantee shall be
     limited to the maximum amount permissible such that the obligations of such
     Guarantor under this Guarantee will not constitute a fraudulent transfer or
     conveyance.

     3. EXECUTION AND DELIVERY. Each Guarantor agrees that the Guarantees shall
remain in full force and effect notwithstanding any failure to endorse on each
Senior Secured Note a notation of such Guarantee.

     4. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Issuer or any Guarantor,
in such capacity, shall have any liability for any obligations of the Issuer or
such Guarantor under the Senior Secured Notes, the Guarantees, the Indenture or
the Collateral Documents or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder by accepting a Senior
Secured Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Senior Secured Notes.

     5. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

     6. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

     7. EFFECT OF HEADINGS. The Section headings herein are for convenience only
and shall not affect the construction hereof.

     8. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guarantor and the Issuer.



                                                                       Exhibit G
                                                                          Page 4


     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

     Dated: ___________

                                        [GUARANTOR]


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        ORCAL GEOTHERMAL INC.


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        UNION BANK OF CALIFORNIA, N.A.


                                        By:
                                            ------------------------------------
                                            Authorized Signatory



                                                                       Exhibit G
                                                                          Page 5


                                   SCHEDULE I

                             SCHEDULE OF GUARANTORS

          The following schedule lists each Guarantor under the Indenture as of
the Closing Date:

          OrHeber 1 Inc.
          OrHeber 2 Inc.
          Second Imperial Geothermal Company
          Heber Field Company
          Heber Geothermal Company

EX-10.14

                                    GUARANTEE

     For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, dated as of December 8, 2005 (the "Indenture"),
among OrCal Geothermal Inc., the Guarantors listed on the signature page
thereto, and Union Bank of California, N.A., as trustee (the "Trustee"), (a) the
due and punctual payment of the principal of, premium, if any, and interest on
the Senior Secured Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest
on overdue principal, premium, if any, and, to the extent permitted by law,
interest, and the due and punctual performance of all other obligations of the
Issuer to the Holders or the Trustee all in accordance with the terms of the
Indenture and (b) in case of any extension of time of payment or renewal of any
Senior Secured Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Senior Secured Notes and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article IX of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee. Each Holder of a Senior Secured Note, by
accepting the same, (a) agrees to and shall be bound by such provisions and (b)
appoints the Trustee attorney-in-fact of such Holder for such purpose.

                             [SIGNATURES TO FOLLOW]



          IN WITNESS WHEREOF, the parties hereto have caused this Guarantee to
be duly executed and delivered by their respective authorized officers as of the
date first written above.

                                        ORHEBER 1 INC.,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        ORHEBER 2 INC.,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        SECOND IMPERIAL GEOTHERMAL COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        HEBER FIELD COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        HEBER GEOTHERMAL COMPANY,
                                           as a Guarantor


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                        2

EX-10.15

                                                                  EXECUTION COPY





                               Ormat Funding Corp.

                                  $190,000,000

                       8.25% Senior Secured Notes due 2020


                             Note Purchase Agreement

                                                                February 6, 2004

Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019

Ladies and Gentlemen:

         Ormat Funding Corp., a Delaware corporation (the "Company"), proposes
to issue and sell to Lehman Brothers Inc. (the "Purchaser"), $190,000,000 in
aggregate principal amount of 8.25% Senior Secured Notes due 2020 (the "Notes")
on the terms and in the manner set forth herein. The Notes will initially be
unconditionally guaranteed when issued on a senior secured basis (the
"Guarantees") by Brady Power Partners, a Nevada general partnership, Steamboat
Geothermal LLC, a Delaware limited liability company, Steamboat Development
Corp., a Utah corporation, OrMammoth Inc., a Delaware corporation, ORNI 1 LLC, a
Delaware limited liability company, ORNI 2 LLC, a Delaware limited liability
company and ORNI 7 LLC, a Delaware limited liability company (each a "Guarantor"
and collectively, the "Guarantors"). In addition, the Company has agreed to
cause Ormesa LLC, a Delaware limited liability company, to unconditionally
guarantee the Notes on a senior secured basis on the Ormesa Support Date (as
defined in the Offering Memorandum (defined below)). The Notes and the
Guarantees are referred to collectively herein as the "Securities."

         The Notes will initially be sold by the Company to the Purchaser
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on certain exemptions from registration. On the
Closing Date (as defined below), the Company and the Guarantors will enter into
the Registration Rights Agreement (as defined below) providing the Holders of
Securities from time to time with the registration rights discussed below.



         The Securities are to be issued pursuant to an indenture among the
Company, the Guarantors and Union Bank of California, N.A., as trustee (the
"Trustee") dated as of February 13, 2004 (as amended, modified, supplemented and
in effect from time to time, the "Indenture").

         The Purchaser is entitled to resell, subject to the conditions set
forth herein, all of the Securities to subsequent investors at any time after
the date of this Note Purchase Agreement (this "Agreement"). The Securities are
to be offered and sold through the Purchaser to such subsequent investors
without being registered under the Securities Act in reliance upon certain
exemptions from registration. As used herein, (a) "Preliminary Offering
Memorandum" means the preliminary offering memorandum dated January 26, 2004,
including the annexes thereto and the documents incorporated by reference
therein, relating to both the Securities to be resold outside the United States
pursuant to Regulation S under the Securities Act ("Regulation S") and the
Securities to be resold in the United States pursuant to Rule 144A ("Rule 144A")
under the Securities Act, (b) the "Offering Memorandum" means the offering
memorandum dated February 6, 2004, including the annexes thereto and the
documents incorporated by reference therein, relating to the foregoing, and (c)
the Preliminary Offering Memorandum and the Offering Memorandum, as either may
be amended or supplemented prior to the Time of Delivery (as defined in Section
5(a) hereof), are referred to herein collectively as the "Offering Materials."

         The Notes are being issued by the Company and sold to the Purchaser for
the purposes set forth in the Offering Materials including, without limitation,
the acquisition of all of the outstanding Capital Stock of Steamboat Development
Corp. and the lessor portion of a lease related to the Steamboat 2/3 project
(the "Steamboat Acquisition") and (ii) the acquisition of OrMammoth Inc., which
includes a 50% ownership interest in Mammoth-Pacific, L.P. The Company hereby
agrees to cause Steamboat Development Corp. to become a party to this Agreement
on the Closing Date with all of the rights and obligations of the Guarantors
party to this Agreement on the date hereof. For purposes hereof, unless
otherwise indicated, all references to the "Subsidiaries" shall include
Steamboat Development Corp. as if it was a Subsidiary of the Company on the date
hereof.

         Capitalized terms used but not defined herein shall have the meanings
assigned thereto under "Description of Notes" and "Description of Principal
Financing Documents" in the Offering Memorandum.

     1. Preliminary Offering Memorandum and Offering Memorandum. The Securities
will be offered and sold (or in the case of the Guarantees, issued) to the
Purchaser without registration under the Securities Act, in reliance on an
exemption pursuant to Section 4(2) under the U.S. Securities Act of 1933, as
amended (the "Securities Act"). The Company has prepared the Offering Materials,
setting forth information regarding the Company, the Guarantors, the Securities
and the Exchange Securities (as defined below). The Company hereby confirms that
it has authorized the use of the Offering Materials in connection with the
offering and resale of the Securities by the Purchaser.

         It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Securities Act,



                                       2


the Notes (and all securities issued in exchange therefor or in substitution
thereof) will bear the following legend (along with such other legends as
required by the Indenture):


         "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
         STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
         MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
         (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
         INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
         SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
         QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
         OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR
         RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN
         EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
         144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL "ACCREDITED
         INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER
         THE SECURITIES ACT, IN A TRANSACTION EXEMPT FROM THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT, (5) IN ACCORDANCE WITH ANOTHER
         EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
         (BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) OR (6)
         PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
         ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS OF THE
         STATES OF THE UNITED STATES."


         You have advised the Company that you will make offers (the "Exempt
Resales") of the Securities purchased by you hereunder on the terms set forth in
the Offering Memorandum, solely to (i) persons whom you reasonably believe to be
"qualified institutional buyers" as defined in Rule 144A under the Securities
Act ("QIBs") and (ii) outside the United States to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. Those persons
specified in clauses (i) and (ii) are referred to herein as the "Eligible
Purchasers"). You will offer the Securities to Eligible Purchasers initially at
a price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.

         Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in the registration rights agreement in the
form of Annex A hereto (the "Registration Rights Agreement"), among the Company,
the Guarantors and the Purchaser, to be dated as of the Closing Date, for so
long as such Securities constitute Transfer Restricted Securities (as defined in
the Registration Rights Agreement). Pursuant to the Registration Rights
Agreement, the Company and the Guarantors will agree to file with the U.S.
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") relating to the Company's 8.25% Senior
Secured Notes due 2020 (the "Exchange Notes") and the guarantees thereof (the
"Exchange Guarantees" and, together with the Exchange Notes, the


                                       3


"Exchange Securities") to be offered in exchange for the Notes and the
Guarantees (such offer to exchange being referred to as the "Exchange Offer")
and (ii) a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement" together with the Exchange
Offer Registration Statement, the "Registration Statements") relating to the
resale by certain holders of the Securities and to use their commercially
reasonable efforts to cause such Registration Statements to be declared
effective and to consummate the Exchange Offer.

     2. Representations, Warranties and Agreements.

         I. As of the date hereof, the Company and each of the Guarantors (other
than Steamboat Development Corp., except with respect to any representation or
warranty that speaks as of the Time of Delivery) jointly and severally,
represent and warrant to the Purchaser, as follows:

               (a) Accurate Disclosure. The Offering Materials, including any
amendments or supplements thereto issued by the Company, and the information
required to be delivered to holders and prospective purchasers of the Securities
on or prior to the Time of Delivery pursuant to the Indenture and in accordance
with Rule 144A(d)(4) under the Securities Act do not and will not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to (i) any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Purchaser expressly for use therein
(as set forth in Section 9(a) hereof), (ii) the Independent Engineer's Report or
excerpts therefrom (except as set forth in the next sentence), (iii) the
Geothermal Consultant's Report or excerpts therefrom (except as set forth in the
next sentence), (iv) the projections referenced in 2(x) below. The factual
information provided by the Company to Stone & Webster Consultants, Inc. (the
"Independent Engineer") for inclusion in the Independent Engineer's Report and
to GeothermEx, Inc. (the "Geothermal Consultant") for inclusion in the
Geothermal Consultant's Report does not, as of the date hereof, and will not, as
of the Time of Delivery, contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements in the
factual information so provided, in the light of the circumstances under which
they were made, not misleading.

               (b) Use of Offering Materials. The Offering Memorandum has been
prepared by the Company for use by the Purchaser in connection with the Exempt
Resales. No order or decree prohibiting the use of the Offering Materials, or
any order or decree asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Securities Act,
has been issued and no proceeding for that purpose has commenced or is pending
or, to the knowledge of the Company, the Guarantors or any person acting on
their behalf, is contemplated.

               (c) Compliance with GAAP. The audited consolidated financial
statements (including the related notes and supporting schedules, if any) of the
Company, Mammoth Pacific, L.P., Steamboat Development Corp., Ormesa Geothermal,
Ormesa Geothermal II, GEM Resources LLC and East Mesa Partners contained in the
Offering Materials have been prepared in conformity with GAAP and fairly present
the financial condition, results of operations and cash flows of such entities
as of and for the dates set forth therein. The pro forma financial



                                       4


statements contained in the Offering Materials have been prepared on a basis
consistent with the historical financial statements contained in the Offering
Materials (except for the pro forma adjustments specified therein) and to the
knowledge of the Company and the Guarantors, include all material adjustments to
the historical financial statements required by Rule 11-02 of Regulation S-X
under the Securities Act and the Exchange Act to reflect the transactions
described in the Offering Materials.

               (d) Interim Financial Statements. The unaudited consolidated
interim financial statements of each of the Company, Mammoth Pacific, L.P. and
Steamboat Development Corp. contained in the Offering Materials were prepared in
conformity with GAAP on a basis consistent with each such entity's respective
most recent audited financial statements so included and fairly present the
financial condition, results of operations and cash flows of each entity as of
and for the dates set forth therein.

               (e) Marketable Title; Absence of Liens. Except as disclosed in
the Offering Materials, the Company and each of its Subsidiaries has, and, to
the knowledge of the Company and the Guarantors, Mammoth-Pacific L.P. has, good
and marketable title to all real properties and all other properties and assets
respectively owned by it (collectively, the "Assets"), in each case free from
all Liens other than Permitted Liens. Except as disclosed in the Offering
Materials, the Company and each of its Subsidiaries and, to the knowledge of the
Company and the Guarantors, Mammoth-Pacific L.P., holds any leased real or
personal property (including without limitation, geothermal resources) under
valid and enforceable leases (including without limitation, Geothermal Resource
Leases (as defined below)) and has rights of access and use under valid and
enforceable easements, in the case of each lease and easement with no material
exceptions. The Material Project Documents are valid and binding agreements
enforceable by the Company, its Subsidiaries and Mammoth-Pacific, L.P., as
applicable, in accordance with their terms except as such enforceability (i) may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement of
creditors' rights and remedies generally and (ii) is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

               (f) Operation of Projects. (i) The material mechanical,
electrical and other operating systems on and in the Projects are in all
material respects in good working order (ordinary wear and tear excepted) and
repair and are adequate in all material respects for the operation of the
Projects by the Company and its Subsidiaries as described in the Offering
Memorandum; and

                   (ii) Except as described in the Offering Memorandum, the use
of the Projects as described in the Offering Memorandum does not in any material
respect depend on any variance, special exception or other local or municipal
Governmental Approval that has not been obtained by or for the benefit of the
Company, its Subsidiaries or Mammoth Pacific, L.P., as applicable, and all
material building, construction, ownership, operation and maintenance,
environmental, water and use related Governmental Approvals necessary for such
use have been issued and are in full force and effect, except in the case of the
Galena Re-Powering and the Mammoth Project enhancement, such Governmental
Approvals that are required or expected to


                                       5


be obtained prior to or in connection with the commencement of the Galena
Re-powering or the Mammoth Project enhancement, as the case may be.

              (g) Due Organization, etc. (i) Each of the Company and Ormat
Nevada Inc. has been duly organized, is validly existing and in good standing as
a corporation under the laws of the State of Delaware;

                   (ii) The entities listed on Schedule B hereto will be all of
the direct and indirect subsidiaries of the Company (the "Subsidiaries") at the
Time of Delivery. Each Subsidiary (other than Steamboat Development Corp.) has
been duly organized, is validly existing and is in good standing as a
corporation, limited liability company, or general partnership, as the case may
be, under the laws of the States indicated on Schedule B hereto;
Mammoth-Pacific, L.P. has been duly organized, is validly existing and in good
standing under the laws of the State of California; and; Steamboat Development
Corp., at the Time of Delivery, will have been duly organized, will be validly
existing and will be in good standing as a corporation under the laws of the
State of Utah.

                   (iii) The Company, each of the Subsidiaries (other than
Steamboat Development Corp.), Mammoth-Pacific, L.P. and Ormat Nevada Inc. has
all requisite power and authority to own, lease and/or operate and maintain its
properties and conduct its business as described in the Offering Materials and
to execute, deliver and perform its obligations under, or as contemplated by,
the Transaction Documents and Steamboat Development Corp., at the Time of
Delivery, will have all requisite power and authority to own, lease and/or
operate its and maintain its properties and conduct its business as described in
the Offering Materials and to execute, deliver and perform its obligations
under, or as contemplated by, the Transaction Documents; and

                   (iv) The Company, each of the Subsidiaries (other than
Steamboat Development Corp.), Mammoth-Pacific, L.P. and Ormat Nevada Inc., is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification; and Steamboat Development Corp., at the Time of Delivery, will be
in good standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires such
qualification; except, in each case, where the failure to be so qualified or in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect.

               (h) ERISA. (i) The Company and each of the Subsidiaries are, and
to the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P. is, in
compliance in all material respects with the applicable provisions of ERISA and
the Code and the regulations and published interpretations thereunder to the
extent that they relate to any Plan. None of the Company or any ERISA Affiliate,
and to the knowledge of the Company and the Guarantors, none of Mammoth-Pacific,
L.P. or any of its ERISA Affiliates, maintains or contributes to or has
maintained or contributed to a Plan subject to Title IV of ERISA or Section 412
of the Code or Section 302 of ERISA with respect to which any liability,
including, without limitation, any contingent, potential or secondary liability,
continues to exist. Neither the Company, any of the Subsidiaries nor
Mammoth-Pacific, L.P. is (A) an employee benefit plan or plan described in
Section 3(3) of ERISA or Section 4975 of the Code or an entity whose underlying
assets include


                                       6


"plan assets" by reason of any such employee benefit plan's or plan's investment
in the Company, any Subsidiary or Mammoth-Pacific, L.P., as the case may be, or
(B) a "foreign person" as defined in Section 1445 of the Code; and

                   (ii) Assuming the Securities are initially resold by the
Purchaser in the manner contemplated by the Offering Memorandum, the issuance,
purchase and sale, and holding by the Purchaser, of the Securities will not
constitute a non-exempt "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975(c)(1) of the Code (or any violation of similar
federal, state, local or non-U.S. law).

                   (iii) As used in this paragraph (h):

                         (A) "Code" means the Internal Revenue Code of 1986, as
               amended;

                         (B) "ERISA" means the Employee Retirement Income
               Security Act of 1974, as amended;

                         (C) "ERISA Affiliate" means any trade or business
               (whether or not incorporated) that is member of a group of which
               the Company, any Subsidiary or Mammoth-Pacific, L.P., as the case
               may be, is a member and which is treated as a single employer
               under Section 414 of the Code; and

                         (D) "Plan" means any "employee benefit plan" within the
               meaning of Section 3(3) of ERISA (1) which is maintained in whole
               or in part for current or former employees (or any beneficiary
               thereof) of the Company, a Subsidiary or Mammoth-Pacific, L.P.,
               as the case may be or (2) with respect to which the Company, any
               Subsidiary, Mammoth-Pacific, L.P., as the case may be, or any
               ERISA Affiliate could have a direct or indirect, actual or
               contingent liability; included (without limitation) in this
               category shall be any multiemployer plan (as defined in Section
               4001(a)(3) of ERISA) to which the Company, any Subsidiary,
               Mammoth-Pacific, L.P., as the case may be, or any ERISA Affiliate
               is making or has an obligation to make contributions, or has at
               the Time of Delivery (as defined in Section 5(a) hereof) any
               outstanding actual or contingent liability.

               (i) Business Activities. Except as described in the Offering
Memorandum, neither the Company, nor any of the Subsidiaries, have, and to the
knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P. does not
have, any direct or indirect equity ownership interest in any corporation,
partnership, joint venture or other entity other than the Subsidiaries. The
Company and the Subsidiaries have not, and, to the knowledge of the Company and
the Guarantors, Mammoth-Pacific, L.P. has not, engaged in any business or
activity other than as disclosed in the Offering Memorandum.

               (j) Capitalization. The capitalization of the Company and the
Subsidiaries, after giving effect to the offering of the Notes and the
application of the proceeds therefrom, will be as set forth in the Offering
Memorandum; the issued and outstanding shares of Capital Stock of the Company
and the Subsidiaries (other than Steamboat Development Corp.), as the case


                                       7


may be, have been duly and validly authorized and issued, are fully paid and
nonassessable and are free from all Liens; and there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or exchangeable
for, any equity interest in the Company or the Subsidiaries (other than
Steamboat Development Corp.). As of the consummation of the Steamboat
Acquisition, the issued and outstanding shares of Capital Stock of Steamboat
Development Corp. will have been duly and validly authorized and issued, will be
fully paid and nonassessable and will be free from all Liens; and there will be
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any equity interest in Steamboat
Development Corp. All of the issued and outstanding Capital Stock of the Company
is owned, free from all liens and encumbrances, by Ormat Nevada Inc.

               (k) Authorization and Enforceability of Transaction Documents.
(i) All action on the part of the Company and the Guarantors (other than
Steamboat Development Corp.) that is required for the authorization, execution,
delivery and performance of this Agreement has been and, at or prior to the Time
of Delivery, all action on the part of the Company, the Guarantors (including
Steamboat Development Corp.) and, Ormat Nevada Inc. that is required for the
authorization, execution, delivery and performance of each other Transaction
Document (including this Agreement with respect to Steamboat Development Corp.)
and the Letter of Representations to The Depository Trust Company ("DTC")
relating to the eligibility of the Securities for inclusion in the DTC
book-entry system (the "Letter of Representations"), in each case has been or
will be duly and effectively taken, and, at or prior to the Time of Delivery,
the execution, delivery and performance of each Transaction Document and the
Letter of Representations will not require the approval or consent of any holder
or trustee of any debt or other obligations or securities of the Company, any
Guarantor or Ormat Nevada Inc. which will not have been obtained.

                   (ii) This Agreement has been (other than with respect to
Steamboat Development Corp.) and, at or prior to the Time of Delivery, each
other Transaction Document to which the Company or any Guarantor is a party and
the Letter of Representations has been or will be, duly executed and delivered
by the Company and the Guarantors. Notwithstanding the foregoing, this Agreement
will be duly executed and delivered by Steamboat Development Corp. on the
Closing Date. Each Transaction Document to which the Company, any Subsidiary or
Ormat Nevada Inc. is a party, other than this Agreement the Securities and the
Exchange Securities, will constitute, at the Time of Delivery, a legal, valid
and binding obligation of the Company, each Subsidiary and Ormat Nevada Inc.
enforceable against the Company, each Subsidiary and Ormat Nevada Inc. in
accordance with the terms hereof or thereof, except as such enforceability (i)
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement of
creditors' rights and remedies generally and (ii) is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

               (l) Authorization and Enforceability of Securities. The
Securities and the Exchange Securities have been duly authorized (other than by
Steamboat Development Corp., which will authorize the Guarantees and the
Exchange Guarantees as of the Closing Date) and, when issued and authenticated
in accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms of this Agreement (in the case of the
Securities), the Registration Rights Agreement (in the case of the Exchange
Securities) and the


                                       8


Indenture, will have been duly executed, authenticated, issued and delivered and
will constitute valid and legally binding obligations of the Company and the
Guarantors enforceable against the Company and the Guarantors in accordance with
the terms thereof, except as such enforceability (i) may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors' rights
and remedies generally and (ii) is subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law). The Securities, the Indenture and each of the other Financing Documents
will conform in all material respects to the description thereof in the Offering
Memorandum, and the Securities will be entitled to the benefits provided by the
Indenture and each of the other Financing Documents.

               (m) Ranking. When the Securities are issued and authenticated in
accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms of this Agreement and the Indenture, and
when the Exchange Securities, if issued and authenticated in accordance with the
terms of the Indenture and the Registration Rights Agreement, each of the
Securities and the Exchange Securities (i) will rank pari passu without any
preference among themselves and (ii) will constitute Senior Secured Obligations
as defined in the Offering Memorandum.

               (n) Property Rights. The Geothermal Resources Leases (as defined
below), leases, easements, licenses, rights of way and other rights possessed by
the Company, the Subsidiaries and Mammoth-Pacific, L.P. provide the Company, the
Subsidiaries, as the case may be, and to the knowledge of the Company and the
Guarantors, Mammoth-Pacific, L.P., with all rights and property interests
required to enable the Company, the Subsidiaries and Mammoth Pacific, L.P. to
obtain, in all material respects, all services, materials (including without
limitation geothermal resources) or rights (including without limitation access
rights and rights to extract and develop geothermal resources) required for the
operation and maintenance of the Projects, as contemplated by the Offering
Memorandum including, without limitation, as contemplated in the Pro Forma
Projections (as defined below).

               (o) Defaults under Material Project Documents. (i) Neither the
Company nor any Subsidiary nor, to the knowledge of the Company and the
Guarantors, Mammoth-Pacific, L.P. or any other party to a Material Project
Document, is in default (and no event has occurred which with lapse of time or
notice or action by a third party could result in a default) in any material
respect in the performance of or compliance with any Material Project Document,
(ii) except as described in the Offering Materials each Material Project
Document is in full force and effect and (iii) to the knowledge of the Company,
no Force Majeure event has occurred and is continuing under any Material Project
Document. Except as described in the Offering Materials each of the other
Project Documents described in the Offering Materials is in full force and
effect.

               (p) Non-contravention. Neither the execution or delivery of this
Agreement, any other Financing Document, the Letter of Representations or any of
the transactions contemplated hereby or thereby nor the performance of or
compliance with the terms and conditions hereof or thereof (i) contravenes in
any material respect any Applicable Law, (ii) constitutes a default under or
results in the violation of the provisions of the organizational documents of
the Company, any Subsidiary or Mammoth-Pacific, L.P. (iii) results in the
creation



                                       9


or imposition of any Liens (other than Permitted Liens) on any assets or
properties of the Company, any of the Subsidiaries or Mammoth-Pacific, L.P., or
(iv) constitutes a default under or results in the violation of any other
material agreement, contract or instrument to which the Company, any of the
Subsidiaries or Mammoth-Pacific, L.P. is a party or by which they or any of
their properties or assets are bound.

               (q) Governmental Approvals. (i) Other than as set forth in the
Offering Memorandum, the Company, each of the Subsidiaries, the Projects, and to
the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P. is in
compliance in all material respects with all Governmental Approvals applicable
to the Company, the Subsidiaries, the Projects and, Mammoth-Pacific, L.P., as
the case may be.

                   (ii) All Governmental Approvals which are required to be
obtained in connection with (i) the ownership, construction, operation and
maintenance of the Projects as described in the Offering Materials and (ii) the
issuance and sale of the Securities and the execution, delivery and performance
by the Company and the Subsidiaries of the Transaction Documents have been or
will be at the Time of Delivery duly obtained, were or will be at the Time of
Delivery validly issued and are or will be at the Time of Delivery in full force
and effect, final, not subject to appeal (and all applicable statutory appeal
periods have or will have at the Time of Delivery expired, except for
Governmental Approvals which do not have statutory limits on appeal periods),
held in the name of the Company, such Subsidiary or Mammoth-Pacific, L.P., as
the case may be, or other appropriate party and free from conditions which the
Company or such Subsidiary, as the case may be, does not reasonably expect
either it or such other appropriate party, as applicable, will be able to
satisfy, except (A) as set forth on Part I of Annex C or in the Offering
Memorandum, (B) those which are not required to be obtained as of the date
hereof or as of the Time of Delivery and can only be obtained at a later time
are listed on Part II of Annex C or in the Offering Memorandum or (C) such as
may be required under state securities or blue sky laws of the various states in
the United States. There are no proceedings pending, with respect to the
Company, the Subsidiaries, or to the knowledge of the Company and the
Guarantors, Mammoth-Pacific, L.P., that may result in a rescission, termination,
modification, or suspension of any Governmental Approval of the Company, any
Subsidiary or Mammoth-Pacific, L.P. The Company and the Guarantors have no
reason to believe that any Governmental Approvals not required to have been
obtained on the date hereof or as of the Time of Delivery (or amendments,
renewals or reissuance of any Governmental Approvals required after the date
hereof) will not be obtained by the Company, the relevant Subsidiary or
Mammoth-Pacific, L.P., as the case may be on or before the date such
Governmental Approval, amendment, renewal or reissuance is required.

               (r) Legal and other Proceedings. Other than as set forth in the
Offering Memorandum, there is no material legal or governmental action, suit,
proceeding or investigation pending before any Governmental Authority to which
the Company, any Subsidiary, or to the knowledge of the Company and the
Guarantors, Mammoth-Pacific, L.P., is a party or to which any property of the
Company, any Subsidiary, or to the knowledge of the Company and the Guarantors,
Mammoth-Pacific, L.P., is subject or affecting the Company, any Subsidiary,
Mammoth-Pacific, L.P. or their respective properties.



                                       10


               (s) Taxes. The Company and the Subsidiaries have, and to the
knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P., has filed
all material federal, state, local and foreign tax returns that are required to
be filed and have paid all material taxes required to be paid and any related
assessments, fines or penalties, except for any such tax, assessment, fine or
penalty that is being contested in good faith and by appropriate proceedings.

               (t) Insurance. The Company and the Subsidiaries have, and to the
knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P., has in full
force and effect, insurance with reputable insurers covering the Projects and
their other assets, properties, operations, personnel and businesses against
such losses, damage, risks and hazards as are consistent with customary industry
practice to protect the Company, the Subsidiaries, Mammoth-Pacific, L.P. and
their respective businesses.

               (u) Compliance with Laws; Environmental Laws. Except as set forth
in the Offering Memorandum, (i) each of the Company, the Subsidiaries and, to
the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P., are in
compliance in all material respects with all Applicable Laws, (ii) the Company,
the Subsidiaries (and their affiliates acting on their behalf), the Projects
and, to the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P.,
are in compliance in all material respects with all applicable Environmental
Laws; (iii) there are no pending or, to the Company's knowledge, threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, Liens, notices of non-compliance or violation, investigations or
proceedings relating to any Environmental Law against the Company, the
Subsidiaries, the Projects, or to the knowledge of the Company, Mammoth-Pacific,
L.P., and (iv) there are no conditions, events or circumstances that may
reasonably be expected to form the basis of an order for clean-up or remedial
action or any action, investigation, claim, suit, or proceeding by a private
party or government body or agency, against or affecting the Company, the
Subsidiaries, the Projects, or to the knowledge of the Company, Mammoth-Pacific,
L.P., relating to Hazardous Substances or Environmental Laws. For purposes of
this subsection (y),"Environmental Law" means any national, regional or local
law, statute, ordinance, rule, regulation, code, principle of common law,
license, permit, authorization, approval, consent, order, judgment, decree,
injunction, requirement or agreement with any Governmental Authority relating to
the environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety,
including, without limitation, statutes, regulations, and rules of common law
regulating or imposing liability or standards of conduct with respect to (A)
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or Hazardous Substances or wastes
into the environment, or (B) the exposure to, or use, storage, recycling,
treatment, generation, manufacturing, transportation, processing, handling,
labeling, production, release or disposal of any Hazardous Substances, in each
case as amended and as now in effect; and "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated under any
Environmental Law, including asbestos containing materials.

               (v) Intellectual Property. To the Company's and the Guarantors'
knowledge, the Company, the Subsidiaries and Mammoth-Pacific, L.P., own, possess
or can acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how,


                                       11


patents, copyrights, confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to operate the Projects
as contemplated by the Offering Memorandum, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to any
intellectual property rights.

               (w) Investment Company Act. The Company, the Subsidiaries and, to
the knowledge of the Company, Mammoth-Pacific L.P. are not and, after giving
effect to the offering and sale of the Securities, neither the Company, any
Subsidiary nor, to the knowledge of the Company, Mammoth-Pacific, L.P. will be,
an "investment company," or an entity "controlled" by an investment company, as
such terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").

               (x) Projections. The financial projections and other projected
financial and operating data relating to the Company, the Subsidiaries,
Mammoth-Pacific, L.P. and the Projects contained in the Offering Memorandum
(including, without limitation, in the Independent Engineer's Report and the
Geothermal Consultant's Report) (i) are, in the judgment of the Company and the
Guarantors as to the matters covered thereby, reasonable as of their date, and
(ii) are based on assumptions that the Company and the Guarantors consider
reasonable as to all factual and legal matters material to the estimates
therein, all of which assumptions, to the extent material, are fairly disclosed
in the Offering Memorandum and (iii) are in all material respects consistent
with the provisions of the Transaction Documents. To the knowledge of the
Company and the Guarantors, none of the information forming the basis of such
projections and assumptions has changed since they were originally prepared so
as to materially affect such projections and assumptions.

               (y) Rule 144A/Regulation S. (i) The Securities are eligible for
resale pursuant to Rule 144A and when the Securities are issued and delivered
pursuant to the Indenture and this Agreement, the Securities will not be of the
same class (within the meaning of Rule 144A) as securities which are listed on a
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or quoted in a U.S.
automated inter-dealer quotation system.

                   (ii) None of the Company or any of its Affiliates, nor any
person acting on its or their behalf (x) has, within the six-month period prior
to the date hereof, offered or sold in the United States or to any U.S. person
(as such terms are defined in Regulation S under the Securities Act) the
Securities or any security of the same class or series as the Securities or (y)
has offered or will offer or sell the Securities (A) in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S, by means of any
directed selling efforts within the meaning of Rule 902(c) of Regulation S. The
Company, its Affiliates and any person acting on its or their behalf have
complied and will comply with the offering restrictions requirement of
Regulation S. Neither the Company nor any of its Affiliates have entered and
neither the Company nor any of its Affiliates will enter into any contractual
arrangement with respect to the distribution of the Securities except for this
Agreement.

                                       12


                   (iii) The proceeds to the Company from the offering of the
Securities will not be used to purchase or carry any security in any manner
which would violate Regulations T, U or X of the Federal Reserve Board.

               (z) Securities Act Registration. Subject to compliance by the
Purchaser with the representations, warranties and agreements set forth in
Section 4 hereof, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchaser (and in connection with the original
resale of the Securities by the Purchaser) in the manner contemplated by this
Agreement and the Offering Materials to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939.

               (aa) Brokerage Commissions. Except as disclosed in the Offering
Materials, there are no contracts, agreements or understandings between the
Company or any Affiliate of the Company and any other person that would give
rise to a valid claim against the Company or the Purchaser for a brokerage
commission, finder's fee or other like payment in connection with the issuance,
sale or delivery of the Notes.

               (bb) Bank Accounts. At the Time of Delivery the Company and the
Subsidiaries will not have any bank accounts, except as expressly contemplated
in the Offering Memorandum.

               (cc) Abandonment. The Company, the Subsidiaries and, to the
knowledge of the Company, Mammoth-Pacific, L.P. have not abandoned (and do not
intend to abandon) any of the Projects or any Plant.

               (dd) Project Documents. All of the Project Documents described in
the Offering Materials and previously provided to the Purchaser are true,
complete and correct copies in all material respects.

               (ee) Solvency. After giving effect to the issuance of the
Securities by the Company and the Guarantors, the use of proceeds therefrom and
the performance by the Company and the Guarantors of their respective
obligations pursuant to the Transaction Documents, the sum of the Assets, at a
fair valuation, of each of the Company and the Subsidiaries, taken as a whole,
will exceed their respective debts and the Company and the Guarantors will not
have incurred (as a result of the issuance of the Securities and the assumption
of their obligations pursuant to the Transaction Documents) and do not intend to
incur, and do not believe that they will incur, debts beyond their ability to
pay such debts as such debts mature.

               (ff) Labor Matters. Neither the Company, any Subsidiary nor
Mammoth-Pacific, L.P. has any employees. No labor dispute exists with the
employees of Ormat Nevada, Inc. that provide services to the Projects that would
result in a Material Adverse Effect.

               (gg) Collateral. The Company and the Guarantors have delivered
or, at the Time of Delivery, will deliver to the Collateral Agent all Collateral
which, pursuant to Applicable Law, must be delivered to the Collateral Agent in
order to perfect the security interest therein as a first priority Lien
(including, without limitation, any letters of credit or bonds for which the
Company or a Guarantor is the beneficiary).



                                       13


               (hh) Security Documents. The Security Documents create valid
first priority liens on and/or security interests in all of the Collateral in
favor of the Secured Parties, subject only to Permitted Liens of the type
described in clauses (b), (c), (d), (e), and (g) of the definition thereof.

               (ii) Absence of Defaults. No condition exists nor would any such
condition exist at the Time of Delivery which would constitute a Default or an
Event of Default under the Indenture or a default or event of default (however
defined) pursuant to any of the other Financing Documents.

               (jj) Registration Statements. Other than the Registration Rights
Agreement, there are no contracts, agreements or understandings between the
Company, any Subsidiary or, to the knowledge of the Company and the Guarantors,
Mammoth-Pacific, L.P., on the one hand, and any person, on the other hand,
granting such person the right to require the Company, any Subsidiary or
Mammoth-Pacific, L.P., as the case may be, to file a registration statement
under the Securities Act with respect to any securities of the Company, any
Subsidiary or Mammoth-Pacific, L.P owned or to be owned by such person or to
require the Company or any Guarantor to include such securities in the
securities registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration statement filed
by the Company, any Subsidiary or Mammoth-Pacific, L.P. under the Securities
Act.

               (kk) Material Adverse Effect. Neither the Company, any Subsidiary
nor, to the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P.,
has sustained, since the date of the latest audited financial statements
included in the Offering Memorandum, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Offering Memorandum
or that would not result in a Material Adverse Effect; and, since such date
other than in connection with the Offering and the application of the proceeds
therefrom, there has not been any material adverse change, or any development
involving a prospective material adverse change, in or affecting the condition,
financial or otherwise, stockholder's equity, results of operations or business
of the Company, the Subsidiaries and Mammoth-Pacific, L.P., taken as a whole,
otherwise than as set forth or contemplated in the Offering Memorandum.

               (ll) Independent Public Accounts. PricewaterhouseCoopers LLP,
Deloitte & Touche LLP and Robison, Hill & Co., who have certified certain
financial statements of the Company, certain of the Subsidiaries or
Mammoth-Pacific, L.P., as applicable, whose reports appear in the Offering
Memorandum and who have delivered the initial letters referred to in Section
8(d) hereof concurrently with the execution and delivery of this Agreement, are
independent public accountants as required by the Securities Act and the rules
and regulations promulgated thereunder (the "Rules and Regulations") and were
independent accountants as required by the Securities Act and the Rules and
Regulations during the periods covered by the financial statements on which they
reported that are contained in the Offering Memorandum.

               (mm) Liabilities. Since the date as of which information is given
in the Preliminary Offering Memorandum through the date hereof, and except as
may otherwise be disclosed in the Offering Memorandum, neither the Company, any
Subsidiary nor, to the


                                       14


knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P. has (i)
issued or granted any securities, (ii) incurred any liability or obligation,
direct or contingent, other than liabilities and obligations which were incurred
in the ordinary course of business, (iii) entered into any transaction not in
the ordinary course of business or (iv) declared or paid any dividend on its
capital stock.

               (nn) Books and Records. Each of the Company, the Subsidiaries
and, to the knowledge of the Company and the Guarantors, Mammoth-Pacific, L.P.
(i) makes and keeps accurate books and records and (ii) maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at reasonable
intervals.

               (oo) FERC. Each of the Projects is a Qualifying Facility that is
eligible for the regulatory exemptions from the FPA, certain state laws and
regulations, and PUHCA set forth in 18 C.F.R. Section 292, Subpart F.

               (pp) Subordinated Credit Agreement. The Subordinated Credit
Agreement between Ormat Nevada, Inc. and the Company has been duly authorized
and executed by the Company and Ormat Nevada Inc. and constitutes Subordinated
Debt for purposes of the Indenture.


     3. Agreements to Sell and Purchase. On the basis of the representations,
warranties and agreements of the Purchaser set forth herein and subject to the
terms and conditions set forth herein, the Company agrees to issue and to sell
to the Purchaser, and the Purchaser agrees to purchase, $190,000,000 aggregate
principal amount of Notes, at the prices set forth on such Schedule A.

     4. Representations, Warranties and Agreements of the Purchaser. The
Purchaser acknowledges that the Securities have not been registered under the
Securities Act and represents, warrants and agrees that it will offer the
Securities for sale only upon the terms and conditions set forth in this
Agreement and the Offering Memorandum and in all cases pursuant to transactions
exempt from registration under the Securities Act. The Purchaser further
represents and warrants to, and agrees with, the Company and the Guarantors
that:

               (a) It (i) is a "qualified institutional buyer" within the
meaning of Rule 144A ("QIB") with such knowledge and experience in financial and
business matters as are necessary in order to evaluate the merits and risks of
an investment in the Securities; (ii) is purchasing the Securities pursuant to a
private sale exempt from registration under the Securities Act.

               (b) It will offer and sell the Securities only to (i) persons
whom it reasonably believes are QIBs within the meaning of Rule 144A or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
such Purchaser that each such account is a QIB to whom such notice


                                       15


has been given that such sale or delivery is being made in reliance on Rule
144A, in each case in transactions meeting the requirements of Rule 144A; or
(ii) persons whom it reasonably believes, at the time any buy order for
Securities was or is originated, were or are outside the United States and were
or are not U.S. persons (and were or are not purchasing for the account or
benefit of a U.S. person) within the meaning of Regulation S ("U.S. Persons").
Notwithstanding the foregoing, following the sale of the Securities by such
Purchaser to subsequent purchasers in accordance with the provisions of this
Agreement and the Offering Memorandum, the Purchaser shall not be liable or
responsible to the Company or the Guarantors for any losses, damages or
liabilities suffered or incurred by the Company or the Guarantors, including any
losses, damages, or liabilities under the Securities Act, arising from or
relating to any resale or transfer of any Securities by any subsequent
purchaser.

               (c) No action has been or will be taken by the Purchaser in any
jurisdiction that would permit or constitute a public offering of the Securities
in any such jurisdiction; and the Purchaser has not offered or sold and it will
not offer or sell the Securities by any form of general solicitation or general
advertising, including but not limited to the methods described in Rule 502(c)
under Regulation D under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; provided that
it is understood and agreed that the Purchaser is permitted to place, at its
cost and expense, a tombstone advertisement with respect to the resale of the
Securities in accordance with the rules of the SEC following the later of the
Time of Delivery or the consummation of the resale of all of the Securities
purchased hereunder.

               (d) The Purchaser represents that, with respect to any offer or
sale made by the Purchaser in reliance on Regulation S, neither the Purchaser
nor any of its Affiliates nor any employees or representatives acting on its
behalf has engaged or will engage in any directed selling efforts with respect
to the Securities, and that any advertisement undertaken by the Purchaser will
comply with Rule 902(c)(3) of Regulation S. The Purchaser agrees that, at or
prior to confirmation of any sale of Securities made in reliance on Regulation
S, the Purchaser will send to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases the Securities from
it a confirmation or notice to substantially the following effect:

                  "The Securities covered hereby have not been registered under
                  the U.S. Securities Act of 1933 (the "Securities Act") and may
                  not be offered or sold within the United States or to, or for
                  the account or benefit of U.S. Persons (i) as part of their
                  distribution at any time or (ii) otherwise until 40 days after
                  the date of the commencement of the offering and the closing
                  date, except in either case in accordance with Regulation S
                  (or Rule 144A if available) under the Securities Act. Terms
                  used above have the meanings given to them by Regulation S."

Terms used in this subsection (c) which are defined in Regulation S have the
meanings given to them therein.



                                       16


               (e) It, and each of its Affiliates, have not offered or sold and,
during the period of six months from the date hereof, will not offer or sell any
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 (the "Regulations").

               (f) It, and each of its Affiliates, have only communicated or
caused to be communicated and will only communicate or cause to be communicated
any invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the Financial Services and Markets Act 2000 (the
"FSMA")) received by it in connection with the issue or sale of any Securities
in circumstances in which Section 21(1) of the FSMA does not apply to it.

               (g) It, and each of its Affiliates, have complied with and will
comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to the Securities in, from, or otherwise involving the United
Kingdom.

               (h) It, and each of its Affiliates, will not offer or sell
directly or indirectly the Securities, and it will not distribute, publish or
make available the Offering Materials in or from any jurisdiction except in
compliance with any applicable rules and regulations of any such jurisdiction.

               The Purchaser understands that the Company and the Guarantors
and, for purposes of the opinions to be delivered to the Purchaser pursuant to
Sections 8(a) hereof, counsel to the Company and counsel to the Purchaser, will
rely upon the accuracy and truth of the foregoing representations, warranties
and agreements and the Purchaser hereby consents to such reliance.

     5. Delivery and Payment. (a) Notes will be issued in registered form in
denominations of $1,000 and integral multiples of $1,000 in excess thereof. The
Notes sold in reliance on Rule 144A or Regulation S will initially be
represented by two or more global notes in registered form without coupons
attached (collectively, the "Global Note(s)"). Each Global Note relating to the
Notes offered and sold pursuant to Regulation S will be authenticated by the
Trustee and deposited with the Trustee, as custodian for DTC as common
depositary (the "Common Depositary") for the respective accounts of Euroclear
Bank, S.A./N.V., as operator of the Euroclear System ("Euroclear"), and
Clearstream, Luxembourg Banking Societe Anonyme ("Clearstream"), at the Time of
Delivery. Each Global Note relating to the Notes offered and sold pursuant to
Rule 144A will be authenticated by the Trustee and deposited with the Trustee,
as custodian for DTC (the "U.S. Custodian") at the Time of Delivery. The Global
Notes and interests therein will be held in book-entry form and will not be
exchangeable for certificated Notes except under certain limited circumstances
described in the Offering Memorandum. In such cases, certificated Notes will be
available in registered form only without interest coupons. Euroclear,
Clearstream or DTC, as the case may be, will credit the account of each
subscriber or participant with the principal amount of Notes being subscribed
for by such subscriber or by or through such participant. The Common Depositary
and the U.S. Custodian are collectively referred to herein as the
"Depositaries". Notes purchased hereunder shall be delivered by or on behalf of
the Company to each Purchaser through the facilities of the Depositaries in
definitive form for the account of such Purchaser, against payment by or on


                                       17


behalf of each Purchaser of the purchase price therefor by wire transfer of
United States dollars in immediately available funds to the Trustee under the
Indenture. The Company will cause the certificates representing the Notes to be
made available for inspection by the Purchaser at least twenty-four hours' prior
to the Time of Delivery at the Closing Location (defined below). The time and
date of such delivery and payment shall be 10:00 a.m., New York time, on
February 13, 2004, or such other time and date not later than five business days
after such date as the Purchaser and the Company may agree upon in writing. Such
time and date are herein called the "Time of Delivery."

               (b) The documents to be delivered at the Time of Delivery by or
on behalf of the parties hereto pursuant to Section 8 hereof, including any
additional documents requested by the Purchaser pursuant to Section 8(u) hereof,
will be delivered at such time and date at the offices of Milbank, Tweed, Hadley
& McCloy LLP, New York, New York (the "Closing Location"), and the Notes will be
delivered to the offices of the U.S. Custodian, all at the Time of Delivery. A
meeting will be held at the Closing Location at 10:00 a.m., on the New York
Business Day next preceding the Time of Delivery, at which meeting the final
drafts of the documents to be delivered pursuant to the preceding sentence will
be available for review by the parties hereto. For the purposes of this Section
5, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.

               (c) Beneficial interests in each Global Note will be shown on,
and transfers thereof will be effected only through, the book entry records
maintained by DTC and its direct and indirect participants.

     6. Additional Agreements of the Company and the Guarantors. The Company and
the Guarantors agree with each Purchaser:

               (a) Not to amend or supplement the Offering Memorandum at any
time unless the Purchaser shall previously have been advised thereof and shall
not reasonably have objected thereto after being furnished a copy thereof.

               (b) Promptly from time to time to take such action as the
Purchaser may reasonably request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Purchaser may reasonably
request and to maintain such qualification in effect in such jurisdictions for
as long as may be necessary to complete the initial distribution by the
Purchaser of the Securities, provided that in connection therewith the Company
and the Guarantors shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction in which
they are not otherwise so subject.

               (c) To furnish the Purchaser with as many copies of the Offering
Memorandum and each amendment or supplement thereto as the Purchaser may from
time to time reasonably request.

               (d) If at any time prior to completion of the initial
distribution of the Securities (i) any event shall have occurred as a result of
which, in the reasonable opinion of


                                       18


counsel to the Company or to the Purchaser, the Offering Memorandum as then
existing, amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Offering Memorandum is delivered, not misleading, or (ii) for any
other reason, in the reasonable opinion of the Purchaser it shall be necessary
during such same period to amend or supplement the Offering Memorandum, then to
notify the Purchaser promptly, and upon the Purchaser's request to prepare and
furnish as many copies as the Purchaser may reasonably request of an amended
Offering Memorandum or a supplement to the Offering Memorandum which will
correct such statement or omission or effect such necessary amendments or
supplements and in form and substance satisfactory in the reasonable opinion of
counsel for the Purchaser. Neither the Purchaser's consent to, nor the
Purchaser's delivery of, any such amendment or supplement prior to the Time of
Delivery shall constitute a waiver of any of the conditions set forth in Section
8 hereof.

               (e) Not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of, at any time prior to the Time of Delivery, or
for a period of 180 days thereafter, any securities of the Company or the
Subsidiaries that are substantially similar to the Securities, or any securities
of the Company or the Guarantors convertible into or exchangeable for securities
issued or guaranteed by the Company or any of the Guarantors substantially
similar to the Securities, except (i) in exchange for the Exchange Notes in
connection with the Exchange Offer or (ii) with the prior consent of the
Purchaser.

               (f) To furnish, or cause to be furnished to the Purchaser (i)
until distribution of the Securities has been completed (as notified to the
Company by the Purchaser), (i) prompt notice of any event or other change known
to the Company or the Guarantors that, in each case, would result in the
Offering Memorandum or any amendments or supplements thereto containing an
untrue statement of a material fact or omitting to state any material fact
necessary to make the statements contained therein, in the light of
circumstances under which they were made, not misleading and (ii) such other
information concerning the business and condition (financial or otherwise) of
the Company or the Guarantors as the Purchaser may from time to time reasonably
request in writing.

               (g) To furnish at its expense, upon request, to holders and
beneficial owners of the Securities, prospective purchasers of the Securities
and to securities analysts, information satisfying the requirements of
subsection (d)(4) of Rule 144A under the Securities Act, unless at such time the
Company and the Guarantors are subject to and in compliance with Section 13 or
15(d) of the Exchange Act.

               (h) For a period of five years from the Time of Delivery, to
furnish to the Purchaser, as soon as reasonably available, copies of all audited
financial statements, quarterly financial information and such other documents,
reports and information as shall be furnished by the Company and the Guarantors
to the Trustee, the holders of the Securities or, after any initial public
offering of any of their equity securities, the Company's and the Guarantors'
shareholders or members, as the case may be, or such other information as the
Purchaser may reasonably request in writing.



                                       19


               (i) During the period of two years after the Time of Delivery not
to, and not to permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell the Securities which have been reacquired by any of
them, as beneficial owner or otherwise, and which constitute "restricted
securities" under Rule 144 under the Securities Act otherwise than outside the
United States in accordance with Regulation S.

               (j) Not to offer or sell any security that will be integrated
with and negatively affect the status of the offer and sale of the Securities in
the United States as contemplated by this Agreement as transactions exempt from
the registration provisions of the Securities Act.

               (k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Memorandum under the caption "Use of Proceeds".

               (l) During the period of two years after the Time of Delivery,
not be or become an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act.

               (m) In connection with the offering, until the Purchaser shall
have notified the Company of the completion of the resale of the Securities, not
to, and not to permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, either alone or with one or more other persons, bid for or
purchase for any account in which it or any of its affiliates has a beneficial
interest, any Securities or attempt to induce any person to purchase any
Securities; and none of the Company, the Guarantors or any of their affiliates
will make bids or purchases for the purpose of creating actual, or apparent,
active trading in, or of raising the price of, the Securities. The Purchaser
shall notify the Company promptly after the consummation of the resale of the
Securities.

               (n) Except as stated in this Agreement and in the Offering
Materials, neither the Company, any of the Guarantors nor any of their
respective Affiliates has taken, nor will any of them take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of any Security of the
Company or any of the Guarantors to facilitate the sale or resale of the
Securities. Except as permitted by the Act, neither the Company nor any of the
Guarantors will distribute any offering material in connection with the Exempt
Resales.

               (o) The Company and the Guarantors will use their commercially
reasonable efforts to permit the Securities to be designated Portal MarketSM
("PORTAL") securities in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. relating to trading in
PORTAL and to permit the Securities to be eligible for clearance and settlement
through DTC.

               (p) In connection with the offering of the Securities, until the
Purchaser shall have notified the Company of the completion of the resale of the
Securities, not to, and to use its commercially reasonable efforts to cause its
controlled Affiliates not to, either alone or with one or more other persons,
offer or sell the Securities in the United States (i) by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities


                                       20


Act or (ii) with respect to any such securities sold in reliance on Rule 903
under the Securities Act, by means of any directed selling effort within the
meaning of Rule 902 or otherwise in violation of the offering restriction
requirements of Regulation S under the Securities Act.

     7. Remuneration, Fees and Expenses. The Company and the Guarantors covenant
and agree with the Purchaser to pay or cause to be paid the following,
regardless of whether or not the sale of Securities provided for herein is
consummated or this Agreement becomes effective or is terminated: (i) the
reasonable fees, disbursements and expenses of the Purchaser's, the Company's
and Guarantors' counsel and accountants in connection with the offering of the
Securities and all other expenses in connection with the preparation and
printing of the Offering Materials and any amendments and supplements thereto
and the mailing and delivering of copies thereof to the Purchaser; (ii) all
reasonable out-of-pocket expenses incurred in producing this Agreement, the
Indenture, the Registration Rights Agreement and the other Transaction
Documents, blue sky memoranda and closing documents; (iii) the cost of preparing
certificates for the Securities; (iv) the reasonable expenses of the Trustee,
the Collateral Agent, the Depositary and any paying agent and any agent of any
thereof and the reasonable fees and disbursements of counsel for the same; (v)
all costs, expenses and registration or filing fees incurred in connection with
the qualifications of the Securities for offer and sale under the securities
laws of the several states of the United States as the Purchaser may reasonably
request pursuant to Section 6(b) hereof (including, the reasonable fees and
disbursements of one counsel to the Purchaser relating to such qualifications up
to a maximum of $10,000); (vi) all reasonable out-of-pocket expenses incurred by
the Purchaser with respect to the "road show" including expenses relating to
slide production, Bloomberg taping and travel; (vii) all other reasonable
out-of-pocket expenses incurred by the Purchaser in connection with the
transactions contemplated in this Agreement (other than expenses paid to
Marathon Capital Markets, Inc.); (viii) all reasonable fees, disbursements and
expenses of the Independent Engineer, the Insurance Consultant and the
Geothermal Consultant and any other independent technical consultant,
independent market consultant, or other third-party consultants who have
prepared reports, in connection with the transactions contemplated in this
Agreement; (ix) any withholding, transfer, stamp or other similar tax of the
federal government of the United States or any state government of the United
States asserted against the Purchaser by reason of the execution and delivery of
this Agreement, the purchase and sale of the Securities pursuant to this
Agreement, or the offer or sale of Notes by the Purchaser to subsequent
purchasers as contemplated hereby; (x) all fees and expenses in connection with
approval of the Notes by DTC for "book-entry" transfer; and (xi) the application
for quotation of the Securities in PORTAL.

     8. Conditions Precedent of the Purchaser's Obligations. The obligations of
the Purchaser hereunder shall be subject, in its discretion, to the condition
that all representations and warranties of the Company and the Guarantors
herein, and any certificates provided by the Company and the Guarantors to the
Purchaser pursuant to this Agreement are, at and as of the date hereof and the
Time of Delivery, true and correct, to the condition that the Company and the
Guarantors shall have performed in all material respects all of their
obligations hereunder theretofore to be performed, and to the following
additional conditions precedent:

               (a) The Purchaser shall have received the favorable opinions
dated the Time of Delivery, in each case in form and substance reasonably
satisfactory to the Purchaser and counsel to the Purchaser, of:



                                       21


                   (i) Latham & Watkins LLP, special counsel for the Company the
               Guarantors, Ormat Nevada and Ormat Technologies, Inc.;

                   (ii) Latham & Watkins LLP, special California permitting,
               environmental and federal regulatory counsel for the Company and
               the Guarantors;

                   (iii) Hale Lane, Nevada counsel for the Company, the
               Guarantors, Ormat Nevada and Ormat Technologies, Inc.;

                   (iv) Hale Lane, special Nevada permitting counsel for the
               Company and the Guarantors

                   (v) Pike & Smith, local Utah counsel for Steamboat
               Development;

                   (vi) Seed, Mackall & Cole, special counsel for the Trustee,
               Collateral Agent and Depositary; and

                   (vii) Milbank, Tweed, Hadley & McCloy LLP, counsel for the
               Purchaser.

               The opinions described above shall be rendered to the Purchaser
at the request of the Company and the Guarantors and shall so state therein.

               (b) Since the dates as of which information is given in the
Offering Memorandum (exclusive of any amendment thereto), neither the Company,
the Subsidiaries, Mammoth-Pacific, L.P. nor any of their respective Affiliates
that are parties to Material Project Documents shall have sustained any loss by
fire, flood, accident or other calamity, or shall have become a party to or the
subject of any litigation, which is materially adverse to the Company, the
Subsidiaries or Mammoth-Pacific, L.P., nor shall there have been a material
adverse change in the condition (financial or otherwise), results of operations,
business or prospects, of the Company, the Subsidiaries or Mammoth-Pacific,
L.P., regardless of whether arising in the ordinary course of business, which
loss, litigation or change, in the judgment of the Purchaser, shall render it
impractical or inadvisable to proceed with the payment for and delivery of the
Securities.

               (c) Until the Time of Delivery, none of the following shall have
occurred (i) the Company or any Guarantor shall have failed, refused or been
unable, at or prior to the Time of Delivery, to perform any agreement on its
part to be performed hereunder, (ii) any other condition of the Purchaser's
obligation hereunder is not fulfilled, (iii) there shall have been a suspension
or limitation of trading in securities generally on the New York Stock Exchange,
the American Stock Exchange or NASDAQ or any setting of minimum or maximum
prices for trading thereon or there shall have been a material disruption in the
settlement of securities which, in the judgment of the Purchaser, make it
inadvisable or impractical to proceed with the offering or delivery of the
Securities, or a banking moratorium is declared by either federal or New York
state authorities, (iv) the United States becomes engaged in hostilities or
there is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or an act of
terrorism shall have occurred which, in the



                                       22


judgment of the Purchaser, make it inadvisable or impracticable to proceed with
the offering or delivery of the Securities or (v) there shall have been such a
material adverse change in general economic, political or financial conditions,
or the effect of international conditions on the financial markets in the United
States shall be such, as to, in the judgment of the Purchaser, make it
inadvisable or impracticable to proceed with the offering or delivery of the
Securities. Any termination of this Agreement pursuant to this Section 8 shall
be without liability on the part of the Company, the Guarantors or the
Purchaser, except as otherwise provided in Sections 7 and 9 hereof.

               (d) Each of PricewaterhouseCoopers LLP, Deloitte & Touche LLP and
Robison, Hill & Co. concurrently with the execution and delivery of this
Agreement, shall have furnished to the Purchaser a letter (the "Initial
Letters"), dated the date hereof, addressed to the Purchaser and in form and
substance reasonably satisfactory to the Purchaser (x) confirming that they are
independent certified public accountants with respect to the Company, the
Subsidiaries or Mammoth-Pacific, L.P., as the case may be, within the meaning of
Rule 101 of the Rules of Conduct of the American Institute of Certified Public
Accountants and (y) reporting on certain financial information relating to the
Company, the Subsidiaries or Mammoth-Pacific, L.P., as the case may be, included
in the Offering Materials; provided that the Purchaser shall provide
PricewaterhouseCoopers LLP, Deloitte & Touche LLP and Robison, Hill & Co. with
such representations as may be recommended by Statement of Financial Accounting
Standards No. 72 and as may be reasonably acceptable to the Purchaser. In
addition, the Company, the relevant Subsidiaries and Mammoth-Pacific, L.P. shall
have furnished to the Purchaser, letters (the "Bring Down Letters") of each of
PricewaterhouseCoopers LLP, Deloitte & Touche LLP and Robison, Hill & Co.
addressed to the Purchaser and dated the Time of Delivery confirming in all
material respects the conclusions and findings set forth in the Initial Letters.

               (e) The Company and each Guarantor shall have furnished or caused
to be furnished to the Purchaser at the Time of Delivery a certificate, dated
the Time of Delivery, of (A) the Chief Executive Officer or any Vice President
and (B) the principal financial or accounting officer in which such officers
shall state that (i) the representations and warranties of the Company and each
Guarantor in this Agreement and each of the other Transaction Documents are true
and correct in all material respects at and as of the Time of Delivery, (ii)
that the Company and each Guarantor has complied in all material respects with
all agreements and has satisfied all conditions on its part to be performed or
satisfied hereunder and under each of the other Transaction Documents at or
prior to the Time of Delivery (iii) no default or event of default has occurred
and is continuing hereunder or under any of the other Transaction Document and
(iv) subsequent to the respective dates as of which information is given in the
Offering Memorandum, there has been no material adverse change in the condition
(financial or other), business, properties or results of operations of the
Company, any Subsidiary or Mammoth-Pacific, L.P.

               (f) The Independent Engineer shall have consented to the
references to it in the Offering Memorandum and the Exchange Offer Registration
Statement and the use of the Independent Engineer's Report prepared by the
Independent Engineer and contained in Annex A to the Offering Memorandum and the
Geothermal Consultant shall have consented to the references to it in the
Offering Memorandum and the Exchange Offer Registration Statement and the use of
the Geothermal Consultant's Report prepared by the Geothermal Consultant and


                                       23


contained in Annex B to the Offering Memorandum; and since the date of the
Independent Engineer's Report and the Geothermal Consultant's Report, no event
affecting the Independent Engineer's Report, the Geothermal Consultant's Report
or the respective matters referred to therein shall have occurred (i) which
shall make untrue or incorrect in any material respect, as of the Time of
Delivery, any information or statement contained in the Independent Engineer's
Report, the Geothermal Consultant's Report or in the Offering Memorandum
relating to matters referred to in the Independent Engineer's Report or the
Geothermal Consultant's Report, or (ii) which is not reflected in the Offering
Memorandum but should be reflected therein in order to make the statements and
information contained in the Offering Memorandum relating to matters referred to
in the Independent Engineer's Report or the Geothermal Consultant's Report, in
light of the circumstances under which they were made, not misleading, as
evidenced by a certificate satisfactory to the Purchaser of an authorized
officer of Independent Engineer and the Geothermal Consultant, in each case,
dated the Time of Delivery.

               (g) The Purchaser shall have received a certificate of the
principal financial or accounting officer of the Company and each Guarantor
dated the Time of Delivery stating that at the Time of Delivery and after giving
effect to the use of proceeds contemplated by the Offering Memorandum (i) the
aggregate value of all Assets of the Company and each Guarantor respectively at
their present fair saleable value, exceeds the probable amount of all debts and
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) of the Company and such Guarantor as they become absolute and
matured, (ii) the Company and each Guarantor does not have an unreasonably small
amount of capital with which to conduct its business operations, (iii) the
Company and each Guarantor expects to have sufficient cash flow to enable it to
pay its debts as they mature and (iv) the Projections and underlying assumptions
contained in such analyses were at the time made and at the Time of Delivery,
fair and reasonable and accurately computed.

               (h) The Purchaser shall have received copies of all of the
Financing Documents and the Material Project Documents described in the Offering
Memorandum and all material Governmental Approvals necessary for the ownership
and operation of the Project, each in form and substance satisfactory to the
Purchaser and, with respect to the Transaction Documents, except as disclosed in
the Offering Memorandum or in writing to the Purchaser prior to the execution of
this Agreement and not required to be disclosed in the Offering Memorandum (i)
each such Transaction Document shall have been duly authorized, executed and
delivered by the parties thereto; (ii) each such Transaction Document shall be
legally binding and in full force and effect; (iii) no defaults, events of
default, events of Force Majeure or material breach by any party to any such
agreement of its obligations thereunder shall have occurred and be continuing;
(iv) all conditions precedent to the effectiveness of each such Transaction
Document shall have been satisfied in full (other than those conditions
precedent which by their express terms are not required to be satisfied until a
later date, as to which the Company and each Guarantor shall certify that it has
no reason to believe that such conditions will not be satisfied when required);
and (v) such Transaction Documents shall not have been amended or modified and
no waivers shall have been granted thereunder other than those satisfactory to
the Purchaser, and the Purchaser shall have received a certificate from a
Responsible Officer of the Company and each Guarantor confirming each of the
foregoing.



                                       24


               (i) The Purchaser shall have received a certificate of the
Company and each Guarantor and a certificate of the Independent Engineer
confirming that the projections set forth in the Offering Memorandum are a true,
correct and complete copy of the pro forma projections for the Project (the "Pro
Forma Projections"), including, in particular, the revenues projected to be
received by the Project.

               (j) The Purchaser shall have received (i) a report by the
Insurance Consultant on the adequacy of the required insurance for the Projects
and that the required insurance meets the requirements of the Projects, in form
and substance satisfactory to the Purchaser and (ii) evidence that the insurance
policies representing the required insurance provided for in the Transaction
Documents have been obtained, are in full force and effect and that all premiums
then due have been paid, in form and substance reasonably satisfactory to the
Purchaser in consultation with the Insurance Consultant.

               (k) In connection with all real estate over which the Collateral
Agent holds a Deed of Trust on the Closing Date, the Purchaser shall have
received a title report and title policy, including endorsements, or title
opinion, in form and substance satisfactory to the Purchaser and its counsel,
and evidence that each Deed of Trust has been filed for recording.

               (l) The Purchaser shall have received certified copies of the
organizational, governing and authorizing documents and certificates of
incumbency and good standing with respect to the Company, each Subsidiary and
their respective shareholders or members, as the case may be , and
Mammoth-Pacific, L.P.

               (m) Valid and perfected first priority (subject to Permitted
Liens of the type described in clauses (b), (c), (d), (e) and (g) of the
definition thereof) security interests in the Collateral shall have been created
in favor of the Collateral Agent for the benefit of the Holders, in form and
substance satisfactory to the Purchaser and its counsel, including, without
limitation, receipt by the Purchaser of the consents from each party to the
Material Project Documents set forth on Annex B attached hereto with respect to
the assignment to the Collateral Agent of each relevant party's (including,
without limitation, the Company's and each Guarantor's) rights under the
Material Project Documents and the filing or registration of all appropriate
documents in accordance with applicable legal requirements, all in form and
substance satisfactory to the Purchaser and its counsel.

               (n) The Notes shall have been accepted for settlement through the
facilities of DTC, the Euroclear System and/or Clearstream, Luxembourg, as
applicable, for "book-entry" transfer of the Notes.

               (o) The Purchaser shall have received evidence satisfactory to it
that each of the Collateral Accounts has been established and funded in
accordance with the terms of the Depositary Agreement.

               (p) There shall not exist at and as of the Time of Delivery any
condition that would constitute any Default or Event of Default (as defined in
the Indenture or other Transaction Documents).



                                       25


               (q) The Company and each Guarantor shall have furnished the
Purchaser with such assurance and evidence as the Purchaser may reasonably
require to confirm that, as of the Time of Delivery, all Indebtedness previously
incurred by the Company, any Subsidiary and Mammoth-Pacific, L.P. has been
repaid in full (other than the Ormesa Credit Agreement and the Subordinated
Credit Agreement) and all Liens and collateral securing such previously incurred
Indebtedness has been released, other than Permitted Liens.

               (r) On or prior to the Time of Delivery, the Company and each
Guarantor shall have furnished to the Purchaser evidence reasonably satisfactory
to the Purchaser of the appointment by each such party of an agent for service
of process as required by the Transaction Documents and the acceptance of each
such appointment by such agent.

               (s) All Collateral which, pursuant to Applicable Law, must be
delivered to the Collateral Agent in order to perfect the security interest
therein as a first priority Lien (including, without limitation, any letters of
credit or bonds for which the Company or any Guarantor is the beneficiary) shall
have been delivered to the Collateral Agent or the Depositary, as applicable.

               (t) The Notes shall have been designated for trading on PORTAL.

               (u) At the Time of Delivery, counsel for the Purchaser shall
have been furnished with all such documents, certificates and opinions as shall
be reasonably set forth in a closing memorandum delivered to the Company by the
Purchaser, and such other documents as counsel for the Purchaser may reasonably
request and that are customary for transactions of a similar nature, and of
which the Company has been notified in writing prior to the date hereof, in
order to evidence the accuracy and completeness of any of the representations,
warranties, certificates or other written statements of the Company or any
Guarantor provided to the Purchaser pursuant to this Agreement, the performance
of any of the covenants of the Company or any Guarantor, or the fulfillment of
any of the conditions herein contained; and all proceedings taken by the Company
or any Guarantor at or prior to the Time of Delivery in connection with the
authorization, issuance and sale of the Securities as contemplated in this
Agreement, including, without limitation, the execution of all Transaction
Documents, shall be reasonably satisfactory in form and substance to the
Purchaser and its counsel.

               (v) The Company shall have entered into such purchase or other
agreements as are necessary to provide for (i) the ownership by the Company of
100% of the economic and voting interest of Steamboat Development Corp. for a
purchase price not in excess of $78.5 million and (ii) the ownership by the
Company (through OrMammoth Inc.) of 50% of the economic and voting interest of
Mammoth-Pacific, L.P. for a purchase price not in excess of $33.5 million.

               (w) The Subordinated Credit Agreement between Ormat Nevada, Inc.
and the Company shall have been executed in form and substance satisfactory to
the Purchaser.

               (x) Steamboat Development Corp. shall have executed this
Agreement.

               (y) The representations and warranties in the Transaction
Documents and the Material Project Documents made by the Company and the
Guarantors shall be true and correct


                                       26


in all material respects, on and as of the Time of Delivery with the same effect
as though such representations and warranties had been made on and as of the
Time of Delivery.

     If any of the conditions specified in this Section 8 shall have not been
fulfilled when and as required by this Agreement, this Agreement may be
terminated by the Purchaser without liability upon notice to the Company and
upon such notice being given the parties hereto shall (except for the liability
of the Company or any Guarantor for the payment of costs and expenses as
provided in Section 7 and the obligations of the parties hereto pursuant to
Section 9) be released and discharged from their respective obligations
hereunder. Notwithstanding any such termination, the provisions of Sections 7,
9, 10, 11, 12, 13 and 14 hereof shall remain in effect.

     9. Indemnification. (a) The Company and each Guarantor, jointly and
severally, shall indemnify and hold harmless the Purchaser from and against any
loss, claim, damage or liability (or any action in respect thereof), joint or
several, to which the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Offering Materials,
or (ii) the omission or alleged omission to state in the Offering Materials a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and shall reimburse the Purchaser promptly after receipt
of invoices from the Purchaser for any legal or other expenses as reasonably
incurred by the Purchaser in connection with investigating, preparing to defend
or defending against any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case such payments shall be promptly refunded;
provided, however, that the Company and the Guarantors shall not be liable under
this Section 9(a) in any such case to the extent, but only to the extent, that
any such loss, claim, damage, liability or action arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the preparation of the
Offering Materials as described in paragraph (b) below; and provided further,
that the foregoing indemnity agreement is subject to the condition that, insofar
as it relates to any untrue statement, alleged untrue statement, omission or
alleged omission made in any preliminary offering memorandum which was
eliminated or remedied in the Offering Memorandum, such indemnity agreement
shall not inure to the benefit of the Purchaser (or its officers, employees or
controlling persons) if the Company shall sustain the burden of proving and it
is finally judicially determined that (i) the person asserting any such loss,
claim, damage, or liability purchased the Securities from the Purchaser in
reliance upon the Preliminary Offering Memorandum but was not delivered or sent
a copy of the Offering Memorandum, at or prior to written confirmation of the
sale of such Securities to such person, unless such failure to deliver or send
the Offering Memorandum was a result of noncompliance by the Company with
Section 6 hereof and (ii) the Purchaser, and each such officer, employee or
controlling person would not have incurred such loss, claim, damage or liability
or action had the Offering Memorandum been delivered.

               (b) The Purchaser shall indemnify and hold harmless the Company
and each Guarantor against any loss, claim, damage or liability (or any action
in respect thereof) to which the Company or any Guarantor may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is


                                       27


based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Offering Materials, or (ii) the omission or alleged
omission to state in the Offering Materials a material fact required to be
stated therein or necessary to make the statements therein not misleading and
shall reimburse the Company or any Guarantor promptly after receipt of invoices
from the Company or such Guarantor for any legal or other expenses reasonably
incurred by the Company or such Guarantor in connection with investigating,
preparing to defend or defending against any such loss, claim, damage, liability
or action notwithstanding the possibility that payments for such expenses might
later be held to be improper, in which case such payments shall be promptly
refunded; provided, however, that such indemnification or reimbursement shall be
available in each such case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use therein, it being understood and
agreed that the only information furnished by any Purchaser consists of the
following information in the Offering Memorandum under the caption "Plan of
Distribution": paragraphs 5, 6, 8, 10 and 14 and the sixth sentence of paragraph
9.

               (c) Promptly after receipt by any indemnified party under
subsection (a) or (b) above of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to so notify the indemnifying party shall not relieve
it from any liability which it may have under this Section 9 except to the
extent it has been prejudiced in any material respect by such failure or from
any liability which it may have to an indemnified party otherwise than under
this Section 9. If any such claim or action shall be brought against any
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under subsection
(a) or (b) above for any legal expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of
investigation; except that the Purchaser shall have the right to employ counsel
to represent the Purchaser who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Purchaser against the
Company or any Guarantor under such subsection if (i) the employment thereof has
been specifically authorized by the Company or any Guarantor in writing, (ii)
the Purchaser shall have been advised by counsel that there may be one or more
legal defenses available to the Purchaser which are different from or additional
to those available to the Company or such Guarantor and in the reasonable
judgment of such counsel it is advisable for the Purchaser to employ separate
counsel or (iii) the Company or such Guarantor has failed to assume the defense
of such action and employ counsel reasonably satisfactory to the Purchaser, in
which event the Company or such Guarantor shall be liable for the fees and
expenses of such separate counsel. Notwithstanding anything in the foregoing to
the contrary, however, in no event shall the Company or any Guarantor be
required to indemnify the Purchaser, in connection with any proceedings or
related proceedings in the same jurisdiction, for more than one legal counsel
(in addition to any local counsel) employed by the Purchaser. No indemnifying
party shall (i) without the prior written


                                       28


consent of the indemnified parties (which consent shall not be unreasonably
withheld or delayed), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.

               (d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors on the one hand and the Purchaser on the other hand from the offering
of the Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors on the one hand and the Purchasers on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, or actions in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand and the Purchaser on
the other hand shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Notes (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions received by
the Purchaser, in each case as set forth in Schedule A hereto. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or any
Guarantor, on the one hand, or the Purchaser, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company, the
Guarantors and the Purchaser agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro rata
allocation (even if the Purchaser were treated as one entity for such purpose)
or by any other method of allocation that does not take into account the
equitable considerations referred to in the first sentence of this subsection
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), the Purchaser shall not be required to contribute any
amount in excess of the amount by which the total price at which the Notes
underwritten by it and distributed to investors were offered to investors
exceeds the amount of any damages that the Purchaser has otherwise been required
to pay by reason of such untrue or


                                       29


alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each party entitled to contribution
agrees that upon the service of a summons or other initial legal process upon it
in any action instituted against it in respect to which contribution may be
sought, it shall promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties of any such service shall not relieve the party from whom
contribution may be sought for any obligation it may have hereunder or otherwise
(except as specifically provided in subsection (c) above).

               (e) The obligations of the Company and the Guarantors under this
Section 9 shall be in addition to any liability that the Company or any
Guarantor may otherwise have, and shall extend, upon the same terms and
conditions set forth in this Section 9, to the officers and directors of the
Purchaser and each person, if any, who controls the Purchaser within the meaning
of the Securities Act; and the obligations of the Purchaser under this Section 9
shall be in addition to any liability that the Purchaser may otherwise have, and
shall extend, upon the same terms and conditions, to each member of the
management committee of the Company or any Guarantor, to each officer of the
Company or any Guarantor and to each person, if any, who controls the Company or
any Guarantor within the meaning of the Securities Act.

     10. Survival of Representations, Warranties, Etc. The respective
indemnities, agreements, representations, warranties and other statements of the
Company, the Guarantors and the Purchaser, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of the Purchaser or
any controlling person of the Purchaser, or by the Company or any Guarantor, or
any officer or director or controlling person of the Company or any Guarantor
and shall survive delivery of and payment for the Securities.

     11. Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and shall be delivered or sent by mail, telex or facsimile
transmission as follows:

                  if to the Purchaser:

                  Lehman Brothers Inc.
                  745 Seventh Avenue
                  New York, New York 10019
                  Facsimile Number:  (212) 526-0943
                  Attention:  Syndicate Department

                  with a copy to:

                  Milbank, Tweed, Hadley & McCloy LLP
                  1 Chase Manhattan Plaza
                  New York, New York 10005
                  Facsimile Number:  (212) 822-5308
                  Attention:  Michael C. Banks, Esq.



                                       30


                  if to the Company or any Guarantor:

                  Ormat Funding Corp.
                  980 Greg Street
                  Sparks, Nevada 89431
                  Tel.:  (775) 356-9029
                  Fax:  (775) 356-9039
                  Attention:  President

                  with a copy to:

                  Latham & Watkins LLP
                  701 "B" Street
                  Suite 2100
                  San Diego, CA  92101
                  Tel.:  (619) 238-2869
                  Fax:  (619) 696-7419
                  Attention:  Andrew Singer, Esq.


         Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.

     12. Benefit of Agreement. This Agreement shall be binding upon, and inure
solely to the benefit of, the Purchaser, the Company and each Guarantor and, to
the extent provided in Sections 9 and 10 hereof, the officers, employees and
directors of the Company, the Guarantors and the Purchaser and each person who
controls the Company, any Guarantor or the Purchaser, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of the Securities from a Purchaser shall be deemed a successor or
assign by reason merely of such purchase.

     13. Submission to Jurisdiction; Service of Process. The Company and each
Guarantor irrevocably (i) agrees that any legal suit, action or proceeding
against it brought by the Purchaser or by any person who controls the Purchaser
arising out of or based upon this Agreement, any of the other Transaction
Documents or the transactions contemplated hereby or thereby may be instituted
in any federal or state court located in the Borough of Manhattan, The City of
New York, New York (each a "New York Court"), (ii) waives, to the fullest extent
it may legally do so, any objection to, or argument that such jurisdiction is
inconvenient, which it may now or hereafter have with respect to the laying of
venue of any such proceeding, (iii) submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of any judgment
of any such court, as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding, (iv) expressly waives any other
requirements of or objections to personal jurisdiction with respect thereto and
(v) appoints HIQ Corporate Services Inc., with offices at the date of this
Agreement at 41 State Street, Suite 405, Albany, New York 12207, United States,
as its authorized agent on which any and all legal process may be served in any
such suit, action or proceeding brought in a New York Court.



                                       31


     14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

     15. Time of the Essence. Time shall be of the essence of this Agreement.

     16. Execution. This Agreement may be executed by the parties hereto in any
number of counterparts, each of which shall be deemed to be an original, but all
such respective counterparts shall together constitute one and the same
instrument.


                                       32


         If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof and upon the acceptance hereof by you this
Agreement shall constitute a binding agreement between the Purchaser, the
Company and the Guarantors.

                                       Ormat Funding Corp.

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       Brady Power Partners

                                       By ORNI 1 LLC.,
                                                Its General Partner

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:

                                       By ORNI 2 LLC,
                                                Its General Partner

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       Steamboat Geothermal LLC

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       OrMammoth Inc.

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       33






                                       ORNI 1 LLC

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       ORNI 2 LLC

                                       By:

                                         -------------------------------------
                                          Name:
                                          Title:


                                       ORNI 7 LLC

                                       By:
                                          -------------------------------------
                                          Name:
                                          Title:


                                       34


Confirmed and Accepted
as of the date hereof:
Lehman Brothers Inc.



By:
     --------------------------------------------
     Name:
     Title:



                                       35


                                                                         ANNEX A
                                                  TO THE NOTE PURCHASE AGREEMENT

                      Form of Registration Rights Agreement








                                                                      SCHEDULE A
                                                  TO THE NOTE PURCHASE AGREEMENT





I.       Purchase Price



                                               PURCHASER'S
                    ISSUE      UNDERWRITING     PURCHASE
                    PRICE         SPREAD         PRICE
                 ------------  ------------    -----------
Senior Secured       100%             3%            97%
Notes due 2020

                 $190,000,000   $5,700,000     $184,300,000






                                                                      SCHEDULE B
                                                  TO THE NOTE PURCHASE AGREEMENT


                              LIST OF SUBSIDIARIES

ENTITY                                           JURISDICTION OF ORGANIZATION
- ------                                           ----------------------------

Ormesa LLC                                       Delaware

ORNI 1 LLC                                       Delaware

RNI 2 LLC                                        Delaware

ORNI 7 LLC                                       Delaware

OrMammoth Inc.                                   Delaware

Brady Power Partners                             Nevada

Steamboat Development Corp.                      Utah

Steamboat Geothermal LLC                         Delaware





                                                                         ANNEX B
                                                  TO THE NOTE PURCHASE AGREEMENT

                                    CONSENTS
                                    --------

Consent of Ormat Nevada with respect to the Steamboat Complex operations and
Maintenance Agreement

Consent of Ormat Nevada with respect to the Brady Operations and Maintenance
Agreement

Consent of Ormat Nevada Galena Re-powering Contract between ORNI 7 and Ormat
Nevada

Consent of Western States Geothermal Company with respect to the Fluid Supply
Agreement and the Brady Operations and Maintenance Agreement

Consent of Ormat Technologies with respect to the Engineering, Procurement and
Construction Agreement Guaranty executed in favor of ORNI 7

Notice of ORNI 6 with respect to Meyburg Geothermal Lease

Notice of Sierra Pacific Power Company with respect to Sierra Pacific Geothermal
Lease




                                                                         ANNEX C
                                                  TO THE NOTE PURCHASE AGREEMENT


Part I - Governmental Approvals Awaiting Authorization to Transfer
- ------------------------------------------------------------------




                                                                              CURRENTLY
    TYPE OF APPROVAL                  ISSUER                 NUMBER           ISSUED TO               DATE ISSUED
    ----------------                  ------                 ------           ---------               -----------

ORMESA

  Title V Operating        Imperial County Air           V-2002          GEM Resources LLC              01/01/00
  Permit                   Pollution Control District

STEAMBOAT

  Authorization to         Nevada Division of            UNEV50018       Far West Capital, Inc. & SB    10/23/98
  Dispose                  Environmental Protection                      Geo, Inc.

  Permit for flammable/    Fire Department, City of      02467           SB Geo, Inc.                   04/01/02
  combustible liquids      Reno, NV

  Permit for hazardous     Fire Department, City of      02467           SB Geo, Inc.                   04/01/02
  production materials     Reno, NV






                                                                         ANNEX C
                                                                          PAGE 2

Part II - Governmental Approvals to be Obtained/Transferred
- -------------------------------------------------------------

     -    Governmental Approvals for Basalt Canyon project, including the
          Permits to Operate that will replace Authorities to Construct #1052
          and #1073 issued by the Great Basin Unified Air Pollution Control
          District;

     -    Governmental Approvals for Galena Project

     -    The following Governmental Approvals related to the Steamboat project
          will be transferred from SB Geo, Inc. to Steamboat Development Corp.:





     TYPE OF APPROVAL                   ISSUER              NUMBER          CURRENTLY ISSUED TO       DATE ISSUED
     ----------------                   ------              ------          -------------------       -----------

Authorization to Dispose     Nevada Division of            UNEV50018       Far West Capital, Inc. &     10/23/98
                             Environmental Protection                      SB Geo, Inc.

Nevada Hazardous Materials   Nevada State Fire Marshal     1697-3384       SB Geo, Inc.                 03/01/03
Storage Permit

Permit for flammable/        Fire Department, City of      02467           SB Geo, Inc.                 04/01/02
combustible liquids          Reno, NV

Permit for hazardous         Fire Department, City of      02467           SB Geo, Inc.                 04/01/02
production materials         Reno, NV

EX-21.1

                                                                    EXHIBIT 21.1

                LIST OF SIGNIFICANT SUBSIDIARIES OF THE COMPANY,
       THE STATE OR JURISDICTION OF INCORPORATION OR ORGANIZATION OF EACH,
             AND THE NAMES UNDER WHICH SUCH SUBSIDIARIES DO BUSINESS

                                          STATE/JURISDICTION OF
                                          INCORPORATION OR
NAME OF SIGNIFICANT SUBSIDIARY            ORGANIZATION
- ---------------------------------------   ----------------------
Brady Power Partners                      Nevada
Ormat Systems Ltd.                        Israel
Ormat International, Inc.                 Delaware
Ormat Nevada, Inc.                        Delaware
Ormat Funding Corp.                       Delaware
OrCal Geothermal, Inc.                    Delaware
OrHeber 1, Inc.                           Delaware
ORMESA LLC                                Delaware
Ormat Holding Corp.                       Cayman Islands
Heber Field Company                       California
Second Imperial Geothermal Company L.P.   California
Heber Geothermal Company                  California
Mammoth Pacific L.P.                      California
OrPower 4, Inc.                           Cayman Islands
Ormat Momotombo Power Company             Cayman Islands
Orleyte Company                           Cayman Islands
Ormat-Leyte Co. Ltd.                      Philippines
OrMammoth Inc.                            Delaware
Ormat Pacific Inc.                        Delaware
Oreg 1 Inc.                               Delaware
Puna Geothermal Venture L.P.              Hawaii
Steamboat Development Corp.               Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Forms S-3 (No. 333-131064) and S-8 (No. 333-129583) of Ormat Technologies, Inc. and subsidiaries of our report dated March 27, 2006 relating to the financial statements, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Sacramento, California
March 27, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report (10-K) of Ormat Technologies, Inc. of our report dated March 27, 2006, with respect to the financial statements of Ormat Leyte Co. Ltd., included in the 2005 Annual Report to Shareholders of Ormat Technologies, Inc.

We consent to the incorporation by reference in the following Registration Statements:

(1)	Registration Statement (Form S-3 No. 333-131064)

(2)	Registration Statement (Form S-8 No. 333-129583)

of our report dated March 27, 2006, with respect to financial statements of Ormat Leyte Co. Ltd. incorporated herein by reference.

/s/ SyCip Gorres Velayo & Co.

A Member Practice of Ernst & Young Global

Makati City, Philippines
March 27, 2006

EX-31.1

Exhibit 31.1

Ormat Technologies, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Yehudit Bronicki, certify that as of the date hereof:

1.  I have reviewed this annual report on Form 10-K of Ormat Technologies, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under his/her supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2006

By: /s/ YEHUDIT BRONICKI

		Yehudit Bronicki Chief Executive Officer and President

EX-31.2

Exhibit 31.2

Ormat Technologies, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph Tenne, certify that as of the date hereof:

1.  I have reviewed this annual report on Form 10-K of Ormat Technologies, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under his/her supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d) Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2006

By: /s/ JOSEPH TENNE

		Joseph Tenne Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Yehudit Bronicki, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the annual report of Ormat Technologies, Inc. on Form 10-K for the year ended December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such annual report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Ormat Technologies, Inc. as of and for the periods presented in such annual report on Form 10-K. This written statement is being furnished to the Securities and Exchange Commission as an exhibit accompanying such annual report and shall not be deemed filed pursuant to the Securities Exchange Act of 1934.

Date: March 27, 2006

By: /s/ YEHUDIT BRONICKI
Name: Yehudit Bronicki
Title:    Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph Tenne, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the annual report of Ormat Technologies, Inc. on Form 10-K for the year ended December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such annual report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Ormat Technologies, Inc. as of and for the periods presented in such annual report on Form 10-K. This written statement is being furnished to the Securities and Exchange Commission as an exhibit accompanying such annual report and shall not be deemed filed pursuant to the Securities Exchange Act of 1934.

Date: March 27, 2006

By: /s/ JOSEPH TENNE
Name: Joseph Tenne
Title:    Chief Financial Officer