Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

These unaudited condensed consolidated interim financial statements of Ormat Technologies, Inc. and its subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2022, the condensed consolidated statements of operations and comprehensive income and the condensed consolidated statements of equity for the three months ended March 31, 2022 and 2021 and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021.

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

These condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2021 but does not include all disclosures required by U.S. GAAP.

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

Property, Plant and Equipment, Impairment [Policy Text Block]

Heber 1 fire

The Company's 40 MW Heber 1 geothermal power plant located in California is experiencing an outage following a fire on February 25, 2022 that caused damage primarily to the steam turbine-generator area. The Heber 1 power plant is part of the 81 MW Heber complex and sells its electricity under a long-term contract with the Southern California Public Power Authority. The Company is still evaluating the cost and the time to restore all or part of the Heber 1 power plants back to operation. In mid- April, the Company gradually re-started operation of the binary units and the Heber 1 power plant is currently running at approximately 20 MW.

The Company holds a business interruption insurance subject to a 45-day deductible period in addition to property damage insurance with customary deductibles and is working with insurers to collect under those policies. At this stage, the Company believes the insurance proceeds from the property damage will exceed the net book value of the damaged property. As the Company expects that its property insurance policy will cover the full amount of the loss related to the damaged equipment, it recorded a receivable for such recovery to fully offset the loss related to the equipment write-off in the same financial statements line item in the condensed consolidated financial statements.

Effect of COVID-19 Pandemic, Policy [Policy Text Block]

COVID-19 consideration

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. Since that time and through the date of this quarterly report, we have implemented significant measures and continue to make efforts in order to meet government requirements and preserve the health and safety of its employees. Our preventative measures against COVID-19 and the recent spread of variant strains include working remotely when needed and adopting separate shifts in its power plants, manufacturing facilities and other locations while working to continue operations at close to full capacity in all locations. Since the end of the second quarter of 2021, we have experienced an easing of government restrictions in a number of countries, including Israel, but uncertainty around the impact of COVID-19 continues. We have not laid-off or furloughed any employees due to COVID-19 and have continued to pay full salaries. In addition, the Company focused efforts on adjusting its operations to mitigate the impact of COVID-19 including managing its global supply chain risks and enhancing its liquidity profile. As most of the Company's electricity revenues are generated under long term contracts, the majority of which are under a fixed energy rate, the impact of COVID-19 on electricity revenues was limited.

In the Product segment, the Company experienced a significant decline in product backlog, which it believes resulted mainly due to the impact of COVID-19 outbreaks, which resulted in the extended shutdown of certain businesses in certain regions, delays in the supply and increases in the cost of raw materials and components that we purchased for our equipment manufacturing, and increases in the cost of marine transportation. The cost increases limited our ability to secure new purchase orders from potential customers and led to a reduction in our operating margins, which in turn negatively impacted our profitability.

In the Energy Storage segment, revenues are generated primarily from participating in the energy and ancillary services markets and therefore are directly impacted by the prevailing energy prices in those markets. We have experienced and are experiencing supply chain difficulties, as well as an increase in the cost of raw materials and batteries, which may impact our ability to complete the projects on time, and increases overall project costs.

While the extent and duration of the economic downturn from the COVID-19 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting and while significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements.

Exploratory Drilling Costs Capitalization and Impairment, Policy [Policy Text Block]

Write-offs of unsuccessful exploration activities

There were no write-offs of unsuccessful exploration activities for the three months ended March 31, 2022 and 2021.

Cash and Cash Equivalents, Policy [Policy Text Block]

Reconciliation of cash and cash equivalents and restricted cash and cash equivalents

The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents as reported on the balance sheet to the total of the same amounts shown on the statement of cash flows:

	March 31,		December 31,		March 31,
	2022		2021		2021
	(Dollars in thousands)
Cash and cash equivalents	$	130,006	$	239,278	$	376,630
Restricted cash and cash equivalents		111,127		104,166		88,449
Total Cash and cash equivalents and restricted cash and cash equivalents	$	241,133	$	343,444	$	465,079

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of credit risk

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

The Company places its temporary cash investments with high credit quality financial institutions located in the United States (“U.S.”) and in foreign countries. At March 31, 2022 and December 31, 2021, the Company had deposits totaling $31.8 million and $31.0 million, respectively, in ten U.S. financial institutions that were federally insured up to $250,000 per account. At March 31, 2022 and December 31, 2021, the Company’s deposits in foreign countries amounted to approximately $82.8 million and $64.3 million, respectively.

At March 31, 2022 and December 31, 2021, accounts receivable related to operations in foreign countries amounted to approximately $76.8 million and $77.5 million, respectively. At March 31, 2022 and December 31, 2021, accounts receivable from the Company’s primary customers, which each accounted for revenues in excess of 10% of total consolidated revenues for the related period, amounted to approximately 54% and 58% of the Company’s trade receivables, respectively.

The Company's revenues from its primary customers as a percentage of total revenues are as follows:

	Three Months Ended March 31,
	2022			2021
Sierra Pacific Power Company and Nevada Power Company		19.5	%		21.4	%
Southern California Public Power Authority (“SCPPA”)		21.9			24.9
Kenya Power and Lighting Co. Ltd. ("KPLC")		14.1			15.6

The Company has historically been able to collect on substantially all of its receivable balances. As of March 31, 2022, the amount overdue from KPLC in Kenya was $19.8 million of which $9.4 million was paid in April 2022. The Company believes it will be able to collect all past due amounts in Kenya. This belief is supported by the fact that in addition to KPLC's obligations under its power purchase agreement, the Company holds a support letter from the Government of Kenya that covers certain cases of KPLC non-payment (such as where caused by government actions and or political events).

In Honduras, as of March 31, 2022, the total amount overdue from Empresa Nacional de Energía Eléctrica ("ENEE") was $20.5 million of which $4.8 million was received in April 2022. In addition, due to continuing restrictive measures related to the COVID-19 pandemic in Honduras, the Company may experience further delays in collection. The Company believes it will be able to collect all past due amounts in Honduras.

The Company may experience delays in collection in other locations due to the restrictive measures related to the COVID-19 pandemic which were imposed globally to different extents.

See Note 4 - Marketable Securities and under the caption "Marketable Securities" below for additional information regarding investment in marketable securities.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Allowance for credit losses

The Company performs an analysis of potential credit losses related to its financial instruments that are within the scope of ASU 2018-19, Codification Improvements to Topic 325, Financial Instruments – Credit Losses, primarily cash and cash equivalents, restricted cash and cash equivalents, investment in marketable securities, receivables (excluding those accounted under lease accounting) and costs and estimated earnings in excess of billings on uncompleted contracts, based on classes of financing receivables which share the same or similar risk characteristics, such as customer type and geographic location, among others. The Company estimates the expected credit losses for each class of financing receivables by applying the related corporate default rate which corresponds to the credit rating of the specific customer or class of financing receivables. For trade receivables, the Company applied this methodology using aging schedules reflecting how long the receivables have been outstanding. The Company has also considered the existence of credit enhancement arrangements that may mitigate the credit risk of its financial receivables in estimating the applicable corporate default rate. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted.

The following table describes the changes in the allowance for expected credit losses for the three months ended March 31, 2022 and 2021 (all related to trade receivables):

	Three Months Ended March 31,
	2022		2021
	(Dollars in thousands)
Beginning balance of the allowance for expected credit losses	$	90	$	597
Change in the provision for expected credit losses for the period		—		—
Ending balance of the allowance for expected credit losses	$	90	$	597

Revenue [Policy Text Block]

Revenues from contracts with customers

Contract assets related to our Product segment reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities related to the Company's Product segment reflect payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in the contracts. Total contract assets and contract liabilities as of March 31, 2022 and December 31, 2021 are as follows:

	March 31,			December 31,
	2022			2021
	(Dollars in thousands)
Contract assets (*)	$	11,522		$	9,692
Contract liabilities (*)	$	(10,964	)	$	(9,248	)

(*) Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts" and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the condensed consolidated balance sheets. The contract liabilities balance at the beginning of the year was not yet fully recognized as product revenues during the three months ended March 31, 2022 as a result of performance obligations having not been fully satisfied yet.

On March 31, 2022, the Company had approximately $45.7 million of remaining performance obligations not yet satisfied or partly satisfied related to our Product segment. The Company expects to recognize approximately 100% of this amount as Product revenues during the next 24 months.

Disaggregated revenues from contracts with customers for the three months ended March 31, 2022 and 2021 are disclosed under Note 9 - Business Segments, to the condensed consolidated financial statements.

Lessor, Leases [Policy Text Block]

Leases in which the Company is a lessor

The table below presents lease income recognized as a lessor:

	Three Months Ended March 31,
	2022		2021
	(Dollars in thousands)
Lease income relating to lease payments from operating leases	$	139,681	$	125,746

Marketable Securities, Policy [Policy Text Block]

Marketable securities

The Company’s investments in marketable securities consist of debt securities with maturity of up to one year and a high credit rating. The investments in marketable securities are classified as available-for-sale ("AFS") and thus measured at fair value based on quoted market prices. Unrealized gains and losses from AFS debt securities are excluded from earnings and reported net of the related tax effect in "Accumulated other comprehensive income (loss)". Realized gains and losses from sale of marketable securities, as determined on a specific identification basis, as well as interest income earned, are included in earnings. The Company considers available evidence in evaluating potential impairments of its investments, including credit market conditions, credit ratings of the security as well as the extent to which fair value is less than amortized cost. The Company estimates the lifetime expected credit losses for all AFS debt securities in an unrealized loss position under its allowance for credit losses model. The Company assesses the security’s credit indicators, including credit ratings when estimating a security’s probability of default. If the assessment indicates that an expected credit loss exists, the Company determines the portion of the unrealized loss attributable to credit deterioration and records an allowance for the expected credit loss in earnings. Unrealized gains and losses attributable to non-credit factors are recorded in "Accumulated other comprehensive income (loss)", net of tax. Marketable debt securities with original maturities of three months or less that are readily convertible into a known amount of cash are presented under "Cash and cash equivalents" in the condensed consolidated balance sheets.

Derivatives, Policy [Policy Text Block]

Derivative instruments

Derivative instruments (including certain derivative instruments embedded in other contracts) are measured at their fair value and recorded as either assets or liabilities unless exempted from derivative treatment as a normal purchase and sale. Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in "Other comprehensive income (loss)" and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to earnings to offset the remeasurement of the underlying hedge transaction which also impacts the same line item in the consolidated statements of operations and comprehensive income.

The Company maintains a risk management strategy that may incorporate the use of swap contracts, put options, forward exchange contracts, interest rate swaps, and cross-currency swaps to minimize significant fluctuation in cash flows and/or earnings that are caused by oil and natural gas prices, exchange rate or interest rate volatility.