Ormat Technologies, Inc. announced today that it is revising its previously issued expectations pertaining to the impact of recently finalized mandatory short-run-avoided-cost ("SRAC") pricing applicable to power purchase agreements ("PPAs") for the Heber 1 and 2 power plants, the Ormesa complex and the Mammoth complex in California (the "SARC PPAs") may have on its revenues in 2012 and 2013.
When originally announced, the impact of this settlement was expected to reduce revenues by $9.5 million in 2012 and $6.5 million in 2013. However, as a result of the significant decrease in natural gas price forecasts for 2012 and 2013 and the delay of California's greenhouse gas ("GHG") cap-and-trade program that is now scheduled to begin in 2013, each of which is uncertain and subject to change, it is now expected that the new SRAC price formulas will reduce revenues in 2012 and 2013 by an estimated $24.8 million and $24.9 million, respectively. Such reduction represents approximately 5.9% of the company's forecasted 2011 total revenues.
Despite the estimated impact, Ormat's total revenues in 2012 are expected to equal or exceed total revenues for 2011. Official financial guidance for 2012 will be provided in the company's 2011 fourth quarter and year-end earnings release which is scheduled for February 22, 2012.
In addition, to mitigate part of the reduction in revenues from these facilities, the company may seek to amend one or more of its PPAs, among other things, to provide for fixed price terms. There is no assurance that the company will be able to amend any of these PPAs on terms that are attractive to it, or at all.
Commenting on the revised guidance, Dita Bronicki, CEO of Ormat Technologies, said: "Revenues from new projects and our strong product segment pipeline should offset the impact of the current natural gas prices. While there are expectations that natural gas prices may increase due to various market conditions, such as LNG exports, we will continue to seek alternatives to the variable pricing terms for our SRAC PPAs."
