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Ormat Industries Ltd. (TASE: ORMT) subsidiary Ormat Technologies Inc. (NYSE: ORA) announced that California regulations will increase the estimated effect on the company's revenue to $24.8 million in 2012 and $24.9 million in 2013, more than the original estimate of $9.5 million and $6.5 million, respectively. The new estimates equal 5.9% of Ormat Technologies' projected revenue for 2011.
California finalized the mandatory shortrun-avoided-cost (SRAC) pricing applicable to power purchase agreements (PPAs), which will affect Ormat's Heber 1 and 2 power plants, the Ormesa complex and the Mammoth complex in the state.
Ormat added that, notwithstanding the estimated impact, it expects that its total revenue in 2012 will equal or exceed its 2011 revenue. The company will announce its guidance for 2012 when it publishes its fourth quarter and full-year 2011 financial report on February 22, 2012.
Ormat says that that new SRAC price formulas are the result of the significant decrease in natural gas price forecasts for 2012 and 2013 and the delay of California’s greenhouse gas cap-and-trade program that is now scheduled to begin in 2013, each of which is uncertain and subject to change. It added that, to mitigate the lower expected revenue from its California geothermal plants, it may seek to amend one or more of its PPAs to provide for fixed price terms and other conditions. It cautioned that there was no assurance that it would be able to amend the contracts on favorable terms.
Ormat Technologies' share price fell 2% yesterday to $17.52, giving a market cap of $796 million, and Ormat Industries' share price fell 1.6% in early trading on the TASE today to NIS 17.68, giving a market cap of NIS 2.1 billion.
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