$48.00
$105.00
bear $48.00
base $77.00
bull $105.00
margin of safety $50.00
market price* $89.31
Ormat Technologies owns and runs geothermal power plants and sells the electricity under long-term contracts. It has 35 plants and complexes with 1,340MW of capacity, 81% of it geothermal. It also builds geothermal power equipment for other developers (the Product segment) and runs grid batteries in California, Texas and the PJM market on the East Coast (the Energy Storage segment). In 2025 revenue was $989.5 million: 70% electricity, 22% products and 8% storage. Geothermal plants run around the clock and hit an 84% capacity factor in 2025. Most of their output is sold at fixed prices, and the contracts have about 14 years left on average. The largest buyers are SCPPA (17.8% of revenue), NV Energy (13.8%) and Kenya Power, KPLC (11.9%). Two sites, McGinness Hills in Nevada and Olkaria III in Kenya, produced 20.7% of revenue. How we measured earnings. We start from reported operating cash flow and take out three things: working-capital swings, stock compensation, and the capital spending needed to keep existing plants running. Ormat spends heavily on new plants: $620 million of capital spending in 2025 against $335 million of operating cash flow. Most of that builds capacity that doesn't produce revenue for one to three years. A standard ratio-based split between upkeep and growth spending would count almost all of this construction as upkeep. It would show the business earning close to nothing, which does not describe a fleet of contracted plants. We therefore used the upkeep budget for operating plants that the company discloses in each annual report. It has run between $35 million and $66 million a year ($55 million for both 2025 and 2026). On that basis, owner earnings per share were about $3.50 to $4.10 from 2016 to 2021, then $4.41 in 2022, $4.66 in 2023, $5.37 in 2024 and $5.25 in 2025. Depreciation ($292 million in 2025) is much larger than that upkeep budget. Part of the gap is accounting: book lives are shorter than real plant lives. Ormat's Ormesa and Heber plants have run since the mid-1980s and have been re-contracted, with 17 years left on their current contracts. Part of the gap is real wear. The company has written down plant capacity to reflect cooling reservoirs, and it counts life-extension work such as the Beowawe repowering and the planned Salt Wells upgrade as growth spending. We carry that decline in the forecast, not in the starting earnings. In all three cases earnings stop growing after year 10, which means they shrink after inflation, and then fade to zero. We added back no debt: the earnings figure is already after interest. Starting point. We used the median of 2022 to 2025, $4.96 per share. Earlier years describe a much smaller business, before the 2021 to 2025 build-out of storage and solar and the acquired Nevada plants. Owner earnings per share fell 2.2% in 2025, as grid curtailments at McGinness Hills and weaker electricity margins offset a strong Product year. Our base case therefore assumes no growth in year 1, which already puts it below 2025. Operating cash flow in the first half of 2026 was $129 million, against $185 million a year earlier, while net income was flat. One half-year is not enough to move the starting level, but it is worth watching. Base case, about $77 per share. Earnings hold at $4.96 in year 1 and then grow about 2% a year through year 10. The drivers are named: the Arrowleaf solar-plus-storage plant (in service December 2025, under contract with San Diego Community Power), the Hoku plant in Hawaii (bought January 2026, 25-year fixed-price contract with HECO), a full year from the Blue Mountain stake added in June 2025, the higher renewal prices the company reports for contracts expiring over the next few years, and signed new business. That business includes a portfolio contract for up to 150MW for Google's data centers through NV Energy, with deliveries from 2028 to 2030 (still awaiting approval from the Nevada utility regulator, expected in the second half of 2026), and a 20-year contract with Switch starting in 2030. The Olkaria III contract in Kenya has about nine years left, and KPLC has asked for lower rates. We assume it is renewed around 2035 at about 30% less. Battery earnings fade to zero by year 18 as the cells wear out. After that, the geothermal fleet holds flat in dollar terms to year 30, then fades to zero by year 40, a span consistent with its oldest plants. Bear case, about $48 per share. Earnings start from the 2021 to 2025 median of $4.66 and slip 2% in year 1. They are flat after that, with three named hits. First, KPLC wins a 30% rate cut in 2028 and Olkaria III is not renewed when its contract ends, removing roughly $0.90 per share. Second, battery earnings shrink, since the company reports that Texas tolling prices have fallen and some tolling agreements were cancelled. Third, refinancing on a $2.66 billion debt load ($304 million comes due in 2026) raises interest cost by about $0.36 per share over five years. Overdue receivables in Kenya ($29.5 million) and Honduras ($20.3 million) show that foreign buyers can be slow payers. The US fleet holds to year 25, then fades to zero by year 32 as contracts run out. There is no value for the Google portfolio. Bull case, about $105 per share. Earnings start from the 2025 level of $5.25. They grow about 4% a year through year 10 as the Google and Switch projects come online on schedule and expiring contracts renew at the higher prices the company reports. Olkaria III renews on similar terms, and the fleet holds flat to year 35 before fading out by year 45. What could make this wrong. On the downside: more upkeep spending than the budgets show (the company files budgets, not actuals, for upkeep), faster reservoir decline, or losing Kenya on worse terms than our bear case assumes. On the upside: new geothermal plants have earned only modest cash returns on the roughly $4 billion invested since 2016. If that improves because of higher contract prices and the tax credits that geothermal and storage keep under the 2025 US tax law (for projects that start construction by 2033), growth could be worth more than we credit. Growth has been paid for partly by issuing shares, with the diluted share count up from 50 million in 2016 to 62.5 million today. Continued issuance would reduce value per share. Margin-of-safety price. Contracted plants make the earnings fairly predictable. But the company carries heavy debt, depends partly on developing-country buyers, and needs outside capital to grow. The estimate applies a margin of safety of about 35% to our base value, which puts the margin-of-safety price near our bear value, at $50.