Ormat Technologies - Q1 2024

Transcript

Operator (participant)

Good morning and welcome to the Ormat Technologies First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. You can ask a question by dialing star one on your telephone keypad to raise your hand and join the queue, and please note that today's event is being recorded. I would now like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead.

Josh Carroll (Head of Investor Relations)

Thank you, Operator. Hosting the call today are Doron Blachar, Chief Executive Officer, Assi Ginzburg, Chief Financial Officer, and Smadar Lavi, Vice President of Business Relations and ESG Planning and Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections, future results, or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties.

For a discussion of such risk and uncertainties, please see risk factors as described in Ormat Technologies' annual report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as Adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the presentation link that's found on the Investor Relations tab. With all that said, I would now like to turn the call over to Doron Blachar. Doron, the call is yours.

Doron Blachar (CEO)

Thank you, Josh, and good morning, everyone. Thank you for joining us today. During the first quarter, Ormat delivered strong financial results driven by improved operating performance and continued growth across all three segments. This quarter, the company saw a 21% increase in total revenues, a 25.5% rise in earnings per diluted share, and a 14.4% increase in Adjusted EBITDA when compared to the first quarter of last year. The first quarter results were fueled by organic growth that includes the successful execution of our strategic plan and enhanced operational efficiency at existing facilities, which together contributed more than 50% of the increase in revenues and in EBITDA. In addition, these results were positively impacted by the recent acquisition of assets from Enel Green Power North America. Our electricity segment continued to drive growth.

This quarter, record results reflect an impressive improvement in operational performance at Puna and at our Heber 1 facility, which was partially operational during the prior year's quarter. Furthermore, the new capacity we added last year in North Valley and Dixie Valley, and the new acquired assets added this year, helped grow our electricity segment economics relative to the comparable prior year period and also offset the impact of business interruption insurance income of $6.7 million included in last year's first quarter results. In the storage segment, we experienced a greater degree of stability in revenues from several new projects launched in 2023 that helped improve the segment's gross margin. The East Flemington project that came online in the first quarter also contributed to our results, and we expect the Bottleneck project to come online towards the end of the second quarter.

In our product segment, our backlog has continued to stay strong due to the growing demand for geothermal products, with year-to-date revenues increasing by an impressive 147%. Since the beginning of the year, we added, including the Enel assets, 130 MW of new generating capacity. Combined with the potential uplift from our successful drilling campaign in Kenya and the macro drivers, we are confident in meeting both our long-term capacity expansion goals and our financial targets for 2024 and beyond. On a macro basis, the global demand for renewable energy continues to grow, driven by increasing environmental concerns, supportive government policies, attractive power purchase agreements, and increased renewable demand, including from data centers. Our diverse portfolio of geothermal, solar, and energy storage solutions positions us well to capitalize on these favorable tailwinds.

Now, before I provide further updates on our operations and plans, I will turn the call over to Assi to review the financial results. Assi?

Assi Ginzburg (CFO)

Thank you, Doron. Let me start my review of our financial highlights on slide 5. Total revenue for the fourth quarter was $224.2 million, up 21% year-over-year. This was driven by growth across all three segments. Ormat's first quarter 2024 gross profit was $78.8 million, up by 3.6% versus $76.1 million in the first quarter of 2023, resulting in a consolidated gross margin of 35.2%. Net income attributed to the company's stockholders was $38.6 million or $0.64 per diluted share in the quarter, compared to $29 million or $0.51 per diluted share in the first quarter of the prior year. Excluding one-time M&A expenses related to the Enel recent acquisition, our adjusted net income attributed to the company's stockholders was $39.6 million or $0.65 per diluted share.

This represents a significant increase of 36.5% in adjusted net income attributed to the company's stockholders and 27.5% in EPS compared to the same quarter last year. The solid earnings and EPS growth were mainly the results of the new assets added to the portfolio relative to last year's first quarter and a lower tax rate as we continue to capture benefit from the IRA tax credits. Adjusted EBITDA of $141.2 million increased 14.4% in the first quarter, compared to $123.5 million in the prior year period.

The year-over-year increase in adjusted EBITDA was driven by growth in all three segments, with the electricity segment leading the increase, largely as a result of better performance of operating assets that led to increased generation, the commercial operation of North Valley last year, the inclusion of the new acquired Enel assets in our portfolio, and a larger contribution from tax equity transactions, offset by $6.7 million business interruption insurance income recorded last year related to Puna. On slide 5, we break down the revenue performance at the segment level. Electricity segment revenues increased 12.3% to $191.3 million. This increase was largely driven by contribution from the new Enel acquired assets and from Heber 1, which was only partially operational in the first quarter of 2023, improved generation at Puna that is now operating above 30 MW, and the addition of North Valley Power Plant in April 2023.

In the product segment, revenue marked a substantial increase, growing by 147.3% to $24.8 million. The growth in our product segment was supported by a higher backlog and the timing of revenue recognitions. The current product segment backlog stands at approximately $130 million as of May 8, 2024. Energy storage segment revenues increased by 66% to $8.1 million in the first quarter, driven largely by the impact of CODs for storage facilities that the company achieved in the second half of 2023, East Flemington that came online this year, and a higher merchant rate in the PJM region. Moving to slide 6. The gross margin for the electricity segment was 39% in the first quarter, down from 44.4% from the previous year. The reduction in margin was driven by the absence of business interruption insurance proceeds that flowed through our last year's cost of revenues.

In the product segment, gross margin was 14.8% in the first quarter, up 790 basis points compared to the first quarter of 2023. Margin increased due to the increased profitability of our recently signed contract. The energy storage segment reported the first quarter gross margin of 7.5% compared to -3.6% in the prior year. The increase in gross margin was driven by the new projects that were launched in 2023, the commercial operation achievements at East Flemington, and better merchant prices, mainly in PJM. Breaking down adjusted EBITDA, the electricity segment generated 92% of Ormat's total consolidated adjusted EBITDA in the first quarter of 2024. The product segment generated 5%, and the energy storage segment reported adjusted EBITDA of $3.7 million, almost 3% of total adjusted EBITDA. Reconciliations of EBITDA and adjusted EBITDA are provided in the appendix slides. Moving to slide 7.

In the first quarter, we recorded $17.5 million in income related to tax benefits, an increase of $4.9 million compared to last year. The increase is mainly due to $2.5 million higher transferable PTCs and $1.7 million income related to the new North Valley tax equity transaction signed in Q4 of 2023. Also, in the first quarter, we recorded $11.5 million of ITC benefits in the income tax line related to the storage facility, and we expect proportional quarterly amounts to be recorded throughout the year. We anticipate during 2024 to receive approximately $150 million in cash proceeds related to the PTC and ITC benefits that will reduce our capital needs, expanding our ability to profitably grow our base of generating assets, and ultimately lowering the capital intensity of our growth efforts.

Looking at slide 8, our net debt as of March 31st, 2024, was approximately $2.1 billion, equivalent to 4.1x net debt to EBITDA. Cash and cash equivalents and restricted cash and cash equivalents as of March 31st, 2024, was approximately $299 million compared to $288 million at the end of 2023. Slide 8 breaks down our use of cash for the 12 months, illustrating Ormat's ability to reinvest in the business and service our debt obligation while also consistently returning capital to our shareholders, while growing our business. Our total debt as of March 31st, 2024, was approximately $2.4 billion net of deferred financing costs. It's presented on slide 30 in the appendix, which outlines the payment schedule. The average cost of our debt for the company stands at 4.57%.

Nearly all of our debt liabilities remain at a fixed rate in nature, which we believe will help continue to position Ormat competitively in a higher and more volatile global interest rate environment. Moving to slide 9. We have approximately $766 million of total liquidity. Our total expected capital expenditure for the remaining of 2024 is approximately $472 million, as detailed in slide 31 in the appendix. We plan to invest approximately $254 million in the electricity segment for construction, drilling, and maintenance capital, and $196 million in our storage assets in the remaining of 2024. Overall, Ormat's balance sheet and capital resources position the company well, facilitating our ability to continue executing our strategic growth plans. We have maintained excellent liquidity, and we have ample access to additional capital.

On May 8, 2024, our board of directors declared, approved, and authorized payment of quarterly dividend of $0.12 per share payable on June 5, 2024, to shareholders of record as of May 22nd, 2024. We expect to maintain this dividend level for the remaining of the three quarters of the year. That concludes my financial overview. I would like now to turn the call to Aron to discuss some of our recent developments.

Aron Willis (Company Representative)

Thank you, Assi. Turning to slide 11 for a look at our electricity segment operating portfolio. As previously mentioned, generation growth in our core electricity segment was positively impacted by several CODs that occurred last year after the first quarter and the COD of Steamboat solar this year. In addition, generation grew from the contribution of the newly acquired geothermal and solar assets. Our Puna complex also helped drive generation growth during the quarter, as its generating capacity continued to ramp up relative to last year, running at 30 megawatts over the last two quarters. This was further accomplished by increased generation at Heber 1. In total, we added 110 megawatts since the beginning of the year to the electricity segment portfolio and grew the generation by 7.9%. Turning to slide 12 for an update on our operating footprint.

At our Olkaria Power Plant in Kenya, our operational teams are continuing to work to increase capacity, and we are currently operating at close to 130 megawatts. Our drilling campaign in Olkaria has continued to show positive results, and we continue to believe that the connection of the new wells will both support generation upside and improve future performance. In Guadeloupe, as announced before, we signed a 30-year PPA with EDF for the development of a new 10-megawatt geothermal power plant, which helps support our capacity growth targets and strategically expands our presence in the attractive Caribbean region. The new geothermal plant will be added to our existing 50-megawatt Bouillante. This and the expected 10-megawatt Dominica Power Plant, currently under development, will bring our total geothermal capacity in the Caribbean region to 35 megawatts once the plants become operational in 2025.

On the strategic front, on slide 13, we announced in January that we completed the acquisition of the portfolio of geothermal and solar assets from Enel Green Power North America. The contribution of the new assets to first-quarter revenues and EBITDA is aligned with our expectations. We have identified new opportunities to enhance the acquired assets on top of the upgrades that we already initiated, and we are currently evaluating their potential contribution. Turning to slide 14. Our product segment backlog stands at $130 million. We are encouraged by the worldwide tailwind for geothermal that should allow us to continue maintaining a strong backlog. Moving to slide 15.

The energy storage segment delivered a strong quarter that was supported by new projects which contributed to our results, as well as the long-term tolling agreement for our Pomona II facility in California, which helped create a stable and profitable revenue stream for the energy storage segment. Also, we saw better merchant rates in the PJM region that supported Q1 profitability. As Assi mentioned, we have also continued to benefit from ITC with both our East Flemington and Bottleneck facilities that are eligible to tax credit, which reduced our tax expense in the quarter. Moving to slides 17 and 18. We continue to see an increase in the demand for our electricity and energy storage segments. The successful and steady execution of our growth strategy has given us the confidence to maintain our targets to reach between 2.1-2.3 gigawatts of portfolio capacity by year-end 2026.

Slides 19 and 20 display the geothermal and hybrid solar PV projects that we currently have underway. We continue to remain on pace to complete three geothermal development projects in 2024, which include Beowawe Repowering in the U.S., Zunil in Guatemala, and Ijen in Indonesia. Combined, these projects will help increase our energy-generating capacity by 26 MW. In our solar PV portfolio, Steamboat Hills Solar completed COD during the first quarter, and during April, we achieved COD for North Valley Solar. Slides 21 and 22 highlight the third layer of our growth plant, the energy storage segment. We completed the East Flemington 20 MWh facility and currently have six energy storage projects under development that will add 335 MW or 1,040 MWh to our storage portfolio by the end of 2025.

At our Bottleneck facility in California, we are currently in the commissioning stage, and we anticipate that the 80 MW or 320 MWh storage facility will begin operating towards the end of the second quarter of this year. Please turn to slide 23 for a discussion of our 2024 guidance. We continue to expect total revenues to increase by 7% year-over-year at the midpoint and to be between $860 million-$910 million, with electricity segment revenues between $710 million-$730 million, an increase of 8% compared to 2023 results. We expect between $115 million-$135 million in the product segment, and energy storage revenues are expected to be between $35 million-$45 million. We expect Adjusted EBITDA to increase by approximately 10% at the midpoint to range between $515 million-$545 million. We expect annual Adjusted EBITDA attributable to minority interest to be approximately $18 million.

I will end our prepared remarks on slide 24. We remain on track to achieve our long-term growth target. We believe that our compelling and differentiated portfolio, unique growth strategy, and our track record to develop compelling projects with long-term PPAs position us well to improve profitability as demand continues to increase for renewable energy and drive significant shareholder value. Supporting this are the favorable macro drivers such as the increasing demand for renewable energy from data centers, attractive power purchase agreements, and declining battery prices. We look forward to meeting and speaking with our shareholders, analysts, and broader stakeholders at our upcoming analysts' day in June 20. This concludes our prepared remarks. Now, I would like to open the call for questions. Operators, please.

Operator (participant)

Thank you. And as mentioned, the floor is now open for questions. To ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. Again, that is star one to join the queue, and your first question comes from the line of Noah Kaye from Oppenheimer. Please go ahead.

Andre Adams (Analyst)

Hi there. You've got Andre Adams on for Noah. The first question would be, you've seen good performance so far from the Enel assets. Can you give us a little bit more color on how you're proceeding with the previously announced capacity upgrades? And if you could provide any more detail on the new opportunities you're pursuing with those assets, whether they're Greenfield or Brownfield specifically.

Doron Blachar (CEO)

Thank you. It is the role. So the assets, as we said, are performing a little bit better than what we've expected as part of the acquisition. The enhancement that we plan to have by the end of 2025, on track, we're actually started already in one of them, the engineering part. And with the other two, we are finalizing our detailed plan, and we'll start engineering and manufacturing immediately afterwards. So things are on track as we expected. The improved enhancement that we see, we actually have spoken with our off-taker mainly in Cove Fort, and there is a very strong demand for additional megawatts, and we are working with him to see if we can increase the interconnection and the PPA, which is very much in favor.

We do believe the resource can support more megawatts than what we anticipated originally. So if these three stars will align, we'll be able to do more than what we've expected. It might move the enhancement a few months forward, but it will be more done. So these are brownfield. And since we do see this very strong demand over there, we believe that we might be able to expedite also the greenfield, which was forecast a few years down the road, but we might be able to bring it a little bit earlier.

Andre Adams (Analyst)

Great. Thanks.

Operator (participant)

Your next question comes from the line of Justin Clare from Roth MKM. Please go ahead. Justin Clare, your line is open.

Justin Clare (Analyst)

Yep. Good morning. Sorry about that. So I wanted to start off here just you had mentioned data centers earlier, and there's obviously pretty strong demand for firm renewable power from data centers. So wondering if you could just speak to the opportunity that you're seeing there for Ormat to serve that need, whether from the geothermal side of your business or from the storage side of your business?

Doron Blachar (CEO)

Well, as you said, the market today is in very strong demand from the utilities, but also from the data centers. We've been approached already by a few data centers that are looking for green and baseload renewable energy. We are discussing with them. Geothermal is in specific sites, so we're discussing with them exactly how we can connect to them and to make sure that they can get the green energy that they are looking for. And I hope that in the next few months, we'll have some more updates to you, but we are in discussion with some of them. The pricing over there are very high. The pricing that we see in the PPA from the utilities, if we talk in the past, in the '80s, I can say today that the discussions for geothermal are in the '90s and above that even.

There's a lot of demand, and we're trying to see how we can generate more and more electricity from our facilities.

Justin Clare (Analyst)

Okay. Great. And then maybe shifting over, you did mention that you've had success in the drilling campaign with your Olkaria facility, and there's potential upside to the generation there. I was wondering if you could just speak to the timeframe at which we could potentially anticipate more capacity coming online. And then can you remind us, do you need to update the PPA as you increase capacity there? And then is there any potential change to the PPA pricing, either for the existing capacity or for the new capacity?

Doron Blachar (CEO)

Thank you for asking. I'll start with the end. Our PPA is for 150 MW with the existing pricing. This is what we have signed, and that's what we can reach. Above 150, we'll obviously need to negotiate an additional PPA. The drilling campaign was very, very successful. We're able to drill to the deep reservoir, which is effectively a new reservoir for us. We see on occasional days very, very high generation above or close to 140 MW, but it's not yet stable. We expect that towards the end of the year, we will be able to make some adjustment to the power plant, and hopefully, by that time, we'll be able to generate closer to 140 MW. But we are very, very encouraged with the campaign that we did. It went to a totally new reservoir, and it was very successful.

Justin Clare (Analyst)

Okay. Got it. And then just one more on the storage. We've heard the pricing for batteries continues to trend lower here. So just wondering if you could update us on what you're seeing? We've also heard that there's potentially more favorable terms being offered from suppliers. And wondering, could this affect your CapEx expectations moving forward here? And I guess maybe could you also comment on the project returns for storage and how attractive those might be?

Doron Blachar (CEO)

So we definitely see the price of batteries going down. It will help us to release more projects with higher returns. We're able to see low double-digit returns on our project IRR on the storage. We do see between the battery suppliers, although most of them are from China, competition between them, or they are trying to get more market share between one another. But we definitely see we feel more comfortable today with securing batteries contracts. The delivery times of batteries have become much faster than in the past. In the past, if it would have been 18 months, sometimes even more than that, today, you can get between 12 to 18 months delivery time. So definitely, the market on the battery side has changed significantly, and we hope and expect it to continue.

Justin Clare (Analyst)

Okay. Thanks very much.

Doron Blachar (CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Ryan Levine from Citi. Please go ahead.

Ryan Levine (Analyst)

Thank you for taking my question. To follow up on some of the earlier comments, you mentioned opportunities to pursue development with some of these data center customers at about $10 per megawatt above previous pricing. What markets are you targeting for that customer base? Is this some of the Western U.S. states or other parts of the world?

Doron Blachar (CEO)

At this stage, we are targeting purely the Western part of the U.S. We had some discussions about supplying somebody that will build a data center someplace on the international front, but we see this as very early. But if somebody will decide to develop a data center in Guatemala or Kenya, we'll be very happy to supply him with green energy from our facilities over there.

Ryan Levine (Analyst)

Great. In the slide deck, it was highlighted the successful campaign in Kenya. Can you provide a little more color around the markers of that success or what you're seeing from that drilling campaign?

Doron Blachar (CEO)

The campaign, basically, we did was split into two. On one hand, we drilled into our existing reservoir, which is relatively shallow, which was okay to support the existing generation. But we also drilled to the deep reservoir. Deep, I mean around 10,000 feet, which is the deepest that we've drilled or much has drilled so far. And here, we hit a very good reservoir. It has potential to increase the generation to the area of the 140 MW. We've seen that for a short period of time, but we need to make some adjustment to the power plant in order to be able to accept this strong resource. And we expect that to happen towards the end of the year.

Ryan Levine (Analyst)

Okay. Last quarter, you had highlighted some trade route redirection away from the Suez Canal. Is that still going on? Is there a way to quantify the impact to your business in margins or outlook?

Doron Blachar (CEO)

Well, the change of route that we mentioned happened. Once it happened, it doesn't change. You take it into account. The shipping time is extended by two weeks. Once you aligned all your projects, all your manufacturing and delivery times to that, then it doesn't impact anymore.

Ryan Levine (Analyst)

Great. Thanks for taking my questions.

Doron Blachar (CEO)

Thank you.

Operator (participant)

As a reminder, if you would like to join the queue and ask a question or if you have a follow-up question, please press star one on your telephone keypad now. Your next question comes from the line of Derek Podhaizer from Barclays. Please go ahead.

Derek Podhaizer (Analyst)

Hey. Good morning. Maybe just to continue the conversation on Kenya, could you provide us an update on the collections progress and whether you're collecting in USD or not?

Doron Blachar (CEO)

Good morning. As we mentioned last year, we do expect improvement in the collection in Kenya. Over the quarter, you will see it in our cash flow. Our operating cash flow was probably the strongest ever in Ormat history. I think it was close to $120 million. You'll see it on the presentation. And it was supported by a very good collection in Kenya. We collected in the last four months, in addition to the current billing, over $25 million. So almost $60 million in four months collection. I don't think we've seen as much in the last few years. The dollar in Kenya, we do see a shift. They had a very successful bond offering for the government. And as a result, the currency is in a much better situation. And I can tell you that we are very pleased with the situation in Kenya these days.

Derek Podhaizer (Analyst)

Great. Appreciate the color. Maybe just expand on the $150 million you're expecting in cash payments from the PTCITC. We saw $29 million first quarter. So maybe walk us through how that'll step up for the remainder of the year just as you see it today.

Doron Blachar (CEO)

So just to explain, the $150 million is a cash item. Not all of it will flow through the P&L. The two largest items in that are two tax equity transactions that we plan to make this year, one for the Heber 2 power plant that is already operating and one for the Beowawe power plant that is basically, as we speak, starting to operate. So those combined will bring close to $100 million of that 150. In addition to that, we have two storage assets that are coming online this year. One that already came online, which is East Flemington, and the second one, which is Pomona, which is very close to start operating in the next few weeks. So between those two, we expect to get roughly $35-$40 million of cash. So when you combine those, this is almost all of the $150 million.

The remaining is PTC transfer, mostly for the Heber 2 power plant that we generated last year. This year, we're generating around $4 million a quarter of PTCs over there. So when you think about it, some of it will flow through the P&L. All of the ITC storage will flow through the P&L. All of the PTCs transfer will flow through the P&L. Then the tax equity transactions on the geothermal, which is roughly $100 million, will flow through the P&L over the next 8-9 years evenly. But the most important thing is that we're expecting $150 million in cash. When you combine it with our very strong EBITDA this year, it gets us to a point that Ormat almost is fully covering all of its needs, including all the growth CapEx, which we haven't been in that situation for years.

Derek Podhaizer (Analyst)

Right. No. I appreciate that. And then maybe just lastly, on the CapEx, I noticed in the deck it was revised up $550-$570 for 2024. Looks like it's all in storage. So maybe some color around that, what's driving the increase to your CapEx budget for the year?

Doron Blachar (CEO)

What we see on storage is two things that are really helping us pre-releasing projects that you don't see their names yet. The first thing is, as mentioned on the call before by Doron, battery prices are down close to 50% versus two years ago. So this enables us to release more projects. So that's one thing that we are already pre-releasing projects. And second, PPA prices are almost at the level that they were before the IRA came in. So we are in a very strong demand for PPAs on one hand. And then battery prices are coming down. So we are pre-releasing more projects. Some of it includes buying some batteries for those projects. And therefore, you see some increase.

But what will happen next in the next few quarters, you will see us bringing more projects to you guys, maybe even as early as between now and year-end. Maybe we'll talk about it in the Analyst Day. But there are more projects that are coming online, and therefore, we're increasing. We don't see an increase in the current project's CapEx. Actually, we see a decrease. So it's coming from new projects.

Derek Podhaizer (Analyst)

Great. Appreciate all the color. I'll turn it back.

Operator (participant)

Your next question is from the line of Jeff Osborne from TD Cowen. Please go ahead.

Jeffrey Osborne (Analyst)

Hey. Good morning. Just two quick ones. I might have missed it, but did you provide an update or could you provide an update on the domestic storage battery supply that you were aiming to achieve? I think that was later this year, early next.

Doron Blachar (CEO)

At this point, it looks like the best route is to focus and buy Chinese-manufactured batteries. Of course, we're talking to many manufacturers to see who will be the first one that will start producing in the U.S. to try to tie to it. We also see that there's many ways to get the domestic content. Even when buying Chinese batteries, it is still very preliminary. But for example, it looks like Tesla that does buy outside the U.S. battery cells are eligible or at least potentially eligible for the domestic content. So there are two routes, just to be clear. One, to buy U.S.-manufactured batteries. They don't exist yet. It will be probably slightly more expensive. The second route is to see, is there a way to buy Chinese-manufactured batteries and to make enough work on them to make them eligible for the extra 10%?

But I will say one thing. We did see a few weeks ago that there were new maps of areas that will be eligible for energy community additional 10%. And this is an indication that some of our projects that we have on the books today that we thought that we'll have a 30% bracket actually going to get to 40% because of the area that they are. So there are positive things on both sides. I just want to make a comment. I responded earlier, and I said that the ITC is related to Pomona. I will just say the ITC is related to Bottleneck, which is a project that cost us slightly over $100 million and has a 40% ITC percentage eligible for it.

Jeffrey Osborne (Analyst)

Got it. That's helpful. The last one I had is just, can you remind us, is there any renewals that you have coming up in the next 2-3 years? Certainly, there's a lot of demand for green baseload power like you offer. It just was unclear to me with the existing assets. Do you have any renewals that would be up for potentially signing at a much higher price?

Doron Blachar (CEO)

So we have a list of the projects on the presentation that are coming online in the coming years. We have some renewals that are coming on as well as new contracts. I believe the renewals, Beowawe is one of them, which is an enhancement and change of a contract. We have Heber 2 that is changing in 2026. We have Galena and Steamboat that are also expected to change end of PPA and go to the new PPA towards the 2026, 2027.

Jeffrey Osborne (Analyst)

But just to be clear, Doron, I thought many of those weren't those for the 150 MW combined. I think it was that you signed a couple of years ago for LADWP or the Southern California Basin or no?

Doron Blachar (CEO)

Some of them are for LADWP. Some of them are for NV Energy. Some we are negotiating. The Heber 2 one is none. It's none of them. So we are negotiating today a PPA. It has a PPA with SCPPA that ends at the end of 2025. And we are now negotiating a new PPA for the extension. We have quite a lot of demand for it. So I think we have all of them going into existing portfolio PPAs and some to new ones. We're also looking to see how we can optimize the existing PPAs that we've signed to make sure that it's a win-win situation for both parties.

Jeffrey Osborne (Analyst)

Perfect. That's all I had. Thank you.

Operator (participant)

That concludes the Q&A session for today. I will now turn the conference back over to Doron for closing remarks.

Doron Blachar (CEO)

Okay. Thank you, everyone, for joining us. The quarter was a very good quarter. The demand that we see in the U.S. from utilities and data centers is very, very strong and increasing and obviously is pushing PPA pricing up. We see the improved operations in Puna that is done in the quarter. Over 30 megawatts is continuing like that and the success campaign in Olkaria. So we're very encouraged for this year and for the coming years. And we look forward to see all of you in New York at our investors and analysts day in June. Thank you.

Operator (participant)

This concludes today's conference call. Thank you all for joining us. Enjoy the rest of your day. You may now disconnect.