Geothermal growth and battery cash, with real execution risk
- Ormat's core business is long-term contracted geothermal power, but the battery storage segment is growing very fast.
- Energy Storage revenue surged 195 percent in the second quarter, but management warned that merchant pricing will normalize in the second half of the year.
- The company introduced the Ormega100 unit to help scale Enhanced Geothermal Systems and make future plants cheaper to build.
- Overdue bills from key customers in Kenya and Honduras remain a watch item, as the company provided no new updates on collections.
- Product segment revenue decreased 21.6 percent in the second quarter, highlighting the lumpy timing of equipment sales.
A cleaner growth story, not a cheap one
Ormat is a rare public pure play on geothermal power. Its base business is steady. It builds power plants, owns them, and sells the electricity under long contracts. That makes it different from many wind and solar developers, because geothermal can run day and night.
The bull case continues to advance. Management officially introduced the Ormega100, a standardized 100-megawatt unit meant to make EGS plants easier and cheaper to build over time. The company also confirmed active talks for EGS power contracts at higher prices than traditional geothermal. At the same time, the Energy Storage segment had a massive second quarter, proving it can capture high merchant power prices.
The bear case is that some of this growth is temporary and risky. Management clearly stated that the strong power prices that boosted second quarter storage results will normalize lower in the second half of the year. Also, the company gave no new updates on the large overdue bills from key customers in Kenya and Honduras.
Finn scores are middling, with the weakest read on valuation and financial health. That fits the story. Ormat owns valuable assets and has real long-term upside, but investors are paying ahead of proof on EGS, storage margins, and customer collections.
Own the plant, sell the power
Ormat makes money in three ways. First, it owns power plants and sells electricity, mostly through power purchase agreements, or PPAs. A PPA is a long-term contract that says who buys the power, how much they buy, and often what price they pay.
Second, Ormat sells equipment and services to other geothermal and recovered energy projects. Its key product is the Ormat Energy Converter, or OEC, which turns heat into electricity. The company introduced the new Ormega100 to standardize this equipment for larger EGS plants.
Third, Ormat owns battery storage projects. These batteries can earn money by selling power, capacity, and grid services. This can grow fast, but it can also swing with power prices, which is why the recent storage profits should not be treated as a normal run rate.
Management has set 2028 targets to reach 1.65 to 1.75 GW of Electricity capacity and 950 to 1,050 MW of Energy Storage capacity. Reaching those targets will take capital, permits, customers, and reliable project execution.
Power plants, parts, and batteries
Electricity
This is the owned power plant business. Ormat develops, builds, owns, and operates geothermal, solar PV, and recovered energy plants, then sells electricity to utilities and large buyers.
Products
This segment sells geothermal and recovered energy equipment, including OEC units, and provides project services. Revenue dropped in the second quarter due to project timing.
Energy Storage
Ormat owns grid batteries that earn money from power markets and grid services. The segment is growing fast and had a massive second quarter thanks to favorable merchant prices.
Enhanced Geothermal Systems
EGS tries to make geothermal work in more places by engineering the underground reservoir. The new Ormega100 unit aims to make these plants easier to build and scale.
Hyperscaler PPAs
Data center operators want clean power that runs all the time. Ormat is in active talks for EGS power contracts that are expected to carry higher pricing points.
Storage claims a larger share
Segment mix is from the three months ended June 30, 2026. Electricity remains the largest piece, but Energy Storage claimed a larger share due to strong market pricing.
What can break the story
EGS does not scale
High impact · Medium oddsEGS is the biggest long-term upside and one of the biggest risks. The technology has real drilling, reservoir, well productivity, thermal recovery, induced seismicity, and permitting risks. If the pilots miss cost or output targets, the market may cut the value it gives Ormat for future growth.
Storage margins fall back
Medium impact · High oddsEnergy Storage had a massive second quarter, with revenue surging 195 percent to $42.8 million. Favorable merchant pricing in PJM drove much of that strength. Management guided that these prices will normalize in the second half of the year, meaning the current run rate is not sustainable.
Utility customers pay late
Medium impact · Medium oddsKPLC in Kenya and ENEE in Honduras are important customers, and overdue balances remain large. Ormat gave no new updates on collections during the second quarter. Slow collections can pressure cash flow and raise credit concerns.
Product revenue stays lumpy
Medium impact · Medium oddsThe Product segment revenue decreased 21.6 percent in the second quarter to $46.7 million due to project timing. The $203 million backlog helps provide visibility, but timing can still swing results from quarter to quarter.
Israel exposure disrupts operations
Medium impact · Low oddsOrmat has senior management and manufacturing facilities in Israel. Geopolitical shocks could affect people, production, shipping, or investor sentiment. This risk has not changed, but it remains important because Ormat is vertically integrated and depends on its own equipment.
In one breath
What does Ormat Technologies do?
Ormat builds, owns, and operates geothermal, solar, recovered energy, and battery storage assets. It also sells geothermal equipment and services to other project owners.
Why is geothermal important for data centers?
Geothermal power can run day and night, unlike solar or wind. That makes it attractive to data centers that need clean power with steady output.
What is EGS for Ormat?
EGS means Enhanced Geothermal Systems. It uses engineering to make underground heat resources usable in more places, but Ormat still has to prove the wells, costs, and long-term output.
Why are Ormat's recent storage results risky to repeat?
The recent Energy Storage results were helped by high merchant prices in PJM. Management said it expects these merchant prices to normalize to lower levels in the second half of 2026.
