ORMAT TECHNOLOGIES, INC.ORA
ORMAT TECHNOLOGIES, INC. Revenue Disclosure
Revenues and Cost of Revenues
Revenues from contracts with customers are recognized in connection with the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Company is required to apply each of the following steps: (1) identify the contract(s) with the customer; (2) identify the performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Revenues are primarily related to: (i) sale of electricity from geothermal and recovered energy-based power plants owned and operated by the Company; (ii) geothermal and recovered energy-based power plant equipment sale, engineering, construction and installation, and operating services; and (iii) sale of capacity, energy and/or ancillary services from its energy storage facilities.
Electricity Segment Revenues:
Revenues related to the sale of electricity from geothermal and recovered energy-based power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. The Company assesses whether PPAs entered into, modified, or acquired in business combinations contain a lease element requiring lease accounting. Revenue from such PPAs are accounted for in electricity revenues. In the Electricity segment, revenues for all but thirteen power plants are accounted as operating leases, and therefore equipment related to geothermal and recovered energy generation power plants as described in Note 8 is considered held for leasing. For power plants in the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company identified electricity as a separate performance obligation. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the invoiced amounts reasonably represents the value to customers of performance obligations fulfilled to date. The transaction price is determined based on the price per actual mega-watt output or available capacity as agreed to in the respective PPA. Customers are generally billed on a monthly basis and payment is typically due within 30 to 60 days after the issuance of the invoice.
Product Segment Revenues:
Revenues from engineering, operating services, and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from the supply and/or construction of geothermal and recovered energy-based power plant equipment and other equipment to third parties are recognized over time since control is transferred continuously to the Company's customers. The majority of the Company's contracts include a single performance obligation which is essentially the promise to transfer the individual goods or services that are not separately identifiable from other promises in the contracts and therefore deemed as not distinct. Performance obligations are satisfied over-time if the customer receives the benefits as the Company performs work, if the customer controls the asset as it is being constructed, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment. In the Company's Product segment, revenues are spread over a period of one to two years and are recognized over time based on the cost incurred to date in ratio to total estimated costs which represents the input method that best depicts the transfer of control over the performance obligation to the customer. Costs include direct material, labor, and indirect costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.
In contracts for which the Company determines that control is not transferred continuously to the customer, the Company recognizes revenues at the point in time when the customer obtains control of the asset. Revenues for such contracts are recorded upon delivery and acceptance by the customer. This generally is the case for the sale of spare parts, generators or similar products.
Accounting for product contracts that are satisfied over time includes use of several estimates such as variable consideration related to bonuses and penalties and total estimated cost for completing the contract. The estimated amount of variable consideration
will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are based on historical experience, anticipated performance and the Company's best judgment at the time.
The nature of the Company's product contracts give rise to several modifications or change requests by its customers. Substantially all of the modifications are treated as cumulative catch-ups to revenues since the additional goods are not distinct from those already provided. The Company includes the additional revenues related to the modifications in its transaction price when both parties to the contract approved the modification. As a significant change in one or more of these estimates could affect the profitability of the Company's contracts, the Company reviews and updates its contract-related estimates regularly. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period in which it is identified.
Energy Storage Segment Revenues:
Battery energy storage systems as a service, and related services revenues are recorded based on energy management of load curtailment capacity delivered or service provided at rates specified under the relevant contract terms. The Company determined that except for three storage facilities of which revenues are accounted as operating leases under lease accounting, such revenues are in the scope of ASC 606, and identified energy management services as a separate performance obligation. Performance obligations are satisfied once the Company provides verification to the electric power grid operator or utility of its ability to meet the committed capacity, the power curtailment requirements or the ancillary services and thus entitled to cash proceeds. Such verification may be provided by the Company bi-weekly, monthly or under any other frequency as set by the related program and are typically followed by a payment shortly after. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the amounts included in the verification document reasonably represent the value of performance obligations fulfilled to date. The transaction price is determined based on mechanisms specified in the contract with the customer.
Contract Assets and Contract Liabilities
Contract assets related to the Company's Product segment reflect revenues recognized and performance obligations satisfied in advance of customer billing. Contract liabilities related to the Company's Product segment reflect customer billing in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on the terms established in the contracts. Total contract assets and contract liabilities as of December 31, 2025 and 2024 are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Contract assets (*) | $ | 30,011 | $ | 29,243 | |||||||
| Contract liabilities (*) | $ | (13,159) | $ | (23,091) | |||||||
(*) Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts", and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the consolidated balance sheets. The contract liabilities balance at the beginning of the year was substantially recognized as product revenues during the year ended December 31, 2025 as a result of performance obligations that were satisfied. Additionally, as of December 31, 2025 and 2024, long-term costs and estimated earnings in excess of billings on uncompleted contracts related to the Dominica project in the amount of $75.0 million and $26.0 million, respectively, are included under “Deposits and other” in the consolidated balance sheets, and not under the contract assets and contract liabilities above, due to their long-term nature. Further details related to the Dominica Project are provided below under the caption “The Dominica Project”.
The following table presents the significant changes in the contract assets and contract liabilities for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Contract assets | Contract liabilities | Contract assets | Contract liabilities | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Recognition of contract liabilities as revenue as a result of performance obligations satisfied | $ | — | $ | 21,478 | $ | — | $ | 12,698 | |||||||||
| Cash received in advance for which revenues have not yet recognized, net of expenditures made | — | (11,546) | — | (17,119) | |||||||||||||
| Reduction of contract assets as a result of rights to consideration becoming unconditional | (19,774) | — | (5,070) | — | |||||||||||||
| Contract assets recognized, net of recognized receivables | 20,542 | — | 15,945 | — | |||||||||||||
| Net change in contract assets and contract liabilities | $ | 768 | $ | 9,932 | $ | 10,875 | $ | (4,421) | |||||||||
The timing of revenue recognition, billings and cash collections result in accounts receivable, contract assets and contract liabilities on the consolidated balance sheet. In the Company's Products segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, or upon achievement of contractual milestones. Generally, billing occurs subsequent to the recognition of revenue, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue can be recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. The timing of billing its customers and receiving advance payments vary from contract to contract. The majority of payments are received no later than the completion of the project and satisfaction of the Company's performance obligation.
On December 31, 2025, the Company had approximately $245.0 million of remaining performance obligations not yet satisfied or partly satisfied related to its Product segment. The Company expects to recognize approximately 100% of this amount as Product revenues during the next 24 months.
The following schedule reconciles revenues accounted under lease accounting, and revenues accounted under ASC 606, Revenues from Contracts with Customers, to total consolidated revenues for the three years ended December 31, 2025, 2024 and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
Electricity and Energy Storage revenues accounted under lease accounting | $ | 569,120 | $ | 553,348 | $ | 542,065 | |||||||||||
| Electricity, Product and Energy Storage revenues accounted under ASC 606 | 420,423 | 326,306 | 287,359 | ||||||||||||||
| Total consolidated revenues | $ | 989,543 | $ | 879,654 | $ | 829,424 | |||||||||||
Disaggregated revenues from contracts with customers for the years ended December 31, 2025, 2024, and 2023 are disclosed under Note 17 - Business Segments, to the consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.