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Financing Geothermal Projects in the Capital Markets A Developer s Perspective Eddie Sadan, Manager Business Developm

GREEN ENERGY you can depend on. 2. Company Profile. Focus on Renewable and Sustainable Energy since 1965Leader in innovative power generation technologiesWorld leader in the use of organic motive fluids (hydrocarbons) in power generation systemsListed on the New York Stock Exchange (ORA)Vertically-IntegratedDesign, Engineering, Manufacturing, Supply, Installation

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Financing Geothermal Projects in the Capital Markets A Developer s Perspective Eddie Sadan, Manager Business Developm

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    1. Financing Geothermal Projects in the Capital Markets A Developer’s Perspective Eddie Sadan, Manager Business Development September 12, 2006

    2. GREEN ENERGY you can depend on 2 Company Profile Focus on Renewable and Sustainable Energy since 1965 Leader in innovative power generation technologies World leader in the use of organic motive fluids (hydrocarbons) in power generation systems Listed on the New York Stock Exchange (ORA) Vertically-Integrated Design, Engineering, Manufacturing, Supply, Installation & Operation Flexible Business Model Equipment only Turnkey (EPC) power plants supply Electricity sales Project financing

    3. GREEN ENERGY you can depend on 3 Geothermal generation 364 MW in operation 131 MW in construction and enhancements Visible development pipeline Recovered energy generation 11 MW in operation 16 MW under construction Long-term contracts Company Profile Business Overview

    4. GREEN ENERGY you can depend on 4 ORMAT’s Worldwide Presence About 800 MW of Geothermal Power Plants

    5. I. Why Go to the Capital Markets ?

    6. GREEN ENERGY you can depend on 6 The Basic Need for External Capital Developing a geothermal power plant is a capital extensive activity. External sources of capital enable a developer: To expand its financial capabilities To improve the project’s economics

    7. GREEN ENERGY you can depend on 7 Financing Projects in the Capital Markets Main Characteristics & Risks Deal size – at least $100M Uniformed transactions – “market” terms Sensitivity to market’s condition Difficulty to handle post closing issues

    8. GREEN ENERGY you can depend on 8 Financing Projects in the Capital Markets The Benefits Simplicity – the other side of “uniformity” Transparency – a known path to closing Better positioning vis-ŕ-vis the investors Efficient execution

    9. GREEN ENERGY you can depend on 9 II. Financing Orcal In the Capital Markets

    10. GREEN ENERGY you can depend on 10 The OrCal Projects – Fact Sheet

    11. GREEN ENERGY you can depend on 11 Ownership Structure

    12. GREEN ENERGY you can depend on 12 Financing Geothermal Power Projects Key Factors to Success The necessary factors to success in financing geothermal projects were present in Orcal’s case: Fuel – high and predictable availability of the geothermal resource Long term PPAs Proven power plant technologies Experienced developer

    13. GREEN ENERGY you can depend on 13 OrCal’s Financing Transaction Fundamentals

    14. III. A Capital Markets Transaction The Process

    15. GREEN ENERGY you can depend on 15 Pre-Deal Process – The Team Structuring and executing a capital market transaction requires an “army” of advisors: Financial Advisors – the Investment Bank Legal Advisors – SEC, Project Finance, Real Estate, etc. Technical Advisors – Independent Engineers (plant & resource), Environmental Advisor, etc. Auditors

    16. GREEN ENERGY you can depend on 16 OrCal’s Advisors Team

    17. GREEN ENERGY you can depend on 17 Pre-Deal Process Once the “deal team” is defined, it focuses on preparing the following documents: Offering Memorandum Legal Agreements Roadshow Materials In parallel, the underwriter is running a due diligence process on the issuer as the future investors’ “representative”.

    18. GREEN ENERGY you can depend on 18 Main rating agencies: S&P, Moody’s and Fitch The rating ladder goes from AAA to C Investment Grade: BBB- and above A rating agency serves the investors by: Running a detailed & objective due diligence process, as it is a true third party. Providing them with a detailed report analyzing the risks involved with the offered bonds Bond Rating - General

    19. GREEN ENERGY you can depend on 19 To Rate or Not to Rate? Benefits: A rated deal is better marketed and lower priced High grade deal will attract more types of investors Risks: Rating might be a “pacing item” Uncertainty in the result

    20. GREEN ENERGY you can depend on 20 Rating – The OrCal Case The deal’s characteristics dictated the decision to rate the offered bonds: Price sensitivity The necessary debt served the refinanced amount only. There was a good chance to get an “investment grade” Rating timing fitted the transaction’s time table The Bottom Line: An Ormat subsidiary (OrCal) went through the rating process for the first time and achieved BBB- from Fitch

    21. GREEN ENERGY you can depend on 21 The Execution Phase - General Once everything is ready, the proposed deal is announced to the market by the investment bankers and the roadshow begins This phase in the process is dominated by the capital markets bankers.

    22. GREEN ENERGY you can depend on 22 The Roadshow Average time frame is between 1-2 Weeks Includes face to face meetings and conference calls with the company. The roadshow route usually focuses on the east coast, while other parts of the US are visited only if necessary. In parallel bankers are working behind the scenes, talking to investors.

    23. GREEN ENERGY you can depend on 23 Pricing I A successful roadshow translates to a sufficient amount of investors bidding for the offered bonds. The bid is placed for a certain amount and a spread over the US Treasury rate (=the price). Pricing day is pre-determined to allow the investors enough time to make a decision. At that day, general interests has to turn to “firm commitments” by investors that wish to buy the offered bonds.

    24. GREEN ENERGY you can depend on 24 Pricing II The final price is set by the bankers that run the “book of orders”. The “right price” should be able to fill up the amount and more, to create competition with some reserve demand and to meet “last minute surprises”. Despite the fact that the bankers are in control of this process, in good deals the company can be aggressive and influence the process to a limited extent

    25. GREEN ENERGY you can depend on 25 OrCal’s Pricing The credit rating and a successful roadshow created the necessary interest among investors The demand was strong (multiple over-subscription) with attractive price bids We were successful in attracting high quality “buy & hold” investors, with large chunks held by major insurance companies The company was able to influence the pricing process in terms of the actual pricing as well as the identity of the chosen investors

    26. IV. Lessons Learned

    27. GREEN ENERGY you can depend on 27 Lessons Learned Control over transaction’s timetable and cost is essential Rating is beneficial Monitoring the investment banker is possible Experience is important

    28. GREEN ENERGY you can depend on 28

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