Its net short of predictions, Ormat sees stock take a hit

The good news was that Reno's Ormat Technologies earned $4.2 million in the fourth quarter.

The bad new was that stock-market analysts expected earnings that were twice as high, and they pounded Ormat's stock down by more than 10 percent on the New York Stock Exchange within hours after the company reported its earnings last week.

Executives of the company that develops geothermal and recovered-energy systems in use around the world said Ormat encountered a number of woes during the fourth quarter.

Costs, for instance, are going up on one of the geothermal projects developed by Ormat, but its contract doesn't contain an escalation clause that would allow the company to recover the higher costs.

A couple of the company's power plants were shut down by operational problems during the quarter, trimming sales of electricity and boosting costs.

The Desert 2 geothermal plant in Churchill County was among the company's challenges.

It was projected to come on line in the middle of 2006, but the company says it's now scheduled to begin commercial operations in mid-2007 a year behind schedule.

And Dita Bronicki, Ormat's president and chief executive officer, said the company's margins are likely to remain squeezed for a while.

Fourth-quarter revenues were up by about $8 million but the cost of producing those revenues rose by nearly $15 million.

Factor in some modest increase in selling and administrative expenses, and Ormat's operating income for the fourth quarter fell to $6.8 million form $13.8 million a year earlier.

The company's common stock was down by nearly $5 a share as analysts digested the news.

It's traded as high as $45.13 in the last 52 weeks, but was as low as $38.18 after the earnings surprise.

Ormat's board also said it expects to cut the company's dividend after the current payout. It will pay 7 cents a share on March 29 to shareholders for record March 21. But in the next three quarters, the board said it expects to pay 5 cents a share.

Bronicki told securities analysts that Ormat expects to bring projects with a generating capacity of 57 megawatts into commercial operation in the first half of this year. She said the company expects its revenues from the sales of electricity to rise by at least $25 million this year.

The company's revenues from the sale of equipment used in geothermal projects, however, may be flat this year. Bronicki said those sales are difficult to predict from quarter to quarter.