Ormat Technologies, Inc. ("Ormat") (NYSE: ORA) announced that it has entered into a definitive agreement to acquire substantially all of the business and assets of Viridity Energy, Inc. ("Viridity"), a privately held Philadelphia-based company with nearly a decade of expertise and leadership in demand response, energy management and storage. The acquisition, which is expected to close early 2017, will mark Ormat's entry into the growing energy storage and demand response markets, with an established North American presence.
Initial consideration for the acquisition is $35 million, which will be paid at closing and is subject to adjustment in certain cases. Additional contingent consideration will be payable in two installments upon the achievement of certain performance milestones measured at the end of fiscal years 2017 and 2020. We expect Viridity to generate a positive operating income in 2017.
Using proprietary software and solutions, Viridity serves primarily retail energy providers, utilities, and large industrial and commercial clients. Viridity's offerings enable its clients to optimize and monetize their energy management, demand response and storage facilities potential by interacting on their behalf with regional transmission organizations and independent system operators. Founded in 2008, Viridity has under contract over 850 MW across 3,000 sites, including management of a portfolio of non-utility storage assets located in the northeastern US with over 80,000 operational market hours.
"This is an important strategic acquisition which combines Viridity's technology, its customer base, its highly experienced leadership team and employees that have in-depth knowledge and significant expertise in the demand response and energy storage and its presence in key North American markets together with Ormat's skills, resources, engineering strengths and access to capital," commented Isaac Angel, Ormat's CEO. "Ormat intends to use the Viridity platform to accelerate long term growth, expand its market presence, and further develop Viridity's demand response VPower software platform and energy storage services. Ormat will continue to provide services and products to existing customers, while expanding into new geographies and targeting a broader potential customer base. By leveraging the strength, stability, resources, EPC capabilities and global reach of Ormat, we expect to unlock significant new value for Ormat and its shareholders in the demand response and energy storage markets and generate incremental revenue and operating income."
Energy storage continues to be one of the fastest growing segments of the broader energy industry, set to reach an overall installed power capacity of 143.7 GW and a cumulative global market size of $162.3 billion in the next 10-year period, according to Navigant Research. This represents a CAGR of approximately 30% over the 10-year period in both in-front-of-the meter grid connected and behind-the-meter commercial and industrial deployments.
"Ormat's long-term vision is to evolve from a recognized leader in the geothermal industry to a leader in the broader renewable energy market," added Mr. Angel. "Establishing capabilities in the energy storage markets is a key element in realizing Ormat's vision, as these capabilities will enable Ormat to provide a complete solution to customers. The acquisition will enable Ormat to become a significant player in the growing energy storage and demand response markets and to diversify its traditional customer base with new commercial and industrial (C&I) customers as well as utility customers, particularly in the energy storage markets."
"This acquisition is a clear win for the Viridity business and its existing customers," added Mack Treece, CEO of Viridity. "With Ormat's management depth, global reach, extensive relationships and financial resources, the Viridity business will be fully empowered to improve its products and services, and deliver increasing value to its customers."
About Ormat Technologies
With over five decades of experience, Ormat Technologies, Inc. is a leading geothermal company and the only vertically integrated company engaged in geothermal and recovered energy generation (REG), with the objective of becoming a leading global provider of renewable energy. The company owns, operates, designs, manufactures and sells geothermal and REG power plants primarily based on the Ormat Energy Converter - a power generation unit that converts low-, medium- and high-temperature heat into electricity. With 72 U.S. patents, Ormat's power solutions have been refined and perfected under the most grueling environmental conditions. Ormat has 450 employees in the United States and over 600 overseas. Ormat's flexible, modular solutions for geothermal power and REG are ideal for the vast range of resource characteristics. The company has engineered, manufactured and constructed power plants, which it currently owns or has installed to utilities and developers worldwide, totaling over 2,000 MW of gross capacity. Ormat's current 710 MW generating portfolio is spread globally in the U.S., Guatemala, Guadeloupe, and Kenya.
Ormat's Safe Harbor Statement
Information provided in this press release contains statements that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters relating to current expectations, estimates, forecasts and projections about the acquisition described herein, Ormat's business strategy and goals, development or operation of assets, market and industry developments and the growth of Ormat's business and operations that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "may", "will", "could", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "projects", "potential" or "contemplate" or the negative of these terms or other comparable terminology are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. These forward-looking statements generally relate to Ormat's plans, objectives and expectations for future operations and are based upon its management's current estimates and projections of future results or trends specifically, the statement related to operating income in 2017. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this press release completely and with the understanding that actual future results and developments may differ materially from those projected as a result of a number of risks and uncertainties, many of which are beyond our control. For a discussion of such risks and uncertainties, see "Risk Factors" as described in Ormat Technologies, Inc.'s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2016.
These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, even though our situation may change in the future.