Ormat Industries Ltd. (TASE: ORMT) is returning to its roots and Sunday Energy Ltd. is getting a boost. Ormat subsidiary Ormat Technologies Inc. (NYSE: ORA) has signed a joint venture agreement with Sunday to develop, construct, and operate solar-photovoltaic energy systems in Israel with a total capacity of 36 megawatts. The companies estimate the investment in the project at $195 million (NIS 720 million).
Sunday will contribute the rights to all of its property and roofs required to develop solar energy systems larger than one megawatt to special purpose entities. Ormat will own and control 70% of each entity, and Sunday will own 30%. The companies will act jointly as the equipment procurement contractor and the operator of each project on the basis of their proportional holdings in each entity.
The special purpose entities will sell electricity generated from the projects to Israel Electric Corporation (IEC) (TASE: ELEC.B22), under 20-year power purchase agreements, which will generate $30 million in annual revenue. The special purpose entities plan to finance the investments in the projects with 80% non-recourse loans.
Ormat noted that it has more than four decades of experience in the development, construction, financing, and operation of hundreds of megawatts of renewable energy projects worldwide. It also noted that Sunday was one Israel's developers of photovoltaic systems, and has the know-how in the design of photovoltaic modules from various suppliers and the capabilities to obtain the necessary regulatory permits for construction and interconnection to the local grid.
Ormat and Sunday have already signed a deal to build a photovoltaic system of up to one megawatt on the roof of Ormat's manufacturing plant in Israel. The first 50-kilowatt system has already been installed and was connected to the national grid in August.
Ormat Technologies chairman and CTO Yehuda Bronicki, said, "Ormat's commercial activity in the solar energy market is part of a strategic plan to be a leading player in renewable energy. We have a long, rich history in renewable energy that includes activity in solar energy that we believe we can leverage to bring unique benefits to this project. Our connection to solar energy goes back over 30 years to the solar pond project that we developed between 1977 and 1984. Our work on the solar pond created the technological foundation for our geothermal technology, which today positions Ormat as the industry leader. We are pleased to finally add an Israeli solar installation, to the current 1,200 megawatts of geothermal and recovered energy power plants that Ormat has installed throughout the years. We are looking at this joint venture as an attractive business opportunity derived by the reduction in solar photovoltaic modules prices and the increase in their supply on one hand and the expected Israeli feed-in tariff for large solar photovoltaic systems on the other hand."
Sunday CEO Kobi Dinar added, "This is the most interesting and challenging collaboration that Sunday has ever embarked upon, both in terms of scale and its strategic importance. Sunday is proud to again collaborate with Ormat, which is the only Israeli company that specializes and leads in the field of renewable energy, including internationally. The combination of Ormat's added value and Sunday's capabilities will turn this partnership into a leading solar energy player in Israel, and will foster the vision of turning Israel into a global solar energy center. I am sure that the Israeli public will benefit and profit from this extensive collaboration."
Ormat Industries owns 57% of Ormat Technologies. Ormat Technologies closed at $41.07 on the NYSE yesterday, giving a market cap of $1.86 billion. Ormat Industries rose 1.5% by early afternoon on the TASE to NIS 33, giving a market cap of NIS 3.86 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on October 19, 2009
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