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Ormat delays annual report on 'material weakness' related to tax reform impacts

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Ormat delays annual report on 'material weakness' related to tax reform impacts

Geothermal power plant developer Ormat Technologies Inc. posted record revenues for 2017 but missed analysts' expectations for the fourth quarter and the full year. Perhaps more concerning for investors, the company delayed filing its annual report with the U.S. Securities and Exchange Commission.

Ormat plans to report "a material weakness in internal control of our financial reporting as a result of an identified deficiency related to accounting for income taxes," CEO Isaac Angel told investment analysts on a March 1 fourth-quarter 2017 and full-year conference call. The company is reviewing its procedures and expects to file its annual report on or before March 16. "In any case, we do not believe it will impact our operational performances or execution of our future plans," Angel added.

"The new U.S. tax reform has multiple elements that impact an international company like Ormat," added CFO Doron Blachar. While based in Reno, Nev., the technology and project developer has been steadily expanding abroad, with recent projects in Indonesia and Honduras. The "identified deficiency," Blachar said, relates to "the recording of deferred tax assets and liabilities" in Ormat's 2017 second- and third-quarter financial statements. In its third-quarter report to the SEC, Ormat said it recorded a deferred tax asset of $111.1 million related to taxes already paid for a subsidiary in Israel. The company does not expect to pay cash taxes in the U.S. in coming years.

Ormat's stock, listed on the New York Stock Exchange, shed more than 7% on the news, falling below $58 per share on March 1.

Ormat entered 2018 in need of capital, with the company reporting $47.8 million in cash and equivalents as of Dec. 31, 2017, down from $230.2 million a year earlier, as capital expenditures totaled $259.2 million in 2017, exceeding cash from operating activities, and the company also invested $35.3 million to expand into battery energy storage with its purchase of Viridity Energy. In January, Ormat said it would acquire U.S. Geothermal Inc. for $109.9 million.

The company estimated its capital needs for 2018 at $409 million. That includes $300 million in capital expenses, more than half of which is needed for construction activities, and $109 million for repayment of debt and credit lines.