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Ormat warns of business impact from lava flows at Hawaiian geothermal plant

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Ormat warns of business impact from lava flows at Hawaiian geothermal plant

Ormat Technologies Inc. said May 28 lava from the Kilauea volcano in Hawaii covered wellheads of two geothermal wells at the 38-MW Puna power plant, which could have an adverse impact on business.

Ormat holds a 63.25% ownership in the facility, and said Puna accounts for roughly 4.5% of its total generating capacity. In 2017, Puna Geothermal Venture, the facility operator, contributed approximately $11 million in net income and approximately $20 million of adjusted EBITDA. The plant's remaining 36.75% interest is held by an affiliate of Northleaf Capital Group Ltd.

Ormat said it could not assess, as of May 28, the extent of the damage to the future functionality of the wells, and the flowing lava could reach other wells at the Puna facility.

Ormat has property and business interruption insurance policies of up to $100 million in the event of volcanic eruptions and earthquake, according to a news release. As of March 31, the Puna complex represented approximately $90 million of net assets on Ormat's balance sheet, based on a total asset value of approximately $109 million, plus approximately $30 million of prepaid expenses less deferred lease income of approximately $49 million. Puna Geothermal Venture is required to pay an aggregate of approximately $22 million of future lease payments until 2027.

J.P. Morgan on May 14 downgraded Ormat to "neutral" from "overweight," citing the lava threat at the Puna facility.

The facility supplies almost one-quarter of the island's daily power need and hosts wells that are 8,000 feet underground across nearly 40 acres of the property, according to a May 23 report by The Associated Press.