Ormat reported revenues of $70.7M for Q4, up 6% from the prior year. More impressively, earnings doubled from $4.2M to $8.9M from the prior year. Details of operational performance are expected to be released at their earnings call scheduled for later today. The 2008 outlook was a bit short of the street’s expectations, so expect the share price to take a hit today. Ormat’s stock closed at $43.82/share yesterday.

Last week there were two interesting stories around power purchase agreements. In one, Western GeoPower backed out of its PPA with PGE and the Calpine/PGE PPA proposal.

First, the standard agreement of PGE attempting to satisfy their renewable portfolio standard requirements and Calpine looking to get a post-bankruptcy win, the two companies announced that a 175MW contract was underway and that they would be seeking regulatory approval on upgrades to Calpine’s geothermal footprint at the Geysers. This is a good sign on multiple fronts and we’re encouraged to see the two companies come to an agreement around the output from the Geysers.

The Western GeoPower example is a little more troubling in terms of setting precedents. On the one hand, as capitalists, it could be a “good thing” – on the other hand, it could prove to be destructive for future developers dealing with PGE and other large IOUs. Essentially, WGP worked to secure an agreement with PGE for 25.5MW as a pre-requisite of securing funding – during the negotiations, PGE was able to secure power at a pretty cheap rate relative to present prices. In an effort to cash in on the new found heat (pun intended though we know it’s bad…) we speculate that WGP has backed out of its commitment to secure a better deal for the power to be produced by its project. The official statement on why the deal was terminated had to do with a technicality about delayed approval of the project by CPUC.

This cancelation could have a chilling effect on future PPAs as IOUs could, and now probably will, attach significant penalties for withdraw from a contract to protect themselves from this sort of activity in the future.

Yesterday Nevada Geothermal reached an agreement with Ormat to provide infrastructure for its Blue Mountain geothermal power plant. The agreement calls for a $20M fixed price procurement and construction plan under the guise of a “Limited Note to Proceed” agreement. After the characterization of the resources at Blue Mountain, this is another step toward commercialization and harvest of the resource, which appears to be about 10MW per well and a 190C (375F) temperature.

Drilling at Blue Mountain, Nevada

Photo Credit: Nevada Geothermal

Earlier this week, Calpine emerged from bankruptcy protection after a prolonged struggle that saw multiple delays. The issue is now trading on the NYSE under symbol CPN-WI. The new issue will have 423 million shares outstanding meaning the market capitalization of the company at today’s values is nearly $7B. We’ve been a bit skeptical that Calpine could emerge, but have been proved wrong as they are now back in business and moving forward.

Let’s hope that the generator can stay in business and invests in the geothermal portion of its portfolio, after all, there are no ongoing fuel costs!

Three of the world’s leading financial institutions today announced the formation of The Carbon Principles, climate change guidelines for advisors and lenders to power companies in the United States. These Principles are the result of a nine-month intensive effort to create an approach to evaluating and addressing carbon risks in the financing of electric power projects. The need for these Principles is driven by the risks faced by the power industry as utilities, independent producers, regulators, lenders and investors deal with the uncertainties around regional and national climate change policy.

The Principles were developed in partnership by Citi, JPMorgan Chase and Morgan Stanley, and in consultation with leading power companies American Electric Power, CMS Energy, DTE Energy, NRG Energy, PSEG, Sempra and Southern Company. Environmental Defense and the Natural Resources Defense Council, environmental non-governmental organizations, also advised on the creation of the Principles.

Read more…

The principles are:

• Energy Efficiency
• Renewable and low carbon distributed energy technologies
• Conventional and Advanced Generation

This is a very healthy development, when the financial backers start to ask questions of the developers and start to use the funding, not only for profit as they well should, but also to help improve and change status quo, that is leadership. We are delighted to see this declaration from Citi, JPM, and Morgan Stanley. Now, there is a small matter of execution, will these companies actually practice the Principles when push comes to shove? Time will tell, but it’s an excellent first step and they are to be commended for taking it.

One other key question, will others sign on?