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Ormat Technologies Inc (NYSE:ORA)
Q1 2020 Earnings Call
May 11, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Ormat Tech Q1 2020 Earnings Conference Call. [Operator Instructions] I'd now like to turn the conference over to Rob Fink. Please go ahead.

Rob Fink -- FNK IR Managing Partner

Thank you, operator. Hosting the call today are Isaac Angel, Chief Executive Officer; Doron Blachar, President; Assaf Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Corporate Finance and Investor Relations.

Before we begin, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the Company's plans, objectives, and expectations for future operations and are based on management's current estimates and projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risk factors and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies' Annual Report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC.

In addition, during the call, the Company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures and management's reasons for presenting such information is set forth in the press release that was issued earlier this morning, as well as in the slides posted on the Company's website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP.

Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the Company's website at ormat.com under the Presentation link that's found on the Investor Relations tab.

With all that said, I would now like to turn the call over to Isaac Angel. Isaac, the call is yours.

Isaac Angel -- Chief Executive Officer

Thank you very much, Rob, and good morning, everyone. Thank you for joining us today.

Starting with Slide 5, our financial results for the first quarter of 2020 demonstrate a strong start to the year, especially in terms of profitability. The world is currently facing a global health crisis, the impact and duration of which is still uncertain. In the first quarter, we took prompt steps to secure the safety of our employees, to optimize our supply chain and enhance our liquidity position in order to support our growth plans. These efforts, together with the inherent stable and long-term contracted portfolio for our electricity segment have enabled us to ease the impact of COVID-19 pandemic at this time. All our power plants and manufacturing facilities are operating as expected. Importantly, our efforts to streamline operations and optimize power generation at the plant level continues to produce benefits, leading to margin expansion and increased profitability.

Our gross profit and operating income also benefited from the receipt of $4.9 million related to the business interruption insurance claim for our Puna power plant compared to $1.3 million last year. Excluding this benefit, our operating income margin still increased more than 290 basis points on the lower total revenue, demonstrating the improvement in our electricity segment operations. The strong quarter reinforces our confidence that Ormat is in the right path with a resilient business model, geographic and revenue diversity, and an excellent team.

Let me spend a moment discussing our management transition process. As previously announced, I will be retiring from my position as CEO on July 1. Doron Blachar, our President and until recently, our CFO, will take over as CEO at that time. If elected at our Annual General Meeting later this year, I'll be joining the Board of Directors as its Chairman. Additionally, Assaf Ginzburg just joined Ormat as our new Chief Financial Officer, enabling Doron to focus his attention on the transition process while assisting Assaf in getting quickly up to speed. This process is proceeding as expected. And I'm confident that the leadership transition will be a smooth one.

Now I will turn the call over to Doron for a review of the financial results before I provide an update on our operations. Doron?

Doron Blachar -- Chief Financial Officer

Thank you, Isaac, and good morning, everyone. Let me start the review of our result on Slide 7. Total revenues for the first quarter of 2020 were $192.1 million, down 3.5%. Our cost of revenues decreased 11.7% to $110.3 million in the first quarter of 2020, resulting in an increase of $7.6 million in gross profit.

Moving to Slide 8 for more details on our electricity segment. Revenues in our electricity segment were $142.9 million for both the first quarter of 2020 and 2019, and represented 74.4% of total revenues for the most recent quarter. As shown in this slide, cost of revenues decreased by $6.2 million due to business interruption insurance income, the termination of Puna lease transaction in the fourth quarter of 2019 and lower operating cost at some of our partners.

Turning to Slide 9. Product segment revenues decreased 9% to $47.4 million or 24.7% of total revenue for the first quarter of 2020. On Slide 10, the energy storage and management services contributed $1.8 million of revenue for the first quarter of 2020 compared to $4 million last year. This decrease was mainly driven by revenues from a one-time EPC project in amount of $2.4 million in the first quarter of 2019.

Moving to Slide 11 for a discussion of our total gross profit and margin. First quarter 2020 consolidated gross margin was 42.6% compared to gross margin of 37.3% for the first quarter of 2019. The increase in gross profit and margin was driven by lower cost of revenues, that's more than offset the year-over-year marginal decline in revenues.

On Slide 12, gross margin for the electricity segment expanded year-over-year to 50% compared to 45.7% for the first quarter of 2019. As explained, cost of revenues went down due to insurance income and termination of lease transaction, both related to Puna as well as lower operating costs. In the product segment, gross margin was 22% in the first quarter of 2020 compared to 19.2% in the first quarter of 2019. The increase is due to relatively low margin contracts recognized in the first quarter of last year. We expect continued improvement as we move forward toward normalized margins in this segment of between 22% and 27% energy storage and management services segment reported a negative gross margin as we anticipated.

Turning to Slide 13. SG&A expenses for the first quarter of 2020 were $19.1 million or 10% of total revenues compared to $19.6 million, 9.8% of total revenues for the first quarter of 2019. The decrease was primarily attributable to business interruption income insurance of $2.4 million, partially offset by $1.1 million cost associated with one of our legal claims and its settlement.

Turning to Slide 14. Operating income for the first quarter of 2020 was $61.1 million compared to $53.7 million for the first quarter of 2019, an increase of 13.6%. On Slide 15 you can see the breakdown of the operating income by segment.

Turning to Slide 16. Net interest expense for the first quarter of 2020 was $17.3 million, a decrease of $4 million. This is due to an increase in interest capitalized to project of $2.2 million, a decrease in interest related to sale of tax benefit of $1.3 million and lower interest expense as a result of principal payment of long-term debt.

Turning to Slide 17. Provision for income tax for the first quarter of 2020 was $18.1 million for an effective tax rate of 37.2% compared to $14 million or an effective tax rate of 31 -- 34.1% for the first quarter of 2019. The variance between the two period is primarily due to the mix of our income in various countries with higher and lower statutory tax rates than the federal tax rate in the US, and changes related to valuation allowance for certain countries.

Turning to Slide 18. Net income attributable to the Company's stockholders was $26 million or $0.51 per diluted share compared to $25.9 million or $0.51 per diluted share for the first quarter of 2019.

Turning to Slide 19. Adjusted EBITDA was $106 million for the first quarter of 2020, up from the $101.8 million in the first quarter of 2019. Reconciliation of EBITDA and adjusted EBITDA are provided in the appendix slide.

Turning now to Slide 20. Cash and cash equivalents and restricted cash and cash equivalents as of March 31, 2020 was $319.8 million compared to $153.1 million as of December 31, 2019. The accompanying slide breaks down the use of cash for the first three months and demonstrates our ability to reinvest in the business, invest in growth, service debt and return capital to our stockholders in the form of cash dividends. Our long-term and short-term debt as of March 31, 2020 was $1.4 billion, net of deferred financing costs, and its payment schedule is presented on Slide 21. The average interest rate on this debt is 4.7%. Our net debt as of March 31, 2020 were similar to year end and stood at $1.1 billion.

Turning to Slide 22. Let me speak briefly to our financing activities since the beginning of the year. As part of our efforts to enhance our liquidity, to support our capital expenditures and growth, we increased and drew lines of credit. And in April 2020, we raised approximately $115 million of long-term debt. On May 8, 2020 the Company Board of Directors declared, approved and authorized payment of a quarterly dividend of $0.11 per share pursuant to the Company's dividend policy. The dividend will be paid on June 2, 2020 to stockholders of record as of the close of business on May 21, 2020.

That concludes my overview. As you know, Isaac will be retiring from the CEO position and moving to the Board only on July 1. Overall, I would like to take this opportunity to thank Isaac for the last six year, during which he drove Ormat to excel in the operation, to excel in manufacturing, to develop new technologies and to achieve new heights that the demonstrated in our adjusted EBITDA that grew from $227 million in fiscal 2013 to $385 million in fiscal 2019.

And on a personal note Isaac, I enjoyed working with you very much. Your leadership, your experience and your support throughout the year and I look forward to working with you as our new Chairman of the Board.

Now, I would like to turn the call to Isaac for an operational and business update. Isaac?

Isaac Angel -- Chief Executive Officer

Thank you very, very much, Doron, and I really appreciate your remarks. Before I move to operational review, I want to spend a few minutes on an update on COVID-19, and its current and potential implication on Ormat. As I mentioned in my opening remarks, in the first quarter, we took prompt steps to minimize the COVID-19 implication on our employees and our business.

Our first priority was to make sure that all our employees are safe and they are able to navigate this crisis unharmed. The employees in our manufacturing facility and power plants continued their work, working in separate shifts, while minimizing physical contact between the different shifts. We are restricted external visitors, and limited activities to critical and essential. Our employees who were able to work remotely, worked from home way before this was required by the authorities, and now we are preparing their gradual return to the office in locations where circumstances and local government instructions allowed. We have not laid off or furloughed any employees due to the COVID-19 and continued to pay full salaries.

We continued our work with the local communities around our power plants, focusing on supporting on their health, education and other needs raised by those communities in our ongoing communication with them. Also, following the COVID-19 outbreak, Ormat donated N95 masks to our local hospital in Reno and donated food packages to communities around our foreign power plants. We are approaching our customers when needed to notify them on any potential implications and we are communicating routinely with the utilities.

As mentioned, we did not experience material impact on our results of operations during the first quarter of 2020. However, we started to experience an impact in the second quarter of 2020, which varies among business segments. In the electricity segment, we expect that the impact of COVID-19 to be limited to its [Phonetic] long-term contracted nature and stability of our revenue streams. Despite this expectation, on April 17 we received from KPLC, our customer in Kenya, a notice declaring a force majeure event due to the impact of COVID-19. In their letter, they are claiming to reduce the Olkaria complex contracted capacity from 150 megawatts to 133.9 [Phonetic] megawatts. We believe that the notice will not have a material impact on our expected revenue.

Additionally, on April 30, we received from [Indecipherable], our customer Honduras, a notice declaring a force majeure event due to the impact of COVID-19. We are currently evaluating the potential impact of this notice on our consolidated financial statements. In addition, although currently not foreseen, our future growth in the electricity segment might be impacted by more limited funding for projects, and the implications of global and local restrictions on our ability to procure raw material, ship our products and travel restrictions.

In our product segment, the recognition of revenue on the contract is impacted by delays in the progress of third-party projects into which our products and services are incorporated. Our product revenue may be adversely impacted because of restrictions on travel, and because of our customers' decision process that can impact our efforts to sign new contracts. However, we do expect a significant contract to be signed during 2020 and we will be updating as it progresses.

Our energy storage and management services segment generate revenues mainly from the sale of ancillary services back to energy markets. There has been a decline in ancillary services prices that was driven primarily by mild winter and lower natural gas prices that might also have been impacted by COVID-19. This decline in turn impacted our energy storage facilities revenues. Given the uncertainties regarding during and potential future impact of COVID-19, we are continuing our efforts to expand our supply base and to validate additional sources for critical items.

In addition, in order to support our capital expenditure and growth plans, in April 2020, we raised an additional $64 million for the sale of bonds and borrowed $50 million pursuant to a long agreement -- to a loan agreement with one of our lenders. As I mentioned earlier, the steps we took together with the inherent stable and long-term contracted portfolio of our electricity segment have enabled us to ease the impact of COVID-19 pandemic at this time.

Turning to Slide 24 for a look at the generation. Power generation in our power plants declined by 2.7% to 1.65 million megawatt hours in the first quarter of 2020. This decline is attributable to lower generation at some of our power plants, mainly due to curtailments in Kenya due to COVID-19 and other curtailments in NV Energy due to transmission line enhancements.

Turning to Slide 25, let me spend a few more minutes providing an update on the situation at Puna. As of today, the reconstruction efforts at Puna continue. All the permits that are required for the construction and operation of the substation have been received. HELCO continues with its effort to complete the upgrade of the transmission network and is expecting the required PUC approval.

On the field side, we have completed drilling of two production wells, one of which was blocked after its flow test while the other is ready to be connected to the power plant and is expected to enable us partial production as soon as the transmission lines will be rebuilt by HELCO. We continue the field recovery work, which includes rig drilling and clean outs of existing wells and drilling of new wells. Currently, we expect gradual increase of production to 29 megawatts by the end of the year, assuming all permits are received, transmission network upgrade is completed and field recovery successfully achieved.

As we announced last quarter, we reached an agreement with HELCO and signed a new PPA that was filed with the PUC for approval. The new PPA extends the current PPA terms until 2052 and increases the current contract capacity by 8 megawatts to 46 megawatts in total. This new PPA will replace the current PPA when the new 46 megawatt power plant reaches commercial operation, which is expected in 2022.

Let me speak on the insurance situation for a moment on Slide 26. As discussed in previous calls, we maintain coverage for property and business interruption scenarios provided by a consortium of insurers. All the insurers accepted and started paying for the cost to rebuild the destroyed substation. However, only some of the insurers are paying for the business interruption coverage. In the first quarter and in April, we received a total of $7.9 million. We recorded income of $44.9 million [Phonetic] of such proceeds in the first quarter. While we are expecting additional payments from our insurers, we also filed a lawsuit, which is being conducted with one of our insurers. As of the end of March, we received a total of $27.8 million for property damage and business interruption.

Turning to Slide 27. In order to support our capital expenditures and growth plans, we increased and drew lines of credit, and in April 2020 we raised additional long-term debt. This enables us to maintain our growth target of 180 megawatts to 200 megawatts until the end of 2022. We continue our work in Steamboat and Heber complexes, experiencing a slight delay in Heber due to COVID-19 that will be ready for operation in the second half of 2021. We are continuing to advance additional projects in the US that are listed on the slide and expect them to be on schedule. Other than the listed projects, we continue our efforts and investments in other prospects to earn the eligibility to PTCs.

Turning to Slide 28 for an update on our backlog. As of May 11, 2020, our product segment backlog was $96.5 million. While this is down from previous periods, fluctuations in this segment of our business are not uncommon. We believe that the decline in backlog resulted in part from the impact of COVID-19 and current concern of potential customers to enter into a large commitment at this time. We are still expecting a significant contract to be signed during 2020 and we will be -- as I said before, we will be updating as it progresses.

Turning to Slide 29 for an update on our energy storage and management services. Our storage fleet, including Plumsted and Stryker in PJM, and Hinesburg in ISO New England, are successfully operating with revenues in the first quarter that were impacted mainly by warm weather and slowing economic environment followed by COVID-19. In April this year, we announced that our 10-megawatt Rabitt Hills storage facility in Texas commenced operation, providing ancillary services and energy optimization to the wholesale market managed by ERCOT. The Vallecito project in California we are progressing with the permitting and EPC works as scheduled. We may experience a slight delay in interconnection due to the COVID-19 outbreak.

We continue our efforts to expand our storage portfolio. In April, we signed a definitive agreement for the acquisition of the Pomona 20-megawatt battery storage facility for a total consideration of $47 million. The Pomona energy storage facility is contracted with South California Edison. The transaction is contingent upon specific conditions related to the project, as well as other customary closing conditions. Closing is expected during the second half of 2020. We continue to participate in new RFPs to develop pipeline projects. Due to the uncertainty around COVID-19, we update our future development target to 100 megawatts to 150 megawatts to be commissioned between 2020 and 2022.

Turning to Slide 30. Our expected capital spend for the rest of the year includes approximately $135 million for capital expenditures for construction of new projects and enhancement to our existing power plants that management released for construction. In addition, we estimate additional $107 million for the exploration and development that were not yet released for full construction. Maintenance of captive expenditures, construction and development of storage projects, and enhancement to our production facilities as detailed in the slide. In the aggregate, we estimate total capital expenditures for the rest of 2020 to be approximately $242 million.

Please turn to Slide 31 for the discussion of 2020 guidance. We are updating our full year 2020 guidance to the -- due to the uncertainty around COVID-19 duration and implications, as well as due to the recent update in Puna. We expect total revenues between $710 million and $740 million, with the electricity segment revenues between $550 million and $570 million. We continue to expect product segment revenues between $140 million and $150 million. Revenues from energy storage and demand response activity remain as expected, to be between $15 million and $20 million. We are also updating 2020 adjusted EBITDA that is expected to be between $400 million and $415 million. We expect annual adjusted EBITDA attributable to the minority interest to be approximately $26 million.

Now on a personal note. As I -- as mentioned before, this is my last conference call as a CFO -- CEO of Ormat and I would like to thank to all of our devoted employees, customers and shareholders for their continued support during the last six years. It was an honor and a privilege to serve as the CEO of such a wonderful company like Ormat.

And this concludes our prepared remarks now. And I'd like to open the call for questions. Operator, if you please?

Questions and Answers:

Operator

We will now being the question-and-answer session. [Operator Instructions] Our first question will come from Paul Coster with JPMorgan. Please go ahead.

Paul Coster -- JPMorgan -- Analyst

Yes, thanks for taking my questions, and by the way congratulations to the executives: One on elevation to the board; the other one, elevation to the CEO role; it's going to be fun.

So the guidance that you've issued, can you just elaborate a little bit about Honduras and Olkaria in particular. Why is it, for instance, you can see this reduction in capacity not having much impact on EBITDA from Kenya, and what is and what is not in guidance for Honduras? Thank you.

Isaac Angel -- Chief Executive Officer

Thank you, Paul, and thanks for your remarks. First of all in Kenya, we have both capacity payments and energy payments. And the capacity payments is the vast majority of the income coming from the power plant. The capacity payment remains as it is on those curtailments, and the thing that it's not paid is the energy. On the 150 megawatts to 133.9 megawatts drop, we are still negotiating and discussing with the utility if they have the ability to have to make this drop, because according to the contract they don't have it. So our expectation is it eventually it will be a non-significant drop on revenue coming from the power plant.

Paul Coster -- JPMorgan -- Analyst

On the Honduras?

Isaac Angel -- Chief Executive Officer

On Honduras, they just let us know on force majeure. They send us a regular force majeure letters we are sending to some of our customers in product segment, and they don't have any claims whatsoever at this stage, so we don't know yet.

Paul Coster -- JPMorgan -- Analyst

In both cases the payment -- the receipts were sort of lagging a little bit, I believe. Accounts receivables are up fairly significantly year-on-year. It seems to pre-date COVID, so can you just kind of give us some sense of the overall dynamics with these two off takers?

Isaac Angel -- Chief Executive Officer

Of course. A quick thought with Kenya. Kenya are lagging with payments for the last five or six years, pretty much. But they are paying eventually and there is no big difference on payments in Kenya. Sometimes middle of year it becomes -- how many days over there? 61 days and they closed the gap. So there is not much of a change in Kenya. The major change was in the last few months. We are expecting curtailments on data because of the COVID-19, but as I said, it's only affecting energy payments and not capacity payments.

On Honduras, I believe in the last year or so the payments are on time. They are not lagging any payment since a management change in ENEE in there. I think it was a year ago or maybe it's more than that. But they have $20 million of debt, which is already more than a year due that was accumulated with the previous management and we are in a process of an arbitration. They don't have any claims against this $20 million. They're not claiming that it's not due. They are simply saying that they are waiting for a funding coming from IMF and then they will close this gap also finally in the August [Phonetic]. These are -- those are the situations with both customers.

Paul Coster -- JPMorgan -- Analyst

Got it, thanks. Last question. On the projects that you're looking to deploy over the next 18 months or so, is there any risk? Can you sort of quantify the risks a project gets pulled?

Isaac Angel -- Chief Executive Officer

We have -- most of the project are with SCPPA1 portfolio projects until the end of 2022 and those projects are already lined up when we expect to be online, on time with those projects. On top of it, as we declared last quarter at the end of the year, we are building PTC projects that will be -- unless we will sign additional portfolio projects with SCPPA or others -- or other CCAs, then they will be sold at the beginning to market price.

Paul Coster -- JPMorgan -- Analyst

Great. Okay, thank you very much.

Isaac Angel -- Chief Executive Officer

And these projects are also as planned. Thanks, Paul.

Paul Coster -- JPMorgan -- Analyst

Got it. Thank you.

Operator

Our next question will come from Noah Kaye with Oppenheimer. Please go ahead.

Kristen Owen -- Oppenheimer -- Analyst

Yes, thank you. This is Kristen on for Noah. I appreciate you taking our questions. If we could just follow-up on the PTC comment that you just made, last week in response to a request from Congress, the Department of Treasury indicated that it anticipates modifying the rules in the near future around the eligibility requirements for projects eligible for production tax credit. The thought is that developers will get more time to complete work on this project. So, what are your current expectations in terms of exploration work and capex you'll spend this year to qualify projects for PTC eligibility and how would you be helped by having those extended timelines?

Isaac Angel -- Chief Executive Officer

Okay, Kristen, you're right. There was some information on that last week, but it was mainly on solar and storage and wind, sorry, and not necessarily on geothermal. We are hoping through our lobbies that it's going to be also on geothermal. In any case, we have a list of projects that we're -- I don't know the slide number -- on Slide 27 that articulates the projects that are going to be ready for PTC this year. Obviously if PTC will be prolonged for 2021 and further, then we will have more projects that will qualify for PTC. So far, because the improvement within the liquidity, we don't see any issue on supporting those PTC projects that we declare.

Kristen Owen -- Oppenheimer -- Analyst

Okay, thank you. And then can you update us on feasibility study in Indonesia for the 110-megawatt geothermal expansion? When should that study be complete and what should we anticipate as far as next steps?

Isaac Angel -- Chief Executive Officer

As a matter of fact, the Ijen project is progressing better than planned. We already hit on the first well drilling, the resource, much earlier than expected. So according to our geologists, the resources is there and the plan was to finalize it by 2022 until 2023, and we believe we will be on time and try to be earlier.

Kristen Owen -- Oppenheimer -- Analyst

Okay, great. And then the last question for us, for Puna, when do you anticipate the transmission upgrade will be complete and has the utility work substantially begun and what is the impact overall from COVID-19 as far as the timeline?

Isaac Angel -- Chief Executive Officer

Okay. Look, it is an ongoing story over there. The first thing was that it's going to be ready by November 19 and then it was prolonged by the PUC because of the public hearing to the beginning of this year. Now, the public hearing was announced. So far we don't have any objections, so the expectation is that HELCO will be erecting the poll and the transmission by August.

If it will be happening, then we will be more than glad to start delivering electricity starting with the transmission lines. I am expecting to lower electricity much before that, but unfortunately this will be on, let's say, a service transmission line in a very low amount, so we won't be paid for it, but at least we will test the power plant, test the resource and so on.

Kristen Owen -- Oppenheimer -- Analyst

Just to be clear, any specific delays owing to construction availability or anything related to COVID-19?

Isaac Angel -- Chief Executive Officer

So far nothing that we are anticipating, because we were ready before time with all the -- with everything that we needed, so I hope there won't be any last moment resource issues that will hold us. Unless something will happen, as I said before, we will be flowing electricity to the utility to be sold sometime around August.

Kristen Owen -- Oppenheimer -- Analyst

Great. Thank you for our questions.

Isaac Angel -- Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question will come from Jeff Osborne with Cowen & Co. Please go ahead.

Jeff Osborne -- Cowen & Co. -- Analyst

Hey, good morning, guys. A couple of questions on my end. One, just circling back to Kenya. I think beyond the curtailment and the receivables, I think if my memory is right, the other issue that some investors had there was the ongoing litigation. Is there anything you can update us as it relates to the historical tax receipts. I think they're claiming you over $200 million for back taxes.

Doron Blachar -- Chief Financial Officer

Hi, Jeff. It's Doron. Basically, we received assessments from the KRA on various items, and all of these assessments based on our understanding, based on our auditors and the legal advice that we got are totally not relevant or correct to the operations of Kenya, of an IPP in Kenya. They have much more important than just to Ormat. So we've got the assessment and we are responding to it within a few weeks and then we'll start the process where we are appealing it. It is based on our understanding of the Kenyan tax law, as well as our advisors. There are no merits to any of these claims they are arguing.

I would say that at least a few of them, well they've already argued with us in the past, and then they went back on them. So we're not sure exactly why are they coming back on these items. But we will work within the Kenyan processes, starting with an alternative dispute resolution process and then if still needed, we'll go through the relevant legal process.

Jeff Osborne -- Cowen & Co. -- Analyst

Got it. So, it sounds like it will be ongoing for quite some time. Is there any other detail you can...

Doron Blachar -- Chief Financial Officer

Yes, it feels like that.

Jeff Osborne -- Cowen & Co. -- Analyst

All right. Is there any other detail you can give us as it relates to the capacity versus energy payments? When you look at, I think the average price there is roughly $119 or $120 a megawatt hour. Is there a way to think about the risk around curtailment? Is it 90% capacity and 10% energy or any help you can give us in terms of magnitude? I understand Isaac indicated that the majority of it was capacity and felt comfortable it will be paid, but is there any finer point that you can put on that as to magnitude?

Doron Blachar -- Chief Financial Officer

Yes. You're not correct with the numbers, Jeff. They're a bit lower than what you just said, but the 90% to 10% is quite accurate.

Jeff Osborne -- Cowen & Co. -- Analyst

Okay. And then is there any update on the insurance...

Isaac Angel -- Chief Executive Officer

Jeff?

Jeff Osborne -- Cowen & Co. -- Analyst

Sure.

Isaac Angel -- Chief Executive Officer

One thing, if you look on the numbers, the capacity pays regardless of the actual generation of curtailment. So whenever they do make curtailments and the generation is lower, the capacity still doesn't change. So that can tweak on a specific quarter, the calculated average per -- price per megawatt hour. In reality the actual price when they are taking the full energy is more in the area of the 90s, [Phonetic] they are taking both capacity and energy. But on a specific quarter the curtailment or sometimes an outage or for maintenance or anything like that, the average can go up a bit.

Jeff Osborne -- Cowen & Co. -- Analyst

Got it. It's helpful. I appreciate the clarification there. Maybe just switching gears, two other quicker ones I hope, on the insurance side. So I think you mentioned in the slides $27.8 million has been received. If my memory is right, the total that you could potentially receive, I believe, was $100 million. Is there any sense of cadence on when additional insurance checks would be coming in similar to what you received this quarter?

Doron Blachar -- Chief Financial Officer

The total policy, as you said, is about $100 million. We did receive some more small amounts in April. We are discussing and it is built with different layers, different insurers. So we are discussing with the other insurers on some kind of a settlement, but there is one insurer that they wasn't willing to discuss settlement and went and we sued him. And honestly I can't understand how multiple insurer companies do pay the policy and one decided he doesn't want to pay, but we'll have to see that through the legal court if needed.

Jeff Osborne -- Cowen & Co. -- Analyst

Got it. And then just to be clear, the guidance does not include any insurance, is that a safe assumption, for the rest of the year?

Doron Blachar -- Chief Financial Officer

The guidance includes business interruptions similar to what we usually make with Puna. So it's not -- doesn't come all in the revenue, but there are some small number that might impact the guidance.

Jeff Osborne -- Cowen & Co. -- Analyst

Okay. And the last one for you Doron is, how should we think about tax rate for the year?

Doron Blachar -- Chief Financial Officer

I think tax rate this quarter was around 37%. It is very hard to focus the tax with the changes with the specific tax status that Ormat had with the valuation allowance -- past the valuation allowance that we have. The best estimate going forward usually is what we recorded in the last period as a good estimate going forward, but it obviously can vary between the countries and the years. Obviously tax rates are different in the different jurisdictions.

Jeff Osborne -- Cowen & Co. -- Analyst

Got it, thank you. That's all I had.

Doron Blachar -- Chief Financial Officer

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Isaac Angel for any closing remarks.

Isaac Angel -- Chief Executive Officer

Thank you very much, Brent. And as I said before, we are in a very strange and difficult era, and no doubt that there will be markets and companies which are going to change completely during this era. I personally believe that Ormat, because of a very specific ingredient, in a very -- is very well positioned to go through this era strongly even then better.

With the devoted employees, very experienced management team, with the support -- full support of the Board, very long term contracts which are already signed and are going to be signed in the future, and a strong cash flow, I'm very optimistic that we will be able to go through this difficult era regardless if it's going to be ending this summer or it's going to take another year to go. And thank you very much for the ongoing support. Have a nice day.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Rob Fink -- FNK IR Managing Partner

Isaac Angel -- Chief Executive Officer

Doron Blachar -- Chief Financial Officer

Paul Coster -- JPMorgan -- Analyst

Kristen Owen -- Oppenheimer -- Analyst

Jeff Osborne -- Cowen & Co. -- Analyst

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