Fitch: No Rating Impact on OrCal Geothermal's Sr. Notes from Consent Solicitation

NEW YORK--()--Today's launch by OrCal Geothermal Inc. (OrCal) of a proposed Equity Transaction and Solar Access Rights defined under a Consent Solicitation Statement will not affect the rating on the company's outstanding $83.7 million senior secured notes, due December 2020, according to Fitch Ratings. Fitch currently rates OrCal 'BBB-' with a Stable Rating Outlook.

If required bondholders approve the terms of the consent, their rights to cash flows available for debt service, total security provided to the bondholders, effective control of the geothermal facility, and the amount of debt held by OrCal will all remain unchanged.

The proposed Equity Transaction will entitle the Tax-Equity Investor to federal income tax benefits and cash distributed from OrCal after payment of debt service, and will not reduce the credit quality of the rated debt. The proposed Solar Access Rights to enable development of a solar power project adjacent to the OrCal site will similarly have no impact on credit quality.

The security package for the senior notes will remain unchanged. The ownership structure will be revised to accommodate the proposed transaction, but all OrCal's equity interests will continue to be pledged for the benefit of the bondholders. Fitch considers granting of the Solar Access Rights as outside of OrCal's security package and will have no impact on the security due to bondholders.

The proposed Equity Transaction will not trigger a Change in Control under the Indenture. Ormat Nevada will continue to own 50% or more of the voting and economic interest in OrCal and its subsidiaries, if the Tax-Equity Investor is approved by the required bondholders to be added as an owner. Ormat Nevada will also continue to exercise day to day management control over OrCal and will have sole voting rights over economic operating decisions made in the ordinary course of business there.

The Equity Transaction will require the Tax-Equity Investor's approval for specific decisions that currently the sponsor has full rights to execute. Fitch does not view the incremental approval requirement as affecting the rating, as both owners' interests are properly aligned.

Finally, Fitch believes that the proposed Equity Transaction and granting the Solar Access Rights will not require additional debt, either at OrCal or its subsidiaries, maintaining current leverage and coverage expectations.

OrCal owns five interrelated geothermal projects in the Imperial Valley of California, which together have an net generating capacity of 92 MWs. OrCal is an indirect, wholly-owned subsidiary of Ormat Technologies, Inc., a vertically integrated owner and developer of geothermal and other recovered energy projects.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'California's Latest Clean Energy Push: Fitch Analyzes the Credit Impact of New Legislation' (Jan. 3, 2012);

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);

--'Rating Criteria for Thermal Power Projects' (June 18, 2012).

Applicable Criteria and Related Research:

California's Latest Clean Energy Push

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662030

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Thermal Power Projects

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681297

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Contacts

Fitch Ratings
Primary Analyst
Cynthia Howells
Director
+1-212-908-0685
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Andrew Joynt
Associate Director
+1-212-908-0842
or
Committee Chairperson
Gregory Remec
Senior Director
+1-312-606-2339
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Cynthia Howells
Director
+1-212-908-0685
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Andrew Joynt
Associate Director
+1-212-908-0842
or
Committee Chairperson
Gregory Remec
Senior Director
+1-312-606-2339
or
Media Relations
Elizabeth Fogerty
+1-212-908-0526
elizabeth.fogerty@fitchratings.com