Omer regev
08/01/2017
The funds that hold the stock
SUMMARY
ORA announced the acquisition of Viridity Energy in what we view as a major strategic move to expand Ormat's addressable markets to include grid optimization and energy storage. One of Viridity's key assets lies in its value-stacking capabilities to maximize the value of flexible load, energy assets and energy storage in both the wholesale and retail/distributed power markets. Viridity has already leveraged this IP to develop a broad partner ecosystem and commercial footprint across a wide range of smart grid applications. We believe the transaction addresses ORA's ambition to move into the storage market as an EPC developer and asset operator and positions ORA as a player in smart grid. Our PT is under review.
KEY POINTS
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ORA acquires IP/energy storage provider, Viridity. ORA announced the acquisition of Viridity Energy Inc., a leader in demand response, demand management and battery storage solutions, for $35M. The deal is expected to close in early 2017 and is expected to generate positive operating income in FY17.
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Proprietary software for multiple smart grid applications. Viridity's software optimizes peak and distribution charge demand management for commercial and industrial, and allows customers to participate in capacity, energy, reserve and frequency regulation markets. IP includes patents for systems/methods used to generate operating schedules for energy storage assets used in connection with transportation systems and EVs, data center operations, and battery/solar assetcombined operations.
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Commercial footprint. Viridity has under contract over 850 MW across 3,000 sites, primarily commercial and industrial customers for demand response. The company also manages a portfolio of non-utility storage assets located in the northeastern US with over 80,000 operational market hours.
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Broad ecosystem of partners and commercial applications. Viridity's demand response partners include ConEdison Solutions, Engie (former GDF Suez Energy Resources) and other utility subs. Other notable projects include campus microgrids, a train braking power-to-battery storage system project with SEPTA, Constellation and ABB (utilizing MXWL ultracapacitors and Saft Li-ion battery storage), and operations of a 4.2MW solar + 7.5MW storage system in Ohio.
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Strategic move expands ORA's capabilities, likely supports Viridity base business. We believe Viridity's software should allow ORA to develop energy storage projects, target new smart grid revenues, and potentially help optimize the value of ORA's renewable energy operating portfolio. ORA’s balance sheet could also provide support for Viridity to sign long-term contracts with large customers.
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