Cleantech Marathon Runners – the Ormat Success Story
Ormat Geothermal turbine in Iceland
From humble beginnings in a remote factory, Ormat is now number 2 in its field, overseeing an international empire. The company’s success is thanks to the persistence of its founders, Yehuda and Yehudit Bronicki, whose unrelenting perseverance can be likened to that of marathon runners. Bearing this in mind, it comes as no surprise that their message to new entrants to the Cleantech market is to forget about exit strategies and focus on the long haul. The company made it big, despite endless business-related difficulties, so there is much to learn from them. The following is based on a conversation with the dynamic duo:
At the beginning of the 60s, the owner of a leather factory in Yavne, Israel let his son, Yehuda Bronicki, use the factory’s grounds to build a manufacturing area for small turbines that would produce electricity from different energy sources. It’s from such modest beginnings that the industrial and business giant “ Ormat” evolved. In 1965 Bronicki expanded operations and established a large factory, which over the years operated in numerous sectors – from solar energy all way to geothermal energy. Today, Ormat is the second biggest company in the world working in the field of geothermal energy, with control over the entire vertical chain. The company develops and builds geothermal power plants, as well as operates them, and manufactures and provides power generating equipment for other companies’ power plants. Ormat also operates plants independently and sells electricity directly. Throughout the years, the company has kept up with the latest technological developments – with Bronicki investing heavily in research and development. Perhaps his most successful decision however, was to marry his wife Yehudit, later known as Dita, who eventually became the Company’s manager.
The Bronicki couple were influential for decades (she as General Manager and he as Chairman and technological visionary) operating within an extremely difficult business climate. They never lost sight of their goals, with Dita Bronicki especially proud of the fact that they never once paid their employees late. Additionally, Ormat never made the decision to cut jobs, even when times were tough. Even during the 2008 crisis they maintained this stance, while many other companies were sending workers home.
In the past decade, as environmental considerations started to take hold, both in the business world and at a governmental level, the company became famous around the world, with the Bronicki couple emerging as key international business figures. It was at this time that they could start to enjoy a more stable business existence. In the year 2000, the company acquired holdings from an American geothermal company named Covanta, doubling its geothermal holdings. Since then, Ormat has continued to enjoy constant growth.
So what does Ormat actually do? Ormat is active in 2 main sectors: Firstly, in the product sector, its focus is manufacturing based on the research and development of turbines and power units used to supply electric energy from geothermal sources and residual heat. In regards to both energy sources – the geothermal (the production of energy from heat found deep in the earth) and the residual heat (production of energy from the heat emitted from machines and turbines) – Ormat has acquired numerous patents, enabling the company to retain its position at the forefront of technology.
The second area in which Ormat is active is the electricity sector. Here Ormat is involved in maintaining and operating power plants based on geothermal and residual heat sources, either fully or partially owned, that produce and supply electricity. The power plants yield profits from long-term contracts, by selling electricity to government-owned or private electric companies, in countries around the world.
The group has also expanded its activities into the solar sector, and is the owner and operator of photovoltaic (PV) solar systems.
According to financial records, it’s been reported that the company owns power plants in the US, Guatemala, Kenya, Nicaragua, and New Zealand. Ormat Industries (the parent company) is a public company whose shares are traded on the Tel Aviv Stock Exchange, providing the Israeli government with substantial profits via taxes on exported equipment manufactured in Yavne. Ormat’s subsidiary, Ormat Technologies (NYSE: ORA), oversees the construction and management of the power plants, and they too enjoy continuous growth.
When calculating the total amount of energy produced from the power plants operated or built by the company, and plants that are run using Ormat’s equipment, Ormat is responsible for approximately 1410 MW. In 2011, Ormat saw a profit of $437 million (a 17% increase on 2010), with a record backlog product level, standing at a staggering $240 million.
A significant chapter in the company’s history is happening at this very time, as the Bronicki couple has brought onboard FIMI, a venture capital fund, as a financial partner. FIMI will be equal partners in the company (22.5% each), as a preemptive step against any attempt at a hostile takeover.
Decide Quickly, Plan Slowly
Because of the Bronicki couple’s background, they have the perspective and the ability to offer sound advice to anyone looking to succeed in the Cleantech field. “Sustainability starts with the working individual, and those currently representing the majority of today’s workforce are the Y generation, who look for immediate gratification, justifying any exit strategies” this according to Dita Bronicki. “But the exit culture is not compatible with a sustainable industry. A sustainable industry is a huge opportunity for Israel, because in many of the Cleantech fields, it’s possible to take advantage, and build upon the infrastructure that was established as a result of the successful evolution of Israeli hi-tech”, she points out. Yehuda Bronicki adds to this “But, in order to succeed in this area, the workforce must be made up of people with an adequate academic and professional background. We need to raise generations of certified and skilled technicians and workers as part of a national strategy, within the education system, and of course researchers who invest themselves in varied types of scientific fields – must be encouraged”.
According to Yehuda Bronicki, “We agree with Steven Cho, the American Secretary of Energy who said, that “the model for renewable energies should be a Silicon Valley, not a Manhattan project”. In other words, it doesn’t have to be a grandiose project, but rather in terms of technological developments, an area in which Israel excels.”
The Bronicki couple predicts that a Cleantech breakthrough will only come about as a result of long-term research in physics, biochemistry and other sciences. According to them, research and development into Cleantech will require large, long-term investments and exceptional scientists, and will involve the industry joining forces with academics. “What we need is a government with a culture of long-term planning, perseverance and flexibility, who will authorize the necessary investment needed for scientific and academic research, and for the promotion of technological ideas that will surface as a result of basic research. There is so much knowledge in Israel when it comes to optics and fuels, and we must discover the real processes that allow us to do different things in a more efficient manner”, says Bronicki.
Dita mentions that Israel made a fantastic breakthrough through drip irrigation (Netafim), “What we at Ormat did with turbines was a breakthrough, and we as a country need more scientific-industrial breakthroughs like this in order to firmly establish ourselves as the indisputable global Cleantech leader”. The two sum up by stating their belief that those working in the Cleantech field have to have the perseverance of marathon runners, yet must also have the ability to sprint when necessary. “The country needs to have the ability to decide quickly and plan slowly. It did this well in the hi-tech boom, and there’s no reason that this success shouldn’t be repeated, while the Cleantech boom is still ahead of us. Prof. Eugene Kendal, Director General of the Prime Minister’s Office, and Prof. Emanuel Trachtenberg, who formulated the government’s economic plan following the social demonstrations of summer 2011 – have already set out some positive policies, and there are already some great beginnings in the industry. In other words, the real test now is in the execution,” states Bronicki.
Since this interview took place, Ormat has signed a $61+ deal in the U.S. to supply geothermal power.
