ReneSola needs to sell projects as Romanian loan deadline looms

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Shanghai-based solar developer ReneSola today told shareholders its second-half revenues will get a lift from planned project sales as it pursues a strategy of evolving “the company into an asset light solar project developer” with a focus on distributed generation and community solar.

That is all well and good but presents a view of the NYSE-listed business as swimming against the tide when its compatriot solar manufacturers are rapidly offloading their project development arms after deciding last year’s 5/31 policy announcement signaled the good times were coming to an end as far as the public subsidy gravy train was concerned.

ReneSola exited the solar module manufacturing business in late 2017 and the subsequent sugar rush of profits from its project development model and feed-in tariff-driven sales of electricity in its homeland appeared to signal it was onto a good thing.

But Beijing’s decision to curtail public subsidies, announced at the end of May last year, has since seen ReneSola’s rivals pursue their own “asset light” path – by ditching project development in favor of more manufacturing.

‘Highlights’

Time will tell which decision is more astute but the letter to shareholders issued by ReneSola chairman and CEO Xianshou Li to publicize the company’s first-quarter performance was a masterclass in positive thinking. The company chief pointed to revenue up 134% on the final three months of last year, failing to mention the $13.1 million figure was down 71% on the same period of last year.

Readers had to scroll further down to the “highlights” section to learn gross profit fell 87% quarter on quarter, to $400,000, for an operating loss of $2.1 million (up 11% on the previous three-month period) and a net loss of $5.4 million (up 20%).

Worst of all, the 21.1 MW of project generation capacity sold in Minnesota – touted as part of the ReneSola success story by Li – had such poor margin it dragged the developer’s quarterly figure down from 51.4% to a wafer thin 2.8%.

Romanian loan looms

Still at least there was good news on the balance sheet, where long-term borrowings came in mightily, from $41.4 million to just $11 million. However, it was swiftly added that was because a $28.8 million Romanian construction loan had been reclassified as short-term borrowings. That debt needs to be settled in March, by a company with cash and cash equivalents of $7 million, aptly illustrating why ReneSola needs to kick-start more project sales from now onwards.

The plan is to monetize the 208 MW of rooftop solar ReneSola operates in its homeland and the company is also pinning hopes on a developer service agreement it has signed with the North American unit of Spanish developer X-Elio which is expected to run to 500 MW of capacity in California, Oregon and Arizona.

With that Romanian loan seeing short term borrowings balloon from $44.5 million in Q4 – and $23.7 million a year ago – to $80.6 million, those project sales will be needed to deliver on expectations of full-year revenue of $150-170 million and an expectation of $10-12 million in the current three-month period.