Emeren(US:SOL)2022-04-28 16:00PART I Key Information The company faces principal risks in solar project development, business conduct in China, international markets, and its American Depositary Shares (ADSs) - The company's auditor, Grant Thornton, is subject to PCAOB inspection limitations in China, which under the HFCAA could lead to a trading prohibition of the company's ADSs16181183 - The company faces significant risks related to PRC government intervention, which could materially change operations and hinder its ability to offer securities to investors22196197 Risk Factors - Business risks are centered on the challenges of solar project development, including operational risks, potential for cost overruns or delays, and reliance on project financing181930 - Risks of doing business in China include potential delisting under the HFCAA, difficulties for overseas regulators to conduct investigations, and potential government intervention in operations21181186 - Risks related to ADSs include high market price volatility, substantial influence of principal shareholders, and potential dilution from future capital raises25239242 Information on the Company Following a 2017 restructuring, the company operates as an asset-light solar project developer focused on high-growth US and European markets - Completed a significant business restructuring in September 2017, divesting its manufacturing businesses to become a pure-play downstream solar project developer and operator277279493 - The company's business model is divided into two main segments: Project Development (selling projects) and IPP (owning and operating solar plants to sell electricity)287289293 Project Pipeline and Operating Assets (as of Dec 31, 2021) | Category | Capacity | Key Details | | :--- | :--- | :--- | | Late-Stage Pipeline | 2.2 GW | Primarily in the USA (728 MW), Poland (594 MW), Spain (286 MW), and UK (214 MW) | | Operating Assets | ~180 MW | Includes 156 MW of projects in China | | 2021 Project Sales | 128 MW | Projects sold in the U.S, Poland, Hungary, and Spain | History and Development of the Company - The company was incorporated in the British Virgin Islands in 2006, listed on the NYSE in 2008, and executed a non-cash restructuring in 2017 to focus on the project business272276277 - To fund its growth, the company raised significant capital, including $45 million in 2020 and a total of $290 million through two offerings in January 2021278283 Business Overview - The company's Project Development business utilizes two models: Build-Transfer (selling grid-connected projects) and Project Rights Sale (selling projects at the 'notice to proceed' stage)289290 - The IPP (Independent Power Producer) business primarily operates in China, selling electricity under gross or net metering schemes, with plans to strategically dispose of these assets293295302 - The company is expanding into utility-scale and solar-plus-storage projects, adding 200 MW to its pipeline through a 2020 acquisition341 Late-Stage Project Pipeline by Location (as of Dec 31, 2021) | Region | Capacity (MW) | | :--- | :--- | | USA | 728.0 | | Poland | 594.0 | | Spain | 286.0 | | UK | 214.0 | | France | 100.0 | | China | 114.0 | | Italy | 57.0 | | Hungary | 52.0 | | Germany | 37.0 | | Total | 2,182.0 | Organizational Structure - ReneSola Ltd is a holding company incorporated in the British Virgin Islands that conducts its global business through a network of subsidiaries in key markets272489 Operating and Financial Review and Prospects Fiscal 2021 revenue grew 8% to $79.7 million, with gross margin expanding to 39.4% and a significantly strengthened liquidity position - The company's growth strategy is focused on Europe, the U.S, and China, aiming to expand its project pipeline to 3 GW by the end of 2022512514515 - The company's liquidity position significantly improved, with cash and cash equivalents rising to $254.1 million at year-end 2021, primarily due to $272.7 million in net proceeds from equity issuances562563577 Financial Highlights (2021 vs. 2020) | Metric | 2021 | 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $79.7 M | $73.5 M | +8% | | Gross Profit | $31.4 M | $16.7 M | +88% | | Gross Margin | 39.4% | 22.7% | +16.7 p.p. | | Operating Income | $12.7 M | $6.8 M | +87% | | Net Income | $6.9 M | $2.8 M | +147% | | Adjusted EBITDA | $25.9 M | $16.4 M | +58% | Operating Results - Net revenue increased to $79.7 million in 2021 from $73.5 million in 2020, driven by a $11.9 million increase in solar power project development revenue550 - Gross margin improved significantly to 39.4% in 2021 from 22.7% in 2020, due to a higher proportion of revenue from high-margin NTP project sales in the USA and Europe525551 - Net income attributable to ReneSola Ltd was $6.9 million in 2021, a substantial increase from $2.8 million in 2020499543555 Liquidity and Capital Resources - The company's debt-to-asset ratio improved significantly, decreasing to 10.28% as of December 31, 2021, from 45.5% at the end of 2020560 - In 2021, the company raised $272.7 million in net proceeds from the issuance of ordinary shares, driving the $204.6 million net cash provided by financing activities567577 Cash Flow Summary (in thousands USD) | Cash Flow Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Operating Activities | (6,100) | (10,033) | 55,914 | | Investing Activities | 19,224 | (3,387) | (1,597) | | Financing Activities | 204,641 | 30,177 | (39,306) | | Net Change in Cash | 213,706 | 16,033 | 16,098 | Critical Accounting Estimates - Revenue recognition for solar project development is a critical estimate, involving significant judgment on whether revenue is recognized over time or at a point in time590591872 - The company must make significant estimates for EPC services revenue using a cost-incurred method, which requires estimating total contract revenues and costs597598 - Valuation of deferred tax assets requires management to assess the likelihood of their realization, with a valuation allowance of $8.7 million recorded as of December 31, 2021534605871 Directors, Senior Management and Employees This section details the company's leadership, board structure, executive compensation, and global employee base of 164 people - The senior management team is led by CEO Yumin Liu, who has over 20 years of experience in the energy and solar sectors, and CFO Ke Chen612622623 - For fiscal year 2021, executives received approximately $2.0 million in cash compensation and were granted 7.1 million options under the 2007 Share Incentive Plan630 - As of March 31, 2022, there were 15.6 million options outstanding under the 2007 share incentive plan, which has 42.5 million shares reserved for issuance631635 - As of December 31, 2021, the company had 164 full-time employees, with 94 in China, 45 in Europe, and 25 in the United States and Canada656 Major Shareholders and Related Party Transactions Key shareholders include Xianshou Li (23.0%) and Shah Capital (17.9%), with notable related party transactions involving a company controlled by Mr Li - The company engaged in related party transactions with ReneSola Singapore Pte Ltd, controlled by former CEO Xianshou Li, which included service agreements and borrowings668671 Principal Shareholders (as of March 31, 2022) | Shareholder | Beneficial Ownership (%) | | :--- | :--- | | Xianshou Li | 23.0% | | Shah Capital Management, Inc | 17.9% | | Invesco Ltd | 11.1% | Financial Information The company does not plan to pay dividends, retaining earnings for expansion, with distributions also constrained by PRC regulations - The company has no present plan to declare or pay dividends, intending to retain earnings to fund operations and business expansion679 - Dividend distributions from the company's PRC subsidiaries are restricted by Chinese regulations, which require setting aside funds for statutory reserves680 The Offer and Listing The company's ADSs, each representing 10 ordinary shares, are listed on the NYSE under the symbol 'SOL' and have shown significant price volatility - The company's ADSs trade on the NYSE under the symbol "SOL", with each ADS representing 10 ordinary shares following a ratio change in 2017683 ADS Trading Price Range in 2021 | Period | High ($) | Low ($) | | :--- | :--- | :--- | | Full Year 2021 | 35.77 | 4.84 | Additional Information This section details the corporate framework, material contracts, and complex taxation considerations, including potential PFIC status for U.S holders - The company is governed by its memorandum and articles of association and the British Virgin Islands Business Companies Act of 2004690 - Material contracts include a joint venture to develop up to 700 MW of solar projects in Europe and a settlement agreement with OCI Company Ltd for $7.5 million712714 - The company does not believe it was a Passive Foreign Investment Company (PFIC) for the 2021 tax year, but notes this is a complex annual determination740742 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are unhedged foreign exchange and interest rate exposures from its global operations and borrowings - The company is exposed to foreign exchange risk; a hypothetical 10% depreciation of the Renminbi would have resulted in a theoretical gain of RMB 21.8 million as of December 31, 2021761763 - The company is exposed to interest rate risk; a hypothetical 100 basis point increase in interest rates would have decreased equity by approximately $0.9 million in 2021766768 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2021 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021777 - Management assessed the effectiveness of internal control over financial reporting based on the COSO 2013 framework and concluded it was effective as of December 31, 2021779 Corporate Governance The company complies with most NYSE standards but follows home country practices for certain committee composition and compensation plan approvals - The company's board has determined that Tan Wee Seng, an independent director, qualifies as the audit committee financial expert781 - Audit fees paid to the principal accountant, Grant Thornton, were $486,450 in 2021, compared to $427,000 in 2020783 - In December 2021, the board authorized a share repurchase program of up to $50 million, and by year-end had repurchased 30.9 million shares for $18.4 million786 - As a foreign private issuer, the company follows British Virgin Islands law, which differs from NYSE standards regarding shareholder approval for equity-compensation plans788789 PART III Financial Statements This section presents the audited consolidated financial statements for 2019-2021, with critical audit matters in revenue recognition and credit loss allowances - The independent auditor identified two critical audit matters: 1) Revenue recognition on the sale of solar power projects and 2) The allowance for credit losses803805 Consolidated Balance Sheet Highlights (in thousands USD) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | 529,268 | 336,942 | | Cash & Cash Equivalents | 254,066 | 40,593 | | Total Liabilities | 80,856 | 153,682 | | Total Shareholders' Equity | 448,412 | 183,260 | Consolidated Statement of Operations Highlights (in thousands USD) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Net Revenues | 79,662 | 73,503 | 119,117 | | Gross Profit | 31,425 | 16,686 | 34,226 | | Income/(Loss) from Operations | 12,652 | 6,780 | (964) | | Net Income/(Loss) Attributed to ReneSola Ltd | 6,862 | 2,779 | (8,831) | Exhibits This section lists all filed exhibits, including corporate governance documents, material contracts, and required officer certifications