ReneSola fires at Grizzly report, misses Q3 revenue guidance

ReneSola Ltd (NYSE:SOL) on Tuesday addressed a “deeply flawed and purposefully misleading narrative” presented recently by a research firm and reported a third-quarter (Q3) revenue below its guidance that, it said, should not bother stockholders.

Last week, the downstream solar company was accused in a report by Grizzly Research LLC of being a fraudulent business with some “non-existent” projects across Europe and the US. ReneSola immediately denied the claims and on Tuesday called the entity behind the report “an obscure short-selling firm” which had previously established a short position in SOL stock.

“After studying the Grizzly report, we conclude that the author has very limited knowledge of how solar project development works and has manipulated facts that are readily available to the public to create an impression of nefarious activity that is false, inappropriate, and misleading,” ReneSola said in a statement to its shareholders.

On a conference call, CEO Yumin Liu stated that the author of the report presents many discontinued projects as if they are fake, while completely disregarding COVID-19-related lockdowns and supply chain issues when pointing at some delayed projects like the 12-MW Caravaca development in Spain. The particular scheme has seen its environmental approval process prolonged by about 18 months. The review has now been concluded and the project has moved into the sales process, which is expected to close soon, the CEO noted.

"People knowledgeable with our industry understand that product development cycles are long. Small projects take one to two years from greenfield to NTP [notice to proceed]. To get to NTP for big utility-scale projects, it can take five to six years in the US and two to three years in most European countries. The development periods we see in our pipeline are totally normal," Liu stressed.

Grizzly Research also claims that ReneSola's former chairman and CEO Xianshou Li continues to secretly exercise substantial control over the firm and is still its biggest shareholder, while dealing with legal issues in China. The current CEO Liu admitted that Li is indeed a large shareholder of the company but said that his individual situation does not have an impact on ReneSola.

As per ReneSola’s financial results for the July-September 2021 period, the company said it is comfortable with its performance even though its top line missed the forecast. While revenue was up by 59% on the year, the figure stood at USD 15.5 million (EUR 13.7m) against projections for a USD 19 million-21 million range.

ReneSola blamed this on its inability to close a couple of project sales during the period. One is now expected to be completed in December and the other by the end of the year or in the first quarter of 2022.

“On a quarterly basis, sales can easily move between periods, skewing the results for a quarter but having no impact on the economics of our business. This was the case in the third quarter,” it explained.

Meanwhile, gross margin was at the high end of the guidance range of 36%-40%, reaching 39.2%. Net income attributed to ReneSola Power common shareholders amounted to USD 0.7 million, compared to USD 7 million in the second quarter of the year and USD 2.1 million in the third quarter of 2020, marking the sixth consecutive quarter of profitability for the company.

“We sustained gross margin through our strategy of selling projects at their most profitable point, NTP [notice to proceed], and through the support of our recurring, high margin IPP electricity sales. Operating expenses declined sequentially, reflecting our discipline,” the company said.

By the end of the year, ReneSola expects to reach 2.2 GW in its mid-to-late stage pipeline, with 1.8 GW already achieved in the third quarter.

The company guides for a fourth-quarter revenue in the range of USD 21 million-27 million and a gross margin of 36%-40%. For the full year, the top line is seen at USD 77 million-83 million and gross margin at more than 40%.

“Our preliminary goal for 2022 is to achieve the net profit growth of at least 30% compared to 2021,” it concluded.

(USD 1.0 = EUR 0.886)

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