ReneSola announced it has entered into a definitive share repurchase and subscription agreement (SPA) with Xianshou Li, the Company’s chairman and chief executive officer for the sale of the Company’s manufacturing and LED distribution businesses.
The transaction will also transfer substantially all of ReneSola’s related indebtedness to Li.
Other outcomes of the transaction include the following:
i) The Company will no longer be liable for the bank borrowings in excess of RMB 3 billion, and the Buyer and his spouse will continue to provide personal guarantees for a majority of such bank’s borrowings;
ii) The acquired businesses will cancel approximately $217.3 million of intercompany payables owed to it by the Company; and
iii) The Company will issue 180 million ordinary shares to ReneSola Singapore, an entity to be fully owned by the Buyer upon completion.
Li said ReneSola is exiting the manufacturing business as it has been impaired by overcapacity, pricing pressure and low profitability. Instead the company is focusing the rapidly growing and profitable project development market.
Since entering the project development business, ReneSola has developed over 480 MW of projects around the world.
“We believe this is the best path forward for ReneSola. The losses and a weakened balance sheet of the manufacturing business have been significant constraints on the growth of our downstream business,” Li added.
According to company officials, this transaction will strengthen company’s balance sheet, providing the financial flexibility necessary to drive the growth of the Company’s project development business. Post transaction the company’s total liabilities have been reduced to US$169.5mn from US$1,140.2mn.
Going forward, ReneSola sees great opportunity in Chinese rooftop solar market. The company anticipates to own 150 MW of China’s rooftop projects by the end of 2017.
For the third quarter of 2017, the Company’s project business is expected to generate revenue in the range of $40 to $45 million . The Company expects to connect 20 to 30 MW of projects during the third quarter of 2017.
The company also announced its unaudited financial results for the second quarter of 2017. Because the majority of revenue and losses are related to the Acquired Businesses being sold, the consolidated results are not indicative of the Company’s future financial outlook.
Second quarter revenue of $151.6 million was down 3.2% sequentially and down 39.4% year-over-year. Net loss was $31.5 million, compared to net loss of $23.2 million in Q1 2017 and net income of $5.5 million in Q2 2016.
The company recognized revenue of $3.1 million from the sale of rooftop projects of 3.0 MW in China’s domestic distributed generation market in Q2 2017.
Rajani Baburajan