UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of | (I.R.S. Employer |
(Address of Principal Executive Offices) (Zip Code)
+1
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which Registered |
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10 shares, no par value per share |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
As of November 13, 2024,
前瞻性聲明
本季度報告中包含的一些聲明屬於emeren group有限公司（以下簡稱"emeren group有限公司"、"我們"、"我們的"或"公司"）根據1933年《證券法》修訂版第27A節和1934年《證券交易法》修訂版第21E節，以及1995年《美國私人證券訴訟改革法案》（"PSLRA"）定義的"前瞻性"聲明。除歷史事實聲明外，本表格10-Q中包含的所有聲明，包括有關公司未來財務狀況、經營成果、計劃、目標、期望、未來表現、業務運營或業務前景的聲明，均屬於前瞻性聲明。諸如"相信"、"預期"、"預測"、"將"、"可能"、"計劃"、"估算"、"預測"、"目標"、"應"、"可以"、"會"、"可能"、"應該"、"努力"等詞語以及這些詞語的變體，旨在識別前瞻性聲明，並與本聲明一起包含，目的是使這些前瞻性聲明受到PSLRA中關於前瞻性聲明的安全港條款的保護。前瞻性聲明既不是歷史事實，也不是對未來表現的保證。相反，這些聲明僅基於我們對未來的信念、期望和假設，可能並不準確，並且受已知和未知的風險和不確定性的影響，其中許多超出了我們的控制。這些風險和不確定性可能導致實際事件或結果與我們的歷史經驗和管理層目前的期望或預測有實質性差異。這些風險和不確定性在公司於2024年8月1日向SEC提交的截至2023年12月31日的年度報告中討論。任何前瞻性聲明僅在其作出之日有效。
提醒您不要過度依賴任何前瞻性聲明。除法律規定外，我們不承擔公開更新或發佈對這些前瞻性聲明進行任何修訂的義務，以反映本10-Q發佈日期後的任何事件或情況，或反映未預期的事件，無論是因新信息，未來事件或其他原因引起的。
此外，有關我們的財務狀況和運營結果的以下討論應與本季度報告的簡明合併財務報表和相關附註一起閱讀。
ii
第一部分.財務信息
項目1.基本報表
emeren group LTD
未經審計的簡明合併資產負債表
（除流通股數和每股金額外，金額以千美元爲單位）
截至 | ||||||||
附註 |
| 2024年9月30日 |
| 2023年12月31日 | ||||
資產 |
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流動資產： |
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現金及現金等價物 | 2 |
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受限現金 | 2 |
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應收賬款（交易），淨額 | 3 |
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應收賬款未開票，淨額 | 3 | |
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預付款項 | 2 |
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應收增值稅 |
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項目資產，流動的 | 5 |
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預付費及其他流動資產，淨額 | 4 |
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總流動資產 |
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物業、廠房和設備，淨值 | 6 |
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項目資產，非流動資產 | 5 |
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營業租賃，使用權資產。 | 16 | | | |||||
融資租賃，使用權資產 | 8 | | | |||||
其他非流動資產 | 3 |
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總資產 | $ | |
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附註爲這些未經審計的簡明合併財務報表的組成部分。
1
emeren group LTD
未經審計的簡明綜合資產負債表（續）
（除流通股數和每股金額外，金額以千美元爲單位）
As of | ||||||||
| 附註 |
| 2024年9月30日 |
| 2023年12月31日 | |||
負債及股東權益 | ||||||||
流動負債: | ||||||||
應付賬款 | $ | |
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客戶預付款 | 2 |
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到相關方款項 | 15 |
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長期借款，流動負債 | 8 |
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應交所得稅 | 7 |
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應付工資 |
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經營租賃負債，流動 | 16 | | | |||||
未能完成銷售及租賃回購的負債，流動負債 | 8 | | | |||||
其他流動負債 | 9 | | | |||||
總流動負債 |
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長期借款，非流動負債 | 8 |
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經營租賃負債，非流動 | 16 | | | |||||
未能完成銷售及租賃回購的負債，非流動負債 | 8 |
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遞延所得稅負債 | 7 | | | |||||
總負債 | |
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承諾和 contingencies | ||||||||
股東權益 | ||||||||
普通股（ | 10 |
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追加實收資本 |
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按成本覈算的公司庫藏股( | 10 | ( | ( | |||||
累積赤字 |
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累計其他綜合損失 |
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Emeren集團有限公司股東權益。 |
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非控股權益 |
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股東權益合計 |
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負債和股東權益總計 | $ | |
| $ | | |||
附註爲這些未經審計的簡明合併財務報表的組成部分。
2
emeren group LTD
未經審計的摘要合併利潤表
（除流通股數和每股金額外，金額以千美元爲單位）
| 截至九月三十日的三個月 | 截至9月30日的九個月 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
淨收入： | |||||||||||||
太陽能發電項目開發銷售 | $ | | $ | | $ | | $ | | |||||
電力發電。 | |
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EPC服務 | |
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DSA | | — | | | |||||||||
其他 | |
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總淨收入 | |
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營收成本 | ( |
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毛利潤 | |
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營業收入（費用）： | |||||||||||||
銷售和市場推廣 | ( |
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General and administrative | ( |
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其他經營收益（費用），淨額 | |
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資產減值損失 | — |
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總營業費用 | ( | ( | ( | ( | |||||||||
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營業收入（虧損） | | ( | | ( | |||||||||
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其他收入（支出）： |
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利息收入 | |
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利息支出 | ( |
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投資（損失）收益 | ( | | ( | | |||||||||
匯率期貨的外匯收益（損失） | |
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其他總收益(費用)，淨額 | |
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所得稅前收益（損失） | |
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所得稅費用 | ( | ( | ( | ( | |||||||||
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淨收入（虧損） | |
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減：歸屬於非控股權益的淨利潤（虧損） | |
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淨利潤歸屬於emeren group有限公司 | $ | | $ | ( |
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歸屬於Emeren Group Ltd每個ADS的收入（虧損） | |||||||||||||
基本 | $ | | $ | ( | $ | ( | $ | ( | |||||
稀釋 | $ | | $ | ( |
| $ | ( |
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用於計算每個ADS的收入（虧損）的加權平均ADS數量 |
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基本 | | |
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稀釋 | |
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附註爲這些未經審計的簡明合併財務報表的組成部分。
3
EMEREN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts expressed in U.S. dollars in thousands)
Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Net income (loss) | $ | | $ | ( | $ | | $ | ( | ||||
Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustment |
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Other comprehensive income (loss) |
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Comprehensive income (loss) |
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Less: Comprehensive income (loss) attributed to non-controlling interests |
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Comprehensive income (loss) attributed to Emeren Group Ltd | $ | |
| $ | ( | $ | |
| $ | ( | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
EMEREN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amount expressed in U.S. dollars in thousands, except for number of shares)
Accumulated |
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Number of | Number of | paid-in | Accumulated | comprehensive | attributable to | Noncontrolling |
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| Shares Issued |
| Amount |
| Shares Issued |
| Amount |
| capital |
| deficit |
| income (loss) |
| Emeren Group Ltd |
| interest |
| Total equity | |||||||||
Balance at December 31, 2022 |
| | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | |
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Net loss |
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Stock repurchase | — | | ( | ( | | | | ( | | ( | ||||||||||||||||||
Share-based compensation | — |
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Initial non-controlling interest of the minority shareholders | — | | — | — | | | | | | | ||||||||||||||||||
Other comprehensive income (loss), net of tax | — | | — | — | | | | | ( | | ||||||||||||||||||
Balance at March 31, 2023 | | |
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Net income (loss) | — |
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Stock repurchase | — | | ( | ( | | | | ( | | ( | ||||||||||||||||||
Share exercised by employee | |
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Share-based compensation | — | — | — | | | | | |||||||||||||||||||||
Initial non-controlling interest of the minority shareholders | — | | — | — | | | | | | | ||||||||||||||||||
Other comprehensive loss, net of tax | — | | — | — | | | ( | ( | ( | ( | ||||||||||||||||||
Balance at June 30, 2023 | | | ( | ( | | ( | ( | | | | ||||||||||||||||||
Net income (loss) | — | — | — | ( | ( | | ( | |||||||||||||||||||||
Stock repurchase | — | ( | ( | ( | ( | |||||||||||||||||||||||
Share-based compensation | — | — | — | | | | ||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||
Balance at September 30, 2023 | | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | | $ | | ||||||||||
Balance at December 31, 2023 | | $ | | ( | $ | ( | $ | | $ | ( | $ | ( | $ | | $ | | $ | | ||||||||||
Net income (loss) | — | — | — | | ( | | ( | | ( | |||||||||||||||||||
Stock repurchase | — | ( | ( | | | | ( | | ( | |||||||||||||||||||
Share-based compensation | — | — | — | | | | | | | |||||||||||||||||||
Issuance of common stock from release of restricted share units | | | — | — | | | | | | | ||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | | | ( | ( | ( | ( | |||||||||||||||||||
Balance at March 31, 2024 | | | ( | ( | | ( | ( | | | | ||||||||||||||||||
Net income | — | — | — | | | | | | | |||||||||||||||||||
Stock repurchase | — | ( | ( | | | | ( | | ( | |||||||||||||||||||
Share-based compensation | — | — | — | | | | | | | |||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | | | ( | ( | ( | ( | |||||||||||||||||||
Balance at June 30, 2024 | | |
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Net income | — | — | — | | | | | |||||||||||||||||||||
Share-based compensation | — | — | — | | | | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | | | | | |||||||||||||||||||||
Balance at September 30, 2024 | | $ | | ( | $ | ( | | ( | ( | | | | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
EMEREN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in U.S. dollars in thousands)
Nine Months Ended September 30, | ||||||
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| 2023 | ||
Operating activities: |
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Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation |
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Allowances for credit losses |
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Loss on cancellation of project assets | | | ||||
Share-based compensation |
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Deferred tax provision |
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Impairment loss of assets | — | | ||||
Loss on disposal of property, plant and equipment |
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Investment gains | | ( | ||||
Changes in operating assets and liabilities: |
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Accounts receivable, trade and unbilled |
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Advances to suppliers |
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Value added tax recoverable |
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Prepaid expenses and other current assets |
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Project assets |
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Other non-current assets |
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Accounts payable |
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Advances from customers |
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Amounts due to related parties |
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Other current liabilities |
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Income tax payable |
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Salaries payable |
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Net cash used in operating activities | ( | ( | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
EMEREN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts expressed in U.S. dollars in thousands)
| Nine Months Ended September 30, | |||||
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| 2024 |
| 2023 | ||
Investing activities: | ||||||
Purchase of property, plant and equipment | $ | ( | $ | ( | ||
Proceeds from disposal of property, plant and equipment | | — | ||||
Proceeds from disposal of non-financial assets in subsidiary | — | | ||||
Interest from U.S. treasury note | — | | ||||
Net cash (used in) provided by investing activities | ( | | ||||
Financing activities: | ||||||
Proceeds from banks and other third-party borrowings | | — | ||||
Repayment of banks and other third-party borrowings | ( | ( | ||||
Proceeds from option exercise | — | | ||||
Repurchase of shares | ( | ( | ||||
Borrowings from related parties | | | ||||
Proceeds from failed sale-lease back | | | ||||
Repayment of finance lease obligations | ( | ( | ||||
Repayment of failed sale-lease back financing | ( | ( | ||||
Net cash used in financing activities | ( | ( | ||||
Effect of exchange rate changes | ( | ( | ||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | ||||
Cash and cash equivalents and restricted cash, beginning of period | | | ||||
Cash and cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental schedule of non-cash operating activities: | ||||||
Non-cash settlement of accounts receivable unbilled, net and accounts payable with the same counterparty | $ | | $ | — | ||
Transfer from property, plant and equipment, net to project assets, current | $ | ( | $ | — | ||
Supplemental schedule of non-cash investing and financing activities: | ||||||
Purchases of property, plant and equipment in accounts payable | $ | ( | $ | ( | ||
Finance leases in accounts payable | $ | ( | $ | ( | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
EMEREN GROUP LTD
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Emeren Group Ltd, rebranded from ReneSola Ltd. in January 2023, was incorporated in the British Virgin Islands on March 17, 2006. On January 29, 2008, Emeren Group Ltd and its subsidiaries (collectively, the “Company”) became listed on the New York Stock Exchange (“NYSE”) in the United States. The Company is a solar project developer and operator, a solar downstream player. The Company develops and sells solar power projects or sells project Special Purpose Vehicles (“SPVs”) (project development business); provides engineering, procurement and construction business (“EPC business”); owns and operates solar power projects and sells the electricity generated by the operated solar power plants (“IPP business”); and provides Development Services Agreement (“DSA”). The Company conducts the IPP business, EPC business, DSA business and project development business in a number of countries, including United States, Poland, Hungary, Spain, France, United Kingdom (“UK”), Germany, Italy and China.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited condensed consolidated financial statements have been prepared and presented in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.
In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Quarterly results are not necessarily indicative of results for the full year. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to generate cash flows from operations, and the Company’s ability to arrange adequate financing arrangements, to support its working capital requirements.
Basis of consolidation
The unaudited condensed consolidated financial statements include the financial statements of Emeren Group Ltd and its subsidiaries. All inter-company transactions, balances and realized and unrealized profits and losses have been eliminated on consolidation.
A non-controlling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Company. Net income (loss) on the condensed consolidated statements of operations and comprehensive income (loss) includes the net income (loss) attributable to non-controlling interests when applicable. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests in the Company’s condensed consolidated balance sheets. Cash flows related to transactions with non-controlling interests are presented under financing activities in the condensed consolidated statements of cash flows, when applicable.
8
Use of estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting periods presented. Actual results could materially differ from these estimates. Significant accounting estimates are susceptible to changes with the acquisition of the information, which include revenue recognition for sales of project asset rights, percentage of completion of EPC services, EPC warranties, allowances for credit losses, valuation of deferred tax assets, and recoverability of the carrying value of long-lived assets and project assets. Management bases its estimates and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Fair value measurement
The Company estimates fair value of financial assets and liabilities as the price that would be received from the sales of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants. The Company utilizes a hierarchy for inputs used in measuring fair value that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. Valuation techniques used to measure fair value maximize the use of observable inputs.
When available, the Company measures the fair value of financial instruments based on quoted market prices in active markets (Level 1 inputs), valuation techniques that use observable market-based inputs (Level 2 inputs) or unobservable inputs that are corroborated by market data. Pricing information the Company obtains from third parties is internally validated for reasonableness prior to use in the unaudited condensed consolidated financial statements. When observable market prices are not readily available, the Company generally estimates the fair value using valuation techniques that rely on alternate market data or inputs that are generally less readily observable from objective sources and are estimated based on pertinent information available at the time of the applicable reporting periods (Level 3 inputs).
In certain cases, fair values are not subject to precise quantification or verification and may fluctuate as economic and market factors vary and as the Company’s evaluation of those factors changes. Although the Company uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique. In these cases, a minor change in an assumption could result in a significant change in its estimate of fair value, thereby increasing or decreasing the amounts of the Company’s consolidated assets, liabilities, equity and net income or loss.
Financial assets and liabilities held by the Company measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 include cash and cash equivalents, accounts receivable, accounts payable and salaries payable.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and salaries payable approximate their fair value because of their short-term nature (classified as Level 1).
Significant accounting policies
There have been no material changes to the Company’s significant accounting policies disclosed in our audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023.
Cash and cash equivalents
The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. As of September 30, 2024 and December 31, 2023, the Company had cash in excess of FDIC insured amount. The Company has not experienced any losses in such accounts.
Advances to suppliers
As of September 30, 2024 and December 31, 2023, advances to suppliers in current assets were $
9
Goodwill
The Company performs goodwill impairment testing at the reporting unit level on December 31 annually and more frequently if indicators of impairment exist. During the three and nine months ended September 30, 2023, the Company recorded $
Leases
Operating lease costs are recognized on a straight-line basis over the lease term. From time to time, the Company’s subsidiaries are asked to prepay the lease costs for over one year. As of September 30, 2024 and December 31, 2023, the prepaid rental fees of $
Revenue recognition
The Company primarily derives its revenues from the following revenue streams:
| ● | Solar power project development – This is comprised of sale of project assets constructed by a third-party EPC contractor, sale of project assets constructed by the Company’s own EPC team, and sale of project asset rights. |
| ● | EPC Services – Certain of the EPC contracts for photovoltaic (PV) solar power systems contain retainage provisions. Retainage represents contract costs for the portion of the contract price earned for work performed but held for payment by the customer as a form of security until a certain defined timeframe has been reached. The Company considers whether collectability of such retainage is reasonably assured in connection with our overall assessment of the collectability of amounts due or that will become due under the EPC contracts. After the Company has satisfied the EPC contract requirements and has an unconditional right to consideration, the retainage is billed and reclassified to “Accounts receivable from EPC services (billed)”. As of September 30, 2024 and December 31, 2023, the unbilled balance of accounts receivable from EPC services included in accounts receivable unbilled, net were $ |
| ● | Electricity generation – See Note 3. ACCOUNTS RECEIVABLE TRADE, NET for further details. |
| ● | DSA and others – DSA revenue is recognized over time based on the percentage of completion by using the cost-based input method upon the performance of relevant project development activities. Ancillary revenues are recorded in others. |
Contract liability
Advances from customers, which represent contract liabilities, are unrecognized revenue received from customers. Advances from customers are recognized as the Company performs under the contract. During the nine months ended September 30, 2024 and 2023, the Company recognized
10
Disaggregation of revenue
The following tables summarizes the Company’s revenues by recognition points:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
in thousands | ||||||||||||
Solar power project development | $ | | $ | | $ | | $ | | ||||
Others | | — | | — | ||||||||
Revenue recognized at a point in time | |
| |
| |
| | |||||
EPC services | |
| |
| |
| | |||||
Electricity generation | |
| |
| |
| | |||||
DSA | | — | | | ||||||||
Others | — |
| |
| |
| | |||||
Revenue recognized over time | |
| |
| |
| | |||||
Total | $ | | $ | | $ | | $ | | ||||
The following table summarizes the Company’s revenues generated by the geographic location of customers:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
in thousands | ||||||||||||
China | $ | | $ | | $ | | $ | | ||||
United States | |
| |
| |
| | |||||
UK | |
| |
| |
| | |||||
Spain | |
| |
| |
| | |||||
France | |
| — |
| |
| | |||||
Poland | |
| |
| |
| | |||||
Italy | |
| |
| |
| | |||||
Hungary | — |
| |
| |
| | |||||
Germany | — | | — | | ||||||||
Total | $ | | $ | | $ | | $ | | ||||
See Note 17. SEGMENT REPORTING for further details.
Feed-in tariff (s) (FIT) payments
The Company collected FIT payments of $
The Company collected FIT payments of $
Foreign currency
The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China foreign exchange trading system market. The Company’s cash and cash equivalents and restricted cash denominated in RMB amounted to RMB
11
Comprehensive income (loss)
Comprehensive income (loss) is the change in equity during a period from transactions and other events and circumstances from non-shareholder sources and included net income (loss) and foreign currency translation adjustments. As of September 30, 2024 and December 31, 2023, accumulated other comprehensive income (loss) is mainly composed of foreign currency translation adjustments.
Recently issued accounting pronouncements
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements, which requires leasehold improvements associated with common control leases to be amortized over the useful life to the common control group. The new standard is effective for fiscal years beginning after December 15, 2023. The Company’s management does not believe the adoption of ASU No. 2023-01 will have a material impact on its unaudited condensed consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company’s management does not believe the adoption of ASU No. 2023-07 will have a material impact on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU No. 2023-09 will have a material impact on its consolidated financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
3. ACCOUNTS RECEIVABLE TRADE, NET
| September 30, | December 31, | ||||
|
| 2024 |
| 2023 | ||
in thousands | ||||||
Accounts receivable trade | ||||||
– from EPC services | $ | |
| $ | | |
– from solar power project assets and DSA |
| |
|
| | |
– from electricity generation (1) |
| |
|
| | |
Total accounts receivable trade |
| |
|
| | |
Less: allowance for credit losses |
| ( |
|
| ( | |
Accounts receivable trade, net | $ | |
| $ | | |
| (1) | Accounts receivable from electricity generation were mainly due from China’s state grid companies. The amounts included the portion of feed-in tariff(s) (FIT) for the electricity sold to the state grid companies in the PRC in which the relevant on-grid solar power stations are still pending for registration to the Renewable Energy Subsidy Catalog, which the Company has submitted the application for its solar power stations that started operation before July 2017 to be registered on the Catalog. The Company expects that a certain part of the FIT receivables will be recovered after |
Accounts receivable trade, net and its allowance for credit losses as of December 31, 2022 amounted to $
12
ACCOUNTS RECEIVABLE UNBILLED, NET
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Accounts receivable unbilled |
|
|
|
| ||
–from solar power project assets | $ | | $ | | ||
–from EPC services | | | ||||
Total accounts receivable unbilled | | | ||||
Less: allowance for credit losses | ( | ( | ||||
Accounts receivable unbilled, net | $ | | $ | | ||
The Company’s contract assets classified as “Accounts receivable unbilled” are primary due to billing of certain project sales and EPC services where the Company has the right to consideration in exchange of the project sales transferred and EPC services performed.
Accounts receivable unbilled, net and its allowance for credit losses as of December 31, 2022 amounted to $
ALLOWANCE FOR CREDIT LOSSES
The Company establishes an allowance for expected credit losses based on historically observed default rates over the expected life of the receivable balance and are adjusted for forward-looking information available without undue cost of effort. The Company’s management regularly reviews the allowance for credit losses to ensure relevant information about specific debtors is updated.
The following table shows the movement in lifetime expected credit losses that has been recognized for trade receivables under the simplified approach.
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
in thousands | ||||||
At beginning of the period | $ | | $ | | ||
Allowance for credit losses for the period |
| |
| | ||
Written off | ( | ( | ||||
At end of the period | $ | | $ | | ||
During the three months ended September 30, 2024 and 2023, the Company recorded credit losses of
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
As of September 30, 2024, receivables from a solar power customer amounted to $
For the three months ended September 30, 2024 and 2023, revenue from this solar power customer accounted for
13
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
September 30, | December 31, | |||||
|
| 2024 |
| 2023 | ||
| in thousands | |||||
Receivables from disposal of property, plant and equipment (1) | $ | | $ | | ||
Deposits (2) | | | ||||
Others (3) |
| |
| | ||
Total prepaid expenses and other current assets |
| |
|
| | |
Allowance for credit losses (4) | ( | ( | ||||
Total prepaid expenses and other current assets | $ | |
| $ | | |
| (1) | Receivables from disposal of property, plant and equipment mainly represented disposal of Company’s solar power stations assets which were primarily for electricity generation revenue segment. |
| (2) | As of September 30, 2024 and December 31, 2023, deposits mainly represented deposits made for interconnection, and the bidding of project asset construction rights and rooftop leases. |
| (3) | As of September 30, 2024, others mainly included $ |
| (4) | As of September 30, 2024, allowance for credit losses mainly represented the allowance for the Korea project’s prepayment which the Company deemed not recoverable. As of December 31, 2023, allowance for credit losses mainly represented the portion of compensation receivable from Canadian authorities on closure of a certain project in Canada that the Company believes is not recoverable, unrecoverable collection from sold entities in China, and allowance for the Korea project’s prepayment which the Company deemed not recoverable. |
5. PROJECT ASSETS
Project assets consisted of the following at September 30, 2024 and December 31, 2023, respectively:
| September 30, | December 31, | ||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Project assets - development and construction cost | $ | | $ | | ||
Project assets - others |
| |
| | ||
Total project assets | $ | | $ | | ||
Current portion | $ | | $ | | ||
Non-current portion | $ | | $ | | ||
14
6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net:
| September 30, | December 31, | ||||
|
| 2024 |
| 2023 | ||
in thousands | ||||||
Land | $ | | $ | | ||
Plant and machinery |
| |
| | ||
Motor vehicles |
| |
| | ||
Office equipment |
| |
| | ||
Power stations (1) |
| |
| | ||
Less: Accumulated depreciation |
| ( |
| ( | ||
| | |||||
Construction in progress |
| |
| | ||
Property, plant and equipment, net | $ | | $ | | ||
| (1) | During the nine months ended September 30, 2023, the Company sold power stations in Henan, China and recorded a loss of $ |
Construction in progress mainly represents solar power projects which are under development for self-electricity generation in China.
Depreciation expense for the three months ended September 30, 2024 and 2023 was $
7. INCOME TAXES
The Company and its subsidiaries file separate income tax returns.
The Company recorded income tax expense of $
The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 was
We determine our income tax provision for interim periods using an estimate of our annual effective tax rate adjusted for discrete items occurring during the periods presented. The Company’s income tax provision in the nine months ended September 30, 2024 and 2023, was primarily related to the foreign tax provision. The Company’s income tax provision in the three months ended September 30, 2024 and 2023, was mainly due to income taxes on earnings from its foreign tax jurisdictions.
The Company conducts its business globally and its operating income is subject to varying rates of tax. Consequently, the Company’s effective tax rate is dependent upon the geographic distribution of its earnings or losses and the tax laws and regulations in each geographical region.
Due to historical losses in the U.S., the Company has a full valuation allowance on its U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If management’s assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.
As of September 30, 2024, there are no material changes on uncertain tax positions.
15
8. BORROWINGS AND OTHER FINANCING ARRANGEMENTS
Borrowings from banks and other third parties
The Company’s borrowings from banks and other third parties consist of the following:
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Long-term borrowings, current | $ | | $ | | ||
Long-term borrowings, non-current |
| |
| | ||
Total borrowings from bank and other third parties | $ | | $ | | ||
As of September 30, 2024 and December 31, 2023, the long-term borrowings of $
Long-term borrowings
In January 2021, the Company’s UK subsidiary obtained a long-term loan by a lender in the UK totaling £
In January 2022, the Company’s Project Branston subsidiary entered into a lease loan contract with Aviva Investor Infrastructure Income No.4 Ltd. The loan bears interest at
As of September 30, 2024, future minimum payments required under the lease loan contract with Aviva Investor Infrastructure Income No.4 Ltd are:
| USD | ||
in thousands | |||
2024 (October 1 through December 31) |
| $ | |
2025 | | ||
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 and later |
| | |
Total minimum lease loan payments |
| | |
Less: Amount representing interest |
| ( | |
Present value of net minimum lease loan payments | $ | | |
In September 2022, the Company’s RPZE 1 subsidiary entered into a shareholder loan contract with a minority shareholder of a subsidiary of the Company, RPZE 1, of $
In February 2023, the Company’s Tensol 3 subsidiary entered into a shareholder loan contract with a minority shareholder of a subsidiary of the Company, Tensol 3, of $
In November 2023, the Company’s China subsidiary obtained a long-term loan by a bank totaling RMB
16
In March 2024, the Company’s China subsidiary obtained a long-term loan by a bank totaling RMB
In July 2024, the Company’s China subsidiary obtained a long-term loan by a bank totaling RMB
Financing associated with failed sale-lease back transactions
In 2019, certain subsidiaries of the Company (the “seller-lessee”) sold self-built solar projects (“leased assets”) with a carrying amount of $
As the leased assets are considered integral with real estate under ASC 360, the sale-leaseback rules related to real estate are applied. The lease transactions do not qualify as a sale-leaseback transaction as these solar projects are initially invested and built up by the seller-lessee with expected useful life of
Accordingly, these transactions are accounted for as financing transactions in accordance with ASC 840. Internal rate of return is used in the computation of interest cost. The assets remain in the property, plant and equipment (“PPE”) and continue to be depreciated.
During the three months ended September 30, 2024 and 2023, the Company paid for amount of financing lease associated with failed sales-lease back transactions of $
Finance lease
The Company leased module, inverter and other materials from different financial leasing companies in China. Pursuant to the terms of the contracts, the Company is required to make lease payments to the finance lease companies and is entitled to obtain the ownership of this machinery and equipment at a nominal price upon the expiration of the lease. These arrangements are guaranteed by other subsidiaries of the Company and are also pledged by the shares and rights for the future power generation income of the leased assets. The lease is classified as finance lease. As of September 30, 2024 and December 31, 2023, the carrying amount is included in finance lease right-of-use assets that is being depreciated over lives of
17
As of September 30, 2024, future minimum payments required under the finance lease are:
| USD | ||
in thousands | |||
2024 (October 1 through December 31) |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
Total minimum lease payments | | ||
Less: Amount representing interest |
| ( | |
Present value of net minimum lease payments | $ | | |
Current portion | $ | | |
Non-current portion | $ | | |
As of September 30, 2024, future minimum payments required under the failed sale-lease back are:
| USD | ||
in thousands | |||
2024 (October 1 through December 31) |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 and later |
| | |
Total minimum lease payments |
| | |
Less: Amount representing interest |
| ( | |
Present value of net minimum lease payments | $ | | |
Current portion | $ | | |
Non-current portion | $ | | |
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Current portion of finance lease | $ | | $ | | ||
Current portion of failed sale-lease back | | | ||||
Total current portion of failed sale-lease back and finance lease | $ | | $ | | ||
Non-current portion for finance lease | $ | | $ | | ||
Non-current portion for failed sale-lease back | | | ||||
Total non-current portion of failed sale-lease back and finance lease | $ | | $ | | ||
Total finance lease liabilities are net of total deposits of $
Interest expense
Interest expenses incurred for the three months ended September 30, 2024 and 2023 were $
18
9. OTHER CURRENT LIABILITIES
The Company’s other current liabilities are summarized below:
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Payables for purchase of property, plant and equipment(1) | $ | | $ | | ||
Other tax payables |
| — |
| | ||
Deferred revenue(3) |
| — |
| | ||
Other (2) |
| |
| | ||
Total other current liabilities | $ | | $ | | ||
| (1) | Payable for purchase of property, plant and equipment as of September 30, 2024 and December 31, 2023 included as payable to ReneSola Singapore Pte Ltd.’s subsidiaries. |
| (2) | Other as of September 30, 2024 and December 31, 2023 mainly includes the payables for claims, audit fees and other professional service fees. |
| (3) | Deferred revenue as of December 31, 2023 is mainly related to Hungary project. |
10. COMMON SHARES
During 2023, the Company repurchased
As of September 30, 2024 and December 31, 2023, the number of total issued shares of the Company was
11. SHARE BASED COMPENSATION
2007 Share Incentive Plan
On September 27, 2007, the Company adopted the Emeren Group Ltd 2007 Share Incentive Plan (the “Plan”) that provides for grant of share options, restricted shares and restricted share units to employees in the Plan. A maximum of
Except as otherwise noted in the award agreements with the employee or consultant, the options can be exercised within from the award date, except for the participant’s termination of employment or service. The vesting schedule and the exercise price per share will be determined by the Committee and set forth in the individual award agreement. In the event of any distribution, share split, or recapitalization of the Company, the Committee shall make such proportionate and equitable adjustments, if any, to reflect such change with respect to (a) the aggregate number and type of shares that may be issued under the Plan and (b) the terms and conditions of any outstanding awards. Except as may otherwise be provided in any award agreement, if a change of control occurs and a participant’s awards are not converted, assumed, or replaced by a successor, such awards shall become fully exercisable and all forfeiture restrictions on such awards shall lapse.
19
Options to Employees
During the nine months ended September 30, 2024 and year ended December 31, 2023,
Expected volatilities are based on the average of the standard deviation of the daily stock prices of the Company and other selected comparable companies in the same industry. The expected term of options represents the period of time that options granted are expected to be outstanding. The risk-free rate of return is based on the US Treasury bond yield curve in effect at the time of grant for periods corresponding with the expected term of the option.
A summary of the option activity is as follows:
Weighted | ||||||||||
Average | ||||||||||
Weighted | Remaining | Aggregate | ||||||||
Number of | Average | Contractual | Intrinsic | |||||||
| Options |
| Exercise Prices |
| Term (in years) |
| Value | |||
Outstanding on December 31, 2023 |
| |
| $ | |
|
| $ | | |
Granted |
| |
|
| |
|
| | ||
Exercised |
| |
|
| |
|
| | ||
Forfeited |
| ( |
|
| |
|
| | ||
Outstanding on March 31, 2024 |
| |
|
| | $ | | |||
Granted | | | | |||||||
Exercised | | | | |||||||
Forfeited | | | | |||||||
Outstanding on June 30, 2024 | | | | |||||||
Granted | | | | |||||||
Exercised | | | | |||||||
Forfeited | | | | |||||||
Outstanding on September 30, 2024 | | $ | | $ | | |||||
Expected to vest at September 30, 2024 |
| |
|
| |
| | |||
Exercisable at September 30, 2024 |
| |
| $ | |
| $ | | ||
As of September 30, 2024, there were
Share-based compensation costs of $
During the nine months ended September 30, 2024, the
12. EMPLOYEE BENEFITS
North America
Emeren extends a 401(k) plan to eligible employees based in the United States. Through our 401(k) plan, eligible employees have the flexibility to defer up to
20
Emeren has implemented a voluntary Registered Retirement Savings Plan (RRSP) tailored for eligible employees based in Canada. This initiative aims to empower our Canadian workforce in achieving their long-term financial objectives in a tax-efficient manner. Under the RRSP program, eligible employees immediately vest in the plan, ensuring immediate access to the benefits it offers. Moreover, the Company provides a structured Employer Match percentage formula, which depends on the percentage of earnings contributed by the employee.
In the fiscal year 2023, eligible employees based in the United States and Canada could enroll in the Company’s comprehensive supplemental benefits plans, comprised of health insurance, dental and vision coverage, life insurance, and a flexible spending account. Furthermore, the Company ensured full compliance with state, provincial, and federal laws and regulations, guaranteeing that all social benefits pertinent to North American employees were provided in accordance with applicable legal frameworks.
Europe
Emeren Group is committed to providing a comprehensive range of benefits to its employees in Europe, maintaining careful adherence to the framework of local laws and regulations governing social welfare. Across the majority of European countries, the cornerstone elements of the social benefit system encompass pension, healthcare, accident, and unemployment insurances. Eligibility criteria, utilization guidelines, and benefit amounts are dictated by relevant local legislation, ensuring compliance and equitable distribution. In alignment with statutory obligations, our company carefully fulfills the provision of all supplementary social benefits mandated by law in each respective country. Furthermore, beyond the statutory offerings, our company extends additional support through supplementary benefits, including private medical insurance, meal vouchers, and commuting allowances.
China
In the fiscal year 2023, our operations in China continued to uphold our commitment to the welfare of our employees through participation in the benefit plans administered by the government of the People’s Republic of China (PRC). These plans encompass essential aspects such as pension, medical insurance, housing funds, unemployment, and workplace injury insurance, ensuring comprehensive coverage for our workforce.
Both the Company and our employees actively contribute to these plans, with the Company assuming the responsibility of withholding the employees’ portion from their salaries and remitting the contributions to the local government on a monthly basis.
13. EARNINGS (LOSS) PER ADS
Basic and diluted earnings per ADS have been calculated as follows:
|
| Three months ended September 30, |
| Nine months ended September 30, | ||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
in thousands, except number of shares and per share amounts | ||||||||||||
Numerator: | ||||||||||||
Net income (loss) | $ | | $ | ( | $ | |
| $ | ( | |||
Less: Net income (loss) attributed to noncontrolling interests | | |
| |
| ( | ||||||
Total net income (loss) attributed to Emeren Group Ltd | $ | | $ | ( | $ | ( |
| $ | ( | |||
|
|
|
| |||||||||
Numerator for diluted income (loss) per ADS | $ | | $ | ( | $ | ( |
| $ | ( | |||
| ||||||||||||
Denominator: | ||||||||||||
Denominator for basic income (loss) per ADS - weighted average number of ADS outstanding* | | |
| |
|
| | |||||
Dilutive effects of share options* | | |
| |
|
| | |||||
Denominator for diluted calculation - weighted average number of ADS outstanding* | | |
| |
|
| | |||||
Basic income (loss) per ADS | $ | | $ | ( | $ | ( |
| $ | ( | |||
Diluted income (loss) per ADS | $ | | $ | ( | $ | ( |
| $ | ( | |||
* | All shares are converted to ADS, each ADS represents |
21
The Company issues ordinary shares to its share depository bank which will be used to settle stock option awards upon their exercise. Any ordinary shares not used in the settlement of stock option awards will be returned to the Company. As of September 30, 2024 and December 31, 2023, there were
The Company uses the treasury method in determining whether those potential common shares are dilutive or antidilutive. That is, the number of potential common shares, after considering the shares repurchased used in computing the diluted per-share amount for income (loss). For the nine months ended September 30, 2024 and 2023, the Company excluded ordinary share equivalents of
14. NON-CONTROLLING INTEREST
During the three months ended September 30, 2024 and 2023, the Company has comprehensive income attributed to non-controlling interest for $
During the nine months ended September 30, 2024, the Company has comprehensive income (loss) attributed to non-controlling interest for $
15. RELATED PARTY BALANCES AND TRANSACTIONS
(a) Related party balances
As of September 30, 2024 and December 31, 2023, related party balances were as follows:
September 30, | December 31, | |||||
|
| 2024 |
| 2023 | ||
in thousands | ||||||
Due from other related party (1) | $ | | $ | | ||
Due from related party balances, net | $ | | $ | | ||
Due to other related party (1) | $ | | $ | | ||
Due to related party balances, net | $ | | $ | | ||
22
(b) Related party transactions
Related party transactions were as follows:
|
| Nine months ended September 30, | ||||
| 2024 |
| 2023 | |||
in thousands | ||||||
Payable to related party services (4) | $ | | $ | | ||
Payment for service (3) | | | ||||
Bond issued (2) |
| |
| | ||
Interest expense (2) | |
| | |||
(1) | The balances due to other related party were mainly convertible bond issued to Eiffel Investment Group for solar power development purpose and included the outstanding service cost that minority controllers of Gravel A provided to the Company. |
(2) | Represents the convertible bond issued to Eiffel Investment Group up to EUR |
(3) | Represents the amount that the Company paid in cash to minority shareholders of Gravel A for settling historical payable balance. |
(4) | Transactions during the nine months ended September 30, 2024, which represents the payable amount of Gravel A to Enerpoint and Kaizen for project services regarding Italy projects. |
16. COMMITMENTS AND CONTINGENCIES
Operating lease accounting
The Company leases rooftop, land, other property, and equipment under non-cancellable operating leases whose initial terms are typically to
As this time, a certain portion of active leases within the Company portfolio are classified as operating leases under the new standard. Operating leases are included in Rights-of-Use (“ROU”) assets, operating lease liabilities, current, and operating lease liabilities, non-current in the condensed consolidated balance sheets. The ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make minimum lease payment arising from the lease for the duration of the lease term.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from
To determine the present value of future minimum lease payments, the Company uses the implicit rate when readily determinable. At this time, many of the Company’s leases do not provide an implicit rate, therefore, to determine the present value of minimum lease payments, the Company uses its incremental borrowing rate based on the information available at lease commencement date. The ROU assets also include any lease payments made and exclude lease incentives.
23
The components of lease expenses consisted of the following:
|
| Nine months ended September 30, | ||||||
Lease cost |
| Classification |
| 2024 |
| 2023 | ||
in thousands | ||||||||
Operating lease cost | Operating expenses: General and administrative | $ | |
| $ | | ||
Short-term lease cost | Operating expenses: General and administrative | — | | |||||
Sublease income | Other operating income, net | ( | — | |||||
Net lease cost |
|
| $ | | $ | | ||
Lease Term and Discount Rate |
| September 30, 2024 | December 31, 2023 |
| |
Weighted-average remaining lease term (years) |
|
| |||
Operating leases |
| years | years | ||
Weighted-average discount rate (%) |
|
| |||
Operating leases |
| % | | % |
| Nine months ended September 30, | |||||
Other information | 2024 |
| 2023 | |||
in thousands | ||||||
Cash paid for amount included in the measurement of lease liabilities |
|
| ||||
Operating cash flows from operating leases | $ | | $ | | ||
Cash paid for short-term leases | $ | — | $ | | ||
As of September 30, 2024, future minimum payments required under the operating lease are:
| USD | ||
in thousands | |||
2024 (October 1 through December 31) | $ | | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 and later |
| | |
Total minimum lease payments |
| | |
Less: Amount representing interest | ( | ||
Present value of net minimum lease payments | $ | | |
Capital commitments
As of September 30, 2024 and December 31, 2023, the Company had capital commitments of approximately $
The capital commitments as at balance sheet date disclosed above do not include those incomplete purchases or acquisitions as at balance sheet dates as the agreements could either be terminated unconditionally without any penalty or cancelable when the closing conditions as specified in the agreements could not be met.
Legal matters
In the ordinary course of business, the Company may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.
The Company is a party to legal matters and claims in the normal course of its operations. While the Company believes that the ultimate outcome of these matters will not have a material adverse effect on its financial position, results of operations or cash flows, the outcome of these matters is not determinable with certainty and negative outcomes may adversely affect the Company.
24
17. SEGMENT REPORTING
The Company separated the solar power project segment into
The chief operating decision maker is the chief executive officer of the Company.
The Company only reports the segment information of net revenue and gross profit, to conform to the information the chief operating decision maker receives to assess the financial performance and allocate resources. There are no differences between the measurements of the Company’s reportable segments’ gross profit and the Company’s consolidated gross profit, as the Company uses the same profit measurement for all of the reportable segments and the consolidated entity. Furthermore, the Company’s chief operating decision maker is not provided with asset information by segment. As such, no asset information by segment is presented.
The following table summarizes the Company’s revenues generated from each segment (in thousands):
| Three months ended September 30, 2024 | |||||||||||||||||
Solar power project |
| Electricity |
| EPC |
|
|
| |||||||||||
| development | generation | services | DSA | Others | Total | ||||||||||||
Net revenue | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Gross profit (loss) | $ | ( | $ | | $ | ( | $ | | $ | | $ | | ||||||
| Three months ended September 30, 2023 | |||||||||||||||||
Solar power project |
| Electricity |
| EPC |
|
| ||||||||||||
| development | generation | services |
| DSA |
| Others | Total | ||||||||||
Net revenue | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Gross profit (loss) | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||
| Nine months ended September 30, 2024 | |||||||||||||||||
Solar power project |
| Electricity |
| EPC |
|
|
| |||||||||||
development | generation | services | DSA | Others | Total | |||||||||||||
Net revenue | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Gross profit | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
| Nine months ended September 30, 2023 | |||||||||||||||||
Solar power project |
| Electricity |
| EPC |
|
|
| |||||||||||
development | generation | services | DSA | Others | Total | |||||||||||||
Net revenue | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Gross profit (loss) | $ | | $ | | $ | ( | $ | | $ | | $ | | ||||||
The following table summarizes the Company’s revenues generated by the geographic location of customers:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 |
| 2024 |
| 2023 | ||||||
in thousands | ||||||||||||
China | $ | | $ | | $ | | $ | | ||||
United States | |
| |
| |
| | |||||
UK | |
| |
| |
| | |||||
Spain | |
| |
| |
| | |||||
France | |
| |
| |
| | |||||
Poland | |
| |
| |
| | |||||
Italy | | | | | ||||||||
Hungary | |
| |
| |
| | |||||
Germany | | | | | ||||||||
Total | $ | | $ | | $ | | $ | | ||||
25
18. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date of issuance of the unaudited condensed consolidated financial statements. There were no subsequent events occurred that would require recognition or disclosure in the unaudited condensed consolidated financial statements.
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 1, 2024 (“Annual Report on Form 10-K”), and related management’s discussion and analysis in Item 7 of the Annual Report on Form 10-K. This discussion contains forward- looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K. Please also see the section herein titled “Forward-Looking Statements.”
Overview
In the third quarter of 2024, we executed on our bottom-line focus, achieving solid profitability despite softer-than-anticipated revenue resulting from delays in closing scheduled project sales. With $12.9 million in revenue during the third quarter of 2024, we still achieved a gross profit of $5.6 million, yielding a solid gross margin of 43.8%, $2.1 million in operating profit and $4.8 million in net income attributed to Emeren Group Ltd.
Net income attributed to Emeren Group Ltd was supported by a foreign exchange gain of $4.6 million as the Euro strengthened during the quarter, offsetting a similar foreign exchange loss earlier in the year. We are positioned to regularly benefit from Euro strength, with our business in Europe currently generating a large portion of our revenue.
Our focus on high-margin growth remains robust. The Independent Power Production (IPP) segment generated $9.4 million in revenue and $5.4 million in gross profit, driven by seasonal strength by our European and China IPP assets. Our Development Service Agreement (DSA) model also expanded in key markets, adding revenue of $1.3 million from Italy. Also, $1.0 million from France and $0.9 million from our first Battery Energy Storage System (BESS) project in the U.S. were added to revenue.
Total revenue was lower than anticipated due to timing issues, particularly delays in government approvals for three projects in Europe. These remain in our project pipeline and are expected to contribute to revenue once approvals are secured.
An overview of each of our business lines is discussed below:
DSA and BESS
In the third quarter of 2024, we executed a 394 MW BESS DSA with PLT energia Srl and completed the sale of 57 MW solar projects to Trina Solar through a mixed DSA structure. Our DSA approach has proven to be a reliable and scalable business model, enabling us to monetize projects at earlier stages while securing high-quality contracted revenue. This strategic model plays a crucial role in mitigating risks and enhancing cash flow across the project lifecycle. Building on this momentum, we achieved a significant milestone with the sale of a standalone 72 MW BESS project in California.
These DSA contracts were part of the over 2 GW of DSA contracts for both PV and BESS projects under negotiation. We anticipated these contracts would close within the following six to eight months, collectively contributing approximately $100.0 million in revenue to be recognized over the next three to four years. This pipeline is expected to enhance our long-term financial stability and growth.
Solar Power Project Development
In the second quarter of 2024, we signed a contract to sell a 42 MWp solar project portfolio in Spain to CVE España. Developed over the past few years, this portfolio is projected to generate approximately 92.8 GWh annually, offsetting nearly 20,000 tons of CO₂ emissions each year. Additionally, we sold a 57 MWp solar project portfolio to Trina Solar, showcasing the strength of our European development efforts, in the third quarter of 2024.
Due to project delays, the sales of a U.S. community solar project and key projects in Spain and Italy, did not close by the end of the third quarter of 2024. Some of the Spain project closings with CVE España were delayed due to local administrative approvals. Those delayed project sales in Spain, Italy and the U.S. are expected to close in the fourth quarter of 2024.
27
IPP
During the third quarter of 2024, our IPP assets demonstrated robust growth, contributing 73.2% of our total revenue for the period. We continued optimizing operations across our solar farms, including Branston, reinforcing the IPP segment as a cornerstone of our business model that offers a dependable,stable and predictable cash flow. Our IPP revenue remains well-balanced between Europe and China, with an emerging presence in the U.S. market.
In September 2024, we grid-connected a 4.5 MW solar power plant at Luxshare iTech, a major facility of Luxshare Precision Industry Co., Ltd., and a prominent Apple supplier active in Apple’s Supplier Clean Energy Program. This collaboration reflects our shared commitment to environmental responsibility and the Company’s expanding renewable energy presence. By the end of the third quarter of 2024, we connected a total of 7.2 MW in solar projects across China while our 35.0 MWh battery storage portfolio fully integrated into Huaneng Power International’s Virtual Power Plant (VPP) platform.
Solar Industry Trends
The solar industry is experiencing a strong momentum due to broader global commitment to renewable energy. This shift toward cleaner energy sources positions solar as a key part of the future energy mix. There is also growing demand for solar power to support artificial intelligence (AI) and blockchain operations, as these technologies require substantial energy, and solar power is viewed as offering a scalable, cost-effective solution.
Advanced-Stage and Early-Stage Solar Development Project Pipeline (in Megawatts)
Project pipeline by region (as of September 30, 2024):
| Advanced |
| Early |
| Total | |
Region | Stage | Stage | (MW) | |||
Europe |
| 1,548 |
| 3,909 |
| 5,457 |
U.S. |
| 925 |
| 1,273 |
| 2,198 |
China |
| 29 |
| — |
| 29 |
Total |
| 2,502 |
| 5,182 |
| 7,684 |
Project pipeline by country (as of September 30, 2024):
| Advanced |
| Early |
| Total | |
Country | Stage | Stage | (MW) | |||
Poland |
| 437 |
| 70 |
| 507 |
Hungary |
| 21 |
| — |
| 21 |
U.K. |
| 110 |
| 25 |
| 135 |
Spain |
| 213 |
| 3,053 |
| 3,266 |
Germany |
| 129 |
| 249 |
| 378 |
France |
| 150 |
| 35 |
| 185 |
Italy |
| 488 |
| 477 |
| 965 |
U.S. |
| 925 |
| 1,273 |
| 2,198 |
China |
| 29 |
| — |
| 29 |
Total |
| 2,502 |
| 5,182 |
| 7,684 |
Advanced-Stage and Early-Stage Solar Storage Project Pipeline (in Megawatts)
Project pipeline by region (as of September 30, 2024):
| Advanced |
| Early |
| Total | |
Region | Stage | Stage | (MW) (1) | |||
Europe |
| 2,536 |
| 3,096 |
| 5,632 |
U.S. |
| 375 |
| 1,787 |
| 2,162 |
China |
| 44 |
| — |
| 44 |
Total |
| 2,955 |
| 4,883 |
| 7,838 |
28
Project pipeline by country (as of September 30, 2024):
| Advanced |
| Early |
| Total | |
Country | Stage | Stage | (MW) (1) | |||
Poland |
| 623 |
| 280 |
| 903 |
U.K. |
| 170 |
| 275 |
| 445 |
Spain |
| 1 |
| 1,091 |
| 1,092 |
France |
| 14 |
| — |
| 14 |
Italy |
| 1,728 |
| 947 |
| 2,675 |
Germany | — | 503 | 503 | |||
U.S. |
| 375 |
| 1,787 |
| 2,162 |
China |
| 44 |
| — |
| 44 |
Total |
| 2,955 |
| 4,883 |
| 7,838 |
| (1) | The average hours per MW vary across regions. For example, in the U.S. and Europe, it ranged from 4 - 8 hours per MW of storage, while in China, it was ~2 hours. |
Growing IPP Asset Portfolio in Attractive Power Purchase Agreement (PPA) Regions
As of September 30, 2024, we owned and operated IPP assets comprising ~272 MW of solar PV projects and 35 MWh of storage.
| PV Capacity |
| Storage | |
Operating Assets* | (MW) | (MWh) | ||
China |
| 166 |
| 35 |
Europe |
| 82 |
| — |
U.S. |
| 24 |
| — |
Total |
| ~272 |
| 35 |
* | Some of these assets could be sold as project assets in the next 6 to 12 months. |
Net Revenue
We are a solar/storage project developer and operator, with our revenues mainly generated from our solar/storage power projects. Set forth below is the breakdown of our net revenue and gross profit (loss) by segment.
The Company has the following reportable segments, including solar/storage power project development, EPC services, electricity generation and DSA (in thousands). Ancillary revenues and expenses and other unallocated costs and expenses are recorded in others.
Three months ended September 30, 2024 | ||||||||||||||||||
Solar power project | Electricity | EPC | ||||||||||||||||
| development |
| generation (a) |
| Services |
| DSA |
| Others |
| Total | |||||||
Net revenue | $ | 1,533 | $ | 9,415 | $ | 337 | $ | 1,291 | $ | 284 | $ | 12,860 | ||||||
Gross profit (loss) | $ | (228) | $ | 5,415 | $ | (690) | $ | 898 | $ | 236 | $ | 5,631 | ||||||
Three months ended September 30, 2023 | ||||||||||||||||||
Solar power project | Electricity | EPC | ||||||||||||||||
| development |
| generation (a) |
| services |
| DSA |
| Others |
| Total | |||||||
Net revenue | $ | 2,300 | $ | 9,366 | $ | 2,109 | $ | — | $ | 173 | $ | 13,948 | ||||||
Gross profit (loss) | $ | 1,342 | $ | 4,881 | $ | (666) | $ | — | $ | 128 | $ | 5,685 | ||||||
Nine months ended September 30, 2024 | ||||||||||||||||||
Solar power project | Electricity | EPC |
| |||||||||||||||
| development |
| generation (a) |
| services |
| DSA |
| Others |
| Total | |||||||
Net revenue |
| $ | 7,417 |
| $ | 23,489 |
| $ | 16,839 |
| $ | 9,452 |
| $ | 320 |
| $ | 57,517 |
Gross profit |
| $ | 1,655 |
| $ | 13,078 |
| $ | 1,026 |
| $ | 3,312 |
| $ | 264 |
| $ | 19,335 |
Nine months ended September 30, 2023 | ||||||||||||||||||
Solar power project | Electricity | EPC |
| |||||||||||||||
29
| development |
| generation (a) |
| services |
| DSA |
| Others |
| Total | |||||||
Net revenue |
| $ | 16,516 |
| $ | 24,067 |
| $ | 18,589 |
| $ | 656 |
| $ | 842 |
| $ | 60,670 |
Gross profit (loss) |
| $ | 5,755 |
| $ | 13,790 |
| $ | (553) |
| $ | 334 |
| $ | 614 |
| $ | 19,940 |
| (a) | The weighted-average capacity factors can vary based on seasonality and weather. Changes in climate, geography, weather patterns, and other phenomena in the regions where we operate may significantly affect our business. As a result, our IPP electricity production and amount of electricity sold and therefore our IPP revenue tend to be higher during periods or seasons when there is more irradiation. |
Geographical Distribution
We are a solar project developer and operator and function as a pure downstream player with a pipeline of projects around the world.
The following table summarizes the Company’s revenues generated by the geographic location of customers:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
in thousands | ||||||||||||
China | $ | 5,306 | $ | 4,155 | $ | 14,430 | $ | 11,465 | ||||
United States |
| 1,223 |
| 331 |
| 2,024 |
| 788 | ||||
UK |
| 3,694 |
| 4,506 |
| 9,828 |
| 11,066 | ||||
Spain |
| — |
| — |
| 815 |
| — | ||||
France |
| 994 |
| — |
| 996 |
| 6 | ||||
Poland |
| 351 |
| 2,123 |
| 3,291 |
| 28,057 | ||||
Italy | 1,292 | 109 | 9,453 | 1,232 | ||||||||
Hungary | — | 291 | 16,680 | 5,623 | ||||||||
Germany |
| — |
| 2,433 |
| — |
| 2,433 | ||||
Total | $ | 12,860 | $ | 13,948 | $ | 57,517 | $ | 60,670 | ||||
We expect the revenue from solar/storage power project to increase generally in parallel with our business growth.
Cost of Revenue
Our cost of revenue for continuing operations consists of costs for:
| A. | development costs (including interconnection fees and permitting costs) of solar/storage power projects; |
| B. | acquisition costs of solar/storage power projects, if applicable; |
| C. | project management costs; |
| D. | EPC costs (consisting of costs of the components of solar/storage power projects other than solar modules, such as inverters, electrical and mounting hardware, trackers, grid interconnection equipment, wiring and other devices); |
| E. | interest costs capitalized for solar/storage power projects during construction period; and |
| F. | site-specific costs |
Gross Margin
Our gross margin is affected by changes in our net revenue and cost of revenue. Gross margin is affected by 1) the gross margin of each individual solar/storage power project we sell, which is determined by our ability to negotiate the sales price and our ability to effectively control the project acquisition and development costs, 2) the gross margin of each individual solar/storage power project we operate, which is determined by revenues from the sale of electricity generated from our operated solar/storage power projects and our ability to effectively control the operation costs, and 3) the gross margin of each individual EPC service we provide, which is determined by our ability to negotiate the sales price and our ability to effectively control the engineering, procurement and construction costs.
Our gross margin increased to 43.8% in the three months ended September 30, 2024 from 40.8% in the three months ended September 30, 2023 primarily due to the increase in favorable margin within DSA and electricity generation segments. Our gross margin is at
30
33.6% in the nine months ended September 30, 2024 from 32.9% in the nine months ended September 30, 2023, primarily due to the increase in favorable margin within EPC services.
Operating Expenses
Our operating expenses primarily include sales and marketing expenses, general and administrative expenses and other operating income and expenses and impairment loss of assets.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries, bonuses and pensions for our sales personnel, commission paid to our sales agents, outbound freight, share-based compensation expenses and benefits, travel and other sales and marketing expenses.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, bonuses and benefits for our administrative and management personnel, consulting and professional service fees, bad debt provision, and travel and related costs incurred by our administrative and management personnel.
Other Operating Income and Expenses
Other operating income (expenses) primarily consist of cancellation loss of project assets, disposal gain (loss) of property, plant and equipment and non FIT payments.
Other Income and Expenses
Our other income and expenses consist primarily of interest income, interest expenses, foreign currency exchange gains or losses and investment gain or loss.
Our interest income represents interest on our cash balances and the recognition of the discounted interest income on the feed-in tariff(s) (FIT) for the electricity sold. Our interest expenses relate primarily to our short-term and long-term borrowings from banks and other financing parties, less capitalized interest expenses to the extent they relate to our capital expenditures.
Our foreign currency exchange gain or loss results from our net exchange gains and losses on our monetary assets and liabilities denominated in foreign currencies during the relevant period. Our functional currency is the U.S. dollar. The functional currency for our subsidiaries in the PRC is Renminbi (“CNY”). The functional currency of our overseas subsidiaries normally is the local currency of the country where the subsidiary is domiciled. Foreign currency transactions have been translated into the functional currency at the exchange rate prevailing on the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated into our functional currency at exchange rates prevailing on the balance sheet date. Our reporting currency is the U.S. dollar. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Income statement items have been translated using the weighted average exchange rate and equity is translated at historical exchange rates, except for the change in retained earnings during the period which is the result of the income or loss.
Taxation
Under the current laws of the British Virgin Islands, we are not subject to any income or capital gains tax. Additionally, dividend payments made by us are not subject to any withholding tax in the British Virgin Islands.
In 2024 and 2023, we had overseas operations in the jurisdiction of the United States, the United Kingdom, Poland, Hungary, Spain, France, Germany, Italy and China. The corporate income tax rates in these jurisdictions range from 0% to 25%.
Segment Operations
We currently separate our business into four reportable segments, including solar/storage power project development, electricity generation, EPC services and DSA. Ancillary revenues and expenses and other unallocated costs and expenses are recorded in others.
31
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances, changes in the accounting estimates are reasonably likely to occur from period-to-period. Actual results could differ significantly from our estimates. Our future financial statements will be affected to the extent that our actual results materially differ from these estimates.
There were no significant changes in the Company’s significant accounting policies during the three months ended September 30, 2024 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on August 1, 2024.
Recent Accounting Pronouncements
A discussion of recently issued accounting standards applicable to the Company is described in Note 2 - Summary of Significant Accounting Policies, in the accompanying notes to the unaudited condensed consolidated financial statements.
32
Results of Operations
The following table sets forth our unaudited statements of operations data for the three and nine months ended September 30, 2024 and 2023. We have derived this data from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. This information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The results of historical periods are not necessarily indicative of the results of operations for any future period.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Net revenues: | ||||||||||||
Solar power project development | $ | 1,533 | $ | 2,300 | $ | 7,417 | $ | 16,516 | ||||
Electricity generation |
| 9,415 |
| 9,366 |
| 23,489 |
| 24,067 | ||||
EPC services | 337 | 2,109 | 16,839 | 18,589 | ||||||||
DSA |
| 1,291 |
| — |
| 9,452 |
| 656 | ||||
Others |
| 284 |
| 173 |
| 320 |
| 842 | ||||
Total net revenues |
| 12,860 |
| 13,948 |
| 57,517 |
| 60,670 | ||||
Cost of revenues | (7,229) | (8,263) | (38,182) | (40,730) | ||||||||
Gross profit |
| 5,631 |
| 5,685 |
| 19,335 |
| 19,940 | ||||
Operating income (expenses): |
|
|
|
| ||||||||
Sales and marketing |
| (8) |
| (74) |
| (124) |
| (293) | ||||
General and administrative |
| (3,959) |
| (6,964) |
| (13,935) |
| (16,689) | ||||
Other operating income (expenses), net |
| 477 |
| (1,281) |
| (1,392) |
| (3,549) | ||||
Impairment loss of assets |
| — |
| (1,325) |
| — |
| (1,325) | ||||
Total operating expenses |
| (3,490) |
| (9,644) |
| (15,451) |
| (21,856) | ||||
Income (loss) from operations |
| 2,141 |
| (3,959) |
| 3,884 |
| (1,916) | ||||
| ||||||||||||
Other income (expenses): |
|
|
|
|
|
|
|
| ||||
Interest income |
| 243 |
| 448 |
| 1,248 |
| 1,604 | ||||
Interest expense |
| (674) |
| (527) |
| (1,576) |
| (1,441) | ||||
Investment (loss) gain | (4) | 57 | (4) | 239 | ||||||||
Foreign exchange gains (losses) |
| 4,615 |
| (4,785) |
| 525 |
| 42 | ||||
Total other income (expenses), net |
| 4,180 |
| (4,807) |
| 193 |
| 444 | ||||
Income (loss) before income tax |
| 6,321 |
| (8,766) |
| 4,077 |
| (1,472) | ||||
Income tax expense |
| (647) |
| (251) |
| (3,145) |
| (478) | ||||
Net income (loss) |
| 5,674 |
| (9,017) |
| 932 |
| (1,950) | ||||
Less: Net income (loss) attributed to non-controlling interests |
| 831 |
| 373 |
| 1,622 |
| (714) | ||||
Net income (loss) attributed to Emeren Group Ltd | $ | 4,843 | $ | (9,390) | $ | (690) | $ | (1,236) | ||||
Income (loss) attributed to Emeren Group Ltd per ADS* |
|
|
|
| ||||||||
Basic | $ | 0.09 | $ | (0.17) | $ | (0.01) | $ | (0.02) | ||||
Diluted | $ | 0.09 | $ | (0.17) | $ | (0.01) | $ | (0.02) | ||||
Weighted average number of ADS* used in computing income (loss) per ADS* |
|
|
|
| ||||||||
Basic |
| 51,254,956 |
| 56,287,193 |
| 52,023,918 |
| 56,958,511 | ||||
Diluted |
| 51,352,136 |
| 56,287,193 |
| 52,023,918 |
| 56,958,511 | ||||
33
Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023
Net Revenue. Our net revenue decreased from $13.9 million in the three months ended September 30, 2023 to $12.9 million in the three months ended September 30, 2024 primarily due to (i) revenue from solar power project development decreasing by $0.8 million; (ii) revenue from EPC services decreasing by $1.8 million; offset by (iii) revenue from electricity generation increasing by $0.05 million and (iv) revenue from DSA and others increasing by $1.4 million. Our net revenue decreased from $60.7 million in the nine months ended September 30, 2023 to $57.5 million in the nine months ended September 30, 2024 primarily due to (i) revenue from solar power project development decreasing by $9.1 million; (ii) revenue from electricity generation decreasing by $0.6 million; (iii) revenue from EPC services decreasing by $1.8 million and; offset by (iv) revenue from DSA and others increasing by $8.3 million, due to timing of project completion.
Cost of Revenue. Our cost of revenue decreased from $8.3 million in the three months ended September 30, 2023 to $7.2 million in the three months ended September 30, 2024. Our cost of revenue decreased from $40.7 million in the nine months ended September 30, 2023 to $38.2 million in the nine months ended September 30, 2024. Our cost of revenue associated with solar power project primarily consists of project development cost and acquisition cost; cost on electricity generation primarily consists of depreciation expenses arising from our solar power fixed assets and EPC cost associated with direct materials, solar modules, labor, subcontractor costs, and others indirect cost related to contract performance, such as indirect labor and supplies. The decrease of our cost of revenue is primarily due to the decrease in net revenue.
Gross Profit. Gross profit for the three months ended September 30, 2024 was $5.6 million, compared to a gross profit of $5.7 million in the three months ended September 30, 2023. Gross profit for the nine months ended September 30, 2024 was $19.3 million, compared to a gross profit of $19.9 million in the nine months ended September 30, 2023. The increase in gross margin was caused by the favorable margin within the revenue from DSA and electricity generation.
Sales and Marketing Expenses. Sales and marketing expenses was $0.1 million in the three months ended September 30, 2023 and $0.01 million in the three months ended September 30, 2024. Sales and marketing expenses was $0.3 million in the nine months ended September 30, 2023 and $0.1 million in the nine months ended September 30, 2024.
General and Administrative Expenses. General and administrative expenses decreased from $7.0 million in the three months ended September 30, 2023 to $4.0 million in the three months ended September 30, 2024. General and administrative expenses decreased from $16.7 million in the nine months ended September 30, 2023 to $13.9 million in the nine months ended September 30, 2024. The decrease was mainly from a decrease in stock based compensation by $1.0 million, decrease in credit losses by $0.2 million, decrease in consulting by $1.9 million and decrease in other expenses (i.e. management, travel, allocation) by $1.4 million, partially offset by an increase in payroll by $1.7 million.
Other Operating Income (Expenses), Net. Other operating expense decreased from $1.3 million in the three months ended September 30, 2023 to other operating income of $0.5 million in the three months ended September 30, 2024. Other operating expense decreased from $3.5 million in the nine months ended September 30, 2023 to $1.4 million in the nine months ended September 30, 2024. Our other operating income (expenses) consisted primarily of cancellation loss of project assets, disposal gain or loss property, plant and equipment and non-FIT payments.
Interest Income and Expenses. Our interest income decreased from $0.4 million in the three months ended September 30, 2023 to $0.2 million in the three months ended September 30, 2024, primarily due to decrease in interest income received from cash deposits. Our interest expenses increased from $0.5 million in the three months ended September 30, 2023 to $0.7 million in the three months ended September 30, 2024, primarily due to the increased average outstanding principal of finance lease and failed sales leaseback and long-term borrowings in the three months ended September 30, 2024. Our interest income decreased from $1.6 million in the nine months ended September 30, 2023 to $1.2 million in the nine months ended September 30, 2024, primarily due to the decrease in interest income received from cash deposits. Our interest expenses increased from $1.4 million in the nine months ended September 30, 2023 to $1.6 million in the nine months ended September 30, 2024 primarily due to the increased average outstanding principal of finance lease and failed sales leaseback and long-term borrowings in the nine months ended September 30, 2024.
Foreign Exchange Gains (Losses). Foreign exchange loss was $4.8 million in the three months ended September 30, 2023 and foreign exchange gain was $4.6 million in the three months ended September 30, 2024, primarily due to the strengthening of Euro during the three months ended September 30, 2024. Foreign exchange gain was $0.04 million in the nine months ended September 30, 2023 and foreign exchange gain was $0.5 million in the nine months ended September 30, 2024, primarily due to the strengthening of Euro in the nine months ended September 30, 2024.
34
Income Tax Expense. Income tax expense increased from $0.3 million in the three months ended September 30, 2023 to $0.6 million in the three months ended September 30, 2024. The income tax expense in the three months ended September 30, 2024 mainly resulted from the taxable income from UK and Italy. Income tax expense increased from $0.5 million in the nine months ended September 30, 2023 to $3.1 million in the nine months ended September 30, 2024. The income tax expense in the nine months ended September 30, 2024 mainly resulted from the taxable income from UK, Italy and Hungary.
Net income (loss). We had a net income of $5.7 million in the three months ended September 30, 2024, compared to net loss of $9.0 million in the three months ended September 30, 2023, primarily as a result of the foreign exchange gain and decrease in operating expenses during the third quarter of 2024. We had a net income of $0.9 million in the nine months ended September 30, 2024, compared to net loss of $2.0 million in the nine months ended September 30, 2023, primarily as a result of the foreign exchange gain, favorable income from operations, offset by income tax expense during the current period.
Liquidity and Capital Resources
For the nine months ended September 30, 2024, we had negative operating cash flow of $14.6 million, and income from operations of $3.9 million and we repaid borrowings, finance lease and failed sales leaseback financing totaling of $7.6 million. As of September 30, 2024, we have positive working capital of $163.0 million. We believe that our cash and cash equivalents, project assets, and continued support from financial institutions, fund investors and financing lease companies, in the form of renewed and additional short-term or long-term financings (including development loans, construction loans and project financings) and equity contribution, will be sufficient to meet our working capital and capital expenditure needs that will arise in the last quarter of 2024 and will be sufficient for the at the least the next 12 months from the issuance date of this quarterly report. We intend to continue to carefully execute our operating plans and manage credit and market risk. However, if our financial results or operating plans change from our current assumptions, our liquidity could be negatively impacted.
As part of our financing policy, we expect to continue to finance our liquidity needs mainly with cash flows from our operating activities. We continuously evaluate opportunities to pursue acquisitions or engage in strategic transactions. We expect to finance any significant future transaction with a combination of cash, long-term indebtedness and the issuance of shares of our company.
As of September 30, 2024, significant components of our working capital were as follows:
| ● | Our total current assets were $211.8 million, including cash and cash equivalents of $35.8 million. |
| ● | We had current project assets of $77.2 million in our late stage projects under development. Although we believe we will be able to sell such project assets at a profit, if we are unable to sell these project assets at reasonable prices in the near term, our liquidity may be negatively affected. |
Cash generated from operations, external financing, and related party credit are our primary sources of operating liquidity, and we believe that cash flows from operations combined with our existing cash and cash equivalents, and facilities currently available, and those expected to be renewed will be sufficient to satisfy our obligations when they become due.
Borrowings
Short-term borrowings
As of September 30, 2024, all the short-term borrowings have been fully repaid and there were no new short-term borrowings.
Long-term borrowings and other liabilities
In January 2021, our UK subsidiary obtained a long-term loan by a lender in the UK totaling $0.06 million. The long-term loan has a maturity date of July 2026 with an interest rate of 2.5%. The proceeds from this loan were used for general working capital purposes. The long-term borrowing was interest free for twelve months. As of September 30, 2024, the balance of this long-term borrowing was $0.03 million.
35
In January 2022, our Project Branston subsidiary entered into a lease loan contract with Aviva Investor Infrastructure Income No. 4 Ltd. The loan bears interest at 4% above the base rate time to time from Lloyds Bank Plc on the bank and will mature in April 2060. As a result of the acquisition of Branston, we took over the loan. As of September 30, 2024, the long-term borrowings were $23.7 million including current of $0.7 million and non-current of $23.0 million.
In September 2022, our RPZE 1 subsidiary entered into a shareholder loan contract with a minority shareholder of a subsidiary of the Company, RPZE 1, of $0.6 million. The loan bears interest at 2% per annum and will mature in December 2025. As of September 30, 2024, the shareholder loan balance was $0.1 million.
In February 2023, our Tensol 3 subsidiary entered into a shareholder loan contract with a minority shareholder of a subsidiary of the Company, Tensol 3, of $0.7 million. The loan bears interest at 2% per annum and will mature in December 2025. As of September 30, 2024, the balance of the shareholder loan was $0.03 million.
In November 2023, the Company’s China subsidiary obtained a long-term loan by a bank in the RMB totaling RMB 1.3 million ($0.2 million). The long-term loan bears interest at 5.2% above the base rate time to time from Loan Prime Rate on the bank and will mature in November 2033. As of September 30, 2024, the long-term borrowings were $0.2 million, including current of $0.02 million and non-current of $0.2 million.
In March 2024, the Company’s China subsidiary obtained a long-term loan by a bank totaling RMB 5.6 million ($0.8 million). The long-term loan bears interest at 5.2% above the base rate time to time from Loan Prime Rate on the bank and will mature in March 2034. As of September 30, 2024, the long-term borrowings were $0.8 million, including current of $0.08 million and non-current of $0.7 million.
In July 2024, the Company’s China subsidiary obtained a long-term loan by a bank totaling RMB 10.0 million ($1.4 million). The long-term loan bears interest at 5.2% above the base rate time to time from Loan Prime Rate on the bank and will mature in June 2034. As of September 30, 2024, the long-term borrowings were $1.4 million, including current of $0.1 million and non-current of $1.3 million.
Contractual Obligations
For more information on our contractual obligations, commitments and contingencies, see Notes 8 and 16 to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report Form 10-Q.
Cash Flows For The Nine Months Ended September 30, 2024 and 2023
The following table summarizes the Company’s cash flows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine Months Ended September 30, | ||||||
| 2024 |
| 2023 | |||
Net cash used in operating activities |
| $ | (14,582) | $ | (30,724) | |
Net cash (used in) provided by investing activities |
| (10,646) |
| 8,368 | ||
Net cash used in financing activities |
| (8,700) |
| (21,700) | ||
Net decrease in cash, cash equivalents and restricted cash |
| (34,418) |
| (48,107) | ||
Cash Flows from Operating Activities
The decrease in net cash used in operating activities by $16.1 million was mainly attributable to the net income for the third quarter of 2024 of $0.9 million, favorable turnover of accounts receivable, trade and unbilled by $27.0 million, increase in cash inflows from prepaid expenses and other current assets by $7.5 million, increase in cash inflows from advances to suppliers by $4.0 million offset by an increase in cash outflows from project assets by $10.3 million, increase in cash outflows from other non-current assets by $2.8 million, increase in cash outflows from amounts due to related parties by $2.7 million and increase in cash outflows from other current liabilities by $8.1 million.
Cash Flows from Investing Activities
The increase in net cash used in investing activities by $19.0 million was mainly attributable to the increase in the purchases of property, plant and equipment by $5.3 million and decrease in proceeds of non-financial assets in subsidiary by $13.9 million.
36
Cash Flows from Financing Activities
The decrease in net cash used in financing activities by $13.0 million was mainly attributable to the decrease in repurchase of shares by $11.4 million and increase in proceeds from banks and other third-party borrowings by $2.2 million.
Off Balance Sheet Arrangements
As of the date of this Quarterly Report on Form 10-Q, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement, or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which it has any obligation arising under a guaranteed contract, derivative instrument, or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity, or market risk support for such assets.
Currently, the Company does not engage in off-balance sheet financing arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (“Disclosure Controls”) within the meaning of Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Our Disclosure Controls are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily applied its judgment in evaluating and implementing possible controls and procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, we evaluated the effectiveness of the design and operation of our Disclosure Controls, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on the evaluation of our Disclosure Controls, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, our Disclosure Controls were not effective due to a material weakness in our internal control over financial reporting as disclosed below.
Material Weaknesses in Internal Control Over Financial Reporting
During the preparation of our Annual Report on Form 10-K, we identified three material weaknesses in our internal control over financial reporting as of December 31, 2023 relating to (i) the ineffective review and approval procedures over preparation of financial reporting at certain of our subsidiary locations; (ii) certain instances where some historical accounting supporting documents were not readily available and (iii) that the Company improperly offset refundable deposits on leases against lease liabilities in the consolidated financial statements presentation related to Accounting Standards Codification 842, Leases (“ASC 842”), in which refundable deposits on leases should be reflected as an asset on the consolidated balance sheet. We concluded that the failure to timely identify such accounting errors constituted material weaknesses as defined in the SEC regulations. As of June 30, 2024, we have addressed and remediated items (ii) and (iii) above; however, we have not remediated item (i) above as of September 30, 2024. In light of the continued material weakness related to the ineffective review and approval procedures over preparation of financial reporting at certain of our subsidiary locations, management determined that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2024.
37
Plan to Remediate Material Weaknesses in Internal Control Over Financial Reporting
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that satisfies our reporting obligations.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2024, we have made significant efforts to implement controls whereby effective review and approval procedures over preparation of financial reporting at certain of our subsidiary locations were performed. In light of these continued significant efforts, we will wait after more time and more test that would extend in the year-end to determine whether this material weakness has been remediated.
Other than the remediation efforts and changes in internal control over financial reporting described above, there were no other changes in our internal control over financial reporting that occurred during the three months ended September 30, 2024, to which this report relates, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information with respect to legal proceedings is set forth under Note 16 - Commitments and Contingencies, in the accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Our risk factors have not changed materially from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Registered Equity Securities
In February, 2024, we announced that our Board of Directors approved an accelerated stock repurchase (ASR) program of up to $10 million, which does not expire. This accelerated stock repurchase program underscores the Board’s commitment to our shareholders and confidence in the Company’s future growth. We repurchased no shares during the three months ended September 30, 2024. During the nine months ended September 30, 2024, we repurchased 33,988,150 shares at the cost of $7.2 million. As of September 30, 2024, we have $0.9 million left under our repurchase plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, there were
39
ITEM 6. EXHIBITS
Exhibit |
| Exhibit Description |
31.1* | ||
31.2* | ||
32.1* | ||
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
*Filed herewith
40
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Emeren Group Ltd | ||
Date: November 14, 2024 | By: | /s/ Yumin Liu |
Yumin Liu | ||
Chief Executive Officer | ||
Date: November 14, 2024 | By: | /s/ Ke Chen |
Ke Chen | ||
Chief Financial Officer | ||
41