ReneSola Inks Major New Solar Plant Deal

(Beijing) — Solar panel maker ReneSola Ltd. said it has signed a major framework agreement to build rooftop solar plants across China as part of the country’s ambitious program to build up renewable energy to help clean up the country’s polluted air.

Industry observers said the deal to build plants with 335 megawatts (MW) of capacity by June looks ambitious, and could face risks due to the long-term nature of projects that make financial uncertainties more likely.

Unlike solar farms that look more like traditional power plants, rooftop solar systems are typically built by big manufacturers within their compounds, allowing them to generate their own electricity and receive state subsidies for doing so. They can also sell back excess power to the local grid operator.

Such rooftop facilities, often called distributed power, are typically built by third-party operators within the manufacturing complexes of the actual users. ReneSola said new power generation facilities built under its new framework agreement will be owned and operated by Hong Kong-listed Beijing Enterprises Clean Energy Group Ltd., according to an announcement issued on Tuesday in the U.S.

Projects will be focused in Hebei, Shandong, Fujian, Shanxi and Jiangsu provinces, with ReneSola supplying panels and construction services. The Beijing partner will provide financing, and take over ownership of the projects upon completion.

“We entered the China distributed generation market a few months ago and have made impressive progress as we continue to develop more distributed generation pipelines,” said ReneSola CEO Li Xianshou. “This new business opportunity together with our successful utility-scale project development business will contribute meaningfully to our profitability in the year ahead.”

China is in the midst of a major renewable energy drive, with solar as one of the main sources of new power. The country is aiming to install 110 gigawatts (GW) of solar capacity by 2020, with 60 GW of that going to smaller projects like the rooftops ReneSola will build under its new agreement.

Such projects typically have capacity of less than 2 MW, meaning the new partnership will need to build a large number over a short period to meet its goal of 335 MW by June, said Alex Shoer, whose Shanghai-based Seeder Clean Energy also builds and operates such projects.

He added that time is also needed to properly assess the long-term viability of such projects and create ones that will ultimately succeed, putting even more pressure on ReneSola and Beijing Enterprises to meet their target.

“It’s incredibly ambitious,” Shoer said. “They may have either a very cheap source of capital or are willing to be more risk-tolerant in taking projects that are less desirable for the market. There are plenty of rooftops that investors won’t touch due to creditworthiness of the companies and prices in the market.”

ReneSola shares rose nearly 2% after the announcement. But the stock has lost nearly two-thirds of its value over the last year amid stiff competition among solar panel makers and mounting concerns that demand will slump as many governments start to reduce state subsidies for solar power plant development.

Contact reporter Yang Ge (geyang@caixin.com)