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Hello, ladies and gentlemen, thank you for standing by for Emeren Group Limited’s Fourth Quarter and Full Year 2023 Earnings Conference Call. Please note, that we are recording today’s conference call. I will now turn the call over to Gary Dvorchak, Managing Director of the Blueshirt Group. Please go ahead, Mr. Dvorchak.

Thank you, operator. And hello, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2023 results. We released our shareholder letter after the market closed today and is available on our website at ir.emeren.com. We also provided a supplemental presentation that’s posted on our IR website that we will reference during our prepared remarks. On the call with me today are; Mr. Yumin Liu, Chief Executive Officer; and Mr. Ke Chen, Chief Financial Officer. Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent Emeren Group’s current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in Emeren Group’s filings with the SEC. Please do not place undue reliance on these forward-looking statements, which reflect Emeren Group opinions only as of the date of this call. Emeren Group is not obliged to update you on any revisions to these forward-looking statements. In addition, please note that all financial numbers discussed in this call are unaudited. Also, please note that, unless otherwise stated, all figures mentioned during the conference call are in US dollars. With that, let me now turn the call over to Yumin Liu. Yumin, go ahead.

Thank you, Gary. Thank you, everyone for joining our call today. I’ll begin by providing an overview of our performance in Q4 and the full year of 2023, followed by the main achievements. I’ll then talk about our project pipeline. After that, Ke will deliver a comprehensive breakdown of our financial results for Q4 and our guidance for 2024. We closed 2023 with $104.7 million revenue, 22.2% gross margin, and a $9.3 million net loss. These results were below our full year guidance, primarily due to the delays in closing the sales of six projects in the US and Europe, which are now expected to be pushed up to 2024. Our Q4 results were further impacted by several one-time items, including a $4.1 million adjustment to the earnout revenue at our 75 megawatt of projects in Poland, as well as a $5 million of write-offs of project cancellations and bad debt reserves. Our projects continue to face delays due to a mix of rising interest rates, affecting financing terms, utility scale project delays stemming from transmission capacity challenges and regulatory uncertainty in the US and Europe. These challenges underscore the need for adaptability in our project financing strategies. The importance of early engagement with transmission and utility stakeholders, and close monitoring of regulatory development in the US and Europe. Despite these challenges, we are focused on executing our core solar project development strategy, diversifying our global footprint and advancing our position as a leading global renewable energy company. Turning to what we have achieved in Q4. First, we announced the sale of a 53.6 megawatts solar project portfolio in Hungary to Kronospan Douglas Renewables. The portfolio includes six projects at various development stages, with four already operational as of today. This venture contributes significantly to Hungary’s photovoltaic capacity and aligns with Emeren’s mission to enhance solar energy infrastructure. Also, we acquired an 86 megawatts solar portfolio in Spain, comprised of 13 utility-scale projects. These projects are expected to significantly contribute to our energy production capacity, powering thousands of households and enhancing our storage capabilities. Further, we achieved a significant milestone by setting a 703 megawatt battery energy storage system or BESS project portfolio in Italy to Matrix Renewables under the Development Service Agreement or DSA, which, combined with the previous sale of the 260 megawatt in Q2, amounted to a total of 963 megawatt of BESS projects, with majority of the portfolio having an 8-hour duration under the DSA structure with Matrix. This achievement marked a substantial advance towards the agreed portfolio target of 1.5 gigawatt in the DSA partnership with Matrix. Finally, we expanded our energy storage portfolio in China by acquiring a 10.8 megawatt hour energy storage portfolio. This acquisition comprised of six energy storage power stations in

Thank you, Yumin. And I thank, everyone again for joining us on the call today. Our revenue of $44 million increased 71% year-over-year from Q4 2022 and 215% sequentially from Q3 2023. Revenue was lower than our guidance, primarily due to delays in closing the sales of six projects in the US and Europe, which are now expected to close in the first half of 2024. Gross profit was $3.3 million compared to $5.7 million in Q3 2023 and $6 million in Q4 2022. Gross margin was 7.6% compared to 40.8% in Q3 2023 and 23.3% in Q4 2022. The gross margin was lower than expected, primarily attributed to higher mix of EPC project revenue, as well as the previously mentioned project delays. Operating expenses were $9.5 million, lower than $9.6 million in Q3 2023 and higher than $7.2 million in Q4 2022. Our Q4 operating expenses were impacted by $5 million of write-offs of projects cancellations and bad debt reserves, partially offset by savings from our cost reduction initiatives. Net loss attributed to Emeren Group Ltd’s common shareholder was $8.1 million, compared to net loss of $9.4 million in Q3 2023 and net loss of $1.7 million in Q4 2022. Diluted net loss attributable to Emeren Group Ltd’s common shareholder per ADS was $0.15, compared to diluted net loss $0.17 in Q3 2023 and diluted net loss of $0.03 in Q4 2022. Turn to our cash flow. Cash provided by operating activity was $2.9 million, cash provided by investing activity was $7 million and the cash used in financing activity was $7.9 million. Cash and cash equivalents at the end of Q4 2023 were $70.2 million, compared to $59.2 million in Q3 2023. So we still have a very strong balance sheet. Net asset value, NAV is approximately $5.91 per ADS. Our debt-to-asset ratio at the end of Q4 2023 was 9.4% compared to 9.9% in Q3 2023. In terms of our share buyback program, we purchased approximately $3.4 million ADS during the quarter and plan to continue to execute on the share buyback program, which has approximately $7.6 million remaining in the authorization. In addition, in February 2024, we announced that our Board of Directors approved an Accelerated Stock Repurchase, ASR program of up to $10 million, of which, we have repurchased approximately $2.8 million ADS as of March 27, 2024. This underscore our commitment to shareholder value and our optimism about our future prospects. Moving to our guidance, we expect 2024 full year revenue to be in the range of $150 million to $160 million. We expect gross margin to be approximately 30% and the net income to be at least $26 million or approximately $0.50 per ADS. We anticipate our 2024 IPP revenue to be between $24 million to $26 million and the gross margin to be approximately 50%. We also expect gross profit contributed by DSA globally to be at least $6 million. For the first half of 2024, we expect revenue to be in the range of $50 million to $55 million. We expect gross margin to be approximately 30%. Finally, we expect our operating cash flow to be positive throughout the full year of 2024 and cash balance to – exceed $100 million at the end of 2024. With that, let’s open our call for any questions. Operator, please go ahead.

Thank you. [Operator Instructions] Our first question comes from Philip Shen with ROTH MKM. You may proceed.

Hey guys, thanks for taking my question. Hey, wanted to talk about the 2024 guidance. You guys missed last year, and you’re making adjustments to hit your goals for this year. One of them is this development service agreements. Can you give us a little more color on how that works? I know you’re trying to collect revenue in payments earlier, but what leverage do you have to allow that to happen? And can you just describe the structure versus what you guys had been doing before? So just give us a little bit of color on what you’re doing differently? Thanks.

Okay. Thank you, Phil. So very good question. DSA has been the form of structure in Italy market when we acquired the company called Emeren back to a year and a half ago. And we had in the structure of the Italian operation about seven to eight different DSAs. And those DSA partnerships are allowing us to provide early-stage product portfolios to the buyers based on development milestones. And the changes throughout the company is not only we execute continuously in Italy, those development milestones based on – development milestone based DSAs, for example, announced the almost 1 gigawatt of the DSA partnership with Matrix, but also we are implementing same DSA strategy throughout all regions, including other countries in Europe and US. The whole operation or execution of DSA has three big benefits to the company. Number one, the DSA will allow us to recognize revenue for early-stage projects based on milestones of so called in our company structure, we have Tier zero to Tier four based on the announcement of the tiers, we will receive the milestone payments from the DSA partners. Those are non-refundable payments and we can recognize the revenue and profit immediately based on the achievements of the milestones. And the second is, that will balance our cash reserve as we will have received the cash based on the milestones. So the cash situation will be significantly improved in the company. The third, we can also very well balance our risk profile as we are now sharing the development risk with the buyer or DSA partner. So although we are creating a very good winning situation, many parties are interested in partnering with us on the DSAs – under the DSA structure. But we do know that to get to the winning situation, we are offering a very favorable price at the DSA structure compared to the final NTP sale.

Okay. So that –

And also, by the way, one more point is, we just guided that we will have minimum $6 million gross profit from the DSAs. That $6 million is under the current DSA structure. We have quite several DSA partnerships under negotiation. So that’s why we say minimum $60 million will be foreseen in the – from the DSAs in 2024.

Right. So you mean for you to get these benefits. That means, your customer needs to get something as well. So I think I just heard you say that you charge them at a discount relative to what they would get at NTP and so they don’t have to pay as much by paying you guys earlier. Can you talk about what that discount is? Is it 5%, 15% or greater? Thanks.

That’s a very, very good question. That from market to market this discount will be different. But, in general, the buyer or a DSA partner is benefiting from the DSA in two things. One is, they are locking into the projects through the DSA, so they guaranteed they will have a portfolio they can work on at the NTP/RTB stage. The second is, they are also managing their risk profile, while we are leveraging the risk profile with them together. But they are also based on the milestone payments managing the risk profile. The third is, talking about the discounting price, instead of paying the one-time lump sum at the final NTP sale, now they are paying in milestones so they will get a discount. It’s a pretty good discount as I see it. But more importantly, I would balance the two things together. One is, the discount price, but also another one is a lock into a project portfolio, especially in the seller’s market it’s not easy to find quality projects in the market. And now, the growth companies, especially the companies who are so eager to go into a market, they like those DSA structures so much.

Okay. So do you expect to make other DSA announcements in the coming quarters?

Yes, absolutely. In fact, last month just announced another – actually, early this month, we just announced another partnership on the independent storage portfolio with Glennmont, one of the largest private investor in Italy. And more to come.

What’s the magnitude? Sorry, what’s the magnitude of the typical DSA partnership that you can imagine? I mean, are we talking about 100 megawatts? Are we talking about 500 megawatts or gigawatt level? Thanks.

It’s always we have a big target. For example, with Matrix when we started DSA a little bit over a year ago, we were setting a target of 1.5 gigawatt of independent storage portfolio and now we are reaching about 1 gigawatt. And so the team is confident that we’ll put more than 500 megawatts into the Matrix’ DSA structure in the next several months. And same thing with Glennmont, the target is a lot bigger than the ones we work on and the team is working actively to close more deals under the DSA structure with Glennmont in the next few weeks.

Right. So this should smooth out your revenue and cash generation over time. So that’s good. Shifting gears to a new topic, FERC in the US recently approved in order 2023, which could have meaningful positive impacts to the US pipeline, not just for you, but for US pipelines in general by weeding out a lot of projects that do not yet have site control. In addition to penalizing develop – actually penalizing the RTOs if they don’t complete the studies on time and forcing the RTOs to group studies together. I was wondering if you can comment on how you expect FERC order 2023 to impact your US pipeline. Could you lose some of your pipeline because you don’t have site control or do you have site control on all your pipeline assets? And do you expect this to actually speed things up for you? Thanks.

This is a very good point that the – from a company, our company, we embrace or we love this FERC rule for two reasons. One is, not many companies/developers have a healthy balance sheet. As we mentioned, we do have a strong balance sheet, implementing our development strategy. The second is, our company does have a very tight control on the tier system we are working on. We use a very tight controlled tier system to value the progress of our projects and we implemented the tier systems throughout all regions in the US and Europe. And we do not count any deal without site control even under the Tier zero. And Tier zero is a typical pre – or early-stage deal. Not really in our 3 gigawatts or advanced-stage yet. Okay, so we feel so good when we see this new policy coming up and that will eliminate bunch of unqualified competitors which who can use that irrational philosophy to compete in the market. Now we see it’s a good thing is coming up.

That’s great. Okay, last one –

Phil, just one – when we list our pipeline in the US advanced pipeline, almost 1.5 gigawatts, they’re all Tier 1 above. So we are – we have very good pipeline here.

Very good to hear. Last question and then I’ll pass it on. AI and data centers are driving a lot of demand. You highlighted that in your prepared remarks. Can you share what percentage of your US pipeline is going to serve maybe in the form of PPA, you have a relationship with an AI or data center end market or customer? Thanks.

We put our strategy internally, evaluating the data centers and data center spots and looking at the possibilities to building up or selecting sites for solar, especially storage assets around the data center need. Okay, I do not have a story to present at this time, but we are actively working on those very possible stories to support the AI operation in the future. Especially we talk about the hybrid deals which can provide the quality and reliable power supply to those AI operations and that can become a big driver for our growth when we select new deals into our development pipeline.

Okay. Thank you, both. I’ll pass it on.

Thank you, Phil.

Thank you.

Thank you. [Operator Instructions] Our next question comes from Donovan Schafer with Northland Capital Markets. You may proceed.

Hey guys. Thanks for taking the questions. So first, I want to ask for the revenue range that you gave for the first half of 2024. If we just – I want to talk just strictly about kind of non-IPP revenue, because we can kind of estimate IPP revenue and maybe back that out or something. So when we talk about the first half of 2024 revenue, and again, the non-IPP part of that, how much of that is expected to come from the delayed projects that were supposed to happen, be monetized in the second half of this year?

Okay. Let me answer first and then pass to Ke for details. Number one is, as I mentioned, we have six projects delays for the closing from ‘23 to ‘24, and most of them will be pushed into first half or maybe I’m looking at one deal, maybe pushed to the second half, okay. But I will say the revenues in the first half, other than the IPP and the DSA, those are considered DSA and IPP are consistent revenue basis instead of a pending on certain one closing of the sale. But the other, I would say at least three or four closings expected mostly will be in Q2 this year accounted into this revenue.

Yeah. Donovan about $6 million to $8 million is from delay of Q4 2023.

Okay. All right, that’s helpful. And then another question is, are you guys still planning on filing a 10-K for the –

Yes,

For 2023, okay. And what’s the timing on that? Is it a deadline at the end of this month or given your small cap and you’re converting from being a form filer to 10-K, do you have until the end of this month or is it till the end of April?

Right now is end of month.

No, end of April –

Okay. Yeah which one is it? Is it the end of April or the end of March is the deadline?

End of April is most likely as the – now we are the first time becoming the local filer. So we need to work with auditor and also work on all ten countries recovered in the project development and operation. So the – most likely will finish the filing of the 10-K and 10-Q in April.

Okay. Okay, that’s helpful. And then I want to ask about the $4.1 million revenue adjustment, the earnout adjustment on the 75 megawatt Poland projects. If – I believe those projects are usually lower than the Rule of Thumb is like $1 a megawatt. It’s probably more like $0.60 or maybe even – maybe $0.60, $0.70, $0.80 per watt. But if we assume $1 dollar a watt, then a $4.1 million amount, that becomes 5 percentage points, sort of a reduction in margin by straight up 5 percentage points. And if it’s $0.60 a watt, that becomes like a 9 percentage point reduction in gross margins. So I’m curious if you guys can talk maybe about what it is that caused that change? Like, if I’m thinking about it the right way, why that revenue just – why you didn’t get that revenue? And if these are projects you still would have taken on or if this makes them the economics where you would not necessarily want to do these projects otherwise?

The construction of the 75 megawatt projects are in the normal schedule. And, in fact, about one-third – over one-third of them has already reached COD. But this $4.1 million write-off is based on the earnout structure, which – was designed based on the last, especially last year’s suddenly price surge in the market. And we were – we are benefiting from the price difference from the traditional PPA market compared to the surged priced merchant market. And we designed a structure we can share those additional revenue with the buyer. But one thing that did not happen is that the surge did benefit the other merchant players, but our construction did not get too much sooner completion to enjoy such a to be recognized earnout. That is why the construction of the finished projects could not enjoy that much of the earnout we booked. And now we have to write it off. You see, I don’t know if you understand my explanation.

I think I understand. Yeah. Okay, all right that’s good. Thank you guys –

Thank you, Donovan –

Yeah, I’ll take the rest of my questions offline.

Thank you.

Thank you. [Operator Instructions] Our next question comes from Amit Dayal with H.C. Wainwright. You may proceed.

Thank you. Good afternoon, everyone. So, Yumin, with respect to some of the regulatory uncertainties you highlighted in your press release, you may have faced in 2023 in the US and Europe, can you give any examples of what some of these challenges were and with respect to your outlook in 2024, are these issues resolved? How are you dealing with some of these challenges that may have been in place in 2023 from a project execution perspective?

Yes, some issue are resolved, some issue are still pending. I can give you a couple very typical examples. One is, as you can see, our press release, we closed a deal, 29 megawatts in Spain, setting [inaudible] back to last year, and we expect to receive the approval by the end of last year. But the approval did not come and we, based on the government policy at that time, we expect the deal will be closed in Q1 this year. But unfortunately, the government just in Q1 announced a new policy which give the old administrative office a 14-month cycle to make approvals, okay. So now, we expect the deal will be closed anytime from now till end of the year, which is the end of the 14 months. That’s why I mentioned earlier that one of the six deals we supposed to close in 2023 will be most likely pushed into second half of this year. That I mean, this deal, that is the 29 megawatts closing in Spain. The second one is that, in Hungary, after experiencing the long delays of the first projects portfolio, 53 megawatts as we announced earlier, we have another 52 megawatts in the sales process and after the government of Hungary issue a right of first refusal language by the local national asset management group, it’s hard for us to secure any foreign buyers to buy this portfolio. So our solution is our local team is working with several local investors, which when we do this one, we don’t need to have government approvals, although we have to go through the National Equity Asset Management or Asset Investment Corporation for the lawful right of first refusal situation. But the situation will be a lot straightforward. So although the process are the buyers pool get limited, but our quality projects are really good in the market, so people are still fighting to get those deals as even in the local market, from the local buyers. So those are the two typical examples. And similar things happen in other places that in Italy, the same thing – very similar thing. The government administrative approvals delays. But, in general, I see that the older delays happened last year, we experienced that. We learn from it. We now try to manage that in a more – more timely to manage all those processes. So we – that is why we feel so confident to present the numbers we present today for the 2024 guidance.

Got it. Thank you. Last question for me. With the balance sheet we have right now, $113 million in debt and $70 million in cash, what level of revenues on an annual basis with this type of balance sheet? Can you – what level of revenues can be generated with this balance sheet if you execute exceptionally well? I know your guidance is for $150 million to $160 million, but in a scenario where everything goes well for you, how much revenues can the company potentially generate with this balance sheet?

Yes, Amit, first of all, let’s look at our pipeline, again, we have three – over 3 gigawatt advanced solar pipeline, 5 gigawatt storage pipeline, and we, talking about the monetize every year 400 to 500 megawatts a year. So that’s our target for 2024, that generate $150 million to $160 million revenue. Going forward, our pipeline, actually our focus, we mentioned we’re going to focus on monetizing this pipeline and going forward, this pipeline is maturing and we should monetize them all year-over-year. So, we do expect again 20% to 30% growth from here with this type of balance sheet.

Adding a couple points on here, Amit, is that when we mentioned DSA, we also mentioned IPP. In the future, we will also make those two numbers apparent or transparent to all our investors that as we said earlier, our IPP gross profit margin will be $24 million to $26 million. And we expect our DSA contribution to the company will become more and more, beyond $6 million, beyond $10 million. And after we implemented the DSA strategy globally, this number will become the similar backbone to the company as an IPP. The goal for our company is, we try to use our limited cash, $70 or $100 million to build up enough IPP so to secure operating cash flow positive and full year profitability from the production revenue. And then, DSA will be adding on top of it, plus our core business of the development and flip. And we see that we are getting into the very healthy cycle at this time starting from 2024.

So is this DSA Emeren creation or is this something that is happening across the industry now?

Yes and no –

Solar developers –

In fact, starting from four years ago when Ke and I joined the company, we did not have much cash in our reserve. So we started our DSA model in the new market, especially in Europe. And now we have about two dozen different DSA partners in Europe and about two-thirds of them are the ones we’d lock into the projects. So that means, way through the DSAs acquiring or lock into the project portfolios and way are the buyer paying the milestones based on the milestones to the small developers. And one-third of those DSA partners will go the other way. That is the one I’ve had mentioned with Matrix, with Glennmont and all those are the ones we are supplying projects to the buyer. So it is a pretty typical exercise in the market, especially in Europe.

Okay, understood. That’s all I have, guys. I’ll take my other questions offline. Thank you so much.

Thank you, Amit.

Thank you. I’m not showing any further questions in the queue. I’d like to turn the conference back to Mr. Liu for any closing remarks.

Okay. Thank you, operator. In conclusion, the future of solar energy is extremely promising and we are positioned to fully capitalize on the accelerating adoption of the solar technology across the globe. With our exceptional expertise in developing and operating solar projects, extensive network of industry partnerships and strong financial position, we are making great strides towards our global – our goal to become a top global renewable energy company. We are thrilled about the bright future of the solar energy and are excited to be at the forefront of this incredible transformation towards a more sustainable future. Thank you again for joining the call. You may now disconnect.