ReneSola's Modules in Middle East

A leading global manufacturer of solar photovoltaic ("PV") modules and wafers ReneSola Ltd. ( SOL - Analyst Report ) has received an order for the delivery of 15 kilowatts of solar modules from the Taibah University in Medina, Makkah Province, Saudi Arabia.

The modules delivered by ReneSola will be used in an off-grid power plant project to test off-grid solutions. The solar modules will be used to charge the battery of the plant and are expected to be delivered soon.

An off-grid solution featuring PV modules will be far most cost-effective in comparison to other conventional means. The company expects off-grid solutions accompanied by its solar modules to be best suitable for the emerging markets like Africa, South America and the Middle East.

With rising oil prices, solar energy would be a good option for the Middle East countries. Saudi Arabia intends to invest $109 billion in order to generate one-third of its power from solar power by 2032. In fact, the whole of Middle East is opting for solar power to reduce its large carbon footprint and dependency on fossil fuel sources. This would likely reap benefits for the companies, such as Trina Solar Limited ( TSL - Snapshot Report ) , LDK Solar Co., Ltd. ( LDK - Snapshot Report ) , Canadian Solar Inc. ( CSIQ - Analyst Report ) , and JA Solar Holdings Co., Ltd. ( JASO - Analyst Report ) .

With its extensive deserts and prolonged periods of sunny days, the Middle East would be the perfect place for utilization of solar energy. Leaving behind UAE, Egypt, Morocco, Tunisia and Algeria, Saudi Arabia currently has around 3 megawatts of solar installations.

Renesola modules are best suitable for the climates of Saudi Arabia and the Middle East. ReneSola Ltd. enjoys a geographically-diversified customer base. The company’s focus is on improving its operating efficiencies, generating material cost savings through its vertically-integrated production structure and introduction of innovative products.

However, we remain concerned due to higher installation costs and stringent laws to regulate solar power that would stop the Middle East countries to shift toward solar energy. Also, the company’s significant presence in the solar module original equipment manufacturing (OEM) market will be hurt by Europe’s challenging financing environment.

Rising competition, credit risk from its customers, oversupply of solar wafer & modules in the market, and the company’s high research and development expenses are other matters of concern. The company presently retains a short-term Zacks Rank #4 (Sell). We have a long-term Neutral recommendation on the stock.