ReneSola Ltd (SOL) Q2 2017 Earnings Call Transcript

Gary Dvorchak - Investor Relations, The Blueshirt Group Asia Xianshou Li - Chief Executive Officer Maggie Ma - Chief Financial Officer Rebecca Shen - Director of Investor Relations

Justin Clare - ROTH Capital Partners McCrea Dunton - JMP Securities Carter Driscoll - FBR Capital Paul Strigler - Esplanade Ke Chen - Shah Capital Peter Law - Quentec

Ladies and gentlemen, thank you for standing by and welcome to the Business Update and Earnings Conference Call. At this time, all participants are in a listen-only mode, we will be taking questions at the later stage of the call. [Operator Instructions] Now I would like to hand the conference over to your speaker for the day Mr. Gary Dvorchak. Over to you sir.

Hello, everyone and thank you for joining us on ReneSola's conference call today. We will provide a business update, as well as discuss the company’s project development strategy. We released second quarter 2017 results earlier today and they are available on the company's website, as well as from newswire services. You can also follow along with today's call by downloading a presentation that is on the website. I’ll talk more about that in a second. On the call with me today are Mr. Xianshou Li, Chief Executive Officer; Maggie Ma, Chief Financial Officer; and Ms. Rebecca Shen, Director of Investor Relations. Rebecca will read Mr. Li's prepared remarks regarding ReneSola's business highlights and strategy. Maggie will briefly discuss the second quarter 2017 financial results. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's Annual Report and Form 20-F and other documents filed with the U.S. SEC. ReneSola does not assume any obligation to update any forward-looking statement except as required under applicable law. Please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. dollars. Also before we start, I want to point out that we have posted a new corporate power point in the investor relations section of the website. This new presentation describes in detail the transaction in our project development strategy. We highly recommend reviewing it after the call is over. With that, let me now turn the call over to Rebecca, who will translate Mr. Li's prepared remarks. Rebecca?

Thank you, Gary. The following are Mr. Li's prepared remarks.

Thank you everyone for joining our call this morning. We have great news to discuss today. This week we announced the signing of a definite agreement for the sale of our manufacturing and LED business. Because our story has changed in profound way, we thought it’s best to provide a business update and enable you to ask questions. After my prepared remarks about operations, Maggie will briefly cover the financials and then we will open the call to Q&A. This week we announced that ReneSola entered into a definitive agreement, in which I will by the company's polysilicon wafer manufacturing and LED distribution businesses. This transaction will also transfer substantially all of ReneSola’s related debt to me. This transaction transforms ReneSola into a pure play solar downstream player with the portfolio of our outstanding project assets around the world and a solid balance sheet with very little debt. Let us start with an overview of the transaction structure and then I would discuss the key benefits and rationale. After that I will spend some time discussing our downstream efforts and growth strategy. Although details are always complex the deal is conceptually simply. We have consolidated the ownership, all of our manufacturing, and LED business into our Singapore subsidiary, after that currently carried by ReneSola was also assigned to that subsidiary. ReneSola will spin-off the entity to me. The entity will also cancel all trade-payables owed by ReneSola. After the deal closes, ReneSola will become a pure project development business with almost no debt. As part of the deal, because I am taking on a huge amount of debt, ReneSola is compensating me by issuing 18 million of ADRs to me. This is especially important as my family is personally guaranteeing that side. The manufacturing in LED business has a negative volume appropriate given the losses in backload. We engaged Roth Capital for fairness opinion on the deal and they concurred that it is reasonable given this risk involved. There are numerous benefits to the transaction and we expect it to be accretive to ReneSola in the longer term. First, from a strategic perspective this transaction completes the transformation that we initiated in 2015. We will completely active manufacturing, which is firstly a very challenging business burdened by over capacity and low profits or become a pure play company in project development, which is an increasingly profitable and rapidly growing segment of the solar value chain. Our entire board believes this is the best and only path forward for ReneSola. The losses in the capital needs of the manufacturing business were significant constraint to the growth of our downstream business. I am incredibly excited to see ReneSola start the new with significantly improved policy, strong team, and abundant growth opportunities ahead of us. We believe this transformative transaction represents a key stat in evolution of ReneSola as we strive to go to premium organization. This transaction is critical to positioning us as an emerging marketing leader in solar project development across the globe. Second is that definitive agreement substantially improves ReneSola’s balance sheet providing the financial flexibility necessary to drive the growth of project development efforts. The deal specifies that ReneSola will no longer be liable for over 3 billion R&D of bank borrowing. The agreement also cancelled substantially all of the trade payables of over $200 million owed by ReneSola to me to the manufacturing business. The board is aware of the investor sentiment and the softness in our share price. We believe this transaction should restore investor confidence in the company. Our balance sheet will be pristine. The drag of money-losing operations will be gone and our project business continues to gain traction with solid global pipeline to ensure future growth. Speaking of project development, let me review our success today and growth strategy. We entered a project development business several years ago and since then we have developed over 480 megawatt of projects around the world. Projects range from utilities go to smaller rooftop distributed generation. All of the projects shared a common trades of operating and stable mature markets with attractive subsidies we believe are strong record of accomplishment will involve us to accelerate a development of the pipeline, as well as to track financing on favorable terms. Going forward, we intend to focus on small scale projects, which differentiates us from our peers. Let me now spend some time discussing our capabilities in our project development business. We have a global team with solid industry background. Our in-house development team enables us to achieve high project IR then acquired projects. On the construction side, we have obtained EPC qualification within China and have an in-house EPC team in Europe as well. Going forward, we intend to expand our in-house O&M team globally thus further lowering the operating cost as an independent power producer. Additionally, we have a robust pipeline of future projects across different geographies in various stages of development. Our late-stage pipeline features 480 megawatts in the U.S., the U.K., Turkey, Japan, Canada, France, Poland Thailand, and China. Our early total pipeline features power projects around the world, something to a capacity of approximately 1 gigawatt. With that we believe our credentials and capabilities continues to give us competitive edge over our peers. Now I would like to highlight our downstream efforts in key several key geographic regions. First China, China rooftop market is a solid and lucrative opportunity for us. We have aggressively established our presence in this market. Rooftop solar can provide steady cash flow, double-digit IRRs and reduced risk of curtailment or subsidy delays. We now have over 130 megawatts rooftop solar and our operation concentrated in a handful of eastern provinces with attractive development environments. Our efforts in the China rooftop market enables us to be become the only US listed company levered to the exciting China rooftop opportunity. We have established solid relationships with numerous financial institutions to fund the projects. We expect to further lower the financing cost with our improved policy after the transaction closes. The US continues to be a large and robust market for us. We have over 150 of shovel-ready projects, of which 40 megawatts is community solar. We'll continue to identify opportunities in that area, which we see higher PPA prices than utility projects. In Canada, we have 8.6 megawatt projects to start construction in Q4 2017. These projects are eligible for FIT 3 with prize higher than $0.28 in Canadian dollar. In addition, we have approximately 10 megawatt of FIT 4 projects in the process of being acquired. In Poland, we were awarded 55 megawatt of projects from the government auction each was size of one megawatt. We expect 13 megawatt of these projects to be connected to the grid in Q4 2017 or early next year. Turkey is an another important market for us with abundant sunshine resources. We have approximately 133 megawatt projects, of which 13 megawatt are under construction. Meanwhile, we are also exploring opportunities in markets such as France, Thailand, and Japan. Build and transfer has been and will be an important strategy for us all over for us over the near term. However, we also intend to start retaining more projects, becoming an operator that sells power. The independent power producer or IPP model is especially attractive given its resulting high margins recurring revenue. Over time we intend to shift a meaningful amount of revenue to a high margin recurring power cells. In some downstream projects we made a sizeable opportunity globally and I am excited as we continue to gain traction in developing the robust pipeline of future projects across different geographies. We have a pipeline of over 1 gigawatt of projects in various stages. Additionally, we have demonstrated our ability to successfully build and transfer solar power projects around the world. Our project development team consists of 314 dedicated employees located around the world. That team, our extensive financial relationships and our relative success give us high confidence that we can profitably grow that new ReneSola. With that, let me now turn the call over to Maggie for very brief comments on Q2 financials. Maggie.

Thank you Mr. Li and Rebecca, and thank you everyone for joining us on the call today. Our financial discussion is going to be very brief today. With the definitive agreement signed as ReneSola is about to be transformed fundamentally and the historical financials are not particularly relevant. I will go through a few line terms on the P&L, but the majority of the revenue and losses is related to the business being sold. The consolidated results are not indicative of the company's future financial structure and outlook. Revenue of $151 million for the second quarter was down 3.2% sequentially and down 39% year-over-year. The year-over-year decline was largely due to lower product shipment to external customers. Gross profit up $4.1 million was up 140% sequentially and is down 90% year-over-year. Gross margin increased sequentially to 2.7% from 141% increase in Q1 2017 and decreased from 16% in Q2 2016. Operating expense were $24.5 million, representing 16.2% of revenue, up from $19.5 million in the first quarter of 2017 and down from $34.8 million in the same quarter last year. Operating loss for the second quarter was $20.4 million, compared to operating loss of $17.8 million last quarter, and operating income of $6.4 million in the prior quarter. Net loss for the second quarter was $31.5 million, which compares to a net loss of $23.2 million last quarter and net income of 5.25 million in the same quarter last year. Loss per ADSs was $1.57 in the quarter compared to loss per ADS of $1.16 in Q1 2017, and earnings of ADS of $0.27 in the prior year quarter. Our project business results are relevant to our future as a pure play developer and so let’s discuss those. We recognized 3.1 million from the sales circle 3 megawatt of rooftop projects in China. In , we also signed an agreement to sell our utility scale project located in North Carolina with capacity of approximately 6.75 megawatt with revenue expected to be recognized in Q3 subsequent to the end of this quarter, we signed additional agreements to sell projects overseas, including two ground-mount projects in the United Kingdom with a combined capacity of approximately 10 megawatt with revenue expected to be recognized in the second half of 2017, and a portfolio of ground-mount project in North Carolina with a aggregated capacity of 24 megawatt. We expect those projects to be connected to the grid by the end of December this year. Now let me turn to guidance, again because of signing the transaction we will give you the relevant numbers, which are the standalone project development business as it will be formed when the transaction closes, so the for the third quarter we expect that the revenue in the range of 40 million to 45 million and gross margin in the range of 15% to 20%, while gross margin from IPP business would be in the range of 65% to 70%. The company also expects to connect 20 to 30 megawatt of projects during this quarter. We would now like to open up the call for any questions that you may have for us. Operator, please go ahead.

Thank you. [Operator Instructions] The first question comes from the line of Justin Clare from ROTH Capital Partners. Please ask your question.

Hi everyone. Thanks for taking my questions and congratulations on getting that transaction completed.

Thank you.

So, first, I just wanted to ask about, I know you haven't provided guidance beyond Q3, but I was wondering if you could comment on how many megawatts could you build for sale in 2018 versus how many megawatts could you build and keep on your balance sheet, what is the plan there?

You mean in 2018?

Yes 2018. Right, not this year, I am just trying to think a little further out what the plan is.

So basically for the next year, in China we basically try to operate the project we developed. So we will develop 400 megawatt of projects more to operate that. For the overseas projects we plan to develop 100 more and try to sell it.

Okay, got it. And then for Q3, I just wanted to get a little bit more detail on the revenue, can you share what the mix is from electricity sales versus projects that you have sold in the quarter?

So basically you have you can see that in our outlook the revenue would be like 40 million to 45 million and which includes $4 million from electricity sales.

Okay. So the rest is project sales. It looks like you’ve sold 6, close to 7 megawatt project in North Carolina, can you share what other projects you have sold in Q3?

That includes 500 in the United Kingdom, sorry that is 5 megawatts in UK and 8 megawatts in the US. I think 24 megawatt in North Carolina projects will be recognized in Q4, it is not in Q3.

Okay great, that’s helpful. And then if we can turn to the balance sheet, I know you have presented some kind of high-level numbers as to what the assets and liabilities would be post-transaction, but can you provide a little bit more detail, for example in the assets how much of that will be cash versus how much will be the value of projects?

The proportion of cash is very small. It is just like 2 million to 3 million at present, but you know that since we - most of our projects are in China, has already connected to the grid. So currently we captured the bank loan drawdown already gradually in Q3 and also in Q4. So this will turn to cash.

Okay. And then can you share a little bit more detail on the liability side as well? So there is 33 million I think that is bank debt, what comprises the other portion of the liability?

So this is the data as of the end of Q2. So in this 33 million, 30 million is for Romania projects, which we operated for almost two years, and for the additional three this together with new developed Chinese rooftop projects.

Okay. So, the liabilities is $170 million in liabilities, so what is the - what comprises the rest of the liabilities, is that debt or some other payable or something else?

Yes payable to the suppliers, equipment suppliers.

Okay, got it. And then maybe one last question from me. In terms of the financing for projects, what is your plan looking ahead and how much of the projects do you plan to finance with debt versus equity and then do you have plans to go to the equity markets to raise capital, can you give us some color on that?

For the project financing we generally look at leverage ratio of around 70% to 80%, but from the corporate perspective we plan to do a public offering in the first half next year, which we plan to raise $50 million from the market.

Okay. And then near term for this year, you already have the capital that you require to reach your targets?

Right, correct.

We will check with Mr. Li to see if he has anything to want to add.

[Foreign Language]

He said, we are working with a lot of financial institutions to fund the China DG projects and currently we have obtained RMB 360 million from financial leading companies and we still have a lot under approval process and Mr. Li said, after the completion of the transaction he thinks it will be a lot easier for us to get financed, and our next step is to negotiate with banks so that we could further lower the financing cost. Right now, our interest rate is around 5.5% to 7.7% and if we engaged with the banks we expect the financing costs could be lower to 6%.

[Foreign Language]

And he said, as for our oversea market we have obtained construction loan for our projects in the US in Poland, in the UK, as well as in Canada. He thinks that the financial institutions they are in favor of our transactions. So he thinks that we are very optimistic about the future financing ability.

Okay, thank you. If I could actually fill one more in here, you know you indicated that SG&A expenses would drop to 12 million a year, so I just want to make sure I understand does that imply that we should expect about 3 million of SG&A for Q4 and then do you have any R&D spending that you plan ahead or what should we expect there?

[Foreign Language]

3 million is close.

[Foreign Language]

No, we don't see any R&D expenses, just SG&A and financing cost.

Okay. Well thank you very much for the questions. I will pass it on.

Thank you.

Thank you. [Operator Instructions] The next question comes from the line of Joseph Osha from JMP Securities. Please ask your question.

Hi there this is McCrea Dunton on for Joe. Thanks for taking the question. Given that ReneSola is transitioned here to a pure play developer, it looks like a significant portion of your pipeline about 152 megawatts out of 480 is located in the US. So given the upcoming tariff actions under section 201 that may be implemented by the US administration, can you discuss the potential impact this would have on the pipeline?

[Foreign Language]

Well he said, one thing that differentiates us from our peers is that we did not do utility, we did not do big scale utility projects which the PBA just around $0.03 to $0.05, so he thinks that these types of projects will be inevitably affected by the 201 petition. He thinks that we do small-scale or community solar projects and for our smaller scale projects the PPA price could be as high as $0.10, so which means that we will be lease affected by the 201. He thinks that our construction cost for the community solar projects is around $1.50 to $2. So we are not going to be greatly affected.

Okay, thank you. Just one question on the Chinese market, the company obviously isn’t going to be planning on fitting into any larger utility scale projects, but how quickly is the DG market or the company expects the market in China to grow?

[Foreign Language]

Well he thinks that the China DG market is going to be the future for the China solar industry. He thinks that the market, the China DG market is going to grow aggressively this year. He thinks that around 40% to 50% of the total installation will come from the China DG market. He thinks that these projects they have a very high subsidy and that will have a very attractive IRR, so he thinks - and we do not need to worry about the curtailment or subsidy delays or things like that. So he is very of optimistic about the opportunity.

Okay, thank you.

Thank you. The next question comes from the line of Carter Driscoll from FBR Capital. Please ask your question.

Good morning. Thanks for taking my question. If somebody could comment on your strategy for securing your upstream equipment, I had assumed, given the disruption with Section 201, a logical outcome would be to continue to source from the assets that are going private. If you could just discuss longer term, once the 201 dies down, the strategy for either bidding out your - the acquisition of your upstream going forward, whether it be by region or any type of commentary to help would be helpful. Thank you. Hello?

Hold on a second. Can you repeat your question? I'm sorry.

I'm just trying to, as you break apart the business and the manufacturing assets are privatized, I am trying to get a sense that where are you going to source your upstream equipment from? I am assuming it would be from the privatized assets beginning, but where you set these out for bid, once the Section 201 noise dies down? I mean has that been a disruptive part, could you just elaborate on who you potentially will be sourcing your upstream assets on, if it isn't your privatized side?

Okay

[Foreign Language]

Well he said with the spin-off, we will definitely acquire from our manufacturing facility, but only at a fair price. And he said that for our overseas market, we are gradually purchasing from our competitors. For example, for our projects in Poland, we buy from JASO. And for our projects in Turkey, we buy from other solar manufacturers as well. And for U.S., because of the 201, we use our own modules.

Okay. My question is will that potentially change if 201 dies down? I'm assuming because such a large percentage of your pipeline is in the U.S., will that be set up for competitive bid once 201, assuming it is a reasonably benign tariff or other type of remedy? Will that potentially be competitively bid out in 2018?

[Foreign Language]

Yes. We think we're very flexible. We just purchased at the fair price, either from the upstream manufacturing or other competitors.

Okay. Maybe just one question for me, if I may. So, I realized that transaction is not fully complete yet, but your debt-to-asset about 68%, obviously a significantly lower post transaction. But as you shift over more to build own and operate certain assets, how do you think your target leverage ratio could change? Would it be - I mean, I could see cases for increasing and decreasing. I'm just trying to get a sense of, as the mix changes more towards build-to-own, should we expect the leverage to go down or up?

[Foreign Language]

He said when we start to build more and more projects the leverage ratio will go up. But on the other side, we're going to be profitable and we are going to do another round of public offering. So he thinks that overall speaking, we're targeting at leverage ratio at around 70%.

Excellent. I appreciate you for taking my question. Thank you. I’ll get back in the queue.

Thank you.

Thank you. The next question comes from the line of Paul Strigler from Esplanade. Please ask your question.

Good evening. Just a couple of questions on the China DG market and more of the project dynamics, are there escalators built in to your the PPA sign with commercial clients?

Are there what?

Or are you escalators. So, I’m wondering of the projects you show in your presentation…

Sorry, Paul. Sorry to interrupt you, Paul.

Yes.

Sorry. I’m so sorry to interrupt you. Your voice is not very clear. Can you be a little away from the mike?

Sure.

I think it's very close to your mouth.

Does that sound better?

Yes, that sounds better.

All right. So it looks like you guys are selling on one of these projects. You're selling to an off-taker at about RMB 64 kilowatt hour, is that a flat rate over the period, a 20-year period, or is there escalator – your escalator built into that?

It’s flat rate, over 20 years.

Understood. And who are some of these commercial off-takers? Are these creditworthy off-takers? Are these local businesses? Who are some examples sort of customers, clients of yours on the DG side?

[Foreign Language]

Paul, if you look at our Investor Relations presentation, we have cash flow model for China DG Projects in appendix, yes. So Mr. Li just explained that there are two types of China DG projects. The first type is those that will be fully connected to the grid. So it works like the utility projects of six FIT rate, which is around $0.80, $0.85 to - which is around $0.85 to $0.98, depends on different regions. And the other type is the China net metering projects. And for the part that will be connected to the grid, the price is made of a standard price plus $0.42 of national subsidy. And for the type that will be consumed by the off-takers, so the price is made of $0.65 to $0.70 plus $0.42 of national subsidy.

Okay, understood. And then when we look at sort of the IRRs, it looks like you modeled out 25 years when lease are 20-year hidden tariffs or net metering schemes. And you also have O&M cost that's flat for the entire 25-year period. Just with Chinese inflation is, are those fair assumptions? I'm just trying to understand what a 20-year equity IRR might look like versus the 25-year with escalating O&M cost.

[Foreign Language]

Well, we have factored in the year from the year 21 to year 25, that's without national subsidy. So on the project IRR side, the - for those that will be fully connected to the grid, the project IRR should be around 8% to 9% and the China net metering projects could be 10% to 11%. That's for the IRR.

Okay. And then, I guess, it looks like you modeled flat or just not increasing O&M cost operations in maintenance expenses. Is that an accurate representation of sort of how O&M costs should trend over 25 years, or should we factor in maybe a little bit of an escalator or some sort of inflation that base operations and maintenance cost?

[Foreign Language]

He said, we modeled $0.05 per watt as an O&M cost, because we think that with the scale coming up, we would be able to keep the cost. We will be able to bring on the O&M cost. And with the future technology, we think that it's fair that we model $0.05 for the O&M cost in the years ahead.

Okay. Thank you.

Thank you. The next question comes from the line of Ke Chen from Shah Capital. Please ask your question.

Sure. Mr. Li just mentioning that we’re going to be profitable, look at your outlook and your operating cost. We are looking, at least, 5% net profit margin. Is that right estimate?

You mentioned 5% of net profit margin, right?

Yes, roughly.

[Foreign Language]

Okay. So he said, right now that only 10% of our revenue coming from the power sales. We're looking at to hold 150 to 200 megawatt of China DG projects by the end of next year and by the end of this year. And by the end of next year, we're going to hold 600 megawatts. And for those China DG projects, the profit margin could be as high as 65% to 70%. And if we take out depreciation, O&M cost, rental and financial interest he thinks that the net profit margin could be 30%. So with that holding more and more China DG projects on hand, he believes that our profitability will improve as well.

Okay, that’s great. Again, I look at your presentation on Page 6, you showed your DG targets have high growth from 2000, I mean 2018 to 2020. So could you talk a little about again to rate it out 30% net profit margin, can you map out the rough estimation for the next three years in terms of net profit growth?

[Foreign Language]

He said that we're going to add 100 to 150 of China DG Projects per quarter and with us accumulating more and more projects. And with the - we just guided gross margin of 65% to 70%. So he thinks that the profitability is predictable. And with us holding more and more of China DG Projects on hand, he thinks we are developing towards a more profitable business model.

[Foreign Language]

If we are able to hold 550 megawatt of China DG Projects by the end of next year, he thinks that the net profit could be 20 million for next year.

Okay, great. Thank you.

Thank you. The next question comes from the line of Peter Law from Quentec. Please ask your question.

Hi, what is the Chairman's strategy for the module business regaining profitability? If you're personally guaranteeing the debt, he must have a plan. What is that plan?

[Foreign Language]

He said in the past, our business model is very complicated. And we - with us - with the transaction being closed, the project business will be able to recover its financing ability and we'll be able to finance itself. So the manufacturing business would no longer have to invest money for the project business. So that it will improve the cash flow for the manufacturing business. And the manufacturing business is able to invest money into a technology improvement to reach the profitability.

Where is the money going to come from? Because right now, the gross margin is 2.7%, your operating is negative. So it's not coming from operating cash flow. The question is, if there was a viable strategy for the module business, why did you have to sell it to the Chairman? Why could ReneSola have not done it itself?

Well, because if we combined those two business segments together, each will constrain the development for the other. So, we think it's better that we split the two companies.

Is the Chairman going to inject new equity into the module business?

It what?

Is the Chairman going to put new money into the module business, new equity into the module business once he takes control?

[Foreign Language]

Well, he doesn’t think it's an appropriate time to talk much about the manufacturing business. But he definitely believes that there are a lot of ways to solve the problem for the manufacturing business.

Okay. Well, it is the appropriate time because your investors today still own the manufacturing business. So in order for them to gauge whether it's a fair price or not, they should have that type of information?

I’m sorry, could you say that again?

No, it's a statement, not a question that right now your shareholders still own the manufacturing business. So in order to gauge whether or not they're receiving a fair deal, it's good to have that information.

[Foreign Language]

He said that definitely it's harder for the manufacturing business. But he thinks that the project business is very promising. And on the other hand, ReneSola Singapore Ltd. will hold like 47% of the listing vehicle. So he's very confident.

Okay. Thank you.

Thank you. [Operator Instructions] There are no further questions at this time. I would like to hand the conference back to speakers, back to Rebecca. Please go ahead.

Thank you, operator. Let me make some closing remarks on behalf of Mr. Li. I want to reiterate our commitment to the shareholders, who are the owners of the company and our partners. I’m optimistic about our opportunities for the remainder of 2017 and beyond. And this transformative transaction represents the start of a new era for ReneSola. We continue to work diligently to create what we believe is the path to sustained profitability. Project development is our business focus. From an operational standpoint, we'll retain our focus on tight cost control and cash generation that will further strengthen our balance sheet. That concludes our call today. You may all disconnect.

Thank you. Ladies and gentlemen that does conclude our conference for today. Thank you all for your participation. You may all disconnect the lines now. Thank you.