One of the world's largest solar companies,
Canadian Solar Inc.
) has acquired majority interest in two utility-scale solar power
projects from SunEdison Power Canada Inc. ("SunEdison"), a
MEMC Electronic Materials Inc.
) for $38 million.
CANADIAN SOLAR (CSIQ): Free Stock Analysis
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Located in Ontario, these two plants have a total capacity of
approximately 24 MW DC. These two projects have received Renewal
Energy Approvals and are scheduled to begin construction in early
2013 and are expected to be on line by late 2013.
Subject to certain conditions, the company has the option to buy
two additional utility-scale solar power projects in Ontario with
a total capacity of approximately 22.5 MW DC. Per the agreement,
Canadian Solar can also purchase a fifth solar project from
SunEdison in the future. The additional three projects, however,
are in the advanced stage of receiving Renewal Energy Approvals.
Construction of these projects is expected to get underway in
early to mid 2013 and they are likely to commence operations by
late 2013 or early 2014.
Under a 20-year purchase power agreement, all the energy
generated from these five projects will be sold to Ontario Power
Authority under Ontario's Feed-In-Tariff Program.
These projects will not likely face funding hindrances during
their construction period. Very recently, the company entered
into a financing agreement with
Deutsche Bank AG
). Per the agreement, Deutsche Bank will provide $139 million to
Canadian Solar with non-recourse, short-term construction
financing for solar power projects in Ontario. The loans are
expected to be repaid from the proceeds of the sale of these
Apart from generating renewable energy over the long term, these
projects will create employment opportunities in Ontario. Aided
by established project infrastructure and excellent support
services, Canadian Solar has been progressing well with its
project pipeline and total solutions business. Moreover, this
financing would help in accelerating growth of the company's
project portfolio. Also, this financing would increase the
confidence of prospective project partners.
Going forward, Canadian Solar looks favorably poised based on a
geographically-diverse customer base and improving operating
efficiencies through its vertically-integrated manufacturing
On the flip side, the company's growth prospects are hampered by
industry-wide oversupply that leads to sharply falling average
selling prices of company modules; tepid module demand in Europe
and rising competition in the market. The company presently
retains a short-term Zacks #4 Rank (Sell). We have a long-term
Neutral recommendation on the stock.