MEMC's Solar Unit in a New Deal - Analyst Blog

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Semiconductor and solar technology provider MEMC Electronic Materials Inc. ( WFR ) announced last week that its subsidiary SunEdison sold four photovoltaic (PV) solar power projects to Canadian Solar Inc. ( CSIQ ) for a sum of $38.0 million. Canadian Solar offers solar wafer, ingots, cells, modules and other related applications that are used to generate electricity from solar rays.

Of the four proposed Ontario-based solar projects, only two plants capable of generating 24 megawatts (MW) power have been handed over to Canadian Solar while the other two projects with an aggregate of 22.5 MW of capacity are in process. Apart from this, the solar module maker has the option to buy a fifth one from SunEdison at a later date.

Many solar projects are being initiated in Ontario, Canada, which is making the state well known as a solar energy developing region. Total energy generated increased from 20 MW in 2006 to 500 MW by the end of 2011. According to the specialized industry analyst GlobalData's report, Ontario's capacity could grow up to 937 MW by 2020. The analyst firm also forecasts Canada to be one of the most powerful solar generating regions by 2020. Apart from Canada, the other leading generators will be Germany, Spain, Italy, France, the U.S., India, China, Japan, and Australia.

To tap the opportunity, Canadian Solar plans to buy more projects in the coming years. This could prove beneficial to SunEdison.

Earlier this month, SunEdison agreed to sell a 20 MW project to Riverside Public Utilities for an undisclosed sum. The construction work is set to commence in 2014 and the plant is expected to be operational by 2015.

Apart from Riverside Public Utilities, SunEdison's rich experience has prompted Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E) to opt for its solar energy services. The MEMC unit will hand over 48 MW and 18.5 MW of solar power generating plants to SCE and SDG&E, respectively. Financial details of the deals were not made public.

Earlier this year, SunEdison sold a 20 MW solar photovoltaic power plant to Southern Company ( SO ) in July and a 30 MW plant to MetLife Inc. ( MET ) in February.

SunEdison currently has 116.8 MW of solar projects under construction. Moreover, a 13.6 MW project is ready for sale in Spain. As per recently concluded third quarter 2012 results, SunEdison has a project pipeline of approximately 2.9 gigawatts (GW), slightly down from 3.0 GW at the end of fiscal 2011.

Though pricing in the solar industry has lacked luster over the past few quarters, there are indications that demand for solar panel installations will ramp in the coming quarters. A report published by GTM Research and Solar Energy Industries Association in June indicated that the U.S. solar panel market could grow 75.0% this year. Hence, it can be inferred that pricing would improve leading to better profitability.

We see MEMC's solar initiatives as a key driver for the long term. But its debt-laden balance sheet keeps us concerned.

Currently, MEMC has a Zacks #3 Rank (Hold).



CANADIAN SOLAR (CSIQ): Free Stock Analysis Report

METLIFE INC (MET): Free Stock Analysis Report

SOUTHN COMPANY (SO): Free Stock Analysis Report

MEMC ELEC MATRL (WFR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CSIQ , MET , SO , WFR

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