Markets

Canadian Solar (CSIQ) Sells 3 Solar Plants to Fengate Unit

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Canadian Solar Inc.CSIQ closed the sale of the outstanding shares of three utility-scale solar farm holding companies − SSM 1 Solar ULC, SSM 2 Solar ULC, and SSM 3 Solar ULC - to Fengate SSM Holdco LP, an affiliate of Fengate Real Asset Investments.

Details of the Deal

Located in Sault Ste. Marie, Ontario, Canada, the three plants comprising the SSM portfolio have a total capacity of 59.8 megawatts ("MW"). The transaction, which was completed on Feb 1, was valued at $195.32 million (CAD 257 million).

The difference between the sales proceeds and the book value of the projects will be recognized in the first quarter of 2017 under the 'Other income (expenses)' head in the company's financial statement.

Per the deal, Candian Solar's outstanding debt with Norddeutsche Landesbank Girozentrale will be assumed by Fengate. Meanwhile, operations and maintenance services as well as asset management services will be provided by Canadian Solar.

With this sale, Canadian Solar has divested all of its operating plants totaling 100 MW in Canada, including BeamLight and Alfred in Dec 2016.

Solar Industry Outlook

Throughout 2016, the solar industry has grappled with challenges like declining solar panel prices, weaker power plant contracting activity and increasing regulatory stringency. The industry-wide downturn was also caused by a looming supply glut of solar panels. As solar players consistently ramped up production in an effort to seize a higher market share, panel supply outweighed the demand significantly.

Moreover, strong project build-up in the U.S. in anticipation of the Dec 2016 expiration of the solar investment tax credit (which was eventually extended) played a major role in curbing activity in this space, as developers have more time to build their projects now.

This had a material impact on solar companies such as First Solar, Inc. FSLR , SunPower Corporation SPWR and Enphase Energy, Inc. ENPH .

The unexpected victory of Donald Trump in the Presidential election did not bode well for the renewable energy space either. The President has not only vowed to revive the coal industry, but has even called the climate change a "Chinese Hoax".

Price Movement

Shares of Canadian Solar lost 34.1% in the last 12 months, which compares favorably with the Zacks categorized Solar industry's decline of 49.3%. Canadian Solar provided a weaker guidance for 2016, lowering its revenue expectation to the band of $2.78−$2.94 billion from the previous estimate of $3.0−$3.2 billion. The company also cut its total module shipment guidance to the range of 5.073-5.173 gigawatts ("GW") from the prior expectation of 5.4-5.5 GW.

Zacks Rank

Canadian Solar currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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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 Nasdaq, Inc.


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

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