Chinese solar companies enjoyed explosive market gains on Monday, July 15, based on the announcement that China is going to quadruple its solar installations by 2015 to a total of 35GW.
While discussions continue between the European Union and China on the level of minimum pricing and the volume quota for exports to Europe, Canadian Solar, Inc. (NASDAQ:CSIQ) is prepared to enlist capacity in Asia or Europe, depending on the outcome of the talks. In addition, Ontario’s 330MW capacity is also available for supply to the European continent, according to Ed Job, Director of Investor Relations for Canadian Solar, in a phone interview.
In the meantime, in order to avoid exposure to European policy risk, Mr. Job says, the company has been focusing its efforts into expanding its market share in emerging growth markets as well as monetizing its significant utility-scale solar power plant pipeline in Canada and the U.S. In addition to the build out of its owned solar power plant project Canadian Solar recently signed an agreement with Samsung Renewable Energy whereby Canadian Solar will supply modules made in its Ontario manufacturing facilities for Samsung’s Ontario project pipeline worth 400MW DC. The first of those projects is a 100-megawatt (MW) AC Grand Renewable Energy Park project in Haldimand County, with construction expected to begin in August and where Canadian Solar will supply the modules and provide turnkey Engineering, Procurement and Construction (EPC) services. The other two projects, a 100MW AC Sol-Luce Kingston Solar PV project in Kingston and one in Loyalist Township are in permitting stages and expected to start construction in 2014.
“Ontario’s Feed-in Tariff (FIT 1.0) program was launched in 2009 to encourage the development of renewable energy technology, attract investment and create new clean energy jobs in Ontario. Canadian Solar’s own projects in Ontario have been awarded a 20-year power purchase contract (a "FIT Contract") by the Ontario Power Authority under Ontario's Feed-In-Tariff Program (FIT version 1.0). Expected changes to Ontario’s FIT program, eliminating domestic content requirement will not affect any of Canadian Solar’s existing FIT contracts in Canada,” he continues. “While the future of the Ontario Feed-in Tariff version 2.0 is still unclear, Canadian Solar’s pipeline of projects in Ontario, including the 16 projects purchased from SkyPower Limited, remains one of the largest in the province. The SkyPower projects purchased by Canadian Solar are on construction schedule between 2013 and 2014. Those projects are expected to bring 20% gross margins.”
In the U.S., the company recently announced that it has completed construction on two utility-scale solar power projects in North Carolina, with a third expected to be completed in July. Totalling 18MW, these projects are part of a 15-project portfolio totaling 85MW, which is being jointly developed with Strata Solar. The first Canadian Solar and Strata Solar project was the 6.4MW DC Fuquay Farm, located in Middle Creek, North Carolina. The project was connected to the grid in March 2013.
“The gross margin situation is different in the US, where low natural gas prices are putting pressure on electricity power purchase agreements (PPA), and solar power project prices,” says Ed Job.
Turning to the pure module business, the company continues to enjoy success in expanding its market share in emerging growth markets, as evidenced by the recently announced 91MW module supply contract win in Thailand. The company also sees attractive opportunities to grow its modules shipment in the US, targeting both commercial and residential segments through its network of distributors and installers. Said Job, “During Intersolar North America in San Francisco, the company exhibited its modules with purpose to increase its presence in this vibrant market.”
Based on customs reports from Solarzoom, Canadian is leading its peers in deliveries to Japan during the first two months of Q2 2013. In April and May, the company delivered 28% more modules than Hanwha SolarOne Co Ltd (NASDAQ:HSOL) and 90% more than JA Solar Holdings Co., Ltd. (ADR)(NASDAQ:JASO), a leader of Q1. Canadian represents 17% of overall deliveries to Japan from China during the two-month period.
“Canadian Solar currently has 125MW of utility-scale projects in late permitting stages and 400MW in early stages of development in Japan. The company has been in Japan since 2009 and we currently have 70 employees there. Over the years we have developed an ecosystem of partnerships and strong brand name recognition that has helped us hit the ground running when we started to develop our own utility-scale project pipeline,” says Job. “Canadian Solar expects to start building its first solar power plant in Japan in the first half of 2014, when we will be in a better position to assess the expected gross margins on these projects,” he adds.
When asked about last week’s Reuter’s article: “The company has always fully cooperated with the SEC, providing all requested documents. A related class action lawsuit was recently dismissed with prejudice as the Judge found that the specific transaction under investigation, totalling $5.8 million, representing less than 1% of the company’s revenue in 2009, was immaterial, and the plaintiffs failed to prove any violation of U.S. Securities Law.” He adds, “In addition, our Board conducted an independent investigation at the time, hiring a team of forensic accountants, who concluded the transaction in question was properly accounted for.”
