Canadian Solar Expands Into Project Development In US and Canada

The portfolio of projects, totaling 16 in number, have already been granted a 20-year power purchase agreement by Ontario Power Authority and will have a combined production capacity of about 200MW

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It has been a busy week for Shawn Qu, CEO and Chairman of Canadian Solar, Inc. (NASDAQ: CSIQ). In a span of seven days, his company has signed major contracts in North America’s leading solar markets representing a combined generation capacity of more than 370MW. The business is already one of the world’s largest solar panel manufacturers, but from now on, it will also become a primary global solar project developer.

The Ontario-based solar company has significant production in China, and has purchased a portfolio from SkyPower, Ltd. for $181M for several solar projects in Ontario, Canada. Accord to the agreement, SkyPower was issued a warrant for 9.9% of Canadian Solar’s outstanding shares at exercise price of $5 per share, for five years. The total amount will accrue after specific milestones have been achieved. Accordingly, the first payment of $69M, about 38% of the total cost, has already been made. 

The portfolio of projects, totaling 16 in number, have already been granted a 20-year power purchase agreement by Ontario Power Authority and will have a combined production capacity of about 200MW, with generated revenues exceeding $785M.  Fifteen contracts are awarded under the province’s Feed-In-Tariff Program, and one under the Renewable Energy Standard Offer Program. CSIQ will have the majority interest in all of the projects. Actual construction on the sites will begin from next year and they will start providing electricity from 2014.

This is exciting news for Canada’s energy sector as CSIQ, one of the world’s leading PV manufacturers, joins hands with SkyPower, the country’s biggest player in the solar energy sector. The two companies have also formed a joint venture called CSI SkyPower. Both of the companies will hold 50% equity each in the new company. CSI SkyPower will combine SkyPower’s experience of operating in the country with Canadian Solar’s technological innovation in solar module manufacturing to deliver sustainable energy to Canada. Furthermore, the project will also generate hundreds of local jobs.

SkyPower operates in Canada and is owned by Los Angeles-based CIM investments. The company owns Canada’s first solar park, First Light I, located in Stone Mills, Ontario, which was developed in 2009 and has a production capacity of 9.1MW. The company is now developing an even bigger solar park at Thunder Bay, Ontario, called “Fort William First Nation,” with a production capacity of 10.8MW.

CSI SkyPower will not just focus on Canada; instead it aims to become a prominent multinational solar company. It plans to expand its operations in Africa, the Middle East and South America. The company’s long-term strategy for growth is to acquire power purchase agreements in the above-mentioned regions and build solar power plants.

The sheer size and scale of the project has confirmed that CSIQ is a leading player in the global solar industry. Shawn Qu has also expressed similar views. He was quoted as saying, “This is yet another example of how Canadian Solar has clearly differentiated itself as a globally branded Tier 1 solar company.”

The Chief Executives of both of the companies believe that they have a very bright and prosperous future ahead. The President and CEO of SkyPower, Kerry Adler, has said, “‘This joint venture allows us to combine Canadian Solar’s technological edge in solar PV module manufacturing, installation and operations with SkyPower’s expertise in developing solar projects in regions where a limited supply of electricity is one of the major challenges for growth.”

Shawn Qu added, “We are excited to close this purchase transaction and are excited about the prospects for our ongoing joint venture with SkyPower.”

Furthermore, on 19^th June, CSIQ announced “acquisition of, or joint venture in” 11 under-development solar projects in the United States with a combined production capacity of 122MW. The locations of the individual solar plants weren’t disclosed, but each plant will have a production capacity between 2MW and 29MW. Construction will begin from this year and will be completed by 2014.

The 200MW SkyPower agreement and the 122MW US acquisitions weren’t the only ones signed by Canadian Solar. The company had more news for its investors. On Monday, just five days after the announcement of CSI SkyPower, the business also revealed in a statement that it has signed yet another agreement, this time with the US-based Real Goods Solar, Inc. (NASDAQ: RSOL), to supply 40MW of solar modules for commercial and residential market in the United States.

RSOL is one of the oldest and foremost companies in the US residential solar market. The company CEO Bill Yearsley has said, "We are excited to team up with Canadian Solar, and have been impressed with the quality, performance and reliability of the Company's panels and its commitment to excellence.” Commenting on the agreement, Alan King, General Manager of Canadian Solar USA, has said that his company is “proud to partner with Real Goods, a leader in bringing solar to the residential market, with a reputation for high quality customer service and customer satisfaction."

The business has now expanded in the North American solar industry strategically, from a supplier of solar modules to a large-scale project developer. The company has earned approximately 10% of its revenues from providing project solutions. In the current year, however, it expects to make 25% as it starts earning from its Canadian and US plants’ sales. More news of acquisitions or joint ventures might come in the near future as, in its press release, Canadian Solar has said that these utility scale solar plants will be the “first of many.”

Earlier this year, on 10^th May, CSIQ revealed its quarterly results and unlike its competitors, who were either going bankrupt or reporting millions in losses, the company recorded a gross profit of $25.1 million. It also announced an optimistic target of shipments for 2012 between 1800MW and 2000MW. In light of its current development, the target now seems realistic.