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Guest nanofrogfish_spf

Hey angelp...thought I'd come keep you company over here on the CSIQ board...

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Guest nanofrogfish_spf

This news is a couple months old now, but I hadn't seen anything released on it before; http://www.lexology.com/library/detail.aspx?g=bbf3db82-2248-46e7-b559-de7a90893d37 Looks like the Court was unanimous in shooting down every one of Skypowers claims. The judgment appears to be the correct one based on the judicial commentary. What was at stake were 118 applications that were submitted for FIT 1.0, but later were required to re-apply those for FIT 2.0. The lawsuit was filed when the proposed rule changes were published. CanSIA had the following comment about the proposed changes as they had been written; "As residential uses are not typically defined in by-laws as secondary uses in most Non-Agricultural designations this effectively eliminates all available private land in southern Ontario from potential use in solar development." The result of this was Skypower sued the OPA for $100 million, as their 118 projects were in danger of getting rejected due to the new, retroactive zoning restrictions. Since then, working with CanSIA the OPA revised the rules and added many exceptions to the zoning restrictions. I’m guessing that many of the Skypower projects will still be viable under these new rules, but the slow painful process of re-filing the applications must be done, and of course the profits they make under the new FIT 2.0 rates will also be lower. This would result in a somewhat lower profit margin for any projects that CSIQ would be involved with, but they are still pretty decent and should result in a nice steadyproject pipeline there for many years to come. None of the 16 projects that Skypower had sold to CSIQ were affected under these rule changes, since their FIT 1.0 contracts had already been completed. To date, the OPA has been extremely slow in processing and approving applications. The new FIT 2.0 rules are supposed to help improve on that. I would like to hear some update on what’s going on with the Skypower/CSIQ joint venture...maybe we’ll get something tomorrow in the CC, but more likely next year in the Q4/2012YE CC.

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I am curious how they do on shipments? I hope they met them so they can rocket to the top.

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Guest nanofrogfish_spf

odyd...you read my mind! If they hit both their shipment & GM guidance (which I think they will since they didn't pre-warn), guide 500MW+ for Q4 (even if they miss YE guidance by 100MW or so), confirm that they will hit 60c or less on costs, and pull in that $100 mil from the expected sale of 2 of the Transcanada solar farms, then the continuing successful execution of their business plan will be confirmed and I believe that will finally separate them from the rest of the Chinese pack for good. If it's a bad release, I may go into hiding for awhile...

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Guest nanofrogfish_spf

Looks like the just barely hit the low end of guidance, but Q4 projections are definitively disappointing. Part of that is those Transcanada projects are not be recognized in Q4, but rather in Q1-2013. It seems like all projects in Canada are moving towards revenue recognition slower than expected. The only real bright spot was they added over 100MW in US projects, and added another 10MW in Canada with Penn energy. Although 2013, especially the back end, looks very profitable...my expectational time-table has certainly been pushed back again..

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Guest nanofrogfish_spf

It's interesting that CSIQ made a similar comment as TSL did about drawing a line in the sand concerning pricing. Is it possible that the Chinese government has gotten involved (or maybe they all just got together on their own), to the extent that the Tier-1 solars have stopped the continuous selling price declines, in order to smooth over all the dumping allegations, while telling them that they will support them until things get back to normal? Just conjecture...but interesting that both made very similar statements on this...

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They probably made the decision on the fact that in order to be a tier-1 someone needs to say stop to drop of ASP. Other makers are shutting down so you have no staying power with them. BMWs do not chase Honda Civic pricing. If they can hold on to this among themselves there is a chance. Their ability to garner projects is the largest differentiation imho. They will be coming on the top with it.

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Guest nanofrogfish_spf

There was quite a lot of detail provided this time around in the CC concerning the project business. I have updated a spreadsheet accordingly that I've made to keep track of these utility scale projects and their probable gross profits.

Revenue by quarter is much more accurate now, as before I had to “smooth the curve” over a time period, since I didn’t have enough specifics. This only covers the known utility scale projects, and includes 7-TransCanada, 16-Skypower, 243MW US, 100MW China and 28.7MW Penn Energy (Q3 Stonepeak was remove). I assumed projects with early OPA FIT 1.0 rates at 25% GM, and new OPA rates (Penn) at 20% GM. Revenue for US projects/EPC work based on 120MW at $2.75/MW in 2013 and 123MW at $2.25, with 18% GM. For the 16 Skypower projects, I deducted the $185 mil. purchase price from my est. rev. of $835 mil. (for easy math), and assumed they make 20% on the remaining $650 mil. For China EPC, I assumed 100MW by Q4 next year at $1.75/W and 12% GM.

I revised the Skypower project revenue recognition to % of completion method. For % of completion I averaged over the

construction/commission period, with a 1-quarter delay, that is somewhat back-ended. I think this is pretty close now as to what to expect in 2013.

Total project size (includes a combo of AC & DC ratings) is now 652.7MW, with $1.988 Billion in rev ($2.173 Bil. if you add

back in the $185 mil Skypower purchase), at an average 19.9% GM or $395 million GP. Quarterly total gross profits (in millions) and GP per share as follows;

This is far from perfect, but it looks like it really is going to peak in Q4, which makes sense from a construction standpoint. The 2013 numbers are probably pretty much set, but the 2014 number obviously have a lot of room to grow.

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