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Canadian Solar (CSIQ)

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Guest nanofrogfish_spf

Spirit, that’s a good question on the land. My GUESS is that most of this land is private, and will be leased for the duration of the project. If the land was actually purchased, this would just be reflected in a higher selling price. So except for some of the upfront fees, leasing costs would come out of the yearly operating cost budgets, affecting IRR’s, but not initial plant costs or sales price. Also, these projects have received their REA’s (Renewable Energy Approvals). There is a considerable amount of work in applications and document submittals, and public notifications to get to this point in the process. The only thing left after this before starting the construction site work would probably be to submit documents for local construction permits, which would be quick and easy since all the engineering design work has already been completed and approved by all relevant authorities.

This link is for the REA application requirements, RE website ,and you can follow the links for their guide for approvals (pdf). A quick overview shows how complicated and how much work goes into the process just to get a REA (it even states that the first 22 of 38 applications were rejected)...it takes considerable time and effort to complete this, and to become efficient at it. So this work is all part of that purchase price, but as explo pointed out, a big part of it is also because the FIT Version 1.0

contract is a valuable asset.

explo, I have to disagree with you again on CSIQ’s long-term prospects. If that was directed at companies trying to do EPC work only in China right now, I would probably agree, since margins will probably always be slim. And yes, the

days of fat FIT 25%+ margins are being reduced and will soon be gone. But CSIQ doesn't perform this work themselves...they’re running the project but work is being completed by local companies, such as in the US with Mortenson Construction (Ranked as the 19th largest contractor in America). They've been in business for almost 60-years, and seem to make a very nice profit most years, and everyone of those years with stiff competition in the market place. So why can’t CSIQ be successfully part of that dynamic, that specializes in solar farm construction and operation for many years to come if they build up the right types of relationships in the right markets?

The threat of competition and resulting “oversupply” in the downstream business is often assumed will suffer the same fate as with the panels. I disagree, because it’s a totally different dynamic than on the manufacturing side, where as soon as something becomes profitable within a year everyone’s doing it and the margins disappear. And then there’s always concern that next year someone will come up with something new and more efficient that puts your wafers/cells/panels GM at risk again, and must constantly innovate to keep up. Very high risk/low reward long term to be dependent primarily on the manufacturing side IMO.

Growing a development and EPC business in foreign countries on the other hand takes a lot of time building local relationships and figuring out local codes and procedures, and also a lot of financial backing. And then it takes a lot of time to see these projects through (the process on most of the Canadian projects will be about 3-years I think?, and in the US it has been about 2-years?) And then to get good enough at it not only to make a profit (as noted, FIT’s are falling and will soon be gone), but also to convince new clients you can actually do the work (build up a portfolio of successfully built and operating projects). Because of the longer time frames involved with getting to be successful on a large scale, and because

of the requirements that the workforce be local, getting to an “oversupply” condition in the large-scale EPC business would be much more difficult and much more muted.

Getting a jump start in EPC, especially in Canada and the USA, and benefiting short-term from impressive margins on high FIT rates not only helps the near term balance sheet , but also long term from the relationships with major players that they've been forging and the experience and portfolio they are building. This has put CSIQ in a very unique position in this industry, and will be much harder on the competition to compete and succeed (at least in NA), while trying to play “catch-up”. None of the other Chinese-based solars has anywhere near the visible revenue streams and margins that CSIQ has right now.

This is all just my opinion of course...

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Guest PV-Opt

Hi Odyd, Right I am interested in CSIQ only. I was trapped by Green and valuation in solar. I turned from an overoptimism to pessimism about solar - it has to rely on government policy for the years to come. And politicians have their own agenda in Green and renewable. So manufacturing side the over-capacity won't be gone for years. Chinese government will support their bankrupted companies such as LDK and STP for quite some time till they can die naturally. From that perspective, shipping and selling for panels doesn't seem to be anything matters to me. That's why I don't look at the shipping data. I am more interested in the balance sheet and the quality of the asset. TSL has the best balance sheet but in the mean time it has over $1B in property/plant/equipment. The $1B can amortize quicker with new equipment and new technology coming out. CSIQ has less such asset and more better quality asset of solar farm (it's a question mark so far though:) . In this perspective, I share the same view as Nano. He is apparently more pro than me though in investment so I value his point very much. Thanks for your board for us to be able to discuss on the future of solar. BTW, if I want to donate to support the site, do you have a link for us to do so?

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Hi PV, Thank you for your view. I can appreciate that you do not see need to know this information. As you probably observed I am trying to have cover all aspects of the information flow. I spent hours analyzing business structures based on balance sheets and I have quarterly summary articles about it. I hope you found those interesting if you came across. At the same time, business models are driven by sales. I asked you, as many investors seek this data as a measurement of success and global presence. I personally like to know where and how big is the business by individual name. I also see that globalization is the only way for businesses to remain strong and have operational continuum. Take CSIQ, they have almost no presence in China, but their shipments indicate where they do business, and that is very encouraging. Their shipments reflect the strategy, selling channels, and success over the competition. I guess for me it was always to get the whole picture, this is why the interviews, articles and now this step, data. In regards of the donation. I had a button on the site and received donations. However I decided to take it off, when we had this revenue opportunity. I thought of it as conflict to ask for money for support at one end and draw the income on the other , if you will. Well, perhaps if you want to support SPVI, you may want to buy data pack? If you find it useful perhaps you will wish to continue, if not it would become a donation. Thank you for this conversation and your consideration .

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Nano, I should have said EPC or project development and sale and I should have said mid-term. Short-term EPC has good margins due to current value-chain imbalance. Long-term I think owning plants might be a good way to diversify revenue stream before saturation hits in 10-20 years. Mid-term (second half of this decade) I think upstream has more (bigger, quicker) profits, although that caused it to get crowded short-term. How do we know the cost efficiency of CSIQ in EPC? So far it seems like a smart way to secure revenue, but we have not seen their costs yet (although they need to be quite EPC incompetent to blow it in Ontario). Still, thanks to this strategy, CSIQ looks well positioned to come out of 2013 in good shape for rebound in 2014. At that time though I think they'll wish they knew how to make wafers themselves. So they should be a good short-term investment, but mid-term I'm not certain. Remember, what is is not what once was, or will be.

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Guest nanofrogfish_spf

Yes, who knows what the future holds...much of the story has yet to be written. And you are correct that we don't know for sure how well CSIQ's EPC will perform under a low/no FIT environment, but they are tracking over 20% GM (and some over 25%) on the existing Ontario projects they are working on/finishing now, which indicates they are executing reasonably well.. That's also what makes all these early high FIT projects so valuable. It enables them to become efficient at it while building relationships with the right companies, and still be able to turn a nice profit. It will be much harder for new EPC entrants to successfully compete and be profitable in the low/no FIT future. btw, they do make wafers themselves (although I can't say how good they are at it). Their internal ingot/wafer capacity is presently 300MW. And if in a year or 2 it proves advantageous to make more internally, I wouldn't think it would be that hard to expand that capacity accordingly. They are very flexible on their supply chain, which I believe is a key to future success. A 100% fully integrated vertical does not have this flexibility, and must excel at every part of the process continuously to be successful long term. And even if it ultimately does cost a couple pennies more per watt for outsourcing wafers, I'm not sure it would really make that much difference to CSIQ's bottom line which will be dominated by project revenue streams...they are more likely to get a better return on their investments in projects than on internal wafer capacity. But the key again is to remain flexible on the manufacturing side so they can quickly adjust to whatever the future market conditions may bring, while maintaining the long-term visible revenue streams from project work. Regardless, it will be interesting to see how everything plays out over the next couples years, and I truly wish the best for all investors in renewable energy, because it's plain and simple the right thing to do for our planet. There will be a few big winners, and many more losers, at every level of the supply chain. But I do believe that the rebound year, at least for CSIQ anyways, will be in 2013...but I guess that depends on your definition of "rebound" (my definition is based on market cap valuation). My toast for 2013; let the clouds pass and the sun shine on solars again...

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Guest nanofrogfish_spf

I have to say I've shared a similar perspective as PV. The shipment data seems like a really valuable resource, but I only own CSIQ stock and I don't really day-trade. Plus, with CSIQ it's mostly about the projects anyway and much less about the modules. That's why I haven't purchased it yet...It really wasn't going to affect my investment one way or another. That being said, I do want to support your excellent site. And if CSIQ's stock rises up another dollar or 2, I would probably take a little off the table and use that money to trade some of the others or just to hedge my bet by buying some puts on the weaker companies. In this case this info would be extremely useful. So I guess I'm starting to consider purchasing this...but is there a yearly subscription available that would be discounted somewhat from buying every month? Thanks...

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Guest nanofrogfish_spf

I’ve added the new SunEdison projects, broken down the Transcanada and Skypower projects into smaller segments, and revised some of the Skypower project info to match the info in CSIQ’s latest IR presentation on slide -22 (including switching from DC to AC values); Total project size (includes a combo of AC & DC ratings) is 661.7MW, with $2.343 Billion in total revenue and $2.120 Billion in net revenue (deducting purchase price), at an average 18.0% GM (based on total rev) or $421 million GP. Quarterly total gross profits (in millions) and GP per share as follows;

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Hello Nano, thank you for your positive statements. No there is no subscription at this time. Subscription to Solarzoom English version is planned in 2013. There is more info there as ASPs for various locations etc, therefore pricing is also higher, $500 per year with year full access, for $41 per month No plans for SPVI subscription service thus far, As you may note we will be offering a bit of discount on data packs, but the pricing I am offering for this product is already low. I was able to negotiate this with Solarzoom. I got to be honest I am somewhat surprised with the outcome. However solar investors are mostly those who bought months back and they sit on the stock of their choice for sometime. Your reasoning makes sense. However, your second part of answer makes a lot of sense too. Not "if" but "when" scenarios start rolling out, looking into business dynamic offers ahead look. I always wonder if I knew ahead of time what would that do for me? If I may throw my view. CSIQ, ships modules from China. It does matter how many they ship even if they ship it for projects in Ontario. So its not about modules but about their projects, versus someone else shipping to clients. Even Ontario plant receives cells from China. So level of shipments are important as this is what those companies do. They will not stop producing modules, even if they expand their business profiles. To me is like sport analogy. Is my favorite team playing a ball ahead of other teams. I own Trina and Yingli for last three years buying stock every year and averaging it. I am planning to buy this year as well. I do not day trade either. Yet the question has never left me, to evaluate my own investments. What I see with this makes me more informed and ahead of others. The premise of knowing is to enable invest wisely and I think this is the premise supporting data purchase. Thanks Nano.

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Guest nanofrogfish_spf

The purchase price of $37 Mil. sounds high if it's just for the first 2 projects. But these do sound like a lot of the development work has already been done, as they're ready for construction so that may be part of it. Not sure what or if the litigation settlement had to do with this number. If it's for at least the first 4 projects totaling 46.5 MW, then not a bad deal at all.

Just read an article in Bloomberg where someone from the company clarified that the $37 mil. is for all 4 projects, with about $20Mil for the first two...that's a pretty good deal IMO.

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Guest nanofrogfish_spf

Some further thoughts on the purchase price for the 4 projects for $37 Mil. That comes out to about 80c/W DC (or about $1.00/W AC). These are some of the soft costs that need to come down considerably to make solar cost effective in Ontario (similar in US). It just shows how generous those first FIT 1.0 rates were, when you can get $1/W AC just for the right to build the plant... These soft costs will come down as the process for applications becomes streamlined and the value of the FIT contracts are reduced, and even further when FIT’s are eventually eliminated. As mentioned before, the FIT part is the biggest % of that $37 Mil., but I do think a lot was just getting the REA, since the process takes so long and you’re also paying for all the ones that didn’t make it to the end. So I could see these costs in Ontario easily dropping by 50% or more over the next couple years...and they’ll need to if Ontario solar is ever going to come close to grid parity...

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Guest nanofrogfish_spf

As a clarification, from a quarterly revenue recognition basis, I'm assuming that all projects will be % of completion except the TransCanada ones that are recognized only when sold.

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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.

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Guest nanofrogfish_spf

Odyd, I purchased the Sept thru Nov info...and it certainly reaffirms my position on CSIQ and their superior performance in the right markets. It was also interesting to see how Japan is ramping up very quickly. Some of the other Tier-1’s lack of significant exports some months was also very interesting. One question though, in your last reply you talked about shipment of cells to Ontario. But looking at the Oct info, where cell shipments were broken out...the table is almost blank with very little on the listed companies (not only were cells less than 10% of modules, but most of it was listed under “other”), with CSIQ showing a very small shipment only to India . And Nov. didn't have any cell info at all. But CSIQ imports all their cells for their Canadian factory from China. The Sept. data, which was combined, had a very high number for Canada which about matched their module production capacity there (although Canada is not even listed on the Oct/Nov reports), so I assume that this was all for cells. So adding probable module shipments from their Canadian factory to their total Sept. shipment number would have been double-counting (I think you did this in that first article a few months back). The cell stuff is of very little importance to me anyway (I know the Canadian factory is running at full capacity for at least the next year), and I don’t think they sell any cells externally. Maybe all these companies just don’t export that many cells (importers buying mostly from Taiwan, etc.) Just wonder what your thoughts are on this. The module info on the other hand is very comprehensive, and I can see how it can be very useful especially when combing with Golden Sun info... Thanks, I’m glad I purchased this...so I hope it doesn't look like I’m complaining...just trying to make sense of the cell side of the equation, or if moving forward the data will be strictly for module exports.

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Hi Nano, thank you for the purchase and I am glad you are enjoying it. Please let me explain this. Solarzoom completes this information based on the Custom offices reports. This is the complete data of what was shipped (more so than just deceleration to ship). They were able make an extraction of cells and modules for period of October based on the minute changes in declared value of the goods shipped. What they discovered is that some companies are frequently showing shipments of modules as cells. CSIQ is one of them, Motech (Chinese factory) and Trina are ones doing it. Based on pricing in November they could not actually identify the variable to a point to declare this 100%. This is why only few in October and nothing for November.

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Guest nanofrogfish_spf

Thanks Odyd, but I'm not sure I completely understand your answer...since cell/module shipments are hard to distinguish, does this mean the Nov. module data is really a combination of cell and modules for some of the others, and how will this be handled moving forward? (the cell shipments from CSIQ to Canada were removed from the module spreadsheet, their data does seem accurate for their module only shipments...so I can add about 25MW/month to get their real module sales numbers...minus China of course). Thanks again...

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Yes, my answer is somewhat convoluted. I am told there are about 70MW of the cells shipped in November (in total for all participants). The numbers we have for November, I am told are modules only (data). No, they are not combined, meaning no cells volume was added to modules (despite of what could have been). I was told that amounts of cells shipped was not significant, when broken down by company. The intent is to show modules shipments moving forward, however if Solarzoom provides other details they will be published.

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Guest nanofrogfish_spf

Thanks for the clarification. The cell shipments of the tracked companies are such a small percentage of the overall export volumes it really doesn't matter that much anyway...

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Guest nanofrogfish_spf

I see Raymond James, represented by Pavel Molchanov, is at it again with his junk rally rant...still trying to use the old playbook that everyone has wised up to by now (btw, he can’t even come up with his own stuff...he stole the “solar junk rally” quote from Jesse Pichel last year). These guys have been getting creamed for over a month now, and have just hit a new high on the desperation meter scale, especially after the huge deal SPWR announced with Buffett and the upgrade by Lazard yesterday causing all solars to spike again . Almost as pathetic as TheStreets “First Solar Inc. Stock Sell Recommendation Reiterated (FSLR)” that they feel compelled to re-release every week or 2 (all the way up from $12 btw). On Dec. 20th the industry was in a huge rally over the previous month and Raymond James was taking a bath on all their shorts...so they tried to play the junk rally card with the advice to “actively short these solar stocks”, but all solars have continued to soar. If you had taken their advice 2 weeks ago, you would be down today anywhere from 8% (FSLR), to 25% (TSL) to 66% (SPWR) (and since mid Nov...WOW!). I don’t think they have the slightest clue as to what’s really going on in the global solar industry right now, at least based on the comments I’ve seen. If solars continue to rise, I would expect Raymond James to come out with a few more “Solar Junk Rally” “reiterations”...at least until the continued losses forces them to cover their large short positions. And you can tell pretty easily who is losing their shirts on their shorts...they will be out in force now with their "doom and gloom sell everything now” commentaries. Btw, does anyone think Pavel will steal Jenny Chase’s quote next that solar plants are bad because they “would depress daytime power prices”? 2013 is going to be a very good year for solars IMHO...especially for CSIQ...there’s a huge wall of worry to climb...

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You can also still see that this stock is constantly frustrated by selling about 100 shares against bid side (also with computer models). If we see a spike up during the day it immediately countered by putting the stock down again with selling a lot of small orders. In this way the shorts still have a tool to easily manipulate CSIQ and that is why we didn't go up as much as the competition. This is also the reason why we have such a rediciously low market cap. in relation to the others. Is is a matter of time that manipulation will be over (when the trading volume goes up) and that is the day we see a huge rally on CSIQ to come back to a market cap. that is in line with others. We have way more upward potential that a lot of the competition in my opinion.

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Guest nanofrogfish_spf

These computers sell 100 shares back and forth to each other all day long, and I don't expect that to change. But volume drowns that out, and we've had plenty of volume lately. If you're looking at the daily chart, it can get frustrating. But the important thing long term is that accumulation is taking place by larger funds and investors, and a good sign of this is higher highs and higher lows...the rest will work itself out. After this impulse rally is over, that's when the fundamentals will start to become important again, and CSIQ has a lot of catching up to do on the valuation side, but right now it's a day-traders paradise...

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