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dydo

Canadian Solar (CSIQ)

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Jetmoney    34
1 hour ago, dydo said:

Awesome!  I wish they would disclose the PPA ($/MW).  King county has cheap available land and San Mateo has rich people and businesses.  Win win for both.

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sunnypease    13

I looked back over the last couple months at all the posts here about CSIQ.  It was very informative.   Thank you Robert & others for the insight into CSIQ.

I have a couple questions based on what I read.  I will ask one by one so I do not overwhelm.

 

Robert, when talking about plant sales, you arrived at a GM of about 10%.  Is that 10% in addition to the normal module GM for the modules to complete the project?  

Otherwise, I do not understand why it is good to make projects, given they can earn a higher or similar GM from module only sales.

Thank you

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dydo    1,425
4 hours ago, sunnypease said:

Otherwise, I do not understand why it is good to make projects, given they can earn a higher or similar GM from module only sales.

What is the gross margin in cents on a module versus a solar plant sale? So let's say you sold 1GW of modules in a quarter and the other company sold 1GW of plants. You overhead costs are the same.

So you sold a module at .35 cents, and you made 0.035 per watt, you made a gross profit of $3.5M. As a plant builder, you built a plant at 1.10 and had 10% margin. You made $110M. Your gross profit is 3.14 times better. If you business costs 50M to run you lost money as a manufacturer, but as a plant builder you made $65M, etc. Your opex can be higher and you still make money. When CSIQ will start selling a large volume of plants this will be a lot more visible.

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dydo    1,425
23 hours ago, Jetmoney said:

Awesome!  I wish they would disclose the PPA ($/MW).  King county has cheap available land and San Mateo has rich people and businesses.  Win win for both.

Instead of knowing the PPA, I would prefer to know what is the CSIQ plan for module supply in the US to fuel Recurrent's pipeline, showing on their site more than 4GW of projects for development. I guess in forum discussion Recurrent can still play in the market of the future but I would love to see Recurrent to be supplied by CSIQ in a way to avoid additional costs.  This is the key.  So is 4GW of projects, exclusive supply to Recurrent worth the hassle of getting NAFTA break or even setting up manufacture to benefit from those conditions?

Isn't past history, Canada, Brazil indicate that setting up production to match local rules is something CSIQ does? I hope this project indicates to shareholders CSIQ is staying in the US. 

"We are proud to help PCE meet their customers' growing demand for clean energy," said Dr. Shawn Qu, chairman and chief executive officer of Canadian Solar. "This contract is an important part of growing our future U.S. project development pipeline."

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Klothilde    1
1 hour ago, dydo said:

What is the gross margin in cents on a module versus a solar plant sale? So let's say you sold 1GW of modules in a quarter and the other company sold 1GW of plants. You overhead costs are the same.

As a matter of fact the Recurrent acquision increased CSIQ's quarterly OPEX by $7M, i.e. overhead costs are not the same:

"As a result, we expect operating expenses to increase around $7 million per quarter, once we integrate Recurrent into our existing business"

https://seekingalpha.com/article/2980826-canadian-solars-csiq-ceo-shawn-qu-on-q4-2014-results-earnings-call-transcript?part=single

Based on the above indication by Potter and assuming $1/W ASP for U.S. plants and 10% GM you would need to build and sell 280MW of U.S. plants every year just to cover Recurrent's OPEX.  The volume needs to be even higher if you include the OPEX associated with the modules that go into the plants.

Is Recurrent generating this run rate of plant business in the U.S.?  I don't think so, at least not yet.

Edited by Klothilde

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dydo    1,425
1 minute ago, Klothilde said:

As a matter of fact the Recurrent acquision increased CSIQ's quarterly OPEX by $7M, i.e. overhead costs are not the same:

"As a result, we expect operating expenses to increase around $7 million per quarter, once we integrate Recurrent into our existing business"

https://seekingalpha.com/article/2980826-canadian-solars-csiq-ceo-shawn-qu-on-q4-2014-results-earnings-call-transcript?part=single

Based on the above indication by Potter and assuming $1/W ASP for U.S. plants and 10% GM you would need to build and sell 280MW of U.S. plants every year just to cover Recurrent's OPEX.  The volume needs to be higher if you include the OPEX associated with the modules that go into the plants.

Is Recurrent generating this run rate of plant business in the U.S.?  I don't think so...

The volume needs to be higher, and we need to see sales a mass to appreciate the value of Recurrent.

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sunnypease    13
21 hours ago, dydo said:

What is the gross margin in cents on a module versus a solar plant sale? So let's say you sold 1GW of modules in a quarter and the other company sold 1GW of plants. You overhead costs are the same.

So you sold a module at .35 cents, and you made 0.035 per watt, you made a gross profit of $3.5M. As a plant builder, you built a plant at 1.10 and had 10% margin. You made $110M. Your gross profit is 3.14 times better. If you business costs 50M to run you lost money as a manufacturer, but as a plant builder you made $65M, etc. Your opex can be higher and you still make money. When CSIQ will start selling a large volume of plants this will be a lot more visible.

That makes a lot of sense.   Thanks for clearing that up.

I looked over income statements from the past few quarters.  I noticed that SG&A was up a lot this quarter.  Did they say what this was due to?  Just a lot of overhead with selling that many modules?

GM on modules is looking good.

I noticed a big FX cost, which will likely reverse this quarter given the USD drop.

Thanks also for giving that link to black silicon.  When I first heard about black silicon.. I thought it was for aesthetics.  No.. this is the magic stuff that I read about years ago:  Tuning nano-rods to somehow convert more photons into electrons.  This has potential for really greatly improving efficiency -- if I what I read years ago holds true.

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sunnypease    13
22 hours ago, Klothilde said:

As a matter of fact the Recurrent acquision increased CSIQ's quarterly OPEX by $7M, i.e. overhead costs are not the same:

"As a result, we expect operating expenses to increase around $7 million per quarter, once we integrate Recurrent into our existing business"

https://seekingalpha.com/article/2980826-canadian-solars-csiq-ceo-shawn-qu-on-q4-2014-results-earnings-call-transcript?part=single

Based on the above indication by Potter and assuming $1/W ASP for U.S. plants and 10% GM you would need to build and sell 280MW of U.S. plants every year just to cover Recurrent's OPEX.  The volume needs to be even higher if you include the OPEX associated with the modules that go into the plants.

Is Recurrent generating this run rate of plant business in the U.S.?  I don't think so, at least not yet.

Hi Klothilde -

  G&A did jump in Q2.  Was it related to Recurrent?  I did not see anything in the CC transcript about it.

  Isn't $1 ASP for US plants rather low? Aren't these older, higher PPA plants & so we should expect higher ASP, based on First Solar's plant sale price and I believe the sPower sale also pointed to higher $/W pricing.

 

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Klothilde    1
3 hours ago, sunnypease said:

Hi Klothilde -

  G&A did jump in Q2.  Was it related to Recurrent?  I did not see anything in the CC transcript about it.

  Isn't $1 ASP for US plants rather low? Aren't these older, higher PPA plants & so we should expect higher ASP, based on First Solar's plant sale price and I believe the sPower sale also pointed to higher $/W pricing.

 

Don't know where the G&A jump came from.

Regarding US plant prices as you point out the resale price is tied to the PPA.  The Recurrent plants with old PPAs were all built in 2016 and were initially valued around $2.2/W (that figure dropped in subsequent valuations).  After the sale of the tax-equity portion of those plants the resale value of the remaining CSIQ stake has dropped to around $1.1-$1.2/W imo based on the calculationss I presented.

The remainder of the Recurrent pipeline are all projects without negotiated PPAs yet, thus they will at best all fall into the current market PPA & System price of 3.x cts/kWh and around $1/W.   Check out the SEIA Solar Market Insight Reports for updated utility prices, in Q1 ASPs for fixed-tilt systems was $0.99/W and for trackers was $1.08/W, in Q2 it dropped to $0.96/W and to $1.07/W based on the drop percentages given.

https://www.seia.org/research-resources/solar-market-insight-report-2017-q2

https://www.seia.org/sites/default/files/2017-09/USSMI-Q3-2017-Executive Summary.pdf

 

Edited by Klothilde
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