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Canadian Solar (CSIQ)

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37 minutes ago, Klothilde said:

Updated investor presentation out:
http://investors.canadiansolar.com/static-files/48509dd8-8e15-4d99-90f8-c22fa89905f8

Anything interesting you guys?  I noticed they've started playing with quasi-mono.  But why?

You know why, the same reason GCL is dabbling in it. To save the investments made in casting technology while they transition to mono. 

 

The real item  is in the end it will be the cost per watt. There will be little differentiation between Mono or Multi or Casted mono presuming price per watt is all similar. That means that while we are at a disparity for Mono vs Multi in ASP, project costs are not much different and eat some of that cost savings from buying Multi. Eventually with the technologies within 1% or so in power outputs, the advantage of 1 over the other as far as LCOE becomes negligeable.

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2 hours ago, SCSolar said:

The real item  is in the end it will be the cost per watt. There will be little differentiation between Mono or Multi or Casted mono presuming price per watt is all similar. That means that while we are at a disparity for Mono vs Multi in ASP, project costs are not much different and eat some of that cost savings from buying Multi. Eventually with the technologies within 1% or so in power outputs, the advantage of 1 over the other as far as LCOE becomes negligeable.

switching from multi to mono on a PERC standard module means going from 290W to 310W or a 7% increase in output.  If that decreases your BOS by 4% and your BOS is 40 cts/W then that's roughly 1.5cts/W in added value.  Means that your multi components (wafers, cells, modules) must be priced 1.5cts/W below equivalent mono components to make up for the lower value.  Only problem is that mono is already selling so cheap that multi cannot go down 1.5 cts below without incurring steep losses.  You can see it with Longi who has a good margin selling mono wafers around 8 cts/W while GCL has negative margin selling multi wafers around 6.5 cts/W.

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2 hours ago, Klothilde said:

CSIQ to sell 80% stake in their Brazilian portfolio:
http://investors.canadiansolar.com/news-releases/news-release-details/canadian-solar-sell-its-80-interest-4826-mwp-contracted

What they don't say is when revenue recognition will occur.  The projects have their CODs in 2020/21 so it may take a while.

But they are sold prior to COD. That makes them NTP. They will recognize some revenue from the asset sale in which they would have gotten a payment. Then they will have incremental revenue recognition as the contractor to build the project. You won't see the large lump sum sales rather small bits of revenue with higher margins

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26 minutes ago, SCSolar said:

You won't see the large lump sum sales rather small bits of revenue with higher margins

That would be a welcome change.

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6 hours ago, SCSolar said:

But they are sold prior to COD. That makes them NTP. They will recognize some revenue from the asset sale in which they would have gotten a payment. Then they will have incremental revenue recognition as the contractor to build the project. You won't see the large lump sum sales rather small bits of revenue with higher margins

Agreed. Entire amount definitely recognized not in Q2. But if at least 60% of it enters 2019, we may see Revenue crossing $4 bn threshold.

Edited by MVA

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2 hours ago, MVA said:

Agreed. Entire amount definitely recognized not in Q2. But if at least 60% of it enters 2019, we may see Revenue crossing $4 bn threshold.

I do not know. I see maybe their fair market value of  $300-$325M. if the project was built.  The total project profit for their 80% is likely $50M or less if built. They might recognize between $30-$60M in revenue of which gross is around 30%.  The rest is likely spread over several years with a total gross of another $37.5M that 50%+  would come from the module sales  and the rest of the gross through service arrangements. That is not much when you break it over 2 years, That is an average of maybe $4-6M gross per quarter after the initial 18-20M gross from the sale. 

 

When you look at projects now in the sub $1 range, it takes massive amounts of projects(2GW+) to pull down $160M gross including module profits.

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14 hours ago, MVA said:

Agreed. Entire amount definitely recognized not in Q2. But if at least 60% of it enters 2019, we may see Revenue crossing $4 bn threshold.

I agree with SCSolar and see only little revenue in 2019 for these plants.

Regarding the $4B figure I think that the original guidance was already a stretch and that the downside risk has increased notably over the last months.  In particular I see increased risk with the monetization of the Chinese and Mexican plants now that it has become clearer that 1) the new CN policy does nothing to solve the lack of subsidies for old plants and 2) the Mexican authorities want to renegotiate solar PPAs awarded.

Apart from that Qu already warned everybody that 2019 was going to suck and Qu is known for sugarcoating everything, so go figure.  I'm sure the Q1 PR and con call will make it clearer how much of a stretch their FY guidance is.

 

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This is horrible for FSLR:

"...Our module manufacturing cost in China, including purchased polysilicon, wafers and cells, decreased to $0.20 per watt in December 2018..."

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4 hours ago, Klothilde said:

This is horrible for FSLR:

"...Our module manufacturing cost in China, including purchased polysilicon, wafers and cells, decreased to $0.20 per watt in December 2018..."

What is FSLR cost per watt now?

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6 hours ago, Klothilde said:

This is horrible for FSLR:

"...Our module manufacturing cost in China, including purchased polysilicon, wafers and cells, decreased to $0.20 per watt in December 2018..."

I had been telling you that the costs being reported in ER's was not where current costs to manufacture were being headed. Now you have hard evidence that the cost to manufacture from the low wafer, cell and lamination price drops has pushed the cost down to $0.20. That cost point can easily be profitable at $0.25/watt that high efficiency poly is averaging according to PV insights.

 

That $0.20 basically means they sell for 20% margins at what is the costs FSLR to produce their S6  modules at today. Their S4 module costs are even higher than your estimate $0.24-$0.25

 

FSLR has become a 1 trick pony selling into a protected subsidized market in which the subsidy will go away and competition will increase. I do not invest in companies that rely on a single market for 80%+ of their revenues. That never ends well.

 

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6 hours ago, Klothilde said:

This is horrible for FSLR:

"...Our module manufacturing cost in China, including purchased polysilicon, wafers and cells, decreased to $0.20 per watt in December 2018..."

That should not be unexpected. I told you 5 or 6 months ago back in October that the cash costs should be around $0.20 based on market data. The pricing then continued to fall for upstream supplies and improvements in manufacturing have continued.

 

 

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Kloth, you forgot to mention the line rght after the $0.20 cost. it said

 

"We expect to continue to decrease the manufacturing costs for our production of wafers, cells and modules."

 

That means that while cost were $0.20 to manufacture already as of December, they are expecting those costs to go lower over time. That is even worse news for FSLR and their S6. That most estimates have loaded costs when ramped at around $020-$0.21 come 2020-2021

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32 minutes ago, SCSolar said:

Kloth, you forgot to mention the line rght after the $0.20 cost. it said

 

"We expect to continue to decrease the manufacturing costs for our production of wafers, cells and modules."

 

That means that while cost were $0.20 to manufacture already as of December, they are expecting those costs to go lower over time. That is even worse news for FSLR and their S6. That most estimates have loaded costs when ramped at around $020-$0.21 come 2020-2021

I like the fact of margin being plus 20% likely now less than 4 cents. The ability to build solar plants and the cost of energy produced is a show of delivery for renewables having this cost. CSIQ is still worth a $1B and so is SPWR. Canadian delivered its business model but the price is really frozen in time. Maybe the next 10 years will be the decade of solar?

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46 minutes ago, dydo said:

Maybe the next 10 years will be the decade of solar?

That's what I thought 10 years ago (wry grin)....

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1 hour ago, SCSolar said:

That means that while cost were $0.20 to manufacture already as of December, they are expecting those costs to go lower over time. That is even worse news for FSLR and their S6. That most estimates have loaded costs when ramped at around $020-$0.21 come 2020-2021

Hold your horses.  I'm sure you're aware their in-house cost is above 20 cts, no?  They can only hit 20 cts by buying 3rd party wafers and cells that are currently selling around cash cost.  Prices of these components may very well head up when demand increases in H2 to a level where production cost + OPEX is covered.  I'm sure GCL won't continue selling wafers below their production cost forever, or will they?

 

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On 4/26/2019 at 12:22 PM, Klothilde said:

Hold your horses.  I'm sure you're aware their in-house cost is above 20 cts, no?  They can only hit 20 cts by buying 3rd party wafers and cells that are currently selling around cash cost.  Prices of these components may very well head up when demand increases in H2 to a level where production cost + OPEX is covered.  I'm sure GCL won't continue selling wafers below their production cost forever, or will they?

 

I have my horses in the barn I built. The reality is that the Chinese have built an infrastructure for manufacturing the entire solar panel line. They are and will continue to drive down costs. As manufacturing rates costs generally drops by 25-50%.

 

As you have aptly pointed out  China is bringing massice quantities of Poly on line at ultra low costs that look to be in the $5  or less cash cost per kilo . It is  suggest they will be selling poly at $7-$8 a kilo. That places poly with high efficiency wafers in the $0.03 range or less. Wafer processing at $0.03 in the low electric areas for manufacturing with the price drops of crucibles

Cellification costs dropping to $0.05 or less  puts cells at the $0.10 or less. Module processing will drop with the ramp of high efficiency products that drops the cost to $0.08 or less.

 

You are looking at a company in CSIQ that could be manufacturing at  $0.18  or less by mid 2020.

 

That is not CSIQ dependent on cheep wafers or cells bought at cash cost or below. Those are costs that are attainable today.

With GCL and others looking at technology that could be online in 2 to 3 years with production costs in the low teens, that is just bad for FSLR and their $0.20 ramped S6 that is coming in 2021 to a project near you. 

 

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I think the real issue with FSLR is its risk concentration:

  • Rely on US market dominated revenues
  • Rely on temporary competition protection in US market
  • Rely on temporary subsidies in US market
  • Rely on competitive success of narrow field of CdTe manufacturing equipment development
  • Rely on success of narrow field of rare Tellurium production
  • Rely on continued wide market acceptance of toxic Cadmium

So far there's been volatile reward for these risk bets. When one has failed another has delivered. It would seem prudent to spread bets.

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On 4/27/2019 at 7:35 PM, SCSolar said:

I have my horses in the barn I built. The reality is that the Chinese have built an infrastructure for manufacturing the entire solar panel line. They are and will continue to drive down costs. As manufacturing rates costs generally drops by 25-50%.

 

As you have aptly pointed out  China is bringing massice quantities of Poly on line at ultra low costs that look to be in the $5  or less cash cost per kilo . It is  suggest they will be selling poly at $7-$8 a kilo. That places poly with high efficiency wafers in the $0.03 range or less. Wafer processing at $0.03 in the low electric areas for manufacturing with the price drops of crucibles

Cellification costs dropping to $0.05 or less  puts cells at the $0.10 or less. Module processing will drop with the ramp of high efficiency products that drops the cost to $0.08 or less.

 

You are looking at a company in CSIQ that could be manufacturing at  $0.18  or less by mid 2020.

 

That is not CSIQ dependent on cheep wafers or cells bought at cash cost or below. Those are costs that are attainable today.

With GCL and others looking at technology that could be online in 2 to 3 years with production costs in the low teens, that is just bad for FSLR and their $0.20 ramped S6 that is coming in 2021 to a project near you. 

 

Oh there's a lot I can agree with you here.

Is a cost below 20 cts in China achievable today with the latest state-of-the-art technology? Hell yes.

Will we see in-house costs below 20 cts in the near-to-mid term? You bet.

Does any CN company have this technology in place today to achieve fully loaded in-house cost at or below 20 cts?  Not yet. 

All the above apply to FSLR as well, so I don't see any disadvantage.

The story of FSLR succumbing to the superior cost-reduction potential of the CNs is now entering its second decade and nothing has happened.  Why? And why should things change now?

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Looks like US tariffs hike on Chinese imports already have positive effect on Canadian Solar's margin: CNY is falling...as of now USD/CNY is 6.8... They don't ship PV panels of chinese origin to USA since 2016 anyway, but for other markets, especially EU, it will help a lot to make more money. Forex traders say CNY/USD may go up to 7+ if Trade deal is not reached until end of this week... I think Chinese government will continue to devalue their currency to offset 25% increase in US tariffs.

Edited by MVA

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23 minutes ago, Klothilde said:

Anybody holding thru earnings?  Cuz I'd be chickening out.

I'm looking to lighten my load, but confess to being stuck in a lousy trade at the moment thanks to the orange clown and tariff selloff.  So I may be stuck in here taking a gamble on a pop.  Q1 is gonna be bad, we all know that... so how much does Qu talk up or down the rest of the year given CN policy.  The currency headwind they made so much about on last call seems to be calming as MVA pointed out, but still, there's no rush to get in here.  I've seen nothing good in the 13F/D filings.  I mean Lion Point is protecting their investment, but they can only do so much when others are dumping large positions.

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2 hours ago, Klothilde said:

Anybody holding thru earnings?  Cuz I'd be chickening out.

Still holding the positions I bought years ago at much higher prices (Mark, I hear you about a lousy trade--sigh!), but I did sell my current trading positions during the recent pop to 21.  But if there is a significant drop after earnings, I will certainly refill my trading positions then.

Trading this ongoing volatility is really working.  I'm in the green for the fourth year in a row now, and this year has been especially good--I've already made as much year to date as I did all of last year.  So now I have a ton of buying power, should solars collapse again.  For the first time, I'm actually looking forward to a price drop!  So let the earnings fiascos begin (wry grin).

I don't mean to brag--God knows I've made enough lousy trades over the years.  But it looks like I've finally stumbled onto something here.  Something about blind squirrels and nuts....

GLTA!

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56 minutes ago, solarpete said:

I don't mean to brag--God knows I've made enough lousy trades over the years.  But it looks like I've finally stumbled onto something here.  Something about blind squirrels and nuts....

Right there with you, felt like I've been in the groove all year so far.  Until this week, ha.  Thankfully I've got enough profits to absorb this (sold 1/3 of my CSIQ today) and still be up on the year.  But this would be even easier if this trade nonsense would come to an end.  It's hard to trade on tweets and lies.

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8 hours ago, Mark said:

I'm looking to lighten my load, but confess to being stuck in a lousy trade at the moment thanks to the orange clown and tariff selloff.  So I may be stuck in here taking a gamble on a pop.  Q1 is gonna be bad, we all know that... so how much does Qu talk up or down the rest of the year given CN policy.  The currency headwind they made so much about on last call seems to be calming as MVA pointed out, but still, there's no rush to get in here.  I've seen nothing good in the 13F/D filings.  I mean Lion Point is protecting their investment, but they can only do so much when others are dumping large positions.

The question I have is If you have gains in some purchases and loses in others, if there is a good bounce, why would you not sell the LT losses to offset gains in other stocks? From a tax purpose you zero out your gains and save the 15-20% taxes you would otherwise pay. That in essence reduces you loss exposure by 15-20% in the stock you have losses in.

You put  more cash in your pockets and you look to re-enter with that cash at lower prices. These solars are so cyclical that you are guaranteed to get a new buy at 25% or more lower than today within 3-6 months. 

 

From a cash perspective if you freed up say $20,000  and took a $10,000 loss. You could save yourself $2,000 in short term taxes on  gains.

 

If you wait for a 25% drop or more, then you buy back in to solars at $20,000 and you can maximize your gains.

 

Instead of holding say 1,000 share at $20 or $20,000.

 

You re-enter at $15 and hold 1333 shares. If the stock moves back to $20, you have made $6667 dollars vs just holding your other shares.

In essence you saved $2,000 in taxes from the loss offsetting gains and you add $6667 in profits from the re-entering. That is $8677 and you have almost recovered your $10,000 in losses by exiting and re-entering. 

 

Doing this you are only down $1,223 and not the $10,000 underwater plus the taxes needed to pain your other gains.

 

Just curious? There are reasons to take losses on what looks to be stuff that is underwater from a long time ago.

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On 5/10/2019 at 12:40 AM, MVA said:

Looks like US tariffs hike on Chinese imports already have positive effect on Canadian Solar's margin: CNY is falling...as of now USD/CNY is 6.8... They don't ship PV panels of chinese origin to USA since 2016 anyway, but for other markets, especially EU, it will help a lot to make more money. Forex traders say CNY/USD may go up to 7+ if Trade deal is not reached until end of this week... I think Chinese government will continue to devalue their currency to offset 25% increase in US tariffs.

CNY continue to fall: 6.87/USD as of now. Step by step increasing margin for Canadian solar!

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On 5/10/2019 at 4:35 PM, SCSolar said:

Just curious? There are reasons to take losses on what looks to be stuff that is underwater from a long time ago.

I don't hold any CSIQ over 20.70, so no long term losses for me.  I'm strictly on a 2019 schedule and I'm still up quite a bit for 2019.  I'm trying to balance selling for loss vs. putting solar on my roof for that credit vs. waiting a few quarters to see if they can turn this around in 2020 as they expect.  I've shaved half my CSIQ trading over the last week, but still hold more than I'd like.  But I feel like this 18-18.67 area is no-man's land.  Just not sure how much farther down it goes.  I also don't see a big upside move anytime soon, but I was really hoping to get somewhere in the mid 19s to just dump the rest.  Alas, not today!  :)

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