Canadian Solar nears completion on several projects in Canada and the U.S.

Canadian Solar Inc. (NASDAQ: CSIQ) said Nov. 10 in a quarterly earnings statement that it has made progress lately with solar projects, including several that are currently under construction in Canada and the U.S.

Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar, said: “This has been a solid quarter as we benefited from strong demand for our modules in the U.S., Japan, China and India. We also made good progress on our Energy business, as we expanded our fleet of operating power plants in Japan and in Canada, grew our pipeline of high quality solar projects in Brazil and China, closed the sale of a controlling interest in our 200 MW Tranquillity Solar Project in California and secured financing for three of our seven U.S. projects.”

Michael G. Potter, Senior Vice President and Chief Financial Officer of Canadian Solar, added: “We were able to deliver a 33.5% increase in net revenue to $849.8 million in the third quarter, compared to the second quarter. Our strategic decision to build inventory levels in the second quarter helped us to seamlessly meet anticipated higher demand levels in the third quarter and has positioned us well entering the fourth quarter. Gross margin of 14.9% was above the high end of our guidance of 12% to 14%, as higher than expected average selling prices for our modules helped offset the lower gross margin from the partial Tranquillity project sale. We remain committed to maximizing the valuation of our asset portfolio for our shareholders. We continue to work hard on a potential YieldCo, while keeping all options open given recent market volatility.”

Canadian Solar’s late-stage, utility-scale solar project pipeline now totals approximately 2.5 GWp, with an estimated resale value and gross profit contribution exceeding $5.0 billion and $850 million, respectively, once these projects are built and connected to the grid over the next three years.

In Canada, in the third quarter of 2015, the company started the commercial operation of its BeamLight solar plant, which is being held on its balance sheet, and reached substantial completion on its 100 MW (ac) (141 MWp) Samsung Phase II, Kingston solar project, the largest solar power plant in Canada. The status of the company’s late-stage, utility-scale solar projects in Ontario, Canada, including commercial operation dates (COD), as of Sept. 30 is:














Canadian Solar Developed

 MWp

Status

Expected COD

Alfred

14.1

In Construction

2015 Q4 

Illumination LP 

14.0

In Construction

2015 Q4

Earth Light LP 

14.1

In Construction

2015 Q4 

Aria LP 

14.8

In Construction

2015 Q4 

Total CSIQ Developed 

57.0

   

3rd Party Developed (EPC)

MWp

Status

 

Samsung Phase II

141.0

Substantial Completion

Total EPC Projects

141.0

   

EPC MW Recognized into Revenue in Prior Quarters

136.6

   

Total Project Backlog

61.4

   

In the United States, in the third quarter of 2015, the company’s wholly-owned subsidiary, Recurrent Energy, entered into an agreement with Southern Power, a subsidiary of Southern Co. (NYSE: SO), whereby Southern Power acquired a controlling interest in the Tranquillity project. Subsequently, Canadian Solar announced a financing agreement with NORD/LB as the lead arranger, to provide project-level construction debt, LC facilities and a back-leveraged term facility, totaling $337 million for the Tranquillity project.

During the third quarter, the company also secured a debt facility with Santander Bank N.A. and a tax equity investment commitment with U.S. Bancorp Community Development Corp., securing financing for the Mustang solar project.

In addition, in the first week of November 2015, Canadian Solar announced a financing agreement with a consortium of banks led by Rabobank to provide $113 million in construction financing, a tax equity bridge loan, and a term loan option, in addition to closing on a separate tax equity investment commitment from U.S. Bancorp Community Development Corp., thus securing financing for the Barren Ridge project.

Canadian Solar said it expects to announce additional financing transactions for the remaining four U.S. projects in the weeks ahead.

As of the end of the third quarter of 2015, the company’s late-stage, utility-scale solar project pipeline in the U.S. totals approximately 1.0 GWp:













Project 

MWp

Location

Status

Expected COD

Astoria 1

131

CA

In Construction

2016

Astoria 2

100

CA

In Construction

2016

Barren Ridge

78

CA

In Construction

2016

Mustang

114

CA

In Construction

2016

Tranquility*

126

CA

In Construction

2016

Roserock

212

TX

NTP in 2015

2016

Garland

272

CA

NTP in 2015

2016

Total

1,034

     

* Reflects Company ownership: 49% of Tranquillity and 85% of Mustang 

In Japan, as recently announced, the company started commercial operation of four of its solar photovoltaic (PV) power plants, with a total capacity of approximately 8.6 MWp. As of the end of October 2015, the company’s pipeline of projects in late stage of development was approximately 608 MWp, of which approximately 336 MWp have obtained full grid connection approval (Keitou Renkei Shoudakusho) and approximately 103.7 MWp were either in construction or near ready to start construction. 

In China, the company expanded its pipeline of late stage projects under development to 459 MWp, and expects to connect 135 MWp to the grid in the fourth quarter of 2015.

In the United Kingdom, the company’s late-stage project pipeline totals 25.1 MWp, with 23.2 MWp on target to connect to the grid in the fourth quarter of 2015, and the balance in 2016.

In Brazil, following recent success in bids for five solar power projects totaling 184 MWp in Pirapora, Minas Gerais, the company’s late-stage solar project pipeline now totals 274 MWp. Canadian Solar expects these solar power plants to be connected to the grid in 2017. Once connected, the electricity generated will be purchased by a Brazilian government entity under a 20-year power purchase agreement.

In addition to its late-stage, utility-scale project development pipeline discussed above, the company now has a fleet of solar plants in operation totaling approximately 257 MWp, with 99 MWp in China, 86 MWp in Canada, 40 MWp in the U.K., 15 MWp in Japan and 17 MWp, owned through Recurrent Energy, in the U.S. and Spain. 

For the fourth quarter of 2015, the company expects total module shipments to be in the range of approximately 1,300 MW to 1,350 MW, including approximately 170 MW of shipments to the company’s utility-scale solar projects that may not be recognized in the fourth quarter 2015 revenue. Total revenue for the fourth quarter of 2015 is expected to be in the range of $930 million to $980 million, with gross margin expected to be between 13% and 15%.

For the full year 2015, the company is updating its guidance for total module shipments recognized in revenue to be in the range of 4.15 GW to 4.2 GW. Total revenue for the full year 2015 is expected to be in the range of $3.28 billion to $3.33 billion, compared to prior guidance of $2.8 billion to $3.0 billion. 

Qu said: “We have held the view all year that demand for our solar products would remain strong, with supply constraints likely. As we look to the future, we continue to see strong global demand for modules and tight Tier 1 capacity availability. As a result, we have made the strategic decision to expand our wafer, cell and module manufacturing capacities. Our manufacturing expansion plan includes a new 400 MW cell and module plant in South East Asia, as well as a new module plant in Brazil. We already have the necessary funding in place and are confident our expansion will result in further improvements to our cost structure. Separately, we are keeping our options open regarding the potential launch of a YieldCo with quality assets in OECD countries, and we continue to work on alternative exit strategies for our project portfolio, and expect to make a decent developer’s margin if we decide to sell to, or partner with, end-buyers of renewable energy assets.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.