Canadian Solar's (CSIQ) Robust Project Pipeline Fuels Growth - Analyst Blog
On Jul 8, 2015, we have updated a research report on Ontario, Canada-based solar module manufacturer Canadian Solar Inc. CSIQ.
Canadian Solar caters to a geographically diverse customer base spread across key markets in the U.S., Canada and Europe, as well as emerging markets like South Korea, Singapore and Brazil.
The company, which has a strong pipeline of projects, continues to engage in acquisitions and adopt various strategies to further consolidate its position. At the end of first-quarter 2015, Canadian Solar’s projects under development increased to about 720 megawatt (MW) direct current. During the first quarter, it acquired Recurrent Energy, LLC, a leading North American solar energy developer. This acquisition expanded Canadian Solar’s total project pipeline to 8.5 GW, with approximately 2.4 GW of late-stage projects. The transaction will further strengthen its hold in the business of ownership and development of solar power plants in North America.
Canadian Solar has plans to form an asset-holding yield company. The company expects that 1,824 MW of late-stage projects will be eligible for drop down into a yield vehicle through 2017. The proposed “Yield Co” is expected to generate $50 million to $60 million of cash available for distribution (“CAFD”) by the end of 2016 and $58 million to $70 million of CAFD by the end of 2017.
It is worth mentioning here that a Yield Co is a dividend growth-oriented public company, created by the parent company. Yield Co’s generally have portfolios of renewable and/or conventional long-term contracted operating assets for generating expected cash flows. They allocate CAFD each year or quarter to their shareholders in the form of dividends.
Canadian Solar however is slowly losing its ground in Asia despite having a manufacturing base in China. With Asia being touted as the next big solar market, the company’s falling revenues in the region is definitely a concern.
Asia and others contributed 33.6% to net revenues in the first quarter of 2015, declining significantly from 50.4% in the year-ago quarter. Chinese solar manufacturers are not only the beneficiaries of the government’s stimulus programs but also enjoy geographical proximity to India and Japan. This means that Canadian Solar needs a more aggressive expansion strategy to gain a competitive edge over Chinese solar manufacturers. Only then will it see a boost in its revenues from Asia.
The company also faces stiff competition from the U.S. solar producers like First Solar Inc. FSLR, SolarCity Corp. SCTY and SunPower Corp. SPWR.
Zacks Rank
Canadian Solar currently carries a Zacks Rank #3 (Hold).
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CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
FIRST SOLAR INC (FSLR): Free Stock Analysis Report
SOLARCITY CORP (SCTY): Free Stock Analysis Report
SUNPOWER CORP-A (SPWR): Free Stock Analysis Report
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