Canadian Solar Inc. (CSIQ) announced that Credit Suisse Group (CS) will provide the company with a one-year tenor loan of up to $40 million. The loan will be used to finance Canadian Solar's previously announced acquisition of solar projects in Ontario, Canada.
Earlier, in December 2012, Canadian Solar Inc. had acquired the majority interest in two utility-scale solar power projects in Ontario from SunEdison Power Canada Inc. ("SunEdison"), a subsidiary of MEMC Electronic Materials Inc. (WFR). The company has the option to buy two additional utility-scale solar power projects in Ontario with a total capacity of approximately 22.5 MW DC. Per the agreement, Canadian Solar can also purchase a fifth solar project from SunEdison in the future.
In distinct contrast with its solar peers, Canadian Solar had a stable balance sheet with a long-term debt-to-capitalization of 22.5% at the end of the first nine months of 2012. As of Sep 30, 2012, the company had approximately $690.8 million in cash, cash equivalents and restricted cash.
In recent times, Canadian Solar booked positive growth in Europe, most notably in Germany, offsetting the weakness in the U.S. market. However, higher volumes were more than offset by persistently falling average selling prices. Average selling prices continued to decline as the Euro weakened and Germany transformed into a new, lower feed-in-tariff regime.
Looking forward, the company is actively branching out to capture new opportunities in key solar markets worldwide. The company continues to see attractive opportunities for growth in China, Japan and India, as well as other emerging markets in Asia, Africa and Latin America. Moreover, its specialization at the downstream total solutions business makes it a higher margin business.
However, in the near term, the fortunes of Canadian Solar could be impacted by the industry-wide supply glut, leading to sharply falling average selling prices, tepid module demand in Europe and rising competition in the market. Given the industry-wide high inventory level, we do not foresee any short-term margin improvement for the company.
Canadian Solar Inc. is one of the world's largest solar companies. As a leading vertically integrated provider of ingots, wafers, solar cells, solar modules and other solar applications, the company designs, manufactures and delivers solar products and solar system solutions for on-grid and off-grid use to customers worldwide.
With operations in North America, Europe, Australia and Asia, Canadian Solar provides premium quality, cost-effective and environmentally friendly solar solutions to support global, sustainable development. The company holds a Zacks Rank #3, which translates into a short-term Hold rating.
In the near term, we would rather advise investors to accumulate the short-term Zacks Rank #1 (Strong Buy rating) stock Yingli Green Energy Holding Co. Ltd. (YGE).
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