Canadian Solar Inc.’s CSIQ arm, Recurrent Energy, recently secured non-recourse project financing worth approximately $100 million for the Ciranda Solar Power Cluster project. Ciranda Cluster, which boasts a capacity of 300 megawatts, completed construction in August 2023 and is owned and operated by Recurrent Energy.
Details of the Financing Structure
The financing for the Ciranda Solar Power Cluster project was achieved through two strategic approaches. Ciranda Phase I issued a BRL 285 million bond in a private placement. At the same time, Ciranda Phase II secured a BRL 205 million facility with Banco Nacional de Desenvolvimento Econômico e Social.
The most notable part of the financing structure is its link to the inflation-indexed to the National Consumer Price Index that allows to meet the cost of debt with the inflation-indexed operating cash flows of the projects.
Such a financing strategy will allow Canadian Solar to use its existing capital to undertake other large-scale projects in the Brazilian solar market.
Canadian Solar’s Prospects in Brazil
The Brazilian market entails significant demand for solar-based energy. Per the report from the Mordor Intelligence firm, the Brazilian solar energy market is projected to grow at a CAGR of 23.3% over the 2023-2028 period, thus exhibiting strong prospects for solar companies like Canadian Solar to capitalize and prosper on strong demand.
Considering such prospects, Canadian Solar’s goal to strategically expand in the region through project financing from Brazilian banks, like the latest one, to support its development and construction of solar projects in Brazil is prudent. CSIQ may further solidify its position in the Brazilian market by undertaking large-scale projects in the future.
Other companies that have carved out a position in the Brazilian solar market and stand to gain from the expanding market are as follows:
Enphase Energy ENPH: The company commenced the shipment of its most powerful microinverters to date, IQ8P, in Brazil in November 2023. Enphase’s IQ8P microinverters come with a peak output AC power of 480 watts and are designed to pair seamlessly with a full range of solar modules up to 670 W DC
Enphase boasts a long-term (three to five years) earnings growth rate of 18.3%. ENPH shares have increased 27.5% in the past month.
JinkoSolar Holdings JKS: In April 2023, the company announced that in 2022, it was the leader for PV modules imported in Brazil, per Greener's Distributed Generation Strategic Study. Consequently, Jinkosolar is expected to surpass a market share of 17.6% in Brazil for the first time. The new facilities are expected to commence operations in the first half of 2023 and the second half of 2023, respectively.
The Zacks Consensus Estimate for JKS’ 2023 sales implies an improvement of 34.9% from the 2022 reported figure. The stock boasts a four-quarter average earnings surprise of 102.66%.
SolarEdge SEDG: In July 2023, the company launched its residential energy management system, SolarEdge Home, in Brazil. Comprised of home hub and home wave inverters, a power optimizer, a battery, a backup interface and a smart operating system, the solution enables homeowners to increase energy savings and sufficiency by optimizing the production, consumption and storage of solar energy.
SolarEdge’s long-term earnings growth rate is pegged at 18.7%. SEDG shares have rallied 4% in the past month.
In the past month, shares of Canadian Solar have increased 7.3% compared with the industry’s growth of 13%.
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Canadian Solar currently carries a Zacks Rank #5 (Strong Sell).
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