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CSIQ's Solar Modules for groSolar

Zacks Equity Research

One of the world's largest solar companies, Canadian Solar, Inc. (CSIQ) has supplied more than 8 MW of solar modules to groSolar for three utility and commercial photovoltaic (“PV”) projects in the United States. groSolar is a leading provider of solar energy solutions for commercial and utility applications. It serves the 1 to 20 MW commercial, residential and utility markets with complete EPC, financing, and development support, exclusively through its nationwide procurement and distribution division.

These three projects have been built by utilizing Canadian Solar’s workhorse module, the CS6P. Out of the three projects, two have completed their construction recently and one 6 MW plant is still under construction in Lancaster County, Pennsylvania. Once completed this 6 MW plant will be the largest solar installation in the state of Pennsylvania.

The plant under construction has used the modules prepared by Canadian solar. It has energy generation capacity of 7.5 million kilowatt hours (kWh). The energy from the plant will be sold under 15-year power purchase agreement (“PPA”) to support farmland preservation and agricultural soil restoration in Lancaster.

One of the completed solar plants, located at the Camden County Municipal Utility Authority's (:CCMUA) wastewater treatment plant in Camden, N.J, has a generation capacity of 1.8 MW.  The electricity generated from the plant will be sold to CCMUA under PPA. The other completed plant is located at Longwood Gardens in Kennett Square, Pa. and has an electric generation capacity of 1.5 MW.

Both these plants together will be able to produce approximately 4.95 million kWh of clean solar energy, which is equal to planting 18,562 trees. Moreover, the clean energy will be sufficient to counterbalance approximately 3,712 tons of carbon emissions per year.

The companies prefer to use Canadian Solar’s modules as every module produced by Canadian Solar has high-yield and long-term performance driven by the company’s scrupulous design and production techniques. In fact, this has made CS6P as one of the top rankers in California for higher energy production. Also, the company’s modules carry an industry-leading 25-year warranty as well as matching warranty insurance underwritten by A.M. Best-rated insurance carriers.

In June this year, Canadian Solar Inc. had entered into an agreement to supply 17 MW of solar photovoltaic (“PV”) modules to Potentia Solar Inc. (Potentia). Per the agreement, Canadian Solar will supply its best-selling module, the CS6P to Potentia to power several commercial rooftop solar systems that will be installed on commercial, industrial and institutional buildings in major urban areas of Ontario. The modules will be used for the development of more than one hundred rooftop solar projects. The company expects the projects to be completed in 2013.

Canadian Solar caters to a geographically-diverse customer base spread across its key markets in Germany, Spain and the U.S., as well as emerging market opportunities in France, the Czech Republic, Italy, South Korea, Canada, Japan and China.

However, in the near term, fortunes will be impacted by the industry-wide oversupply, 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 improvement in margins of the company.

Moreover, Canadian Solar Inc. reported higher quantum of losses for the second quarter of 2012. In the reported quarter, the company with a loss per share of 59 cents missed the Zacks Consensus Estimate of a loss of 30 cents per share. Results were also much lower when compared to earnings of 16 cents in the year-ago period.

The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

The company mainly competes with JA Solar Holdings Co. Ltd. (JASO) and JinkoSolar Holding Co. Ltd. (JKS).

Read the Full Research Report on JASO

Read the Full Research Report on CSIQ

Read the Full Research Report on JKS

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