Canadian Solar improves revenues in 3rd quarter despite pressure

Canadian solar

Canadian Solar has earned net revenues of $912.2 million during the quarter ended September 30, 2017, compared to $692.4 million in the second quarter of 2017.

Total solar module shipments were 1,870 MW, compared to 1,745 MW in the second quarter of 2017, and the third quarter guidance in the range of 1,650 MW to 1,700 MW.

Net income attributable to Canadian Solar was $13.3 million, compared to net income of $38.2 million, in the second quarter of 2017.

Research and development expenses were $7.3 million in the third quarter of 2017, compared to $7.3 million in the second quarter of 2017 and $4.6 million in the third quarter of 2016.

The Company’s portfolio of solar power plants in commercial operation was 1,419.5 MWp as of September 30, 2017, with an estimated total resale value of approximately $2.0 billion.

In September and October 2017, the Company entered into definitive agreements with two Asian buyers, to sell a portfolio of six solar power projects in California, totaling 703 MWp. The transactions are expected to close in the fourth quarter of 2017 or the first quarter of 2018, depending on the timing of the required governmental approvals.

In September 2017, Canadian Solar Infrastructure Fund, (“CSIF”), a fund sponsored by a subsidiary of the Company, obtained approval from the Tokyo Stock Exchange (the “TSE”) to list its investment units on the TSE’s infrastructure investment fund securities market. Japanese subsidiaries of Canadian Solar agreed to sell 13 operating solar power plants with a total installed capacity of 72.7 MWp to CSIF as its initial portfolio (the “Initial Portfolio”).

An initial public offering of 177,800 CSIF investment units was priced at 100,000 Japanese yenper unit, before underwriting discounts. Of the units included in the offering, Canadian Solar purchased 25,395 units as the designated purchaser. The listing was completed on October 30, 2017.

CSIF plans to use the net proceeds from the offering and anticipated bank borrowings of JPY 17.7 billion (approximately $156 million) to consummate the acquisition of the Initial Portfolio. Net sale proceeds to Canadian Solar from the Initial Portfolio amounted to JPY 30.4 billion (approximately $270 million). Canadian Solar expects to use part of the net sale proceeds to reduce its overall debt by JPY 18.7 billion (approximately $165 million).

In September 2017, the Company entered into an agreement to sell 99 percent of its Class B membership interests in the 92 MWp IS-42 project in North Carolina to Falck Renewables S.p.A., with closing expected in November 2017.

In October 2017, the Company entered into agreements to sell interests in three solar projects in Australia, totaling 117 MWp, to Foresight Solar Fund Limited. The transaction is expected to close in the fourth quarter of 2017.

During the quarter, the Company completed the sale of the 108 MWp SECI Maharashtra project in India.

The year-over-year increase reflects the Company’s continued commitment to investing in and commercializing solar energy technologies that differentiate the Company and strengthen its competitive position through higher efficiency, and more sought after energy solutions.

Dr. Shawn Qu, chairman and chief executive officer of Canadian Solar, remarked, “The cost of raw materials, such as high-purity polysilicon and aluminum extrusion products, increased significantly during the quarter. In addition, the appreciation of the Chinese Renminbi and the Canadian dollar against the U.S. dollar resulted in foreign exchange losses to the Company and drove up our production cost.”

Dr. Huifeng Chang, senior vice president and chief financial officer of Canadian Solar, added, “Our higher-than-expected solar module shipments in the third quarter were driven by strong demand for solar modules from China, the U.S., Japan and India. Our higher gross margin was the result of increased average selling price compared to our previous expectation, better cost controls and manufacturing efficiencies.”

Chang further said, “We will further reduce our overall debt, after the sale of the 703 MWp of U.S. projects, 150 MWp U.K. project and CSIF’s initial public offering in Japan.”

As of October 31, 2017, the Company’s late-stage utility-scale solar project pipeline, including those in construction, totaled approximately 1,598.9 MWp, which included 344.5 MWp in Japan, 416 MWp in China, 326.4 MWp in Brazil, 238 MWp in the U.S., 117 MWp in Australia, 68 MWp in Mexico, 41 MW in Chile, 22 MWp in the Philippines, 18 MWp in Africa and 8 MWp in the U.K. The Company cautions that some late-stage projects may not reach completion due to various completion risks, such as failure to secure permits and grid connection, among others.

In the U.S., the Company signed two PPAs for the 150 MWac/210 MWp Mustang 2 solar photovoltaic project located in Kings County in central California. Peninsula Clean Energy signed a 15-year Power Purchase Agreement (“PPA”) for 100 MWac of solar power, and the Modesto Irrigation District signed a 20-year PPA for the remaining 50 MWac of the project. Electricity will be delivered following commercial operation of the project, expected in 2019.

The 20 MWac/28 MWp Gaskell West 1 solar project, located in Kern County in southern California, is currently under construction and is expected to begin delivering electricity to Southern California Edison by mid-2018 pursuant to a 20-year PPA.

The Company’s wholly-owned subsidiary, Recurrent Energy, entered into an agreement for the sale of 99 percent of its Class B membership interest in the 71 MWac/92 MWp IS-42 solar project located in North Carolina to Falck Renewables S.p.A., with closing expected in November 2017. This project reached commercial operation in September 2017.

For the full year 2017, the Company expects its total module shipments to be in the range of approximately 6.7 GW to 6.8 GW, compared to 6.0 GW to 6.5 GW as previously guided. The Company expects its revenue for the full year 2017 to be in the range of $4.05 billion to $4.09 billion. Module shipments recognized in revenue and total annual revenue will depend on market conditions, including ASP trends and governmental approvals for the sale of solar projects.

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