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Canadian Solar Completes Sale of 99% Stake in IS-42 Project


Canadian Solar Inc.’s CSIQ wholly owned subsidiary, Recurrent Energy closed the sale of 99% stake in the partnership that owns the Class B membership interest in the 92 megawatt-peaks (MWp) (71 MWac) IS-42 solar project to Falck Renewables S.p.A.

Details of the Sale

Falck Renewables indirectly acquired the stake in the solar project through its wholly-owned subsidiary Falck Renewables IS 42 LLC. The transaction was done in an all-cash outlay of approximately $43 million.

Located in North Carolina, the project started operating commercially at the end of September 2017. Currently, the solar plant provides electricity to Progress Energy, a subsidiary of Duke Energy Corp. DUK.

While Recurrent Energy is providing asset management services to the project, DEPCOM Power acted as the operations and maintenance contractor, besides offering engineering, procurement and construction (EPC) services to the project.

According to Dr. Shawn Qu, chairman and chief executive officer of Canadian Solar, the IS-42 is Recurrent Energy's first solar project in the North Carolina, which has allowed the company to expand its footprint in the United States.

Canadian Solar’s Prospect in United States

In the United States, Canadian Solar’s portfolio stands at 900 MW of operating plants at the end of September 2017. Per the U.S. Energy Information Administration (EIA), solar consumption in the country is expected to surge 108.2% to 0.887 quadrillion British thermal unit in 2018 from the 2015 levels.

Moreover, the EIA observes that even if the Trump administration abolishes the Clean Power Plan, the renewable space will continue to grow in the United States albeit at a slower rate. In fact, EIA projects U.S. renewable generation capacity to grow by an average of 1.9% per year between 2017 and 2050.

Additionally, the EIA expects utility-scale solar capacity to increase to 31 GW at the end of 2018 compared with 22 GW in 2016. All these developments indicate better growth prospects for Canadian Solar in the United States.

Canadian Solar’s International Projects

Alternative energy sources have been the primary target of utility service providers due to rising concerns regarding the consumption of fossil fuel and the subsequent carbon emission. To make most of the situation, each day more utilities are shifting their focus to generation of alternative energy, in particular solar energy.

Per a report from GTM Research, the global solar market will hit 85 GW in 2017, nearly doubling the installed capacity of 2014. As a result, solar companies like Canadian Solar have started enhancing its overseas base, in other parts of the globe, apart from America.

While the latest deal with Falck Renewables is one such instance, in the same line of strategy, Canadian Solar secured three solar power projects during Mexico’s third Long-term Auction for renewables held on Nov 15. Totaling 367 megawatt-peaks (MWp), these power projects will be developed and build in the Mexican cities of Aguascalientes, Hermosillo and Obregón.

Likewise, in October, the company announced that its wholly-owned subsidiary has entered into a joint venture (JV) with a few subsidiaries of Menora Mivtachim Holdings Ltd. — one of Israel's five largest insurance and finance groups. The JV aims to invest in the development, financing, construction and ownership of solar power projects in Israel.

Price Movement

Canadian Solar has underperformed the industry in a year. The stock has rallied 34.5% compared with the industry’s gain of 43.4%. This lackluster performance might have been due to the market dislocation that the company is already experiencing with no improvement expected in near term.

Zacks Rank & Stocks to Consider

Canadian Solar carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the solar space include SolarEdge Technologies, Inc. SEDG and SunPower Corporation SPWR sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SolarEdge Technologies delivered a positive earnings surprise of 20% in the third quarter. Its Zacks Consensus Estimate for 2017 moved up nearly 12.2% to $2.11 per share in the last 30 days.

SunPower came up with a positive earnings surprise of 158.33% in the third quarter. Its Zacks Consensus Estimate for fourth quarter of 2017 climbed nearly 45.5% to 16 cents per share in the last 30 days.

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