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Canadian Solar Arm Vends 3 Solar Plants to Shenzhen Energy


Canadian Solar Inc.’s CSIQ subsidiary, CSI New Energy Holding Co., Ltd. recently completed the sale of three solar power plants in China to Shenzhen Energy Nanjing Holding Co., Ltd. The units have a capacity to generate solar power worth 44.3 Mega Watt peak (MWp).

Details of the Deal

The deal was closed on Dec 29, 2017. Canadian Solar expects the sale to contribute to fourth-quarter 2017 revenues. To date, the company has delivered seven solar power plants to Shenzhen Energy Nanjing Holding, which aims at growing its renewable energy assets and producing cleaner air in China.

Solar Power Prospects in China

Unprecedented investments in solar power in the rapidly developing economy of China promise a renewable energy revolution. In 2017, China exceeded its already ambitious plan to install 105 gigawatts (GW) of solar capacity by 2020 as part of its 13th Five Year Plan, forcing administrators to revise the target to 213 GW.

Of the five largest solar power plants in the world, three are based in China. The country leads the world in terms of installed solar capacity, crossing the 112-GW mark in July 2017.

It is to be noted that the drive for solar power is not restricted to large, remote solar installations. Bloomberg New Energy Finance predicts that rooftop solar will account for as much as 40 GW by 2020 and to the extent of 125 GW by 2040 in China.

Given the substantial prospects in the Chinese solar market, solar module producers like Canadian Solar are vying to expand their footprint in the country. The latest plant sale to Shenzhen Energy reflects this.

Meanwhile, not only does Canadian Solar boast strong prospects in China, the company’s business is spread across the globe.

Global Footprint

As renewables will probably replace fossil fuels as a source of electrical power, most utility providers across the globe are gradually shifting away from fossil fuel toward alternative energy. GTM Research’s latest ‘Global Solar Demand Monitor’ report states that 13 countries will surpass the 1-GW level of annual PV installations by the end of 2018. With solar being a major growth area in the renewable space, this is clearly a golden era for solar module producers like Canadian Solar.

Per another report by GTM research, the global solar market will continue grow to annual installations of more than 120 GW by 2022. Naturally to exploit the growth opportunities of the global solar market, Canadian Solar has been expanding its footprint worldwide, which can be supported by the recent international ventures it has taken up, as discussed below.

Last December, Canadian Solar secured a project, with 17.8-MWp capacity, during Japan's inaugural solar energy auction. Located in Suzuhari City within Hiroshima prefecture, the project will utilize more than 48,000 high-efficiency modules of Canadian Solar.

Last November, Canadian Solar started the construction of two Japanese solar power projects — one with a capacity of 10.77 MWp in Shizuoka and the other with a capacity of 2.1 MWp in Miyagi.

In the same month, Canadian Solar secured three solar power projects during Mexico’s third Long-term Auction for renewables held on Nov 15. Totaling 367 MWp, these power projects will be developed and built in the Mexican cities of Aguascalientes, Hermosillo and Obregón.

In October 2017, 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 large insurance and finance groups. The JV aims to invest in the development, financing, construction and ownership of solar power projects in Israel.

Canadian Solar also entered binding contracts to sell interests in three solar farms to Foresight Solar Fund Limited in Queensland, Australia. These farms have an aggregate capacity of 117 MWp.

Price Movement

Shares of Canadian Solar have rallied 35.6% last year, lagging the industry’s gain of 54.1%. The underperformance might have been caused by stiff competition from cheaper alternatives like natural gas, given the current shale boom in the United States.

Zacks Rank & Key Picks

Canadian Solar carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same sector are Yingli Green Energy Holding Company Limited YGE, First Solar, Inc. FSLR and JA Solar Holdings, Co., Ltd. JASO. Yingli Green Energy, First Solar and JA Solar carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Yingli Green Energy posted an average positive earnings surprise of 1.65% in the past four quarters. The Zacks Consensus Estimate for 2018 loss narrowed down by 10 cents over the last 60 days.

First Solar has an average positive earnings surprise of 537.39% for the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 36 cents in the past 60 days.

JA Solar has an average positive earnings surprise of 574.07% for the past four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 5 cents in the past 60 days.

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