The year 2013 will go down as a major turning point for China’s
solar panel makers, with some names emerging as new sector leaders
after a prolonged downturn while others quietly disappeared.
The
latter category saw former leader Suntech (OTC:
STPFQ) go bankrupt and LDK (NYSE: LDK)
quietly sell off many of its assets, while the former category has
seen Canadian Solar (Nasdaq: CSIQ)
and Shunfeng (HKEx: 1165)
emerge as names to watch in the future. Canadian Solar in
particular has been coming back strong in the second half of this
year with a steady stream of good news, including its latest
mega-deal to sell panels in China.
Sensing the end of a nearly 3-year-old downturn is finally in
sight, investors have sharply bid up shares of many healthier
solar panel makers this year. Canadian Solar’s shares have posted
some of the biggest gains, rising from about $3 at the beginning
of the year to their current $28. For anyone too lazy to do the
math, that means anyone smart enough to buy the shares in January
would have received a 9-fold return on their investment. The rally
has helped Canadian Solar shares to regain most of the value they
previously held at their peak in 2010 when bullishness towards the
solar panel sector was at its height.
All that said, let’s take a look at Canadian Solar’s latest
mega-deal, which will see it sell 100 megawatts worth of modules
to Chinese power plant developer Zhenfa New Energy
to build 3 new plants in Gansu province and one in Inner Mongolia.
(company announcement) Normally I don’t write
about individual deals, since companies frequently make such
announcements. But in this case the size of the deal is quite
large, especially when one considers the amount is more than a
fifth of Canadian Solar’s total sales for its latest reporting
quarter.
This deal also caught my attention because it followed another
100 megawatt deal for the company announced last month with 3
Gorges New Energy, a company associated with the
massive 3 Gorges Dam project in interior China. Canadian Solar
also announced another big China deal in November to sell 32
megawatts of modules to China Perfect Machinery Industry
Corp. That means in the last 2 months alone, Canadian
Solar has signed deals for 232 megawatts of modules in China.
Industry followers will
note that this series of deals comes as China embarks on an
ambitious campaign to build up its solar power generating
capacity. Despite producing more than half of the world’s solar
panels, China historically wasn’t a strong buyer of those panels.
But that has rapidly changed in the last year, as Beijing has
steadily raised its targets for an ambitious plan to build new
solar plants throughout the country.
In the latest adjustment to its plans, reports last month said
Beijing aims to have 12 gigawatts of solar power capacity
installed by the end of next year, up from a previous goal of 10
gigawatts. (previous post) It plans to triple that
figure to 35 gigawatts by the end of 2015. That means that if
Beijing really follows its plan, these orders we’re seeing now
from Canadian Solar should be just the beginning of an ordering
frenzy likely to accelerate in 2014.
I fully expect such a buying binge to materialize, as state-owned
power plant builders and other local entities will be anxious to
carry out Beijing’s plan. That should be great news for the panel
makers, and should help propel most back to profitability next
year. The binge could be more problematic for China’s grid
operator as it tries to connect all these new facilities to the
national grid. But that’s a problem for Beijing and not the panel
makers.
Bottom line: A recent series of mega deals for
Canadian Solar augers a buying binge in 2014 by solar plant
builders, as they rush to fulfill Beijing’s ambitious solar energy
targets.
http://www.altenergystocks.com/archives/2013/12/canadian_solar_caps_2013_with_meg adeals_1.html
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