Doug Young
Just days after announcing big new financing for its unit focused
on solar power plant construction, Canadian Solar
(Nasdaq: CSIQ)
is taking a big new step by disclosing it is preparing an IPO to
separately list that unit. The move marks the latest wrinkle in
the evolving story for Chinese solar panel manufacturers, which
are quickly becoming their own best customers by selling their
products to solar plants that they build themselves.
Canadian Solar and some of its peers have actually engaged in
this kind of plant construction for a while, though the pace has
picked up in the last couple of years. But the latest trend marks
a divergence from the past, since Canadian Solar and others are
now becoming long-term owners of the plants they build and putting
them into wholly-owned units that look like a solar equivalent of
traditional power utilities. In the past, Canadian Solar and the
others would simply build solar plants, and then sell them to
independent long-term owners upon completion.
Canadian Solar has emerged as a leader in this particular trend,
and one of my sources tells me that the next company that’s likely
to announce a similar development is JinkoSolar
(NYSE: JKS).
But others are also working on similar plans, with a longer term
aim of diversifying their business and providing their core
panel-making units with a more reliable stream of sales for
projects that they self-develop.
Canadian Solar’s statement is quite brief, and simply says that
it has submitted a confidential filing with the US securities
regulator that would be the first step towards an eventual IPO. (company announcement)
The company adds that no decision has been made on how many shares
would be sold, or how much it would like to raise. Such an
offering would most likely come of the Nasdaq, where Canadian
Solar’s American Depositary Shares (ADSs) currently trade,
probably by year end.
This particular announcement comes less than a week after
Canadian Solar announced it had just landed $100 million in new
financing from Credit Suisse, with an option to
borrow another $100 million. (previous post) It said part of that money
would provide bridge financing for solar power plant builder Recurrent
Energy, following Canadian Solar’s announcement earlier
this year that it would buy the company for $265 million.
Recurrent Energy IPO
Based on these 2 recent announcements, it appears that Canadian
Solar is centering its new solar plant construction unit around
Recurrent Energy, and will inject some of its other solar plant
assets into the unit. What’s more, it appears the loan announced
last week will serve as temporary financing for Canadian Solar’s
purchase of Recurrent until the IPO. That would indicate that
Canadian Solar is probably hoping to raise at least $100 million
from the IPO, and then use the proceeds to pay off the Credit
Suisse loan.
Investors weren’t too impressed by the new announcement, with
Canadian Solar shares rising slightly during the latest session in
New York. Part of that may be because this deal has been rumored
for the last few months. And that said, the shares are up nearly
50 percent from a late-September low, as investors take new
interest in some of China’s solar panel makers with good prospects
of surviving a second round of industry consolidation.
From an investor’s perspective, this kind of move certainly seems
like a relatively positive development for Canadian Solar and
others who follow a similar path, since it will help to stabilize
their business. The new IPO could also be an attractive
alternative for people who like more conservative investments in
the power utility sector. The biggest risk is government policy,
since most of these new plants are dependent on inflated
government-set tariffs to operate profitably. But if technology
continues to improve, which seems inevitable, it’s quite possible
this new generation of plants could operate profitably without
government support at some point in the next decade.
http://www.altenergystocks.com/archives/2015/11/canadian_solar_eyes_ipo_for_plantbuilding_ unit.html
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