* Says turned profitable on sales of power plants
* Third-quarter profit $0.56/share vs loss $1.01/share year
* Expects full-year panel shipments at high end of forecast
* Shares rise 12 pct to four-year high
(Adds executive, analyst comments)
By Swetha Gopinath
Nov 13 Canadian Solar Inc is
considering spinning off a unit to operate some of the
high-margin solar power plants that helped the company to its
first profit in nine quarters.
Canadian Solar's shares rose 12 percent to a four-year high
on Wednesday after the company posted a quarterly profit that
Chief Executive Shawn Qu said had laid the ground for its first
full profitable year since 2010.
By moving into power plant construction, Canadian Solar has
cut its dependence on the more competitive business of selling
panels and other solar products. Its stock has risen eightfold
this year, making it the best performer in the solar industry.
The Guelph, Ontario-based company, which has most of its
manufacturing operations in China, plans to create a unit that
would hold and operate these plants after construction, Chief
Financial Officer Michael Potter said on a post-earnings call.
"As an operating company, (with) the cost of capital we
have, it doesn't make the greatest sense to hold and operate
projects within the current Canadian Solar structure," said
Potter. He said such a unit could potentially be taken public.
Solar companies are exploring new financing structures to
lower the cost of capital and maximize returns.
SunEdison Inc, a U.S. competitor, has also
announced plans to spin off some power plants into a listed
company next year, while SolarCity Corp has launched
bonds backed by solar assets.
Canadian Solar's "total solutions business", the unit that
includes its power plant operations, contributed 41 percent of
the company's total revenue in the third quarter, up from 21.5
percent a year earlier.
"They are going to continue to grow this portion of their
business and, as they improve their cost of capital, there is a
healthy profit driver here," said Colin Rusch, analyst at
Northland Capital Markets.
In the eight quarters prior to its latest reporting period,
Canadian Solar had racked up cumulative losses of about $316
million, in part due to a slump in panel prices resulting from
excess capacity in China and the loss of European subsidies.
The slump has halted in the last two quarters, giving solar
companies a renewed confidence.
"The industry is emerging from a very challenging period,
with improved pricing power and growing demand," Qu, the chief
executive, said in a statement.
For the third quarter ended Sept. 30, net income
attributable to Canadian Solar was $27.7 million, or 56 cents
per share, compared with a net loss of $43.7 million, or $1.01
per share, a year earlier.
Revenue rose 51 percent to $490.9 million.
Canadian Solar said it had increased its project pipeline to
1,015 megawatts (MW) by the close of the quarter from 971 MW at
the end of the second quarter.
The company also said it expects its full-year panel
shipments to be between 1.75 gigawatts (GW) and 1.77 GW, near
the top end of its prior forecast of 1.6-1.8 GW.
In the fourth quarter alone, the company expects to ship
480-500 MW of panels, driven by demand from China and Japan. It
expects to begin construction of its first Japanese solar power
project early next year.
In the third quarter, the company sold two solar power
plants to TransCanada Corp for about C$95 million ($91
million) and two utility-scale solar power plants to BlackRock
Inc for about C$120 million.
Canadian Solar said its backlog of utility-scale projects in
Canada totaled 499 MW of direct current at the end of the third
quarter, with an estimated resale value of more than C$1.7
billion once the projects are functional.
"They are going to see some outsized margins for this year
and next year on projects from Canada," said Rusch.
Canadian Solar's shares were up 10.3 percent at $31.13 in
morning trading on the Nasdaq.
($1 = 1.0493 Canadian dollars)
(Editing by Savio D'Souza and Robin Paxton)