Canadian Solar Teams With SkyPower - Analyst Blog

Canadian Solar Inc.(CSIQ) is teaming up with SkyPower Limited, for constructing two solar parks with a nameplate capacity of 18.5 megawatts (MW) in Ontario, Canada. Financing for the projects will come from Deutsche Bank AG (DB). The first project is a 10.5 MW solar park in Napanee while the second project is an 8.5 MW solar park located in Thunder Bay. Canadian Solar expects to finish work on the projects by mid-2011.

SkyPower Limited is one of Canada's largest owners and developers of solar Energy projects. The company has an extensive pipeline of over 1500 MW of solar projects under development across North America. SkyPower prospects, develops, manages, finances, owns and operates solar energy projects from initial discovery stages through to commercial operation.

Canadian Solar is a vertically-integrated manufacturer of silicon ingots, wafers, cells, solar modules and custom-designed solar power applications. The company sells its products to customers worldwide, spread across Germany, Spain, the U.S., France, the Czech Republic, Italy, South Korea, Canada and China.

The company offers one of the broadest crystalline silicon solar module product lines in the industry ranging from modules made of medium power, low-cost upgraded metallurgical-grade silicon, to high efficiency, high power output mono-crystalline modules, along with a range of specialty products.

The company's standard solar modules are sold to distributors and system integrators, and specialty solar modules and products to various manufacturers, who integrate these solar modules into their own products or sell and market them as part of their own product portfolio.

Canadian Solar's China based manufacturing assets have a distinct cost advantage over its peers. The company also pursues a balanced and diversified supply channel mix by entering into long-term supply contracts and toll manufacturing arrangements. In addition to in-house solar cell, wafer and ingot manufacturing, it is also ramping up its internal solar cell capacity to cut back its reliance on third party solar cells for the manufacture of solar modules.

Looking forward the prospects of Canadian Solar look greener based on a geographically-diversified customer base, ongoing capacity expansion programs, improving operating efficiencies, rising margins, and material cost savings through its vertically-integrated manufacturing operation.

However in the near-term its shipments were curtailed by higher solar cell prices in the market, which was eating into its margins. The company is addressing this by ramping up its captive solar cell capacity. However it will take some time until the company becomes self-sufficient for its solar cells requirements.

The company currently is trading at a premium compared to its peers in terms of forward earnings estimates. Thus in the near term, we believe its Zacks #1 Rank (Strong Buy) peers like JA Solar Holdings Company Ltd. (JASO), and LDK Solar Company Ltd. (LDK) are more promising compared to the Zacks #3 Rank (Hold) Canadian Solar stock.