Canadian Solar’s Profit Slumps 68% Amid Yieldco Transition Plan

Updated on

Canadian Solar Inc., the third-biggest panel maker, reported a 68 percent slump in earnings as it transitions from a company focused on manufacturing to one that also builds, owns and operates renewable power plants.

Net income in the second quarter was $17.9 million, or 31 cents a share, down from $55.8 million, or 95 cents, a year earlier, the Guelph, Ontario-based company said in a statement Tuesday.

That still came in ahead of the 29-cent average of five estimates compiled by Bloomberg, indicating that analysts are aware the company is shifting its strategy. Canadian Solar said in March it was planning to form a separate company to own and operate completed power plants. This model, generally known as a yieldco, often leads to lower profit during the transition because the company holds on to assets instead of selling them.

Canadian Solar is “on track for launch” of a yieldco, Chief Executive Officer Shawn Qu said Tuesday in a conference call with analysts. That may take place by the end of this year or early 2016.

Yieldcos have become increasingly common among renewable energy companies, with at least 15 initial public offerings since early 2013. There’s some concern in the industry that there are too many, creating competition to buy wind and solar farms and driving up prices.

TerraForm Global Inc., a yieldco that began trading at the end of July, is down 31 percent since its IPO and has never closed above its $15 initial share price.

Other Options

Canadian Solar is also looking at other options, according to Chief Financial Officer Michael Potter.

“We recognize that the market has recently experienced volatility around yieldco valuations and we have alternative plans to monetize our utility-scale solar power plant assets, if necessary,” Potter said in the statement.

Canadian Solar shipped 850 megawatts of panels in the quarter, falling short of its May guidance of 950 megawatts to 1 gigawatt. The company reaffirmed its forecast for delivering as much as 4.3 gigawatts this year, which would put it on track to surpass Yingli Green Energy Holding Co. to become the world’s second-largest panel producer, after Trina Solar Ltd.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE