Canadian Solar Inc. (CSIQ:US), a producer of solar cells and panels, formed a joint venture with the renewable-energy project developer SkyPower Ltd. that will provide an outlet for its products in North America and emerging markets.
Under the agreement, Canadian Solar will pay C$185 million ($187 million) for majority stakes in 16 projects that SkyPower is planning in Ontario, and the two companies will each own half of a venture that will develop solar farms in other countries, according to a statement today.
By taking a more active role in developing energy projects, Canadian Solar will have more control over sales of its panels, a strategy that First Solar Inc. (FSLR:US) and other rivals have used for years, according to Jesse Pichel, an analyst with Jefferies Group Inc. in New York.
“We have seen several upstream solar companies move downstream to projects,” Pichel wrote in a note to investors today. “By going downstream, Canadian Solar is chasing richer profit pools.”
The projects Canadian Solar is buying into in Ontario have total capacity of 190 megawatts to 200 megawatts and will sell their power to the Ontario Power Authority under 20-year contracts. They are expected to go into operation in 2014 and will generate more than C$800 million in revenue for the the company, according to the statement.
Fifteen of those contracts were issued under the province’s feed-in tariff program, which offers premium rates for electricity generated from renewable sources.
Canadian Solar, based in Kitchener, Ontario, manufactures solar cells in China and has a plant in the province that assembles them into panels, meeting the feed-in tariff program’s domestic-content requirement.
The development joint venture will focus on solar farms in emerging markets and may generate revenue within three years, according to the statement.
SkyPower, based in Toronto, will also get warrants to purchase as much as 9.9 percent of Canadian Solar’s outstanding shares for $5 each.
“Deals like Canadian Solar and SkyPower are likely to happen again in Ontario due to the feed-in tariff,” said Anthony Kim, an analyst with Bloomberg New Energy Finance in New York. “Manufacturers in Ontario will certainly want to guarantee demand for their modules if they invest in the region and set up a plant in the province.”
The agreement will help Canadian Solar meet a goal of getting 40 percent of its revenue from solar power plants in 2013, Chief Executive Officer Shawn Qu said in the statement.
LDK Solar Co. Ltd., a Chinese maker of solar panels, acquired 70 percent of the California energy developer Solar Power Inc. (SOPW:US) in January 2011. Other solar manufacturers including SunPower Corp. (SPWR:US) and First Solar use development units to initiate power projects that will use their products.
Sharp Corp., Japan’s largest solar company, purchased San Francisco-based Recurrent Energy in November 2010 for $305 million.
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