Canadian Solar returns to profit, eyes power plant spinoff

Wed Nov 13, 2013 11:49am EST
 
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By Swetha Gopinath

(Reuters) - Canadian Solar Inc (CSIQ.O: Quote) 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 SUNE.N, a U.S. competitor, has also announced plans to spin off some power plants into a listed company next year, while SolarCity Corp SCTY.O 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.   Continued...