Canadian Solar CEO Shawn Qu is pictured in Toronto in 2010.Jennifer Roberts/The Globe and Mail
Shares in Guelph, Ont.-based solar panel maker Canadian Solar Inc. jumped Thursday after the company said it is forging ahead with plans to create a spinoff "yieldco" that will hold some of its completed power projects.
The company's stock rose more than 14 per cent on the Nasdaq, after it announced strong fourth-quarter financial results and outlined some of the plans for the spinoff. It closed at $34.60 (U.S.) on Thursday, up $4.42.
Canadian Solar makes solar panels and modules, but it also builds solar projects with that equipment. Currently, it sells most of those completed projects, but it now plans to hang on to more of them, through a separate company. This spin-off yieldco would be publicly traded and pay dividends to shareholders – including Canadian Solar, which would keep a majority stake – while generating funds for new developments. Because the solar projects it holds will be completed and selling power to utilities, the new company should generate a steady amount of cash flow.
On a conference call with analysts, Canadian Solar chief executive officer Shawn Qu said that the company is now in a solid financial condition, and has a sufficient project pipeline, so "we will now move ahead with our yieldco plans."
The new entity will likely be created around the end of 2015, or early in 2016, the company said.
In February, Canadian Solar beefed up its project pipeline by signing a deal to buy solar project developer Recurrent Energy LLC from Japanese electronics giant Sharp Corp. for $265-million (U.S.). When that purchase closes in the next few weeks it will almost double Canadian Solar's pipeline of new projects.
Canadian Solar does most of its manufacturing in China, bit it also makes panels in plants in Guelph and London, Ont., and it has its corporate headquarters in Guelph. It has built dozens of projects in Canada, and hundreds more in about 70 countries.
Mr. Qu said the yieldco may buy some completed projects from other builders, in addition to holding projects built by Canadian Solar. However, most of the solar projects it holds will be located in "highly developed OECD countries" such as Japan, Britain, the United States and Canada, where the company can be certain it will receive payment for the power the solar farms produce, Canadian Solar chief financial officer Michael Potter said.
In 2014, Canadian Solar reported revenue of $2.96-billion, up 80 per cent from 2013, and net income that increased five-fold to $244-million. In 2015 it expects to have roughly the same revenue, between $2.8-million to $3-billion, because it will not be generating as much as it would have if it continued selling completed projects to other owners.