Skip to main content
energy

Canadian Solar is now considering the creation of a separate firm to hold its solar projects.

Canadian Solar Inc., whose stock has been rising like a rocket, took another big leap Wednesday after it revealed its first quarterly profit in two years.

Shares of the Guelph, Ont.-based company rose more than 13 per cent to close at $32 (U.S.) on the Nasdaq Stock Market. Since the start of 2013, the stock has appreciated ninefold, having begun the year at $3.53.

Even though many solar companies have shown dramatic improvements in 2013, following several dismal years, Canadian Solar has been the strongest performer. But its share price is still not quite back to its 2008 peak when it climbed to more than $50 a share.

Still, investors are clearly thrilled that Canadian Solar is back in the black. In the third quarter it reported a profit of $27.7-million on revenue of $491-million. In the year-ago quarter it lost $43.7-million on sales of $326-million.

While the company is based in Canada, most of its manufacturing is in China. It does have one panel-making plant in Guelph, and it recently announced it will build a new plant in London, Ont., to make solar modules and power components.

Its founder and CEO, Shawn Qu, was born in China but he earned graduate degrees from two Canadian universities, and worked for Ontario Hydro and Cambridge, Ont.-based ATS Automation Tooling Systems Inc. before setting up his own company.

Like many other panel-makers, Canadian Solar was hit by a worldwide glut of solar panel production starting around 2010, which contributed to a sharp drop in panel prices. While consolidation among companies in the business helped those that survived, Canadian Solar's return to profitability has been nudged along by a big shift in strategy.

Mr. Qu decided the firm would dramatically expand its business in building commercial-scale solar farms – including dozens in Canada – instead of just selling panels to other companies.

In most cases, once these solar projects are up and running, Canadian Solar sells them to independent power producers who then hold them for the long term.

This solar farm development arm, which the company calls its "total solutions business," accounted for 41 per cent of its total revenue in the third quarter, up about 22 per cent in the same quarter of 2012.

"Clearly we are making major progress in our business transformation from a module manufacturer, into a one-stop shopping provider of solar power solutions with a global reach," Mr. Qu told analysts on a conference call.

This part of the business "is a lot less crowded than the manufacturing space," he said, and will underpin the company's growth in the future.

Canadian Solar also benefits from a very diverse geographic footprint. It sells its products all around the world, with the strongest demand now coming from Japan, China, the United States, Thailand and India. The company also recently signed a deal with the provincial government in Punjab to build a solar plant in Pakistan.

Japan has been particularly strong market recently, with a huge increase in solar power development there in the wake of the tsunami and meltdown at the Fukushima nuclear power plant. "We were one of the first foreign module suppliers to establish our brand in Japan, and our timing was ideal," Mr. Qu said.

Michael Potter, Canadian Solar's chief financial officer, told analysts that the company is considering setting up a separate firm to hold its solar projects – instead of selling them off when they are complete. Another option, he said, would be to form a "close alliance" with an existing company, and hold the projects through that entity.

Interact with The Globe