Canadian Solar eyes power plant business with Recurrent acquisition

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Canadian Solar Inc. has dramatically expanded its global pipeline of solar projects by purchasing California-based Recurrent Energy LLC, a move that will also pave the way for the company to become a project owner and operator.

Guelph, Ont.-based Canadian Solar has until now focused on making panels and building solar farms, only to sell them to other owners when they are finished. But the purchase of Recurrent will give it a means to forge a new strategy – setting up a separate unit that will own projects and collect the revenues from their operation.

A spin-off "yieldco" would be publicly traded and pay significant dividends to shareholders, while generating funds for new developments. Canadian Solar chief executive Shawn Qu, who in the past has indicated the company wants to go that route, said the Recurrent deal "broadens our strategic options to extend our business model from development and construction into potential ownership and operation of solar power plants."

Canadian Solar will pay $265-million (U.S.) in cash for Recurrent, which is now owned by Japanese electronics giant Sharp Corp. The deal will boost Canadian Solar's pipeline of new projects, particularly in the United States.

Investors appeared to be thrilled with the purchase, as Canadian Solar's stock rose more than 25 per cent on Tuesday.

The purchase will add about 4 gigawatts of new projects, pushing Canadian Solar's total pipeline to 8.5 gigawatts. Late-stage projects will grow by about one gigawatt to 2.4 gigawatts, the company said.

"By combining Canadian Solar's global reach and experience with Recurrent's proven solar energy development track record in the U.S. and Canada, we are significantly expanding the scale of our solar energy development platform," Mr. Qu said.

The late-stage portfolio is made up of utility-scale projects in California and Texas scheduled to be built prior to the expiration of a 30-per-cent federal investment tax credit program in 2016.

Canadian Solar is often described as being more of Chinese company than a Canadian one, because most of its manufacturing is done in China. But it does have significant operations in this country, as well as its corporate headquarters. It has solar panel manufacturing operations in Guelph and London, Ont., and has built many large solar projects here.