Canadian Solar Closes First Equity Securitization

Canadian Solar (NASDAQ:CSIQ) announced on Wednesday (January 9) that it has raised 6.3 billion Japanese yen (US$58 million) in the “first ever” equity securitization backed by solar assets.

The company, which is focused on solar power, said that it secured the equity from an array of Japanese and Korean institutional investors with the proceeds from the offering initially used to acquire Canadian Solar’s 34MWp operating portfolio.

The projects acquired include the 23.8MWp Smart Solar Yamaguchi-Aio Solar Power Plant and the 10.2 MWp Kamikitagun Rokunohemachi Solar Power Plant. Canadian Solar stated that the revenue from the sale of the plants were recognized in its third and fourth quarter 2018 results.

Electricity generated from the solar power plants purchased by Canadian Solar are sold to Tohoku Electric Power and Chugoku Electric Power Company under 20 years feed-in-tariff contracts.

In particular, the electricity generated from the Kamikitagun Rokunohemachi Solar Power Plant is purchased by Tohoku Electric for 36 Japanese yen (US$0.33) per kWh. Similarly, the electricity generated from the Smart Solar Yamaguchi Aio Solar Power Plant is purchased by Chugoku Electric Power Company for 40 Japanese yen (US$0.37) per kWh.

The Operations and Maintenance (O&M) services of the plans are looked over by Canadian Solar O&M Japan for the remainder of the 20 year contract period. Canadian Solar said that the plants utilise the modules supplied by the company and began commercial operations in late 2016.

“We are delighted to originate this ground-breaking transaction and to take solar securitization to the next level,” Shawn Qu, CEO of Canadian Solar, said in a release.

Canadian Solar said that the solar power plants have each received an “A” rating from the Japan Credit Rating Agency (JCRA) for its non-recourse project bonds.

It was noted that the investment period matures in September 2037 and that the securities given were the highest tier under the Environmental, Social and Governance (ESG) slab by JCRA.

“We plan to grow our ESG investor base to provide further avenue for institutional and retail investors who are increasingly looking to diversify their portfolios into supporting clean energy transition and secure an investment opportunity in solar assets backed by attractive long-term yields,” Qu said.

Both the projects are set to produce a combined total of 38,580 MWh of clean solar energy or have the capacity to reduce 25,441 tons of carbon dioxide emissions.

Following the announcement on Wednesday, shares of Canadian Solar were up 0.47 percent and closed the trading session at U$17.21.

The stock has a “Buy” ranking on TradingView with 17 verticals in favor, nine in neutral and two against. Canadian Solar has a “Moderate Buy” ranking on TipRanks with an analyst trading price of US$19.80 representing an 15.05 percent upside from its current price.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.