Canadian Solar Ends Rough Year on Rougher Note as Selling Prices Plunge, Maintains Strong Project Outlook

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Canadian Solar Incorporated (NASDAQ:CSIQ) (Kitchener, Ontario), a designer and manufacturer of solar products and one of the world's largest solar module producers, reported steep losses in fourth-quarter and full-year 2012, as falling average selling prices, bad debt allowances and a negative arbitration decision pummeled the company's bottom line, despite lower manufacturing costs and stronger solar module shipments. Net losses were reported to be $104.99 million for the quarter, compared with losses of $59.89 million in fourth-quarter 2011, and $195.47 million for the year, compared with losses of $90.8 million in 2011.

Canadian Solar executives pointed out that if bad debt allowances and the effects of an arbitration decision in a dispute over wafer supply contracts with LDK Solar Company Limited (NYSE:LDK) (Xinyu, China) are excluded, losses amounted to $43.69 million for the quarter and $131.22 million for the year.

Total revenues were reported to be $294.84 million for the quarter, a 37.81% decrease from the same period in 2011, and $1.29 billion for the year, a 31.81% decrease from 2011. In addition to a steep decline in selling prices, Canadian Solar saw stronger costs from transportation and project development. Still, Canadian Solar executives stressed that the company reduced inventories by $43.3 million and its short-term borrowings by $31.6 million, and has reached some of the lowest production costs among the company's peers. They also said that shipments to the Japanese market tripled during the year.

Solar module shipments were stronger for the quarter and the year, at 404 MW and 1,543 MW, respectively, compared with 384 MW and 1,323 MW in 2011. Sales to European markets made up 40.6% of the company's net revenue during the fourth quarter, while North America made up 20%, and Asia and all other regions made up 39.4%. Europe and North America represented lower portions of total sales than in previous quarters.

Industrial Info is tracking more than $1.3 billion in projects involving Canadian Solar that are in the planning phase, including the $69 million construction of an 11.5-MW solar power station in North Fredericksburgh, Ontario. The station will utilize Canadian Solar's CSA 230-watt photovoltaic solar panels, plus associated equipment, to supply renewable energy for local grid. Industrial Info also is tracking the $60 million construction of the 10-MW RayLight PV Solar Power Station in Tay, Ontario, which will utilize the same panels.

"2012 has been a difficult year for the whole solar industry, with persistent module [average sales prices] declines, module margin pressure, and escalating trade dispute," said Shawn Qu, the chairman and chief financial officer of Canadian Solar, in a conference call. "In this difficult environment, we have fared relatively well. We measure our success based on the execution of our strategy, which is to increase market share, reduce cost, and differentiate our business model by expanding our total solutions business, while maintaining prudent financial management."

Canadian Solar reported weaker revenue to varying degrees in each of its segments for the quarter and the year, except for the Americas segment, which managed a slight gain for 2012:

• The European segment reported $119.7 million in revenue for the quarter, a 45.71% decrease from fourth-quarter 2011. For the year, the segment reported $656.5 million, a 46.76% decrease from 2011.
• The Americas segment reported $58.8 million in revenue for the quarter, a 53.81% decrease from the same period in 2011. For the year, the segment reported $342.3 million, a 2.21% increase from 2011.
• The Asian and all other segments reported a total of $116.3 million in revenue for the quarter, a 7.92% decrease from fourth-quarter 2011. For the year, the segment reported $296 million, a 10.52% decrease from 2011.

Canadian Solar executives noted that prices were beginning to stabilize within the solar industry, and that the company's total solutions business is rapidly expanding. PV module shipments are expected to be between 1.6 and 1.8 gigawatts (GW) for the full year, including between 290 and 310 MW during the first quarter. In the U.S., Canadian Solar expects to complete construction on 100 MW of solar power plants by the end of 2013. The company also is working as the engineering, procurement and construction contractor on three solar power plants with Penn Energy Renewables Limited, which total 29 MW and are expected to be completed in the second half of the year.

"In the U.S., we are seeing many of the projects that were delayed during the year finally being completed," Qu said in the conference call. "Our utility-scale project pipeline now stands at about 780 MW, with approximately 400 MW in Canada, 250 MW in the U.S., and 100 MW in other regions. Importantly, we have been able to secure financing to acquire and build solar power plants from key global financial institutes, underscoring the quality and bankability of our pipeline. It is worth mentioning that we have also lined up buyers for all of our projects in Ontario, Canada."

For more information, visit Industrial Info's North American Power Project Database.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.