First published in the Quoted Cleantech newsletter, April 2011. Copyright Cleantech Investor 2011

Canada is home to several firms that supply products and services to the solar energy market. Ontario in particular has proved an excellent  place to set up solar technology businesses in recent years thanks to that state’s feed-in tariff programme.

In the December 2010 issue of Quoted Cleantech we profiled ARISE Technology Corporation, an Ontario-based firm focused on developing proprietary technologies for the manufacture of both high-efficiency photovoltaic (PV) cells and low cost, high purity silicon. This month, we take a look at another company from Ontario that has seen astonishingly fast growth during the past six years: Canadian Solar.

NASDAQ-listed Canadian Solar is a major supplier of solar modules to customers throughout the world for both on-grid and off-grid use. Founded in Ontario in 2001, the $500 million market cap firm also makes ingots, wafers, solar cells and other specialised solar products. Today, it operates in North America, Europe and Asia, delivering solar products to customers in more than 30 countries.

In fact, the company is one of the fastest  growing solar companies in China because, although it is headquartered in Kitchener, Ontario, Canadian Solar has seven wholly-owned manufacturing subsidiaries across China. Additionally, in 2009 the company decided to open a state-of-the-art solar PV research centre in the country’s Suzhou district. The 1,500-square metre facility is staffed by PhD-qualified scientists, engineers and technicians who focus on the continuous improvement of efficiency and production yields for standard polysilicon cells and proprietary solar grade cells.

The firm’s customers are solar project developers, solar power system integrators and installers, commercial property owners, independent power producers and major utility companies.

Canadian Solar’s vertically-integrated business model has helped it to grow from revenues of $18.3 million and net income of $3.8 million in 2005 (the year prior to its flotation on NASDAQ) to $1.5 billion revenues and a $50.6 million net income in 2010.

Canadian Solar claims to provide the solar industry with the widest PV product lines available. Its solar modules use both polycrystalline and monocrystalline cells, and they range from between 5W to 300W. The firm also offers customised PV products and OEM services to its customers around the world.

In the fourth quarter of 2010, Canadian Solar shipped 237MW of solar modules, compared with 200MW for the previous quarter. Shipments for the whole of 2010 were 803MW, a 159% increase over the 310MW shipped during 2009.

According to the company, its sales growth reflects the continuing success of its market diversification efforts, with sales to non-European markets accounting for 29% of revenues in Q4 2010, compared with 23% in Q3 2010 and just 8% in Q4 2009.

“2010 was a banner growth year for the company,” says Dr Shawn Qu, chairman and CEO of  Canadian Solar. “Our shipments grew faster than the global market for solar modules; we gained market share and more than doubled our net revenues. We also had higher margins than in 2009, primarily due to our increased sales volumes and lower processing costs at our wafer and cell plants. Concurrently, we continued our geographic diversification strategy and the development of our systems business, with considerable progress in North America and Japan.”

Qu expects 2011 to be another growth year for Canadian Solar, with the company focusing on increasing its vertical integration to improve its margins and cash flow.

Canadian Solar’s target is to be substantially vertically integrated at the cell and module production stages, with capacity to produce 50% of its own wafer requirements. The firm also plans to build on its momentum in non-European markets. Management believes that, while European markets will continue to dominate the solar business in 2011, non-European markets can, in some segments, support higher selling prices and higher rates of growth.

For Q1 2011, Canadian Solar expects shipments to be approximately the same as the previous quarter. But for the year as a whole the company is forecasting shipments of between 1,200MW and 1,300MW – as much as a 62% increase over 2010 shipments.

In January 2010, the company announced that it had supplied its solar modules to north-east Italy’s 70MW Rovigo solar plant – the largest capacity PV solar plant in Europe. Constructed by SunEdison, the plant is expected to generate enough energy in its first year to power more than 16,500 homes, so reducing emissions by more than 40,000 tons of carbon dioxide.

In February, Canadian Solar supplied modules to SolarLAB2 – an open-air solar laboratory designed to study the integration of PV technology in prefabricated roofing. Built by Baraclit at its Bibbiena headquarters in Italy, the facility is divided into four sections and has a total peak capacity of 2.5MW.

Also in February, the company announced that it had won a contract to supply 60MW of PV modules to SAG Solarstrom for deployment in Germany and Italy this year. Based in Freiburg, Germany, SAG Solarstrom is an independent supplier of individually customised high quality PV systems.

Even more recently, in March, Canadian Solar announced a third deal to build a 10.5MW solar park at Thunder Bay in Ontario, Canada in conjunction with SkyPower, Canada’s biggest owner and developer of large scale solar projects. Canadian Solar will manufacture solar panels for incorporation into the project.

The two previous projects which the two firms are developing amount to 18.5MW. The construction of all three projects is expected to reach completion by Q3 2011.

  Market: Nasdaq
  Symbol: CSIQ
  Price: $11.49
  12 month high/low: $26.26/$8.99 
  Market cap: $493m