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Canadian Solar's (CSIQ) Arm Expands Its Footprint in Virginia

Canadian Solar Inc.’s CSIQ subsidiary, Recurrent Energy, recently revealed the expansion of its footprint in Virginia through a purchase and sale agreement involving a solar project named Firefly. The agreement has been inked with Appalachian Power, part of American Electric Power AEP, serving customers across Virginia, West Virginia and Tennessee.

The agreement involves the construction and development of the Firefly Energy solar project by Recurrent Energy in Virginia. It is the largest solar project acquisition for Appalachian Power.

Details of the Agreement

Recurrent Energy received regulatory approval on the siting agreement from Pittsylvania County Board of Supervisors to develop the Firefly project with a capacity of 150 megawatts (MW). Per the agreement, Pittsylvania County will receive an upfront payment of $2.25 million as well as long-term revenues for public services over the life of the project.

Subsequent to this development, the company entered into Build Transfer Agreement (BTA) with Appalachian Power, with an aim to monetize the project.  As part of the BTA, Recurrent Energy intends to construct the project before handing it over to Appalachian Power, which will then become the long-term owner of the project and will be accountable for the distribution of solar energy to its Virginia customers.

Subject to regulatory approval, the project is expected to commence its construction in early 2023 and is anticipated to be operational by 2024.

Canadian Solar’s Growth Prospects in Virginia

The Virginia Clean Economy Act, passed in 2020,  bodes well for solar and wind projects in Virginia as it emphasizes on the adoption of clean energy by 2050. The act also includes a binding renewable portfolio standard (RPS) for American Electric-regulated utility company Appalachian Power and Dominion Energy D utility to compulsorily retire their carbon-emitting electrical generation facilities.

Also, the act comprises RPS for Dominion Energy for a mandatory 1% inclusion of renewable energy from solar sources. Moreover, Dominion Energy plans to add a minimum of 15,900 MW of new solar energy in the next 15 years.

Currently, D is looking to either purchase or enter into power purchase agreements with solar companies for 1000 MW of solar and wind projects, enough to power more than 250,000 houses, in a bid to achieve its goal of carbon neutrality by 2050.

American Electric’s Virginia utility company, Appalachian Power, plans to acquire or contract 210 MW of solar power and 200 MW of wind power over the span of five years. The current acquisition is one step ahead in its goal to achieve its energy target.

All these energy goal targets provide an edge to solar companies like CSIQ to expand their portfolio of solar projects in the region. With the latest agreement, Canadian Solar not only gets an opportunity to tap Virginia’s growing solar market but also open avenues for the company to develop more solar projects in the region and boost its operational results by monetizing the same.

Peer in Virginia

To capitalize on the evolving clean energy trend in Virginia, First Solar FSLR in July 2020, announced an 80 MW Lily Pond solar project in Virginia. The project is expected to be operational by 2023.

First Solar’s long-term earnings growth rate is pegged at 10.8%. FSLR expects 2021 earnings in the range of $4.00-$4.60 per share on sales of $2.88-3.10 billion.

Price Movement

In the past year, shares of Canadian Solar have declined 48% compared with the industry’s fall of 49.3%.

Image Source: Zacks Investment Research

Zacks Rank

Canadian Solar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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