Canadian Solar Inc. (CSIQ - Free Report) recently signed a 15-year Power Purchase Agreement (PPA) with Techgen S.A. de C.V., a combined cycle power plant operator, which produces electricity for the manufacturing plants in Mexico. Per the terms of the PPA, Canadian Solar will build a 103-Mega-Watt-peak (MWp) solar power project in the Mexican state of Zacatecas, wherein its high-efficiency models will be installed.
How Will the PPA Benefit Canadian Solar?
The PPA agreement with Techgen promises to be beneficial for Canadian Solar in strengthening its leadership position in Latin America, going forward. Techgen is already an established name in the global steel tube market and the recent PPA will help Canadian Solar expand its clean energy portfolio in the Mexican solar market.
Mexico & Canadian Solar
Per a report by the International Energy Agency (IEA), Mexico’s population is expected to grow to more than 150 million in 2050 from 125 million . This is expected to result in a significant increase in energy demand. Although the energy mix in this country is still dominated by oil and gas, a decent expansion in the Mexican solar market is projected in the coming years as the whole world is making a shift toward a cleaner energy environment.
Notably, per a report by Mordor Intelligence, the market for solar photovoltaic (PV) in Mexico is expected to see a CAGR of approximately 8.90% during the 2020-2025 period. This must have encouraged Canadian Solar to engage in supply contracts for its high-efficiency modules in this nation.
Evidently, in February 2019, Canadian Solar announced its first solar power project of 68 MWp in Mexico, powered by more than 200,000 of its high-efficiency poly modules, CS6U-P. The solar power plant, expected to generate 145 gigawatt hours (GWh) of electricity annually, will be crucial for the company in expanding footprint in Mexico.
Further, as of Sep 30, 2019, Canadian Solar had a 370-MWp late-stage, utility-scale solar project pipeline in Mexico. Now, with the signing of the new PPA, the company looks forward to strengthening its track record in Mexico, where it has been awarded four projects totaling 438 MWp in the Long-Term Auctions.
Other Companies in the Mexican Solar Market
Alongside Canadian Solar, other companies are strengthening their project pipeline in Mexico. In September 2019, Sempra Energy’s (SRE - Free Report) subsidiary in Mexico, IEnova, signed two long-term solar capacity agreements with units of a department store chain. As of 2018, IEnova invested $8.8 billion in assets and projects in Mexico. SunPower Corp. (SPWR - Free Report) , one of America’s largest solar-panel makers, also has two solar cell and module manufacturing facilities in Mexico.
Canadian Solar’s stock has declined 23% in a year against the industry’s growth of 42%.
Zacks Rank & Key Picks
Canadian Solar currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is SolarEdge Technologies, Inc. (SEDG - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SolarEdge Technologies delivered a positive earnings surprise of 10.28%, on average, in the last four quarters. It currently has a solid long-term earnings growth rate of 25%.
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