Canadian Solar Inc., based in Guelph, Ont., was the world’s largest solar company last year.
Guelph, Ont.-based Canadian Solar Inc. is facing the threat of American trade action against its Asian manufacturing operations as the global solar-energy industry struggles with tough competition and plummeting costs.
In a conference call Tuesday, Canadian Solar chief executive Shawn Qu said the company is weathering the storm by driving down its own costs and increasing the productivity of its solar modules, even as it sells solar-energy projects it had developed.
"We appreciate that a potential industry overcapacity is a subject of concern for investors," Mr. Qu told analysts, as he emphasized that the company is following a conservative business plan. "Please rest assured that, as Canadian Solar's largest shareholder, I have been watching it as well. We have never rushed into a market and never pursued a strategy of overbuilding."
The company – whose largest manufacturing operations are now in Asia – is one of a number of offshore producers that could be hit by a trade complaint launched by Georgia-based manufacturer Suniva Inc., which filed for bankruptcy protection in April and petitioned the U.S. International Trade Commission to impose tariffs on imported solar cells and modules.
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Another U.S.-based manufacturer, German-owned SolarWorld AG, filed for insolvency last month and joined the Suniva petition.
Solar-project developers in the United States oppose the duty, worried that punitive tariffs will erode the enviable competitive position the industry now boasts.
The price for solar components has dropped dramatically in recent years as Asian – and particularly Chinese – companies increased production and improved the efficiency of their panels. Solar energy is now seen as a low-cost source of power in many markets as utilities find ways to manage its intermittent electricity production.
Despite the troubles faced by some manufacturers, the solar industry boomed in the United States last year, nearly doubling the amount of capacity installed in 2015. However, project development has slowed in Canada, as Ontario cancelled a planned renewable procurement last year.
Canadian Solar – the world's largest solar company last year with revenue of $2.85-billion (U.S.) – has reduced its exposure to the U.S. market over the past year. In the first quarter of 2017, the Americas accounted for 30 per cent of its revenue while Asia provided 58 per cent; in the corresponding quarter last year, the split was 43 per cent for the Americas and 44 per cent for Asia.
Still, "the U.S. market is an important market for Canadian Solar," Mr. Qu said. "It is unfortunate that the marketplace is once again trying to punish companies that are competitive and innovative.
"We hope that cooler heads will prevail and industry will be allowed to compete in an opening marketplace with quality, technology and customer service."
With the purchase of Recurrent Energy in 2015, the company expanded its reach and became a global solar-energy-project developer. That diversification will help it survive any U.S. trade action, said Jeffrey Osborne, analyst at Cowen and Co. LLC.
"They can pivot their resources elsewhere given the Recurrent Energy acquisition," Mr. Osborne said in an interview. "I don't think [the potential for U.S. tariffs] is the end of the world for them but it certainly would be an uphill battle."
He said the company is pursuing a prudent course by investing new technology to reduce the costs of the solar components while at the same time increasing the energy efficiency of the panels.
"It's a cut-throat industry and they are making the needed improvements to drive down their cost structure," he said.
Mr. Qu is still bullish on the future of the solar industry, and said Canadian Solar's margins remain between 13 per cent and 15 per cent in the second quarter.
The company lost money in the first quarter as revenues fell 6 per cent from the corresponding quarter in 2016. For the three months ending March 31, the company lost $13.7-million (U.S.), compared to a net income of $23.8-million (U.S.) in the first quarter of 2016.
The company forecasts that solar will grow in the next 13 years from providing 1 per cent of the world's power needs to 10 per cent. However, average growth of installed capacity will slow from nearly 40 per cent since 2009 to around 11 per cent over the next four years.