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Canadian Solar plans big expansion as part of China IPO

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Canadian Solar plans big expansion as part of China IPO

Canadian Solar Inc. said it will use money raised ahead of a planned stock sale in China to add manufacturing capacity as it looks to more than double its module shipments next year compared to 2019.

The company said Sept. 30 that it raised nearly $260 million from third-party investors and employees who bought shares in CSI Solar Co. Ltd., the manufacturing division that Canadian Solar is preparing to take public in China. Canadian Solar CEO Xiaohua Qu said the fundraising will help increase module shipments next year to between 18,000 MW and 20,000 MW from 8,600 MW in 2019.

"We believe this strategy will allow us to expand our market share, sustain and enhance our future pricing power and maintain better control over our manufacturing costs," Qu said in a news release.

Canadian Solar is one of at least three U.S.-listed solar companies planning stock sales in China. Like Canadian Solar, panel maker JinkoSolar Holding Co. Ltd. and polysilicon producer Daqo New Energy Corp., both of which are headquartered in China, said Chinese investors offer a new source of capital.

As they try to tap new sources of capital, the companies could face tougher regulations in the U.S. A proposal by the Trump administration in August called for Chinese companies to be delisted from U.S. stock exchanges if they fail to abide by U.S. accounting standards. Congress is also considering tightening securities rules for U.S.-listed Chinese companies.

Canadian Solar is headquartered in Ontario but has a large manufacturing presence in China and uses accountants that are based there. The company said it is "fully committed to its shareholders and NASDAQ listing."

Majority control

CSI Solar, the subsidiary that Canadian Solar plans to list in China, houses its manufacturing division, which generated more than three-quarters of Canadian Solar's net revenues in 2019, according to an annual report to the U.S. SEC.

In order to qualify CSI Solar for a stock sale in China, Canadian Solar said, it sold shares in the subsidiary worth about $219 million to third-party investors, including Chinese private equity firms CDH Investment Management Company Ltd. and SIP Oriza PE Fund Management Co. Ltd., part of Suzhou Oriza Holdings Co. Ltd. Canadian Solar employees and board members paid an additional $40.5 million for new and existing shares in CSI Solar.

Once those investments are finalized, Canadian Solar said, it will own about 75% of CSI Solar. Canadian Solar said it would remain the majority and controlling shareholder after the initial public offering.

Canadian Solar shares were up 5.73% at $35.99 in midday trading in the U.S. on Sept. 30.