Canadian Solar Inc. — another troubled company promoted by Rahim Jaffer and Patrick Glemaud

This post is going to begin with a bit of a rant. After a flurry of splashy headlines in the spring, the mainstream media now only occasionally dabbles into the Rahim Jaffer-Patrick Glemaud-Helena Guergis affair. The big news this week was the Government Operations committee meeting that collapsed into anarchy. Bouncing off that story, the MSM now seems focused on Christian Paradis’ dealings with Mr. Jaffer. From the Globe & Mail:
Natural Resources Minister Christian Paradis is the latest federal minister under fire as a result of the Guergis-Jaffer affair.
 
The Liberals are asking Ethics Commissioner Mary Dawson to investigate whether Mr. Paradis used his position to advance a business proposal from former Tory MP Rahim Jaffer.
The minister admitted earlier this week that Mr. Jaffer called him in August to discuss a proposal to install solar panels atop federal government buildings.
Mr. Paradis, who was public works minister at the time, said he advised Mr. Jaffer to contact his office to arrange a meeting with bureaucrats.
An aide to Mr. Paradis subsequently pressured officials in the deputy minister’s office to meet Mr. Jaffer.
To be fair, it’s the Liberals that initiated this inquiry — but the media now only seems interested in scratching the surface of this scandal, reporting the various petty moves taken by our politicos on the Hill.
It’s hard to see what the opposition hopes to gain in this latest strategy, and it’s even harder to conceive what sort of juicy story the media hopes to get by piggybacking off of it. I mean, what’s the takeaway from this particular story? That Mr. Jaffer may have engaged in some lobbying without registering as a lobbyist? What’s the penalty for that? A fine, maybe? As for Mr. Paradis, he may have abetted Mr. Jaffer’s actions, but that’s hardly the crime of the century — he might earn a finger wag from Stephen Harper, if that.

If only the mainstream media would dig a little deeper, they would find much more interesting narratives to latch onto. For example, there’s Mr. Jaffer and Mr. Glemaud’s dealings with Rick MacPherson, who was president of a defunct shell company named RLP Energy Inc.. There’s the possible connections between Nazim Gilani and Glenn Collick. There are the links between Mr. MacPherson and the EERC, and the links between the EERC and the Aboriginal Cogeneration Corporation that was causing such a stir in Kamloops last year.

There are so many interesting angles to take on this story. Yet the media seems obsessed with the mundane charge that Mr. Jaffer engaged in improper lobbying. Well, guess what? Maybe he did. But, seriously, with so many other fascinating angles to this story, who really cares?

On that note, I want to bring you the story of yet another company that Mr. Jaffer and Mr. Glemaud were promoting to the feds, a firm by the name of Canadian Solar Inc. Once again we have the story of what seems be yet another troubled green tech firm. And once again we can tie this company directly to Mr. Jaffer and Mr. Glemaud, who once operated deep inside the federal government. Now, isn’t that a more interesting story than the one about whether or not Mr. Jaffer broke a few lobbying rules?

Green Power Generation and Patrick Glemaud’s solar power dreams

It was widely reported in the media that Mr. Jaffer and Mr. Glemaud met with Brian Jean, parliamentary secretary to John Baird, and discussed three green tech project that they were trying to get funded for through the Green Infrastructure Fund. Now, one of those projects involved developing a solar power field on a piece of property Mr. Glemaud owned in Bancroft (just south of Algonquin Park in Ontario). The project involved two solar power concerns: Canadian Solar Inc., based in Kitchener, ON, and Upper Canada Solar Generation Ltd., from Brockville, ON. I’ll let the Kitchener Record explain the whole story (you can read the article here, but I cite it in full below):

Kitchener firm denies Jaffer links

April 23, 2010
By Joanna Smith

OTTAWA — A director with a Kitchener solar energy company that recently got a multimillion-dollar boost from the Ontario government denies that his company had any lobbying relationship with the consulting firm co-founded by ex-MP Rahim Jaffer.

A report Thursday indicated that Jaffer’s consulting firm – Green Power Generation Corp. – had submitted three proposals for projects to Conservative MP Brian Jean, the parliamentary secretary to federal Transport Minister John Baird, to be considered for government funding under the billion-dollar Green Infrastructure Fund. All three were rejected.

One of the proposals involved a request for $15 million from the federal government for the first phase of a solar power generating facility in Brockville, and listed the project stakeholders as Canadian Solar Inc. of Kitchener and Upper Canada Solar Generation Ltd., near Brockville.

Officials for both companies say they did not give Green Power Generation permission to lobby the federal government on their behalf.

Alex Taylor, director of investor relations and special projects for Canadian Solar Inc., denied any lobbying relationship with Green Power Generation.

“My understanding is that Green Power is either a project being proposed by Rahim Jaffer and Patrick Glémaud or a company owned by them, or both,” he said in an email from the company’s office in China.

“We have not authorized either of these gentlemen to act on our behalf or to represent us either in a capacity as lobbyists or in any other matter.”

Canadian Solar Inc. was in the news earlier this month when the Ontario government announced the first approvals for large-scale renewable energy contracts. Canadian Solar Inc. will provide the solar panels for a number of the projects. Company president Milfred Hammerbacher said last week the contract is worth roughly $700 million to $800 million in new business to Canadian Solar’s Kitchener subsidiary over the next two years.

Last December, Canadian Solar Inc. announced it plans to build a $24-million plant, which could be staffed by up to 500 people, to produce solar panels in the Ontario market. A site for the new plant has not yet been chosen.

Although Taylor’s brief statement denied a lobbying relationship with Jaffer, a director with Upper Canada Solar Generation says it was the Kitchener company that introduced Jaffer to his firm.

“I was as shocked as anybody this morning when I sort of found out that our company was listed on what was being described as a proposal,” said former Liberal MP Joe Louis Jordan, who is a director of a company run by his brother, Michael Jordan, called Upper Canada Solar Generation Ltd.

Jordan, who represented the Ontario riding of Leeds-Grenville from 1997 to 2004, said the firm came into contact with Jaffer’s business partner Patrick Glémaud in April 2009 through Canadian Solar Inc., which is its solar panel supplier.

Glémaud had a piece of property in Bancroft that he wanted to convert into a solar power field, but after taking a look, both companies decided the project was not feasible.

Jordan said he remembers Glémaud then saying he was trying to learn more about federal funding programs “and whether or not projects like this were eligible.” Jordan said he passed along a briefing note he had often used to describe the company and for submitting funding proposals to the Ontario government and was surprised to see that information pop up in the proposal.

“At no time in my mind was I engaging in any kind of formal proposal process. If I was going to do that I would have done it myself,” said Jordan, who now works as a registered lobbyist for The Capital Hill Group in Ottawa and said he takes the rules seriously. “We never paid them any money. We never entered into any negotiation about them representing us in any official capacity. This was always framed as they were going to try to find out some information about the program.”

Jordan said he has contacted the office of the federal lobbying commissioner to say the company would “co-operate in any way, shape or form.” A spokesperson for the lobbying commissioner said she could not confirm this.

Glémaud said on Thursday the proposals, which he described as “concept papers,” did not amount to lobbying and said he would not comment any further pending an investigation by the lobbying commissioner.

Now that I’ve given you here the article, here’s what I thought were the key takeaways.

Firstly, despite the protestations of these two companies regarding the actions of Mr. Jaffer and Mr. Glemaud, clearly both firms – Canadian Solar Inc. in particular – were familiar with Mr. Glemaud. Joe Louis Jordan (a former high-ranking Liberal MP, it should be noted) said as much when he stated that his firm "came into contact with Jaffer’s business partner Patrick Glémaud in April 2009 through Canadian Solar Inc., which is its solar panel supplier." Clearly we can draw reasonably close ties between the two firms and Mr. Glemaud, then.

Secondly, Canadian Solar Inc. was the recent recipient was what could turn out to be hundreds of millions of dollars in funding from the Ontario government. You can read more about that in this Record article. I’ll give you a partial citation below:

Solar contracts will bring new business worth millions to Waterloo Region companies

April 13, 2010
By Rose Simone, Record staff

WATERLOO REGION — Area companies that make rooftop solar products are getting a multi-million dollar boost from an Ontario government program that pays people to produce energy on their rooftops.

Canadian Solar Solutions Inc, of Kitchener, ATS Automation Tooling Systems in Cambridge and Arise Technologies of Waterloo will benefit from the program.

Milfred Hammerbacher, president of Kitchener’s Canadian Solar Solutions Inc, said the subsidiary’s parent company, Canadian Solar Inc., will be selling the modules for 176 megawatts worth of power-generation contracts awarded by the Ontario Power Authority to building owners who propose to provide electricy into the hydro grid under the provinces feed-in tariff program.

That means roughly $700 to $800 million worth of business in Ontario over the next two years, Hammerbacher said.

“That was a good start,” Hammerbacher said. “We had a lot more applications out there, and the government has those in a holding queue, but our expectation that we will get more approvals in the future.”

The Ontario government announced the first batch of 184 large-scale renewable energy contract approvals last week. Under the feed-in program, those with solar rooftops will get paid a premium of 44.3 cents to 80.2 cents per kilowatt-hour for electricity that is fed back into the hydro grid, in contracts that are awarded for a 20-year period.

The third takeaway is that everyone seems to think that Canadian Solar Inc. is just swell. So let’s dismiss that notion right away.

Canadian Solar Inc. and its legal troubles

Canadian Solar trades on the Nasdaq under the symbol CSIQ. You can have a look on it at Yahoo! Finance here.

Now, the stock is currently sitting at just under $10US, which seems fine. But note the series of "Headlines" that appear below the stock:

Yikes — that’s a lot of lawyers and shareholders going after Canadian Solar. But what exactly is going on here?

Well, the story seems to begin on June 1st, as this Reuters article suggests:

Canadian Solar gets SEC subpoena, delays results

By Poornima Gupta

SAN FRANCISCO, June 1 (Reuters) – Chinese solar-cell maker Canadian Solar Inc (CSIQ.O) said on Tuesday it received a subpoena from U.S. securities regulators seeking documents relating to certain sales in 2009, sending its shares down over 16 percent.

Canadian Solar shares fell 16 percent in after hours trading, once the stock started trading after being initially halted. The shares closed down 8.42 percent at $11.86 in regular trading on the Nasdaq exchange.

Canadian Solar said in a statement it will cooperate with the Securities and Exchange Commission inquiry.

The company, which was founded in Ontario, Canada, but has manufacturing operations in China, also said it has delayed the full release of its first quarter results because the audit committee of Canadian Solar’s board has launched an investigation.

The audit committee has retained outside counsel and independent forensic accountants to help review the transactions described in the subpoena, the company said, but did not provide further details on the SEC inquiry.

Burt Chao, an analyst with Simmons & Co said the lack of information on the investigation could have a big impact on the shares.

"It’s bad for any company to have this happen. I think it’s worse for the Chinese companies because they already have this assumed lack of transparency in the market," he said.

"They’re not very specific as to what the allegations are in the subpoena … that could be to the benefit or the detriment of the company. People are going to just let their imaginations somewhat run wild."

MAY REVISE PRIOR RESULTS

Canadian Solar also said it may revise its fourth quarter and full year 2009 results as the company now intends to recognize sales only after receiving full cash payments from certain customers. This is also being done to account for subsequent return of goods after the end of the quarter, it said.

These sales figures are being deferred to the first and second quarters of 2010 and the full year 2009 net revenues may be revised accordingly, the company said.

In fact, Canadian Solar has been bleeding share price all year, as this April, 2010 article from TheStreet.com noted:

CSIQ’s Reputation: A Weakened Currency?

NEW YORK (TheStreet) — Street frustration with corporate management often takes the form of pithy titles given to negative research reports, and the solar industry was no exception on Wednesday.

This was the case with the Macquarie Securities view of Canadian Solar(CSIQ), as Canadian Solar shares fell 15% on Wednesday after pre-reporting weaker-than-expected gross margins for the first half of 2010.

Macquarie Securities’ analyst Kelly Dougherty titled her Canadian Solar report, "Oops They Did it Again," a rare moment of convergence between solar stock earnings surprises and pop star Britney Spears.

The bleeding in Canadian Solar’s share price was continuing in Thursday’s trading session. Canadian Solar share losses were at 3% in the afternoon on Thursday, after the 15% share decline on Wednesday.

Thursday share decline brought Canadian Solar’s trading price below $18 intraday — the first time that CSIQ shares have dipped below the $18 mark since last November.

Canadian Solar had the biggest loss in the solar sector for the second consecutive day on Thursday, and it was bringing many stocks in the solar sector down alongside it.

What exactly did Canadian Solar do to merit the share price implosion, the mocking reference to Britney, as well as a downgrade from Macquarie to neutral, and a price target drop from $35 to $23?

For the second consecutive quarter, Canadian Solar surprised the market with a pre-earnings announcement that gross margins would disappoint.

But it was the SEC investigation news that came in last week that got the class action lawsuits going (see hereherehereherehere, and here).

And in case you were wondering why the re-statement of revenues may be troubling, consider the following with regards to the 2009 number, as noted in this March, 2010 article:

Record fourth-quarter sales help Canadian Solar to strong 2009

Vertically integrated solar player Canadian Solar posted record fourth quarter 2009 sales of $287m, up dramatically on its year-earlier performance and well ahead of Wall Street expectations. But its profit of $14.9m was lower than expected.

The quarter capped a year of continued improvement for the Ontario-based company, but 2009 sales of $663.8m fell short of the $705m posted in 2008, despite nearly doubling its shipment volume. The bottom line was much brighter, though: 2009 profit was $53.1m, $1.41 per share, compared to a net loss in 2008 of $7.5m, $0.24 per share.

Canadian Solar’s fourth quarter solar photovoltaic shipments hit 155.5 megawatts (MW), also a record, contributing to full-year shipments of 325.5MW, up 94% from 2008.

So we have the company bragging about numbers that are probably not accurate. Hmm.

Anyway, this is clearly a developing story. But I’ll keep close to it, and keep you posted.

Connections, connections

As I’ve stated so many times before, it’s the connections between various individuals and entities that need to be investigated here. This is particularly important when such individuals and entities seem to have common interests.

Let’s look at Patrick Glemaud’s LinkedIn page for a moment. Here is how he describes his time at the Department of Justice:

Note in particular the following passage:

He advised on the planning and financing of more than $3 billion dollars towards renewable energy initiatives and projects, namely the Sustainable Development Technology Fund, the Green Municipal Fund, the Wind Power Production Incentive Program, the Ethanol Expansion Program, the Bio-Energy Development and other Renewable Energy Initiatives and projects financed by the government of Canada.

Now, isn’t it a little disturbing that someone that had so much power over billions of dollars in green technology funding has such suspicious connections? He can be tied clearly to Rick MacPherson, whose shady dealings I’ve described in detail. He can be tied to a firm that is being investigated by the SEC. And he apparently had no problems working with Nazim Gilani, who is allegedly tied to Glenn Collick. And, of course, Mr. Glemaud has been friends with Mr. Jaffer since their university days — so all this likely implicates him as well, particularly since they seemed so eager to work together after Mr. Jaffer was booted from office.

Does this concern people? Or are we more interested in seeing Mr. Jaffer get slapped with an improper lobbying fine?

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