Special Feature

The weather was generally stable throughout the 13th fiscal period. Output curtailment was implemented to a certain extent mainly at power plants under unlimited output rules in Kyushu Electric Power jurisdiction, but the overall impact was limited. As a result, actual energy output was 100.81%, slightly higher than projected, and operating revenue was higher than initially forecast. Operating expenses were lower than initially forecast due to a certain degree of cost control, mainly through a decline in construction costs compared to the budget and a decrease in depreciation. In non-operating incomes and expenses, we reduced investment unit issuing expenses at the time of raising capital through the public offering in July and decreased interest expenses and borrowing-related expenses for borrowings by using variable interest rates. As a result, ordinary income exceeded the initial forecast. Ultimately, operating revenue was 4,537 million yen, operating income was 1,846 million yen, ordinary income was 1,386 million yen, and net income was 1,385 million yen. As a result, profit distributions per unit increased 528 yen from the initial forecast, to 3,067 yen. Distributions in excess of earnings were decreased by 528 yen, the same amount as the increase in profit distributions per unit, and the total dividend per unit was set at 3,750 yen, the same amount as the initial forecast.

Although we instituted output curtailment to a certain extent in the 13th fiscal period, it had a limited impact on our overall performance compared with the 12th fiscal period in the first half of the year. The reason for this is that, in addition to the fact that the output curtailment was implemented in the second half of the year (July to December), it was limited mainly to power plants under the unlimited rules in the Kyushu Electric Power jurisdiction. 10 power plants, most of the power plants held by CSIF in the Kyushu Electric Power jurisdiction as of the end of the 13th fiscal period, are under the 30-day rule, which sets the maximum number of days of output curtailment at 30 days a year (April to March in the following year), and the number of days output curtailment implemented in April through June 2023 is approaching 30 days. Regarding the 14th fiscal period, we believe that the impact on business results will be small compared to last year, given that there is little room to implement output curtailment until the end of fiscal 2023 (March 2024).
In addition, government initiatives to reduce curtailment of renewable energy power output are underway. In May 2023, METI’s Power Grid Working Group proposed measures such as (i) a reduction of minimum output for newly constructed thermal power plants from the current 50% to 30%, and (ii) wide-area output curtailment operation. At the Mass Renewable Energy Introduction / Next Generation Energy Network Committee in June 2023, under the basic policy of reducing curtailment of renewable energy power output, experts agreed to compile new countermeasure packages for the reduction of curtailment of renewable energy power output within 2023 after broadly discussing possible actions to be taken each for supply, demand and grid. In the Committee, a new “Countermeasure Package to Reduce the Curtailment of Renewable Energy” was compiled in December 2023 to investigate the curtailment of renewable energy in more detail. As for specific measures, multiple items have been proposed for each of demand measures, supply measures, and grid measures. Based on the above, we expect that the impact of output curtailment will be mitigated in the next fiscal year onwards compared to the current fiscal year.

Since the listing, CSIF has been working to expand the asset size by mainly acquiring assets from the pipeline, centered on projects developed by the sponsor, and set a new medium-term target of 200 billion yen last year, aiming for further growth. To increase our asset size to 200 billion yen, we intend to achieve sourcing route diversification by accelerating acquisitions of third-party developed assets in addition to acquisitions from our abundant sponsor pipeline. Currently, the total number of properties in the sponsor-developed assets is 19 with 345.8 MW, and if 2 properties with 47.0 MW developed by third parties are added, the total number of properties in the pipeline will be 21 with 392.8 MW, which exceeds the asset size at the end of the 12th fiscal period and a sufficient scale compared to the current panel output of 226.4 MW. Among these, CS Azuma Kofuji Solar Power Plant, which was the sponsor’s largest development project and was among Japan’s largest projects, was transferred to a bridge fund at the end of May 2023. Canadian Solar Asset Management K.K. (CSAM), which is CSIF’s asset manager, concluded a basic agreement with the bridge fund under which CSAM holds preferential negotiating rights to acquire the asset in the future. Three other properties are also included in bridge funds, and we plan to sequentially acquire them as the next acquisition targets, in preference to other properties that are already in operation. The advantages of using a bridge fund include that this enables (i) adjustment of mismatches between the desired timing of transactions between the seller and CSIF and (ii) allows CSIF to control the number of assets acquired and the scale of acquisitions and to make asset acquisitions more flexibly. As just described, we will aim to achieve stable external growth by diversifying property acquisition routes and acquisition methods.

Since it started to pay distributions per unit of 3,600 yen in the third fiscal period after the listing, CSIF has offered stable distributions and achieved steady increases in distributions. In addition, distributions per unit are expected to be 3,775 yen, the fourth increase in distributions, in the 14th fiscal period party due to the contribution of property acquisition at the time of capital increase through the public offering in July 2023. As a breakdown, the rate of increase in profit distributions is expected to rise significantly. With the aim of growing while maintaining stable distributions, CSIF will continue to increase profit distributions per unit (EPU) for each event such as a property acquisition in order to raise the proportion of EPU in distributions per unit and reduce distributions in excess of earnings.