Title

Presentation

Canadian Solar Inc. beats earnings expectations. Reported EPS is $-1.07, expectations were $-1.5.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar’s First Quarter 2025 Earnings Call. My name is Sheri, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Wina Huang, Head of Investor Relations at Canadian Solar. Please go ahead.

Wina Huang: Thank you, operator, and welcome everyone to Canadian Solar’s first quarter 2025 conference call. Please note that today’s conference call is accompanied with slides, which are available on Canadian Solar’s Investor Relations website within the Events and Presentation section. Joining us today are Dr. Shawn Qu, Chairman and CEO; Yan Zhuang, President of Canadian Solar subsidiary, CSI Solar; Ismael Guerrero, Corporate VP and President of Canadian Solar subsidiary, Recurrent Energy; and Xinbo Zhu, Senior VP and CFO. All company executives will participate in the Q&A session after management’s formal remarks. On this call, Shawn will go over some key messages for the quarter. Yan and Ismael will review business highlights for CSI Solar and Recurrent Energy, respectively, and Ismael will go through the financial results.

Shawn will conclude the prepared remarks with the business outlook, after which we will have time for questions. Before we begin, I would like to remind listeners that management’s prepared remarks today, as well as their answers to questions, will contain forward-looking statements that are subject to risks and uncertainties. The company claims protection under the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management’s current expectations. Any projections of the company’s future performance represent management’s estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law.

A more detailed discussion of risks and uncertainties can be found in the company’s annual report on Form 20-F filed with the Securities and Exchange Commission. Management’s prepared remarks will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles, or GAAP. Some financial information presented during the call will be provided on both a GAAP and non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to enable further analysis of the company’s performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP.

And now, I would like to turn the call over to Canadian Solar’s Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Operator: Your line might be muted.

Shawn Qu: Thank you. Thank you, Wina, and thank you all for joining our first quarter earnings call. Please turn to Slide 3. We began the year with a solid performance. Module Shipment reached 6.9 gigawatts, slightly above our guidance. Revenue totaled $1.2 billion at the high end of our range, while gross margin of 11.7% modestly exceeded expectations. Profitability was impacted by lower contributions from storage duties and tariffs, recurrence, ongoing transformation, and intra-company eliminations. This resulted in a net loss to shareholders of $34 million, or $0.69 per diluted shares. 2025 will face many of the same challenges that define 2024. While net — while near-term headwinds remain, we are confident in the long-term opportunities and will continue to invest in them.

Please turn to Slide 4. In the near term, we are tackling challenges that test us both operationally and financially. Structural overcapacity across the solar supply chain has prolonged the market downturn, putting pressure on module pricing in almost — in most global markets. In addition to fierce competition, tariffs and shifting policies are raising costs and squeezing margins. To navigate these challenges, we are maintaining a profit-focused approach to our modules business, carefully managing volumes in less profitable markets, leveraging a blended supply chain strategies and offering bundled sales. Storage continues to be a key differentiator and profit driver. We are also rigorously managing operating expenses and capital expenditures to support our bottom line and cash flow.

Recently, we held an internal town hall meeting where I post a question on behalf of the broader renewable energy sectors. Does this industry still have a bright future? My answer is a resounding yes. Global electricity demand is growing at its fastest pace in years, and the rise of AI and other energy-intensive applications is widening the energy gap. Solar power, clean, affordable, and easy to deploy, can quickly meet this demand, especially when paired with storage. Canadian Solar has a proven track record of navigating policy shifts and market cycles, demonstrating our technological leadership and resilient in challenging times. While our operating environment continue to evolve, our one constant is our commitment to R&D and leadership through innovation.

Please turn to Slide 5. Over the past two months, we have announced several new products showcasing our leadership across both solar and energy storage technologies. In solar, we completed our first deployment of Canadian Solar’s innovative Anti-Hail technology in Australia. This technology protects solar panels from severe weather, reflecting our dedications to delivering durable high-performance solutions in even the most demanding environment. We also introduced our new N-type High Power TOPCon Gen 2 modules for utility scale and C&I systems. Built on our latest TOPCon Cell technology, these modules deliver a maximum power output of up to 660 watts and a conversion efficiency of up to 24.4%. By advancing our solar technology, we help customers lower their levelized cost of energy and improve project economics, reinforcing solar as one of the most cost-effective energy generation options.

On the storage front, we achieved key milestones in both utility-scale and residential offerings. At Intersolar in Munich, we officially launched our SolBank 3.0 Plus enhancements to the lithium-ion phosphate battery cell manufacturing process elevate its performance beyond the already successful SolBank 3.0. This solution offers a 25-year lifespan, near-zero degradation for the first four years and up to 12,000 cycles at 95% round-trip efficiency. Solbank 3.0 Plus can significantly reduce our customers’ operational costs by boosting overall lifetime energy throughout — throughput by over 13%. We are also proud that our residential energy storage solution, EP Cube, received the prestigious 2025 iF Design Award and Gold at the 2025 MUSE Design Awards.

EP Cube combines aesthetically pleasing design important to homeowners, with functional advantages like easy installation and flexible capacity options. It continues to gain strong traction in global markets. With that, I will now turn the call over to Yan, who will provide more details on our CSI Solar business. Yan, please go ahead.

Yan Zhuang: Thank you, Shawn. Please turn to Slide 6. In the first quarter of 2025, module shipments increased by 9.4% year-over-year to 6.9 gigawatts. We slightly exceeded our module shipment guidance, driven by incremental shipments to China as the industry rushed to complete installations ahead of new policies taking effect on June the 1st. Storage deliveries aligned with guidance, totaling 849 megawatt hours. Revenue reached $1.2 billion, and our gross margin declined by 640 basis points quarter-over-quarter to 13.4%, primarily due to lower energy storage shipments, while costs rose slightly, partly from non-refundable VAT changes in China effective last December and slightly higher manufacturing costs in Southeast Asia under our blended supply chain strategy.

Average selling prices improved with a higher share of shipments to North America, with shipping costs declining sequentially due to softening global shipping rates and our rigorous management of operating expenses. We achieved operating income of $2 million. Now turning to e-STORAGE, please refer to Page 7. In the first quarter, we recognized revenue from 849 megawatt hours of shipped solutions. The softer performance was due to contract timing, and we expect a much stronger second quarter. Understandably, the ongoing US-China tariff negotiations remain top of mind for all stakeholders. While we cannot predict final outcomes, it is critical to recognize that these US energy storage projects, essentially for great resilience and energy dispatchability, took years of planning and significant investment.

While clarity may take some time, the industry will work together to advance these projects. Like all market participants, we’re navigating this uncertainty. For e-STORAGE, the US accounts for upwards of one-third of our energy storage business expected for this year. We are actively engaging with customers to mitigate risks and ensure smooth project execution. Notably, we are well-positioned with our global blended manufacturing strategy. Beyond our planned Kentucky storage facility, we have cell manufacturing capabilities and supplier partnerships that will allow us to offer customers flexible options starting in 2026. Demand for storage is stronger than ever, not just in the US, but globally. As of March 31, our record pipeline of 91 gigawatt hours, including $3.2 billion in contracted backlog, highlights the structural growth potential of energy storage worldwide.

For example, we recently secured another major project in Latin America. Please turn to Slide 8. Colbun, a leading Chilean power generation company, selected e-STORAGE to supply a 912 megawatt-hour battery energy storage system for their Diego de Almagro Sur project in Chile’s Atacama region. Like many in e-STORAGE’s global track record now exceeding 11 gigawatt hours, this project highlights the value of energy storage. It strengthens grid reliability, optimizes renewable energy use, and ensures secure continuous power for industrial demand. Now let me hand the call over to Ismael, who will provide an overview of Recurrent Energy, Canadian Solar’s global project development business. Ismael, please go ahead.

Ismael Guerrero: Thank you, Yan. Please turn to Slide 9. In the first quarter, we generated $125 million in revenue. Gross margin was 18.6%, driven by project sales in Latin America. Due to the operating costs of our platform and the ongoing scaling of our IPP portfolio, we posted an operating loss of $12 million for the quarter. Regarding our business transformation, we will remain focused on execution. Currently, we have 1.2 gigawatt peak of solar and 1.4 gigawatt hours of energy storage projects under construction in Europe and the US. n January, our 35 megawatts peak Montalto project in Lazio, Italy, reached commercial operation. The PV project was contracted with Axpo with an attractively priced PPA. In addition, Montalto is also one of the first co-located PV and best projects in the Italian market.

The best portion won a 15-years fixed capacity payment in a public auction and it is now under construction. In the US, we secured tax equity and project finance for Fort Duncan, a 200 megawatt hour Merchant Project — Merchant Storage project in ERCOT, Texas. This is testament to the strength of our projects and financing teams as well as the strong support from our capital partners in enabling innovative solutions to drive impact. Construction for Fort Duncan is complete and under commissioning as we speak. In line with our global growth strategy, we secured a $450 million multicurrency credit facility, which includes an accordion feature that allows for potential upsizing. This corporate facility provides flexible and scalable financing with disbursements in US dollars, Euros, British Sterling, and Australian dollars, supporting our strategy to expand our IPP portfolio across diverse markets and geographies.

Given the uncertain policy environment in the US, we are proactively implementing safeguards for all major IPP projects, including safe harboring equipment. While the long-term effects of tariffs remain to be seen, we expect very limited impact given recent progress in trade negotiations. Now, please turn to Slide 10 for an update on our pipeline. As of March 31st, 2025, we have secured interconnections for 9 gigawatts of solar and 16 gigawatt hours of storage globally, excluding projects already in operation. Our total project pipeline now stands at 27 gigawatts of solar and 76 gigawatt hours of energy storage. While we continue to expand our pipeline, the availability of easy-to-develop land with relatively cheap interconnections is becoming increasingly scarce.

We are now prioritizing our core markets, the US and Europe, while in other regions we focus primarily on low-cost greenfield development. Now, let me hand the call over to Xinbo, who will go through our financial results in more detail. Xinbo, please go ahead.

Xinbo Zhu: Thank you, Ismael. Please turn to Slide 11. In the fourth quarter, we shipped 6.9 gigawatts of modules, slightly above guidance, and delivered 849 megawatt hours of energy storage solutions, in line with expectations. Revenue reached $1.2 billion, at the high end of our forecast. Gross margin of 11.7% exceeded guidance. The 260 basis point sequential decline was primarily due to lower energy storage shipments, while the 730 basis point year-over-year decline was driven by lower module ASP. Operating expenses decreased 4% year-over-year, driven by lower shipping costs. Last quarter’s results included non-recurring impairment charges related to certain manufacturing and solar assets, making the year-over-year comparison more reflective of our ongoing operational performance.

Net interest expense in the first quarter was $28 million compared to $9 million in the fourth quarter of 2024 and less than $1 million in the first quarter of [2024] (ph). The current quarter reflects a more normalized interest expense as prior comparative periods benefited from non-recurring interest income items. Net foreign exchange loss was $14 million, primarily due to dollar weakness and tariff-related pressures. Total net loss was $34 million, or $0.69 per diluted share. These results included a positive HLBV impact of $26 million or $0.38 per share from tax equity arrangements tied to certain US operating projects. Now, let’s turn to cash flow and the balance sheet. Please turn to Slide 12. Net cash flow used in operating activities during the first quarter of 2025 was $264 million.

This outflow was primarily driven by increased inventories and project assets. Total assets grew to $13.9 billion, driven by investments in project assets and solar power systems, positioning us for longer-term value creation. In the first quarter, we allocated $256 million in capital expenditures primarily toward US manufacturing initiatives. Our full year 2025 CapEx outlook remains unchanged at around $1.2 billion. We ended the quarter with a cash balance of $2.0 billion and total debt of $5.7 billion, reflecting borrowings for capacity extension, working capital, and project and operational assets development. Now, let me turn the call back to Shawn, who will conclude with our guidance and business outlook. Shawn, please go ahead.

Shawn Qu: Thank you, Xinbo. Please turn to Slide 13. For the second quarter of 2025, we anticipate CSI Solar’s module shipment will range between 7.5 gigawatts to 8 gigawatts, including approximately 500 megawatts allocated to our own project. We also expect to deliver between 2.4 gigawatts and 2.6 gigawatts of energy storage solutions during this period. We project total second quarter revenue to be in the range of $1.9 billion to $2.1 billion with gross margin expected to be between 23% and 25%. The anticipated margin improvement reflects strong energy storage shipment and includes a sizable margin contribution from the deconsolidation of a US project. This deconsolidation would release previously eliminated intracompany gross margin on CSI Solar components installed within the project.

We continue to operate in an environment marked by global pricing volatility and evolving policy uncertainty, which limits our margin visibility. Based on our recent assessment of market and geopolitical development, we are updating our full year guidance as follows. For the full year of 2025, we update module volume guidance to 25 gigawatts to 30 gigawatts, including approximately 1 gigawatt to our own project. For energy storage shipments, we provide conditionally — we provide conditional guidance between 7 gigawatt hours to 9 gigawatt hours, including approximately 1 gigawatt hours allocated to our own projects. The reduced module volumes primarily reflect our strategic reduction of exposure to less profitable markets, while the expected storage adjustments relate to US volumes affected by trade negotiations.

As a result of these volume adjustments, we now expect full-year revenue to be between $6.1 billion and $7.1 billion. With that, I would now like to open the floor for questions. Operator?

Operator: [Operator Instructions] Our first question is from Colin Rusch with Oppenheimer & Company. Please proceed.

Colin Rusch: Thanks so much, guys. There’s a lot of variables here, and Shawn, obviously, you’ve gone through a variety of policy shifts. One element that I’d love to get a bit more detail on is around the FEOC provisions that were released in the budget. I guess as you guys look at how that might evolve and get solidified in the budget, how does that impact your plans for US capacity investment? And how should we think about that, some of those elements impacting the variability in your guidance?

Shawn Qu: Well, thanks Colin. It’s a good question, but also a tough question. Now the new draft of the FEOC was only released two days ago by The House Ways and Means Committee, and it’s only the first draft. We believe it will not look like this at the final bill — final reconciliation bill. So, it’s hard to comment at this moment because in the next two, three years there will be — we believe there will be changed and we will also put our opinion, our suggestions to — through the relevant representatives and senators and also to the administration. So, I will not comment now because it’s only two days the draft and only the first draft from The House Ways and Means, Colin.

Colin Rusch: Perfect. Appreciate that answer. And then just shifting gears to the balance sheet, as you move through this year, we’ve seen some of the long-term debt increase, assuming that the bulk of that is around projects. How should we think about target ratios for you guys from a cash flow perspective and a leverage perspective?

Shawn Qu: Yeah, Xinbo, do you want to answer this question?

Xinbo Zhu: From recurrent perspective, we are still in the transition of — from the project developer to [partial] (ph) IPP so we are continuing to do projects and [Technical Difficulty]. So the leverage of Recurrent will increase a little bit. For CSI Solar, we will maintain similar leverage ratio to balance growth and our capital structure.

Colin Rusch: Okay. Thanks, guys. I’ll hop back in the queue.

Operator: Our next question is from Philip Shen with Roth Capital Partners. Please proceed.

Philip Shen: Hi, thanks for taking my questions. In terms of the 2025 guidance, you lowered your module shipments by 15% and battery shipments, I think by 30%. But the revenue guide only came down 10%. Can you walk us through again, or just walk us through how revenue is able to be down only 10%? Do you expect pricing to go higher? Sorry if I missed some of your explanation. Thanks.

Shawn Qu: Yeah, maybe, Wina, you are at the best position to answer this question.

Wina Huang: Hi, Philip. So as Shawn mentioned, we are maintaining a profit first strategy, which means that the volumes we reduce for marginals is in less profitable markets, whereas for storage, this is our best estimate given the ongoing trade negotiations. So, this is still very fluid. As you can see, it’s a pretty wide revenue guidance range.

Philip Shen: Okay. Thank you, guys. And as it relates to the Draft House bill, I know Shawn, you talked about the FEOC rules and how that might need to be changed, or you might, you expect it to be changed ahead. They also have new rules as it relates to the ITC and PTC. If they were to pass, now they’re looking to get placement service requirements instead of construction starts to secure the ITC and PTC. How would you expect that to impact your installations over the next two years? Do you think there would be modest, if limited, impacts on the recurrent business, or do you think there might be some challenges with that new language? Thank you.

Shawn Qu: Yeah, Philip, this is also a very good question. The FEOC is important, and the ITC schedule is also very important. So we are paying lots of attention to the draft from the Ways and Means committee. And as I said, I expect this to change. It looks like it’s still far from the final law. However, the ITC does means a lot to developers and also to manufacturers. And Canadians Solar are both developers and manufacturers. So indeed, ITC will have a impact, and significant meaningful impact if it is scaled back. Our calculation shows the one year of ITC means several hundred millions of dollars to Canadian Solar alone, not to mention the whole industry. So, it’s very important and we will put in our suggestion and our opinions.

But on the other hand, Philip, if you remember, there has been talking of ITC phase out several times in the past 10, 15 years and I believe ITC was first introduced during President Bush time and then every year, every year President afterward and also the house and finance reduced — extended this ITC. So, but we also have been preparing for ITC phase out over time, and for just for Recurrent. I remember Recurrent had like safe harbored some modules and other equipment several times in the past 15 years and every time ITC got extended. So ITC seems to have good longevity. So we’ll see how it looks like this time. But the industry, and also Recurrent, plus Canadian Solar we are prepared to go through another round. I believe the solar project and energy storage project the price is very economic these days and also the electricity demand is high.

So whatever the ITC is, I think the industry will adjust eventually will adjust and then continue to grow.

Philip Shen: Okay. Thanks, Shawn. Hey, I had a follow-up question on the Q2 margin guide, and you gave some detail around the strength is due to storage, and I think the deconsolidation of the US project. Can you share a little more color there? What is the expectation for storage margins these days? Historically, I think you guys have talked about 20-ish percent, but is it closer to mid-20s percent or even higher? And just provide a little bit more detail on the deconsolidation? Thanks.

Shawn Qu: Provide comments on the energy storage and margin, and then Xinbo, you may want to explain the deconsolidation of solar project. Yan?

Yan Zhuang: So on the storage side, the Q2 storage shipment happened in Q1. So it was before this tariff war. And so margin-wise, I can only say it’s about 20%. It was pretty healthy. And also volume-wise, Q2 is going to be much higher. So, the guidance is 2.6 gigawatt hours to 2.8 gigawatt hours — 2.4 gigawatt hours to 2.6 gigawatt hours. So it’s much higher than Q1.

Xinbo Zhu: Yeah. Let me comment on the deconsolidation. We have a storage project with fixed-rate toll agreement covering about 80% of the project lifetime. According to accounting standard, when the projects reach COD, the majority of the risks and controls are transferred to the counterpart. So, according to accounting standard, we need to deconsolidate this project from our balance sheet and release the intercompany profit eliminated in earlier quarters, and it’s a one-time event contributing about 5% to 6% of gross margin in next quarter.

Philip Shen: Okay, thank you. And would you expect this strength — what kind of gross margins could we see in Q3 and Q4? Thanks.

Xinbo Zhu: No, we are not guiding this.

Philip Shen: Okay, appreciate it. Thank you, guys. I’ll pass it on.

Operator: Our next question is from Brian Lee with Goldman Sachs. Please proceed.

Tyler Bisset: Hey guys, this is Tyler Bisset for Brian. Thanks for taking our questions. You guys lowered storage volume expectations due to the trade negotiations. And can you provide some details on what sort of tariff assumptions are embedded in your guidance? I know there are some recent negotiations. Just want to confirm what’s embedded there. And, similarly, you mentioned offering some flexible sourcing capabilities. So, can you provide some more details on kind of the pricing differentials of leveraging different sources versus your existing products?

Shawn Qu: Yeah. Yan, do you want to handle this question, the energy storage guidance, new guidance.

Yan Zhuang: Sure. Yeah, I think the 7 gigawatt hour to 9 gigawatt hour actually covered the different uncertainties already. So that is — that included the [spending] (ph) days exemption, and also the uncertainties after that. So it can be as low as 7 gigawatt hour or as high as 9 gigawatt hour. So that’s our assumption.

Tyler Bisset: And any sort of details on, just like pricing differential from different sourcing capabilities?

Yan Zhuang: Okay. And actually, for the storage contracts, most of the — we all have a change of law protection. Some of them are like capped pricing and the other others with shared on tariff. So, even with the different uncertainties, I think the 7 gigawatt hour to 9 gigawatt hour we continue to have a healthy margin.

Shawn Qu: Yeah. Brian, just add one comment that the sourcing flexibility will only help us in 2026. The sourcing for we are seeing sourcing flexibility with our supplier start to build and ramp up their capacities outside China. But most of this will only help us in 2026. So, 2025 we have to deliver all the storage project from China. So the impact does have a — no, the tariff does have an impact. And because of that, some of customers ask it to push their project deliver to next year. And when we have this non-China battery cell option ready, so that accounts for most of the change on the guidance.

Tyler Bisset: Super helpful color. Appreciate that. And then you discussed some pull forward of demand in China, given some policy changes there. Do you have any sort of expectation for shipment growth next year in China?

Shawn Qu: Yan, do you want to answer this question? The shipment growth in China.

Yan Zhuang: Yeah. So we’re still waiting for policy clarification at provincial level, which is the action points, right. So before that the investment decisions in China are mostly on health. So, however, from our understanding about the market dynamics, we think it will have a few months of adjustment in China, but after that once the clarification, once we have the policy clarification, it should — it will not be a disaster. The demand will start to pick up but however, I think second half will be weak. Next year, we don’t really know because there’s a lot of uncertainty. We’re still waiting for the policy clarification. However, we believe the healthy demand for storage is going to come because in the past we — most of the storage demand in China was kind of mandatory on solar.

So, but since this policy change the Policy 133, I think we’ll have a free trade market, the trading market will actually bring in a real demand for storage. So we anticipate a healthy growth on high-quality storage projects coming up next year.

Tyler Bisset: Perfect. Really appreciate the color. Thank you.

Shawn Qu: Thank you.

Operator: Our next question is from Alan Lau with Jefferies. Please proceed.

Alan Lau: Thanks for taking my question. A follow-up question on the 6% margin contribution from the [capitalization of this] (ph) project. So, I would like to know there’s a fixed rate agreement covering the project life so based on accounting standard it — we will have to record the profit but would like to know is it a one-off just to confirm is it a one-off impact on Q2 or like how does it amortize over the time the quarter.

Xinbo Zhu: From accounting perspective, yeah, it’s a one-off impact on Q2 this year.

Alan Lau: Okay, thank you. Thank you. That’s clear. So, Q3 onwards unless you have other projects that are deconsolidated otherwise this is only one of Q2, right?

Xinbo Zhu: Correct.

Alan Lau: Thank you. And then next question is a follow-up on US policies because there’s a lot of prevalence in the past one week. Would like to check on your view because the language is actually saying that at least for the next two years, if a FEOC is not having the majority stake, then we’ll be still able to get 45x. Just to reconfirm our company, CSIQ, is actually Canadian owned, and also per your understanding, it’s not an FEOC, or what do you think about it?

Shawn Qu: Canadian Solar itself is Canadian-owned and also traded on NASDAQ. So there are common shareholders from the US Stock market. Now, Canadian Solar holds about 65% of CSI Solar, which is trading on Shanghai Stockings, which is organized under the Chinese corporate law and is trading on Shanghai Stock Exchange. And then CSI Solar invested into the facilities in US, including the modular factory in Mesquite, also the cell factory in Jeffersonville, Indiana, and its storage factory in Shelbyville, Kentucky. So if the current language in the new draft stay as yet, then all these three facilities will be impacted. We’ll have to change the ownership structure in order to fit with the — comply with the new laws. But on the other hand, as you see that CSIQ, which is a Canadian company, still holds 65% and it’s the controlling shareholder for CSI Solar.

So I suppose that it will be much easier for us to change the structure, maybe to invite some third-party investors in order to make us three entities complying with the new rules. But I also mentioned when I answered the previous question from Philip Chen that what we — what released by The House Ways and Means Committee two days ago was only the first draft. We expect it to go through many changes before it become new law. So there’s a question of how fast the reconciliation will go through. Some says July for the August recess and some says September. So we’ll see. We’re not expert in how the legislative bodies work. However, we are sending our comment and opinions through our channels. And so I hope the final bills will consider all this, and final bill will — I hope the final bill will truly help to make manufacturing back to get manufacturing go back to China rather than otherwise, and that’s my hope.

Alan Lau: Go back to the US. Sorry, Shawn.

Shawn Qu: Yeah, this is about US. What I’ve been talking is about US, is about The House Ways and Means draft of the new requirement, and also I answered your question on FEOC.

Alan Lau: Thank you. So next question is because I saw on a news mentioning Canadian Solar is having a — actually CSI Solar it’s having a commitment in Ethiopia. So we’d like to know what’s your plan there in terms of modules, or is there any plan for sales?

Shawn Qu: Yeah, that’s not true. We — our business development people have traveled around the world. So they travel to Ethiopia, but we haven’t made any committed decision to any activities in Ethiopia yet.

Alan Lau: I see. So there’s some probably due diligence, but not up to the stage of any commitment yet?

Shawn Qu: Right. We are developing and exploring options, but no, there has — we haven’t committed anything.

Alan Lau: I see. So my last question is about should the guidance — would like to know like the guidance — actually module guidance has came down. I would like to know is that main difference versus last time? Is that mainly the US volume?

Shawn Qu: Yan, should you answer this question?

Yan Zhuang: Okay. So, the US annual volume stays, so we don’t have a new update on that.

Alan Lau: Okay.

Shawn Qu: The shipment to US is pretty much still what we guided before, and this volume reduction reflects the reduction of unprofitable sales to other market.

Alan Lau: That’s very clear. I’ll pass on. Thanks a lot for taking my questions.

Operator: Our next question is from Praneeth Satish with Wells Fargo. Please proceed.

Praneeth Satish: Thank you. Good morning. Just going back to the FEOC draft legislation, I guess the question here is on your Indiana, Kentucky facilities. Does it make sense to put those on pause? You maintained your CapEx guidance $1.2 billion, but until you get final clarity on the rules, is there a chance that maybe some of that CapEx comes down, you ship the projects out, or are you confident that the draft language will change with the future revisions? Or you see a path here that even if it doesn’t change through ownership changes bringing in third-party investors, that you can comply with the rules?

Shawn Qu: The Jeffersonville, Indiana factory, as you mentioned, is in the middle of the building construction and also the equipment. We already shipped in the Phase — most of the Phase 1 equipment, and those Phase I equipment, which is about 2 gigawatt of capacity, solar cell capacity, those equipment stay in a warehouse in Indiana right now waiting for the building to complete. So I think Phase 1 of about 2 gigawatt, the Jeffersonville facility, we have announced a proposal, a plan to reach 5 gigawatt, and we cut into Phase 1 and Phase 2. So we are quite conservative when it comes to actually spending money. So, at this moment, phase one, as I said, equipment are almost there. So, we will — I think we will complete the Phase 1.

Well, and the Phase 2 decision will probably be made in the summer or after summer, the final decision. And so I hope, I think this budget reconciliation will come to a conclusion, final form, either before the summer or after summer. So, in a way that we are not spending a lot of money on the Jeffersonville, other than what we already committed. And so the schedule is in parallel with the schedule of this budget reconciliation process. So, if somehow — we think the final language will be reasonable. Final language about FEOC will be reasonable. And but also as you said, we are ready to change the capital structure once the policy is clear, the language is clear, the legal explanation is clear, then we will make our existing capacity to meet with the whatever the new language.

But we don’t want to completely stop. So we are still continuing with, design some final like detailed design of the factory, and also certain civil construction work. Because the IRA itself only have a few years of shelf time, right, even the previous original IRA already contains a phase down after 2030. And I think by 2035, right, all the ITC and also the advanced manufacturing quality, the so-called 45X will stop. So that’s only a final time — so only finite amount of time, limited amount of time. So, if we delay too much, the project will become uneconomic. So, we’ll balance this and we’re spending some money to keep the construction and design work going and however, for most of the equipment other than what we already shipped in, will probably only be able to make decision, let’s say, in August or September.

I hope by that time, this budget reconciliation is already completed.

Praneeth Satish: Okay. That’s helpful. And maybe one more on the Recurrent business here. So, at least in the US PPA prices are, are going up and we’re seeing on the gas side for CCGT costs and prices are going up a lot with data center demand. So is that giving you more headroom on the solar and storage side to increase PPA prices and absorb a lot of the cost increases that we’re seeing from all the trade and policy uncertainty? And then are you any more inclined for long-term ownership of assets versus monetization in the current environment?

Shawn Qu: Yeah, Ismael, this is a question for you.

Ismael Guerrero: Thank you, Shawn, thanks for the question. We see the market in a similar way. Yes, we do. We are experiencing the same things you are referring to. In general, with the capital we have, we have a limited capability to hold a certain amount of projects. And we are continuously assessing every time a project reaches the RTB status, whether we should sell it or we should keep it in operation. So, how many projects we keep in operation is a decision taken based on the amount of money we have available and the status of the project, and which are better to hold and better to sell. But the market remains very attractive. This is what we are seeing both in the US And Europe.

Praneeth Satish: Got it. Okay, thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Shawn Qu: Thank you. And thank you for joining us today for your continued support. If you have any questions or would like to set up a call, please contact our investor relations team. And take care and have a great day.

Operator: This concludes today’s conference. You may disconnect your lines at this time. And thank you for your participation.