GUELPH, ON, Aug. 22, 2024 /PRNewswire/ -- Canadian Solar Inc. ("Canadian Solar" or the "Company") (NASDAQ:CSIQ) today announced financial results for the second quarter ended June 30, 2024.
Highlights
Solar module shipments of 8.2 GW, above guidance of 7.5 GW to 8.0 GW.
Net revenues of $1.6 billion, in line with guidance of $1.5 billion to $1.7 billion.
17.2% gross margin, in line with guidance of 16% to 18%.
e-STORAGE backlog grew to $2.6 billion, backed by a record 66 GWh of pipeline, as of June 30, 2024.
Recurrent Energy expanded its total development pipeline to 27 GWp of solar and 63 GWh of battery energy storage, as of June 30, 2024.
Achieved initial closing of BlackRock's investment in Recurrent Energy, representing the majority of the planned $500 million capital infusion.
Announced a $200 million private placement of secured convertible notes with PAG.
Published the 2023 Corporate Sustainability Report, featuring sustainability disclosures aligned with global standards, on May 31, 2024.
Dr. Shawn Qu, Chairman and CEO, commented, "We achieved solid results in the second quarter of 2024, with shipments, revenue, and gross margin meeting or surpassing our previous guidance. Today, we have reached an optimal scale—large enough to maintain a highly competitive cost structure yet lean enough to adapt swiftly to changes in industry dynamics. In our module business, we continue to apply a disciplined approach to operations, from strategic capacity investments to stringent order management. At the same time, we are positioning ourselves for sustainable medium- and long-term growth through our energy storage business, e-STORAGE, and global project development platform, Recurrent Energy. Sustainable and ethical growth is key to our strategy, and we are proud to have published our latest Corporate Sustainability Report, featuring expanded disclosures and enhanced transparency."
Yan Zhuang, President of Canadian Solar's CSI Solar subsidiary, said, "Despite challenging market dynamics, CSI Solar achieved strong results in the first half. Amidst fierce industry competition, we maintained our focus on profitability while also increasing volume this quarter. As polysilicon prices further declined, the resulting price decreases across the upstream supply chain helped reduce manufacturing costs. Given the current industry landscape, we have decided to delay certain upstream investments to further prioritize profitability. In these situations, our partial vertical integration affords us strategic agility. Additionally, e-STORAGE not only delivered record volumes, but also grew its backlog to $2.6 billion, supported by a robust 66 GWh pipeline."
Ismael Guerrero, CEO of Canadian Solar's Recurrent Energy subsidiary, said, "We successfully completed the initial closing of BlackRock's $500 million investment and expect to finalize the transaction in the coming months. As we progress toward our operational targets, we continue to demonstrate our ability to secure competitive financing. Notably, we obtained a landmark multi-currency revolving credit facility valued at up to €1.3 billion, involving ten banks, to support the construction of renewable energy projects across several European countries."
Xinbo Zhu, Senior VP and CFO, added, "In the second quarter of 2024, we delivered $1.6 billion in revenue, a gross margin of 17.2%, and $4 million in net income. Going forward, CSI Solar and Recurrent Energy's leverage profiles will align with their respective strategic goals. This quarter, CSI Solar reduced its debt to better navigate the industry cycle. Meanwhile, Recurrent Energy will continue to increase leverage in the near-term to support its transition to a partial IPP model. The recently announced convertible notes will contribute to optimizing our capital structure, providing us with added financial flexibility."
Second Quarter 2024 Results
Total module shipments recognized as revenues in the second quarter of 2024 were 8.2 GW, up 30% quarter-over-quarter ("qoq") and remained consistent year-over-year ("yoy"). Of the total, 135 MW were shipped to the Company's own utility-scale solar power projects.
Net revenues in the second quarter of 2024 increased 23% qoq and decreased 31% yoy to $1.6 billion. The sequential increase primarily reflects a higher solar module shipment volume, partially offset by a decline in module average selling price ("ASP"). The yoy decrease primarily reflects a decline in module ASPs and lower project sales, partially offset by higher battery energy storage solutions sales.
Gross profit in the second quarter of 2024 was $282 million, up 12% qoq and down 36% yoy. Gross margin in the second quarter of 2024 was 17.2%, compared to 19.0% in the first quarter of 2024 and 18.6% in the second quarter of 2023. The gross margin sequential decrease was primarily caused by lower module ASPs. The gross margin yoy decrease was primarily driven by lesser margin contribution from solar power and battery energy storage asset sales and lower module ASPs, partially offset by lower manufacturing costs.
Total operating expenses in the second quarter of 2024 were $234 million, compared to $204 million in the first quarter of 2024 and $216 million in the second quarter of 2023. The sequential and yoy increases were primarily driven by higher shipping and handling expenses, with the yoy increase being partially offset by a decrease in share-based compensation expense.
Depreciation and amortization charges in the second quarter of 2024 were $122 million, compared to $110 million in the first quarter of 2024 and $73 million in the second quarter of 2023. The sequential and yoy increases were primarily driven by the Company's continued investment in vertical integration and incremental capacity expansion.
Net interest expense in the second quarter of 2024 was $19 million, compared to less than $1 million in the first quarter of 2024 and $21 million in the second quarter of 2023. Net interest expense returned to a normalized level in the second quarter of 2024 with the absence of an interest benefit deriving from the interest income generated by anti-dumping and countervailing duty deposit refunds in the first quarter of 2024.
Net foreign exchange and derivative gain in the second quarter of 2024 was $13 million, compared to a net loss of $4 million in the first quarter of 2024 and a net gain of $34 million in the second quarter of 2023.
Net income attributable to Canadian Solar in the second quarter of 2024 was $4 million, or $0.02 per diluted share, compared to a net income of $12 million, or $0.19 per diluted share, in the first quarter of 2024, and net income of $170 million, or $2.39 per diluted share, in the second quarter of 2023. Basic and diluted earnings per share ("EPS") includes Recurrent Energy redeemable preferred shares dividends payable in kind. As a result, an EPS effect of 3 cents was deducted in the second quarter of 2024 on a dilutive basis.
Net cash flow used in operating activities in the second quarter of 2024 was $429 million, compared to net cash flow used in operating activities of $291 million in the first quarter of 2024 and net cash flow provided by operating activities of $290 million in the second quarter of 2023. The operating cash outflow primarily resulted from increased project assets and accounts receivable.
Total debt was $4.2 billion as of June 30, 2024, including $2.0 billion, $2.0 billion, and $0.2 billion related to CSI Solar, Recurrent Energy, and convertible notes, respectively. Total debt decreased as compared to $4.3 billion as of March 31, 2024, mainly driven by optimization of CSI Solar's financial leverage to navigate the industry cycle, partially offset by new project development for Recurrent Energy.
Business Segments
The Company has two business segments: Recurrent Energy and CSI Solar. The two businesses operate as follows:
Recurrent Energy is one of the world's largest clean energy project development platforms with 15 years of experience, having delivered approximately 11 GWp of solar power projects and 3.7 GWh of battery energy storage projects. It is vertically integrated and has strong expertise in greenfield origination, development, financing, execution, operations and maintenance, and asset management.
CSI Solar consists of solar module and battery energy storage manufacturing, and delivery of total system solutions, including inverters, solar system kits, and EPC (engineering, procurement, and construction) services. CSI Solar's e-STORAGE branded battery energy storage business includes its utility-scale turnkey battery energy system solutions, as well as a small but growing residential battery energy storage business. These battery energy storage systems solutions are complemented with long-term service agreements, including future battery capacity augmentation services.
Recurrent Energy Segment
As of June 30, 2024, the Company held a leading position with a total global solar development pipeline of 27 GWp and a battery energy storage development pipeline of 63 GWh.
While Recurrent Energy's business model was historically predominantly develop-to-sell, the Company has been adjusting its strategy to create greater asset value and retain greater ownership of projects in select markets to increase revenues generated through recurring income, such as power sales, operations and maintenance, and asset management income.
The business model consists of three key drivers:
Electricity revenue from operating portfolio to drive stable, diversified cash flows in growth markets with stable currencies;
Asset sales (solar power and battery energy storage) in the rest of the world to drive cash-efficient growth model, as value from project sales will help fund growth in operating assets in stable currency markets; and
Power services (O&M) and asset management through long-term operations and maintenance ("O&M") contracts, currently with approximately 11 GW of contracted projects, to drive stable and long-term recurring earnings and synergies with the project development platform.
In January 2024, the Company announced a $500 million investment from BlackRock. The investment will provide Recurrent Energy with additional capital to grow its high value project development pipeline while executing its strategy to transition from a pure developer to a developer plus long-term owner and operator in select markets including the U.S. and Europe. This transition is expected to create a more diversified portfolio and provide more stable long-term revenue in low-risk currencies, and enables Recurrent Energy to create and retain greater value in its own project development pipeline. The perimeter of the transaction includes 30 countries, excluding China and Japan.
In June 2024, Recurrent Energy announced the initial closing of the $500 million investment. The initial closing presents the majority of the planned capital infusion at $300 million (before transaction costs). Once the transaction is fully complete, BlackRock's $500 million investment will represent 20% of the outstanding fully diluted shares of Recurrent Energy on an as-converted basis. Canadian Solar will continue to own the remaining majority shares of Recurrent Energy.
Project Development Pipeline – Solar
As of June 30, 2024, Recurrent Energy's total solar project development pipeline was 27.4 GWp, including 1.7 GWp under construction, 4.8 GWp of backlog, and 20.9 GWp of projects in advanced and early-stage pipelines, defined as follows:
Backlog projects are late-stage projects that have passed their risk cliff date and are expected to start construction in the next 1-4 years. A project's risk cliff date is the date on which the project passes the last high-risk development stage and varies depending on the country where it is located. This is usually after the projects have received all the required environmental and regulatory approvals, and entered into interconnection agreements, feed-in tariff ("FIT") arrangements, and power purchase agreements ("PPAs"). A significant majority of backlog projects are contracted (i.e., have secured a PPA or FIT), and the remaining have a reasonable assurance of securing PPAs.
Advanced pipeline projects are mid-stage projects that have secured or have more than 90% certainty of securing an interconnection agreement.
Early-stage pipeline projects are early-stage projects controlled by Recurrent Energy that are in the process of securing interconnection.
While the magnitude of the Company's project development pipeline is an important indicator of potential expanded power generation and battery energy storage capacity as well as potential future revenue growth, the development of projects in its pipeline is inherently uncertain. If the Company does not successfully complete the pipeline projects in a timely manner, it may not realize the anticipated benefits of the projects to the extent anticipated, which could adversely affect its business, financial condition, or results of operations. In addition, the Company's guidance and estimates for its future operating and financial results assume the completion of certain solar projects and battery energy storage projects that are in its pipeline. If the Company is unable to execute on its actionable pipeline, it may miss its guidance, which could adversely affect the market price of its common shares and its business, financial condition, or results of operations.
The following table presents Recurrent Energy's total solar project development pipeline.
Solar Project Development Pipeline (as of June 30, 2024) – MWp*
Region
In Construction
Backlog
Advanced Pipeline
Early-Stage Pipeline
Total
North America
261
224
1,244
4,374
6,103
Europe, the Middle East, and Africa("EMEA")
783**
2,465
1,578
5,539
10,365
Latin America
450**
486
83
4,540
5,559
Asia Pacific excluding China and Japan
-
173
708
1,413
2,294
China
100
1,320**
-
1,390
2,810
Japan
59
131
-
49
239
Total
1,653
4,799
3,613
17,305
27,370
*All numbers are gross MWp.
**Including 74 MWp in construction and 551 MWp in backlog that are owned by or already sold to third parties.
Project Development Pipeline – Battery Energy Storage
As of June 30, 2024, Recurrent Energy's total battery energy storage project development pipeline was 62.8 GWh, including 8.5 GWh under construction and in backlog, and 54.3 GWh of projects in advanced and early-stage pipelines.
The table below sets forth Recurrent Energy's total battery energy storage project development pipeline.
Battery Energy Storage Project Development Pipeline (as of June 30, 2024) – MWh
Region
In Construction
Backlog
Advanced Pipeline
Early-Stage Pipeline
Total
North America
1,400
600
1,580
15,444
19,024
EMEA
-
1,580
4,627
26,612
32,819
Latin America
-
1,765
-
-
1,765
Asia Pacific excluding China and Japan
444
-
400
1,240
2,084
China
2,000
-
-
2,600
4,600
Japan
-
727
449
1,350
2,526
Total
3,844
4,672
7,056
47,246
62,818
Projects in Operation – Solar Power and Battery Energy Storage Power Plants (Including Unconsolidated Projects)
As of June 30, 2024, the solar power and battery energy storage plants in operation totaled around 1.6 GWp and 1.0 GWh respectively, with a combined estimated net resale value of approximately $1.2 billion. The estimated net resale value is based on selling prices that Recurrent Energy is currently negotiating or comparable asset sales.
Power Plants in Operation*
North America
EMEA
Latin America
Asia Pacific
ex. China and Japan
China
Japan
Total
Solar (MWp)
163
58
970
6
310
62
1,569
Battery Energy Storage (MWh)
280
-
-
24
700
-
1,004
*All numbers are net MWp or MWh owned by Recurrent Energy; total gross MWp of solar projects is 2,621 MWp and total gross batteryenergy storage projects is 2,124 MWh, including volume that is already sold to third parties.
Operating Results
The following table presents select unaudited results of operations data of the Recurrent Energy segment for the periods indicated.
Recurrent Energy Segment Financial Results
(In Thousands of U.S. Dollars, Except Percentages)
Three Months Ended
Six Months Ended
June 30,
2024
March 31,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Net revenues
50,525
39,433
360,045
89,958
380,097
Cost of revenues
26,564
26,381
201,981
52,945
214,824
Gross profit
23,961
13,052
158,064
37,013
165,273
Operating expenses
32,877
33,573
35,874
66,450
58,288
Income (loss) from operations*
(8,916)
(20,521)
122,190
(29,437)
106,985
Gross margin
47.4 %
33.1 %
43.9 %
41.1 %
43.5 %
Operating margin
-17.6 %
-52.0 %
33.9 %
-32.7 %
28.1 %
* Income (loss) from operations reflects management's allocation and estimate as some services are shared by the Company's two business segments.
CSI Solar Segment
Solar Modules and Solar System Kits
CSI Solar shipped 8.2 GW of solar modules and solar system kits to more than 70 countries in the second quarter of 2024. For the second quarter of 2024, the top five markets ranked by shipments were China, the U.S., Pakistan, Germany, and Brazil.
CSI Solar's revised manufacturing capacity expansion targets are set forth below.
Solar Manufacturing Capacity, GW*
June 2024
Actual
September 2024
Plan
December 2024
Plan
Ingot
20.4
25.0
25.0
Wafer
28.0
31.0
31.0
Cell
48.4
48.4
48.4
Module
60.0
61.0
61.0
*Nameplate annualized capacities at said point in time. Capacity expansion plans are subject to change without notice based on market conditions and capital allocation plans.
e-STORAGE: Battery Energy Storage Solutions
e-STORAGE is CSI Solar's utility-scale battery energy storage platform. e-STORAGE provides customers with competitive turnkey, integrated, utility-scale battery energy storage solutions, including bankable, end-to-end, utility-scale, turnkey battery energy storage system solutions across various applications. System performance is complemented with long-term service agreements, which include future battery capacity augmentation services and bring in long-term, stable income.
As of June 30, 2024, e-STORAGE had a total project turnkey pipeline of around 66 GWh, which includes both contracted and in-construction projects, as well as projects at different stages of the negotiation process. In addition, e-STORAGE had approximately 3.1 GWh of operating battery energy storage projects contracted under long-term service agreements, all of which were battery energy storage projects previously executed by e-STORAGE.
As of June 30, 2024, the contracted backlog, including contracted long-term service agreements, was $2.6 billion. These are signed orders with contractual obligations to customers, providing significant earnings visibility over a multi-year period.
The table below sets forth e-STORAGE's manufacturing capacity expansion targets.
Battery Energy Storage Manufacturing Capacity, GWh*
June 2024
Actual
December 2025
Plan
SolBank
20.0
30.0
*Nameplate annualized capacities at said point in time. Capacity expansion plans are subject to change without noticebased on market conditions and capital allocation plans.
Operating Results
The following table presents select unaudited results of operations data of the CSI Solar segment for the periods indicated.
CSI Solar Segment Financial Results*
(In Thousands of U.S. Dollars, Except Percentages)
Three Months Ended
Six Months Ended
June 30, 2024
March 31, 2024
June 30,
2023
June 30,2024
June 30,
2023
Net revenues
1,731,470
1,342,153
2,013,993
3,073,623
3,723,723
Cost of revenues
1,441,897
1,094,568
1,726,154
2,536,465
3,120,275
Gross profit
289,573
247,585
287,839
537,158
603,448
Operating expenses
196,255
165,113
168,455
361,368
314,606
Income from operations
93,318
82,472
119,384
175,790
288,842
Gross margin
16.7 %
18.4 %
14.3 %
17.5 %
16.2 %
Operating margin
5.4 %
6.1 %
5.9 %
5.7 %
7.8 %
*Include effects of both sales to third-party customers and to the Company's Recurrent Energy segment. Please refer to the attached financial tables for intercompany transaction elimination information. Income from operations reflects management's allocation and estimate as some services are shared by the Company's two business segments.
The table below provides the geographic distribution of the net revenues of CSI Solar:
CSI Solar Net Revenues Geographic Distribution* (In Millions of U.S. Dollars, Except Percentages)
Q2 2024
% of Net Revenues
Q1 2024
% of Net Revenues
Q2 2023
% of Net Revenues
Americas
892
56
676
53
722
36
Asia
455
29
417
32
716
36
Europe and others
238
15
197
15
566
28
Total
1,585
100
1,290
100
2,004
100
*Excludes sales from CSI Solar to Recurrent Energy.
Business Outlook
The Company's business outlook is based on management's current views and estimates given factors such as existing market conditions, order book, production capacity, input material prices, foreign exchange fluctuations, the anticipated timing of project sales, and the global economic environment. This outlook is subject to uncertainty with respect to, among other things, customer demand, project construction and sale schedules, product sales prices and costs, supply chain constraints, and geopolitical conflicts. Management's views and estimates are subject to change without notice.
For the third quarter of 2024, the Company expects total revenue to be in the range of $1.6 billion to $1.8 billion. Gross margin is expected to be between 14% and 16%. Total module shipments recognized as revenues by CSI Solar are expected to be in the range of 9.0 GW to 9.5 GW, including approximately 100 MW to the Company's own projects. Total battery energy storage shipments by CSI Solar in the third quarter of 2024 are expected to be between 1.4 GWh to 1.7 GWh, including about 1.2 GWh to the Company's own projects.
For the full year of 2024, the Company expects total module shipments to be in the range of 32 GW to 36 GW and CSI Solar's total battery energy storage shipments in the range of 6.5 GWh to 7.0 GWh, including approximately 1 GW and 2.5 GWh respectively to the Company's own projects. The Company's total revenue is expected to be in the range of $6.5 billion to $7.5 billion.
Dr. Shawn Qu, Chairman and CEO, commented, "While we continue to navigate challenging market conditions, our focus remains on sustainable, profitable growth. We are beginning to see signs of market rationalization, as module pricing and input costs reach record lows. In line with our commitment to strategic future planning, we are adjusting certain capacity investments to ensure a resilient financial profile. We anticipate stabilization in the second half of the year. Although global economic and political uncertainties will likely persist in the coming months, we have consistently managed risk effectively for our shareholders, partners, and customers in the past—and we remain committed to doing so going forward."
Recent Developments
Canadian Solar
On August 19, 2024, Canadian Solar announced it had entered into a definitive agreement with PAG, pursuant to which PAG will subscribe for US$200 million in aggregate principal of convertible notes due 2029. The transaction is expected to close in the fourth quarter of 2024, subject to closing conditions. The Company will retain certain flexibility on drawdowns, using the net proceeds to optimize its capital structure.
On May 31, 2024, Canadian Solar announced it had published its 2023 Corporate Sustainability Report that showcases the Company's ongoing progress and achievements in its environmental, social, and governance (ESG) initiatives. The sustainability disclosures in this report are aligned with global standards set by the SASB (the Sustainability Accounting Standards Board) and the Global Reporting Initiative (GRI), with reference to the IFRS (the International Financial Reporting Standards) set by ISSB (International Sustainability Standards Board).
CSI Solar
On August 8, 2024, Canadian Solar announced it had signed a turnkey EPC contract for 100 MW / 200 MWh energy storage solutions with Fotowatio Renewable Ventures (FRV) Australia for FRV's Terang energy storage project in Victoria, Australia. FRV Australia, part of Jameel Energy and the Canadian infrastructure fund OMERS, is a leading developer of sustainable energy solutions. An energy storage supply agreement and a long-term service agreement had been signed between the companies. Construction of the project is scheduled to commence in August 2024.
On July 18, 2024, Canadian Solar announced it had signed a contract with Root-Power Ltd., part of YLEM Group, to supply 11 MW AC / 22 MWh AC energy storage solutions for Root-Power's Coryton Energy Park project located in Corringham, Essex, England. Construction of the project started in late May 2024. An energy storage supply agreement and long-term service agreement had been signed between the companies.
On July 9, 2024, Canadian Solar announced it had secured a contract with Aypa Power to deliver a 498 MWh DC standalone battery energy storage system for Aypa's Bypass Project in Texas. The project is scheduled for completion in the third quarter of 2025. After integrating and commissioning the project to commercial operation, e-STORAGE will provide ongoing operational support for the project under a long-term service agreement.
On July 8, 2024, Canadian Solar announced it had secured a contract from Nova Scotia Power to develop flagship energy storage projects across three locations in Nova Scotia, Canada: Bridgewater, Waverley, and White Rock. The projects total 150 MW / 705 MWh DC. Construction will be completed by the end of 2026, and the first site is expected to be operational in 2025. e-STORAGE will provide comprehensive EPC services along with long-term service agreements.
On June 20, 2024, Canadian Solar announced it had entered into a partnership agreement with leading renewable energy supplier Lifestyle Solar Inc. to provide solar and energy storage solutions to homebuilders in California. Canadian Solar will offer its new N-type modules from its factory in Mesquite, TX, and the innovative stackable EP Cube home battery, enabling Lifestyle Solar's clients to achieve energy resilience and lower electricity costs.
On June 13, 2024, Canadian Solar announced it had entered into an agreement with U.S. homebuilder D.R. Horton to offer its solar and energy storage products across communities in California. In its commitment to excellence, D.R. Horton has chosen Canadian Solar's solar panels and batteries, a testament to the superior quality of Canadian Solar's products.
Recurrent Energy
On August 6, 2024, Canadian Solar announced it had completed the sale of an 83 MWp project in the Dominican Republic to Grupo País and Acciona Energía. The Pedro Corto solar project, located in San Juan de la Maguana, is in the late stage of development.
On July 24, 2024, Canadian Solar announced it had achieved the financial close on a €50 million loan from the European Investment Bank. The facility will support the development and construction of a solar energy portfolio in Italy.
On July 10, 2024, Canadian Solar announced it had signed a 10-year power purchase agreement with GKN Automotive, a global leader in drive systems, for the annual production of approximately 200 GWh of renewable electricity produced by Recurrent Energy's 115 MWp Rey I Project located in Seville, Andalucia, Spain. Currently under construction, Rey I is expected to be fully operational by the first half of 2026. Recurrent Energy will own and operate the project upon completion.
On June 27, 2024, Canadian Solar announced it had signed a $103 million tax credit facilitation agreement with Bank of America for its North Fork Solar Project. The 160 MW solar project, located southwest of Oklahoma City, is now operational.
On June 20, 2024, Canadian Solar announced it had secured $513 million in project financing for its landmark Papago Storage project located in Maricopa County, Arizona. Construction of the 1,200 MWh Papago Storage is slated to commence in the third quarter of 2024, with commercial operations expected to begin in the second quarter of 2025. This project holds a 20-year tolling agreement with Arizona Public Service, and Recurrent Energy will own and operate the project after construction.
On June 17, 2024, Canadian Solar announced it had achieved commercial operation on its first portfolio of Japan's feed-in premium (FIP) PV projects on June 1, 2024. Toyota Tsusho Corporation entered into a 20-year power purchase ...
