GUELPH, ON, Aug. 18, 2022 /PRNewswire/ — Canadian Solar Inc. (“Canadian Solar” or the “Company”) (NASDAQ: CSIQ) today announced financial results for the second quarter ended June 30, 2022, with solar module shipments, revenue and gross margin all at or exceeding the high end of prior guidance.

 

Highlights

• ●Solar module shipments of 5.06 GW, at the high end of 4.9 GW to 5.1 GW guidance range.
• ●62% increase in revenue year-over-year (“yoy”)　
  

  　to $2.31 billion, above the high end of $2.2 billion to $2.3 billion guidance range.

• ●16.0% gross margin exceeds the guidance range of 14.5% to 15.5%.
• ●Net income attributable to Canadian Solar of $74 million, or $1.07 per diluted share.
• ●Accelerating upstream capacity expansion plans to further increase control over supply chain.
• ●Global Energy solar project pipeline expands to 26 GWp and storage pipeline expands to over 31 GWh,　
  

  　as of June 30, 2022.

• ●Carve-out IPO of CSI Solar Co., Ltd. (“CSI Solar” or the “CSI Solar subsidiary”) remains on track awaiting　
  

  　completion of the CSRC registration.

 

Second Quarter 2022 Results

Total module shipments recognized as revenues in the second quarter of 2022 were 5.06 GW, up 37% yoy. Of the total, 126 MW were shipped to the Company’s own utility-scale solar power projects.

 

Net revenues in the second quarter of 2022 were $2.31 billion, up 85% quarter-over-quarter (“qoq”) and 62% yoy. The sequential and yoy increases were mainly driven by higher project sales, higher solar shipment volumes and average selling price, and significant growth in the Company’s battery storage solutions business.

 

Gross profit in the second quarter of 2022 was $371 million, up 105% qoq and 101% yoy. Gross margin in the second quarter of 2022 was 16.0%, above prior guidance, and compared to 14.5% in the first quarter of 2022. The sequential gross margin increase was mainly driven by higher module pricing, lower manufacturing costs from the depreciation of the Renminbi relative to the U.S. Dollar and scale benefits from higher volume.

 

Total operating expenses in the second quarter of 2022 were $255 million compared to $165 million in the first quarter of 2022 and $158 million in the second quarter of 2021. The sequential increase was mainly driven by higher shipping and handling expenses and an impairment charge related to certain manufacturing assets.

 

Depreciation and amortization charges in the second quarter of 2022 were $63 million, compared to $66 million in the first quarter of 2022 and $66 million in the second quarter of 2021.

 

Net foreign exchange and derivative gain in the second quarter of 2022 was $6 million, compared to a net gain of $3 million in the first quarter of 2022 and a net loss of $3 million in the second quarter of 2021.

 

Income tax expense in the second quarter of 2022 was $28 million, compared to a $5 million income tax benefit in the first quarter of 2022 and a $2 million income tax benefit in the second quarter of 2021. The expense was a result of the Company’s higher income before income tax.

 

Net income attributable to Canadian Solar in the second quarter of 2022 was $74 million, or $1.07 per diluted share (“diluted EPS”), compared to net income of $9 million, or $0.14 per diluted share, in the first quarter of 2022, and net income of $11 million, or $0.18 per diluted share, in the second quarter of 2021.

 

For the three months ended June 30, 2022, diluted EPS of $1.07 was calculated to include the dilution effect of the outstanding convertible notes. Diluted EPS of $1.07 was calculated from total earnings of $76 million, adding back the 2.5% coupon of $1.3 million, divided by 71.1 million diluted shares, including 6.3 million shares issuable upon the conversion of the convertible notes. For the three months ended March 31, 2022, diluted EPS of $0.14 was calculated from total earnings of $9 million divided by 64.7 million diluted shares. For the three months ended June 30, 2021, diluted EPS of $0.18 was calculated from total earnings of $11 million divided by 61.3 million diluted shares.

 

Net cash flow provided by operating activities in the second quarter of 2022 was $293 million, compared to net cash flow provided by operating activities of $159 million in the first quarter of 2022. The increase in operating cash inflow was mainly driven by higher earnings and monetization of project assets.

 

Total debt was $2.7 billion as of June 30, 2022, unchanged from March 31, 2022. Non-recourse debt used to finance solar power projects decreased to $264 million as of June 30, 2022, from $550 million as of March 31, 2022, mainly due to the monetization of project assets.

 

Corporate Structure

The Company has two business segments: Global Energy and CSI Solar, which operate as follows:

 

The Global Energy segment carries out the Company’s global project development activities for both solar and battery storage project development, which include sourcing land, interconnection agreements, structuring PPAs and other permits and requirements. The Global Energy segment develops both stand-alone solar and stand-alone battery storage projects, as well as hybrid solar plus storage projects. Its monetization strategies vary between develop-to-sell, build-to-sell, and build-to-own, depending on business strategies and market conditions, with the goal of maximizing returns, accelerating cash turn, and minimizing capital risk.

 

The CSI Solar segment consists of solar module manufacturing and total system solutions, including inverters, solar system kits and EPC (engineering, procurement and construction) services. The CSI Solar segment also includes the Company’s battery storage system integration business, delivering bankable, end-to-end, turnkey battery storage solutions for utility scale, commercial and industrial, and residential applications. These storage systems solutions are complemented with long-term service agreements, including future battery capacity augmentation services.

 

Global Energy Segment

Canadian Solar has one of the world’s largest and most geographically diversified utility-scale solar and energy storage project development platforms, with a strong track record of originating, developing, financing, and building over 6.8 GWp of solar power plants across six continents. The Company has built a leadership position in solar project development with 26 GWp total pipeline, as well as in energy storage project development with over 31 GWh of aggregate pipeline.

 

The continued pipeline expansion and strong project development track record will support Global Energy’s growth in three key areas:

 

1. Project sales: The Company plans to grow its volume of project sales by a compound annual growth rate of approximately 50% to 2026, while holding and accumulating assets through investment vehicles (see below) in order to better capture asset value.

 

2. Investment vehicles: The Company is optimizing its project monetization strategy by establishing local investment vehicles that will help maximize the value of its project assets. The Company also intends to retain minority ownership in these vehicles. By 2026, the Company plans to reach 1.3 GW of combined net ownership in solar power projects through these vehicles. This approach will help the Company build and grow a stable base of long-term cash flows from contracted electricity. The Company plans to recycle a large portion of the capital into developing new solar projects for growth. Meanwhile, Canadian Solar expects to capture additional operational value throughout the partial ownership period, including long-term cash flows from power sales, O&M, asset management and other services (see point 3). The Company currently owns a 15% stake in the Canadian Solar Infrastructure Fund (“CSIF”, TSE: 9284), the largest Japanese infrastructure fund listed on the Tokyo Stock Exchange, and has also established the CSFS Fund I, a closed-ended alternative investment fund of a similar nature in Italy. Through launching these localized vehicles, Canadian Solar is building its expertise in designing investment vehicles in local markets that will help maximize the value of its project assets.

 

3. Services: Canadian Solar currently manages over 3.1 GW of operational projects under long-term O&M agreements, and an additional 2.4 GW of contracted projects that will be operated and maintained by the Company once they are placed in operation. The Company’s target is to reach 20 GW of projects under O&M agreements by 2026.

 

Management targets to achieve the following over the next few years:

 

Solar Project Pipeline

As of June 30, 2022, the Company’s total project pipeline was 26.2 GWp, including 1.3 GWp under construction, 3.9 GWp of backlog, and 21.0 GWp of projects in advanced and early-stage pipelines. We have updated our project pipeline classification 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 PPAs. Over 90% of projects in backlog are contracted (i.e., have secured a PPA or FIT), and the remaining are reasonably assured 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 Canadian Solar that are in the process of securing interconnection.

 

The following table presents Global Energy’s total solar project development pipeline.

 

Battery Storage Project Pipeline

In addition to developing utility-scale solar power projects, the Global Energy segment has also been developing hybrid solar plus energy storage projects, as well as stand-alone battery storage projects. Since the first quarter of 2021, the Company has been co-hosting energy storage facilities with solar power plants on the same piece of land for nearly all projects under development. By using a single interconnection point per project, the Company expects to significantly enhance the efficiency of its development and the value of its assets under development.

 

Canadian Solar’s storage development business model also includes signing storage tolling agreements with a variety of power purchasers, including community choice aggregators, investor-owned utilities, universities, and public utility districts. In addition, the Company has signed development services agreements to retrofit operational solar projects with battery storage, many of which were previously developed by the Company.

 

The table below sets forth Global Energy’s total storage project development pipeline.

 

Solar Power Plants and Battery Storage Projects in Operation

As of June 30, 2022, the Company’s solar power plants in operation totaled 311 MWp, with a combined estimated net resale value of approximately $270 million to Canadian Solar. The estimated resale value is based on selling prices that Canadian Solar is currently negotiating or comparable asset sales.

Operating Results

The following table presents select unaudited results of operations data of the Global Energy segment for the periods indicated.

 

CSI Solar Segment

CSI Solar’s 2022 and 2023 capacity expansion targets are set forth below.

 

Operating Results

The following table presents select unaudited results of operations data of the CSI Solar segment for the periods indicated.

 

The table below provides the geographic distribution of the net revenues of CSI Solar:

 

CSI Solar shipped 5.06 GW of modules to more than 70 countries in the second quarter of 2022. The top five markets ranked by shipments were China, the U.S., Spain, Brazil and Germany.

 

Battery Storage Solutions

Within CSI Solar, the battery storage solutions team provides customers with competitive turnkey, integrated battery storage solutions, including bankable and fully wrapped capacity and performance guarantees. These guarantees are complemented with long-term service agreements, which include future battery capacity augmentation services and bring in long-term, stable income.

 

The table below sets forth CSI Solar’s battery storage system integration’s project pipeline as of June 30, 2022.

LTSA projects are operational battery storage projects delivered by CSI Solar that are under multi-year long-term service agreements and generate recurring earnings. Contracted/in construction projects are expected to be delivered within the next 12 to 18 months. Forecast projects include those that have more than 75% probability of being contracted within the next 12 months, and the remaining pipeline includes projects that have received exclusivity agreements or have been shortlisted, but still have a below 75% probability of being contracted.

 

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SOURCE Canadian Solar Inc.