Canadian Solar Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 21, 2025

Key Takeaways

  • Neutral Sentiment: In Q2, Canadian Solar shipped 7.9 GW of modules (near the high end of guidance) and 2.2 GWh of storage, generating $1.7 B in revenue and a 29.8% gross margin, but reported net income of $7 M (a $0.08 per share loss).
  • Neutral Sentiment: The “One Big Beautiful Bill” Act introduces more stringent FEOC requirements and import deadlines impacting up to 23 GW of existing U.S. solar capacity, with ITC credits phasing out by 2027, though management expects long-term demand growth.
  • Negative Sentiment: Rising polysilicon, ingot and wafer costs—driven by Chinese supply-side measures and U.S. tariffs—are expected to outpace module price increases in H2 2025, while storage margins normalize as lithium carbonate cost benefits taper.
  • Positive Sentiment: In 2024 sustainability efforts, Canadian Solar cut greenhouse gas emissions by 54%, reduced waste intensity by 53%, recycled 94% of waste, and completed 147 supplier ESG audits, earning silver RBA VAP recognition at two facilities.
  • Positive Sentiment: Recurrent Energy’s global development pipeline now totals 27 GW of solar and 80 GWh of storage, with 1.6 GW of U.S. projects safe-harbored and its first merchant 200 MWh Texas storage project energized and financed.
AI Generated. May Contain Errors.
Earnings Conference Call
Canadian Solar Q2 2025
00:00 / 00:00

There are 11 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's Second Quarter twenty twenty five Earnings Conference Call. My name is Daryl, 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.

Operator

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Winna Wong, Head of Investor Relations at Canadian Solar. Please go ahead.

Speaker 1

Thank you, operator, and welcome everyone to Canadian Solar's second quarter twenty twenty five 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 Presentations section. Joining us today are Doctor. Sean Hsu, Chairman and CEO Yan Zhong, President of Canadian Solar's subsidiary CSI Solar Ismail Guerrero, Corporate VP and President of Canadian Solar subsidiary Recurrent Energy and Simhua Dhru, Senior VP and CFO. All company executives will participate in the Q and A session after management's formal remarks.

Speaker 1

On this call, Sean will go over some key messages for the quarter. Yan and Ismail will review business highlights for CSI Solar and Recurrent Energy respectively. Hugh will go through the financial results. John 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.

Speaker 1

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.

Speaker 1

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.

Speaker 1

And now I would like to turn the call over to Canadian Solar's Chairman and CEO, Doctor. Sean. Sean, please go ahead.

Speaker 2

Thank you, Wina, and thank you all for joining our second quarter earnings call. Please turn to Slide three. In the second quarter, we delivered 7.9 gigawatts of modules near the end of our guidance, near the high end of our guidance. Storage shipment reached 2.2 gigawatt hours, below guidance due to tariff impacts, which shifted deliveries into the second half. Revenue totaled $1,700,000,000 for the quarter, also impacted from certain project sales delay.

Speaker 2

Gross margin exceeded guidance at 29.8%, driven by a higher mix of North America module shipments with notable contributions from our Texas module factory, which has made strong progress in ramping up. Robust storage performance further supported margins. Profitability was weighted down by certain non recurring operating expenses, including the impairment of remaining legacy manufacturing assets. As a result, we reported net income attributable to shareholders of $7,000,000 or a net loss of $0.08 per diluted share due to the PIK accounting for our preferred shareholder of recurrent. Over the past few months, our industry has faced a challenging policy environment.

Speaker 2

While the industry continues to adjust to the recently passed One Big Beautiful Bill Act, I would like to discuss some potential impacts at this time. Please turn to Slide four. The One Big Beautiful Bills Act has swiping implications for both supply and demand in The U. S. On the supply side, solar and storage domestic onshoring is challenged by increasingly stringent FEOC requirements and higher import due dates on both equipment and components.

Speaker 2

According to Wood Mackenzie, up to 23 gigawatts of operating solar module capacity could be affected. Cell capacity, which requires more complex manufacturing process and higher capital expenditure could also moderate. On the demand side, outlooks across solar, energy storage, and distributed generation appear mixed. Other than for projects that have been safe harbored, the investment tax credit or ITC for solar will phase out by the 2027. Meanwhile, energy storage project must navigate annual FEOC threshold to maintain developer credit.

Speaker 2

Despite this near term uncertainty, the long term outlook of our industry remains strong. AI, cryptocurrency and other energy intensive applications are driving rising electricity demand and solar plus storage is among the most cost competitive solutions to meet this demand. Future growth will continue to be underpinned by solid fundamentals. As with challenges we have overcome in the past two decades, we believe that a new paradigm creates new opportunities. Today, every part of our business is deeply engaged in The U.

Speaker 2

S. Market. We deliver both solar and storage solutions across utility scale, D and I and residential applications. We are a domestic manufacturer and a local project developer. We remain committed and will do what is necessary to continue prioritizing this market.

Speaker 2

Another ongoing commitment is our focus on sustainability. On May 29, we released our 2024 sustainability report. Please turn to Slide five. We are proud of our continued progress in our sustainability journey and reporting standards. In 2024, Canadian Solar reduced greenhouse gas emissions, energy, water, and waste intensities by 54%, 37%, 75%, and 53% respectively compared to 2017 levels.

Speaker 2

Consistent with our commitment to improving our environmental footprint, we increased the percentage of recycled and reused waste to 94% in 2024. We're maintaining 100% recycling or reuse of all packaging materials used in our production process. We also continue to uphold the highest standards of technical business conduct across our supply chain. After receiving silver level recognition in 2023 for the RBA VAP audit of our Thailand module facility, we achieved another silver level recognition this year for our solar cell factory in Shuchen, Jiangsu Province, China. In 2024, we conducted 147 supplier ESG audits, including 31 on-site evaluation, surpassing our twenty twenty three totals.

Speaker 2

Following collaborative consultations and the corrective action plans, all suppliers met our stringent ESG criteria. 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.

Speaker 3

Thank you, Sean. Please turn to Slide six. In the 2025, module shipments reached 7.9 gigawatts, near the high end of our expectations. Energy storage deliveries were below guidance due to tariff impacts, shifting some shipments to the second half. Despite this, we still delivered one of our strongest quarter with 2.2 gigawatt hours of storage shipments.

Speaker 3

Revenue reached $1,700,000,000 with gross margin expanded eight ninety basis points quarter over quarter to 22.3%. This increase was primarily driven by a stronger mix of North American module volumes and the installation search in China, which increased both industry wide volumes and pricing. As a result, we achieved a sequentially higher average selling price in our module business. Strong storage volumes and healthy margin further reinforced gross margin performance. Given the phase out of legacy PERC technology, we wrote down our remaining related assets Together with other smaller non recurring items, operating expenses rose sequentially from 13.2% to 15.3% of revenue and we delivered $121,000,000 in operating income.

Speaker 3

Although costs in the module business remained stable in the second quarter, we are now seeing rising supply chain costs driven by the anti involution campaign in China. Combined with tariffs, duties and the incremental impact of underutilization, these factors will raise unit costs in the second half. While module pricing shows signs of improvement, we expect price increases to lag rising costs, creating pressure on module profitability. We expect additional pressure from normalizing storage margins. The cost benefit from decreasing lithium carbonate prices, which supported gains in 2024 and the first half of this year is now tapering off.

Speaker 3

For more details on this business, please turn to Slide seven. In the second quarter, we recognized revenue on 2.2 gigawatt hours of storage solutions with sizable deliveries to customers in Europe, North America and Latin America. Due to tariffs, some opportunities shifted into the second half in 2026. Importantly, these are not lost opportunities. Demand remains robust and we continue to actively support customers in navigating trade related uncertainties.

Speaker 3

As of June 30, contracted backlog including long term service agreement was $3,000,000,000 To support our growth, we are expanding our globally diversified capacities from 10 gigawatt hours of best and three gigawatt hours of battery cell today to 24 gigawatt hours and nine gigawatt hours respectively by 2026 year end. The expanded best capacity will enable us to scale shipments as needed from quarter to quarter with additional headroom if we add working shifts. Our battery cell capacity also strengthens our upstream strategy by helping us manage risk across cycles, while providing customers with greater supply chain flexibility. The market is growing quickly and we are scaling alongside it. To remain competitive, we must continue to uphold the highest safety standards and drive product innovation.

Speaker 3

Please turn to Slide eight. In June, we successfully completed large scale fire testing for our SolBank three point zero energy storage system. The test confirmed that our system meets key fire safety criteria by containing thermal events within the single enclosure. The results were independently witnessed and verified by both CSA Group and the Energy Safety Responses Group. In residential storage, EPQ won the Japan International Pioneer Design Award or IDPA in the electrical products category.

Speaker 3

This award was established in 2018 in Tokyo and has since become one of the most influential international design awards for pioneering design globally. This quarter, our proprietary residential energy storage system also earned the prestigious Red Dot Award, often described as the Oscars of Industrial Design. These recognitions are in addition to the IF design award and the MUSE Design Gold Award that EPQ received earlier this year. EPQ has made strong progress in its target markets since we earned the prestigious JET Compliance Certification. Shipments to Japan have surged, now approaching 1,000 units per month.

Speaker 3

We're also steadily advancing in Europe and The U. S. We expect significant growth ahead in this business and we continue to develop other emerging profit drivers such as bundled sales solutions. With that, let me hand the call over to Ismail, who will provide an update on Recurrent Energy, Canadian Solar's global project development business. Ismail, please go ahead.

Speaker 4

Thank you, Ian. Please turn to Slide nine. In the second quarter, we generated $106,000,000 in revenue. Revenue was sequentially lower, primarily due to lighter project sales. We monetized over 200 megawatts of projects in Europe and Japan, including our first profitable sale of a battery storage project in Italy, while a large project sale in Latin America shifted into the second half of the year.

Speaker 4

Gross margin was 32.4%, reflecting healthy project sales returns and stable margins in electricity sales from our operating portfolio and growing Power Services business. The solar power system write down in Latin America, combined with other nonrecurring expenses, led to elevated operating expenses and an operating loss of $74,000,000 We remain focused on disciplined execution while managing ongoing trade and policy risks. We energized our first merchant 200 megawatt hour Fort storage project in Texas. Despite Fort Duncan being a merchant storage project, we were able to secure both project finance and tax equity for this project. Within the quarter, we also achieved an important milestone at Blue Moon Solar in Kentucky, closing $260,000,000 of project financing and tax equity.

Speaker 4

The off taker for this project is Constellation, who will purchase power and renewable energy certificates generating by this nearly 100 megawatt facility. Please turn to Slide 10 for an update on our pipeline. As of 06/30/2025, we own interconnections for eight gigawatts of solar and 16 gigawatt hours of storage globally, excluding projects already in operation. Our total pipeline now stands at 27 gigawatts of solar and 80 gigawatt hours of storage. In The U.

Speaker 4

S. And Europe, we have 500 megawatts of solar and about 1.7 gigawatt hours of storage already in operation. Meanwhile, we are building more than 1.3 gigawatts of solar and 600 megawatts of storage in these markets as we speak. This positions us with one of the largest and most globally diversified pipelines in the industry, giving us significant runaway to grow in the future and the flexibility to focus our resources to advance the most attractive projects and markets. In The U.

Speaker 4

S, we have already safe harbor 1.6 gigawatts of solar projects that are in execution or late stage development. We continue to execute our safe harbor strategy on an additional 2.3 gigawatts of solar through off-site start of construction, providing both increased flexibility over the coming years and a competitive advantage as U. S. Assets gain value under the updated tax credit policies. At the same time, we are expanding our battery storage pipeline, particularly in The U.

Speaker 4

S, Europe and Japan, where we already hold store market positions. Our O and M business continues to gain traction with 10.5 gigawatts currently in operation and 3.2 gigawatts contracted coming into service in the next quarters. Finally, we are advancing development of our data center sites in both The U. S. And Spain, where we expect to have the first projects ready within the next few quarters.

Speaker 4

Now I will hand the call to Shimbo to review our financial results. Shimbo, please go ahead.

Speaker 5

Thank you, Ismail. Please turn to Slide 11. In the second quarter, we delivered 7.9 gigawatts of modules, near the high end of our guidance. We shipped 2.2 gigawatt hours of storage, below expectations due to delayed shipments. With additional impact of delayed project sales, total revenue was $1,700,000,000 Gross margin was 29.8%, elevated by a sale type that is related to a U.

Speaker 5

S. Project and an ADCVD two hour adjustments. Excluding this onetime impact, gross margin would have been 21.6%, sequentially higher due to stronger North American module mix and the storage volumes. Operating expenses increased to $378,000,000 primarily due to non recurring items, including impairment charge related to certain solar and storage assets, as well as manufacturing assets. Without these items, operating expenses would have been $259,000,000 or 15.3% of revenue compared to 16.3% in the fourth quarter.

Speaker 5

Net interest expense rose from $28,000,000 in the first quarter to $35,000,000 reflecting higher borrowings and recurrent energy and lower interest income. Net foreign exchange loss was $13,000,000 primarily driven by dollar weakness. Net income attributable to shareholders was $7,000,000 or a net loss of $08 per diluted share. This result included a positive $30,000,000 HLBV impact or $0.45 per share from tax equity arrangements tied to certain U. S.

Speaker 5

Projects.

Speaker 3

Dollars $0.01

Speaker 5

9 per diluted share of preferred dividend impact lead to the diluted loss per share to shareholders. Please turn to Slide 12 for cash flow and the balance sheet. Net cash inflow from operating activities was $189,000,000 compared with an outflow of $264,000,000 in the first quarter. Cash inflow was primarily driven by change in working capital, specifically a decrease in inventories. Total assets grew to $14,800,000,000 with project assets rising to 1,200,000,000.0 $1,700,000,000 Solar power systems and battery energy storage systems now stand at $2,000,000,000 CapEx totaled $173,000,000 mainly reflecting payments for existing capacities.

Speaker 5

Our full year 2025 CapEx outlook remains unchanged at approximately $1,200,000,000 primarily driven by investment in U. S. Manufacturing initiatives. Total debt increased to $6,300,000,000 mainly due to new borrowings for project development and operational assets. We closed the quarter with a cash position of $2,300,000,000 Looking ahead, we remain focused on disciplined debt management and the prudent liquidity oversight, aligned with industry dynamics and our financial fundamentals.

Speaker 5

In light of ongoing profitability pressures in both manufacturing and the project development businesses, we expect to gradually reduce leverage from current levels over the next month. Now, let me turn the call back to Sean, who will conclude with our guidance and the business outlook.

Speaker 2

Sean, please go ahead. Thank you, Xinbo. Please turn to Slide 13. For the third quarter of twenty twenty five, we expect to deliver module volumes between five to 5.3 gigawatt. For energy storage shipments, we expect to deliver 2.1 to 2.3 gigawatt hours, including about two fifty megawatt hours to our own project.

Speaker 2

We project third quarter revenue to be in the range of $1,300,000,000 to $1,500,000,000 with gross margin expected to be between 14 to 16%. Sequential lower margins reflect the impact of rising solar manufacturing costs, driven in part by supply chain price increases and normalizing storage margins. For the full year of 2025, we are narrowing our module volume guidance to 25 to 27 gigawatts, including approximately one gigawatt to our own project. The reduced midpoint of our module guidance primarily reflects our self restraint, which results in a decision to reduce exposure to less profitable markets. For energy storage shipments, given increased near term visibility in the trade environment, we are maintaining our storage shipment guidance of seven to nine gigawatt hours for the full year of 2025, including approximately one gigawatt hour allocated to our own projects.

Speaker 2

We're revising our full year revenue guidance to between 5,600,000,000.0 and $6,300,000,000 This reflects the delay of certain project sales into 2026 and more conservative module pricing in the second half, driven by weakening demand in China. With that, I would like to now open the floor for questions. Operator?

Operator

Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Colin Rusch with Oppenheimer. Please proceed with your questions.

Speaker 6

Thanks so much guys. Now, could you talk a little bit about the PERC write down here and the impact ultimately on margins? I'm just trying to get a sense of how much that really impacts from a percentage basis on your margin sale or on your module sales? Does that start to look like two or three points or is it a little bit more than that?

Speaker 2

Well, we decided to roll it off pretty much all of our perk equipment asset this quarter, because in Q2, we stopped the manufacturing of PERC product. So, we think this is the right time to the write off. Now the write off was, I believe, quite a big impact. It's 46,000,000. Yes.

Speaker 6

Okay. I'll follow-up on manufacturing afterwards. Just with the treasury rules that have come out, I think everybody is trying to understand how developers are going to approach their safe harboring strategy qualification.

Speaker 7

Can you

Speaker 6

guys give us a sense of where you're at from a safe harboring perspective? What you're seeing from any of your customers on the module side? And how you anticipate some of the enforcement realities for the industry, given just your first look in less than a week of being able to evaluate the new rules?

Speaker 2

Colin, as you know, our subsidiary, Recurrent, is a long term player with twenty years of operating in The U. S. Market. So, we have been safe harboring several times because ITC reached the deadline several times in the past ten, thirteen years. So, every time we approach the deadline, we safe harbor.

Speaker 2

So, we are very familiar with the role. So, and we're pleased to see that the newly released guidance, the new guidance for the safe harbor pretty much confirm that our standard strategy for safe harbor is correct and also is prudent. So, our current safe harbor project, we see no change. And as Ismail said in his speech, we are safe harboring a little bit more. Well, actually, we are safe harboring 2.3 gigawatt more of project.

Speaker 2

So, if recurrent achieve this goal, then 1.6 plus 2.3 no, 1.6 plus 2.3, well, we will be able to safe harbor somewhere close to four gigawatts. So, that will give us a very strong pipeline in US. You know, four gigawatts is almost equal to one gigawatt each year. So, you can see that for say four years a fiber is pretty significant, it shows our strong ability, recurrent, the strong ability and very solid practice in the development procedure. As for the whole industry, that's a good question.

Speaker 2

We have been sending our antevent up and but it has only been a few days, so I don't have that much industry wide safe harbor information. However, I would say for the developers who have similar experience, they should see the same thing as the recurrent. So, I think the industry has relieved that at least their work so far has been recognized. Ismail, do you want to add some more colors?

Speaker 4

Thank you, Sean. Look, I think, Colleen, thanks for the question. I think we've been a little bit lucky too, because many of our projects have local community others. So we started to safe harbor to make sure that we enjoy those others. And as a result, we have a pretty advanced pipeline of safe harbor already online.

Speaker 4

And we always use the off-site start of construction. So it looks like the current regulation is not changing that. So we've been a little bit lucky this time.

Speaker 8

Okay. Thanks so much, guys.

Operator

Thank you. Our next question has come from the line of Philip Shen with Roth Capital Partners. Please proceed with your question.

Speaker 9

Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. Given the OBBB and Fiat in The U. S, do you believe Canadian Solar and its subsidiaries are currently Fiat compliant? If so, could you please give some details around what gives you confidence?

Speaker 9

And then if not, like what steps are you taking to comply with FIAC? And then lastly on FIAC, how are you planning for potentially stricter FIAC IRS guidance that could come out sometime next year?

Speaker 2

Mark, thank you for the question. I kind of expected this question. Now, as you know, OBBA have different requirements for different years. So, based on that yearly fee requirement, yes, Canadian Solar, yes, comply with OBPA requirement after this moment, and we will continue, we believe we will continue to be compliant for the future years. As you know, every year, the PR condition change, including the percentage change.

Speaker 2

So, we have a plan to make sure that the Canadian Solar three factory, which is a solar module factory, solar cell factory, and also the energy storage factory continue to meet the OBBA requirement this year.

Speaker 9

And just on potential guidance, they're going to release guidance on the FiOQ restrictions, And those potentially could be a little bit stricter than kind of the language that's in the bill. How are you guys planning for that kind of situation?

Speaker 2

Well, we are our internal legal team, accounting team, and the external team have debated and due diligence in the past more than a month. But ever since July 4, when the OBPA was signed to law, we have been studying it and debating and doing due diligence. So we think our understanding of the bill is pretty conservative. And well, there may be some change or some clarifications of the guidance. Well, I mean, the IRS guidance might clarify some of the point.

Speaker 2

But I believe as long as those are the guidance to interpret it, the OBBBA, it can't change very much from the legal language itself in the bill. Therefore, we believe some were a little bit more restrictive, a little bit less restrictive guidance from IRS will not change our judgment call. So, I think our current strategy is quite solid to so that we can first of all, we make sure our customers will be able to claim their ITC because our chairman meet the OBBBA rule of that particular year and also our factory, three factories in US, will be able to claim the 45X for any of the particular year.

Speaker 9

Great. Really appreciate the color there, Sean. If I could just squeeze in one more on policy, given like the upcoming Section two thirty two case on polysilicon and its derivatives as well as it seems like they're reinforcing UFLPA with Q cells getting recently detained. How are you guys looking at your upstream supply chain and maybe different strategies there for The U. S.

Speaker 9

Capacity?

Speaker 2

Well, you probably know that Canadian Solar filed our comment to Department of Commerce for the section two thirty two polysilicon. And I believe you can get access to our filings through your lawyer or whatever. But basically, we believe that polysilicon for solar is not a national security concern, because I don't think US even want that much solar. Anyway, so why is solar grade polysilicon a national security control? You know, concern, the country has enough coal, oil, gas, you know, everything, right?

Speaker 2

The country is very fossil fuel. Planned it. So, based on that, we don't feel like polysilicon or solar is should be a national security control. However, we are waiting for the process to run to the end, and at this moment, I don't want to speculate.

Speaker 9

Okay, great. Thanks for the answers,

Speaker 2

Sean. Thank

Operator

you. Our next questions come from the line of Maheep Mandloy with Mizuho Securities. Please proceed with your questions.

Speaker 7

Hi. Thanks for taking questions. Maybe follow more on the pre op side. Appreciate the color there. But we can just talk more about the 45 x eligibility for The US assets.

Speaker 7

I'm sorry, The US manufacturing line, or the strategy to be compliant there? Or do you need more information from Treasury guidance to help with that? And then I have a follow-up, especially on tariffs.

Speaker 2

Yeah. Well, I think our team, including our internal legal team and our external councils believe that OBBBA is quite clear in terms of the FEOC and the material assistance definition and requirement. So, we pretty much understand the meaning of those language and clauses. As I mentioned that the IRS guidance may clarify a few points, but as those long guidance follows the language in the OPBBA itself, then I think our strategy is, you know, we have a good understanding. Therefore, our assessment is solid.

Speaker 2

And for 45X, both the 45X and for energy storage and for solar will continue according to the previous schedule. So, as you know, there's no change on the like in terms of the schedule in terms of the timeframe and also the ramp down schedule of those incentives. And however, there are different material assistance table for each year. So, we just have to every year we do a due diligence and calculate and just to make sure that our product meet those tables. And fortunately, solar is a global manufacturing.

Speaker 2

Energy storage is also more or less a global manufacturer. So, they are suppliers of the key material for both solar and for energy storage from several different countries. So, I believe that give us the ability to navigate and to meet to comply with the material assistance requirement, the percentage for each year. Now, mentioned IRS guidance. Well, people have been speculating how much maybe the IRS guidance can help people a little bit.

Speaker 2

For example, IRS published a table for the domestic content in the past, which stop guessing, you know, each component, a guidance specified percentage. So, makes the job easy and also standardized it. So, we'll see whether the IRS guidance for material assistance follow the same thought, same path, or maybe follow a different path. So, for me, that's something we are waiting to see. If somehow it follows the same path, well, it stops, then at least everybody will use the same table.

Speaker 2

But maybe it will follow a different path for material assistance. So, that's something we are waiting to see. However, as I said, the OPBBA itself is already quite clear. For example, it defines the component like to be, for example, over 60% for 2026 for energy storage and I believe 55%, right? Or 50% for solar.

Speaker 2

So, that's pretty clear. Any company who have employed a few capable accountant can do their calculation. So yes, just with this language, we have we can already calculate our percentage. But if IRS instead publish a table for everybody to use, that also work. So, I think, one way or another, We already calculated, look at our product.

Speaker 2

We think our so far at this moment, our percentage will be way over above the minimum requirement for the next few years. So that's why I think we are, have a good strategy to be OBBBA compliant.

Speaker 7

Thanks. I appreciate the color on the materials. A quick one on the polypyrite to get that. Do you anticipate reducing CSI solar ownership in The US manufacturing? Just trying to understand the strategy there and the timeline on when to expect any changes in the structures of The US manufacturing.

Speaker 2

Yes, this year, we don't have to our structure comply. Next year and the year after, we will have a minute company will have to do something to make sure they always comply with the OBB and Canadian SolarWinds do the same. As I said, we have a strategy. So, we will be able to be we will be I think we have a solid strategy to be OBBBA compliant every year.

Speaker 7

Yes. Thanks for the color. I'll take the rest offline.

Speaker 3

Thank you.

Operator

Thank you. Our next question has come from the line of Allen Lau with Jefferies. Please proceed with your questions.

Speaker 8

Thanks for taking my question. Would like to ask on there was a meeting in China. I think it it was probably Tuesday in the Ministry of Industry and Information Technology. So first of all, we'd like to know if Canadian Solar has participated in that meeting. And then secondly is, do you think the price hike in China would lead to price hike in the rest of the world as well?

Speaker 2

Canadian Solar representative. Well, the Canadian Solar China factories received the invitation, so we sent the representative to the meeting. And the government in Beijing is trying to resolve some of the supply demand balance issues. So, I think it's a good approach. And this is also, I think this is what other countries has been expecting China to do.

Speaker 2

So, I'm glad the Chinese government got the message and start to work with the industry to for a better like balance of supply and demand.

Speaker 8

So I heard there was clear guidance on a higher module price after the meeting. So because the in the results briefing, I I I remember we've mentioned that we expect this manufacturing cost hike, I guess, is the cost hike in polysilicon and wafer. But if module prices are higher, do you think that would actually improve your margins?

Speaker 2

Well, I think Yan answered your question. Yan said, we have seen upstream material price increase. I'm not going to say hike that much, but we saw some increase, especially the polysilicon ingot wafer. Yan said, we expect the module price to go up, but maybe lack the movement of the materials. Yan, you want to?

Speaker 3

Yes. So, there's no top down minimum pricing on module. However, there's the industry few there's a companies volunteered to actually put on some more discipline pricing. There's some predefined price, but that's not a top down. And usual the price was not carried with high efficiency, so I have to say.

Speaker 3

So it's basically few mostly market driven. The ARPU stream is actually price went up because it's easier for upper stream because there's lack of a number of players. So that's why I said module price likely to go up as well, but maybe not as much as the upper stream. You're breaking.

Speaker 2

Sorry.

Speaker 3

You were breaking. We can hear you.

Speaker 7

Hello? You hear me?

Speaker 8

Can you hear me?

Speaker 2

Yes. Now it is. Yes.

Speaker 8

So we'd like to know your view on The U. S. Solar demand because President Trump yesterday has posted that kind of he would not approve any projects, etcetera. So how do you think like the demand in U. S.

Speaker 8

And how much projects might be affected with the federal land approval requirement?

Speaker 2

I don't know. We are not a market direct company. So you ask the wrong person. And I don't want to comment on White House speech also. I don't want to comment.

Speaker 8

Thanks a lot.

Operator

Thank you. Our next questions come from the line of Vikram Bagri with Citi. Please proceed with your questions.

Speaker 10

Hi. Good morning, everyone. And I apologize in advance for asking another question on Pheoch. But the press release mentioned that there has been some push outs and I saw that the storage backlog declined marginally also in second quarter. I didn't see a pipeline number in the presentation.

Speaker 10

I was wondering if you saw any cancellations in the quarter and if there is a common theme that explains the push outs or slash cancellations in the quarter. Is FiOp playing a role? Are customers asking for confirmation of compliance in a in a contract before signing a contract and that's sort of like creating an uncertainty or slowdown in backlog bookings. If you can just explain the push outs and cancellations and if it's somehow related to FIAWC.

Speaker 2

The new FiOQ requirement also take effect next year. So this year's project is a project which I reached COD this year and there's no new fee requirement. So, however, I mean, we mentioned that there are some projects pushed to second half due to tariff issues. So tariff is different from the ARC. Clarify that our pipeline didn't go down.

Speaker 2

We delivered 2.3 gigawatt hour, but we add new pipeline. So our new energy storage pipeline in terms of dollar value actually went up a little bit. You can find that in our press release.

Speaker 3

So actually we do have some major deals that is at the very last stage of negotiation. So, there's some big numbers there.

Speaker 10

Got it. And as a follow-up, you mentioned that the storage margins without the benefit of falling lithium carbonate pricing have been normalizing. Historically, you've mentioned 20% margins and later on 15% to 17% margins. Is the second half lower than 15? Any indication on current margins or margin on backlog would be helpful?

Speaker 3

We're working on the 20% as a target.

Speaker 7

Got it. Thank you.

Operator

Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to management for any closing comments.

Speaker 2

Thank you for joining us today and for your continued support. If you have any questions or would like to set up a call, please contact our Investor Relations team. Take care, and have a great day.

Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

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