Canadian Solar Q2 2026 Earnings Report

Canadian Solar EPS Results

• Actual EPS: -$1.40
• Consensus EPS: -$0.18
• Beat/Miss: Missed by -$1.22
• One Year Ago EPS: -$0.53

Canadian Solar Revenue Results

• Actual Revenue: $1.21 billion
• Expected Revenue: $1.17 billion
• Beat/Miss: Beat by +$36.16 million
• YoY Revenue Growth: -28.70%

Canadian Solar Announcement Details

• Quarter: Q2 2026
• Date: 8/27/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, August 27, 2026
• Conference Call Time: 8:00AM ET

Canadian Solar (NASDAQ:CSIQ) (NASDAQ:CSIQ) is a solar technology and renewable energy company founded in 2001 by Shawn Qu and headquartered in Guelph, Ontario. The company designs and manufactures solar photovoltaic modules and provides related products, including battery energy storage systems, inverters and other equipment used in commercial, industrial and utility-scale renewable energy installations.

Through its CSI Solar business, Canadian Solar supplies solar modules and delivers integrated energy solutions, including engineering, procurement and construction services. The company also develops, constructs and operates utility-scale solar power and battery storage projects through its Recurrent Energy business, which focuses on renewable energy assets in key markets.

Canadian Solar serves customers and energy markets internationally, with operations and projects spanning North America, South America, Europe, Asia-Pacific and other regions. Shawn Qu serves as the company’s chairman and chief executive officer. Canadian Solar completed its initial public offering on the Nasdaq Stock Market in 2006.

Canadian Solar Q2 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Canadian Solar posted a $77 million net loss in Q2, or $1.40 per share, as elevated freight costs, Jeffersonville cell-factory ramp-up expenses, higher interest costs, and a foreign-exchange loss weighed on profitability. Gross margin was 13.9%, while operating cash flow was negative $181 million.
• Positive Sentiment: The company opened its U.S. HJT cell facility in Jeffersonville, with Phase 1’s 2.1 GW capacity expected to reach full production on October 1 and total capacity targeted at 6.3 GW in 2027. Canadian Solar has more than 13 GW of contracted U.S. domestically manufactured module backlog valued at over $4.5 billion through 2029.
• Positive Sentiment: e-STORAGE exceeded delivery guidance by shipping 3.7 GWh and recognizing revenue on 3.3 GWh; its contracted backlog stood at $3.5 billion, including long-term service agreements covering 34 GWh. Management also sees growing opportunities to supply battery systems supporting data-center power and grid-resiliency needs.
• Negative Sentiment: Recurrent Energy generated $117 million of revenue and recorded a $19 million operating loss, partly because several project sales shifted into the second half and a $24 million impairment was recognized. Management plans selective asset monetization to recycle capital, improve flexibility, and reduce leverage.
• Neutral Sentiment: For Q3, management forecast revenue of $1.3 billion to $1.5 billion, module shipments of 3.5–3.8 GW, storage deliveries of 3.4–3.8 GWh, and gross margin of 13.5%–15.5%; full-year U.S. shipment guidance was maintained. Full-year 2026 capital expenditures are expected to reach approximately $1.3 billion, with heavier spending on U.S. manufacturing and Southeast Asian storage capacity in the second half.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to Canadian Solar's second quarter 2026 earnings conference call. My name is Melissa, 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, Head of Investor Relations at Canadian Solar]

Thank you, operator, and welcome everyone to Canadian Solar's second quarter 2026 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 Colin Parkin, CEO, Dylan Marx, CEO of Canadian Solar's subsidiary, Recurrent Energy, Xinbo Zhu, Senior VP and CFO, and Dr. Shawn Qu, Executive Chairman and CTO. All company executives will participate in the Q&A session after management's formal remarks. On this call, Colin will deliver key messages for the quarter. Dylan will share updates for Recurrent Energy. Xinbo will go through the financial results, and Shawn will discuss sustainability and technology highlights. Colin will conclude the prepared remarks with the business outlook, after which we will have time for questions.

[Wina Huang, Head of Investor Relations at Canadian Solar]

Before we begin, I would like to remind listeners that management's prepared remarks today, as well as their answers to questions, will contain certain 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.

[Wina Huang, Head of Investor Relations at Canadian Solar]

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 provided in accordance with GAAP. I would now like to turn the call over to Canadian Solar's CEO, Colin Parkin. Colin, please go ahead.

[Colin Parkin, CEO at Canadian Solar]

Thank you, Wina, and thank you all for joining our second quarter earnings call. Beginning on slide three, we recognized 3.1 GW of solar modules within guidance. We exceeded our storage guidance, shipping 3.7 GWh and recognizing revenue on 3.3 GWh within the quarter. Revenue totaled $1.2 billion at the high end of guidance. Gross margin was in line with guidance at 13.9%. Profitability was impacted by elevated freight costs from ongoing geopolitical uncertainties. We also faced near-term ramp-up costs for our solar cell manufacturing facility in Jeffersonville. These factors led to a net loss attributable to shareholders of $77 million, or $1.40 per share. Turning now to slide four. Our manufacturing segment remains the key driver of our financial performance today. It is also where our strategic priorities lie. In our solar business, we continue to prioritize high-margin regions.

[Colin Parkin, CEO at Canadian Solar]

We shipped nearly half of our quarterly module volumes to our North America home base. In our energy storage business, we are scaling rapidly and executing well globally. In a single quarter, we delivered to utility scale projects across North America, EMEA, Asia-Pacific, and Latin America. We outperformed guidance due to accelerated deliveries for two projects in the U.S. and Canada. Higher unit shipping costs and ramp-up expenses led to an operating loss of $49 million. As we finish ramping phase I of our solar cell facility and expand through phase II, these costs will normalize. We expect overall module margins to improve as a result. Now turning to slide five. A major highlight this quarter was the official opening of our state-of-the-art HJT solar cell facility. This marks a historic milestone. Canadian Solar is now the first commercially operational HJT manufacturer in the United States.

[Colin Parkin, CEO at Canadian Solar]

We are also proud of the facility's meaningful impact and contribution to the local economy and community. We are currently ramping up phase I capacity to 2.1 GW peak. Phase I is set to enter full-scale production on October 1st. Before the end of the year, we will begin installing equipment for phase II, which will bring our Jeffersonville total nameplate cell capacity to 6.3 GW peak in 2027. This facility will be the largest crystalline silicon cell manufacturing plant in North America. Paired with our 10 GW peak module facility in Texas, CS PowerTech solidifies its place as one of North America's largest and premier integrated photovoltaic manufacturers. These expansions are backed up by strong customer demand for our high-performance U.S. solar products, which offer valuable domestic content benefits. Turning please to slide six.

[Colin Parkin, CEO at Canadian Solar]

CS PowerTech has secured over 13 GW peak in contracted backlog for our domestically manufactured HJT and TOPCon n-type bifacial modules. Deliveries are scheduled through 2029. This backlog includes multiple long-term master service agreements with leading U.S. utilities, IPPs, developers, and EPCs. These commitments continue to grow daily and already represent north of $4.5 billion in value. On the policy front, President Trump released a new Section 232 announcement this month, which is focused on imported polysilicon and its derivative products. We view this new policy structure as supportive of our long-term investment in domestic manufacturing. Key details include minimum import pricing, tariff provisions, and potential manufacturing offsets for companies investing in domestic manufacturing capacity. The Department of Commerce will work to approve U.S. investment plans. We will continue to be active, constructive, ongoing dialogue with Department of Commerce and will continue to participate throughout the 120-day implementation period.

[Colin Parkin, CEO at Canadian Solar]

Our current evaluation indicates that these measures will reinforce U.S. solar pricing, and we are actively working with our customers to navigate this period of uncertainty. Overall, we view this policy direction as net positive for Canadian Solar, and we welcome the administration's support for American industrial growth. Now turning to slide seven. For e-STORAGE, we shipped 3.7 GWh of energy storage solutions this quarter and recognized revenue on 3.3 GWh after accounting for the more than 400 MWh to internal projects under execution. At the end of this quarter, our contracted backlog stood at $3.5 billion. This includes long-term service agreements covering 34 GWh of contracted projects. We see demand from data centers transitioning from conversations to contracted opportunities.

[Colin Parkin, CEO at Canadian Solar]

Earlier this year, e-STORAGE secured a contract with a major U.S. utility for a 500 MW, 2.5 GWh DC project designed to support data center, grid infrastructure, and resiliency. Energy-intensive data centers and their stakeholders face two primary hurdles: securing power and maintaining grid stability. Interconnection approvals and transmission builds require years to complete. Battery energy storage unlocks the higher throughput from existing infrastructure, responds dynamically to load swings, fortifies grid resilience, and protects mission-critical computing hardware from power disruptions. For on-site behind-the-meter facilities, energy storage integrates seamlessly with other energy generation technology, including natural gas and renewable power generation. We are actively engaging with data center hyperscalers, developers, and utility customers to deliver solutions that help overcome these challenges. Our market value extends well beyond supplying battery containers.

[Colin Parkin, CEO at Canadian Solar]

We produce our own battery cells, design the SolBank platform, integrate the power conversion and proprietary energy management controls, and deliver full EPC and commissioning services, and provide ongoing support through long-term service agreements. This end-to-end full stack model offers customers a single accountable partner while supplying us with real-world operating data to refine future solutions. Now let me hand the call over to Dylan to review updates for Recurrent Energy, Canadian Solar's global project development business. Dylan, please go ahead.

[Dylan Marx, CEO of Recurrent Energy at Canadian Solar]

Thank you, Colin. Starting on slide eight, we generated $117 million of revenue in the second quarter. Revenue declined sequentially, primarily because several project sales moved into the second half of the year. Electricity sales revenue rose quarter-over-quarter, supported by the commercial operation of a large solar asset in Spain. With muted project sales during the quarter and a $24 million impairment charge related to an upcoming project sale in Latin America, operating expenses rose quarter-over-quarter. As a result, we recorded an operating loss of $19 million. Despite the lowered financial performance, we continued to hit key operational milestones throughout the second quarter. Earlier in the quarter, we brought a 426 MW solar asset in Spain into commercial operation, which began contributing recurring energy. Our partnerships with leading global technology companies further validate our development platform.

[Dylan Marx, CEO of Recurrent Energy at Canadian Solar]

In Australia, we recently connected the 150 MW Carwarp project, which is backed by a long-term power purchase agreement with Microsoft. We also continue to secure competitive large-scale project financing. Recently, we closed a $695 million construction financing tax equity package for our 330 MW Cobalt Solar facility in California. MUFG and NORD/LB provided the construction loans while Wells Fargo provided the tax equity. Turning to slide nine for our portfolio pipeline update. As of June 30, 2026, we have secured grid interconnections for approximately 6 GW of solar and 13 GWh of energy storage globally, excluding projects already in operation. Our total development pipeline stands at nearly 22 GW of solar and 84 GWh of energy storage. Our strategy for this pipeline remains focused on high quality, high margin opportunities that drive real value. We are actively pruning lower margin assets.

[Dylan Marx, CEO of Recurrent Energy at Canadian Solar]

For instance, we scaled back our EMEA pipeline following detailed evaluations of permitting, technical, and commercial viability. At the same time, we are moving decisively where we see attractive upside. Our team is actively positioning us to compete in Brazil's upcoming energy storage auction, which expanded our early-stage pipeline in Latin America. For the second half of the year, our priority remains the selective monetization of certain operating assets under construction and development assets. These transactions are intended to support our capital recycling strategy, improve financial flexibility, and address leverage levels over time, while preserving our ability to invest in high return growth opportunities. 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, SVP and CFO at Canadian Solar]

Thank you, Dylan. Beginning on slide 10. In the second quarter, we recognized revenue on 3.1 GW of modules and 3.3 GWh of energy storage solutions, both sequentially higher. Module performance was bolstered by strong U.S. volumes, while storage beat guidance due to accelerated project deliveries in North America. Despite light contributions from Recurrent Energy due to deferred project sales, solid execution in the manufacturing segment lifted total revenue to $1.2 billion, reaching the high end of our guidance. Gross margin was 13.9%, in line with guidance. The sequential and year-over-year margin drops reflect two non-recurring items. First, the tariff refund benefits recognized last quarter. Second, the release of unrealized profit upon sales completion of a U.S. project in the prior year period. Operating expenses rose 21% sequentially. This was driven by a combination of elevated freight rates and non-logistic ramp-up costs at our Jeffersonville solar cell plant.

[Xinbo Zhu, SVP and CFO at Canadian Solar]

Net interest expense rose to $43 million from $36 million in the first quarter, primarily due to lower capitalized interest. We recorded a net foreign exchange loss of $9 million, primarily driven by strong appreciation in the Chinese yuan. CSI Solar recorded a $41 million mark-to-market gain in investment income from its equity investment in a battery equipment company, helping buffer our bottom line. As a result, Canadian Solar recorded total net loss attributable to shareholders of $77 million, or $1.40 per share. Now let's turn to cash flow and the balance sheet on slide 11. Net cash flow used in operating activities during the second quarter of 2026 was $181 million, driven primarily by changes in working capital. Total assets grew to $16.1 billion. This increase primarily reflects ongoing construction of U.S. solar and storage projects, along with inventory expansion to support our U.S. manufacturing strategy.

[Xinbo Zhu, SVP and CFO at Canadian Solar]

Total debt increased to $7.1 billion, mainly from non-recourse construction financing for solar and storage projects under Recurrent Energy in the U.S. As we monetize operating under construction in the development assets, we expect to deleverage the project's development business. At the same time, our manufacturing segment will take on incremental debt to fund strategic U.S. manufacturing investments, which we expect to expand profitability and cash flow in 2027 and beyond. Capital expenditures in the second quarter were $172 million, primarily directed toward our U.S. manufacturing initiatives. We anticipate full year 2026 CapEx to total around $1.3 billion. This implies higher capital outlays in the second half as we begin phase II equipment installation at Jeffersonville, double capacity at our Mesquite module plant, and scale up our energy storage facility in Southeast Asia.

[Xinbo Zhu, SVP and CFO at Canadian Solar]

We closed the quarter with a cash balance of $1.9 billion, providing us with solid liquidity to execute on our strategic priorities. Now let me turn the call to Shawn, who will discuss our sustainability achievements and the technology roadmap. Shawn, please go ahead.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Thank you, Xinbo. Turning to slide 12. In June, we published our 2025 corporate sustainability report. This highlights our commitment to driving the global clean energy transition through sustainable and responsible business practices. The report tracks our focus on value-driven growth. Notably, the Science Based Targets initiative then validated our net zero greenhouse gas target. We also advanced our resource efficiency, achieving significant energy and water saving, alongside two zero carbon factory certifications. Furthermore, we reinforced our supply chain transparency and ethical labor standards. These efforts are backed by independent audits and certifications across our manufacturing footprint and key suppliers. Overall, this report demonstrates that environmental stewardship, social responsibility, and strong governance are fundamental to how we build long-term stakeholder value. At the core of everything we do is technological innovation. Turning to slide 13.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

We continue to execute on a multi-generation technology roadmap across both solar PV and energy storage solutions. Starting with solar PV, our near-term priority through 2028 is the mass production and optimization of our next generation HJT, our heterojunction, and TOPCon architectures. Across our core utility, C&I, and residential market, we are scaling module efficiency from 23.2% up to 24.4%, while aggressively reducing silver consumption from 6.5 mg/W down to 3 mg/W to drive down this key input cost. Looking slightly further ahead, we expect mass production of our premium TBC architecture by 2028. Designed primarily for the premium residential market, TBC aims to deliver efficiencies between 24.8% and 25.2%, with ultra-low silver usage of just 1 mg/W-2 mg/W.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Beyond terrestrial single-junction silicon, where we approach physical limits at around 25%-26% module efficiency, we are expanding into frontier applications and multi-junction technologies. We have already begun collaborating on space PV opportunities using our HJT cell technology, with planned shipment in 2029 for extreme space environment, where radiation tolerance and thermal cycling resilience are critical. For long-term utility scale expansion, our ultimate efficiency frontier lies in tandem cells targeted for commercial shipment in 2030 to break through the 30% module efficiency barrier. Given that perovskite reliability will require another 5-10 years of validation before large-scale ground deployment, space applications may well serve as the initial commercial stepping stones to these next generation tandem structures. Turning to our energy storage and power electronics roadmap on slide 14. We are building a foundation for sustainable high density and long-duration storage assets.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

We are currently mass producing SolBank 3.0, which delivers 5 MWh in a standard 20 ft enclosure using 314 Ah LFP cells. We will soon begin shipping the next iteration, SolBank 4.0, starting 2027. This solution increases energy density by 25%, delivering 6.25 MWh in the same 20 ft footprint, utilizing high capacity 588 Ah LFP cells. To complement these larger battery systems, our power electronics hardware is scaling in tandem. We are transitioning from our air-cooled mid-voltage SCAD 1.0 to our liquid-cooled mid-voltage SCAD 2.0, which integrates 32 of 450 kW inverters to achieve 14.4 MW in a 40 ft layout. Further out on our 2030 roadmap, we are exploring solid-state transformers, a 2.5 MW, 34.5 kV AC to 800 V DC solution, achieving over 98.5% conversion efficiency. That has the potential to replace traditional PCS units and integrate directly into BESS platforms as cost and reliability mature.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

To address long-duration storage and harsh environment requirements at a potentially lower levelized cost of storage, or LCOS, we are actively validating our containerized sodium-ion platform. This will eventually deliver an exceptional cycle time of over 15,000 cycles. Sodium-ion technology offers compelling structural advantages, abundant raw materials free from geopolitical restraints, superior performance in extreme cold temperature, and simplified cooling requirements that could meaningfully reduce long-term operational expenditures. It also delivers important safety advantages, such as significantly reduced thermal runaway risk. We are also developing a high-capacity energy storage product designed for deployment inside AI data center server room to deliver millisecond-scale energy management solutions. Ultimately, unifying these solar and storage developments advances our vision of Canadian Solar as a total energy technologies provider.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

By pairing these technology roadmaps with robust end-to-end capabilities and full visibilities across our supply chain, we are uniquely positioned to deliver the mission-critical clean energy infrastructure of tomorrow to our global customers. We will unveil more cutting-edge energy technologies in the future. Stay tuned. Now, let me turn the call back to Colin, who will conclude with our guidance and business outlook. Colin, please go ahead.

[Colin Parkin, CEO at Canadian Solar]

Thank you, Shawn. Turning now to slide 15. For the third quarter of 2026, we expect to recognize revenue from 3.5 GW-3.8 GW of solar modules. We expect energy storage deliveries to range between 3.4 GWh and 3.8 GWh. Driven by sequentially higher manufacturing volumes, we project third quarter revenue to be between $1.3 billion and $1.5 billion, with gross margin expected to range between 13.5% and 15.5%. We anticipate U.S. solar and storage shipments to accelerate in the second half, with each remaining quarter delivering higher volumes than the last.

[Colin Parkin, CEO at Canadian Solar]

At Recurrent, we expect to finalize the project sales delayed from the second quarter. This will drive a sequentially stronger third quarter. For the full year of 2026, we reiterate our U.S. volume guidance of 6.5 GW-7 GW of module shipments and 4.5 GWh-5.5 GWh of energy storage shipments. With that, I would now like to open the floor for questions. Operator, please go ahead.

[Operator]

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We do ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Colin Rusch with Oppenheimer & Co. Please proceed with your question.

[Colin Rusch, Analyst at Oppenheimer & Co]

Thanks so much, guys. Shawn, as you look at the roadmap that you just articulated from the technology perspective, it's pretty robust. There's a lot of activity. I want to understand two dynamics. One, just trend lines on overall spending on the R&D line to bring all of this to fruition. Secondarily, from a regionalization perspective, where is that work going to happen and where is the IP going to sit as you bring, looks like, five or six pretty significant technology evolutions to market?

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Yeah, Colin, thank you. Because our revenue base is big, although the R&D spending is significant, but typically, it's around 1%-2% of the total revenue. We are controlling it well.

[Colin Rusch, Analyst at Oppenheimer & Co]

From an IP perspective, is that going to sit in the U.S.? Is it going to sit outside the U.S.? Is that not a concern? Is it more around just know-how and understanding how to manufacture these things where you guys feel like you have an advantage?

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Yeah, Colin, this is a good question. As we develop more and more the manufacturing, and also process R&D capabilities in U.S., we will see more and more IP sit in U.S. Meanwhile, we also develop a lot of good technology in Canada. I also see more and more IP sit in Canada, especially the IP related to the power electronics and either from the inverter to the PCS half or the energy storage system.

[Colin Rusch, Analyst at Oppenheimer & Co]

Excellent. The follow-up here is really around shipping expense and practical ways that you guys can manage that or start passing that on in a more material way to customers here over the next 6-12 months.

[Colin Parkin, CEO at Canadian Solar]

Yeah. Good morning, Colin. Thanks for the question. Colin here. Regarding the shipping expense, we do build that into our contracts and pass that along. But of course, the dynamic of the shipping cost, logistics costs start to change when we look at us continuing to scale in North America. Obviously, we don't have as significant overseas freight, so we'll start to see that shipping cost start to decrease just as primarily due to the onshoring in the U.S.

[Colin Rusch, Analyst at Oppenheimer & Co]

Okay. Thanks, guys.

[Operator]

Thank you.

[Colin Parkin, CEO at Canadian Solar]

Thank you.

[Operator]

Our next question comes from the line of Maheep Mandloi with Mizuho Securities. Please proceed with your question.

[Maheep Mandloi, Analyst at Mizuho Securities]

Hey, thanks for taking the questions and for the color on the new bookings. One question on that, you talked about the 13 GW of bookings through 2029. The pricing seems to be mid $0.30/W. Could you clarify if that already includes any impact of this new Section 232 on polysilicon? If not, then what prices are you seeing, and is there any flexibility to go to the existing customers on higher prices if the spot prices move up on Section 232? Thanks.

[Colin Parkin, CEO at Canadian Solar]

Yeah. Good morning, Maheep. Thanks for the question. Colin here. We have Thomas on the line as well, but I'll start. Our contracts are structured with change in law and adjustment mechanisms with all this anticipated. What we see is, this is all very new. I think, as you know, this is only fresh in the last couple of weeks with the new Section 232, but we already see the market adjusting. We think it will definitely drive for accelerated deliveries in the second half of this year in advance of the proclamation implementation, I think on December 4th. We're going to see a rush, and with that, it's driving increase in price and correlating demand. We are seeing that start to adjust. We are seeing the market start to adjust, but it is a relatively new change to the market.

[Colin Parkin, CEO at Canadian Solar]

But I think, overall, from Canadian Solar's standpoint, with the backlog that we mentioned, the 13 GW backlog, it shows a strong demand for our U.S.-based products, and our customers are certainly willing to work with us as they have to adjust as well. Thomas, would you add anything to that? Do you have anything to add on top of that?

[Thomas Koerner, Corporate SVP at Canadian Solar]

Sure. Good morning. Colin is spot on. The only comment I would make is that this backlog and the respective revenue value does not include a 232 adjustment yet, so this is going to increase and grow further as we are adjusting contracts and agreements with customer. It includes, of course, a certain portion of down payments, certain shipment costs. Some are further away, some are closer away, so you can take that all into account. But the 232 announcement will push the respective value upwards as we discuss and readjust and renegotiate with customers. Hope this answers your question.

[Maheep Mandloi, Analyst at Mizuho Securities]

That is great. Thanks for the color. Maybe just make a different follow-up on the tariff or the duty exemption in lieu with domestic CapEx. Just want to understand how much could we expect on that for you guys, for CapEx? I think there was some language on that exemption is only applicable for new CapEx. Just curious if the R&D CapEx could be used for that or the set CapEx. Thank you.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

The Section 232 does allow the U.S. manufacturing project to offset the tariff duties. As Colin said, we will actively engage with Department of Commerce. I think we are in a good standing, and we will try to go through this process. Yes, we will apply for the tariff and MIP exemptions related to our U.S. manufacturing plan.

[Maheep Mandloi, Analyst at Mizuho Securities]

All right. Thanks for the color. I'll jump back and look here.

[Colin Parkin, CEO at Canadian Solar]

Thank you, Maheep.

[Operator]

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

[Philip Shen, Analyst at Roth Capital Partners]

Hi, everyone. Thank you for taking my questions. As a follow-up to Maheep's second question on the tariff rebate program, Shawn, you just mentioned that you have good standing with the Department of Commerce, so I was wondering if you might be able to elaborate on that. Specifically, do you expect to qualify for the tariff rebate program? If so, can you give us some color on why and how? Thanks.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Well, we do expect we are qualified. We qualify for the tariff relief program because we are the one who invest and really invested into U.S. manufacturing. Our solar module factory in Mesquite and also the solar cell factory in Jeffersonville, plus the energy storage factory in Shelbyville. So we are putting real dollars into onshoring the U.S. manufacturer. So we believe we are qualified. However, as I mentioned, we will go through the process. So I guess, I shouldn't comment too much before we finish the dialogue and the process with Department of Commerce.

[Philip Shen, Analyst at Roth Capital Partners]

Okay, thank you. Earlier, Colin and Thomas talked about pricing already moving. So I was wondering if you guys might be able to quantify the magnitude of the price increase that you've seen thus far, and then where you expect things to change. So if your existing bookings are at X, do you think we see a $0.05 move in pricing to the upside, or do you think it's $0.10 or maybe more? Thanks.

[Colin Parkin, CEO at Canadian Solar]

Philip, I think we're just like everybody else. We're monitoring the market and seeing what the opportunity looks like. I think it might be a little premature for us to speculate how fast those changes and how in the magnitude. So I think we're only a week or two into this new proclamation, and we're still waiting for, as a matter of fact, expecting new guidance to come. So that could also shape things as well. So I'd hesitate to give a specific amount, but I can tell you that we do feel it's going to be accretive to CSI Solar overall.

[Philip Shen, Analyst at Roth Capital Partners]

Okay. Thanks, Colin. One last follow-up. As it relates back to the tariff rebates program based on U.S. CapEx, what happens and what do you guys do if you cannot qualify for that tariff rebate program?

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Well, that's a good question. I think the MIP requirements will help to strengthen the U.S. manufacturer's advantages. The overall price will go up. If the overall solar module price go up, it will help us, even in a case that we don't fully receive the rebate related to our CapEx. So overall, with or without rebate, we think that this decision will be accretive to CSI, to CS PowerTech, and any real meaningful manufacturers investing to U.S.

[Philip Shen, Analyst at Roth Capital Partners]

Great. Appreciate the color. Thank you, Shawn, and thanks, Colin, as well.

[Colin Parkin, CEO at Canadian Solar]

Thank you, Philip. Appreciate the questions.

[Operator]

Thank you. Our next question comes from the line of Alan Lau with Jefferies. Please proceed with your question.

[Alan Lau, Analyst at Jefferies]

Thanks for taking my question. I would like to ask management about the recent policy coming out from the White House last night on the bulk power system. I would like to know, because Canadian Solar actually has a battery cell and pack plant in the U.S., what is your view on complying to that U.S. manufacturing requirement, especially in relation to energy storage?

[Colin Parkin, CEO at Canadian Solar]

Alan, I would like to just hold off responding on that because it is something very new, and we have not had a chance to fully study that. I will just generally say that, in all respects, our ability to comply to U.S. requirements is strong generally because our supply chain has already evolved to supporting the domestic content requirements, and our U.S. manufacturing plans have been structured around that. I do not want to comment on such a recent policy change, but I would only say that at the moment, I expect we will be able to address any changes.

[Alan Lau, Analyst at Jefferies]

Understood. Regarding to another previous FCC investigation, I think there were clarifications, I think in 20th of August, on basically for inverters that were produced in the U.S. and is eligible for 45X would not be classified as foreignly produced. I recall the company previously was having third party as a supplier for inverters, but the company is also starting to do PCS as well. I wonder if management has any comment in regards to FCC previous restrictions on this front.

[Colin Parkin, CEO at Canadian Solar]

Yeah. Alan, a good question. First of all, our inverters are not currently being moved into the U.S., so it is not an issue for us, in terms of our current supply chain. As you mentioned, we do procure significant amounts of third party inverters, PCS, for example, and we are actively involved with our supply chain to ensure that they meet all the FCC requirements, or have the path to have those FCC requirements in place. We do not see any issues with any of our business activities at this time related to the recent changes. I know there is just recent clarification provided with respect to the communication protocols, which we are looking at very carefully, but we do not see any impact to our business at the moment with respect to the new FCC requirements.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Yeah, I would like to add a little bit color comment on top of what Colin just said. We also noticed that in the new guidance, the FCC said anything qualified for the 45X, which means qualified for the local manufacturing and eligible for 45X will be considered domestic, therefore, will not require FCC approval. I think this is a very interesting policy clarification. As you mentioned, we do have our own PCS. We have that technology centered in Canada. So we have started to actively look into the feasibility of manufacturing that PCS and inverter in U.S., utilizing the advantage that Canadian Solar already have CS PowerTech, which is the 45X qualified structural in U.S. So yes, we are actively reviewing the visibility of that.

[Alan Lau, Analyst at Jefferies]

Thanks both. That's very clear. Because I recall the company actually got a very strong record in U.S. manufacturing and has already secured 45X credits for other products like module already. So that might actually be a positive opportunity for the company to take share. So that's where the question is coming from. Switching gear to the technology path, because I noticed that Shawn has spent quite a lot of time. I think that this is quite new, I think, in this quarterly results briefing. Would like to know, because Shawn has mentioned about space PV, so I suspect if there has already been some form of discussion with major clients in the aerospace industry, or it's more a product development stage, or there's actually already some early-stage navigation already?

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Yeah. Space PV is a very interesting direction, although I don't expect it to contribute meaningfully this or next year. But in long run, space is what everybody looking at, including Canadian Solar and I myself. You realize that Canadian Solar is a strong participant in the so-called HJT, or hybrid junction solar cell architecture. This is what the industry consider very favorable for silicon-based space PV applications. The research so far shows that the so-called p-type heterojunction will have better tolerance to the high-energy particle radiation bombardment in the space. Therefore, p-type heterojunction, especially the thin p-type heterojunction, is considered to be a leading candidate for silicon-based solar cell application in the space. So we do manufacture the p-type. As you know, our Jefferson solar cell factory adopted the p, the hybrid junction, the HJT solar cell structure.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

So far, we use n-type for the terrestrial applications. However, it's very easy for us to convert that into p-type. We already use very thin wafers. The wafer to be processed in our Jeffersonville factory average at 110 micron thickness, which is one of the thinnest wafer used for commercial production. Also, on the R&D side, we have designed and processed even thinner to 50 micron, wafer thickness with p-type heterojunction, and very successful. So we can supply that. So we are at the leading front of space PV. We are talking to other space and satellite, especially the satellite companies, about this application. We are collaborating. I can't disclose the customer name. But yes, we have close collaborations with space-related partners.

[Alan Lau, Analyst at Jefferies]

Understood. It is also interesting that your view on the space PV is on p-HJT. Having mentioned about HJTs, there are some market views that TOPCon might have some issues in relation to the Section 337 patent investigation. Is it one of the reasons that you are selecting HJT technology in the U.S. because it is not the mainstream technology outside of the U.S., or is it really other reasons like labor or shorter production process?

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

Yeah. We choose HJT, heterojunction, for the U.S. factory for several reasons, not one reason. Number one, yes, our strong R&D effort already into its HJT solar cell. As a matter of fact, we have studied the HJT structures as early as 2017 and 2018. We have been doing pilot line HJT development for six, seven years already. We have very strong knowledge. By the way, that also explains why our ramp-up of the Jeffersonville solar cell line was so far successful, and I will say pretty smooth. Any ramp-up will have some issues. That is the point of the ramp-up, right, which is to discover and resolve and solve an issue. But our ramp-up in Jeffersonville was very successful. That is a technical side. Second, our HJT process is very neat. It is more equipment-dependent than human-dependent.

[Shawn Qu, Executive Chairman and CTO at Canadian Solar]

It does require much less operators than a TOPCon, and we think this is a very unique advantage for the U.S. manufacturing. IP is also an issue, no question about it. On one hand, we are fully confident that our TOPCon technology stands alone on its own feet, and does not have any conflict with other companies' TOPCon IPs. However, less IP conflict is even better. The HJT IP is clean, much cleaner than TOPCon. That is also one reason for us decision to select HJT for U.S. cell manufacturing. There are multiple, there are quite a few factors. All in all, we believe that HJT is the second. Also, as I mentioned, HJT is a leading candidate for the space application. We also consider this factor when we make this decision around two years ago.

[Operator]

Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Parkin for final comments.

[Colin Parkin, CEO at Canadian Solar]

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, everybody, and have a great day. Thank you.

[Operator]

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Wina Huang, Head of Investor Relations
• Colin Parkin, CEO
• Dylan Marx, CEO of Recurrent Energy
• Xinbo Zhu, SVP and CFO
• Shawn Qu, Executive Chairman and CTO
• Thomas Koerner, Corporate SVP

Analysts

• Colin Rusch, Analyst at Oppenheimer & Co
• Maheep Mandloi, Analyst at Mizuho Securities
• Philip Shen, Analyst at Roth Capital Partners
• Alan Lau, Analyst at Jefferies