Canadian Solar Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's first quarter 2025 earnings call. My name is Sherry 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 Wena Hong, Head of Investor Relations at Canadian Solar. Please go ahead.

Thank you, operator, and welcome everyone to Canadian Solar's first quarter 2025 conference call. Please note that today's conference call is accompanied with supplies which are available on Canadian Solar's Investor Relations website within the events and presentation section. Joining us today are Dr. Sean Hsu, Chairman and CEO, Yan Zhuang, President of Canadian Solar's subsidiary, CSI Solar, Ismael Guerrero, Corporate VP and President of Canadian Solar's subsidiary, Recurrent Energy, and Kim Bo-ju, Senior VP and CFO. All company executives will participate in the Q&A session after management's formal remarks. On this call, Sean will go over some key messages for the quarter. Yan and Ismael will review business highlights for CSI Solar and Recurrent Energy, respectively, and Kim Bo-ju will go through the financial results. Sean will conclude the prepared remarks with a business outlook after which we will have time for questions. Before we begin, I would like to remind listeners that management's prepared remarks today, as well as their answers to questions, will contain forward-looking statements that are subject to risks and uncertainties. The company claims protection under the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. A more detailed discussion of risks and uncertainties can be found in the company's annual report on Form 20F, 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 for GAAP. Some financial information presented during the call will be provided on both a GAAP and non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to enable further analysis of the company's performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. And now I would like to turn the call over to Canadian Solar's Chairman and CEO, Dr. Sean Chu. Sean, please

go ahead. The line might be muted. Thank you. Thank

you, Wina. And thank you all for joining our first quarter earnings call. Please turn to slide three. We began the year with a solid performance. Module shipment reached 6.9 gigawatts, slightly above our guidance. Revenue totaled $1.2 billion at the high end of our range, while gross margin of .7% modestly exceeded expectations. Profitability was impacted by lower contributions from storage, duties and tariffs, recurrent ongoing transformation, and intercompany eliminations. This resulted in a net loss to shareholders of $34 million, or $0.69 per diluted share. 2025 will face many of the same challenges that defined 2024. While net, while near-term headwinds remain, we are confident in the long-term opportunities and will continue to invest in them. Please turn to slide four. In the near term, we are tackling challenges that test us both operationally and financially. Structural overcapacity across the solar supply chain has prolonged the market downturn, putting pressure on module pricing in almost the most global market. In addition to fierce competition, tariffs and shifting policies are raising costs and squeezing margins. To navigate these challenges, we are maintaining a profit-focused approach to our modules business, carefully managing volumes in less profitable markets, leveraging planted supply chain strategies, and offering bundled sales. Storage continues to be a key differentiator and profit driver. We are also rigorously managing operating expenses and capital expenditures to support our bottom line and cash flow. Recently, we held an internal town hall meeting where I posed a question on behalf of the broader renewable energy sectors. Does this industry still have a bright future? My answer is a resounding yes. Global electricity demand is growing at its fastest pace in years, and the rise of AI and other energy-intensive applications is widening the energy gap. Solar power, clean, affordable, and easy to deploy, can quickly meet this demand, especially when paired with storage. Canadian solar has a proven track record of navigating policy shifts and market cycles, demonstrating our technological leadership and resilience in challenging times. While our operating environment continues to evolve, one constant is our commitment to R&D and leadership through innovation. Please turn to slide 5. Over the past two months, we have announced several new products, showcasing our leadership across both solar and energy storage technologies. In solar, we completed our first deployment of Canadian solar's innovative anti-hail technology in Australia. This technology protects solar panels from severe weather, reflecting our dedication to delivering durable, high-performance solutions in even the most demanding environment. We also introduced our new N-Type high-power TopCom Gen2 modules for utility scale and CNI systems. Built on our latest TopCom cell technology, these modules deliver a maximum power output of up to 660 watts and a conversion efficiency of up to 24.4%. By advancing our solar technology, we help customers lower their levelized cost of energy and improve project economics, reinforcing solar as one of the most cost-effective energy generation options. On the storage front, we achieved key milestones in both utility scale and residential offerings. At InterSolar in Munich, we officially launched our Solar Bank 3.0 Plus. Enhancements to the lithium-ion phosphate battery cell manufacturing process elevate its performance beyond the already successful Solar Bank 3.0. This solution offers a 25-year lifespan near zero degradation for the first four years and up to 12,000 cycles at 95% round-trip efficiency. Solar Bank 3.0 Plus can significantly reduce our customers' operational costs by boosting overall lifetime energy throughout throughput by over 13%. We are also proud that our residential energy storage solution, EPQube, received the prestigious 2025 IF Design Award and Gold at the 2025 MUSE Design Awards. EPQube combines aesthetically pleasing design important to homeowners with functional advantages like easy installation and flexible capacity options. It continues to gain strong traction in global markets. With that, I will now turn the call over to Yan, who will provide more details on our CSI solar business. Yan, please go ahead.

Thank you, Sean. Please turn to slide six. In the

first quarter of 2025, module shipments increased by .4% -over-year to 6.9 gigawatts. We slightly exceeded our module shipment guidance, driven by incremental shipments to China as the industry rushed to complete installations ahead of new policies taking effect on June 1. Storage deliveries aligned with guidance totaling 849 megawatt hours. Revenue reached $1.2 billion and our gross margin declined by 640 basis points quarter over quarter to 13.4%, primarily due to lower energy storage shipments. While costs rose slightly, partly from nonrefundable VAT changes in China effective last December and slightly higher manufacturing costs in Southeast Asia under our blended supply chain strategy. Average selling prices improved with a higher share of shipments to North America. With shipping costs declining sequentially due to softening global shipping rates and our rigorous management of our printing expenses, we achieved a printing income of $2 million. Now turning to eStorage. Please refer to page seven. In the first quarter, we recognized revenue from 849 megawatt hours of shipped solutions. The softer performance was due to contract timing and we expect a much stronger second quarter. Understandably, the ongoing US-China tariff negotiations remain top of mind for all stakeholders. While we cannot predict final outcomes, it is critical to recognize that these US energy storage projects, essentially for great resilience and energy dispatchability, took years of planning and significant investment. While clarity may take some time, the industry will work together to advance these projects. Like all market participants, we're navigating this uncertainty. For eStorage, the US accounts for upwards of one-third of our energy storage business expected for this year. We are actively engaging with customers to mitigate risks and ensure smooth project execution. Notably, we're well positioned with our global blended manufacturing strategy. Beyond our planned Kentucky storage facility, we have cell manufacturing capabilities and supplier partnerships that will allow us to offer customers flexible options starting in 2026. Demand for storage is stronger than ever, not just in the US, but globally. As of March 31, our record pipeline of 91 gigawatt hours, including $3.2 billion in contracted backlog, highlights the structural growth potential of energy storage worldwide. For example, we recently secured another major project in Latin America. Please turn to slide 8. Korgon, a leading Chilean power generation company, selected eStorage to supply a 912 megawatt hour battery energy storage system for their Diago de Almagro CER project in Chile's Atacama region. Like many in eStorage's global track record, now exceeding 11 gigawatt hours, this project highlights the value of energy storage. It strengthens grid reliability, optimizes renewable energy use, and ensures secure, continuous power for industrial demand. Now let me hand the call over to Ismail, who will provide an overview of recurrent energy, Canadian Solos Global Project Development Business. Ismail, please go ahead.

Thank you, Jan. Please turn to slide 9. In the first quarter, we generated $125 million in revenue. Growth margin was 18.6%, driven by project sales in Latin America. Due to the operating costs of our platform and the ongoing scaling of our IPP portfolio, we posted an operating loss of $12 million for the quarter. Regarding our business transformation, we remain focused on execution. Currently, we have 1.2 gigawatt peak of solar and 1.4 gigawatt hours of energy storage projects under construction in Europe and the US. In January, our 35 megawatt peak Montalto project in Lazio, Italy, reached commercial operation. The PV project was contracted with AXPO, with an attractively priced PPA. In addition, Montalto is also one of the first co-located PV and best projects in the Italian market. The best portion won a 15-year fixed capacity payment in a public auction, and it is now under construction. In the US, we secured tax equity and project finance for Fort Duncan, the 200 megawatt hours merchant project, Merchant Storage Project in Ercot, Texas. This is testament to the strength of our projects and financing teams, as well as the strong support from our capital partners in enabling innovative solutions to drive impact. Construction for Fort Duncan is complete and under commissioning as we speak. In line with our global growth strategy, we secured a $450 million multi-currency credit facility, which includes an accordion feature that allows for potential upsizing. This corporate facility provides flexible and scalable financing with disbursements in US dollars, euros, British sterling, and Australian dollars, supporting our strategy to expand our IPP portfolio across diverse markets and geographies. Given the uncertain policy environment in the US, we are proactively implementing safeguards for all major IPP projects, including safe harboring equipment. While the long-term effects of tariffs remain to be seen, we expect very limited impact given recent progress in trade negotiations. Now, please turn to slide 10 for an update on our pipeline. As of March 31, 2025, we have secured interconnections for 9 GW of solar and 16 GW of storage globally, excluding projects already in operation. Our total project pipeline now stands at 27 GW of solar and 76 GW of energy storage. While we continue to expand our pipeline, the availability of -to-develop land with relatively cheap interconnections is becoming increasingly scarce. We are now prioritizing our core markets, the US and Europe, while in other regions we focus primarily on low-cost greenfield development. Now, let me hand the call over to Simbo, who will go through our financial results in more detail. Simbo, please go ahead.

Thank you, Ismael. Please turn to slide 11.

In the first quarter, we shipped 6.9 GW of modules slightly above guidance and delivered 849 MWh of energy storage solutions in line with expectations. Revenue reached $1.2 billion and the high end of our forecast. Gross margin of .7% exceeded guidance. The $260 basis point sequential decline was primarily due to lower energy storage shipments, while the $730 basis point -over-year decline was driven by lower module ASPs. Operating expenses decreased 4% -over-year, driven by lower shipping costs. Last quarter's results included non-recurring impairment charts related to certain manufacturing and solar assets, making the -over-year comparison more reflective of our ongoing operational performance. Net interest expense in the first quarter was $28 million, compared to $9 million in the fourth quarter of 2024 and less than $1 million in the first quarter of 2024. The current quarter reflects a more normalized interest expense as prior comparative periods benefited from non-recurring interest income items. Net foreign exchange loss was $14 million, primarily due to dollar weakness and tariff-related pressures. Total net loss was $34 million, or $0.69 per diluted share. These results included a positive HLVB impact of $26 million, or $0.38 per share, from tax equity arrangements tied to certain U.S. operating projects. Now let's turn to cash

flow and biology. Please turn to slide 12. Net cash flow used in operating

activities during the first quarter of 2025 was $264 million. This outflow was primarily driven by increased inventories and project assets. Total assets grew to $13.9 billion, driven by investments in project assets and solar power systems, positioning us for longer-term value creation. In the first quarter, we allocated $256 million in capital expenditures, primarily toward U.S. manufacturing initiatives. Our full-year 2025 Timex outlook remains unchanged at around $1.2 billion. We ended the quarter with a cash balance of $2.0 billion and total debt of $5.7 billion, reflecting borrowings for capacity extension, working capital, and project and operational assets developments. Now let me turn the call back to Sean. We will conclude with our guidance and business outlook. Sean, please go ahead.

Thank you, Xinbo. Please turn to slide 13. For the second quarter of 2025, we anticipate CSS Solar's module shipment will range between 7.5 to 8 gigawatts, including approximately 500 megawatts allocated to our own project. We also expect to deliver between 2.4 and 2.6 gigawatts of energy storage solutions during this period. We project total second quarter revenue to be in the range of $1.9 to $2.1 billion, with gross margin expected to be between 23 and 25 percent. The anticipated margin improvement reflects strong energy storage shipments and includes a sizable margin contribution from the deconsolidation of a U.S. project. This deconsolidation was released previously eliminating inter-company gross margin on CSS Solar components installed within the project. We continue to operate in an environment marked by global pricing volatility and evolving policy uncertainty, which limits our margin visibility. Based on our recent assessment of market and geopolitical development, we are updating our full-year guidance as follows. For the full year of 2025, we update module volume guidance to 25 to 30 gigawatts, including approximately 1 gigawatt to our own project. For energy storage shipments, we provide conditional guidance between 7 to 9 gigawatt hours, including approximately 1 gigawatt hour allocated to our own project. The reduced module volumes primarily reflect our strategic reduction of exposure to less profitable markets, while the expected storage adjustments relate to U.S. volumes affected by trade negotiations. As a result of these volume adjustments, we now expect full year revenue to be between $6.1 and $7.1 billion. With that, I would now like to open the floor for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Colin Rush with Oppenheimer & Company. Please proceed.

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

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

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

Yeah, Xinbo, do you want to answer this question?

From recurrent perspective, we are still in the transition from the project developer to a partial IPP, so we are continuing to do projects and add non-requests. So the leverage of recurrent will increase a little bit. For CSI solar, we will maintain a similar leverage ratio to balance the growth and

capital structure.

Okay, thanks guys. I'll hop back in here.

Our next question is from Philip Shen with VARAS Capital Partners. Please proceed.

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

Thanks. Yeah, maybe we are at your best position to answer this question.

Hi, so as Sean mentioned, we are maintaining a profit-first strategy, which means that the volume we reduce for modules is in less than possible markets. Whereas for storage, this is our best estimate given the ongoing trade negotiations. So this is still very fluid. As you can see, it's a pretty wide revenue guidance range.

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

Yeah, Philip, this is also a very good question. The FEOC is important and the ITC schedule is also very important. So we are paying lots of attention to the draft from the way and the main committee. And as I said, I expect this to change. It looks like it's still far from the final law. However, the ITC does mean a lot to developers and also to manufacturers. So and Canadian solar are both developers and manufacturers. So indeed, the ITC will have a significant, meaningful impact if it is scaled back. Our calculation shows one year of ITC credit means several hundred millions of dollars to Canadian solar alone, not to mention the whole industry. So it's very important. And we will put in our suggestions and our opinions. But on the other hand, Philip, if you remember, there has been talking of ITC face out several times in the past 10, 15 years. And I believe ITC was first introduced during President Bush time and then every year, every year, President Bush and also the House and Senate extended this ITC. So we also have been preparing for ITC face out several times and for just for recurrent. I remember recurrent had like safe harbored solar modules and other equipment several times in the past 15 years. And every time ITC got extended. So ITC seems to have good longevity. So we'll see how it looks like this time. But the industry and also recurrent plus the Canadian solar, we're prepared to go through another round. I believe the solar project and the historic project, you know, the price is very economic these days. And also the electricity demand is high. So whatever the ITC is, I think the industry will adjust, eventually adjust and then continue to grow. OK,

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

the

deconsolidation. Thanks.

Provide comments on the

energy storage

and

margin. And then, Xinbo, you may want to explain the deconsolidation of solar project. Yeah.

Oh, so on the storage side, the Q2 storage shipment happened in Q1. So it was before this terrible war. And so, margin-wise, I can only say it's above 20 percent. It was pretty healthy. And also volume-wise, Q2 is going to be much higher. So the guidance is 2.6 to 2.8. 2.4 to 2.6 gigawatt hour. So it's much higher than Q1. Yeah. Let me comment on the deconsolidation. We have a storage project with fixed rate toll agreement covering about 80 percent of the project lifetime. According to accounting standard, when the project reaches COD, the majority of the risks and controls are transferred to the counterpart. So according to accounting standard, we need to deconsolidate this project from our balance sheet. And it releases the intercompany profit eliminated in early quarters in its one-time event, contributing about 5 to 6 percent of gross margin

in the next quarter. Okay. Thank you. Would you expect this strength? What kind of gross margins could we see in Q3 and Q4? Thanks.

No, we're not guiding this.

Okay. Appreciate it. Thank you, guys. I'll pass it on.

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

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

Yeah, Ian, do you want to handle this question? Any of the storage guidance, new guidance?

Yeah, I think to the seventh mine, a gigawatt hour actually covered the different uncertainties already. So that is, you know, that included the spending days exemption and also the uncertainties after that. So it can be as low as seven or as high as nine. So that's our assumption.

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

and actually for the storage contracts, most of the co we all have a change of law protection. Some of them are like capped pricing and the other others we've shared on tariff. So so even, you know, with the different uncertainties, I think the seven to nine gigawatt hour, we continue to have a healthy margin.

Yeah, Brian, just one comment that the sourcing flexibility will only help us in 2026. The sourcing, we are seeing sourcing flexibility with our suppliers start to build and ramp up their capacities outside China. But most of this will only help us in 2026. So 2026, we have to we have to deliver all the storage project

from

China. So the impact does have no, the tariff does have an impact. And because of that, some of customers ask it to push their project deliver to next year. And when we have this non China battery cell option already. So that accounts for most of the per the change

on the guidance.

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

Yeah. Do you want to answer this question?

Yeah,

I should. And growth in China.

Yeah. So, you know, we're still waiting for policy clarification at provincial level, which is the action points. Right. So before that, the investment decisions in China are mostly on how I'm held. So, however, from our understanding about the market dynamics, we think, you know, it will have a few months of adjustment in China. But after that, once the clarification, once we have the policy clarification, this should, you know, it will not be a disaster. Well, the demand will start to pick up. But, however, I think second half will be weak next year. We don't really know because there's a lot of uncertainty. We're still waiting for the policy clarification. However, we believe that the healthy demand for storage is going to come. Because in the past, we, you know, most of the storage demand in China was kind of mandatory on solar. So, but since this policy change, the policy 133, I think it will be, we'll have a free trade market. The trading market will actually bring in a real demand for storage. So we anticipate a healthy growth of high quality storage projects coming up next year.

Perfect. Really, really appreciate the call. Thank you.

Thank you.

Our next question is from Alan Lau with Jeffries. Please proceed.

Thanks for taking my question. A follow up question on the 6% margin contribution of the consolidation of this project. So I would like to know, there's a fixed rate agreement covering the project life. So based on accounting standards, we will have to record the profit. But what I would like to know is, is it a one-off, just to confirm, is it a one-off impact on Q2? Or like how does the amortize over the time? From

an accounting perspective, yeah, it's a one-off impact on Q2 this year.

Okay. Thank you. Thank you. That's clear. So Q3 onwards, unless you have other projects that are deconsolidated. Otherwise, this is only one-off on Q2, right? Correct. Thank you. And then our next question is, also a follow up on US policies because there's a lot of prevalence in the past one week. I would like to check on your view because the language is actually saying that at least for the next two years, if a FEOC is not having the majority stake, then we'll be still able to get 45x. Just to reconfirm, our company, CSIQ, is actually Canadian owned and also, per your understanding, is not an FEOC or what do you think about that?

Canadian solar itself is Canadian owned and also traded on NASA. So there are common shareholders from the US stock market. Now, Canadian solar holds about 65% of CSI solar, which is trading on Shanghai Stock Exchange, which is organized under the Chinese corporate law and is trading on Shanghai Stock Exchange. And then CSI solar invested into the facilities in the US, including the module factory in Muskie, also the cell factory in Jeffersonville, Indiana, and a storage factory in Shelbyville, Kentucky. So if the current language in the new draft stays as yet, then these three facilities will be impacted. We'll have to change the ownership structure in order to fit or comply with the new laws. But on the other hand, as you see that, CSIQ, which is a Canadian company, still holds 65% and it's the controlling shareholder for CSI solar. So I suppose that it will be much easier for us to change the structure or maybe to invite some third party investors in order to make all three entities comply with the new rules. But I also mentioned when I answered the previous question from Philip Chen that what we what released by the House, Way and Means Committee two days ago was only the first draft. We expected to go through many, many changes before it becomes the law. So there's a question of how fast the reconciliation will go through. Some say it's July or August recess and some say it's September. So we'll see. We're not experts in how the legislature bodies work. However, we are sending our comments and opinions through our channels. And so I hope the final bill will consider all this and final bill will I hope the final bill will truly help to make manufacturing back to get manufacturing go back to China rather than otherwise. And that's my hope.

Let's go back to the US. Sorry, Sean.

Yeah, this is about US. What I've been talking about US is about a House, Way and Means draft of the new requirement. And also I answered your question on FEOC.

Thank you. So next question is because I saw on a news mentioning Canadian solar is having a commitment in Ethiopia. So we'd like to know what's your plan there in terms of modules or is there any plan for sales?

Yeah, that's not true. We would you know our development people have you know travel around the world so they travel to Ethiopia. But we haven't made any committed like decision to any activities in Ethiopia yet.

I see. So there's some probably due diligence but not up to the stage of commitment yet.

Right. We're developing and exploring options but no, we haven't committed anything.

I see. So my last question is about should the guidance we'd like to know like the the guidance actually module guidance has came down. I would like to know is that main the difference versus last time is that mainly the US volume?

Should you answer this question?

So the US annual volume stays so we don't have a new update on that.

Okay, so yeah,

so what you're doing the shipment to US is pretty much what we guided before and this volume reduction reflect the reduction of non-unprofitable sales to other market.

And

that's very clear. Thanks a lot for taking my question.

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

Thank you. Good morning. Just going back to the FEOC draft legislation. I guess the question here is on your Indiana, Kentucky facilities. Does it make sense to put those on pause? Yes, you maintained your your capex guidance 1.2 billion. But, you know, until you get final clarity on the rules, is there a chance that maybe, you know, some of that capex comes down, you ship the projects out or are you confident that, you know, the draft language will change with the future revisions or you see a path here that even if it doesn't change through ownership changes, bringing in third party investors that you can come up with. So, yes, I think it's a good idea to apply with the rules.

The Jefferson, Jeffersonville, Indiana factory, as you mentioned, is in the middle of the building construction and also the equipment. Well, they shipped in the phase of most of the phase one equipment and those phase one equipment, which is about two gigawatt of capacity. So let's say capacity. Those equipment stay in a warehouse in Indiana right now, waiting for the building to complete. So I think phase one of about two gigawatts, you know, the Jeffersonville facility, we have announced a proposal, a plan to reach five gigawatts. We cut into phase one and phase two. So we are quite conservative when it comes to actual spending money. So at this moment, phase one, as I said, equipment are almost there. So we will, I think we will complete the phase one. Well, and the phase two decision will probably be made, you know, in the summer or after summer, the final decision. And so I hope, I think this budget reconciliation will come to a conclusion, final form, either before the summer or after summer. So in a way that we are not spending a lot of money on the Jeffersonville, you know, other than what we already committed. And so the schedule is in parallel with the schedule of this budget reconciliation process. So if somehow, you know, we think the final language will be reasonable, final language about FGLC will be reasonable. And but also, as you said, we are ready to to change the capital structure. Once the policy is clear, the language is clear, the legal explanation is clear, then we will make our existing capacity to meet with the whatever the new language. But we don't want to completely stop. So we are still continuing with, you know, design some final like detailed design of the factory and also certain civil construction work. Because the IRA itself only have a few years of shelf time, right? Even the previous original IRA already contains a phase down after 2030. And I think by 2030, 2035, right, all the ITC and also the advanced manufacturing acquired the ITC, the so-called 45X will stop. So this is only a final time. So, you know, only finite amount of time, limited amount of time. So if we delay too much, the project will become un-economic. So we'll balance this. We'll spend some money to keep the construction and design work going. And however, for most of the equipment, other than what we already shipped in, we will probably only be able to make decisions, let's say in August or September. I hope by that time, this budget reconciliation is already completed.

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

Yes, Ismail, this is a question for you.

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

it. Okay.

Thank you.

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

Thank you and 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 and take care and have a great day.

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