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Canadian Solar Inc.
8/21/2025
Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's second quarter 2025 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. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Wynna Wong, Head of Investor Relations at Canadian Solar. Please go ahead.
Thank you, Operator, and welcome everyone to Canadian Solar's second quarter 2025 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 presentation section. Joining us today are Dr. Sean Chu, Chairman and CEO, Yan Zhuang, President of Canadian Solar subsidiary CSI Solar, Ismael Guerrero, Corporate VP and President of Canadian Solar Subsidiary Recurrent Energy, and Simbuo Zhu, 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. Simbuo will go through the financial results. Sean 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. 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 GAAPs. 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. Shawn. Shawn, please go ahead.
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, we shifted deliveries into the second half. Revenue totaled $1.7 billion for the quarter. also impacted from certain project sales delay. Gross margin exceeded guidance at 29.8 percent, 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 now recurring operating expenses, including the impairment of remaining legacy manufacturing assets. As a result, we reported net income attributable to shareholders of $7 million. or a net loss of $0.08 per diluted share due to the PIK accounting for a preferred shareholder of recurrent. Over the past few months, our industry faced a challenging policy environment. 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 striking implications for both supply and demand in the U.S. On the supply side, solar and storage domestic onshoring is challenged by increasingly stringent of EOC requirements and higher for two days on both equipment and components. According to Wood Mackenzie, up to 23 gigawatts of operating solar module capacity could be a factor. 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 end of 2027. energy storage project must navigate annual FEOC threshold to maintain developer credit. 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 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.S. market. We deliver both solar and storage solutions across utility scale, D&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. Another ongoing commitment is our focus on sustainability. On May 29, we released our 2024 Sustainability Report. Please turn to slide 5. 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. 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 ethical 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 Sichuan, Jiangsu Province, China. In 2024, we conducted 147 supplier ESG audits, including 31 on-site evaluations, surpassing our 2023 totals. Following collaborative consultations and corrective action plans, all suppliers met our stringent ESG criteria. With that, I will now turn the call over to Yann, who will provide more details on our CSI solar business. Yann, please go ahead.
Thank you, Sean. Please turn to slide six. In the second quarter of 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. Revenue reached $1.7 billion with gross margin expanded 890 basis points, quarter over quarter, to 22.3 percent. 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 a healthy margin further reinforced growth 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 percent to 15.3 percent of revenue. and we delivered $121 million in operating income. 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 lack 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 peppering off. 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. As of June 30, contracted backlog, including long-term service agreement, was $3 billion. To support our growth, We are expanding our globally diversified capacities from 10 gigawatt hours of BES and 3 gigawatt hours of battery cell today to 24 gigawatt hours and 9 gigawatt hours respectively by 2026 year end. The expanded BES 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. Please turn to slide eight. In June, we successfully completed large-scale fire testing for our SoBank 3.0 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 and the energy safety responses group. In residential storage, EPQ won the Japan International Pioneer Design Award, or IDPA, in the electrical products category. 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. 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 cell solutions. With that, let me hand the call over to Ismael, who will provide an update on recurrent energy, Canadian solar's global project development business. Ismael, please go ahead. Thank you, Jan.
Please turn to slide nine. In the second quarter, we generated $106 million 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. 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 breakdown in Latin America, combined with other non-recurrent expenses, led to elevated operating expenses and an operating loss of $74 million. We remain focused on discipline execution while managing ongoing trade and policy risks. We energized our first merchant 200 megawatt-hour Fort Duncan 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 million of project financing and tax equity. The off-taker for this project is Constellation, who will purchase power and renewable energy certificates generated by this nearly 100 megawatt facility. Please turn to slide 10 for an update on our pipeline. As of June 30th, 2025, we own interconnections for 8 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 US 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 a 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.S., We have already safe harbored 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 offsite 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 US, Europe, and Japan, where we already hold store market positions. Our O&M business continues to gain traction with 10.5 gigawatts currently in operation and 3.2 gigawatts contracted coming into service in the next course. Finally, we are advancing development of our data center sites in both the US and Spain. where we expect to have the first projects ready within the next few quarters. Now, I will hand the call to Shinbo to review our financial results.
Shinbo, please go ahead.
Thank you, Ismael.
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 the additional impact of delayed project sales, total revenue was $1.7 billion. Gross margin was 29.8%, elevated by a sale type related to a U.S. project and an ADCVD 2-up adjustment. Excluding this one-time impact, gross margin would have been 21.6%, sequentially higher due to a stronger North American module mix and the storage volumes. Operating expenses increased to $378 million, primarily due to non-recurring items, including impairment charts related to certain solar and storage assets, as well as manufacturing assets. Without these items, operating expenses would have been $259 million, or 15.3 percent of revenue, compared to 16.3 percent in the first quarter. Net interest expense rose from $28 million in the first quarter to $35 million, reflecting higher borrowings and recurrent energy and lower interest income. Net foreign exchange loss was $13 million, primarily driven by dollar weakness. Net income attributable to shareholders was $7 million, or a net loss of $0.08 per diluted share. This result included a positive $30 million HLBV impact, or $0.45 per share, from tax equity arrangements tied to certain U.S. projects. 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. Cash inflow from operating activities was $189 million, compared with an outflow of $264 million in the first quarter. Cash inflow was primarily driven by chance in working capital, specifically a decrease in inventory. Total assets grew to $14.8 billion, with project assets rising to $1.7 billion. Solar power systems and battery energy storage systems now stand at $2 billion. CapEx totaled $173 million, mainly reflecting payments for existing capacities. Our full-year 2025 CapEx outlook remains unchanged at approximately $1.2 billion. primarily driven by investment in U.S. manufacturing initiatives. Total debt increased to $6.3 billion, mainly due to new borrowings for project development and operational assets. We closed the quarter with a cash position of $2.3 billion. Looking ahead, we remain focused on discipline, debt management, and the prudent liquidity oversight aligned with industry dynamics and our financial fundamentals. 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. Let me turn the call back to Sean, who will conclude with our guidance and the business outlook. Sean, please go ahead.
Thank you, Xinbo. Please turn to slide 13. For the third quarter of 2025, we expect to deliver module volumes between 5 to 5.3 gigawatts. For energy storage shipments, we expect to deliver 2.1 to 2.3 gigawatt hours, including about 250 megawatt hours to our own project. We project third quarter revenue to be in the range of $1.3 to $1.5 billion, with gross margin expected to be between 14 to 16 percent. 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 1 gigawatt to our own project. The reduced midpoint of our marked 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 trading 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 project. We are revising our full-year revenue guidance to between $5.6 and $6.3 billion. 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?
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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment for your first questions. Our first questions come from the line of Colin Rush with Oppenheimer. Please proceed with your questions.
Thanks so much, guys. Now, can you talk a little bit about the perk right down here and the impact ultimately on margins? I'm just trying to get a sense of how much that really impacts impact from a percentage basis on your module sales? Does that start to look like two or three points, or is it a little bit more than that?
Well, we decided to roll off pretty much all of our current equipment assets. 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, was quite a big impact.
Yeah, it's 46 million.
Yeah. Okay, but I'll follow up on the manufacturing afterwards. You know, just with the Treasury rules that have come out, I think everybody's trying to understand how developers are going to approach their safe harboring strategy and qualification. Can you guys give us a sense of where you're at from a safe harboring perspective, you know, what you're seeing from any of your customers on the module side, and how you anticipate some of the enforcement aspects realities for the industry, given, you know, just your first look in, you know, less than a week of being able to evaluate the new rules?
Yeah, Colin, as you know, our subsidiary Recurrent is a long-term player with 20 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 10, 13 years. So every time we approach the deadline, we save harbor. So we are very familiar with the role. And we're pleased to see that the newly released guidance, the new guidance for the safe harbor pretty much confirmed that our standard strategy for safe harbor is correct and also is proven. 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. So, if recurrent achieve this goal, then 1.6 plus 2.3, you know, 1.6 plus 2.3, well, we will be able to save harbor somewhere close to 4 gigawatt. So that will give us a very strong pipeline in U.S. You know, 4 gigawatt is almost equal to 1 gigawatt each year. So you can see that for, say, 4 years of harbor, It's pretty significant for us. It shows our strong ability, recurrent strong ability and very solid practice in the development procedure. As for the whole industry, that's a good question. We have been sending our antennas up, but it has only been a few days. 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 Recurrent. So I think the industry is relieved that at least their work so far has been recognized. Ismael, do you want to add some more colors?
Thank you, Sean. Look, I think, Colin, 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. 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. Okay. Thanks so much, guys.
Thank you. Our next question has come from the line of Philip Shen with Roth Capital Partners. Please proceed with your question.
Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. You know, given the OBBB and FEOC in the US, do you believe Canadian solar subsidiaries are currently FEOC compliant? If so, could you please give some details around what gives you confidence? And then if not, like what steps are you taking to comply with FEOC? And then lastly on FEOC, how are you planning for potentially stricter FEOC IRS guidance that could come out, you know, sometime next year?
Mark, thank you for the question. I kind of expected this question. Now, as you know, OBBA has different FIAC requirements for different years. So based on that yearly FIAC requirement, yes, Canadian solar is compliant with OBBA requirement at this moment. And we will continue, we believe we will continue to be compliant for the future years. As you know, every year the FIAC condition change, including the percentage change. So we have a plan to make sure that the Canadian solar three factory, which is the solar module factory, solar cell factory, and also the energy storage factory continue to meet the OBBA requirement this year.
And just on, you know, potential guidance, you know, they're going to release guidance on the FEOC restrictions and those potentially could be, you know, a little bit stricter than kind of the language that's in the bill. How are you guys planning for that kind of situation?
Well, we... Our internal legal team, accounting team, and the external teams have debated and due diligence in the past more than a month. Well, ever since July 4th when the OBBA was signed into 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 you know oh well I mean the IRS guidance might clarify some of the point and but I believe as long as those are the guidance to interpreted the OBBA, it can't change very much from the legal language itself in the bill. Therefore, we believe some, well, 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, so that we can, first of all, we make sure our customers will be able to claim their ITC, because our chairman meet the OBPBA rule of that particular year, and also our factory, three factories in U.S. will be able to claim the 45X for any of the particular year.
Great. Really appreciate the color there, Sean. If I could just squeeze in one more on policy. Given the upcoming Section 232 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. capacity?
Well, you probably know that Canadian Solar filed our comment to Department of Commerce for the Section 232 on polysilicate. And I believe you can get access to our filings through your lawyer or whatever. But basically, we believe that polysilicon or solar is not a national security concern because I don't think U.S. even want that much solar. Anyway, so why is solar-grade polysilicon a national security concern? The country have enough coal, oil, gas, you know, everything, right? The country is very also feel planned it so that based on that, we don't feel like polysilicon or solar should be under 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.
Okay, great. Thanks for the answer, Sean. I'll pass.
Thank you. Our next questions come from the line of Mahith Manloy with Mizuho Securities. Please proceed with your questions.
Mahith Manloy Hey. Hi. Thanks for taking the questions. Let me just follow more on the PEOC side. I appreciate the color there. Can you just talk more about the 45X eligibility for the U.S. assets, the U.S. 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 will follow up with you on that.
Yeah, well, I think our team, including our internal legal team and our external counsels, 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 long as those guidance follows the language in the OBPBA, itself, then I think our strategy is, you know, we have a good understanding. Therefore, our assessment is solid. And for 45X, both the 45X and for energy storage and for solar will continue according to the previous schedule. As you know, there's no change on the, like, in terms of the schedule, in terms of the timeframe, and also the run-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 meets those tables. And fortunately, solar has a global manufacturing. Energy storage is also more or less a global manufacturer. So there are suppliers of the key material for both solar and for energy storage. from several different countries. So, I believe that gave us the ability to navigate and to meet, to comply with the material assistance requirement, the percentage for each year. Now, you mentioned IRS guidance. Well, you know, people have been speculating or how much, you know, maybe the IRS guidance can help people a little bit. For example, IRS published a table for the domestic content in the past, which stopped guessing, you know, each component, the guidance specified percentage, so it makes the job easy, and also standardized. 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, you know, that's something we are waiting to see. If somehow they follow the same path, well, they stop, then at least everybody will use the same table. But maybe we'll follow a different path for material assistance. So that's something we are waiting to see. However, as I said, the OBPBA itself is already quite clear. For example, it defined the component like to be, for example, over 60% for China 26 for energy storage, and I believe 55%, right? or 50% for solar. So that's pretty clear. Any company who have employed a few capable accountants can do their calculation. So yeah, just with this language, 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 calculate, look at our product. 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, we have a good strategy. to be OBBBA compliant.
Thanks. And a picture of the color on the material system. Let me just, like, put one on the 45X to get that. Do you anticipate reducing CSI Solar's ownership in the U.S. manufacturing? Just trying to understand, like, the strategy there and the timeline on when to expect any changes in the structures of the U.S. manufacturing.
Thanks. This year, we don't have to, you know, 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 OBBA. Canadians only want to do the same. As I said, we have a strategy, so we will be able to be, we will be, you know, I think, We have a solid strategy to be OBBBA compliant every year.
Yeah, thanks for that, Colin. I'll take it as offer. Thank you.
Thank you. Our next question has come from the line of Alan Lau with Jefferies. Please proceed with your questions.
Thanks for taking my question. There was a meeting in China, I think 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, do you think the price hike in China would lead to a price hike in the rest of the world as well?
Canadian Solar is representative Well, the Canadian solar China factories received the invitation, so we sent a 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 have been expecting China to do. So I'm glad the Chinese government got the message and start to work with the industry to for better like balance of supply and demand.
So I heard there was clear guidance on a higher module price after the meeting. So because in the results briefing, I remember we mentioned that we expect this manufacturing cost hike, I guess it's the cost hike in polysilicon and wafer. But if module prices are higher, do you think that would actually improve your margins?
Well, I think Jan answered your question.
Jan said we have seen upstream material price increase. I'm not going to say spike that much, but we saw some increase, especially the polysilicon in-ground wafer. And Jan said we expect the module price to go up. or maybe lack the movement of the materials. Yan, you want to?
Yeah, so there's no top-down minimum pricing on module. However, there's a industry, there's a company that volunteered to actually put on some more discipline on pricing, some predefined price. but that's not a top-down. And the price was not carried with high efficiency, so I have to say. So it's basically mostly market-driven. The upper stream is actually priced one up because it's easier for upper stream because of the lack of a number of players. So that's why I said model price likely to go up as well, but maybe not as much as the upper stream.
You're breaking.
Sorry, you were breaking. We hear you. Hello, can you hear me?
Yeah, now it's good. Can you hear me? Yes. Yes, now it is good.
Yeah, so we'd like to know your view on the U.S. solar demand because President Trump yesterday has posted that he would not approve any projects, etc. So how do you think the demand in the U.S. and how much projects might be affected with the federal land approval requirement?
I don't know. Well, not... market direct company so you ask it a wrong person and I don't want to comment on White House speech also I don't want to comment thank you our next our next questions come from the line of Vikram Bagri with City please proceed with your questions
hi uh good morning everyone and i apologize in advance for asking another question on fiat but the press release mentioned that there has been some push outs uh and i saw saw that the storage backlog declined marginally also in second quarter i didn't see a pipeline number in the presentation i was wondering if if uh 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 FEOC playing a role? Are customers asking for confirmation of compliance 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 FEOC.
The new FEOC. requirement also take effect next year. So, this year's project, the project reached COD this year. There's no new FIAC 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 FIAC.
I also want to clarify that our pipeline didn't go down. 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.
So actually, we do have some major deals that is at the very last stage of negotiation. So there's some big numbers there.
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?
We're working on the 20% as a target. Got it. Thank you. 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.
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.
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.