GUELPH, ON, March 21, 2023 /PRNewswire/ -- Canadian Solar Inc. ("Canadian Solar" or the "Company") (NASDAQ: CSIQ) today announced financial results for the fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022 Highlights
- 68% increase in solar module shipments year-over-year ("yoy") to 6.4 GW, above guidance range of 6.0 GW to 6.3 GW.
- 29% increase in revenue yoy to $1.97 billion, above guidance range of $1.8 billion to $1.9 billion.
- 17.7% gross margin at the high end of guidance range of 16% to 18%.
- Net income attributable to Canadian Solar of $78 million or $1.11 per diluted share.
Full Year 2022 Highlights
- Record revenues of $7.47 billion, a 42% increase yoy.
- Record net income attributable to Canadian Solar of $240 million, or $3.44 per diluted share.
- Record solar module shipments of 21.1 GW by CSI Solar, a 45% increase yoy.
- Record utility-scale battery storage shipments of 1.79 GWh by CSI Solar, doubling last year.
- 25 GWp of solar development pipeline and 47 GWh of battery storage development pipeline, as of January 31, 2023 (Global Energy).
Dr. Shawn Qu, Chairman and CEO, commented, "We achieved record financial results in 2022, with revenue increasing 42% and net income attributable to shareholders increasing 152%. Our company and industry are at a critical turning point as we transition towards a grid parity market where clean energy investments are attractive both economically and from a sustainability standpoint, unlocking significant global demand. In addition, as solar equipment costs reach closer to the bottom of the cost curve, volume growth is translating into both revenue and earnings growth, driven by a combination of a stabler cost structure, increasing pricing power and operating leverage. This is evident in our 2022 results and adds to our confidence in our future growth opportunities. Lastly, CSI Solar's carve-out IPO just got approved by China Securities Regulatory Commission as we speak today."
Yan Zhuang, President of Canadian Solar's CSI Solar subsidiary, said, "We achieved significant growth and profitability improvements throughout 2022. We continued to focus on strengthening our competitive advantage in technology and product leadership, positioning our brand in high-priced premium markets, building on strong customer and channel relationships, and increasing control over costs through vertical integration of manufacturing capabilities. Both material and logistical costs declined further. Looking ahead, we expect significant growth driven by our solar and battery storage offerings. In particular, we achieved over $1 billion in contracted battery storage revenues as of January 31, 2023, giving us significant visibility over our multi-year growth prospects and ability to deliver sustainable long-term value to our shareholders."
Ismael Guerrero, Corporate VP and President of Canadian Solar's Global Energy subsidiary, said, "The fourth quarter of 2022 was impacted by the timing of project sales, as expected, and adjustments in our growth strategy to hold valuable solar assets for the longer term. We continue to execute on 25 GW of solar and 47 GWh of battery storage projects (of which 13.5 GW and 11.6 GWh respectively have interconnections), one of the largest pipelines globally, and create value in our projects."
Dr. Huifeng Chang, Senior VP and CFO, added, "In the fourth quarter, we achieved $1.97 billion in revenue, a 17.7% gross margin, and net income of $1.11 per diluted share. We ended the quarter with a total cash position of $2.0 billion and reduced our leverage from a net debt to EBITDA standpoint. Overall, we remain disciplined in our capital deployment and are positioned to capture long-term growth and value."
Fourth Quarter 2022 Results
Total module shipments recognized as revenues in the fourth quarter of 2022 were 6.4 GW, up 68% yoy. Of the total, 216 MW were shipped to the Company's own utility-scale solar power projects.
Net revenues in the fourth quarter of 2022 were up 29% yoy and 2% quarter-over-quarter ("qoq") to $1.97 billion. The sequential increase primarily reflects higher solar module shipment volumes, partially offset by a small decline in module average selling price ("ASP") and lower revenue from battery storage solutions and project sales. The yoy increase was mainly driven by the significant increase in solar module shipments.
Gross profit in the fourth quarter of 2022 was $349 million, up 16% yoy and down 4% qoq. Gross margin in the fourth quarter of 2022 was 17.7%, compared to 18.8% in the third quarter of 2022, at the high end of the guidance range. The gross margin decline was mainly driven by lower margin contribution from project sales and lower module ASPs, partially offset by lower manufacturing costs and the depreciation of the Renminbi relative to the U.S. Dollar.
Total operating expenses in the fourth quarter of 2022 were $213 million compared to $274 million in the third quarter of 2022 and $234 million in the fourth quarter of 2021. The decrease was mainly driven by lower logistics costs and a lower impairment charge related to certain manufacturing assets.
Depreciation and amortization charges in the fourth quarter of 2022 were $50 million, compared to $56 million in the third quarter of 2022 and $84 million in the fourth quarter of 2021. The decline was mainly driven by an accelerated depreciation of a production facility that occurred in the fourth quarter of 2021 and currency translation of the Renminbi relative to the U.S. Dollar.
Net interest expense in the fourth quarter of 2022 was $11 million, compared to net interest income of $4 million in the third quarter of 2022 and net interest expense of $13 million in the fourth quarter of 2021. Net interest expense returned to a normalized level in the fourth quarter with the absence of an interest benefit generated by the anti-dumping and countervailing duty deposit refunds in the third quarter of 2022.
Net foreign exchange and derivative loss in the fourth quarter of 2022 was $15 million, compared to a net gain of $39 million in the third quarter of 2022 and a net gain of $1 million in the fourth quarter of 2021. The net foreign exchange loss was mainly driven by the strengthening of the Euro and the Japanese Yen against the U.S. Dollar.
Net income attributable to Canadian Solar in the fourth quarter of 2022 was $78 million, or $1.11 per diluted share ("diluted EPS"), compared to net income of $78 million, or $1.12 per diluted share, in the third quarter of 2022, and net income of $26 million, or $0.39 per diluted share, in the fourth quarter of 2021.
Net cash flow provided by operating activities in the fourth quarter of 2022 was $397 million, compared to $68 million in the third quarter of 2022. The increase in operating cash inflow was mainly driven by changes in working capital.
Total debt was $2,593 million as of December 31, 2022, compared to $2,713 million as of September 30, 2022, and included $684 million and $842 million of debt related to project assets as of December 31, 2022 and September 30, 2022, respectively. Non-recourse debt used to finance solar power systems and project assets increased to $365 million as of December 31, 2022, from $311 million as of September 30, 2022.
Total project assets at the end of the fourth quarter of 2022 were $824 million, compared to $911 million at the end of the third quarter of 2022. Project assets are projects that are developed and built for sale, as part of Global Energy's business model.
The net value of solar power systems at the end of the fourth quarter of 2022 were $365 million, compared to $101 million at the end of the third quarter of 2022. Solar power systems are projects that are developed and built to hold on the Company's balance sheet. During the fourth quarter of 2022, the Company determined that certain solar projects in Brazil and Italy with book value of $264 million were appropriately reclassified as solar power systems as the intention on these projects transitioned to be held on the Company's balance sheet for the purpose of generating long-term electricity income.
Corporate Structure
The Company has two business segments: Global Energy and CSI Solar, which operate as follows:
The Global Energy segment carries out the Company's global project development activities for both solar and battery storage project development, which include sourcing land, interconnection agreements, structuring power purchase agreements (PPAs) and other permits and requirements. The Global Energy segment develops both stand-alone solar and stand-alone battery storage projects, as well as hybrid solar plus storage projects. Its monetization strategies vary between develop-to-sell, build-to-sell, and build-to-own, depending on business strategies and market conditions, with the goal of maximizing returns, accelerating cash turn, and minimizing capital risk.
The CSI Solar segment consists of solar module manufacturing and total system solutions, including inverters, solar system kits and EPC (engineering, procurement, and construction) services. The CSI Solar segment also includes the Company's battery storage system integration business, delivering bankable, end-to-end, turnkey battery storage solutions for utility-scale, commercial and industrial, and residential applications. These storage systems solutions are complemented with long-term service agreements, including future battery capacity augmentation services.
Global Energy Segment
Canadian Solar has one of the world's largest and most geographically diversified utility-scale solar and energy storage project development platforms, with a strong track record of originating, developing, financing, and building nearly 9 GWp of solar power plants and 3 GWh of battery storage power plants across six continents. As of January 2023, the Company had a total global solar pipeline of 25 GWp and an energy storage project development pipeline of 47 GWh.
The continued pipeline expansion and strong project development track record support Global Energy's growth in three key areas:
- Project sales: The Company plans to grow its volume of project sales by a compound annual growth rate of approximately 20% to 2026, while holding and accumulating assets through investment vehicles (see below) in order to better capture asset value.
- Investment vehicles: The Company is optimizing its project monetization strategy by establishing local investment vehicles to help maximize the value of its project assets while retaining minority ownership in these vehicles. This approach will help the Company build and grow a stable base of long-term cash flows from contracted electricity while recycling a large portion of the capital into developing new solar projects for growth. Meanwhile, the Company expects to capture additional operational value throughout the partial ownership period, including long-term cash flows from power sales, operations and maintenance ("O&M") and other services (see point 3). The Company currently owns a 15% stake in the Canadian Solar Infrastructure Fund ("CSIF", TSE: 9284), the largest Japanese infrastructure fund listed on the Tokyo Stock Exchange, and has established the CSFS Fund I, a fund of a similar nature in Italy.
- Services: The Company currently manages over 3.7 GW of operational projects under long-term O&M agreements, and an additional 2.3 GW of contracted projects that will be operated and maintained by the Company once they are placed in operation. The Company's target is to reach 20 GW of projects under O&M agreements by 2026.
Management targets to achieve the following over the next few years:
| Global Energy Targets | 2022A | 2023E | 2024E | 2025E | 2026E |
| Annual Project Sales, GWp | 2.0 | 2.8-3.3 | 3.5-4.0 | 4.0-4.5 | 4.3-4.8 |
| Operational O&M Projects, GWp | 3.7 | 7.5 | 11 | 15 | 20 |
| Net Cumulative Projects Retained, MWp* | 417 | 630 | 1,000 | 1,100 | 1,300 |
| Gross Cumulative Projects Retained, MWp* | 1,400 | 2,580 | 3,500 | 4,000 | 5,000 |
|
| *Net projects retained represents CSIQ's net partial ownership of solar projects; the gross number represents the
aggregate gross size of projects, including the share which is not owned by CSIQ.
|
Project Development Pipeline – Solar
As of January 31, 2023, the Company's total solar project development pipeline was 24.7 GWp, including 1.8 GWp under construction, 4.9 GWp of backlog, and 18.0 GWp of projects in advanced and early-stage pipelines, defined as follows:
- Backlog projects are late-stage projects that have passed their risk cliff date and are expected to start construction in the next 1-4 years. A project's risk cliff date is the date on which the project passes the last high-risk development stage and varies depending on the country where it is located. This is usually after the projects have received all the required environmental and regulatory approvals, and entered into interconnection agreements, feed-in tariff ("FIT") arrangements and power purchase agreements ("PPAs"). Over 90% of projects in backlog are contracted (i.e., have secured a PPA or FIT), and the remaining are reasonably assured of securing PPAs.
- Advanced pipeline projects are mid-stage projects that have secured or have more than 90% certainty of securing an interconnection agreement.
- Early-stage pipeline projects are early-stage projects controlled by Canadian Solar that are in the process of securing interconnection.
The following table presents Global Energy's total solar project development pipeline.
| Total Project Pipeline (as of January 31, 2023) – MWp* |
| Region | In
Construction | Backlog | Advanced
Pipeline | Early-Stage
Pipeline | Total |
| North America | - | 422 | 2,310 | 4,324 | 7,056 |
| Latin America | 1,400** | 2,397** | 908 | 510 | 5,215 |
| Europe, the Middle East and Africa
("EMEA") | 89 | 936 | 3,509 | 2,803 | 7,337 |
| Japan | 36 | 149 | 3 | 55 | 243 |
| Asia Pacific excluding Japan and China | - | 3 | 135 | 2,058 | 2,196 |
| China | 250 | 971** | - | 1,475 | 2,696 |
| Total | 1,775 | 4,878 | 6,865 | 11,225 | 24,743 |
|
| *All numbers are gross MWp. **Including 645 MWp in construction and 282 MWp in backlog that are owned by or already sold to third parties. |
Project Development Pipeline – Battery Storage
As of January 31, 2023, the Company's total battery storage project development pipeline was 46.9 GWh, including 0.3 GWh under construction, 2.9 GWh of backlog, and 43.7 GWh of projects in advanced and early-stage pipelines.
The table below sets forth Global Energy's total storage project development pipeline.
| Storage Project Development Backlog and Pipeline (as of January 31, 2023) – MWh |
| Region | In
Construction | Backlog | Advanced
Pipeline | Early-Stage
Pipeline | Total |
| North America | - | - | 4,098 | 15,382 | 19,480 |
| Latin America | - | 2,300 | 1,650 | 970 | 4,920 |
| EMEA | - | 110 | 2,620 | 9,999 | 12,729 |
| Japan | - | - | - | 19 | 19 |
| Asia Pacific, excluding Japan and China | 20 | 458 | - | 1,640 | 2,118 |
| China | 300 | - | - | 7,300 | 7,600 |
| Total | 320 | 2,868 | 8,368 | 35,310 | 46,866 |
|
Projects in Operation – Solar and Battery Storage Power Plants
As of January 31, 2023, the Company's solar power plants in operation totaled 574 MWp, with a combined estimated net resale value of approximately $620 million to Canadian Solar. The estimated net resale value is based on selling prices that Canadian Solar is currently negotiating or comparable asset sales.
| Solar Power Plants in Operation – MWp* |
| Latin America | Japan | Asia Pacific ex. Japan and China | China | Total |
| 336 | 140 | 12 | 86 | 574 |
|
| *All numbers are net MWp owned by Canadian Solar;
total gross MWp of projects is 1,027 MWp, including
volume that is already sold to third parties.
|
As of January 31, 2023, the Company's battery storage power plants in operation totaled 280 MWh, representing the 20% interest Canadian Solar retains in the 1,400 MWh Crimson standalone battery storage project in California.
Operating Results
The following table presents select unaudited results of operations data of the Global Energy segment for the periods indicated.
| Global Energy Segment Financial Results (In Thousands of U.S. Dollars, Except Percentages) |
| Three Months Ended |
| Twelve Months Ended |
|
| December 31,
2022 | September 30,
2022 | December 31, 2021 |
| December 31,
2022 | December 31, 2021 |
|
| Net revenues | 73,650 | 100,925 | 232,418 |
| 821,525 | 1,124,083 |
|
| Cost of revenues | 57,686 | 53,366 | 224,359 |
| 660,161 | 930,099 |
|
| Gross profit | 15,964 | 47,559 | 8,059 |
| 161,364 | 193,984 |
|
| Operating expenses | 17,315 | 20,512 | 22,787 |
| 81,000 | 96,805 |
|
| Income (loss) from
operations* | (1,351) | 27,047 | (14,728) |
| 80,364 | 97,179 |
|
| Gross margin | 21.7 % | 47.1 % | 3.5 % |
| 19.6 % | 17.3 % |
|
| Operating margin | -1.8 % | 26.8 % | -6.3 % |
| 9.8 % | 8.6 % |
|
|
|
| *Income (loss) from operations reflects management's allocation and estimate as some services are shared by the
Company's two business segments. |
|
CSI Solar Segment
Solar Modules
CSI Solar shipped 6.4 GW of solar modules to more than 70 countries in the fourth quarter of 2022. For both the fourth quarter and full year of 2022, the top five markets ranked by shipments were China, the U.S., Brazil, Spain, and Germany.
CSI Solar's 2023 solar capacity expansion targets are set forth below.
| Solar Manufacturing Capacity, GW* |
| December 2022 Actual | June 2023 Plan | December 2023 Plan |
| Ingot | 20.4 | 20.4 | 20.4 |
| Wafer | 20.0 | 21.0 | 35.0 |
| Cell | 19.8 | 26.0 | 50.0 |
| Module | 32.2 | 36.7 | 50.0 |
|
| *Nameplate annualized capacities at said point in time.
Capacity expansion plans are subject to change without
notice based on market conditions and capital allocation
plans.
|
Battery Storage Solutions
Within CSI Solar, the battery storage solutions team, namely CSI Energy Storage, provides customers with competitive turnkey, integrated, utility-scale battery storage solutions, including bankable and fully wrapped capacity and operating performance levels. System performance is complemented with long-term service agreements, which include future battery capacity augmentation services and bring in long-term, stable income.
As of January 31, 2023, CSI Energy Storage had a total project turnkey pipeline of 22.6 GWh, which includes both contracted and in construction projects, as well as projects at different stages of the negotiation process. CSI Energy Storage was also managing 2.3 GWh of projects under long-term service agreements, which are operational battery storage projects delivered by CSI Energy Storage that are under multi-year long-term service agreements and generate recurring earnings.
The total contracted turnkey pipeline was over $1 billion, which are contractual obligations that provide significant earnings visibility over a multi-year period.
During 2022, CSI Energy Storage launched the SolBank, a lithium iron phosphate (LiFePO4) chemistry-based battery storage enclosure with up to 2.8 MWh of usable energy capacity, specifically engineered for utility-scale applications. The SolBank is designed with liquid cooling and humidity control, active balancing BMS (battery management system) technologies, and complies with the latest international safety and compliance standards. CSI Energy Storage produces the SolBank on fully automated, state-of-the-art production and testing facilities.
The table below sets forth CSI Energy Storage's battery storage manufacturing capacity expansion targets.
| Battery Storage Manufacturing
Capacity, GWh* | December 2022 Actual | December 2023 Plan |
| SolBank | 2.5 | 10.0 |
|
| *Nameplate annualized capacities at said point in time. Capacity expansion
plans are subject to change without notice based on market conditions and
capital allocation plans.
|
Operating Results
The following table presents select unaudited results of operations data of the CSI Solar segment for the periods indicated.
| CSI Solar Segment Financial Results* (In Thousands of U.S. Dollars, Except Percentages) |
| Three Months Ended |
| Twelve Months Ended |
| December
31, 2022 | September
30, 2022 | December 31, 2021 |
| December
31, 2022 | December 31, 2021 |
| Net revenues | 1,976,045 | 1,973,163 | 1,343,278 |
| 6,975,612 | 4,371,603 |
| Cost of revenues | 1,631,417 | 1,632,518 | 1,056,750 |
| 5,824,855 | 3,689,126 |
| Gross profit | 344,628 | 340,645 | 286,528 |
| 1,150,757 | 682,477 |
| Operating expenses | 192,099 | 243,667 | 204,969 |
| 806,959 | 608,345 |
| Income from operations | 152,529 | 96,978 | 81,559 |
| 343,798 | 74,132 |
| Gross margin | 17.4 % | 17.3 % | 21.3 % |
| 16.5 % | 15.6 % |
| Operating margin | 7.7 % | 4.9 % | 6.1 % |
| 4.9 % | 1.7 % |
|
| *Include effects of both sales to third-party customers and to the Company's Global Energy segment. Please refer to the
attached financial tables for intercompany transaction elimination information. Income from operations reflects
management's allocation and estimate as some services are shared by the Company's two business segments. |
The table below provides the geographic distribution of the net revenues of CSI Solar:
| CSI Solar Net Revenues Geographic Distribution* (In Millions of U.S. Dollars, Except Percentages) |
| Q4 2022 | % of Net
Revenues |
| Full Year 2022 |
|
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