Q3 2024 Canadian Solar Inc Earnings Call

Shawn Qu

Thank you and thank you to everyone for joining our third quarter earnings call today. Please turn to slide 3. In the third quarter, we shipped 8.4 gigawatts of solar modules and 1.8 gigawatt hours of battery energy storage solution. Revenue totaled $1.5 billion and gross margin surpassed the guidance at 16.4%.
Last November, we began to experience the most intense evolution in the history of solar. By evolution, I mean the industry compete internally on cost with no significant outward market expansion. Nearly a year later, this intense competition remains, the solar market continues to face significant pressures, geopolitical challenges, trade barriers, fierce price competition, and ongoing patent dispute to name a few. These combined factors have kept the industry in a cyclical low.
However, every downturn serves as a stress test, strengthening the company’s resilience and competitiveness that in turn drives improvement in economics of solar and energy storage solutions further expanding their applications.
Speaking of publication, let’s discuss the growing role of solar and storage in broader energy applications on slide 4. Two years ago, OpenAI launched ChatGPT, marking the beginning of a global AI revolution. As A I models and their applications expand, they will present both exciting opportunities and new challenges, particularly regarding high energy consumption and associated carbon emissions.
According to McKinsey in the United States, the largest data center market, power demand from data center is projected to grow from 3% to 4% of total energy consumption to around 12% by 2030 and higher beyond that.
Data centers are not only growing in number but also in size. Research from BCG shows that the average size of individual data centers is currently around 40 megawatts but there is a growing pipeline of data center campuses size at 250 megawatts or more. Solar and storage will be crucial in addressing the energy needs of AI infrastructure, providing reliable and sustainable power.
A year ago, I also spoke about the potential of reaching the terawatt generation for both solar and energy storage. Today, global solar installation have cumulatively reached nearly 2 terawatts. But to achieve global carbon neutrality, [we would need] close to 20 terawatts of solar capacity.
Similarly, storage capacity is projected to continue growing rapidly with annual installation exceeding 300 gigawatt hours by 2030. Solar and storage are still in their early stage and Canadian solar is well positioned for this long-term growth opportunities. As we move into the new era of growth, differentiation will be the key.
Please turn to slide 5. Being a market leader means more than just operational scale. It also requires innovation and leadership. Our recent partnership with SOLARCYCLE is a prime example of our leadership in and committed to advancing sustainability. Through this collaboration, Canadian Solar becomes one of the first crystalline silicon solar module manufacturers to offer comprehensive recycling services to US customers.
In a time when trust is in short supply, we are proud to be named the world’s most trustworthy company in the energy and utility sector on Newsweek’s 2024, world’s most trustworthy companies list. This recognition is a testament to our ongoing commitment to transparency, sustainability, and delivering high-quality service across our global operations.
At the core of our business is our commitment to delivering high quality, reliable products. Our continuous investment in research and development ensures that we remain at the forefront of technological innovation in both the solar and energy storage sector across our suite of products and solutions.
Finally, let me update you on our American manufacturing plan. Please turn to page 6. We are making long term investments in the US for both solar and energy storage. Our Texas solar module facility came online late last year. We have been adding more production lines and ramping up the volumes since then. We expect to reach full capacity by the middle of next year.
For our solar cell facility in Indiana, we expect to be operational by the end of 2025. We are also excited to announce that through our subsidiary e-STORAGE, we will build a state-of-art battery cell module and packaging manufacturing facility in Shelbyville, Kentucky. This project will be built in two phases. With phase one taking off this year. We will invest more than $300 million in the first phase to build a production capacity of 3 gigawatt hours annually.
Once the first phase is completed, we plan to invest in a second phase to double the capacity of our facility. With our inhouse factory management system and US sourced thermal management system, we will be able to meet domestic content requirements. The products built in a Shelbyville factory will be ready to be installed into energy storage projects nationwide by fall of 2025. Well, this is an ambitious timeline, we are confident in our ability to meet it. Thanks to the support of Shelbyville community, the governor’s office, and our talented workforce.
Following our storage manufacturing decision, Canadian Solar will have committed nearly $2 billion to American manufacturing with plan to employ more than 4,000 people across Texas, Indiana, and Kentucky. These jobs will spend manufacturing, engineering, and R&D contributing to local economies and helping foster a strong manufacturing presence in the United States.
Last month, Canadian Solar celebrated its 23rd anniversary. With more than 20 years of global manufacturing experience, we are proud to play a role in revitalizing American manufacturing.
With that. I will now turn the call over to Yan, who will provide more details on our CSI solar business. Yen, please go ahead.

Yan Zhuang

Thank you Shawn. Please turn to slide 7. In the third quarter of 2024, we shipped 8.4 gigawatts of modules. We generated revenue of $1.7 billion and achieved a gross margin of 18.6%. CSI solar delivered an operating income of $111 million. This quarter, we continued to execute our profit first strategy, prioritizing orders that meet our profitability criteria. Demand in the large China market softened in the second half of the year while Europe faced minor disruptions due to logistics, which resulted in lower shipment volumes than initially guided.
However, as evidenced by our strong performance in the generally lossmaking industry, we are focused on achieving sustainable growth and recognize the natural tradeoff between volume and profitability. Shipments to the North American market continue to increase accounting for over 30% of total shipments in the third quarter. While energy storage shipments reached 1.8 gigawatt hours marking new highs in both volume and profit contributions. These two drivers were key contributors to our third quarter performance.
Moving on to the market and Canadian Solar’s solar supply chain. Please turn to slide 8. The solar market continues to face significant pressure. Upstream costs are stabilizing while module ASPs continue to decline albeit at a slower pace than seen in the first half of the year.
With costs below those of perk and increasingly strong power outperformance, TOPCon technology has now become the industry standard. As Shawn mentioned earlier, we continue to actively invest in R&D optimizing TOPCon and other emerging technologies. Today, we’re seeing TOPCon cell efficiencies at mass production levels reaching as high as 26.7%.
The current market environment demands a more surgical rather than a sledge hammer approach. We remain prudent not only in our go to market strategy but also in our manufacturing plants. In the near term, our capacity investments will focus on strategic areas namely those in the United States.
Now to our storage business, please turn to slide 9. In the third quarter, we achieved record shipments of 1.8 gigawatt hours globally. Despite the large quotas of shipments and revenue recognition, we have now grown our backlog to a record $3.2 billion as of November 30. We continue to solidify our presence in established regions while also expanding into emerging markets as demonstrated by our inaugural contract in Chile.
For the Chile, Huatacondo and other global projects, we are delivering e-STORAGE, latest proprietary solutions, the SolBank 3.0. This system offers exceptional performance and safety featuring high density LFP battery cells and advanced battery management system and innovative liquid coding thermal management system. Its compact design with 5 megawatt hours of capacity per 20 foot container optimizes land use and reduces costs. The SolBank 3.0 also boosts an IP55 protection rating, making it an ideal solution for demanding environments.
So what is our competitive advantage? Please turn to slide 10. Despite only a few years of commercialization, e-STORAGE is already a consistent Top 10 player in the global energy storage market. In key markets like the United States, the United Kingdom, and Canada, we hold very strong market shares. e-STORAGE is differentiated by our ability to deliver comprehensive integrated solutions and services.
For DC systems safety, reliability, and cost are the primary factors with cost often being the most significant consideration. For AC solutions, success depends on a more balanced set of factors including system integration, local great knowledge, effective risk management, long term services, and more. In today’s geopolitical environment, customers also need to be confident in the long term consistency and reliability of the services they receive.
For one of the few players with expertise spanning both upstream and downstream. On the upstream side, we can leverage our experience across R&D supply side management and cost control. Downstream, we offer complete implementation, differentiated parent company guarantees and long term service capabilities. We remain firmly committed to driving technological and operational differentiation while further strengthening our leadership in global channels to build long term sustainable value.
Finally, I would like to briefly address the ongoing anti-dumping and countervailing duty proceedings. With over a decade of experience in the US market, we are well versed in the legal process and continue to actively engage as both an importer and a domestic manufacturer. We remain committed to the US market and will play our part in pursuing a fair and equitable outcome as the final determination is made.
It is important to note that even once final, these rulings will serve as estimates of cash deposits. The definitive rates would still be determined on a company by company basis during the annual administrative review.
Now let me turn the call over to Ismael who will provide an overview of Recurrent Energy, Canadian Solar’s global project development business. Ismael, please go ahead.

Ismael Guerrero

Thank you, Yan. Please turn to slide 11. Third quarter financials were modest. A certain project sales have been delayed into the next quarter and next year. We reported $45 million in revenue with a gross margin of 32% and an operating loss of $21 million. In the absence of significant project sales and with [being to hold] projects still under construction, P&L will experience near term pressure.
However, we remain disciplined in managing our operating stances to optimize our financial performance. This quarter, we successfully closed the previously announced $500 million investment from BlackRock. This marks an important milestone providing us with the capital needed to accelerate the transformation of our business to a partial [ITP] model.
We are currently managing execution of the largest number of projects in the history of our development business. This includes approximately 1 gigawatt peak of solar capacity under construction in Spain and Italy and an additional 127 megawatts peak of solar capacity along with 1.4 gigawatt hours of [desk] capacity under construction in the US.
This builds on the 300 megawatts of solar projects we successfully brought to commercial operation earlier this year. As part of our business model transformation, we are securing long term competitive offtake agreements to establish [retirement] predictable revenue streams.
Please turn to slide 12 for one such example. We have significantly expanded our partnership with Arizona Public Service or APS. This includes three 20-year tolling agreements, collectively covering 1,800 megawatt hours of energy storage and 150 megawatts of solar capacity, enough to power approximately 72,000 homes for 4 hours with energy storage and 24,000 homes family with solar.
These agreements cover the Desert Bloom Storage and Papago Solar and storage projects in Maricopa County, Arizona. Notably Papago Storage, a 200 megawatt hour standalone energy storage facility is currently under construction and is scheduled to come online in 2025. Once operational, Papago Storage will be the largest standalone energy storage project in the entire state.
Energy prices have been volatile across different markets. In Europe, we are observing a trend toward declining prices reflecting broader market dynamics. Conversely, in the US, particularly in regions experiencing high demand, projects with interconnections have more favorable pricing. Notably, as Shawn mentioned earlier, AI is driving a search in energy demand.
Our key differentiator in this space is our extensive global footprint which positions us to meet the growing demand for renewable energy solutions in any geography. To date, we have signed approximately 1.5 gigawatts with leading technology companies around the world. Many of which we have contracted across several regions including the US, Europe, Japan, and Australia. Our ability to sign long term contracts with strong counterparties is one of the factors that drives our long term growth.
Please turn to slide 13. We continue to build and maintain one of the largest and most mature solar and storage project development pipelines in the industry, now standing at more than 26 gigawatts of solar and 66 gigawatt hours of battery energy storage capacity. The total cycle from early pipeline to in construction is taking longer and we are seeing significant delays due to bottlenecks during permitting and in the interconnection process which now take three to eight years depending on the country and the project.
It is one of our challenges. As we are dependent on government agencies that are clearly overwhelm by the huge number of applications they receive. The same applies to the grid operators when it comes to connecting the power plants. As grid operators, we are not planning according to the massive volume that is now coming online.
Building a PV plant takes around a year. The permitting process takes two to five, depending on the country, mainly waiting on queues and the same applies to interconnections. Projects in backlog are expected to start construction within the next six quarters. While projects under construction usually take 6 to 18 months to be operational, depending on size and permitting. Overall, while project delays are coming in our business, we are confident about our future growth given the volume of interconnections we have secured, which includes approximately 10 gigawatts of solar projects and 16 gigawatt hours for storage projects.
For most products in the US and Europe, our strategy is to build own and operate while selling portions of the operational fleet at the right time. Operates in non-ITP regions, we can sell at any time once they enter our backlog. Our extensive pipeline not only showcases a robust funnel of projects through which we can realize long term value, but also highlights our ability to selectively monetize projects at the best time.
Now let me hand the call over to Xinbo who will go through our financial results in more detail. Xinbo, please go ahead.

Xinbo Zhu

Thank you Ismael. Please turn to slide 14. For the third quarter, we reported revenue of $1.5 billion with a gross margin of 16.4%. Gross margin contracted by 80 basis points quarter over quarter, primarily reflecting lower third party battery energy storage volumes and reduced module margins. Operating expenses for the quarter totaled $247 million. The sequential increase was driven by modest rises in R&D expenses and shipping costs, which we expect to gradually decline in the coming quarters.
Net interest expense remained stable, rising slightly to $20 million; meanwhile, the Federal Reserve’s rate cut in September coupled with the announced economic stimulus in China contributed to a weaker US dollar and stronger Chinese yuan, resulting in a net foreign exchange and derivative loss of $4 million.
We reported a total net loss of $6 million, while the net loss attributable to Canadian Solar was $14 million or $0.31 per diluted share. This includes the impact of dividends payable in time on the Recurrent Energy redeemable preferred shares associated with BlackRock’s investment, which had a dilutive effect on earnings per share of $0.10.
This quarter’s financial results reflect the ongoing transformation of Recurrent Energy’s business model. Notably, the absence of project sales by Recurrent and the significant intra-group transaction eliminations recorded for energy storage cells to projects in the US and Asia contributed to the net loss at the Canadian Solar level.
In the near to midterm, Recurrent sells fewer projects but continues to build projects that have not yet reached commercial operation. This may result in pressure on Canadian Solar’s P&L in certain periods. However, it’s important to emphasize that this doesn’t imply a reduction in the value of the projects, rather the value will be realized in a more consistent and long term manner. For example, during this quarter, CSI Solar delivered substantial volumes to Recurrent’s Papago Storage projects. As Ismael discussed, this is a landmark project for which we have already secured a long term toll agreement with Arizona Public Service.
Now let’s turn to our cash flow and balance sheet. Please turn to slide 15. Net cash used in operating activities for the third quarter was $231 million. This outflow was primarily driven by increased project assets and the lower short term notes payable. Our net debt position stands at $3.3 billion with gross debt total being $5.4 billion. This increase in financing was primarily driven by new borrowings to support capacity expansion, working capital requirements, and the development of both projects and operating assets.
In the third quarter, we invested approximately $237 million in manufacturing capital expenditures. Following the adjustments to our CapEx plan in the first half of the year, we remain on track to meet our lowered full-year target of $1.2 billion. Looking ahead, we expect next year’s CapEx to be around the same level as we prioritize strategic investment in the US.
Now let me hand the call back over to Shawn, who will provide our guidance and the business outlook. Shawn, please go ahead.

Shawn Qu

Thank you Xinbo. Please turn to slide 16. For the fourth quarter of 2024, we anticipate solar module shipments by CSI Solar to be in a range of 8 to 8.5 gigawatts, including approximately 500 megawatts for our own projects. In terms of battery energy storage, we expect total shipments to range between 2 to 2.4 gigawatt hours, with around 1.2 gigawatt hours allocated to our own projects.
Even accounting for intra-group eliminations, this will mark our largest storage quarter to date. We forecast total revenue for the fourth quarter to fall between $1.5 billion and $1.7 billion, with gross margin expected to be in a range of 16% to 18%.
For the full year of 2025, we project total solar module shipments to be between 30 to 35 gigawatts. For battery energy storage, we expect shipments to be in a range of 11 to 13 gigawatt hours in 2025. These estimates include approximately 1 gigawatt of solar module and 1 gigawatt hour of storage allocated to our own projects.
As we move into next year, we anticipate continuous challenges in the solar module market as supply and demand dynamics work towards rebalancing. On storage, demand remains strong, costs are stabilizing, and pricing is also adjusting. We will continue to manage through these market uncertainties with a focus on sustainable growth and rigorous risk management.
With that, I would now like to open the floor for questions. Operator?

Operator

(Operator Instructions)
Colin Rusch, Oppenheimer & Company

Andre Adams

Hi there, this is Andre Adams on for Colin. I was hoping you could speak to your plans for monetizing the project pipeline in light of the ongoing increases in wholesale electricity prices for data center supply.

Shawn Qu

Hi. I would like Ismael to address this question. Ismael?

Ismael Guerrero

Sure. Thank you Shawn. Look, I mean, basically we are seeing a significant amount of customers looking for PPAs. That’s how we see the high demand of data centers affecting us, and we are starting to explore how can we serve better our customers, in case we can do something else for them. But that’s what we see significantly.
The strategy to monetize the projects, we are always open to whatever we believe is the best way to add the most value to our shareholders, so we will remain open all the time to see when is the best time. But initially, what we are thinking on doing is start to operate, and once we have enough volume, around 2, 3 gigawatts in operation and start selling [chunk] of it and keeping the majority ownership, that’s the initial intention, but it’s open to whatever we believe is the best at the time.

Andre Adams

Thank you. Just on the battery supply side, how are you planning to navigate potential tariffs, and how much are your conversations with new non-Chinese suppliers?

Shawn Qu

Yan will address this question. Please, Yan?

Yan Zhuang

Thanks Shawn. Well, I think on contract, on sales side, we actually for the [volume] to be delivered after January 1, 2026, we — the contract price already accounted for the 25% of the duty, and for earlier volume, we actually — it’s accounting for the current duty rate, which is 7.5%. However, we always have [tender for law] protection. So for any possible change beyond the 301. And also we have announced the Kentucky storage project and we’re also actively evaluating and looking for different supply options. I hope this answers your question.

Shawn Qu

Absolutely. Thank you so much.

Operator

Praneeth Satish, Wells Fargo

Praneeth Satish

Thanks, good morning. I guess first question, broadly you have a 30% market share in the US. How do you think about maintaining that market share, given the anti-dumping duties that were announced at 80%, recognizing that they’re not finalized? I guess just what’s the strategy in the US going forward? You said you’re committed to it.
Is the strategy kind of building out the manufacturing presence or raising ASPs? And then I guess, how do you balance building out more manufacturing capacity with the potential for some of this foreign entity of concern language that’s out there?

Shawn Qu

This is Shawn. I will address this question and then ask Yan and Thomas to provide further comment.
As you mentioned, Canadian Solar has advantage, so we have a suite of weapons or options and we are going to use a combined strategy. You mentioned the US factory, our US module factory is up and running. We can ship cells from Thailand to the US. Now the solar cells from Thailand also have tariffs, but solar cells have less value, so obviously less tariffs if we ship it to the US to make it into modules in our factory in Texas.
And we are also building a solar cell factory in Indiana and we expect to see output from that factory in 2026. That’s another solution. And also, even for Thailand and for Southeast Asia, we always maintain a relationship with a few good third party suppliers, so this will be another option. So as I said, we have a suite of different options and weapons, all weapons we can use to make sure we continue to deliver to our customers in the US.
Now, you mentioned 30%. I’m not sure if we had that much market share. We shipped around 8 or 9 — we are going to ship around 8 to 9 gigawatts to the US this year, and I believe the US market should be like 40 to 50 gigawatt size. So no, we are not 30% but probably 20%-something. So I guess that’s my 30,000 foot overview.
Now I would like to introduce Thomas Koerner, our Senior VP for Sales and Marketing, and he may have more insight to share with you. Thomas?

Thomas Koerner

Hi there, good morning. How are you? As Shawn outlined, first of all, we are using different channels and different strategies to continue serving the US market. The US factory and the US capacity is further increasing and coming along, but of course for the Southeast Asia manufacturing, we can use different locations, different bill of materials, and different combinations. And all of that will help us to at least continue on the same level, if not potentially growing the volume into the US market. And at the same time, we expect market prices starting to slightly increase, so we believe on the customer side, they are helping us and this will help us in addition to the overall circumstances.

Praneeth Satish

Got it, that’s very helpful comments.

Yan Zhuang

Let me add one more. Regarding FUC, actually, as you know, there’s no FUC items in the current IRE law for solar and managed storage. So for that, for any revision of that requires a process, a legal process in Congress. So we feel–we don’t feel anything that risky for us, given we’re actually a Canadian-owned company, so we actually are highly confident about our robust presence in the US.

Praneeth Satish

Okay, makes sense. I wanted to ask on the 2025 module guidance of 30 to 35 gigawatts, maybe if you could provide any more details around how you came up with this forecast and the assumptions. It seems like it’s kind of assuming a flat outlook for demand into next year, but did you basically size this level of shipments as kind of the amount that the market can take without impacting your gross margins? Just trying to understand, high level, how you came up with it.

Shawn Qu

Hi, this is Shawn again. You are correct — we put out this number, 30 to 35 gigawatts, so that we maintain our market share while do not sacrifice gross margin too much. Even at this price, at this range maybe we will see less gross margin next year. As Thomas mentioned, there is additional duty for Southeast Asian product, and we believe our customers will have to handle–shoulder part of the cost increase, but still we are shouldering the cost increase together with our customer.
So this will probably hit our gross margin a little bit. But you will see only the announcement of the preliminary AD ruling three days ago, so we are still analyzing, and also we are still waiting for DOC to release more documents. So we understand exactly how they arrive at this number and what can we do to avoid such a high tariff in the final review, and also the administrative review process a few years from today. To answer your question, yes, 30 to 35 gigawatts should allow us to more or less protect the same market share, but also to protect our gross margin.

Praneeth Satish

Thank you.

Operator

Philip Shen, Roth Capital Partners

Philip Shen

I think Thomas just talked about how pricing is already going higher following the antidumping preliminary determination. Our checks suggest pricing is already up at least $0.02 to $0.03. And then when we get the final determination, we could get another $0.03 to $0.04 of price going higher. Does that sound reasonable? What are your price expectations? So that’s the first question.
Second question as it relates to anti-dumping and the Southeast Asia tariffs, have you guys had to cancel any of your contracts because of how high the Southeast Asia AD/CVD country rates have been? Are you exposed to any of the critical circumstances? Thanks.

Shawn Qu

Hi. You mentioned Thomas, so I will ask Thomas to share his view with you. Thomas?

Thomas Koerner

Yeah. So at this point, as you mentioned, yes, prices have started to come up. I cannot talk about the specifics – that’s very individual customer by customer, but the demand and the customer feedback towards Canadian Solar product and our supply remains actually very strong. We did not have any cancelations or anybody too concerned, and as Shawn says, we currently are shouldering the need to adjust together with customers, and this can vary in different cases, in different strategies and channels. As you know, we have different cost-plus activities, we have other activities, and this is a pretty broad spread which helps us significantly, both sides, to move forward and actually have further demand for ’25.

Philip Shen

Okay. Thank you, Thomas And then are you guys (multiple speakers). Sorry Shawn. Go ahead.

Shawn Qu

Yeah, I just wanted to add my comment now on the second part of your question. As far as I know, we haven’t had to cancel any of the existing contracts. And also we have been shipping–producing and shipping to the US even throughout the year, so for us, we don’t have any critical circumstances. Our shipments shouldn’t show any critical circumstances. Now, whether critical circumstances apply to the total shipment, I think we’ll have to wait until the final ITC ruling.

Philip Shen

Got it, okay. Thank you. In terms of exposure to the cash deposits, is it fair to say that you don’t have any now? Or you have some but you want to wait for what the final determination looks like?

Shawn Qu

That’s a good question. Well, we have been producing, and some of the product that we already produced maybe will — I want to say we’re exposed to some of this AD/CVD preliminary ruling. But how much we still have to calculate? If the exposure is too high, we will divert the product to somewhere else.

Philip Shen

Great, okay. Got it, thank you for the color.

Shawn Qu

I mean, if the customer — if the customer, some customers are willing to pay, we might just eat the [bullet and ship], import and — or deliver, if we can breakeven, but if no customer wants to pay this kind of duty, then for some of the product we already produced or already on the water, we may have to divert every product. But it’s not a big amount compared with 8 to 9 gigawatts annual shipment from Canadian Solar — annual sales from Canadian Solar in the US, whatever we have to divert at this moment is a small amount.

Philip Shen

Okay, thank you. Shifting to the other topic on AI and data centers. These hyperscalers are very hungry for power. You guys have your Recurrent business. There’s a lot of uncertainty, as you highlighted in your release and remarks in the US market. And so power demand is going higher but it doesn’t seem like the hyperscalers are willing to pay a premium on power thus far.
When do you think they might be willing to pay higher prices that can support economics in the development of solar in the US? There’s so much uncertainty in the higher — with the ITC risk, of that being compressed or going away. It won’t go away, but we think it might get compressed. What are your thoughts as to the timing as to when hyperscalers are willing to pay higher prices to offset some of this uncertainty and the potential weaker economics? Thanks.

Shawn Qu

Philip, I would like to take this question because I just released two short videos of my public speech in a forum. I was talking about how the solar and energy storage can help the hyperscalers to be built. And our calculation — actually, see, I would say my calculation, not just our calculation. I put on my PhD hat and did some of this modeling together with our team, right? And our modeling says even for California, where you can’t install wind and also where the seasonal difference of solar from winter to summer is really big, in California, the winter output of a solar system is only 43% of the summer.
And Philip, you see, I know this number by heart now. And so it’s not a very convenient place to have solar provide like 12 months 24/7 continuous power. But even in that situation, our calculation shows that we will be able to provide 72% of the power from on-site solar plus energy storage to a California hyperscaler and at the same price, more or less the same price as the grid price. So, they don’t have to pay a higher price. They just have to pay whatever they have to give to the grid.
And as you know, these days, it’s not — sometimes it’s not a price, but whether you can get a permit and clearance to build a data center. So, I believe that people will see that, and we are going to build — I mean, I would like to build a few demo cases in different parts of the world. Certainly, US is the biggest data center market. So, we would like to do that in US.
And I think with one demo, people will see how wonderful the solar plus storage can provide on-site power to data centers. And of course, with some help from the grid, but grid will only have to supply 20% to 30% power and that’s it. So, I would say build a demo. The first demo always takes some time. So, I would say maybe in two years, people will see how solar plus storage can handily provide on-site power to data centers.

Philip Shen

Great. Thank you, Shawn. I’ll pass it on.

Operator

Vikram Bagri, Citi.

Vikram Bagri

Hi, good morning everyone. I wanted to talk about CapEx and liquidity requirements. In the presentation, you’ve highlighted [$800 million] for PV cells, $700 million for battery cells, I would imagine some maintenance CapEx on legacy assets over the next 12 months also, and combine that with cash deposits at CBP and buybacks planned at CSI Solar and other uses. I was wondering how do you look to fund these, what would be the strategy? Could you transfer the CSI Solar cash, which is in China to the US to fund some of these expenses? How much is the minimum cash balance required on the balance sheet, and what leverage are you comfortable with? If you can just help us understand the sources and uses of cash over the next 12 to 18 months.

Shawn Qu

Yeah, that’s a good question. Canadian Solar, I always pay attention to the cash flow, always maintain a good cash level to be healthy, protect our balance sheet. Now, I have Xinbo, the CFO of CSIQ and also Stephen, the Chief Accounting Officer for CSI Solar, so I would like these two gentlemen to provide some additional color.

Xinbo Zhu

Okay, this is Xinbo speaking. Sorry, your question is about how we are managing the cash at CSIQ and the CSI Solar site, right?

Shawn Qu

The investment —

Vikram Bagri

Yeah, just trying to understand, given the intensity, capital intensity at CSI Solar, where this–how do you fund that capital intensity, the PV cells, the battery cells, the upgrading and keeping the legacy assets up to date, the CVP deposits and the buyback at CSI Solar, how you fund that, and what’s the appropriate leverage level you’re comfortable with?

Xinbo Zhu

Yeah, it’s a big question. I will break it down into some smaller categories. For project development, the majority of the CapEx is financed with non-recourse debt. The project financing is — normally, it covers 17% of the total CapEx of the project. And we financed the project equity (multiple speakers) –.
Then about the manufacturing side, we financed the factory partially from the down payments from the supplier — from our customers and also partially with the facility, we are raising in the US. We are closing $450 million debt in the US to support our manufacturing expansion in the US. Of course, we also invest some of our own equity into the factories.
Have I covered all your questions? Oh, about the working capital, right, about the deposits —

Vikram Bagri

Yes, just the leverage question —

Xinbo Zhu

Yeah, it’s a part of the working capital. We have been closely monitoring our working capital, and we have more than $1.5 billion cash to support CSI Solar, the manufacturing and solutions business. Yes, we are confident that we have enough working capital to support our business volume.

Vikram Bagri

Thank you, and then (multiple speakers) —

Wina Huang

Vik, I also just want to remind you that [$2 billion], it’s a total number. So it would be invested over the course of a few years.

Vikram Bagri

Got it. Thank you. And then quickly, I wanted to clarify the — if you can provide some color on what the geographical mix of shipments, PV shipments will be next year. Should we expect US will still be around 8 gigawatts to 9 gigawatts, or that mix is going to change?
And you mentioned CSI Solar will maintain the margins. You have — you’ve seen like very, very strong increase in battery sales, which has higher margins. Are you expecting the geographical mix to shift and offset some of the margin accretion from battery sales next year? Just trying to understand like what are the puts and takes for margin next year?

Shawn Qu

Yeah, for the margin — well first off for the geographic distribution of the solar module sales next year, I would like to ask Thomas to give you some color; but I want to clarify that. We are still early — we are still in December, we’re not in 2025 yet, so whatever we say will be based on our current view. Thomas, do you want to share some — share your view?

Thomas Koerner

Yeah, for the US module shipments, as you mentioned, we should be able to at least have the same volume as this year, but we are also slightly positive to increase it slightly further into 2025. We’ll see how the year goes and how our diversified strategy ramping up US capacity, other manufacturing activities and other BOMs help us to potentially further grow. The demand is definitely there in the market and we are trying to capture that demand.

Vikram Bagri

All right, thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I’ll turn the floor back to management for any final comments.

Shawn Qu

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Operator

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