Q4 2020 Canadian Solar Inc Earnings Call
Ladies and gentlemen, thank you for standing by.
Thank you for starting by one came together so long as the fourth quarter and full year 2020 earnings Conference call. My name is Jay and I will be your operator for today at this time all participants on listen only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purposes.
Yes.
I would now like to turn the call over to dispose Zhang IR manager at Kennedy and solar. Please go ahead.
Thank you operator, and welcome everyone to the Canadian solar fourth quarter and full year 2020 conference call.
Please note that we have provided slides to accompany today's conference call, which are available on Canadian solar Investor Relations website.
Joining us today are Dr. Shawn Qu chairman and CEO.
I'm, John <unk> President of Canadian Solar is majority owned subsidiary CSI solar.
Firstly from Chung senior VP and CFO.
Corporate VP and president of Canadian Solar is wholly owned energy.
All company executives.
Sure.
Yes.
Today's call Shawn Who'll go through an overview of Canadian solar strategy.
And it's my Irrespectively with you the highlights of the CSI solar and global energy segment, respectively.
Well, let the free phone will go through the financial results.
John will conclude the prepared remarks with the business outlook after which we will have time for questions.
In today's earnings release, we have provided an overview of the new reporting structure as a reminder, GSI solar which was formerly the module and system solutions business. Now includes Canadian solar is China energy business as well.
In addition on the global energy business includes solar projects O&M and I said management services is now called the global energy business.
Second financials will be reported as TSA solar in global energy going forward.
The historical segment financials have been revised to conform to current period presentation.
These are provided in today's results press release.
Before we begin may I 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.
He claims the protection of the Safe Harbor from forward looking statements that is contained in the private Securities Litigation Reform Act of 1995.
Actual results may differ from management's current expectations and projections of the company's future performance represents managements 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 the risks and uncertainties can found on 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.
Yeah.
Some financial information presented drew.
Non-GAAP basis by disclosing certain non-GAAP information management intends to provide investors with additional information to permit 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.
Sure.
I'd now like to turn over the call for Canadian Solar as Chairman and CEO, Dr. Shawn Chi Shawn. Please go ahead. Thanks.
Curious about on the hydro ever away work on.
And thanks for joining us today.
From there trying to it was a very challenging year.
Not only for me for Canadian Solar, but also forever body.
It is also a strong one for a reason here for the solar business on entirety.
We delivered 11.3 gigawatt shipments.
5 billion.
U S dollar euro revenue on 19, or a percentage being gross margin.
We also achieved diluted EPS of $2 38 sales.
I would like to thank our team for their forecast on great work Julien This challenger.
In Q4, we delivered three gigawatts of shipments.
Which was towards the high end of our guidance.
Also on achieved 1.04 billion U S dollar in revenue and a 13, 6% in gross margin.
Uh huh.
Our expectation.
Beforehand, you smell and know who your phone go through our quarterly results in more details I would like to share some thoughts on on the solar market and Canadian solar strategy.
Now, let's turn to the.
Slide number three.
We are on your.
Flexion point.
In which solar grid parity.
Net with grow in societal awareness of the urgent need to Decarbonize the global economy.
Solar energy has been the largest decline.
Liberalize the cost of electricity.
All sources of electricity over the past decade.
And now as the most the comparative L. C O E. According to independent third party calculations.
Likewise over the past few quarters, we have seen several major economies commit more concrete decarbonization target.
And the increase in frequency of natural catastrophes related to climate change. It's also already a high level.
Hey.
These factors are significantly accelerating demand for solar assets.
With no end in sight.
To give you some perspective.
Solar installations are all seven true non times.
What there was a decade ago.
Yes average solar penetration at this moment.
Mens at just 30%.
On the.
Penetration I'll ask their penetration of solar energy.
Other renewables continues to increase.
It will create new market opportunities such as in battery storage.
This is a market in which Canadian solar has become a early mover Uh huh.
Pink comparative advantage.
Our talk more about that later on.
Now, let's move to slide four.
Now under this backdrop.
Our growth strategy remains unchanged.
Firstly, where are you investing where are you invest.
Long term growth.
And expanding our capacity across the supply channel.
Secondly, well grow in or project development market process and optimizing our project volume.
As Asia strategists.
Lastly, well executing a multi year growth.
Area.
Including just storage.
Now please turn to slide five.
We have been building out our checking the outage on market expertise in battery storage for several years.
And now we are reaching large scales.
Well I'll start and you will see fixed financial market growth, Yes, I did.
Storage.
According to wood Mackenzie the.
Global energy storage market in tonnage on and what well be trended two gigawatt hours and demand over the next decade, well reach several hundred gigawatt hours.
All of the debt.
For all of their meter applications, where I'll call for a <unk>.
Proximately, 70% of the total capacity addition.
And U S were all calling for roughly half of the global market.
Over the next day.
Canadian solar.
I've taken this market opportunity very seriously.
We think that.
This is a game changer, not just for solar energy, but for the global electricity grid.
Paris over the past two years, we have been building on pack an outage in.
System integration.
And our go to market capabilities.
In both the CSI on solar elsewhere.
Our global energy segment.
Now, let's turn to.
Slide number six.
As we explained in the press release.
The CSI on solar battery solution teams they are focused all deliberate.
Power's holiday.
Bankable.
For the integrated battery storage solutions.
This includes the end to end technology offering.
The long term service agreement over the batteries.
And that's future capacity augmentation service there.
We have nearly six gigawatt hours on pipeline.
Storage system integration business.
Just showing on the table on the left hand of this size.
Although at a hand or storage project development isn't yet this now on.
Integrated part of our global energy business.
We now have nearly nine gigawatt hours of global utility scale storage pipeline.
We're just showing on the table on the right hand side.
Our global and geographically diversified presence.
Give us a competitive advantage.
<unk> the early opportunities in storage market and capture attractive returns.
So what we did in solar development in the early days.
Some of it is on new opportunities.
On a retrofit to solar project, which were delivered in the past.
We work on both co located solar PV plus storage project.
Well as stand alone batteries.
There are significant thing.
And they're just even though these are two separate teams.
Meanwhile, not all of the protein overlap and both teams work on their respective third party project as market opportunities arise.
Finally, let's turn to slide seven.
Regarding the planned China lifting of our solar subsidiary.
We are on track.
And we have completed all the targeted milestones.
We expect to submit their on Fisher material. So are there regulatory authorities on the stock has changed index.
<unk>.
Well targeting you'll complete IPO within this year. However, as we all know they are all on a certain pace. Therefore, it could slip into next year.
With that let me turn over the call to yen.
Talk about the performance of CSI solar Yeah. Please go ahead.
Thank you Shawn.
In 2020, we delivered 11.3 gigawatts in shipments up 32% year over year.
CSI solar revenue was $3 $1 billion.
Around zero point $2 billion from China energy.
He was formerly reported as part of the energy business.
In Q4, we delivered $785 million in revenue and 13, 5% in gross margin.
Better than our expectations as we were able to mitigate some of the cost pressures with inc. With increases in average selling price.
Turning to slide eight.
I'd like to update you on the cost situation, which has not improved a great deal since the last quarter.
Polysilicon prices remained elevated in Q4 and recently increased by another 33% based on PV in falling data.
Prices of most commodities, which include those used by solar modules continued to increase.
And the Chinese RMB, which accounts for the majority of our costs.
Continued to appreciate against the men market the man basket of currencies.
Which we are exposed to at the revenue level.
With constant currency appreciated on a revenue currency depreciated our margin has been squeezed.
On the positive side.
With capacity expansion solar glass prices have started to come down and we expect it to decline further during the year.
We've also been working closely with our logistics partners too.
To lower our transportation costs.
We expect this will help us gradually reduce some costs through the year.
And importantly, we've been working closely with our customers.
Transparently communicating the changing dynamics in our supply chain.
<unk> has allowed us to increase prices and share some of the cost burden.
Turning to slide number nine.
It is important to understand that we are approaching the bottom of the solar cost curve.
They're off ever declining solar module prices is largely behind us.
In fact near term as we have seen prices are actually going on this.
This is driven by three main factors.
First the cost of solar has declined by more than 95% over the past two decades.
Driven by a combination of technology and scale manufacturing.
Allowing us to move from a subsidy to a market driven industry.
Shawn mentioned.
Solar PV is already the cheapest way to produce electricity in most markets.
And solar ALC will continue to decline driven by technology advancements and efficiency gains.
Second the cost of solar modules assets.
Percent of the total system cost has declined from over two thirds, two decade ago, a decade ago too.
Third after total system cost today so.
So the marginal benefit from.
Further reduction total module prices, it's very small.
And third.
Demand for solar assets is very strong.
Given these factors.
It no longer pays two week for total module prices to come down. We think this is a positive development for our industry as we reached the bottom of the cost curve in the Greek parakeet solar market.
Turning to slide 10.
So what does this mean for US that's one of the top global solar brands, our SaaS high solar strategy will increasingly focus on premium markets and segments and channels.
For example, we will continue to enhance our market leading position in the in the distributed generation markets, where we have greater pricing power and stickier customer base.
In fact last year.
More than half of our total shipments one into this channel.
Even though globally this channel accounts for less than 40% of the total market.
In this channel the value preposition is driven by the total system solutions because user experience matters a lot more than just its utility.
This is why we're working on the higher value add system integration solutions, including battery storage.
For storage.
Where we are present.
<unk> Oh segments initially focusing on the utility scale, but we are also increasing working on commercial industrial and residential solutions, which is important for our strategy.
Some detail.
We already have a significant pipeline of nearly six gigawatts hours of which nearly one gigawatts hours will be delivered this year.
Now let me pass on to email. Please go ahead and smell.
Thank you again.
I'm proud to report that we achieved one four gigawatts in project savings from 2020.
Which exceeded our target.
In Q4, we closed over 300 megawatts in project sales.
Spanning the U S Mexico, Japan father in Egypt.
Meanwhile, we've increased our total project pipeline to over 20, Gigawatts from 15, Gigawatts one year ago.
Please turn to slide 11.
We are seeing that the demand for solar projects, including hybrid solar plus storage.
Increasing dramatically.
As one of the few stand alone Global Renewables project developers, we are really well positioned to capitalize on the secular growth trend.
Specifically, we are focusing our strategy on the following three areas.
First on most importantly is growth.
We are expanding our development activities across different geographies on signing ppas with a growing but are you at the of our purchasers.
We are expanding our permitting and interconnection liabilities on the strengthening our financial capability to support expanded growth.
Recently, we announced the launch of the Japan Green infrastructure Fund.
This is a new development platform.
We allow us to accelerate our project development growth in the Japanese market.
Note that this is different from the Canadian solar infrastructure fund, which.
It's also a sponsored by Canadian solar.
CSI CSI, yes, wholesale operating assets only.
Although we will continue to expand on what tightening on my team.
Around 20% compound growth in product sales over the next five years.
This means we are currently targeting over four gigawatts hopefully explained by 2025.
On three times, what we did last year.
Second we have been optimizing our project monetization strategy.
From developing on selling projects to retain a minority ownership in projects in certain markets.
As I said last quarter.
We expect to agree to the Canadian solar ecosystem to capture additional value through the project lifecycle.
We are doing this through that shouldnt that the government revenues from power production on sales.
Operations from maintenance on assets.
Asset management services BDC.
Currently we have a long 100 on 50 megawatts of proportional assets from <unk>.
Two two gigawatts of unemployed casino operation.
On an additional one seven gigawatts of contracted on in projects.
By 2025, we expect to reach one gigawatt the proportion of lots of Tuesday on Guadalajara 12, Gigawatts of go on in projects in operation.
This will have significant implications on reducing the risk profile of the global energy business by generating a stable recovery cash flows.
On that as we increase the amount of assets through team the share of your government cash flows will also increase over time.
Two activities, we have been for me on the city of Socal localized capital partnerships with long term investors.
In Japan for example.
Canadian solar on infrastructure fund or CSA, yes.
Which we own 15%.
So, let's say you have completed the capital raise a few weeks ago.
We are establishing its position as the data goes introspect from funding the fun, we thought around $740 million and assets under management.
So, yes, I guess staple dividend yield on capital appreciation continues to attract a wide range of investors.
In Brazil.
We currently have over two gigawatts of contracted projects.
Solar completed the formation of the it infrastructure.
Infrastructure vehicle.
The first assets that included will soon start of construction.
Similar vehicles, such as the one 4 million in Italy. We also have projects that are set to start construction over the next couple of quarters.
Third we are making significant strategic inroads in battery storage project.
In 2020, we have triple our total net product pipeline from live from three Gigawatts hours last year.
For me I believe nine gigawatt solar Michigan.
Of these on.
Almost one gigawatt hour you talk with the envelope on selection.
This is very exciting on which a significant profit on growth opportunities from the start up stage.
With that let me turn over the call to hear from.
<unk>. Please go ahead.
Thank you smell.
Please turn to slide 13.
We delivered Q4 revenue on one.
For filling up around 13% over last quarter.
Gross margin in Q4 was 13, 6% well above our guidance of 8% to 10%.
While all day, along various favorable dynamics in Q4, but outpaced our higher module asps, such as the surge in material and on logistical costs and depreciation and R&D.
We work hard on our customer engagements and optimize our supply channel to achieve an outcome that came in well above our own expectations for the quarter.
Additionally, we.
We successfully closed on more than 370 million of our product sales in spite of the challenges of pandemic.
To cap off the year as Shawn mentioned in 2020, we drove 30% higher volume for module shipments and achieved on.
Overall gross margin of 19, 8%.
Equally important over the years, we have built up to strong business units.
So better capture on our performance we have revised our segment reporting this quarter.
Firstly <unk>.
I solar.
This represents our business units, assuming the carmike deal.
On the right Global energy this business captures the product sales on a recording income from ownership from retention on a contract into long term services, such as O&M and asset management.
To help investors better understand our battery storage growth story.
We're going to present additional information for the new business, respectively within the two segments on the.
C S on solar.
We have storage integrations subs revenue and on the global energy, we will present storage pipeline.
Within global Energy segment.
Not permitting a project sales revenue on a battery storage component from the civil component of solar hybrid power plants.
<unk> is a single Inc.
Hello.
Investment.
While global Energy will continue to reported revenue based on project Salt storage, Inc, which is service revenue on the CSI solar will be captured or based on construction milestones.
To give you more color on the announced storage contracts, we sign the audio.
We expect.
The CSI solar storage revenue contribution.
Our salaries.
Starting from second quarter of 2021 according to these construction schedules.
Solid.
And the distribution expenses in Q4 increased by 20% moving.
On revenue growth due to cost of spike for shipping on the transportation.
G&A.
<unk> expenses were higher mostly driven by non cash impairment on manufacturing equipment.
That's a one time 1 million U S dollar charge on.
Otherwise our G&A would have remained flattish over the past quarter.
Full year, Opex was 2% higher than last year.
The transportation cost of challenges outpaced tight cost control and then roll. This question on the expenses.
The net foreign exchange gain in the fourth quarter was 4 million.
We will continue to reduce currency exposures.
He can only against the RMB and adjust our hedging activities accordingly.
Income tax was a balance of $2 million this quarter.
We expect some factories to carry more future tax benefits as we continue with our manufacturing capacity expansion plans.
Net income to shareholders was 7 million starting in Q4 or 11 cents per diluted shares.
<unk> com to shareholders.
147 million U S dollar.
For 2.38 solar pool that we need to share.
Now moving onto the balance sheet on slide 14.
We generate substantial cash from a sweep on a 5 billion sales this year.
What should we invest into building a larger operating scale.
<unk> solar on in global average.
Manufacturing Capex were $330 million in 2020 lower than our earlier guidance.
Additionally.
The CSI solar on pre IPO investment along with ways of fresh cash capital to invest into Capex expense roll into this year.
2021 we are prepared to invest up to several hundred million in capex, depending on market outlook on the conditions.
We will continue to retain flexibility to adjust our capex spending this year.
Archives manufacturing productivity and a profit relative.
So with that our total cash position remains strong at $1 6 billion, giving us the financial flexibility and improving the cash position to fund our capex spending rather than prior years.
Our cash levels remain elevated.
Managed it on our total debt to $2 2 billion.
Our net debt to EBITDA, excluding cash remains at a healthy level of two four times at the end of last year.
Now, let me pass it back to Sean who will conclude with our guidance on our business outlook Shawn.
Now, let's talk about the guidance both the China in general on Q1 guidance and annual guidance.
For the first quarter.
Of China, China, while we expect total module shipment to be in a range of three to 3.2 gigawatt.
Including approximately 300 megawatts of module shipment total.
The Companys all project.
Total revenue are expected to be in a range of one to one point on what Sterling U S dollar.
Gross margin, yes expected to be between <unk>.
610% to 18%.
For the full year tonnage on Hawaii.
We iterate.
We reiterate total shipment to be in a range of 18 to China gigawatt.
Sales of one eight to 2.3 gigawatt.
On total revenue to be in the range of 5.626 billion U S dollar.
Our updated guidance reflects our financial improvement quarter over quarter.
Previously expected.
The batter Q1 profitability also reflect the sales of high gross margin projects.
Naturally in Japan, which we have already announced.
We remain very excited about our long term growth opportunities in solar and energy storage.
We will continue to go forward.
Okay.
Building our competitive advantages.
To deliver sustainable returns to our shareholders.
With that I would now like to open the call to your questions operator.
Secondly lay.
<unk> and gentlemen.
No.
Question. Please.
Work on the telephone keypad bleed free named 50 loans reached.
So the liquids police response on cash.
Thanks again.
Ask your question.
We have the first question on it from the line of Judy loss from Citi.
Okay.
Hey, good morning, everyone.
I I wanted to start on the gross margin guidance of 16% to 18% Shawn as you mentioned.
The first quarter to be impacted by some some some high margin project sales I was I was just wondering if you could break down the guidance between CSI solar.
And the global energy business or maybe give some some brackets on what can we can expect on gross margin between the two segments.
Yeah.
Maybe if we're going to handle this question.
You usually do not provide.
All of the details on breaking down to the two businesses, but I can give.
To give you some.
Yeah, I think at a high level.
Part of a color.
The margin.
Is higher on the global LNG site and low war on the CSI solar side.
Okay fair enough and I guess, what what percentage of the of the cost increases that you guys are seeing do you think youre going to be able to push through through.
Through higher Asps.
The first quarter and then just kind of the outlook I know, it's kind of pushing into Q2, but.
Gross margin cadence specifically on the module side, how do you think that it will progress throughout the year.
Yeah, that's a very good question.
Net.
Yes to answer this question.
Yes.
Well, that's a very good question that everybody wants to get on Sir.
<unk>.
And I think for Q1, moving from Q4 to Q1.
On one hand, we do carry some of the low price orders from last year, but on the other hand, we successfully buy a.
Parent sorry, transparent communication with our customers in debt, we successfully raised asps.
<unk>.
And also we have some some material inventory carrying from Q3 into Q I'm sorry.
We'll have some.
Supply chain arrangements, helping us to bridge some of the cost level. So so Q1, we see.
I actually did.
Sure.
Okay, not a super quarter.
We actually for life so.
Moving into the rest of the year.
We see actually.
A bigger chance for improvements because oh.
We see that.
Stabilization of the exchange rate.
And we also see that the shipping cost would likely too.
To go down.
With the ending of the Covid impact.
And also.
Glass prices coming down and.
Moving to our second half we're also observing.
The diversification of the wafer suppliers basically the monopoly power pricing power, it's going to be weak.
So overall, we also believe that there are so many others a lot of project that has been on waiting list people are waiting for module to come down and now they realized that it's not going to come down that much and they are under.
Kind of urgent timeline to build the project so customers. So actually we start to see that customer starts to accept better module price. It. So this is the overall trend.
So.
I think from moving to the rest of the year the margin situation, we continue to improve.
This is <unk>.
Our observation and our <unk>.
Evaluation of the market situation.
This is Shawn.
Hi, Jeremy go ahead, Shawn I'd like to I would like to supplement on yes, yes.
Remember when we provided our Q4.
<unk> September no backing on November last year, we said, we expect the gross margin to be 8% to 10%.
Our mono factor inside the.
CSI is solar side, the gross margin, yes, indeed more on less in this range in Q4.
Over the.
Global energy contributed to higher margin, therefore, bringing the total up to like.
Over 13% now moving into Q1 this year.
We have successfully pushed up.
ASP, However, as Jan said.
How are the material cost also go up so I believe we believe at this moment that.
We're probably still end up on the.
CSS solar site and App.
This range however, they are high margin.
On the.
I need your business.
Project helped us to move the.
Total gross margin for Q1 from the 16% to 18%. So I guess Luckily Canadian solar has total wins, we always have the tools segment, which use usually.
<unk>.
The supplement to each other.
While well help another segment.
Now moving into Q2.
We are still.
Focusing on our plan to move the manufacturing or let's say move the CSS solar gross margin on a ball, 10% cash into the low teens range as with that back in November no back in November.
Believe we have a fighting chance but.
There are certain factors, which one confidante count can't control.
Al.
However, we are seeing that like our effort in the cost control and also using race in the price.
<unk>.
Show in.
Are there are bearing fruit.
Net.
At least we're be able to.
The.
Somehow will be able to at least maintain.
Steel.
<unk> gross margin.
I guess that.
<unk>.
Partially answer your question Ralph.
Much of the cost increase can be passed over to the customers welcome to ship.
Yeah that was that was excellent. Thank you I will I'll, let someone else hop on thanks for answering my questions.
Thank you.
Next question.
Of prolific Shen from Roth capital. Please go ahead.
Hi, Thanks for taking my questions Shawn that was a lot of good detail on the margin outlook.
Thanks for sharing that.
Following up on that.
Hugh.
<unk> talked about how the CSI solar.
Margins could trend in Q2 can you talk about how you expect the energy business margins to trend in Q2 as well.
Well.
Energy Global energy vision yet.
Margin, depending on which project with cell and.
On what particular quarter.
Kind of launches.
Absolutely if that were sold.
Some high margin project in Q1.
Don't expect to sell.
There's similar higher margin.
In Q2.
Therefore Q2 will.
Happy to do have to do a better job.
On the solar side in order to.
Two.
Two.
Our balance.
Balance out and.
And <unk>.
Continuing to improve.
Okay. Thank you shifting over to storage you guys gave a lot of great color on that business. So thanks for that.
And I think quite a phone you talked about more revenue coming from this business in Q2 I was wondering if you could share for the year, what kind of revenue contribution the storage business might have and what's the margin profile of those.
That business could be.
Feel first of all talking about our storage business. We have two units one assets, yes on the CSI solar site.
Which.
As the system integration et cetera, and the other part of its solar storage battery storage project developments in global.
Energy.
The revenue growth.
For 2021.
Significant flow battery storage based on price.
They are well balanced between the two sides the system integration side on the project depart from our side.
But because the schedule on bookings or revenue.
It depends on you know.
Construction milestone and also on the global energy side as I mentioned earlier.
Yeah the.
The revenue is mingled aware overall solar on our project development business.
No we cannot give you exactly.
On the numbers and also over the quarters.
You can do is that you know what the battery storage projects are coming out in the U S Y and then from that you can get out.
Estimated of debt.
<unk> size of the.
A business that will start from 'twenty to 'twenty, one and going forward into 'twenty on Youtube.
Okay.
We're not one more time.
Yes.
<unk> reported a comment from you.
<unk> solar side.
On the system integration side on the total solution side of the storage.
I'm not going to give you the exact number because of the time schedule for the recognition over the year, but.
Are you into next year, but.
In terms of revenues like add hundreds of.
Meaningful dollars level and profitability wise it is a significantly better than module sales.
So.
So that is a.
It's not a high Capex high depreciation.
Mass manufacturing business right. So it's a solution business and so.
So the portion of the percentage of the net profit level is actually very healthy.
It's much better than module sales.
That's the indication that I can give you.
Oh, yes.
Sure I'll comment and provide.
Yes, Matt I'll do on the worldwide.
More color on the.
On the battery.
Development.
Revenue.
From the global language aside in tonnage on Hawaii.
Sure.
Looking at in terms of projects Shawn mentioned before it depends on the local on the geographies from.
On the local from the details of the Ppas that you're signing.
What I can tell you spent the day you said that we have under construction right now.
Uh huh.
Getting a very strong demand.
The profit that we didn't think it was picked out of them.
I think I'm really better than the average.
Yes.
Because of the quality of the Ppas that we have on them on the quality of the solution. We are providing so I think that everything that we aren't going to be delivering day.
Yeah on the starter kits are going to have a very high margins.
Great.
Thanks for all the color really appreciate that one other quick question on the China listing status Shawn you gave.
Some good detail as to what it could be completed but it was a wide range of timing and I know a lot depends on things out of your control, but if you were to guess do you think it's a healthy probability that the China listing gets done sometime.
In 2021 or do you think it's more likely in 2022.
All our fellow.
It's not a wide right akshay is a very detailed very clear range.
I'll just add that we expect to make the Hertfordshire submission.
In the next months, which means April on after that.
There will be usually two to three raw some time for all of quest strength from the exchange.
And just like what happened to it.
It goes through with <unk>.
SEC review on <unk>.
After that the.
Change well schedule.
Reveal median here.
And here and there.
The strength.
Approve or disapprove, whilst on proof case will be brought to the China CSI, China ACC level for registration lots for the whole process. So typically that process would take.
No.
And if you look at in the past year or two year or we take typically like five to six months.
And then you'll start with social so you're free.
Hey, if everything go according to our schedule then yes.
Timing will be.
End of this year on by the way the Roche on the tightening it's not like.
So like while week roadshow, the grocery in China is rather low takes long.
That's why we said that.
We.
They were targeting to compete listing this year. However, the market can change also.
The <unk>.
<unk> authorities may have additional questions on whatever therefore, it won't be it won't surprise me.
Oh, you all surprised anyway, yes.
Yes.
Split too.
Got flipped to China, China too.
Got it okay. Thanks, again I'll pass it on.
Okay.
Okay.
Yes.
Hello, operator.
Thank you we'll have our next question from.
Line, that's coming from.
Please go ahead.
On the project side from potential projects related to hydrogen, particularly for green hydrogen whether it's on Europe Latin America on North America.
Yeah.
Oh, that's a very good question.
We are very interesting hydrogen and.
Also on a green hydrogen.
Languages, So january of hydrogen.
Hydrogen is another way of any of their storage.
At this moment.
Let's say that we have a hydrogen technology offered yet we are working with some partners and I'm looking for the Green hydrogen project.
And I guess I will update you once we have a.
Concrete project.
Hey.
On a pipeline at this moment.
On the project pipeline when mention on the non gigawatt projective on on pipelines of salaries.
<unk>.
The.
With the.
The chemical chemical.
And then just on region.
But that is on mature technology and.
We have the.
They are back and the bid.
The battery.
Our systems and also the <unk>.
System, the total integrated system solution right.
We're ready to offer well actually in the process of delivery.
Excellent that's super helpful. And then as you guys evaluate which projects to retain on the balance sheet and and.
Which geographies can you give us a sense of what the target.
Financial characteristics are on those projects and how you think about geographic diversity for that portfolio.
Okay, Yes, Mel question volume toy Oscar.
Sure. Thank you Shawn but a good question. Thanks.
Thanks for making it.
Look the way we think about it is we are thinking on the on the on regions, where we have on local bixby and from them. We have on value to what we believe the projects going on be having.
More value over time.
Want to make a one time table.
So we will probably focus on things we can from Japan, We I don't know have you joined us as CMO.
The next one quarter going on because evil, Italy.
If something else is coming up to that it will probably be on other regions in Europe, maybe you gave me.
Maybe a usual vehicle.
And we will consider that the U S wholesale but truly depends on the weather or the regulatory environment in the U S clears up.
It looks like the changes that the debt.
<unk> grew more so say you might be in favor.
Well on make it this year for the company like us to hold some percentages, but look its always based on.
We still do on running by holding the assets I wouldn't speeding up from the region.
The returns that you can do that.
We have taken a relationship and also making sure that they will make enough volume on that we can because it's.
It's not our intention to free thing.
A very small volume on metal I mean, we.
Insurance to retain on the small percentage hopefully beat.
Volume. So if we are not capable to container volume on the volume.
Gonna be pursuing over there on a percentage.
That is helpful to understand what we're trying to do.
Yes, I have a couple of volume, but I'll take those offline. Thanks. So much go ahead Shawn.
I called out on the either.
Some color scheme.
Individual project, depending on the economics and sometime depend on it depends.
So we think the project.
Actually <unk>.
Situated in order to decide whether we want to retain.
It's a more on our ships.
When I say strategically what is on board as to one project in U S.
Pure storage program very very good project.
And we actually got very good offer from investing a whole loans or by a 100% profit.
On a program, we are thinking kind of say jewelry.
I'll be retaining.
You may now on their ship just because this will be the first.
Just storage project, which we retain ownership in U S. We believe that we can learn a lot of the sort of the operation.
And also I understand a lot better on.
The revenue molecules off.
Just the larger project so yes economic.
Indicator.
One consideration.
Sometime.
On the strategic important sales still a consideration so that's one on.
So to your question now a second.
Geographically.
It did set in our press release that we on.
Launching another vehicle until hoping for debt.
In Brazil, We also mentioned, Italy, which we are structured vehicles, so all of that.
Those are the area, we think that first of all we have high quality project being scale. Therefore, we kind of structural a vehicle rather than just the sale our return project on the individual.
Basis now.
At the end of the east males to comment he also mentioned that day.
Maybe some change in terms of regulation.
U S.
Well actually he means.
Infrastructure, Bill and whether there will be some new.
Policies in terms of.
ITC.
Different waste for example, direct pay.
Options for ITC.
<unk> Dot happen, then that will stick and then from fundamentally change the U S market.
That will also significantly increase the value of a project on.
And also make like holding project much much more profitable U S. So we are just waiting and not on a weighted by way of analyzing.
Policy changes in U S. But we are seeing some very interesting very encouraging that's taken off.
Excellent. Thanks, so much guys.
We have the next question from the line of Brian.
Brian.
Goldman Sachs. Please ask your question.
Yeah.
Hey, guys. Thanks for taking the questions.
Maybe just to start I had a clarification question Shawn.
On the gross margins I think.
Maybe you mixed it up or maybe I'm reading it incorrectly but in the back of your press release you show the.
CSI solar in global energy.
Margins from.
For Q C.
CSI was 13.5% in global energy was eight 6%.
And I think in your commentary to one of the earlier questions. Maybe it was sales around margin cadence.
You seem to suggest that.
Margins would be about.
About the same into Q1 for for CSI and.
Then back up to volume.
Fly right, yes, you'll have a very bright.
Yes, you'll have a very sharp eye I realize that mixed on actually a mixed up the suicide.
Analysis of his question, yes, you're on.
Right.
Okay.
Q4, the number you show a philosophy.
Sure.
Okay. So my question I guess, Shawn it with that in mind as Youre, basically, saying CSI I'm guessing because of input costs and poly being up 33% ESI will be down from <unk> to <unk>.
And then.
Youre expecting from <unk> to <unk> improves and then it improves back to like 10% and then when do we get back to sort of Q4 level as you just put up 13, 5%.
In CSI solar from <unk>, youre, implying that youll be back to 10% by two key when do we get back to.
Just <unk> levels is that ended the year like youll be back to you.
13, 14% by the end of 2021 in CSI.
Yes, our target is to bring it back to low teens and in.
In the second half on half a year.
Operating in Q3.
For Q4, as they were targeting to bring the CSI solar on gross margin to the mid teen level.
Yes, they are.
On some headwinds.
Yeah mentioned.
However, there are also some tailwind.
For example, we have gone through.
The low price.
Contract, which was signed.
Net of net last year.
We have gone through all of those college Altra obligations, Inc.
<unk> in Q1.
We lost money on some contracts that we still decided.
<unk> decided to.
<unk>.
Meet all obligate counter obligation so from Q2 side Oh, sorry.
<unk> refreshed contract.
So there are some tailwind as well.
So.
I believe <unk> team, who will do a good job too.
Finally as highways.
With our effort.
Okay.
Thank you that's super helpful clarification, I think it just helps everyone for the modeling purposes.
Between the two segments, especially.
Since there is so much focus on on the module margin cadence here okay.
Second question I had was on.
If I look at the global Energy business again, you did one four gigawatt of project sales in 2020, that's the actual and then you did a little over $700 million of net revenue in the global energy segment under the new reporting so should we expect a similar ratio.
I guess, you know like 50 cents a lot implied on the one eight to two three gigawatts for project sales in the 2021 outlook.
That somehow dependent on weather and GPU sales.
The sales so it was a little bit complicated.
Our IR team can guests provide you on more data on them all different partners, maybe after the call.
Got it.
Okay.
Yes, hi, it's dry.
Hi, Brian this is away from.
You mentioned about the gross margin for global image business in Q4, we reported in the press release I'd like to highlight that our gross margin number well, it's not a degree lull.
As a result of volume of Oh.
Two or three large.
Solar projects.
And then we kind of all the revenue.
Into the total value of the project into the revenue on.
That drove down the gross margin number significantly.
And again that is the reason why we hesitate to give the gross margin guidance with sometimes.
And it depends on the form of a partner sales is that the C. O D O N P. P and then.
It can be very choppy and I know this may be compute so I take that into consideration. Our please do not extrapolate the gross margin for global Energy Group, Inc. Q4 into 2021, especially for Q1 Q1, although we announced the product.
Sales happened in Japan, and the margin at.
Historically has been very high.
Okay.
Yeah, the Japan stuff I know it can come in at a very high gross margin way from maybe last one from me I'll pass it on.
If you can't provide and I know, we can take this offline as well, but if you can't provide the actual dollar.
Revenue targeted a range that's implied by the one eight to two three Gigawatts of project sales for 2021 can you at least give us some sense of cadence is it.
40% first half revenue for global energy and 60% in the back half or is it more some more balanced or more skewed just any sense of how much of the revenue in global energy will show up earlier in the year versus later on here.
I guess, Brian the best way is due to two.
You know to have the IR team to help you on the modeling.
<unk>.
Rather than just giving.
Yeah.
Rough numbers.
In this call.
Alright fair enough.
Thanks, guys.
Thank you.
Yes.
We have the next question from the line of survival.
Jos from Jpmorgan. Please ask your question.
Yeah. Thank you very much for taking my questions.
Shawn I'm just curious from your your high level views on some of the recent headlines that have come out about the potential.
Potential force labor being years for silicon production, and and Jinjiang Province.
Are you able to quantify what percentage of your business might might use associated with product and.
Maybe it's a bit of a high price hypothetical at this point, but to the extent that there are or any kind of international.
International government restrictions on imports of of.
Silicon from that province.
What are kind of the steps that you can take to mitigate.
If needed.
Well.
Mark This is a very hypothetical question.
However, I can give you concrete offers.
Canadian solar never.
On tolerate selling force labor and we are not aware of any force neighbor.
Issue.
Company.
Within our suppliers and also based on the information we have we don't believe force from a labor exist our company our our supplier.
Would be my answer to your question now.
Some regulation so.
New loans come off from certain countries.
Ill stay on to comply with the local regulation on local law when knock on.
Alright. This is liquidity from let me also adds that we do not have any manufacturing facility in Xinjiang. We only have one employee looking ishi, John who is the manager at our solar power plant and together with six all the employees from <unk>.
Subcontract on all that.
Okay on Chinese and also for polysilicon, we believe polysilicon facility is pool of high risk chemicals, hi, crush on selling does extremely sensitive to safety. So we don't think it makes sense to have any forced labor in those facility and then we.
Haven't seen any evidence of force lately to be used at the polysilicon price already of course, we are aware of the political climate you have some regulation.
In placed and then we will operate our business income price. Thank you.
Okay that makes sense that's good to hear thank you very much.
At this time there are no further questions on the telephone line.
I would like to hand, the call back to the speakers.
So thank you for joining us today and also thanks for your continued support.
You all have any questions or would like to set out on my call. Please contact our investor relations team.
Well hope you on your family stay safe and healthy which is very important.
Take care and have a nice day.
Yeah.
Thank you Sir.
Ladies and gentlemen that does.
Moving to at our conference for today. Thank you for participating you may all disconnect.
Yeah.
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Sure.
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