Q3 2025 First Solar Inc Earnings Call
Speaker #1: Good afternoon and welcome to First Solar . S third Quarter 2020 Earnings Call . This call is being webcast live on the investor section of First Solar website at investor .
Byron Jeffers: Good afternoon and welcome to First Solar's third quarter 2025 earnings call. This call is being webcast live on the investor section of First Solar's website at investor.firstsolar.com. All participants are in a listen-only mode, and please note that today's call is being recorded. I would now like to turn the conference over to your host, Byron Jeffers, Head of Investor Relations. Please go ahead, sir.
Speaker #1: All participants are in a listen only mode , and please note that today's call is being recorded . I would now like to turn the conference over to your host , Byron Jeffers Head of Investor Relations .
Speaker #1: Please go ahead, sir.
Speaker #2: Good afternoon, and thank you for joining us on today's earnings call. Joining me are our Chief Executive Officer, Mark Widmar, and our Chief Financial Officer, Alexander Bradley.
Alex Bradley: Good afternoon, and thank you for joining us on today's earnings call. Joining me are our Chief Executive Officer, Mark Widmar, and our Chief Financial Officer, Alex Bradley. During this call, we will review our quarterly results and share our outlook for the remainder of the year. After our prepared remarks, we'll open the line for questions. Before we begin, please note that some statements made today are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We undertake no obligation to update these statements due to new information or future events. For discussion of factors that could cause these results to differ materially, please refer to today's earnings press release and our most recent annual report on Form 10-K, as supplemented by our other filings with the SEC, including our most recent quarterly report on Form 10-Q.
Speaker #2: During this call, we will review our quarterly results and share our outlook for the remainder of the year. After our prepared remarks, we'll open the line for questions.
Speaker #2: Before we begin , please note that some statements made today are forward looking and involve risks and uncertainties that could cause actual results to differ materially from management's current expectations .
Speaker #2: We undertake no obligation to update these statements due to new information or future events . For a discussion of factors that could cause these results to differ materially , please refer to today's earnings press release and our most recent Annual Report on Form 10-K as supplemented by our other filings with the SEC , including our most recent quarterly report on Form 10-q .
Speaker #2: You can find these documents on our website at investor First Solar . Com . With that , I'll turn it over to mark .
Alex Bradley: You can find these documents on our website at investor.firstsolar.com. With that, I'll turn it over to Mark.
Speaker #3: All right . Good afternoon . Thank you for joining us today . Beginning on slide three , I will share some key highlights from Q3 2025 .
Mark Widmar: All right. Good afternoon, and thank you for joining us today. Beginning on slide three, I will share some key highlights from Q3 2025. Since our last earnings call, we secured gross bookings of approximately 2.7 gigawatts at a base ASP of $0.309 per watt, including 0.4 gigawatts of Series 7 modules impacted by previously disclosed manufacturing issues, booked at an ASP of $0.29. We terminated 6.6 gigawatts of bookings under multi-year agreements defaulted on by affiliates of BP, a European oil and gas major, at a base ASP of $0.294 per watt. As a result, total debookings since the last earnings call were approximately 6.9 gigawatts, and our current expected contracted backlog is approximately 54.5 gigawatts. We delivered a record 5.3 gigawatts of module sales and reported Q3 earnings of $4.24 per diluted share, both near the midpoint of our previous earnings call forecast.
Speaker #3: Since our last earnings call , we secured gross bookings of approximately 2.7GW at a base ASP of 30.9 cents per watt , including 0.4GW of series seven modules impacted by previously manufacturing issues booked at an ASP of $0.29 .
Speaker #3: We terminated 6.6GW of bookings under multiyear agreements , defaulted on by affiliates of BP , a European oil and gas major , at a base .
Speaker #3: ASP of 29.4 cents per watt . As a result , total bookings since the last earnings call were approximately 6.9GW , and our current expected contracted backlog disclosed approximately 54.5GW .
Speaker #3: We delivered a record 5.3GW of module sales and reported Q3 earnings of $4.24 per diluted share , both near the midpoint of our previous earnings call forecast .
Speaker #3: Gross cash increased to $2 billion , supported by improved working capital , new bookings , deposits and accelerated customer payments ahead of the effective date for the new beginning of construction guidance .
Mark Widmar: Gross cash increased to $2 billion, supported by improved working capital, new bookings deposits, and accelerated customer payments ahead of the effective date for the new beginning of construction guidance. Alex will walk through our financial results in more detail later in the call. From a manufacturing perspective, we produced 3.6 gigawatts of modules in the third quarter, 2.5 gigawatts from our U.S. facilities, and 1.1 gigawatts from our international operations. In Q3, we reduced production in Malaysia and Vietnam, primarily due to lower demand driven by the customer default previously mentioned. We continue to advance our domestic capacity expansion, notably at our Louisiana facility, where we initiated production runs and started plant qualification. We have also continued to pursue the enforcement of our intellectual property rights. During the quarter, we made three separate filings requesting that the U.S.
Speaker #3: Alex will walk through our financial results in more detail later in the call . From a manufacturing perspective , we produced 3.6GW of modules in the third quarter , 2.5GW from our U.S.
Speaker #3: facilities and 1.1GW from our international operations in Q3 , we reduced production in Malaysia and Vietnam , primarily due to lower demand , driven by the customer default previously mentioned .
Speaker #3: We continue to advance our domestic capacity expansion, notably at our Louisiana facility, where we initiated production runs and started plant qualification. We have also continued to pursue the enforcement of our intellectual property rights.
Speaker #3: During the quarter, we made three separate filings requesting that the U.S. Patent and Trademark Office, or PTO, deny petitions filed by affiliates of Canadian Solar, JinkoSolar, and Mundra that seek to invalidate our U.S. patents.
Mark Widmar: Patent and Trademark Office, or PTO, deny petitions filed by affiliates of Canadian Solar, Ginkgo Solar, and MUNDRA that seek to invalidate our U.S. TOPCon patents. Our filings include a reference to comments made earlier this year by the Acting Director of the PTO, who stated, "The longer a patent has been in force, the stronger and more settled the patent owner's expectations should be." We believe our ongoing vigorous enforcement of our decade-old U.S. TOPCon patents, which we consider fundamental to producing that technology, is a prime example of a patent holder having settled expectations of the integrity of its IP rights. The view that module manufacturers and their customers and financing parties should strongly consider the potential hurdles of producing, selling, or purchasing modules employing TOPCon cell technology is not one held just by us.
Speaker #3: Our filings include a reference to comments made earlier this year by the acting director of the PTO , who stated , quote , the longer a patent has been in force , the stronger and more settled the patent owner's expectations should be .
Speaker #3: We believe our ongoing vigorous enforcement of our decade-old U.S. top patents, which we consider fundamental to producing that technology, is a prime example of a patent holder having settled expectations of the integrity of its IP rights.
Speaker #3: The view that module manufacturers, their customers, and financing parties should strongly consider the potential hurdles of producing, selling, or purchasing modules employing Top Gun sale technology is not one held just by us.
Speaker #3: For example , earlier this quarter , the CEO of Esw Foundry explained that his company's decision to focus on manufacturing Perc technology was due at least in part , to the quote , legal troubles that would be encountered by Top Gun producers .
Mark Widmar: For example, earlier this quarter, the CEO of ES Foundry explained that his company's decision to focus on manufacturing PERC technology was due, at least in part, to the "legal troubles that would be encountered by TOPCon producers." Lastly, we're pleased to continue building on our commitment to responsible solar, not simply by exceeding industry norms in sustainability and human rights, but by continuously improving on our own performance. Our Ohio facilities, which previously earned a silver rating in the Responsible Business Alliance's validated assessment program, have progressed to a gold rating in its 2025 audit, which was completed this past quarter. Turning to slide four, I will now provide an update on our manufacturing operations. As it relates to our Alabama facility, two of our domestic glass suppliers faced manufacturing disruptions that limited our ability to operate at full capacity, which impacted Q3 production by approximately 0.2 gigawatts.
Speaker #3: Lastly , we're pleased to continue building on our commitment to responsible solar , not simply by exceeding industry norms and sustainability and human rights , but by continuously improving on our own performance .
Speaker #3: Our facilities , which previously earned a silver rating in the responsible business Alliance's validated assessment program , have progressed to a gold rating in its 2025 audit , which was completed this past quarter .
Speaker #3: Turning to slide four, I will now provide an update on our manufacturing operations as it relates to our Alabama facility. Two of our domestic glass suppliers faced manufacturing disruptions that limited our ability to operate at full capacity, which impacted Q3 production by approximately 0.2 GW.
Speaker #3: The primary supply chain issue resulted from throughput limitations due to insufficient initial facility readiness at a new factory , while simultaneously a different supplier experienced unplanned downtime .
Mark Widmar: The primary supply chain issue resulted from throughput limitations due to insufficient initial facility readiness at a new factory, while simultaneously a different supplier experienced unplanned downtime. Corrective actions have been implemented at both suppliers, and our U.S. glass supply base is again positioned to meet our requirements. While now resolved, this resulted in a temporary shortage of cover glass supply to our Alabama facility, which led to reduced production and increased underutilization charges in the third quarter. Our Louisiana factory has initiated integrated production runs, started plant qualification, and the early stage ramp is slightly ahead of expectations. We anticipate receiving required production certificates in Q4 and will begin shipment at that time.
Speaker #3: Corrective actions have been implemented at both suppliers and our US blast supply base is again positioned to meet our requirements . While now resolved , this resulted in a temporary shortage of cover glass supplied to our Alabama facility , which led to reduced production and increased underutilization charges .
Speaker #3: In the third quarter . Our Louisiana factory has initiated integrated production runs , started plant qualification and the early stage ramp is slightly ahead of expectations .
Speaker #3: We anticipate receiving required production certificates in Q4 and will begin shipment at that time . As it relates to our international capacity , we have previously indicated the implementation of the Reconciliation Act earlier this year , as well as the evolving universal and Reciprocal Tariff environment could potentially support a business case to establish one or more lines in the US to finish front end production initiated within our international fleet .
Mark Widmar: As it relates to our international capacity, we have previously indicated the implementation of the Reconciliation Act earlier this year, as well as the evolving universal and reciprocal tariff environment, could potentially support a business case to establish one or more lines in the U.S. to finish front-end production initiated within our international fleet. We have made the decision to establish a new production facility in the U.S., allowing us to onshore the finishing of Series 6 modules initiated by the company's international factories. While the location is subject to final negotiations, with an announcement expected in the coming weeks, the planned capacity will be 3.7 gigawatts. Production will start at the end of 2026 and ramp through the first half of 2027. As we previously noted, such an investment is expected to enable additional production in the U.S.
Speaker #3: We have made the decision to establish a new production facility in the United States , allowing us to onshore the finishing of series six modules initiated by the company's international factories .
Speaker #3: While the location is subject to final negotiations , we have with an announcement expected in the coming weeks , the planned capacity will be 3.7GW .
Speaker #3: Production will start at the end of 26 and ran through the first half of 2027 . As we previously noted , such an investment is expected to enable additional production in the US market that we expect will be fully compliant with forthcoming fiat guidance , as well as improve the gross margin profile of our sales by reducing tariff charges and logistics costs associated with importing finished goods .
Mark Widmar: market that we expect will be fully compliant with forthcoming FIAC guidance, as well as improve the gross margin profile of our sales by reducing tariff charges and logistics costs associated with importing finished goods. Furthermore, we expect that the modules produced at this facility will provide domestic content points benefits for our customers and qualify for Section 45X module assembly tax credits. We continue to evaluate options for the remainder of our international Series 6 capacity, including options related to long-term U.S. market demand, U.S. market supply, and the global tariff environment. Shifting to the current policy landscape, the U.S. policy and trade environment remains generally favorable. As we have long stated, one of First Solar's key competitive differentiators is the ability to provide certainty to our customers, both in terms of pricing certainty and the certainty of timing the producing and delivering product.
Speaker #3: Furthermore, we expect that the modules produced at this facility will provide domestic content points, benefits for our customers, and qualify for the $45 module assembly tax credits.
Speaker #3: We continue to evaluate options for the remainder of our International Series six capacity , including options related to long term US market demand , US market supply , and the global tariff environment .
Speaker #3: Shifting to the current policy landscape , the US policy and trade environment remains generally favorable as we have long stated , one of First Solar key competitive differentiators is the ability to provide certainty to our customers , both in terms of pricing certainty and the certainty of timing .
Speaker #3: Producing and delivering product . These attributes are particularly valuable in the US solar market , where fiat compliance suppliers who have domesticated their supply chains and localized their production capabilities provide the surest pathway to enable developers to realize tax benefits and to mitigate the exposure of project Proformas to both the imposition of tariffs and the risk to project schedules associated with relying on imported products .
Mark Widmar: These attributes are particularly valuable in the U.S. solar market, where FIAC-compliant suppliers who have domesticated their supply chains and localized their production capabilities provide the surest pathway to enable developers to realize tax benefits and to mitigate the exposure of project proformas to both the imposition of tariffs and the risk to project schedules associated with relying on imported products. A number of trade and policy developments over the quarter amplify these competitive differentiators. In August, the U.S. Court of International Trade ruled that the Biden administration's two-year suspension of circumvention-related anti-dumping and countervailing duties was unlawful, paving the way for possible retrospective duty payments on solar imports brought into the U.S. between June 2022 and June of 2024. Also during the quarter, the U.S. International Trade Commission issued a preliminary affirmative determination in an anti-dumping and countervailing duty case known as Solar 4.
Speaker #3: A number of trade and policy developments over the quarter amplified these competitive shaders . In August , the US Court of International Trade ruled that the Biden administration's two year suspension of circumvention related anti-dumping and countervailing duties was unlawful , paving the way for possible retrospective duty payments on solar imports brought into the United States between June 22nd and June of 24 .
Speaker #3: Also , during the quarter , the US International Trade Commission issued a preliminary affirmative determination in an anti-dumping and countervailing duties case known as solar for that imports of Chris and silicon cells and modules from India , Indonesia and Laos are causing material injury to the US solar industry .
Mark Widmar: That imports of crystal silicon cells and modules from India, Indonesia, and Laos are causing material injury to the U.S. solar industry. In addition to a range of alleged illegal subsidies, the petitioners identified dumping margins of approximately 90% for Indonesia, approximately 247% for Laos, and approximately 215% for India. Also during the quarter, U.S. Customs and Border Protection issued a notice of initiation of investigation and interim measures against an affiliate of Walree Solar in response to a claim submitted by the American Alliance for Solar Manufacturing Trade Committee, of which First Solar is a member, that Walree has effectively transshipped Chinese solar cells and modules into the United States through India. In addition, we, together with the rest of the industry, are awaiting the results of the administration's Section 232 polysilicon and derivative investigation, including the potential for incremental tariffs impacting the crystal silicon supply chain.
Speaker #3: In addition to a range of alleged illegal subsidies , the petitioners identified dumping margins of approximately 90% for Indonesia . Approximately 247% for Laos , and approximately 215% for India .
Speaker #3: Also during the quarter . US Customs and Border Protection issued a notice of initiation of Investigation and Interim Measures against an affiliate of Huawei Solar in response to a claim submitted by the American Alliance for Solar Manufacturing Trade Committee , of which First Solar is a member , that while has effectively transshipped Chinese solar cells and modules into the United States through India .
Speaker #3: In addition , we , together with the rest of the industry , are awaiting the results of the administration's 232 polysilicon and derivative investigation , including the potential for incremental tariffs impacting the silicon supply chain .
Speaker #3: From a policy perspective , the industry also awaits guidance from the administration related to project impacts from foreign entity of concern or fiat procurement , which may be delayed as a result of the ongoing government shutdown .
Mark Widmar: From a policy perspective, the industry also awaits guidance from the administration related to project impacts from foreign entity of concern, or FIAC, procurement, which may be delayed as a result of the ongoing government shutdown. In short, there continues to be mounting headwinds or uncertainties for U.S. developers associated with procurement dependent on Chinese crystal silicon supply chain, which we believe enhances the value proposition of our vertically integrated production capabilities. It also validates our approximately $4.5 billion investment strategy of expanding our U.S. manufacturing production and reshoring supply chains, which began under the first Trump administration and continues through the current Trump administration, with our most recent facility currently ramping in Louisiana and the announcement of our new U.S. finishing line.
Speaker #3: In short , there continues to be mounting headwinds or uncertainties for us developers associated with procurement dependent on Chinese . Crystal and silicon supply chain , which we believe enhances the value proposition of our vertically integrated production capabilities .
Speaker #3: It also validates our approximately $4.5 billion investment strategy of expanding our US manufacturing production and reshoring supply chains , which began during the first Trump administration and continues through the current Trump administration .
Speaker #3: With our most recent facility currently ramping in Louisiana and the announcement of our new US finishing line . This activity places us uniquely at the intersection of several of the administration's key priorities , including those related to domestic manufacturing , job creation , American energy and energy affordability , and serving among the generation solutions that enable the US to win the artificial intelligence race against China .
Mark Widmar: This activity places us uniquely at the intersection of several of the administration's key priorities, including those related to domestic manufacturing job creation, American energy and energy affordability, and serving among the generation solutions that enable the U.S. to win the artificial intelligence race against China. Turning to India, since our last earnings call, there have been several notable policy deployments. First, significantly, the application of tariff rate for imports of finished modules into the U.S. was increased to 50%. We continue to monitor dialogue between the U.S. and Indian government. Related to a potential bilateral trade treaty easing of tariffs between the two countries. As it relates to the country's domestic market, the Indian government continues to promote its domestic renewable energy value chain by progressively including cells in the remit of the approved list of models and manufacturers under a recently announced List 2.
Speaker #3: Turning to India , since our last earnings call , there have been several notable policy deployments . First , significantly , the application of tariff rate for imports of finished modules into the US was increased to 50% .
Speaker #3: We continue to monitor dialogue between the US and Indian government related to a potential bilateral trade treaty , easing of tariffs between the two countries as it relates to the country's domestic market .
Speaker #3: The Indian government continues to promote its domestic renewable energy value chain by progressively including cells in the remit of the approved list of models and manufacturers under a recently announced list , two .
Speaker #3: Inclusion in the list becomes mandatory for solar OEMs to sell into segments of the domestic market . Effective June of 26 . Notably , First Solar was automatically qualified in this list , which was released in August of 25 .
Mark Widmar: Inclusion in the list becomes mandatory for solar OEMs to sell into key segments of the domestic market effective June of 2026. Notably, First Solar was automatically qualified in this list, which was released in August of 2025. The Indian government also released stakeholder consultation in September of 2025 related to a further extension of the ALMM regulations to include domestically made wafers for potential deployment after June of 2028. Once again, First Solar's India production is expected to automatically qualify. We anticipate that these regulations will progressively strengthen our position in the Indian market by leveling the playing field. I'll now turn the call over to Alex to discuss shipments, bookings, Q3 financials, and guidance. Thanks, Mark. Beginning on slide five, as of December 31, 2024, our contracted backlog totaled 68.5 gigawatts, valued at $20.5 billion, or approximately $0.299 per watt.
Speaker #3: The Indian government also released stakeholder consultation in September of 25 , related to a further extension of the regulations to include domestically made wafers for potential deployment .
Speaker #3: After June of 2028 . Once again , First Solar India's production is expected to automatically qualify . We anticipate that these key Indian market by leveling the playing field .
Speaker #3: And I'll turn the call over to Alex to discuss shipments, bookings, Q3 financials, and guidance.
Speaker #4: Thanks , Mark . Beginning on slide five . As of December 31st , 2024 , our contracted backlog totaled 68.5GW , valued at 20.5 billion , or approximately 29.9 cents per watt .
Speaker #4: Through Q3 , we recognized 11.8GW in module sales and recorded gross bookings of approximately 5.1GW . This included four gigawatts booked between the enactment of the reconciliation bill in early July and the September 2nd effective date for the new commenced construction guidance .
Mark Widmar: Through Q3, we recognized 11.8 gigawatts in module sales and recorded gross bookings of approximately 5.1 gigawatts. This included 4 gigawatts booked between the enactment of the reconciliation bill in early July and the September 2 effective date for the new commenced construction guidance. Since our last earnings call, we had gross bookings of 2.7 gigawatts and an average selling price of $0.309 per watt. This includes approximately 0.4 gigawatts of Series 7 modules impacted by previously disclosed manufacturing issues, booked at an ASP of $0.29 per watt. The remaining bookings, 2.1 gigawatts, were sold into the U.S. market at a blended ASP of $0.325 per watt. As a reminder, a significant portion of our contracted backlog includes pricing adjustments that may increase the base ASP, contingent upon achieving specific milestones within our technology roadmap by the time of delivery.
Speaker #4: Since our last earnings call , we had gross bookings of 2.7GW , an average selling price of 30.9 cents per watt . This includes approximately 0.4GW of series seven modules impacted by previously disclosed manufacturing issues booked at an ASP of $0.29 per watt .
Speaker #4: The remaining bookings , 2.1GW , were sold into the US market at a blended ASP of 32.5 cents per watt . As a reminder , a significant portion of our contracted backlog includes pricing adjusters that may increase the base ASP contingent upon achieving specific milestones within our technology roadmap .
Speaker #4: By the time of delivery . According to the ASPs presented , exclude potential adjustments related to module bin freight overages , commodity price fluctuations , committed wattage , US content volumes , and tariff changes .
Mark Widmar: According to the ASPs presented, exclude potential adjustments related to module bin, freight overages, commodity price fluctuations, committed wattage, U.S. content volume, and tariff changes. With our recent bookings scheduled for delivery in periods where such milestones could be met, the potential value is reflected in our backlog as an opportunity rather than the base ASP represented. For example, among recent bookings, we secured a 0.6 gigawatt order for 2027 delivery at an ASP of $0.316 per watt, with the potential for an incremental $0.046 per watt contingent on achieving specific milestones within our technology roadmap. Demand in the U.S. remained strong. However, we recorded foliar debookings totaling 8.1 gigawatts as of September 30, including 6.9 gigawatts in the third quarter. The majority of these were driven by contract terminations with affiliates of BP, which accounted for 6.6 gigawatts.
Speaker #4: Our recent booking schedule for delivery periods were . Such milestones could be met . The potential value is reflected in our backlog as an opportunity rather than the base ASP represented .
Speaker #4: For example , among recent bookings we secured a naught point six gigawatt order for 2027 delivery at an ASP of 31.6 cents per watt , with the potential for an incremental 4.6 cents per watt , contingent on achieving specific milestones within our technology roadmap .
Speaker #4: Demand in the US remains strong . However . We recorded full year bookings totaling 8.1GW as of September 30th , including 6.9GW in the third quarter .
Speaker #4: The majority of these were driven by contract terminations , with affiliates of BP , which accounted for 6.6GW . Note aside from the contract terminations with the BP affiliates , a number of other terminations were for project specific reasons as opposed to reflecting customer pivots from solar project development .
Mark Widmar: Note, aside from the contract terminations with the BP affiliates, a number of other terminations were for project-specific reasons as opposed to reflecting customer pivots from solar project development generally. For example, our Q3 bookings include volume expected to be delivered to a customer who terminated a project in 2024 but is recommitted to solar development in 2025, continues to source its module supply with First Solar. In addition, we're currently in active negotiations for the procurement of new volume with another customer who previously terminated a contract with us for a specific project of theirs earlier this year. In both cases, these customers satisfied their termination payment obligations. In prior calls, we highlighted the emerging risk of a strategic shift concerning multinational oil and gas and power and utilities companies, particularly those based in Europe, with some moving away from renewables project development and back towards fossil fuel investments.
Speaker #4: Generally, for example, our Q3 bookings include volume expected to be delivered to a customer who terminated a project in 2024 but is recommitted to solar development in 2025. The customer continues to source its module supply with First Solar.
Speaker #4: In addition , we're currently in active negotiations with procurement of new volume with another customer to previously terminated a contract with us for a specific project of theirs earlier this year .
Speaker #4: In both cases , these customers satisfied their termination payment obligations in prior calls . We highlighted the emerging risk of a strategic shift concerning multinational oil and gas and power utilities companies , particularly those based in Europe , with some moving away from renewables .
Speaker #4: Project development and back towards fossil fuel investments . On September 30th , First Solar filed a lawsuit against BP Solar Holding LLC and its affiliate Lightsource Renewable Energy Trading , following their failure to cure multiple breaches of contractual obligations .
Mark Widmar: On September 30, First Solar filed a lawsuit against BP Solar Holding LLC and its affiliate, Light Source Renewable Energy Trading, following their failure to cure multiple breaches of contractual obligations. According to public reports published earlier in the year, BP has been looking to divest its interest in its renewables development arm. Despite agreements to purchase approximately $1.9 billion, or 6.6 gigawatts, of solar modules, these BP affiliates did not meet required payment obligations or provide required payment security. After issuing default notices and providing opportunities to cure, we terminated the contract, which entitles us to approximately $385 million in termination payments. Of this amount, we've recognized $61 million in previously collected down payments as revenue. We're seeking monetary damages, which includes approximately $324 million in remaining termination payments, along with certain other receivables for solar modules previously delivered and interest.
Speaker #4: According to public reports published earlier in the year . BP has been looking to divest its interests in its renewables development arm , despite agreements to purchase approximately 1.9 billion , or 6.6GW of solar modules .
Speaker #4: These BP affiliates did not meet required payment obligations or provide required payment security after issuing default notices and providing opportunities to cure. We terminated the contract, which entitles us to approximately $385 million in termination payments.
Speaker #4: Of this amount , we've recognized 61 million in previously collected down payments as revenue . We're seeking monetary damages , which includes approximately 324 million in remaining termination payments , along with certain other receivables for solar modules .
Speaker #4: Previously delivered and interest . And if realized , the 324 million we recognized as revenue . We were ready , willing and able to continue fulfilling our contractual obligations to these BP affiliates and are disappointed that we must resort to litigation .
Mark Widmar: It's realized the $324 million we recognized as revenue. We were ready, willing, and able to continue fulfilling our contractual obligations to these BP affiliates and are disappointed that we must resort to litigation. The modules that are subject to the contract breach are a mix of domestic and international product, most of which were scheduled to be produced in Q3 and future quarters. The delivery is expected to extend into 2029. We're working to address the planned allocation of module inventory that could have been delivered to the BP affiliates if not for their contract breach. With respect to such planned future module production, the market for these modules may be constrained by the U.S., Indian, and European policy and market conditions discussed on the February earnings call, and there has since been further exacerbation in the U.S.
Speaker #4: The modules that are subject to the contract breach are a mix of domestic and international products, most of which were scheduled to be produced in Q3, with future deliveries expected to extend into 2029.
Speaker #4: We're working to address the planned allocation of module inventory that could have been delivered to the BP affiliates , if not for their contract breach .
Speaker #4: With respect to such planned future module production , the market for these modules may be constrained by the US , Indian and European policy and market conditions discussed on the February earnings call .
Speaker #4: And has since been further exacerbated in the US with our traditional utility scale customer . Experiencing transmission and permitting related challenges in large part due to the constraints reflected in the July Department of Interior memo related to renewables project development .
Mark Widmar: with our traditional utility-scale customer experiencing transmission and permitting-related challenges, in large part due to the constraints reflected in the July Department of Interior memo related to renewables project development, the ongoing government shutdown, and the impact of tariffs. Note, these same factors, which are further exacerbated by the breach of contract of these BP affiliates, given our loss of contracted offtake for the product, may drive further underutilization charges being realized in 2026 as it relates to our Southeast Asian production facilities for the planned module volume expected to be delivered to these BP affiliates. As a result, our quarter-end contracted backlog stood at 53.7 gigawatts, valued at $16.4 billion, or approximately $0.305 per watt. As of today, our total expected contracted backlog stands at 54.5 gigawatts, excluding any volume sold after the end of the quarter.
Speaker #4: The ongoing government shutdown and the impact of tariffs note these same factors , which are further exacerbated by the breach of contract for these BP affiliates .
Speaker #4: Given our loss of contracted offtake for the product , may drive further utilization . Underutilization charges being realized in 2026 . As it relates to our Southeast Asian production facilities for the planned module volume expected to be delivered to these BP affiliates .
Speaker #4: As a result , our quarter end contracted backlog stood at 53.7GW , valued at 16.4 billion , or approximately 30.5 cents per watt .
Speaker #4: And as of today , our total expected contracted backlog stands at 54.5GW , excluding any volume sold after the end of the quarter .
Speaker #4: Moving to slide six , our total pipeline in mid to late stage booking opportunities remains strong . The bookings opportunities of 79.2GW and mid to late stage booking opportunities of 17.8GW .
Mark Widmar: Moving to slide six, our total pipeline and mid to late-stage booking opportunities remain strong. The bookings opportunities are 79.2 gigawatts and mid to late-stage booking opportunities are 17.8 gigawatts. Our mid to late-stage pipeline includes 4.1 gigawatts of opportunities that are contracted subject to conditions precedent. As a reminder, signed contracts in India will not be recognized as bookings until we receive full security against the offer. I'll now cover our third quarter financial results from slide seven. We recognized 5.3 gigawatts of module sales during the quarter, including 2.5 gigawatts from our U.S. manufacturing facilities. Our net sales totaled $1.6 billion, representing an increase of $0.5 billion compared to the prior quarter. This increase was primarily driven by higher shipment volumes and the anticipated back-weighted profile of deliveries over the course of the year.
Speaker #4: Our mid to late stage pipeline includes 4.1GW of opportunities that are contracted , subject to conditions , precedent . As a reminder , signed contracts in India will not be recognized as bookings until we receive full security against the offering .
Speaker #4: I'll now cover our third quarter financial results on slide seven . We recognized 5.3GW of module sales during the quarter , including 2.5GW from our US manufacturing facilities .
Speaker #4: Our net sales totaled 1.6 billion , representing an increase of 0.5 billion compared to the prior quarter . This increase was primarily driven by higher shipment volumes from the anticipated back weighted profile of deliveries over the course of the year .
Speaker #4: Our sales included 81 million in contract termination payments , with 61 million related to the contract breach with the BP affiliates . This amount was recognized from existing cash deposits .
Mark Widmar: Our sales included $81 million in contract termination payments, with $61 million related to the contract breach with the BP affiliates. This amount was recognized from existing cash deposits. Gross margin for the quarter was 38%, a decrease from 46% in the prior quarter. This decrease was primarily due to a lower mix of modules sold from our U.S. manufacturing facilities, which benefit from Section 45X tax credits. Additionally, we incurred higher underutilization costs due to continued production curtailment in Southeast Asia, the BP affiliate's termination, and glass supply chain disruption at our Alabama facility. As an update on warranty-related matters, we've resolved certain obligations in advanced negotiations with additional customers regarding manufacturing issues affecting select Series 7 modules produced prior to 2025.
Speaker #4: Gross margin for the quarter was 38% , a decrease from 46% in the prior quarter . This decrease was primarily due to a lower mix of modules sold from our US manufacturing facilities , which benefit from section 45 tax credits .
Speaker #4: Additionally , we incurred higher utilization costs due to continued production curtailments in Southeast Asia . The BP affiliates termination and glass supply chain disruption at our Alabama facility .
Speaker #4: An update on warranty related matters . We've resolved certain obligations and advanced negotiations with additional customers regarding manufacturing issues affecting select series seven modules produced prior to 2025 , based on our settlement experience , the estimated number of affected modules and projections of probable remediation costs , we believe a reasonable estimate of potential future losses will range from approximately 50 million to 90 million .
Mark Widmar: Based on our settlement experience, the estimated number of affected modules and projections of probable remediation costs, we believe a reasonable estimate of potential future losses will range from approximately $50 million to $90 million. Within this range, we've recorded a specific warranty liability of $65 million, an increase of $9 million from our prior estimate, representing our best estimate of expected future losses associated with these manufacturing issues. As of the end of the third quarter, we maintain approximately 0.6 gigawatts of potentially impacted Series 7 inventory, including 0.2 gigawatts under contract and included in our backlog. SG&A, R&D, and production startup expense totaled $145 million in the third quarter, an increase of approximately $6 million compared to the second quarter. This increase was primarily driven by startup costs associated with the accelerated ramp-up of our Louisiana facility, aimed at providing resiliency to our U.S. production for the year.
Speaker #4: Within this range , we recorded a specific warranty liability of 65 million , an increase of 9 million from our prior estimate , representing our best estimate of expected future losses associated with these manufacturing issues .
Speaker #4: As of the end of the third quarter , we maintained approximately 0.6GW of potentially impacted series seven inventory , including 0.2GW under contract and included in our backlog .
Speaker #4: SG&A , R&D , and production start up expense totaled 145 million in the third quarter , an increase of approximately 6 million compared to the second quarter .
Speaker #4: This increase was primarily driven by start up costs associated with the accelerated ramp up of our Louisiana facility , aimed at providing resiliency to our US production for the year .
Speaker #4: Operating income for the quarter was 466 million , which included 138 million . In depreciation , amortization and accretion , 49 million in ramp and underutilization costs , 37 million .
Mark Widmar: Operating income for the quarter was $466 million, which included $138 million in depreciation, amortization, and accretion, $49 million in ramp-and-underutilization costs, $37 million in production startup expense, and $7 million in share-based compensation. Non-operating income resulted in a net expense of $6 million in the third quarter, representing a decrease of approximately $4 million compared to the prior quarter. This was primarily driven by higher interest income as a result of an increase in investable cash, cash equivalents, and marketable securities. Tax expense for the third quarter was $4 million compared to tax expense of $10 million in the second quarter. This decrease in tax expense was primarily driven by a $19 million discrete tax benefit associated with the acceptance of a filing position on an amended tax return in a foreign jurisdiction, partially offset by higher pre-tax income. This resulted in third-quarter earnings of $4.24 per diluted share.
Speaker #4: Production start up expense and 7 million in share based compensation . Non-operating income resulted in a net expense of 6 million in the third quarter , representing a decrease of approximately 4 million compared to the prior quarter .
Speaker #4: This was primarily driven by higher interest income as a result of an increase in investable cash, cash equivalents, and marketable securities.
Speaker #4: Tax expense for the third quarter was 4 million , compared to tax expense of 10 million in the second quarter . This decrease in tax expense was primarily driven by a 19 million discrete tax benefit associated with the acceptance of a filing position on an amended tax return in a foreign jurisdiction , partially offset by higher pre-tax income .
Speaker #4: This resulted in a third quarter earnings of $4.24 per diluted share . Turning to slide eight . I'll discuss select balance sheet items and summary cash flow information at the end of Q3 .
Mark Widmar: Turning to slide eight, I'll discuss select balance sheet items and summary cash flow information. At the end of Q3, our total cash, cash equivalents, restricted cash, and marketable securities stood at $2 billion, an increase of approximately $0.8 billion from Q2, driven by improved working capital, new bookings deposits, and accelerated customer payments ahead of the effective date for new beginning-of-construction guidance. As disclosed in our Form 8-K, on October 20, 2025, we executed two Section 45X tax credit transfer agreements totaling up to $775 million in tax credits. A fixed agreement for the sale of $600 million in tax credits at a purchase price of $573 million, payable by year-end, and a variable agreement for sale of up to $175 million in tax credits, with payment expected in Q1, 2026.
Speaker #4: Our total cash cash equivalents , restricted cash and marketable securities stood at 2 billion , an increase of approximately 0.8 billion from Q2 , driven by improved working capital , new bookings , deposits and accelerated customer payments .
Speaker #4: Ahead of the effective date for new beginning of construction guidance as disclose in our form 8-K on October 20th , 2025 , we executed two section 45 Tax Credit Transfer Agreements totaling up to 775 million in tax credits .
Speaker #4: A fixed agreement for the sale of 600 million tax credits , and a purchase price of 573 million , payable by year end , and a variable agreement for the sale of up to 175 million in tax credits .
Speaker #4: With payment expected in Q1 2026 . These transactions highlight the liquidity of the credit market and strengthen our near term liquidity to support our technology roadmap and expansion priorities .
Mark Widmar: These transactions highlight the liquidity of the 45X credit market and strengthen our near-term liquidity to support our technology roadmap and expansion priorities. Accounts receivable decreased sequentially, driven by higher cash collection. Quarter-end total overdue balances were approximately $334 million, including a deferred payment settlement of $93 million with a customer, for which interest payments remain current. In addition, we have approximately $70 million in uncollected receivables related to termination payments. We currently have $82 million in accounts receivable for delivered modules that are aged and past due with the aforementioned BP affiliates. This does not include any additional anticipated proceeds from potential recoveries associated with their breach of contract. Although termination payments remain contractually due, these balances are expected to persist pending the resolution of arbitration and litigation.
Speaker #4: Counts receivable decreased sequentially , driven by higher cash collections , quarter end total overdue balances were approximately 334 million , including a deferred payment settlement of 93 million with a customer for which interest payments remain current .
Speaker #4: In addition , we have approximately 70 million in uncollected receivables related to termination payments . We currently have 82 million accounts receivable for delivered modules that are aged and past due with the aforementioned BP affiliates .
Speaker #4: This does not include any additional anticipated proceeds from potential recoveries associated with their breach of contract , although termination payments remain contractually due .
Speaker #4: These balances are expected to persist pending the resolution of arbitration and litigation . In all instances of contract termination . We're actively pursuing all available remedies , including arbitration and litigation , to enforce our contractual rights and recover amounts owed .
Mark Widmar: In all instances of contract termination, we're actively pursuing all available remedies, including arbitration and litigation, to enforce our contractual rights and recover amounts owed. Deferred revenue increased by $395 million, primarily due to accelerated customer payments ahead of the effective date for new beginning-of-construction guidance, partially offset by revenue recognized from delivered modules and termination payments. Capital expenditures totaled $204 million in Q3, mainly driven by investments in our Louisiana facility, where we initiated production runs and started plant qualification. As a result, our net cash position increased by approximately $0.9 billion to $1.5 billion. Before addressing our updated guidance, I'd like to revisit the policy and trade environment that shaped our operational decisions throughout the year. These evolving dynamics influenced our strategy, impacted quarterly performance, and informed our adjustment to forward guidance.
Speaker #4: Deferred revenue increased by $395 million, primarily due to accelerated customer payments ahead of the effective date for new beginning of construction guidance, partially offset by revenue recognized from delivered modules and termination payments.
Speaker #4: Capital expenditures totaled 204 million in Q3 , mainly driven by investments in our Louisiana facility , where we initiated production runs and started plant qualification .
Speaker #4: As a result , our net cash position increased by approximately 0.9 billion to 1.5 billion . Before addressing our updated guidance , I'd like to revisit the policy and trade environment that shapes our operational decisions throughout the year .
Speaker #4: These evolve these evolving dynamics influence our strategy , impacted quarterly performance , and informed our adjustments to forward guidance . Our 2025 shipment profile required sustained production to fulfill can contract commitments concentrated in the second half of the year amid significant trade and tariff uncertainty .
Mark Widmar: Our 2025 shipment profile required sustained production to fulfill contractual commitments concentrated in the second half of the year, amid significant trade and tariff uncertainty. During this period, we navigated a range of potential tariff scenarios, customer negotiations, and regulatory developments, including Section 232 actions, FIAC restrictions, and ADCVD investigations. At one point, we managed two possible tariff regimes: the continuation of a 10% universal tariff or adoption of reciprocal tariffs initially set at 26% for India, 24% for Malaysia, and 46% for Vietnam, later amended to 50%, 19%, and 20%, respectively. Our strategy has been to maintain sufficient capacity to fulfill international module commitments and to actively pursue tariff recoveries from customers, at the same time as temporarily curtailing or idling capacity and recording underutilization in circumstances where tariff recovery was unlikely and module sale economics would be challenged.
Speaker #4: During this period , we navigated a range of potential tariff scenarios customer negotiations and regulatory developments , including section 232 actions , restrictions and investigations .
Speaker #4: At one point , we managed two possible tariff regimes continuation of a 10% universal tariff tariff or adoption of reciprocal tariffs , initially set at 26% for India , 24% for Malaysia and 46% for Vietnam , later amended to 50% 19 and 20% respectively .
Speaker #4: Our strategy has been to maintain sufficient capacity to fulfill International Module and to actively pursue tariff recoveries from customers . At the same time as temporarily curtailing or idling capacity and recording underutilization in circumstances where tariff recovery was unlikely and module sale economics would be challenged , the upper end of our prior guidance assumes sustained production with partial tariff recoveries , whereas the lower end reflected risks tied to termination related impacts , including additional underutilization costs and margin erosion from terminated contracts .
Mark Widmar: The upper end of our prior guidance assumed sustained production with partial tariff recoveries, whereas the lower end reflected risks tied to termination-related impacts, including additional underutilization costs and margin erosion from terminated contracts. Three significant updates drive our revised guidance ranges today. Firstly, the decision announced today to establish a new 3.7-gigawatt U.S. production facility, enabling us to onshore finishing for Series 6 modules initiated by our international fleet, will result in approximately $330 million of the total program direct spend, including approximately $260 million of capital expenditures and approximately $70 million of non-capitalized expense associated with equipment de-installation, cleaning, packaging, shipping, import tariffs, and reinstallation. Of this, we expect an incremental $26 million of CapEx and $2 million of production startup expense in 2025. In addition, we forecast approximately $10 million of incremental indirect charges in 2025 associated with this decision, including severance and asset impairment expenses.
Speaker #4: Three significant updates drive our revised guidance ranges today . Firstly , the decision announced today to establish a new 3.7GW US production facility enabling us to onshore finishing for series six modules initiated by our international fleet .
Speaker #4: Will result in approximately 330 million of total program direct spend , including approximately 260 million of capital expenditures . Approximately 70 million of non capitalized expense associated with equipment Deinstallation cleaning , packaging , shipping , import tariffs and reinstallation .
Speaker #4: Of this , we expect an incremental 26 million of CapEx and 2 million of production start up expense in 2025 . In addition , we forecast approximately 10 million of incremental indirect charges in 2025 associated with this decision , including severance and asset impairment expenses .
Speaker #4: As previously noted , we continue to evaluate options for our remaining Malaysia and Vietnam facilities . Today's guidance excludes any additional costs associated with potential restructuring charges or asset impairments that may impact 2025 or future operating results .
Mark Widmar: As previously noted, we continue to evaluate options for our remaining Malaysia and Vietnam facilities. Today's guidance excludes any additional costs associated with potential restructuring charges or asset impairments that may impact 2025 or future operating results. Secondly, as it relates to the termination of contracts with affiliates of BP, the loss of gross margin assumed in 2025 was largely offset by the termination payment recorded in Q3. Increased underutilization expenses from reduced plant throughput, which we could tail production given this termination of demand, were incorporated in the lower end of our guidance range. Thirdly, as previously discussed, simultaneous incidents at two of our glass suppliers led to a shortage of glass available at our Alabama facility in Q3. This reduced full-year production by approximately 0.2 gigawatts, resulting in a reduction to gross margin and Section 45X tax credits and increased underutilization costs.
Speaker #4: Secondly , as it relates to the termination of contracts with affiliates of BP , the loss of gross margin assumed in 2025 was largely offset by the termination payment recorded in Q3 , increased underutilization expenses from reduced plant throughput , as we curtail production .
Speaker #4: Given this termination of demand were incorporated in the lower end of our guidance range . Thirdly , as previously discussed , simultaneous incidents of two of our glass suppliers led to a shortage of glass available at our Alabama facility in Q3 .
Speaker #4: This reduced full year production by approximately 0.2 GW, resulting in a reduction to gross margin and Section 45 tax credits, and increased underutilization costs.
Speaker #4: Turning to slide nine . I'll now outline the key updates to our 2025 guidance ranges , which incorporate the cascading impact of our third quarter operational and financial results .
Mark Widmar: Turning to slide nine, I'll now outline the key updates to our 2025 guidance ranges, which incorporate the cascading impacts of our third-quarter operational and financial results. Our net sales guidance is projected at $4.95 to $5.20 billion, reflecting a downward revision of approximately 0.5 gigawatts from the top end of our prior guidance. This adjustment primarily reflects reduced international volume sold due to customer terminations, partially offset by termination payments, as well as a 0.5-gigawatt reduction in assumed domestic India sales following a mid-year redirection of India product from the U.S. market to the domestic book and bill market, driven by the high tariff for imports into the U.S. Additionally, U.S.
Speaker #4: Our net sales guidance is projected at 4.95 to 5.20 billion , reflecting a downward revision of approximately 0.5GW from the top end of our prior guidance .
Speaker #4: This adjustment primarily reflects reduced international volumes sold due to customer terminations , partially offset by termination payments , as well as 0.5GW reduction in assumed domestic India sales following the mid-year redirection of India product from the US market to the domestic book and bill market , driven by the high tariff for imports into the US .
Speaker #4: Additionally , US manufactured volumes sold is expected to decrease 0.2GW at the high end of the guide as a result of Q3 glass supply constraints .
Mark Widmar: manufactured volume sold is expected to decrease 0.2 gigawatts at the high end of the guide as a result of Q3 glass supply constraints at our Alabama facility, partially offset by 0.1 gigawatts at the lower end by expected increased supply from our Louisiana factory. Gross margin is expected to be between $2.1 billion and $2.2 billion, or approximately 42%. This includes approximately $1.56 billion to $1.59 billion of Section 45X tax credits and $155 million to $165 million of ramp and underutilization costs. The bottom end of our previous guide has increased significantly due to further curtailment of our Southeast Asia manufacturing capacity following the contract terminations by affiliates of BP. SG&A and R&D combined expenses are expected to total $425 million to $445 million, and total operating expenses, which include $90 million of production startup expense, are expected to be between $515 million and $535 million.
Speaker #4: At our Alabama facility , partially offset by 0.1GW at the low end by expected increased supply from our Louisiana factory . Gross margin is expected to be between 2.1 and 2.2 billion , or approximately 42% .
Speaker #4: This includes approximately 1.56 to 1.59 billion of section 45 tax credits and 155 to 165 million of ramp and underutilization costs . The bottom end of our previous guide has increased significantly due to further curtailment of our Southeast Asia manufacturing capacity .
Speaker #4: Following the contract terminations by affiliates of BP , SG&A and R&D . Combined expense is expected to total 425 to 445 million and total operating expenses , which include 90 million of production start up expense , is expected to be between 515 and 535 million .
Speaker #4: Operating income is expected to range between 1.56 and 1.68 billion , implying an operating margin of approximately 32% . This guidance includes 245 million to 255 million .
Mark Widmar: Operating income is expected to range between $1.56 billion and $1.68 billion, implying an operating margin of approximately 32%. This guidance includes $245 million to $255 million in combined ramp, underutilization, and production startup expense, as well as approximately $1.56 billion to $1.59 billion in Section 45X tax credits, net of the anticipated discount associated with the sale of these credits. This results in a full-year 2025 earnings-per-diluted-share guidance range of $14 to $15. In summary, the upper end of our EPS guidance range is reduced by $1.50 per diluted share. This includes approximately $0.60 per share from the supply chain impact at our Alabama facility, which resulted in increased underutilization costs and lower volume sold. Contract termination by BP affiliates reduces EPS by another approximately $0.60 per share due to increased underutilization costs and lower volume sold, partially offset by termination payments.
Speaker #4: In combined ramp and utilization , and production start up expense , as well as approximately 1.56 to 1.59 billion in section 45 tax credits , net of the anticipated discount associated with the sale of these credits .
Speaker #4: This results in a full year 2025 earnings per diluted share guidance range of 14 to $15 . In summary , the upper end of our EPs guidance range is reduced by $1.50 per diluted share .
Speaker #4: This includes approximately $0.60 per share from the supply chain , impacts that our Alabama facility , which resulted in increased utilization costs and lower volumes , sold contract termination by BP affiliates reduces EPs by another approximately $0.60 per share due to increased utilization costs and lower volumes sold , partially offset by termination payments .
Speaker #4: The remaining $0.30 per share is a combination of reduced India volumes sold , increased production start up expense , finishing line costs , and warranty expense , partially offset by non BP affiliate termination payments and decreased full year tax expense .
Mark Widmar: The remaining $0.30 per share is a combination of reduced India volume sold, increased production startup expense, finishing line costs, and warranty expense, partially offset by non-BP affiliate termination payments and decreased full-year tax expense. Capital expenditures for 2025 are now expected to range between $0.9 and $1.2 billion. Our year-end 2025 net cash balance is anticipated to be between $1.6 and $2.1 billion. Turning to slide 10, I'll now summarize the key messages from today's call. Despite some near-term headwinds, we continue to believe that our integrated domestic manufacturing platform and reshored domestic supply chain position us for long-term success. We're building a new 3.7-gigawatt capacity module finishing line in the U.S., which is expected to begin production in Q4 of 2026 and ramp into the first half of 2027.
Speaker #4: Capital expenditures for 2025 are now expected to range between 0.9 and 1.2 billion . Our year end 2025 net cash balance is anticipated to be between 1.6 and 2.1 billion .
Speaker #4: Slide ten . I'll now summarize the key messages from today's call . Despite some near-term headwinds , we continue to believe that our integrated domestic manufacturing platform and reassured domestic supply chain position us for long term success .
Speaker #4: We're building a new 3.7GW capacity module finishing line in the US , which is expected to begin production in Q4 of 2026 and ramp into the first half of 2027 .
Speaker #4: We delivered a record 5.3GW of module sales , and our Q3 earnings per diluted share came in above the midpoint of our guidance range at $4.24 per share .
Mark Widmar: We delivered a record 5.3 gigawatts of module sales, and our Q3 earnings per diluted share came in above the midpoint of our guidance range at $4.24 per share. We saw an improvement in our gross cash position to $2 billion and recently executed agreements to sell additional Section 45X tax credits, which we expect to further enhance our liquidity position. We've revised our full-year guidance to reflect the impact of third-party glass supply chain disruptions, as well as the termination of 6.6 gigawatts of volume by affiliates of BP, for which we recognize a partial termination payment and file a lawsuit for damages for breach of contract. With this, we conclude our prepared remarks and open the floor to questions. Operator. Thank you. Just a reminder that it is Star One if you have a question today. The first question comes from Philip Shen, ROTH Capital Partners. Hey, guys.
Speaker #4: We saw an improvement in our gross cash position to 2 billion . And recently executed agreements to sell additional section 45 tax credits , which we expect to further enhance our liquidity position .
Speaker #4: We've revised our full-year guidance to reflect the impact of third-party supply chain issues, as well as the termination of 6.6 GW of volume by affiliates of BP. We recognize a partial termination payment and have filed a lawsuit for damages for breach of contract.
Speaker #4: With this , we conclude our prepared remarks and open the call for questions . Operator . .
Speaker #1: Thank you . And just a reminder that it is star one . If you have a question today . The first question comes from Philip Shen Roth Capital Partners .
Speaker #5: Hey , guys . Thanks for taking my questions .
Mark Widmar: Thanks for taking my questions. The first one is on the 6.6 gigawatts of termination with BP. Just want to check in on whether or not, in terms of rebooking this volume, it sounds like it's volume from 2026 through 2029. What kind of incremental pricing do you think you can get for this? Would you expect these bookings to get locked in following the Section 232 tariff announcement, which should be near-term, sometime in Q4, Q1, and then, or do you think you might wait until things settle down post-232? The second question is tied into this as it relates to the 232. Is there room for negotiation, you think, with any of your fixed-price contracts that you have out there, where they may not have been accounted for in terms of this new tariff? Just curious if you can share some color on that as well. Thanks.
Speaker #5: one is on the 6.6GW of termination with disruptions , as BP . Just want to check in on whether or not , you know , in terms of rebooking this volume .
Speaker #5: It sounds like it's volume from 26 through 29 . What kind of incremental pricing do you think you can get for this ? Would you expect these bookings to get locked in ?
Speaker #5: You know , following the section ? 232 tariff announcement , which should be near term . So , you know , a sometime in Q4 , Q1 and then or , or do you think you might wait until you know , things settle down ?
Speaker #5: Post 232 and then the second question is tied into this as it relates to the 232 . Is there room for negotiation ? Do you think , with any of your fixed contracts that you have out there ?
Speaker #5: Where they may not have been accounted for in terms of this new tariff ? So just curious if you can share some color on that as well .
Speaker #5: Thanks .
Speaker #3: Yeah . Phil , look , I mean now with with with the termination , we clearly are going to be engaging looking given our overall pipeline of opportunities to figure out the right opportunities for for this volume and the respective windows that it was anticipated to be delivered .
Mark Widmar: Yeah, Phil. Look, I mean, now with the termination, we clearly are going to be engaging, looking. Given our overall pipeline of opportunities, to figure out the right opportunities for this volume and the respective windows that it was anticipated to be delivered, we will continue to be very patient in that regard, assuming we can get good prices. If you look at the one deal that Alex included in his prepared remarks, the base price plus the CuRe adders gets that number into a little bit north of $0.36, close to $0.365. I think that's a number that we would continue to look to engage. At this point in time, I think there's other catalysts that could put a little bit more momentum behind that pricing as well, especially with the Section 232, as you referenced.
Speaker #3: one deal that Alex included in his prepared remarks , you know , the base price plus the curators gets that number into a little bit , you know , north of 36 , close to 36.5 cents .
Speaker #3: And And there's still obviously fiat guidance that's going to continue to be provided as well . So a lot a lot of insights or information that still is valuable to us to gain .
Speaker #3: I think that's a number that we would continue to to look to engage . But , you know , at this point in time , I think there's other catalysts that could put a little bit more momentum behind that pricing as well , especially with the 232 as you referenced .
Mark Widmar: There's still, obviously, FIAC guidance that's going to continue to be provided as well. A lot of insights or information that still is valuable to us to gain. If we can get good pricing, we'll continue to layer on some volumes into the years that we currently have available supply. I think the value of being patient here is going to only work to our benefit in that regard. As it relates to the fixed-price contracts, the value of certainty, I think, is what Alex indicated in his comments, and we said that many times before. The contracts do not have latitude for something like a revised tariff environment that was not assumed at the time of the committed obligations that both parties assumed. They do not allow openers for Section 232s, as an example.
Speaker #3: If we can get good pricing , we'll we'll continue to layer on some volumes into the years that we currently have available supply .
Speaker #3: But I think the value of being patient here is going to only work to our to our benefit in that regard . As it relates to the , you know , fixed price contracts , you know , the value of certainty , I think is is what Alex indicated in his comments .
Speaker #3: And we said that many times before. You know, the contracts do not have latitude for something like a revised tariff environment that was not assumed at the time of the committed obligations that both parties assumed.
Speaker #3: So they do not allow openers for for 232 . As an example . But , you know , we still have capacity and , you know , in the foreseeable future , especially through our international operations , that we can use to engage the market and provide supply .
Mark Widmar: We still have capacity in the foreseeable future, especially through our international operations, that we can use to engage the market and provide supply once we know the outcome of Section 232. Yes, the existing contracts that are on the books right now, those are obligations for both parties, and we take that seriously. That's also why we took the position that we did with the Light Source BP transaction and the termination enforcing our contractual rights. We worked, as we indicated in our prepared remarks, to try to get to an outcome that would be beneficial for both parties. We couldn't get there, so we had to enforce the contract. We hold ourselves accountable to that as well. We have contracts and obligations to deliver.
Speaker #3: Once we know the outcome of . 232 but yes , the existing contracts that are on the books right now , you know , those are obligations for both parties .
Speaker #3: And we take that seriously . That's also why we took the position that we did with , you know , the light BP transaction .
Speaker #3: And the termination and our contractual rights . We worked , as we indicated , our prepared remarks to try to get to an outcome that would be beneficial for both parties .
Speaker #3: We couldn't get there . So we had to enforce the contract . And we and we hold ourselves accountable to that as well .
Speaker #3: We have contracts and obligations to deliver . Pricing is fixed for certain respective adders and would not include tariff related outcome or any other adjustments that were a result of the 232 that are being currently under investigation .
Mark Widmar: Pricing is fixed except for certain respective adders, and it would not include tariff-related outcome or any other adjustments that were a result of the Section 232s that are being currently under investigation. The next question today is Brian Lee from Goldman Sachs. Hey, guys. Good afternoon. Thanks for taking the questions. I guess, first, I just want to make sure I interpret this correctly. It sounded like, Mark, you're saying, given the adders, indicative pricing, $0.36, $0.365 per watt, that's maybe kind of the level of entitlement you think you'll ultimately settle at once this game of patience evolves to when you really engage in pricing discussions post-FIAC and Section 232. The second question, just on the 3.7 gigawatt finishing line, great to hear on that. Is the CapEx all being spent this year? Maybe high-level thoughts around just expanding that?
Speaker #1: The next question today is Brian Lee from Goldman Sachs .
Speaker #6: Hey guys . Good afternoon . Thanks for taking the questions . I guess first I just want to make sure I interpret this correctly .
Speaker #6: It sounded like , Mark , you're saying , you know , given given the adders , you know , indicative pricing . 36 36.5 cents per watt , that's maybe kind of the level of entitlement you think you'll ultimately settle at once , you know , this game of patience evolves to to when you , you know , really engage in pricing discussions , post Fiac in 232 .
Speaker #6: And then the second question , just on , you know , the 3.7GW finishing line . Great to hear on that . But is the CapEx all being spent this year ?
Speaker #6: And then maybe high level thoughts around just expanding that ? Why not simply do a full seven gigawatts plus to cover both the Vietnam and Malaysia volume capacity ?
Mark Widmar: Why not simply do a full 7 gigawatts plus to cover both the Vietnam and Malaysia volume capacity? Thanks, guys. Yeah. Brian, I think as you summarized what I said to Phil, I think that's the objective of where we'd like to ultimately see, especially with, on the other side of understanding of FIAC and Section 232. That's kind of the entitlement that we would expect, especially for the new technology and the value add that we provide through CuRe. I think you summarized that well. I'll let Alex talk to the CapEx. Before that, as it relates to where we are right now, it is 3.7. One of the things that we do want to try to keep measured is the finishing line will bring with it domestic content, right?
Speaker #6: Thanks guys .
Speaker #3: Yeah . So , Brian , I think , you know , as you summarized what I said to to Phil , I think that's the objective of where we'd like to ultimately see , especially with the on the other side of understanding of Fiac and the 232 that's kind of the entitlement that we would expect with , especially for the new technology and the value add that we provide through cure .
Speaker #3: So I think you summarized that that well , I'll let Alex talk the CapEx . But before that , as it relates to where we are right now , is 3.7 .
Speaker #3: One of the things that we do want to try to keep measured is . The finishing line will bring with it . Domestic content , but it's not going to bring the entire value stack of domestic content that we capture through our production in Perrysburg , the front end semi-finished product that comes into the US .
Mark Widmar: It's not going to bring the entire value stack of domestic content that we capture through our production in Perrysburg. The front-end semi-finished product that comes into the U.S., obviously, by definition, will not create domestic content value. What we're trying to do is keep that throughput pretty much balanced so we can continue to blend. Even that contract that I referenced with the adders that got into the mid-$0.36, that was still a blend of international and domestic. We think that by keeping that balance, it allows us to realize the highest potential value for that finishing line. That's where our head is right now. 3.7 kind of balances very well with the production that we have in Perrysburg, which is north of 3 gigawatts as well. We'll continue to evaluate whether there's an opportunity to bring more into the U.S. using the front-end capacity we have internationally.
Speaker #3: Obviously , by definition will not value , will not create domestic content value . So what we're trying to do is keep that throughput pretty much balanced so we can continue to blend .
Speaker #3: So even that contract that I , that I referenced with the adders that got into the mid 36 , that was still a blend of international and domestic .
Speaker #3: And so we think that by keeping that balance that allows us to realize the highest potential value for that finishing line . So that's where our head is right now .
Speaker #3: 37 kind of balances very well with the production that we have in Perrysburg , which is north of three gigawatts as well . We'll continue to evaluate whether there's an opportunity to bring more into the US using the front end capacity .
Speaker #3: We have internationally . We'll have opportunities to better reassess that once we understand the outcome of 232 in particular and the guidance that we're looking forward to , and we'll make that decision at that time .
Mark Widmar: We'll have opportunities to better reassess that once we understand the outcome of Section 232 in particular and the FIAC guidance that we're looking forward to, and we'll make that decision at that time. Brian, just on the spend, what we said is about $330 million of direct spend. Of that, $260 million is CapEx, and of that $260 million, we'll spend about 10% of it this year, so $26 million. The remainder will be spent in 2026. The other $70 million, so $260 million of CapEx, $330 million of total spend, the other $70 million is non-capitalizable spend. That's going to be decommissioning of the current tools, taking them out, cleaning, packing them, the freight to get them to the U.S., some tariff on the import, reinstallation. All of that will be expense versus capitalized. Of that $70 million, we're only forecasting spending about $2 million this year.
Speaker #3: .
Speaker #4: And Brian , just on the spend . So what we said is about 330 million of direct spend of that , 260 is CapEx .
Speaker #4: And of that 260 will spend about 10% of it this year . So 26 million , the remainder will be spent in 2026 .
Speaker #4: The the the other 70 million . So 260 of CapEx , 330 of total spend . The other 70 is non-capital spend . So that's going to be decommissioning of the current tools , taking them out , cleaning , packing them the freight to get them to the US , some tariff on the import reinstallation .
Speaker #4: So all of that will be expense versus capitalized of that 70 , we're only forecasting spending about 2 million this year that the rest will come in 2026 .
Mark Widmar: The rest will come in 2026. There is some incremental charge that will hit this year. We said about $10 million. That's indirect, associated with what we're doing, so it's not part of $330 million. That's some severance for some associates that will be impacted in Southeast Asia. There'll be some equipment write-off as well. There may be more associated with that in 2026, and we'll give you more color around that when we guide for next year. Your next question comes from Moses Sutton from BNP Paribas. Thanks. In the past, Alex, you delineated, I think, 85% of either gigawatts or customers were in a true take-or-pay structure contractually, and 15%, maybe it was 16%, were supported by the non-refundable deposits or termination fees. Was BP in the latter bucket, hence the 20% that you're going after and litigating for that?
Speaker #4: There is some incremental charge that will hit this year . We said about $10 million that indirect associated with what we're doing . So it's not part of 330 million .
Speaker #4: That's some severance for some some associates that will be impacted in in the Southeast Asia . And then there'll be some equipment write off as well .
Speaker #4: There may be more associated with that in 2026 . And we'll give you more color around that when we guide for next year .
Speaker #1: Your next question comes from Moses Sutton from BNP Paribas .
Speaker #7: Thanks . In the past , Alex , you delineated , I think , 85% of either gigawatts or customers were in like a true take or pay structure contractually and 15% .
Speaker #7: Maybe it was 16% were supported by the non-refundable deposits or termination fees . Was BP in the latter bucket ? Hence , you know , the 20% that you're going after and mitigating for that , given BP is over 10% of the backlog , or was at least I would assume that they weren't in the taker pay bucket .
Mark Widmar: Given BP is over 10% of the backlog, or was at least, I would assume that they weren't in the take-or-pay bucket. I just want to confirm, and if you can comment on which bucket they are. Can you update how firm the rest of the contracts are? I think it would be a good time to give a mark-to-market on that. Thanks again. Yeah. When you say take-or-pay, I think maybe what you're referring to is termination for convenience, potentially. Correct me if I'm wrong, but if you're referring to that piece, then the BP contracts were not contracts that had an ability to terminate for convenience. They had no ability to exit those contracts. If they had wanted to cancel, they could have certainly worked with us. We would have had a discussion. It's potentially a solution we could have come to.
Speaker #7: But I just want to confirm , and if you can comment on which bucket they are and can you update how firm the rest of the contracts are ?
Speaker #7: I think it would be a good time to give a mark to market on that . Thanks again .
Speaker #4: Yeah , so when you say take or pay , I think maybe what you're referring to is termination for convenience , potentially . And so correct me if I'm wrong , but if you're referring to that piece , then the BP contracts were not contracts that had an ability to terminate for convenience .
Speaker #4: So they had no ability to exit those contracts . Now , if they had wanted to cancel , they could have certainly worked with us .
Speaker #4: We would have had a discussion as potentially a solution . We could have come to . But as Mark said , unfortunately , despite working with them for a long period of time , the they chose to default on these contracts .
Mark Widmar: As Mark said, unfortunately, despite working with them for a long period of time, they chose to default on these contracts. We did have some cash deposits from them. That's the piece that we recognize as revenue associated with this termination. We also had some LCs. Generally, that was going against some of the accounts receivable that we had outstanding, so we have pulled those LCs as well. The residual is generally parent guarantees, and that's the piece that we will be litigating to recover. The next question comes from John Wyndham, UBS. Hey, thanks. Just a quick point of clarification, and then I'll get on to my real question. Was the cancellation related to BP? Was that all from international factories? No, it was a mix of products, both international and domestic. The supply, just to clear on this too, the current year supply was essentially all international.
Speaker #4: We did have some cash deposits from them . That's the piece that we recognize as revenue associated . Termination . We also had some LCS generally that was going against some of the accounts receivable that you had outstanding .
Speaker #4: So we pulled those LCS as well . And then the residual is generally parent guarantees . And that's the piece that we will be litigating to recover .
Speaker #1: The next question comes from John Wyndham UBS .
Speaker #8: Hey thanks . Just a quick point of clarification . And then I'll get on to my real question . Did was the cancellation related to BP ?
Speaker #8: Was that all from international factories ?
Speaker #4: No , it was a mix of products , both international and domestic .
Speaker #8: The okay .
Speaker #3: Did it just clear on this one to the current year ? Supply was essentially all international . So it was a mix , but the again , the contract goes out multiple years with delivery anticipated to go out through 29 .
Mark Widmar: It was a mix. The contract goes out multiple years with delivery anticipated to go out through 2029. Think of it as the front of that is mostly international, and then as you get more longer dated, it then transitions into domestic. Thinking about it, so then that is a half-half. How should we think about it? Yeah. I mean, it's more than half of it being domestic, but there's a very significant chunk of it being international. Up next, we'll hear from Julien Dumoulin-Smith from Jefferies. Hey, good afternoon, team. Thank you guys very much. Appreciate it. Hey, just following up a little bit on the earlier comments here about the CapEx, you suggested that maybe one or more lines.
Speaker #3: So think of it as a front of that is mostly international . And then as you get more longer dated it , then transitions into domestic .
Speaker #8: And then so just thinking about it to the net net , is it half half ? How should we think about it .
Speaker #3: Yeah I mean it's more than half of it being domestic , but it's a very significant chunk of it being international .
Speaker #1: Up next, we'll hear from Julien Dumoulin-Smith from Jefferies.
Speaker #9: Hey , good afternoon team . Thank you guys very much . Appreciate it . Hey , just a follow up a little bit on the earlier comments here about the CapEx .
Speaker #9: You suggested that maybe one or more lines can you elaborate under what conditions you would look to seek to open multiple new lines on the finishing front and how you would think about that in terms of the sourcing front as well .
Mark Widmar: Can you elaborate under what conditions you would look to seek to open multiple new lines on the finishing front and how you would think about that in terms of the sourcing front as well, internationally? Yeah. It's also the distinction of how do we define it. Right now, there will be two lines that we will be bringing into the U.S. for finishing. There'll be two finishing lines, okay? That is 3.7 gigawatts of capacity. We could bring more lines in, right? It doesn't have to be another 3.7. It could be effectively half of that to be another line. Or we could potentially bring in two lines if need be. It's something that we're continuing to evaluate. There's enough front-end capacity to enable more finishing here in the U.S., obviously. Number of variables, number of items that we've already referenced will inform our decisions around that.
Speaker #9: Internationally ?
Speaker #3: Yeah , it's also a distinction of of how do we find it . So right now the there will be two lines in that .
Speaker #3: We'll be bringing into the US for finishing . So there'll be two finishing lines . Okay . That is 3.7GW of capacity . We could bring more lines in right .
Speaker #3: It doesn't have to be another 3.7 . It could be effectively half of that to be another line . Or we could potentially bring in two two lines if need be .
Speaker #3: It's something that we're continuing to , to evaluate . There's enough front end capacity to enable more finishing here in the US . Obviously number of variables , number of items that we've already referenced will inform our decisions around that .
Speaker #3: You know, we're very excited about getting the first two lines, which add up to the 3.7 gigawatt capacity, up and running here as we exit next year.
Mark Widmar: We're very excited about getting the first two lines, which adds up to the 3.7 capacity, up and running here as we exit next year. As we continue to evaluate market opportunities and demand, we'll form our decisions. Do we make additional investments, and how do we bring those lines in in terms of timing? Do we do just only Series 6, or do we also look potentially to bring in Series 7 as well? Next up is Ben Callow from Baird. Hey, thank you. Just following up, I think, on Brian's question earlier on pricing, the 4.1 gigawatts of opportunities confirmed but not booked. Can you talk anything about pricing there? With your cash balance, how do you think about that? Maybe Alex, just the priorities of cash going forward over the next two years. I know there's a lot of uncertainty, but thank you.
Speaker #3: And as we continue to evaluate market opportunities and demand , then inform our decisions , do we make additional investments and how do we bring those lines in in terms of timing and and do we do just only six or do we also look potentially to bring in series seven as well ?
Speaker #1: Next up is Ben Kallo from Baird .
Speaker #10: Hey, thank you. Just following up, I think, on Brian's question earlier about pricing the 4.1 GW of opportunities confirmed but not booked.
Speaker #10: Can you talk anything about pricing there and then with your cash balance , how do you think about that ? Maybe Alex , just , you know , the priorities of cash going forward over the next two years ?
Speaker #10: I know there's a lot of uncertainty , but thank you .
Speaker #3: Yeah . On that 4.1 Ben , the the that's that's more I would historical I would say pricing some of that's India . That's contract .
Mark Widmar: Yeah, on that 4.1, Ben, that's more historical, I would say, pricing. Some of that's India. That's contracted that we don't count as a booking until we've received all the security. Some of that is kind of variable pricing dynamics that we have with customers. Effectively, they can flex up or down from their MSA, their module sale agreement. I wouldn't say that that's really a reflection of kind of current market pricing. All I would say is that we're happy with the market pricing that we're seeing. We believe there could be additional tailwinds that could further support a very favorable pricing environment for us and continue to engage the market and react accordingly. Yeah, as it relates to cash, clearly cash positions increased quarter over quarter. We saw some activity during that safe harbor window where we saw some volume that was 100% prepaid.
Speaker #3: It's you know that we don't count as a booking until we received all the security and some of that is kind of variable pricing dynamics that we have with customers .
Speaker #3: Effectively they can flex up or down from their MSA , their module sale agreement . So I wouldn't say that that's really a reflection of kind of current market pricing .
Speaker #3: All I would say is that , you know , we're happy with the market pricing that we're seeing . We we we believe there could be additional tailwinds that could further support a very favorable pricing environment for us .
Speaker #3: And , you know , we'll continue to engage the market and react accordingly .
Speaker #4: As it relates to cash . Clearly , cash positions increased quarter over quarter . We saw some activity during that safe harbor window where we saw some volume that was 100% prepaid .
Speaker #4: Some of that was taken at the same time within the quarter , some not . So you saw the deferred revenue amount increase .
Mark Widmar: Some of that was taken at the same time within the quarter, some not. You saw the deferred revenue amount increase. We also had some improvement in the working capital position, which we talked about expecting to improve as we got further into the year. An increase in cash, no doubt. We're announcing some more CapEx for next year. As Mark said, we'll continue to look at additional finishing lines if there's an opportunity there. The overall framework we use to evaluate cash is one we've talked about before. It hasn't fundamentally changed around running the business day-to-day, looking at additional capacity, looking at M&A, especially as it relates to R&D. If we get to a point where we can't accretively deploy that capital, we'll look at capital return. We'll give a further update as we go into next year's guidance, how we think about capital structure longer term. Hi.
Speaker #4: We also had some improvement in the working capital position , which we talked about expecting to improve as we got further into the year .
Speaker #4: So , you know , an increase in cash , no doubt we're announcing some more CapEx for next year . As Mark said , we'll continue to look at additional finishing lines and see if there's an opportunity there .
Speaker #4: But the overall framework we use to evaluate cash is one we've talked about before and hasn't fundamentally changed. It revolves around running the business day to day, looking at additional capacity, and considering M&A, especially as it relates to R&D.
Speaker #4: And then if we get to a point where we can't acutely deploy that capital, we'd look at capital return. We'll give a further update as we go into next year's guidance on how we think about capital structure longer term.
Speaker #1: David Arcaro from Morgan Stanley has the next question .
Speaker #11: Hi . Thanks so much . I was just wondering if you could give a little color on your confidence level in the 54.5GW backlog .
Mark Widmar: Thanks so much. I was just wondering if you could give a little color on your confidence level in the 54.5 gigawatt backlog now. Are there other customers that could be at risk that you're aware of, that you're risk-weighting in there, or any other market dynamics that make you think, or customer-specific dynamics that make you think this debooking pace could continue or not? We've been saying now for, I don't know, it could be going on close to two years now, something along those lines. There have been indications by a number of large oil and gas multinationals, international companies that are continuing to evaluate their commitment to renewables, right? Obviously, BP falls in that bucket. There have been others as well. Just think about NatGrid.
Speaker #11: Now , you know , are there other customers that think could be at risk that you're aware of , that your risk weighting in there or any other market dynamics that make you think or customer specific dynamics that make you think this deep bookings pace could continue or not ?
Speaker #3: Yeah . So , you know , we've been saying now for I don't know , it could be going on close to two years now .
Speaker #3: Something along those lines . You know there's been you know , indications by a number of large oil and gas multinationals . International companies that are continuing to evaluate their commitment to renewables , right .
Speaker #3: And , you know , obviously , you know , BP falls in that bucket . You know , there's there's been others , you know , as well , you know , just think about that grid , that grid , obviously a large European company made a decision to sell down its development business .
Mark Widmar: NatGrid, obviously, a large European company that made a decision to sell down its development business, going back to now Geronimo, sold it over to Brookfield. You could look at Enel as another example of a commitment to the U.S. market that had been reevaluated. I think they've changed their perspective in that regard. There are a couple of others which I won't name, but EDF is, I guess, maybe another one I would throw into that bucket a little bit. I mean, it's not oil and gas, but obviously a large European company that's reevaluating its commitment to the U.S. market. That risk profile is something we foreshadowed. It's something that has played itself out.
Speaker #3: You know , going back to now , Geronimo sold it over to Brookfield . You could look at . It now as another example of a commitment to the US market that had been reevaluated .
Speaker #3: Now , I think they've changed their perspective in that regard . And there's a couple of others which I won't name , but it's , you know , EDF is , I guess , maybe another one I would throw into that bucket a little bit .
Speaker #3: I mean , it's not oil and gas , but obviously large European company that's reevaluating its commitment to the US market . So there's you know , obviously that risk profile is something we foreshadowed .
Speaker #3: It's something that has has played itself out . If you go back and if you look at what's in our contracted backlog , you can go back and look at announced deals that we've done , who some of our larger partners are .
Mark Widmar: If you go back and if you look at what's in our contracted backlog, you can go back and look at announced deals that we've done, who some of our larger partners are, you're going to find that that profile is dramatically different with what sits in our contracted backlog. Now, having said that, we all know that a number of developers and IPPs here in the U.S., I mean, they're working through a number of challenges, right, and permitting issues and project-related issues and what have you, that things could evolve in such a way that at a project level, we could potentially see some movement. We said in the call today, we had a couple of customers that have project-specific terminations. One of them who terminated last year, project-specific, and then now they're back on our order book for more than half a gigawatt of volume.
Speaker #3: You're going to find that that profile is dramatically different with what sits in our contracted backlog . Now , having said that , I mean , we all know that a number of the developers and IPPs here in the US , I mean , they're working through a number of of challenges , right ?
Speaker #3: And permitting issues and project related issues and , and what have you that things could evolve in such a way that at a project level , you know , we could potentially see some movement .
Speaker #3: You know , we said in the call today , we had a couple of customers that have have project specific terminations . One of them who terminated last year , project specific , and then now they're back on our order book for , you know , more than half a gigawatt of volume .
Speaker #3: And and then we had another one who terminated this year that were actively negotiating a meaningful contract with . So I don't want to give a , an indication of there may not be further terminations , but I also want to somewhat reflect that I don't think something as large and structural as what we saw with lightsource is a high risk .
Mark Widmar: Then we had another one who terminated this year that we're actively negotiating a meaningful contract with. I don't want to give an indication that there may not be further terminations, but I also want to somewhat reflect that I don't think something as large and structural as what we saw with Light Source is a high risk. At any point in time, things can evolve. Things could change. A number of our partners have sponsor capital behind them. If Brookfield decides to go a different direction, if KKR decides to go a different direction, if TPG decides to go, Macquarie, I mean, you name whoever sponsor you want to say is behind a portfolio business, if they decide to pivot and go a different direction, there's always an inherent risk in that regard.
Speaker #3: But at any point in time , things can evolve , things can change . You know , a number of our partners have sponsor capital behind it .
Speaker #3: If Brookfield decides to go a different direction , if if KKR decides to go a different direction , if TPG decides to go , Macquarie , I mean , you name whoever sponsor you want to say is behind a portfolio business .
Speaker #3: If they decide to pivot and go a different direction , I mean , there's always an inherent risk in that regard . But what I would say is that while there's still challenges and issues that are being dealt with , there's an opportunity here .
Mark Widmar: What I would say is that while there's still challenges and issues that are being dealt with, there's an opportunity here. The policy environment, I think, is still very positive with what came out of the One Big Beautiful Bill. There's a need for more electrons on the grid. The load profile is only going to continue to grow, and project economics and PPAs are still strong, right? I think those fundamentals still would say it's enduring and that we would have a higher level of confidence in the contracted offtake agreements that we have on our books right now. I also want to be balanced in understanding that there could be some amount of risk. I do think that on balance, there's a lot of market opportunity for our partners and obviously for us to continue to supply into the market.
Speaker #3: The policy environment , I think is very still , very positive with what came out of the one big beautiful bill . There's a need for more electrons on the grid .
Speaker #3: The load profile is only going to continue to grow in project economics , and PPAs are still strong , right ? So , I think those fundamentals I think still would say it's enduring and that we would have a higher level of confidence in contracted offtake agreements that we have on our books right now .
Speaker #3: But I also want to be balanced and understanding that there could be some amount of risk . But I do think that on balance , there's a lot of market opportunity for our partners .
Speaker #3: And obviously for us to continue to supply into the market .
Speaker #1: Next up is a follow up from John Wyndham , UBS .
Mark Widmar: Next up is a follow-up from John Wyndham, UBS. Perfect. Thank you. I want to ask about a topic we haven't covered much in this call, how the ramp and product quality is in Louisiana and Alabama. Can you just touch on how that's running next to expectations? Thank you. The ramp for DRT, I would say that it has gone well. It's an aggressive ramp that we've had. Sorry, Alabama, referred to it by acronyms. It actually has gone well, but it's also had its own set of challenges that we've been working through in terms of the ramp process and getting to full entitlement and throughput. Where I see the factory at right now for Alabama, I see it at a very good level. It's hitting its throughput requirements.
Speaker #8: Perfect . Thank you . I want to ask about a topic we haven't covered much on this call is how the ramp and product quality is in Louisiana and Alabama .
Speaker #8: You can just touch on how that's running next to expectations . Thank you .
Speaker #3: Let the the ramp you know for for D.R. I would say that it has gone well . It's an aggressive ramp that we've had .
Speaker #3: So sorry Alabama . We refer to it by acronyms . It's actually has gone well but it's also had its own set of challenges that we've been we've been working through in terms of the ramp process and getting to full entitlement and throughput and where I see the factory at right now for for Alabama , I see it at a very good level .
Speaker #3: It's hitting its throughput requirements . You know , it struggled as we indicated in our prepared remarks , with a disruption on our glass supply chain .
Mark Widmar: It struggled, as we indicated in our prepared remarks, with a disruption on our glass supply chain, and obviously, that had an adverse impact on the factory. Louisiana is going extremely well. We're in the midst of going through our product qualification, and that'll be complete here in Q4. We will start shipping product. As of right now, the ramp is ahead of schedule, which is all very positive for us in that regard. As you said, I think you may have mentioned product quality and the like. We are continuing to do, as always, being very diligent as we manufacture our product and to ensure that we have a high level of indication of field performance based off of not only accelerated life testing, but obviously field deployment as well.
Speaker #3: And obviously that had an adverse impact on the factory. Louisiana is going extremely well. You know, we're in the midst of going through our product qualification.
Speaker #3: And that'll be complete here in Q4 . And we'll start shipping product . And as of right now , the ramp is is ahead of schedule , which which is all very positive for us in that regard .
Speaker #3: You know , as you said , I think you may have mentioned product quality and the like . You know , we are continuing to do , as always , being very diligent as we manufacture our product and to ensure that we have a high level of indication of of field performance based off of not only accelerated life testing , but obviously field deployment as well .
Speaker #3: And it's something that , you know , our level of rigor and intensity around that is only going to continue to be more heightened as the result of the initial launch of of series seven .
Mark Widmar: Our level of rigor and intensity around that is only going to continue to be more heightened as the result of the initial launch of Series 7. That was the launch of a new product. In this case, both Alabama and Louisiana are just replications of the factories that we launched our Series 7 technology from. The key learnings that we captured from that launch and some of the changes that we've already communicated that we needed to make to our manufacturing process, both were implemented into Alabama and Louisiana before we started production. We know that with the reputation, once a brand issue, we've got to stay on top of it. We're going to continue to do everything we can to meet our customers' expectations in that regard. The next question comes from Vikram Baghri from Citi. Good evening, everyone. Just a quick question.
Speaker #3: Again , that was the launch of a new product in this case , you know , both Alabama and Louisiana are just replications of the of the factories that we launched our series seven technology from .
Speaker #3: And the key learnings that we captured from that launch and some of the changes that we've already communicated that we need , that we needed to make to our manufacturing process , both were implemented into Alabama and Louisiana before we started production .
Speaker #3: But it's something we know that with the reputation , it's a brand issue . We've got to stay on top of it and we're going to continue to do everything we can to meet our customers expectations .
Speaker #3: In that regard .
Speaker #1: The next question comes from Vikram Bagheri , from Citi .
Speaker #12: Good evening everyone . Just a quick question mark . Can you remind us if there is a precedent of successful litigation against a customer who was in a similar breach of contract , or this this case with BP will set a precedent that for , for for future .
Mark Widmar: Mark, can you remind us if there is a precedent of successful litigation against a customer who was in a similar breach of contract or this case. BP.
Mark Widmar: will set a precedent for future. Thank you.
Speaker #12: Thank you .
Speaker #3: Yeah , I don't I don't have my GC in the room right now because I could ask them that question . But what I can tell you is that , you know , we are using outside counsel .
Byron Jeffers: I don't have my GC in the room right now because I could ask him that question, but what I can tell you is that we are using outside counsel. We believe very strong contracts that enforce the rights and obligations of both parties, and we believe that if either of those parties are in default, then there's consequences associated with that. I would also use whether there's legal precedents, and I'm sure there are. I can't cite them to you right now. What I would go back to is if you look at the, I believe we've had a number across the last couple of years, somewhere in the range of north of $200 million, $250 million or so of various terminations. I think we've also disclosed that about $70 million is sitting outstanding.
Speaker #3: You know , we have . We believe very strong contracts that enforce the rights and obligations of both parties . And we believe that if either of those parties are in default and there's there's consequences associated with that , I would also use whether there's legal precedents and I'm sure there are .
Speaker #3: Well , I can't cite them to you right now . What I would go back to is if you look at the I believe we've had a number across the last couple of years , somewhere in the range of north of 200 million , 250 million or so of various terminations .
Speaker #3: I think we've also disclosed that about 70 million is sitting outstanding . Okay . That means that , you know , the vast majority of that those terminations were paid because the counterparties understood the obligations in terms of conditions of the agreements , which are essentially identical across our contracts .
Byron Jeffers: That means that the vast majority of those terminations were paid because the counterparties understood the obligations in terms of conditions of the agreements, which are essentially identical across our contracts. They have honored that obligation and respected that obligation, and they've remitted payment. They would not have done that if they thought that there was a reason why underneath the contract that they would not have an obligation for First Solar for their default. I can use two data points. One is just look at experience. The other is the input that we're getting from outside counsel around our contracts. We feel very good about the contracts, the way they're structured, and the enforceability of the contracts. My understanding is that, again, this would be the filing of this litigation is in the state of New York.
Speaker #3: And they have honored that obligation and respected that obligation . And they've remitted payment . They would not have done that unless they thought if they thought that there was a reason why underneath the contract , that they would not have an obligation to First Solar for their for their default .
Speaker #3: So , you know , I can use two , two data points . One is just look at experience and the other is , you know , the input that we're getting from outside counsel around our contracts .
Speaker #3: And we feel very good about the contracts , the way they're structured . And the enforceability of the contracts . And my understanding is that , again , the this would be the filing of the litigations in the state of New York .
Speaker #3: I think my understanding is the state of New York has taken a very strong position around this type of condition . Underneath the contract for for default and the associated with termination , payment .
Byron Jeffers: My understanding is the state of New York has taken a very strong position around this type of condition underneath the contract for default and associated with termination payment. Generally, the courts in New York have sided with the plaintiff in the situation of similar circumstances. That's about as much information as I have. I do believe, though, we're in a strong position.
Speaker #3: And generally the the courts in New York have cited with the , with the , the plaintiff in this situation , if similar circumstances .
Speaker #3: So that's about as much information as I have . I do believe though , we're in a strong position .
Speaker #1: Our final question today will come from Joseph OSHA , Guggenheim Partners .
Alex Bradley: Our final question today will come from Joseph Osha, Guggenheim Partners.
Speaker #13: Hello , and thank you . As we think about the timing of the finishing fab coming up in the US and what the commercial environment looks like .
Mark Widmar: Thank you. As we think about the timing of the finishing fab coming up in the U.S. and what the commercial environment looks like, I'm wondering what conclusion we can draw about underabsorption of Malaysia and Vietnam next year. Perhaps to put a sharper point on that, is there any market at all for products being shipped directly out of either of those two fabs? Thank you.
Speaker #13: I'm wondering what conclusion we can draw about under absorption of Malaysia and Vietnam next year . And perhaps to put a sharper point on that is , is is there any market at all for products being shipped directly out of either of those two two fabs ?
Speaker #13: Thank you .
Speaker #3: Yeah . So one thing to remember is that we're using the front end capacity or in our of our international facilities in order to to fund that into to the US .
Byron Jeffers: Yeah. One thing to remember is that we're using the front-end capacity of our international facilities in order to fund that into the U.S., right? When you think about the cost structure and absorption, especially around the capital intensity of the equipment, it largely sits on the front end of the processing. You're going to see reasonably good absorption for that front-end manufacturing that then is finished in the U.S. We also identified that we have taken some headcount reductions, so we are minimizing the back-end processing and labor associated with that. Those tools that are being used in the back end are being brought into the U.S., so the depreciation there will be absorbed against the finishing processes that are being done here in the U.S.
Speaker #3: Right . And when you think about the cost structure and the absorption , especially around the capital intensity of the equipment , it largely sits on the front end of the processing .
Speaker #3: So you're going to see reasonably good absorption for that front end manufacturing that then finished in the US . We also identified that , you know , we have taken some headcount reductions .
Speaker #3: So we are minimizing the back end processing of in labor associated with that . And then those tools that are being used in the back end are being brought into the US .
Speaker #3: So therefore there depreciation there will be absorbed against the finishing processes that are being done here in the US . So just to put that in perspective , yes , as it relates to the balance of that production , you know , one of the things we're continuing to work through and we are in negotiations with , with a couple of of counterparties to almost do a bilateral for that offtake of that volume and to structure a deal around that .
Byron Jeffers: Just to put that in perspective, yes, as it relates to the balance of that production, one of the things we're continuing to work through, and we are in negotiations with a couple of counterparties to almost do a bilateral for that offtake of that volume and to structure a deal around that. If we can get to terms, we'd like to find potentially a couple of large customers with large offtake requirements that we can then sort of just sole-source that into those opportunities. Clearly, we believe there is an opportunity subject to the tariff environment, subject to what happens with Section 232, subject to FIAC guidance, and everything else. There are some more triggering events that would have to happen. I think we said in our prepared remarks we have something like 6 gigawatts of a contracted backlog or something like that for Series 6 international still.
Speaker #3: If we can get to terms , we'd like to to , you know , find potentially a couple large customers with large offtake requirements that we can then sort of just sole source that into those opportunities .
Speaker #3: But clearly we believe there is an opportunity subject to , you know , the tariff environment , subject to what happens with 232 subject to fiat guidance and everything else .
Speaker #3: So there's some more triggering events that would have to happen . I think we said in our prepared remarks , we have something like six gigawatts of a contracted backlog or something like that for for series six international .
Speaker #3: Still . So , you know , we've got some runway in terms of volume and absorption for those production assets . And then we'll continue to evaluate them as we learn more about some of these policies , policy decisions that will be made .
Byron Jeffers: We've got some runway in terms of volume and absorption for those production assets, and we'll continue to evaluate them as we learn more about some of these policy decisions that will be made.
Speaker #1: Everyone that does conclude our question and answer session , this also concludes our conference for today . We would like to thank you all for your participation today .
Alex Bradley: Everyone, that does conclude our question-and-answer session. This also concludes our conference for today. We would like to thank you all for your participation today. You may now disconnect.