Canadian Solar Inc. · NASDAQ:CSIQ
Canadian Solar — Investor Presentation (December 2019)
53 slides from Canadian Solar's investor presentation, Dec 4, 2019
Slide 1: Safe Harbor Statement
Safe Harbor Statement This presentation has been prepared by the Company solely to facilitate the understanding of the Company’s business model and growth strategy. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express
Slide 2: Table of contents
Table of contents 1 2 3 4 5 Company Overview The Market Opportunity Module and Systems Energy Business Financial Highlights Solutions 3
Slide 3: Company Description and Global Footprint
Company Description Leading solar module manufacturer and Global Footprint utility-scale solar developer with one the world’s largest solar project pipelines of Founded in Ontario, 2001 Listed on NASDAQ (CSIQ) in 2006 Over 13,000 employees globally Presence in >20 countries / territories 1 1 5 6 2 1
Slide 4: Investment Thesis
Investment Thesis Levered to long-term growth in demand for solar energy Differentiated, resilient business model leveraging strong sales channel, low cost manufacturing, own project development and EPC capabilities Leading module manufacturing platform, delivering high quality products to over 160
Slide 5: Table of Contents
Table of Contents 1 2 3 4 5 Company Overview The Market Opportunity Module and Systems Solutions Energy Business Financial Highlights 6
Slide 6: Solar energy has already become mainstream
Solar energy has already become mainstream… Solar energy adoption is accelerating, driven by policy support and competitive economics Solar energy currently delivers the lowest levelized cost of electricity in most geographies From 2016 solar capacity additions outpaced other sources, and in 2019 ex
Slide 7: Solar plus storage is competitive with gas generation
Solar plus 4 hours of storage is competitive with gas generation and on a path become cheaper than gas in the years ahead Recently issued PPAs in the US are $4-5 c/kWh for PV + 4h storage (to be connected in 2021-2024). Majority of new solar PPAs in California and a big portion in the US require sto
Slide 8: Key energy markets remain underpenetrated
Key energy markets remain underpenetrated providing long-term visibility into the demand environment for our business Solar energy will grow from 2% of global electricity generation today to around 10% by 2030 Independent analysts expect near term growth in demand for modules to be healthy % GW % of
Slide 9: Industry consolidation is shifting the basis of competition
Industry consolidation is shifting the basis of competition attributes Growing customer loyalty driven by: Brand and bankability(1) to non-price Reliability and predictability Long-term partnership of delivery and other services 141.1 2010 2013 2014 2015 2016 2017 2018 2019E 2020E Top 10 Module Manu
Slide 10: Table of Contents
Table of Contents 1 2 3 4 5 Company Overview The Market Opportunity Module and Systems Solutions Energy Business Financial Highlights 11
Slide 11: Leading module and total solutions provider
Leading module and total solutions provider with a track record of delivering high-quality products and services in over 160 countries World-leading bankable brand with global footprint Leader in solar cell and module technologies, with homegrown innovation driving product differentiation Technology
Slide 12: World-leading bankable brand
World-leading bankable brand No. 1 Bankable Module Supplier, Bloomberg New Energy Finance 2019 Bankability Survey – top bankable module supplier with 100% bankability for 3 consecutive years No. 1 Module Supplier, for Quality & Performance-Price Ratio, IHS Markit, 2016 Canadian Solar Trina Solar Jin
Slide 13: Leader in solar cell and module technologies
Leader in solar cell and module technologies, innovation driving product differentiation with homegrown Among the first solar PV manufacturers to mass produce: Black silicon and diamond wire saw (DWS) poly wafers 5 busbar (5BB) and multi-busbar cells (MBB) Half-cut cells Large 166 mm wafers HiKu 166
Slide 14: Technology-agnostic cell and module manufacturing capacity
Technology-agnostic cell and module manufacturing capacity Our cell capacity is convertible to produce mono-or multi-with low or no additional capex requirements During 2018/19, gross margin of multi-product has exceeded that of mono-product by 400 basis points Inverted pyramid manufacturing capacit
Slide 15: Best-in-class sales operation management
Best-in-class sales operation management Industry leading operations management and efficiency: Fast payment cycle Low inventory Negative cash conversion cycle Close to zero bad debt in 2017-2019 YTD Highest module ASP among all China based manufacturers in 2019 YTD. Source: Company filings. (1) CSI
Slide 16: Optimized sales channel strategy
Optimized sales channel strategy, delivering higher ASPs and providing a source of sustainable competitive advantage Captive market opportunity in 2019 totals ~4.0GW Container size direct sales to premium rooftop installers, stable predictable quarterly demand Our own energy business projects Turnke
Slide 17: Premium rooftop markets is a captive market
Premium rooftop markets is a captive market for Canadian Solar Rooftop Markets Container-size orders at a premium price Stable and predictable quarterly demand 18 Direct Sales Channel to Premium Shipment & Market Share ~2.2 GW in 2019 ~20% market share in target residential & small commercial market
Slide 18: Japan is a premium market with 2-3x profitability
Japan is a premium market with 2-3x profitability Strong Brand Name and Presence in Japan: No.2 residential solution supplier behind Panasonic but ahead of Toshiba, Sharp & Kyocera– among the few foreign household brands in Japan. No.1 module supplier with ~10% market share in one of the most highly
Slide 19: Downstream total solutions is a captive market
Downstream total solutions is a captive market 3rd Project Development Markets and Party EPC Why 3rd Party EPC? Shared OPEX with both MSS & EG business Additional Profits: • Embedded margins from module, components & optimized solution Margins increased by 100%~300% on top of module sales Canada • C
Slide 20: Leverage storage business to grow systems solutions
Opportunity to energy storage leverage business captive (SSES) markets to grow our systems solutions and Technology Migration System Solutions and Energy Storage (SSES) Tech DNA Enabling Technologies: Power Electronics Energy Storage IoT, Big Data, AI, Cloud Computing Economics and Safety Driven Int
Slide 21: System solutions and energy storage as important part of business
We expect system solutions and energy storageto become an important part of our business in the years ahead 100% Addressable Captive Markets Energy Group Turnkey Solutions MSS (Module & System Solutions) • • • • • Inverters Trackers Storage EPC O&M • • • Inverters Trackers Storage • • System Kits Mo
Slide 22: Table of Contents
Table of Contents 1 2 3 4 5 Company Overview The Market Opportunity Module and Systems Solutions Energy Business Financial Highlights 23
Slide 23: Leading utility-scale solar developer with global presence
Leading utility-scale solar developer with global presence Track record developing, building and operating solar power plants across major energy markets in 6 continents several Proven capabilities at all stages of the solar development value chain Relationships with leading players in the global so
Slide 24: Leading utility-scale solar developer with global presence
Leading utility-scale solar developer with global presence Calgary, Canada Guelph, Canada Warsaw, Poland London, UK Walnut Creek, CA Milan, Italy New York, NY Madrid, Spain Tokio, Japan Austin, Texas Seoul, Korea San Francisco, CA Hong Kong, China Taipei, Taiwan Mexico City, Mexico Singapore Sao Pau
Slide 25: Track record developing, building and operating solar power plants
Track record developing, building and operating across major energy markets in 6 continents solar power plants Regional mix of all projects built and connected to date Cumulative Solar Power Plants Built and Connected(1) (MWp) 5,565 5.6 GWp 2011 2012 2013 2014 2015 2016 2017 2018 2019 N AMERICA LATA
Slide 26: Proven capabilities at all stages of the solar development value chain
Proven capabilities at all stages of the solar development value chain Project development Project Execution Monetization controlled by Canadian Solar 3.Construction 27 Project Finance Commissioning and Acceptance EPC and Project Management 1.Engineering 2.Procurement 4.Project Management Third Part
Slide 27: Established relationships with key financial players
Established relationships with key financial players in the solar ecosystem energy KeyBank <>-w nI!.:.:.!!u Spi:: lry lnsu ranc:e TATA CAPITAL Bank Bcrk hi rc:: Hathaway KDB Bank IIIFC FC CLEANEWE GY RNA.NL £ C:OiiiP ._A DC * Export Development C.Jnada Export-!'tion et di>veloppemen1Cttn d BANCOIVEX
Slide 28: Success launching Japan's largest solar infrastructure fund
Success launching Japan’s largest solar infrastructure fund Consistent growth of the largest listed infrastructure fund in Japan sponsored by Canadian Solar, assets under management on mark-to-market basis has exceeded ¥50Bn. <Portfolio as of the end of 3rd FP> <Assets acquired during 4th FP> <Portf
Slide 29: Solar power plant assets dropped down into Japanese fund
Solar power plant assets dropped down by Canadian Solar into our Japanese Infrastructure fund as of June 30, 2019 total 108.9 MW… S-01 CS Shibushi-shi S-02 CS Isa-shi Power Plant 0.9MW S-03 CS Kasama-shi Power Plant S-04 CS Isa-shi Dai-ni S-05 CS Yusui-cho Power Plant Power Plant 1.2MW 2.1MW Power P
Slide 30: Expected growth of the fund through Canadian Solar dropdowns
… and are expected to grow to Canadian Solar dropdowns Achieve \100Bn in asset size over sponsor pipeline 339.5MW in the next few years driven by the medium term drawing on acquisitions from Sponsor portfolio snapshot FIT purchase price range: Mostly \32~\40/kWh By size (per asset) 2 7 By FIT pric
Slide 31: Globally diversified project pipeline
Globally diversified project energy markets pipeline with strong competitive position in key MW 1,910 Early-stage Early-Mid-stage pipeline 9.0 GWp Late-stage pipeline/backlog 4.0 GWp Plants in construction 415 MWp Plants in operation 871 MWp MW 1,430 Late-stage MW 100 In Operation Late-stage pipel
Slide 32: Competitive position in key energy markets – N. America
Strong competitive position in key energy markets – N. America (MWp) 2019-2024 Pipeline COD Targets 3000 4,389 MWp Early-Mid-stage 2500 2000 1,499 MWp Late-stage 1500 1000 0 MWP In Construction 500 0 2019 2020 2021 2022 2023-2024 216 MWP In Operation Late-Stage and Execution Early-Mid-Stage Developm
Slide 33: Competitive position in key energy markets – LATAM
Strong competitive position in key energy markets - LATAM (MWp) 2019 - 2025 Pipeline COD Target 2,057 MWp Early-Stage 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1,430 MWp Late-Stage 244 MWP In Construction 2019 2020 2021 2022 - 2025 100 MWP In Operation Late-Stage and Execution Early-Stag
Slide 34: Competitive position in key energy markets – EMEA
Strong competitive position in key energy markets - EMEA 2019-2024 Pipeline COD Targets (MWp) 800 1,910 MWp Early-Mid-Stage 223 MWP Late-Stage 18 MWp In Construction 3 MWp In Operation 700 600 500 400 300 200 100 0 2019 Aug-Dec 2020 2021 2022-2024 Late Stage and Execution Early-Mid-Stage Development
Slide 35: Competitive position in key energy markets – APAC
Strong competitive position in key energy markets - APAC (1) (MWp) 53 MWp Early-Mid-Stage 2019-2022 Pipeline COD Targets 300 276 MW 250 p Late-Stage 200 53 MWP In Construction 150 100 143 MWP In Operation 50 0 2019 Aug-Dec 2020 2021 2022 Late-Stage and Execution Early-Stage Development The above C
Slide 36: Competitive position in key energy markets – APAC (Australia)
Strong competitive position in key energy markets - APAC (Australia) (MWp) 2019 Aug-2022 Pipeline COD Targets 620 MW p 600 Early-Mid-Stage 522 MWp Late-Stage 400 0 MWP In Construction 200 59 MWP In Operation 0 2019 Aug-Dec 2020 2021 Early-Stage Development Late-Stage and Execution The above COD ta
Slide 37: Table of Contents
Table of Contents 1 2 3 4 5 Company Overview The Market Opportunity Module and Systems Solutions Energy Business Financial Highlights 39
Slide 38: Resilient business model, consistently profitable over past 7 years
Resilient business model combining manufacturing operations and downstream total solutions consistently profitable over past 7 years 2013-19E CAGR: Gross Margin 16.7% 19.6% 16.6% 14.6% 18.8% 20.7% 8,400-8,500 MW 28% 6,828 MW 6,615 MW 5,232 MW 4,706 MW 3,105 MW 3,745 1,894 MW 3,468 3,390 11% 2013 201
Slide 39: Consolidated Income Statement Summary
Consolidated Income Statement Summary 9M19 9M18 Energy Group, $504 mn Module and System Solutions, $1,777 mn Europe and Others 28% Asia 31% Americas 41% (1) EBITDA calculated as operating income after loss/gain on change in fair value of derivatives, FX gain/loss, investment income/loss, and income
Slide 40: Modules and System Solutions Summary Financials
Modules and System Solutions Summary Financials Key highlights Total module shipments grew by 11% qoq and 50% yoy, driven by strong demand from Brazil, the US, Europe and South East Asia. Canadian Solar continued to maintain a leading position in high ASP and captive markets, driving gross margin ex
Slide 41: Energy Business Summary Financials
Energy Business Summary Financials Key highlights Lower revenues in Q3 was mainly driven by the delayed closing of project sales in Japan, which are expected to be completed in Q4 2019 and Q1 2020. Q3 projects sold included the sale of the 266 MWp Rambler project in the US and the sale of 80% intere
Slide 42: Disciplined working capital management and capex
Disciplined working capital management, disciplined and balanced capex Working Capital Days Capital Expenditures (USD million)(4) Inventory turnover days calculated as average gross inventory (adding back provisions) divided by cost of revenues x365 Account receivables days calculated as average gro
Slide 43: Significantly deleveraged balance sheet
Canadian Solar has significantly deleveraged its balance sheet in the several quarters Total and net debt to EBITDA now at 4.0x and 2.8x respectively. The ratios would be approximately 1x lower excluding project level non-recourse debt. last Deleverage mainly driven by growth in EBITDA and reduction
Slide 44: Strong cash position
We have maintained a strong cash position the long-term success of our business while continuing to invest in Cash flow movement from FY18 year-end USD millions +353 +19 1,049 Cash end of 2018 Cash provided by operations Cash used in investing activities Cash provided by financing activities FX chan
Slide 45: Attractive valuation supported by resilient financial performance
Attractive valuation supported by resilient financial performance *EBITDA including impairments Market Capitalization $970 mn Non-Controlling Interests $38 mn Enterprise Value $2,368 mn EV/EBITDA TTM 4.9x/4.3x* Total Debt $1,968 mn Total Cash $608 mn 1. 2. 3. Source: Factset, company filings. Prices
Slide 46: Attractive valuation supported by resilient financial performance
Attractive valuation supported by resilient financial performance EV/EBITDA TTM EV (USD mn) 2,445 1,884 P/E TTM Market Capitalization (USD mn) The above relative valuation analysis is intended for illustration purposes only, investors are encouraged to do their own due diligence based on their own
Slide 47: Experienced and strategically prudent management team and board
Experienced and execution strategically prudent management team and board with track record of Founded Canadian Solar in 2001, firmly establishing the company as a global leader of the solar industry Director & VP at Photowatt International S.A. Research scientist at Ontario Hydro (Ontario Power Gen
Slide 48: Guidance as of November 12, 2019
Guidance as of November 12, 2019 $880 mn (1) Includes MSS and Energy businesses. 51 FY2018FY2019EYoY ∆% 6,615 MW8.4 GW to 8.5 GW+27.7% $3.74 bn$3.13 bn to $3.16 bn-15.9% NANANA Q3 2019Q4 2019E Module Shipments2,387 MW2.3 GW to 2.4 GW $850 mn to Revenue(1)$759.9 mn Gross Margin(1)26.2%19% to 21%
Slide 49: Consolidated Income Statement
Consolidated Income Statement 52 USD millions except per share data 2017 2018 9M18 9M19 9M yoy 3Q18 4Q18 1Q19 2Q19 3Q19 3Q qoq 3Q yoy Net Revenue 3,390 3,745 2,843 2,281 -20% 768 901 485 1,036 760 -27% -1% Cost of revenues -2,753 -2,969 -2,340 -1,792 -23% -568 -630 -377 -854 -561 -34% -1% Gross prof
Slide 50: Summary Balance Sheet
Summary Balance Sheet 53 USD millions3Q174Q17 1Q182Q183Q184Q18 1Q192Q19 3Q19 Cash and cash equivalents615562 567452520444 370438 526 Restricted cash - current529618 613536460481 516526 515 Accounts receivable457358 354370323498 389455 449 Inventories302346 414336322262 385338 413 Project assets - cu
Slide 51: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation To supplement financial disclosures presented in accordance with GAAP, the Company uses non-GAAP measures which are adjusted from the most comparable GAAP measures for certain items as described herein. The Company presents non-GAAP values for EBITDA so that readers c
Slide 52: Thank You
,, r CanadianSolar • • • • • • • • • • . Thank You! a CSIQ NasdaQ Listed •• •
Slide 53: Thank You
S¢ CanadianSolar Thank You! CSIQ Nasdaq Listed
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