U.S. markets open in 7 hours
  • S&P Futures

    4,382.25
    +10.25 (+0.23%)
     
  • Dow Futures

    34,408.00
    +71.00 (+0.21%)
     
  • Nasdaq Futures

    14,906.00
    +43.25 (+0.29%)
     
  • Russell 2000 Futures

    1,803.90
    +6.00 (+0.33%)
     
  • Crude Oil

    90.14
    +0.51 (+0.57%)
     
  • Gold

    1,944.50
    +4.90 (+0.25%)
     
  • Silver

    23.88
    +0.19 (+0.81%)
     
  • EUR/USD

    1.0655
    -0.0007 (-0.06%)
     
  • 10-Yr Bond

    4.4800
    0.0000 (0.00%)
     
  • Vix

    17.54
    +2.40 (+15.85%)
     
  • GBP/USD

    1.2282
    -0.0012 (-0.10%)
     
  • USD/JPY

    148.1220
    +0.5590 (+0.38%)
     
  • Bitcoin USD

    26,649.16
    -371.03 (-1.37%)
     
  • CMC Crypto 200

    567.92
    -8.34 (-1.45%)
     
  • FTSE 100

    7,678.62
    -53.03 (-0.69%)
     
  • Nikkei 225

    32,402.41
    -168.62 (-0.52%)
     

Q1 2023 Canadian Solar Inc Earnings Call

Participants

Huifeng Chang; Senior VP, CFO & Director; Canadian Solar Inc.

Isabel Zhang

Ismael Guerrero Arias; Corporate VP & President of the Energy business; Canadian Solar Inc.

Xiaohua Qu; Chairman, President & CEO; Canadian Solar Inc.

Yan Zhuang; Director; Canadian Solar Inc.

Colin William Rusch; MD & Senior Analyst; Oppenheimer & Co. Inc., Research Division

Philip Shen; MD & Senior Research Analyst; ROTH MKM Partners, LLC, Research Division

Praneeth Satish; Senior Equity Analyst; Wells Fargo Securities, LLC, Research Division

Unidentified Analyst

Presentation

Operator

Greetings. Thank you for standing by. Welcome to Canadian Solar's First Quarter 2022 Earnings Conference Call. My name is Melissa and I'll be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the call over to Isabel Zhang, IR Director at Canadian Solar. Please go ahead.

Isabel Zhang

Welcome everyone to Canadian Solar's First Quarter 2023 Conference Call. Please note that we have provided slides to accompany today's conference call, which are available on Canadian Solar's Investor Relations website within the Events and Presentations section. Joining us today are Dr.
Shawn Qu, Chairman and CEO; Yan Zhuang, President of Canadian Solar's majority-owned subsidiary, CSI Solar. Dr. Huifeng Chang, Senior VP and CFO; and Ismael Guerrero, Corporate VP and President of Canadian Solar's wholly-owned subsidiary, Recurrent Energy, formerly Global Energy.
All company executives will participate in the Q&A session after management's formal remarks. On this call, Shawn will go over some key messages for the quarter. Zhuang and Ismael will respectively review the highlights of the CSI Solar and Recurrent Energy businesses, followed by Huifeng, who will go through the financial results. Shawn will conclude the prepared remarks with the business outlook, after which we'll have time for questions. Before we begin, may I remind listeners that management's prepared remarks today as well as their answers to questions will contain forward-looking statements that are subject to risks and uncertainties.
The company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Any projections of the company's future performance represent management's estimates as of today. Canadian Solar assumes no obligation to update these projections in the future unless otherwise required by applicable law. A more detailed discussion of the risks and uncertainties can be found in the company's annual report on Form 20-F filed with the Securities and Exchange Commission.
Management's prepared remarks will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles or GAAP. Some financial information presented during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to further analyze the company's performance and underlying trends.
Management meets non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP.
And now I would like to turn the call over to Canadian Solar's Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Xiaohua Qu

Thank you, Isabel and hi everyone. Welcome and thanks for joining us today. Now please turn to Slide 3. We had a very strong start to the year in what is typically a seasonally soft quarter. We've delivered 6.1 gigawatts of module shipments in Q1 with $1.7 billion in revenue and also a solid gross margin at 18.7%. Importantly, this was one of the strongest quarters in Canadian Solar's history in terms of underlying net profit.
Our team has done an excellent job in executing on our long-term strategy. We continue to build our technology brand and customer relationships. This is further strengthening our leadership position and driving high quality profitable growth. I'm very thankful to my global team for their focus and outstanding work.
Please turn to Slide 4. Canadian Solar is a Canadian company listed in the U.S. with a global manufacturing base predominantly in Asia. We proudly support customers across the world in their decarbonization efforts as we work to make a more sustainable world for future generation. This is our core motivation.
We have developed some of the most tech knowledge, advanced and competitive clean energy solutions and we care about doing business ethically, sourcing our materials responsibly and treating our employees fairly with open and competitive markets where our renewable product commands a premium as we leverage our competitive advantages, strong brand and long track record. For example, we are strongly committed to the U.S. market where we have been building our long-term partnerships. We have delivered some of the most iconic projects in the U.S. market, such as the 1.4 gigawatt hours Crimson storage project in California.
We are also excited about the 100-megawatt solar virtual power purchase agreement, we recently signed in Texas with a consortium of 5 industry leaders in their respective fields. And now we are also investing in U.S. manufacturing, further contributing to local communities.
Over the past week, we have been reviewing the most recent U.S. IRA guidance on domestic content. As an initial assessment, we think it is encouraging that the guidance promotes investment in clean energy capacity across the supply chain and provide incentive for both the demand and supply of clean energy.
Our position is to continue to support and deliver value to our customers. Importantly, we believe that this guidance removes our policy overhead from customers' standpoint. As a result, we think this will help them make more informed decisions and move faster in executing their growth plans.
Please turn to the next slide. Finally, let me comment on the CSI's Solar carve-out IPO. The full financial audits are being completed and I have final on the numbers. We expect the updated CSI Solar prospectus to be published on the Shanghai Stock Exchange website. We hope the IPO can be completed over the next few weeks before the end of the second quarter.
With that, let me now turn over to Yan who will provide more detail on our CSI Solar business. Yan, please go ahead.

Yan Zhuang

Thanks, Shawn. Please turn to Slide 6. In Q1, the CSI Solar division delivered 6.1 gigawatts of solar module shipments and $1.7 billion in revenue. Gross margin expanded to 18.5%, which represents 110 basis points improvement in profitability quarter-over-quarter and almost 400 basis points improvement year-over-year. At operating profit level, our improvement is even more significant.
Our operating profit grew over 5x year-over-year with operating margin almost touching 10% during the seasonally soft Q1. I have to say that I'm quite proud of our teams for having achieved this and it was not easy.
Let me go over some key drivers and market dynamics. Please turn to Slide 7. On the solar module business, costs continue to come down, particularly input costs. Polysilicon is the main driver of the decline. Although as we expected, polysilicon prices are coming down gradually.
On the manufacturing cost side, our processing costs are also coming down. Although slower as the expansion of our upstream manufacturing in ingot, wafer and cell is mostly going to happen in the second half of the year. With greater vertical integration, we expect to further optimize our costs and gain greater control over our supply chain.
On the market side, we see significant demand up from customers across nearly all channels and regions. Customers and projects that were held up over the past couple of years due to the price inflation are starting to come back, given the stronger project economies -- economics. This means we're starting to see module prices come down, although also gradually, given the strong demand and steady trajectory in polysilicon pricing. So all these are contributing positively to our margin even though there are many moving parts.
Note that prices remain divergent between the U.S. and the rest of the world, which follow a similar trend to what we see in Europe as strong on the chart in the middle. Below the gross margin line, unit shipping costs continued to decline for us, helping drive operating leverage and further expansion in operating profitability.
By now, I think we have pretty much reached the bottom in terms of shipping cost declines. We now expect unit logistics cost to remain relatively stable going forward. So that means while it will grow with volumes, the unit cost should remain relatively unchanged.
Please turn to Slide 8. Moving on to our utility steel storage business, as we previously communicated, the first half of 2023 is expected to be a relatively small contributor to our utility skill project deliveries as we transition from a white label third-party product to our own manufactured proprietary battery storage product. From a development and execution standpoint, our team is preparing for a busy second half of the year, led by deliveries of our SolBank product.
The fact that the lithium carbonate prices have fallen by over 60% since the peak in Q4 of last year is also a demand driver. On the commercial side, our teams have been actively signing new contracts. Our CSI energy storage team expanded our contracted revenues from approximately $1 billion at the end of January to $1.3 billion at the end of March. And this number continues to grow, led by our deep understanding of the market and long-term customer relationships.
For example, yesterday, we announced a follow-on transaction with Aypa Power, a Blackstone portfolio company. We're expanding our relationship with Aypa Power from 490-megawatt hours to 850-megawatt hours, and we are expanding from an initial project in California to more projects in Texas. This is typical as most of our customers are repeat clients that come back to us after our successful initial collaboration. Since we started our turnkey energy storage business, our execution has been one of the best in the industry.
Please turn to Slide 9. On the residential energy storage side, we continue to make good progress on our EP Cube product. We are delivering significant growth and continue to capture new contract opportunities. EP Cube is an OU1 LFP-based residential energy storage solution with integrated hybrid inverter. The product is both AC and DC coupled with an AC round-trip efficiency of just under 94%.
A single system can deliver 7.6 kilowatts of continuous power with solar PV and has a storage capacity from 10-kilowatt hours up to 20-kilowatt hours. As you can see in the picture on the slide, we designed the product in the Lego-like manner such that we can effortlessly add more EP Cube stacks up to 6 in parallel. This means the largest system can reach 45 kilowatts in output power and nearly 120-kilowatt hours in energy storage. This is more than enough for most high load households.
Importantly, each of the tubes we less than 70 pumps, which makes the physical work of transportation and the installation much easier. The commissioning of the EP Cube is designed to be seamless using a mobile phone app with step-by-step instructions. Our first time installers could do it within 30 minutes and much faster in subsequent installations. In addition, we offer one of the strongest warranty in the market with at least 80% capacity after 10 years or 6,000 cycles.
Our distributor and installer network have embraced our new solution and we expect to achieve around 100-megawatt hour in shipments in 2023. We will be showcasing the EP Cube again at the Intersolar Conference in Munich next month, and I encourage you to see it for yourself.
Now let me pass it on to Ismael. Ismael, please go ahead.

Ismael Guerrero Arias

Thank you, Yan. Please turn to Slide 10. First, let me say a few words on the rebranding of our global solar and battery energy storage project development business. In April, we rebranded our business from global energy to Recurrent Energy. Recurrent Energy was previously our North American utility scale development business. Going forward, it will encompass our entire global development and services businesses. The goal of this rebranding was to strengthen our brand as one of the world's largest cleaner energy development platforms and unify under strong brand.
Moving on to our quarterly performance. Q1 was a small quarter for us as expected due to the timing of product sales. We monetized around 5 megawatts of projects in Japan and delivered $20 million in revenue with a 36% gross margin. As we talked about on the prior call, we are more proactively holding projects longer term in certain markets, such as Europe and the U.S., where we believe we can capture higher value being the long-term asset owner and operator.
So we continue to transition from developing and selling projects, which is . And while we've had a few smaller quarters recently, we are in the process of closing a major project sales. As a result, we expect Q2 to be the largest quarter of the year for Recurring Energy. Shawn will provide more color on the guidance.
Next slide, please. As of March 31, our total pipeline stood 25 gigawatts for solar and 47 gigawatt hours for battery storage projects. This number is unchanged from 2 months ago, not because we ceased to originate and develop a new pipeline, but rather because we are rebalancing our pipeline by reducing the weight of the Latin America region and increasing the weight of the EMEA region, where we added 0.5 gigawatt of solar development pipeline in the last 2 months.
Our pipeline is large and mature especially given the 14 gigawatts of solar and 12 gigawatt hours of battery energy storage interconnections. We are being increasingly selective on how we enhance our portfolio and how we add the most value. We are also focusing our resources towards executing these projects and moving projects from advanced pipeline to backlog and construction.
Please turn to Slide 12. Longer term, as we've discussed, our strategy is to retain greater asset ownership in select markets such as North America and Europe to increase the revenues generated through recurring income, such as power sales, operations and maintenance, and asset management income. This is partially reflected from the shifting of resources towards execution of projects as opposed to the pure development and sales model.
This means that instead of monetizing the projects in North America and Europe in a series of one-off transactions, we'll monetize these assets over 30 or 40 years periods. This gives us higher visibility on cash flows as 70% to 80% of these cash flows are fully contracted, including the energy product projects. It also means that in the short term, we may see lower revenues. However, the aggregate value retained by recurrent energy will be larger and more sustainable than under the previous model. We should start seeing the positive impact as these projects are built out and start operating in 2024 and 2025.
Now let me pass it to Huifeng, who will go through the financial results in greater detail. Huifeng, please go ahead.

Huifeng Chang

Thanks, Ismael. Please turn to Slide 13. In Q1, we delivered $1.7 billion in revenue, up 36% year-over-year. Gross margin was 18.7%, a sequential increase of 100 basis points driven by lower manufacturing costs that were partially offset by lower module averaging selling price.
Selling and distribution expenses in Q1 declined by 30% quarter-over-quarter after 24% sequential decline in the previous quarter. As Yan mentioned, shipping costs declined further. At this point, we don't think there is much room for further declines, but we expect the unit costs to remain relatively stable.
General and administrative expenses declined by 12% quarter-over-quarter due to OpEx efficiencies and the absence of impairment costs. Overall, total operating expenses were down 19% in Q1 sequentially after a 22% decline in Q4. Total OpEx fell to 10.1% of total revenue. As previously guided, we are starting to see operating leverage with economies of scale and normalizing logistics costs.
Net foreign exchange and the derivative loss in the first quarter was $30 million, mainly driven by the weaker U.S. dollar. Total net income was $107 million with net income attributable to Canadian Solar shareholders at $84 million or diluted EPS of $1.19.
Now turning to cash flow and the balance sheet. Next slide, please. In Q1, we generated approximately $60 million in operating cash and spent around $230 million in CapEx. Our full year 2023 CapEx expectation remains unchanged at approximately $1.5 billion. We ended at a period with a healthy cash balance of $2.1 billion and a total debt of $3 billion.
Our leverage, as measured by net debt-to-EBITDA, excluding restricted cash, was stable at 2.8x. Lastly, let me make a couple of housekeeping comments on the CSI Solar IPO. We expect to incur a one-time IT-related stock incentive expense continuing upon the successful completion of IPO, which we expect to occur in June next month.
The full year impact is expected to be approximately $50 million or approximately $40 million after allocation to noncontrolling interests. Also note that with the successful completion of the CSI Solar's IPO, net income attributable to noncontrolling interest will increase given that minority investors in CSI Solar will account for a great ownership share. Please consider this in your models as a delta between total net income and the net income attributable to Canadian Solar shareholders will be greater after the IPO.
And now let me pass it back to Shawn, who will conclude with our guidance and the business outlook. Shawn, please go ahead.

Xiaohua Qu

Thanks, Huifeng, and let's turn to Slide 15. For the second quarter of 2023, we expect solar module shipment by CSI Solar to be in a range of 8.1 gigawatts to 8.4 gigawatts including approximately 60 megawatts to recurring energy project. Total revenue are expected to be in the range of $2.4 billion to $2.6 billion. Gross margin is expected to be between 19% to 21%, reflecting further margin improvement from low cost, a higher contribution from recurrent energy, partially offset by slightly lower solar module ASPs.
For the full year of 2023, we reiterate CSI Solar's total solar module shipment guidance to be in the range of 30 gigawatt to 35 gigawatt. CSI Solar's battery storage shipments are expected to be between 1.8 gigawatt to 2 gigawatt hours reflecting this year's transition from white label to own manufactured products as explained by Yan earlier. We expect full year 2023 revenue to be between 9 billion to 9.5 billion towards the upper end of our previous guidance branch. As we come out of a challenging market period, our business and outlook are strong as we continue to focus on our long-term market position to deliver sustainable and profitable growth.
With that, I would like to open the call to your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Colin Rusch with Oppenheimer.

Colin William Rusch

Kind of it's a 2-part question related to Polysilicon pricing and availability. You've got a pretty wide range of shipment guidance for the year. I just want to understand how much of that is supply related and how much of that is considerations around demand? And then would love to understand the margin trajectory as poly prices continue to go lower, how much incremental leverage you think you actually have on the margin side?

Xiaohua Qu

Thanks for the question. I would like to Yan to answer this question. Yan?

Yan Zhuang

Colin, this is Yan. And so you have 2 parts of the question. One is the volume and the shipment volume range. For that question, I would say we actually have a pretty high capacity utilization rate. So for the year, so with our volume guidance, it is more about the available effective capacity. And on margin side with the silicon price going down, we always as we expected -- we also -- we still believe the same way that silicon price will continue to go down, but in a gradual manner. And module price will also go down, but we believe that module price will go down at a slower pace than the supply chain cost. So we're confident that over the year -- over the course of the year, our market will continue to improve. So we're confident on this whole year's performance on margin side.

Colin William Rusch

Okay. And then just on the sales side and how to think about that expense, how much of that sales expense is fixed and how much is variable at this point? And how should we think about that kind of fixed sales expense on a go-forward basis?

Yan Zhuang

You're talking about the selling...

Colin William Rusch

Yes, on the OpEx line.

Yan Zhuang

Sorry. So yes, the sales expenses actually, we believe is to actually on the downside trend because the shipping cost has reached to a low level. And also with the volume increase Q-to-Q, we believe it will help us to dilute some part of the overhead and expenses. So we don't expect any upside on the sales and distribution expenses.

Operator

Our next question comes from the line of Philip Shen with Roth MKM.

Philip Shen

Now that the domestic content at our guidance has been released. Can you talk to us about your U.S. manufacturing plans? Do you expect to ramp up cell and module capacity and -- can you talk to us about what's the total capacity timing and any other detail around that? And then also, as it relates to your utility-scale module customers in the U.S., do you expect many of them to not pursue the domestic content ITC adder given the complexities -- or what do you think the impact of the guidance has been thus far with your customer base?

Xiaohua Qu

Philip, this is Shawn. So let me answer this question. Our plan for U.S. manufacturing, as we explained in the past, what go through the order of solar module first and then the upstream cell or wafer. Now with the release of the new guidance on the domestic content, I think we are still going to follow the same pattern, which is first Solar modules than either solar cell or solar wafers. We are pretty advanced in our U.S. based solar module manufacturing plan already. I think in the next while -- a little while, we are going to make a clear announcement about that. So please stay tuned.
Now the second question is about our customer. To say the truth, we are still waiting for a customer to come back with that reaction after this new guidance on the domestic content. But so far, we haven't heard any customer to back off from the purchase intention for CSI US made solar module yet. But we haven't asked them what are they going to -- how are they going to handle the domestic content? That's a question we're still waiting for our customer to give us feedback.

Philip Shen

Okay. And then shifting to the China IPO. It sounds like you're expecting that to be finished in June. Was wondering if you could give us a little more color on how that process is going? Is there a risk that, that could be delayed beyond June? And can you guys fund U.S. capacity expansion with China IPO proceeds?

Xiaohua Qu

Well, this is Shawn again. At this moment, we don't see any particular risk of delaying the China IPO after June -- behind June. However, as you know, IPO is always -- there are always some possibility of unexpected event even some market uncertainty. So we can't say that for sure.
Now the second question, we are not going to fund the U.S. manufacturing through the proceeds from the China IPO for any IPO or public fund raising in the stock market in China, you have to specify the project and we already -- we have already specified the project. In other words, we have already specified how we are going to use the U.S. -- use the proceeds from the China IPO, which will be for China project and also for some of our operating cash requirement. The U.S. manufacturing plant are going to fund it with other source of funding.

Philip Shen

Great. And then one final question. As coming back to the domestic content adder and U.S. manufacturing, in general, after you guys ramp up U.S. manufacturing, as you go through your cost structure. Have you guys been able to determine what percentage of your overall U.S. expected module cost structure could be U.S. content versus non-U.S.? And then what is your estimated cost per watt using Southeast Asia so?

Xiaohua Qu

Wow, Huifeng, do you want to handle this question?

Huifeng Chang

First of all, we -- our U.S. module factory will maximize the sourcing in the U.S. for all the components. Second, we are still working on the details, put all the cost of numbers of different components within the module. It's still a moving part. And also we are talking to our customers. We have received a very, very strong interest and forward orders for our module, but also many of our customers, they are willing to place -- pay the forward payment to partially fund our manufacturing facility. So we look forward to next few weeks, new developments and also working with all other components manufacturers coming out of the U.S. and eventually to reach the goal to U.S. made solar modules.

Operator

(Operator Instructions) Our next question comes from the line of Brian Lee with Goldman Sachs.

Unidentified Analyst

This is Miguel on for Brian. My first question was just on the guidance. So you raised the low end of the revenue guidance this year, but you kept the module and battery shipment guidance unchanged. What's giving you the confidence to tighten the range for the year? Is it just a better expected pricing? Is it better timing on the projects business? Just hoping to get some color there.

Xiaohua Qu

Isabel, our guidance master, do you want to answer this question?

Isabel Zhang

Sure. So we had previously given a pretty wide range for the revenue guidance, considering certain uncertainties on both volume and pricing side. At this point, we've left the module shipment number unchanged. But overall, we think that our ability or confidence to reach the higher end of our previous guidance, i.e., $9 billion to $9.5 billion is much higher. And therefore, that is the reason why we narrowed and increased the overall guidance range to the upper end of where we were before.

Unidentified Analyst

Okay. I appreciate that. And then just a follow-up question on the domestic content. I just wanted to touch a bit more on your interpretation today on that guidance. Regarding the details, it talks about various subcomponents, if you will and helping customers meet a minimum threshold. So for module assembly, if you were to do that in the U.S., how much would you have to set up in terms of new domestic supply for things like aluminum frames, glass, back sheets? And does it change at all how you're thinking about setting up the manufacturing footprint in the U.S.?

Xiaohua Qu

This is Shawn speaking. Now first of all, I want to make a comment we are very open mind. We are looking into all possibilities. We're looking at all the sub-components of the solar module, which includes solar cell, but also include other bond materials. We are actively accessing which component -- which components can be produced in U.S.
Now Huifeng, you want to share more color?

Huifeng Chang

Yes. Actually for charter, all the bond materials such as aluminum frame and also the solar glass relative to cell factory, this probably requires a longer period of time to receive all the permits, et cetera. All the bond material are much easier to set up, especially solar glass and aluminum frame. We have glass factories plant in the U.S. and also a lot of aluminum related factory in the U.S. So we are not only seeing that all these manufacturers, they are moving into the solar supply chain. But also, we are talking to them regarding partnership. So it will be a much clearer road map after IRA guidance published earlier. And so I think in the next few weeks, we'll get a lot of the answers were much more clear.

Operator

(Operator Instructions) Our next question comes from the line of Praneeth Satish with Wells Fargo.

Praneeth Satish

Maybe just one more follow-up on the domestic content guidelines. It sounds like now maybe you're considering cell capacity in the U.S. after modules. Can you just maybe give us a ballpark of how long it takes to build a cell plant in the U.S. How the economics might compare to building it overseas? Yes, that's my first question.

Xiaohua Qu

That's a very good question. I think that the site selection and all the permitting will probably take half year to 1 year. And then it will probably be another 2 years before we can bring in machines for a modern solar cell facility because in the good old days back 10 years ago or 15 years ago, sometime, we can just find an old semiconductor fab and then convert it into our solar cell facility.
By now, the solar cell manufacturing line become so special. For example, the tube diffusion machine or PECVD machine is . Usually, it contains 6 cubes arrange in a vertically and each tube can take in the 210-millimeter wafers machine is very high and then plus all the facilities below the ground floor and also above the machine. So the building and the facility becomes very special. So I don't think any of the modern solar cell supply manufacturers are going to convert any old buildings for today's solar cell line. So the building facility and power supply, everything will probably have to be built from zero. So altogether, I will say, maybe 3 years minimal to bring the state of our solar cell facility online. So it takes time.

Praneeth Satish

Okay. Got it. No, that's very helpful. And then maybe if you can help us understand roughly the CapEx that's tied to the recent March 2024 expansions. How much of that CapEx will be spent in '23 versus '24? Is that included in your $1.5 billion of CapEx guidance for 2023, the portion that would be spent in '23?

Xiaohua Qu

Yes. Our new plan, basically, as we're going to build 30 gigawatt new solar wafer facility, it's a ingot wafer facility. I believe altogether, it will take just over RMB 10 billion, which is maybe about USD 1.2 billion to USD 1.3 billion CapEx in total. Now that money will be spread out in 2023, 2024 and some in 2025. Because the typical payment term for the machines 2 years after the machine delivery. So I would expect it to be that CapEx to be spent in '23, '24 and also '25.

Operator

Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to CEO, Shawn Qu for any final comments.

Xiaohua Qu

Okay. Thank you. Now thanks for everyone for joining us today and also for your continued support. If you have any questions or would like to set up a call, please contact our Investor Relations team. Take care and have a nice day.

Operator

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