Canadian Solar Inc (CSIQ) Q1 2023 Earnings Call Transcript

Canadian Solar Inc (NASDAQ: CSIQ) Q1 2023 earnings call dated May. 18, 2023

Corporate Participants:

Isabel Zhang — Director, Investor Relations

Shawn Qu — Chairman and Chief Executive Officer

Yan Zhuang — President, CSI Solar

Ismael Guerrero Arias — Corporate Vice President and President of the Energy Business

Huifeng Chang — Senior Vice President and Chief Financial Officer

Analysts:

Colin Rusch — Oppenheimer — Analyst

Philip Shen — Roth MKM — Analyst

Miguel De Jesus — Goldman Sachs — Analyst

Praneeth Satish — Wells Fargo — Analyst

Presentation:

Operator

Greetings, and welcome to — thank you for standing by. Welcome to Canadian Solar’s First Quarter 2023 Earnings Conference call. My name is Melissa and I will be your operator for today. [Operator Instructions]

I would now like to turn the call over to Isabel Zhang, IR Director at Canadian Solar. Please go ahead.

Isabel Zhang — Director, Investor Relations

Thank you, operator and 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. Yan 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 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 permit further analysis of the Company’s performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared 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.

Shawn Qu — Chairman and Chief Executive Officer

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 softer quarter. We delivered 6.1 gigawatts of module shipments in Q1 worth $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 on 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 US 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 generations. This is our core motivation. We have developed some of the most technology advanced and competitive clean energy solutions, and we care about doing business ethically, sourcing our materials responsibly and treating our employees fairly. We thrive in 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 US market, where we have been building our long-term partnerships. We have delivered some of the most iconic project in the US 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 five industry leaders in their respective fields. And now we are also investing in US manufacturing further contributing to local communities.

Over the past week, we have been reviewing the most recent US IRA guidance on domestic content. After initial assessment, we think it is encouraging that the guidance promote investment in clean energy capacity across the supply chain and provide incentives to 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 a policy overhang 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 Solar carve-out IPO. The full financial audit are being completed and are final on the numbers. We expect the updated CSI Solar prospectus to be published on the Shanghai Stock Exchange website soon. 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 details on our CSI Solar business. Yan, please go ahead.

Yan Zhuang — President, CSI Solar

Thanks, Shawn. Please turn to Slide 6. In Q1, the CSI Solar divisions delivered 6.1 gigawatt 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 5 times 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 will help us 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 US 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 logistic 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 scale storage business, as we previously communicated, the first half of 2023 is expected to be a relatively small contributor to our utility scale 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 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 a 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. The EP Cube is an all-in-one LSP-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 solo 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 a Lego-like manner, such that we can effortlessly add more EP Cube stacks up to six 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 cubes weigh less than 70 pumps, which makes the physical work of transportation and installation much easier. The commissioning of the EP Cube is designed to be seamless using a mobile phone app with step-by-step instructions. A first time installer could do it within 30 minutes, and much faster in subsequent installations. In addition, we’ll offer one of the strongest warranties in the market with at least 80% capacity up to 10 years or 6,000 cycles. Our distributor and installer network have embraced our new solution and we expect to achieve around 100 megawatt-hours 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 — Corporate Vice President and President of the Energy Business

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 clean energy development platforms and unify under strong brands.

Moving on to our quarterly performance. Q1 was a small quarter for us, as expected, due to the timing of project sales. We monetize 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 US, where we believe we can capture higher value being the long-term asset owner operator. So we continue to transition from developing and selling projects, which is inherently lumpy. And while we had a fewer smaller quarters regionally, 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 Recurrent Energy. Shawn will provide more color on the guidance.

Next slide please. As of March 31st, our total pipeline stood at 25 gigawatts for solar and 47 gigawatt-hours for battery storage projects. This number is unchanged from two months ago, not because [Indecipherable] and develop our 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. We added healthy gigawatt of solar development pipeline in the last two months.

Our pipeline is large and mature, especially given the 14 gigawatts of solar and 12 gigawatt-hours of battery energy storage interconnections. We have been increasingly selective on how we enlarge 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 on construction.

Please turn to Slide 12. Longer term, as we’ve discussed, our strategy is to retain greater assets 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 on the shifting of resources towards execution of projects as opposed to the pure development and sale 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 storage projects. It also means that in the short-term, we may see lower revenues. However, the aggregate value retained at Recurrent Energy will be larger and more sustainable than under the previous model. We should start seeing the positive impacts as these projects are built out and start operating in 2024 and 2025.

Now, let me pass it on to Huifeng, who will go through the financial results in greater detail. Huifeng, please go ahead.

Huifeng Chang — Senior Vice President and Chief Financial Officer

Thank you, 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 was partially offset by lower module average selling price. Selling and distribution expenses in Q1 declined by 30% quarter-over-quarter after 24% sequential decline 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 23% decline in Q4. Total opex fell to 10.1% of total revenue, previously guided, we are starting to see operating leverage with economies of scale and a normalizing logistics costs. Net foreign exchange and the derivative loss in the first quarter were $13 million, mainly driven by the weaker US 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 constantly $1.5 billion. We ended the period with a healthy cash balance of $2.1 billion and total debt of $3 billion. Our leverage, as measured by net debt to EBITDA, excluding restricted cash was stable at 2.8 times.

Lastly, let me make a couple housekeeping comments on the CSI Solar IPO. We expect to incur a one-time IPO-related stock incentive expense contingent upon the successful completion of the 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 non-controlling interests.

Also note that with the successful completion of the CSI Solar IPO, net income attributable to non-controlling interests will increase given that minority investors in CSI Solar will account for a greater ownership share. Please consider this in your models as the 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.

Shawn Qu — Chairman and Chief Executive Officer

Thanks, Huifeng. And let’s turn to Slide 15. For the second quarter of 2023, we expect solar module shipments by CSI Solar to be in a range of 8.1 to 8.4 gigawatt, including approximately 60 megawatt to Recurrent 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 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 to 35 gigawatt. CSI Solar’s battery storage shipments are expected to be between 1.8 to 2 gigawatt-hours, reflecting this year’s transition from white-label to own manufactured product 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 range.

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?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question.

Colin Rusch — Oppenheimer — Analyst

Thanks so much, guys. Kind of two — it’s a two-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 do you think you actually have on the margin side.

Shawn Qu — Chairman and Chief Executive Officer

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

Yan Zhuang — President, CSI Solar

Hi. Hey, Colin. This is Yan. And so you have two parts of the question. One is the volume, the shipment volume branch. 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 margin side with silicon price going down, we always — as we expected, we also still believe the same way that sort of contracts 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 are confident that over the year — over the course of the year, our margin will continue to improve. So we’re confident on this whole year’s performance on margin side.

Colin Rusch — Oppenheimer — Analyst

Okay. Thanks so much. And then just on the sales side, how to think about that expense? How much of the sales expenses 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?

Shawn Qu — Chairman and Chief Executive Officer

[Speech Overlap]

Colin Rusch — Oppenheimer — Analyst

Yeah, the sales — yeah, on the opex, I mean.

Shawn Qu — Chairman and Chief Executive Officer

Go ahead, Yan.

Yan Zhuang — President, CSI Solar

Sorry. So, yes, the sales expense is actually we believe it’s going 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.

Colin Rusch — Oppenheimer — Analyst

Okay. I’ll try to clarify that offline. Thanks a lot guys.

Operator

Thank you. Our next question comes from the line of Philip Shen with Roth MKM. Please proceed with your question.

Philip Shen — Roth MKM — Analyst

Hi, everyone. Thanks for taking my questions. Now that the domestic content at our guidance has been released, can you talk to us about your US manufacturing plants? 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 US, 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? Thanks.

Shawn Qu — Chairman and Chief Executive Officer

Yeah. Hi, Philip. This is Shawn. So let me answer this question. Our plan for US manufacturer, as we explained in the past, what goes through the order of total module first and then the upstream sell our wafer. Now, with the release of the new guidance on the domestic content, I think, we’re still going to follow the same pattern, which is, first, the solar modules, then either solar cell or solar wafers. We’re pretty advanced in our US-based solar module manufacturing plant already. I think in the next while — little while, we’re 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’re still waiting for our customer to come back with their reaction after this new guidance on the domestic content, but so far we haven’t heard any customer to back off from their 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 — Roth MKM — Analyst

Okay. Thanks for that color, Shawn. And then shifting to the China IPO. It sounds like you’re expecting that to be finished in June. I 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 US capacity expansion with China IPO proceeds? Thanks.

Shawn Qu — Chairman and Chief Executive Officer

Well, this is Shawn again. At this moment, we don’t see any particular risk of delay in the China IPO after June, behind June. However, as you know, IPO is always — you need — they always have 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 US manufacturing through the proceeds from the China IPO. For any IPO or public fundraising 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 US — no, use the proceeds from the China IPO, which will be for China project, and also for some of our operating cash requirement. The US manufacturing plant going to fund it with other source of funding.

Philip Shen — Roth MKM — Analyst

Great. Thanks for the clarity on that, Shawn. And then one final question, as we’re coming back to the domestic content either [Phonetic] in US manufacturing in general after you guys ramp-up US manufacturing as you go through your cost structure, have you guys been able to determine what percentage of your overall US expected module cost structure could be, US content versus non-US? And then what is your estimated cost per watt using Southeast Asia cell? Thanks.

Shawn Qu — Chairman and Chief Executive Officer

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

Huifeng Chang — Senior Vice President and Chief Financial Officer

Hi, Phil. First of all, our US module factory will maximize the sourcing in the US for other components. Second, we are still working on the details, put all the cost numbers of different components, putting the module. It’s still moving parts 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 look forward to next few weeks. New developments and also looking with all other components manufacturers coming out of the US and eventually to reach the goal for our US-made solar modules. Thank you.

Philip Shen — Roth MKM — Analyst

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

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Miguel De Jesus — Goldman Sachs — Analyst

Hi, everyone. 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 better expected pricing? Is it better timing on the projects business? Just hoping to get some color there. Thank you.

Shawn Qu — Chairman and Chief Executive Officer

Hi, Isabel. You are our guidance master. Do you want to answer this question?

Isabel Zhang — Director, Investor Relations

Sure. Hi, Miguel. This is Isabel. 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.

Miguel De Jesus — Goldman Sachs — Analyst

Okay. Thanks. I appreciate that. And then just a follow-up question on 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 US, how much would you have to set-up in terms of new domestic supply for things like aluminum frames, glass, backsheets and does it change at all how you’re thinking about setting up the manufacturing footprint in the US? Thanks.

Shawn Qu — Chairman and Chief Executive Officer

Yeah. Hi. This is Shawn speaking. Now, first of all, I want to make a comment or two. We are open mind, we are looking into all possibilities. We are looking at all the subcomponent of the solar module, which include solar cell, it also include other raw materials. We are actively accelerating which component, which components can be produced in US.

Now, Huifeng, you want to share more color?

Huifeng Chang — Senior Vice President and Chief Financial Officer

Yes. Actually, for charter, all the BOM materials such as aluminum frame and also the solar glass, relative to cell factory, it’s probably requires a longer period of time to receive all the permits, etc. Other BOM material are much easier to set-up, especially solar glass and aluminum frame, we have glass factories plenty of them in the US and also on other aluminum-related factory in the US. So we are not only seeing value all these manufacturers, they are moving into the solar supply chain, but also we are talking to them regarding partnership. So it will be much clear roadmap of the IRA guidance published earlier. And so, I think in the next few weeks, we’ll get a lot of — the answers will much more clear. Thank you.

Miguel De Jesus — Goldman Sachs — Analyst

Okay. Great. Thanks. I’ll pass it on.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Praneeth Satish with Wells Fargo. Please proceed with your question.

Praneeth Satish — Wells Fargo — Analyst

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

Shawn Qu — Chairman and Chief Executive Officer

Oh, that’s a very good question. I think that the sizable action and all the permitting will probably take half-year to one year. And then it will probably be another two year 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 a old semiconductor fab and then convert it into a solar cell facility. But now, the solar cell manufacturing line become so special. And for example, the tube, diffusion machine, TECBD [Phonetic] machine is so tall, usually it contains six tubes arranging vertically and these tubes can take in 200 10 millimeter wafers. [Indecipherable] and then plus all the facility below the ground floor and also above the machines. So the building and the facility become very special. So I don’t think any of the modern solar cell supply manufacturers are going to convert any old buildings for the today’s solar cell line. So the building facility and power supply, everything will probably have to be built from zero. So altogether I would say maybe three years minimum to bring a state-of-art solar cell facility online. So it takes time.

Praneeth Satish — Wells Fargo — Analyst

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?

Shawn Qu — Chairman and Chief Executive Officer

Yeah. Our new plan basically is we’re going to build a 30 gigawatt new solar wafer facility is a ingot wafer facility. I believe, altogether it will take just over RMB10 billion, which is maybe about $1.2 billion to $1.3 billion capex in total. Now, that money will be spread out in 2023, 2024 and some in 2025, because the typical payment terms for the machines are two years after the machine delivers. So I would expect it to be — that capex to be spent in ’23, ’24 and also ’25.

Praneeth Satish — Wells Fargo — Analyst

Okay. Thank you.

Shawn Qu — Chairman and Chief Executive Officer

Thank you.

Operator

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

Shawn Qu — Chairman and Chief Executive Officer

Okay. Thank you. No, 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

[Operator Closing Remarks]