T1 Energy Inc. (TE) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto contained in Part I, Item 8 “Financial Statements and Supplementary Data” and Part I, Item 1 “Business” of this Annual Report on Form 10-K, for an overview of our operations and business environment.

For a discussion related to changes in financial condition and the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 29, 2024.

Overview

We are an energy solutions provider building an integrated U.S. supply chain for solar and batteries. We manufacture and sell PV solar modules in the United States for our U.S. customers.

The year ended December 31, 2024 was transformative for T1 Energy. On November 6, 2024, we announced that the Company had entered into the Transaction Agreement to acquire all the shares of capital stock of Trina Solar US Holding. The transaction closed on December 23, 2024. As part of the Transaction Agreement, we acquired G1 Dallas, a 5 GW solar module manufacturing facility in Wilmer, Texas from Trina Solar US Holding. Following the closing of the Transaction Agreement, we recognized our first revenues.

Under the terms of the Transaction Agreement, we also agreed to use reasonable efforts to dispose, divest, transfer or otherwise sell the assets and operations that constitute our European business within six months of closing. As of December 31, 2024, we determined that our European businesses and our Coweta County, Georgia business met the criteria for classification as held for sale. Additionally, we concluded that the ultimate disposal will represent a strategic shift that will have a major effect on our operations and financial results. As such, the historical financial results of the European businesses and our Coweta County, Georgia business have been reflected as discontinued operations in our consolidated financial statements. Refer to Note 16 to the consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional details.

Results of Operations

The following table sets forth information on our consolidated results of operations (in thousands, except percentages):

NM - Not meaningful

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Net sales

Net sales consist of sales of solar modules. We recognize sales for PV solar module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts.

Net sales were $2.9 million in 2024 compared to zero in 2023. Net sales related to PV solar modules after the Trina Business Combination was completed on December 23, 2024.

Cost of sales

Our PV solar modules business cost of sales includes the cost of raw materials and components for manufacturing solar modules. In addition, our cost of sales includes direct labor for the manufacturing of solar modules and manufacturing overhead, such as engineering, equipment maintenance, quality and production control, and information technology. Our cost of sales also includes depreciation of manufacturing plant and equipment, facility-related expenses, environmental health and safety costs, and costs associated with shipping.

Cost of sales were $1.7 million in 2024 compared to zero in 2023. Cost of sales related to PV solar modules after the Trina Business Combination was completed on December 23, 2024.

General and administrative expenses

General and administrative expenses primarily consists of personnel and personnel-related expenses for our administrative employees, costs for administrative offices, and outside professional services including legal, accounting, and other advisory services.

General and administrative expenses increased by $10.0 million or 15%, to $75.5 million in 2024, from $65.5 million in 2023. The increase is primarily due to legal and operating costs associated with the Trina Business Combination.

Other (expense) income

Other (expense) income primarily consists of the fair value adjustments on our warrant liability, derivative liabilities, interest income and expense, and net foreign currency transaction gains and losses.

Other (expense) income changed by $53.5 million to $(6.1) million in 2024, from $47.3 million in 2023. Other (expense) income changed primarily due to a loss on warrant liability fair value adjustment of $1.3 million in 2024 compared to a gain of $31.8 million in 2023 and a loss from derivative liabilities of $14.9 million in 2024 with no comparable activity in 2023. In addition, we recognized $3.4 million of interest income, net in 2024 compared to $9.9 million in 2023.

Income tax benefit (expense)

We recorded income tax benefit of $15.8 million in 2024 compared to income tax expense of $0.4 million in 2023. In 2024, the Company recorded excess deferred tax liabilities related to the Trina Business Combination which provided a source of future taxable income to support the partial realization of the Company’s pre-existing deferred tax assets which was not available in 2023.

Net loss from discontinued operations, net of tax

We concluded the assets of our European businesses and business in Coweta County, Georgia met the criteria for classification as held for sale as of December 31, 2024. Additionally, we concluded that the ultimate disposal will represent a strategic shift that will have a major effect on our operations, resulting in the presentation of the historical financial results of these businesses as discontinued operations.

Net loss from discontinued operations, net of tax increased by $331.5 million or 609%, to $385.9 in 2024 from $54.4 million in 2023. This increase primarily relates to the $312.9 million loss from classification to held for sale relating to a non-cash valuation charge relating to recording our CQP and Giga Arctic battery production facilities, inclusive of accumulated foreign currency translation adjustments, at fair value less costs to sell. Additionally, we recorded a non-cash termination cost for our battery cell technology license with 24M which required we transfer our preferred stock investment for $1. Additionally, foreign currency transaction gains from discontinued operations of $21.2 million were recognized in 2023 with $1.2 million comparable activity in 2024.

Financial Condition, Liquidity, and Capital Resources

Liquidity and Capital Resources

As of December 31, 2024, we believe that our cash, cash equivalents, and cash flows from operating activities will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

As of December 31, 2024, we had approximately $76.6 million of cash, cash equivalents, and restricted cash. To date, our principal sources of liquidity have been proceeds received from our business combination with Alussa Energy Acquisition Corp., issuance of equity securities, and amounts received from government grants. Historically, these funds have

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been used for our Trina Business Combination, constructing and equipping our battery manufacturing facilities, the purchase of land in Coweta County, Georgia, technology licensing, R&D activities, and general corporate purposes. After our Trina Business Combination on December 23, 2024, we expect cash flows from operating activities will also be available to meet our upcoming liquidity needs.

Our future liquidity requirements depend on many factors, including the timing and extent of the following: capital expenditures for construction of future facilities and purchase of related equipment; spending on other growth initiatives, including through joint ventures; spending to support revenue generating activities; and general economic conditions. In addition to those activities, our short term liquidity will be utilized to fund the current portion of non-cancellable commitments including leases and debt obligations.

Our long-term operating plan requires the repayment of non-cancellable commitments including leases and debt obligations. In addition, our planned investments in our business and manufacturing footprint, as currently devised, will require significant financing to complete. Such financing may not be available at terms acceptable to us, or at all. The credit market and financial services industry have in the past, and may in the future, experience periods of uncertainty that could impact the availability and cost of equity and debt financing. If we are unable to raise substantial additional capital, our ability to invest in further facilities or other development projects will be significantly delayed or curtailed which would have a material adverse impact on our business prospects and results of operations. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of holders of our common stock. The terms of debt securities or other borrowings could impose significant restrictions on our operations. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of our common stock.

In November 2024, the Company estimated that a 5 GW solar cell manufacturing facility in the United States would have a total cost of approximately $850 million. The estimated costs of construction remain subject to technology and product specification decisions, ongoing business, financing, and operational changes, and changes to the overall macroeconomic environment. We will continue to provide updates to reflect material developments, including approvals or commitments for spending that differ materially from our previous estimates.

Our planned capital expenditures are based on management’s current estimates and may be subject to change. There can be no assurance that we will execute our capital expenditure plans as currently estimated, without addition, reduction, or modification. We may also from time to time reduce or increase planned spending on specific capital projects and/or adjust the timing of planned capital expenditures due to factors both within and outside of our control, including the availability of financing. As a result, actual capital expenditures in future years may differ materially from the amounts discussed above.

Cash Flow Summary

The following table summarizes our cash flows for the periods presented (in thousands):

Operating Activities

Cash flows used in operating activities were $102.8 million in 2024, compared to $87.9 million in 2023. The increase in cash used in operating activities was primarily due to the receipt of $23.5 million for government grants in connection with the planned development of the land in Coweta County, Georgia in 2023 with no corresponding amount in 2024, in addition there was an increase in routine working capital needs in 2024 offset by a decrease in net loss, adjusted for non-cash items.

Investing Activities

Cash flows used in investing activities were $137.7 million in 2024, compared to $187.0 million in 2023. The decrease in cash used in investing activities was primarily driven by $50.8 million in purchases of property and equipment in 2024 compared to $187.8 million in 2023 and proceeds from the return of property and equipment deposits of $22.7 million in 2024 with no comparable amounts in 2023. This decrease was partially offset by the net cash used in the Trina business acquisition of $109.6 million.

Financing Activities

Cash flows from financing activities were $45.9 million in 2024, compared to zero in 2023. Cash flows from financing activities in 2024 consisted of net proceeds from the issuance of preferred stock of $50.0 million, offset by a $4.1 million outflow for the purchase of our non-controlling interest in our U.S. joint venture.

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Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates, assumptions, and judgments that can significantly impact the amounts we report as assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates.

Our significant accounting policies are described in more detail in Note 1 to our consolidated financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involved a greater degree of judgment and complexity.

Assets Held for Sale and Discontinued Operations

A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and when certain other criteria are met. A business classified as held for sale is recorded at the lower of (i) its carrying amount and (ii) estimated fair value less costs to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate.

The results of operations of businesses classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial results. When a business is identified for discontinued operations reporting: (i) results for prior periods are retrospectively reclassified as discontinued operations; (ii) results of operations are reported in a single line, net of tax, in the consolidated statement of operations; and (iii) assets and liabilities are reported as held for sale in the consolidated balance sheets in the period in which the business is classified as held for sale.

We concluded the assets of our European businesses and our Coweta County, Georgia business, met the criteria for classification as held for sale as of December 31, 2024. Additionally, we concluded that the ultimate disposal will represent a strategic shift that will have a major effect on our operations. As such, the results of our European businesses and Coweta County, Georgia business are presented as discontinued operations herein.

We calculated an estimated loss on classification to held for sale of $312.9 million to reflect the write-down of the carrying value to fair value less costs to sell. The fair value was determined by using market participant assumptions. Costs to sell included incremental, direct costs incurred to transact the sale. Refer to Note 16 Discontinued Operations for further details.

Business Combinations

We allocate the fair value of purchase consideration to the tangible and intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. The determination of fair values of assets acquired and liabilities assumed requires estimates and the use of valuation techniques when a market value is not readily available. Such valuations require our management to make significant estimates and assumptions, especially with respect to intangible assets. Significant judgment was exercised in estimating the fair value of the customer contracts acquired, which involved the use of estimates and assumptions with respect to the amounts of merchant revenues and discount rates. Our management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is allocated to goodwill. If we obtain new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to fair value of the purchase consideration and the allocation of purchase consideration to all tangible and intangible assets acquired and identified and liabilities assumed.

Impairment of Long-Lived Assets

We review our property, plant, and equipment, right-of-use asset under operating leases, definite lived intangible assets, and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. We measure recoverability by comparing the carrying amount to the future undiscounted cash flows that the asset is expected to generate. If the asset is not recoverable, its carrying amount would be adjusted down to its fair value.

We estimate the recoverability of long-lived assets by applying an income approach, using estimated cash flows expected to be realized from the use of the assets. When appropriate, we may apply a scenario-based framework that incorporates various scenarios weighted based on the expected likelihood of occurrence. Asset impairment evaluations are, by nature, highly subjective. The critical estimates are significant unobservable inputs, which are based on numerous estimates and assumptions about future operations and market conditions including but not limited to those such as revenues, costs of goods sold, and scenario probabilities.

An impairment loss is measured by the amount by which the carrying value of an asset group exceeds its fair value. We estimate fair value through valuations obtained from third-party brokers or by using other valuation techniques.

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Recent Accounting Pronouncements

See Note 1 – Summary of Significant Accounting Policies in the accompanying consolidated financial statements for information concerning new accounting standards and the impact or expected impact of the implementation of these standards on our financial statements.