Fluence Energy, Inc.

Previous wording

There have been no material changes with respect to our risk factors previously disclosed in our 2024 Annual Report and in our Quarterly Report on Form 10-Q for the fiscal period ended December 31, 2024 filed with the SEC on February 10, 2025 (the “First Quarter Report”), other than as set forth below. You should carefully consider the risks described in Item 1A. "Risk Factors" of our 2024 Annual Report, Item 1A. “Risk Factors” of our First Quarter Report, and the risk factors below along with our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before making an investment decision. Our business, financial condition, and results of operations could be materially and adversely affected by any of these risks or uncertainties.

Current wording

There have been no material changes with respect to our risk factors previously disclosed in our 2024 Annual Report, other than as set forth below. You should carefully consider the risks described in Item 1A. "Risk Factors" of our 2024 Annual Report and the risk factors below along with our unaudited condensed consolidated financial statements and the related notes, as well as our other public filings with the SEC, before making an investment decision. Our business, financial condition, and results of operations could be materially and adversely affected by any of these risks or uncertainties.

Previous wording

Our business and customer demand for our offerings depends in part on government incentives and/or regulations relating to or mandating the use of renewable energy and/or energy storage. The reduction, elimination, modification, expiration, or determination of inapplicability of such government incentives or regulations could reduce customer demand for our energy storage solutions, which could lead to adverse effects to our business, operating results, and cash flows.

Current wording

Our business and customer demand for our offerings depends in part on government incentives and/or regulations relating to or mandating the use of renewable energy and/or energy storage. The reduction, elimination, modification, expiration, or determination of inapplicability of such government incentives or regulations or the potential of any such reduction, elimination, modification, expiration, or determination of inapplicability of government incentives or regulations has and could in the future impact demand for our energy storage solutions, which could lead to adverse effects to our business, operating results, and cash flows.

Previous wording

Federal, state, local, and foreign government bodies provide incentives and/or regulations relating to mandating or encouraging use of renewable energy and/or energy storage to owners, end users, distributors, system integrators, and manufacturers of renewable energy and energy storage products and solutions to promote renewable electricity and energy storage in the form of rebates, tax credits, other financial incentives, procurement requirements and market structures. The range and duration of these incentives and regulations varies widely by jurisdiction. Our customers typically use our energy storage solutions for grid-connected applications wherein power is sold under a power purchase agreement or into an organized electric market. The reduction, elimination, modification, expiration, or determination of inapplicability of government incentives or regulations related to mandating or encouraging the use of grid-connected renewable electricity and/or energy storage may negatively affect the competitiveness of our offerings relative to conventional renewable sources of electricity and could harm or halt the growth of our industry and our business. These incentives and/or regulations may expire on a particular date, end when the allocated funding is exhausted or be reduced or terminated as renewable energy adoption rates increase or as a result of legal challenges, the adoption of new statutes or regulations or changes to existing regulations, new regulatory guidance, or the passage of time. Reductions, modification, terminations, or determination of inapplicability of government incentives and/or regulations may occur without warning. There is no guarantee that such policies, regulations, and incentives will continue to exist in current form, if at all. The reduction, modification, elimination, or expiration of such government incentives and/or regulations or determination of inapplicability of such government incentives or regulations could reduce customer demand for our offerings, lead to a loss of customers and potential customer projects, and could harm our business, operating results, and cash flows.

Current wording

Federal, state, local, and foreign government bodies provide incentives and/or regulations relating to mandating or encouraging use of renewable energy and/or energy storage to owners, end users, distributors, system integrators, and manufacturers of renewable energy and energy storage products and solutions to promote renewable electricity and energy storage in the form of rebates, tax credits, other financial incentives, procurement requirements and market structures. The range and duration of these incentives and regulations varies widely by jurisdiction and type of asset involved. Our customers typically use our energy storage solutions for grid-connected applications wherein power is sold under a power purchase agreement or into an organized electric market. The reduction, elimination, modification, expiration, or determination of inapplicability of government incentives or regulations related to mandating or encouraging the use of grid-connected renewable electricity and/or energy storage or the potential of any such reduction, elimination, modification, expiration, or determination of inapplicability of government incentives or regulations has and may in the future negatively affect the competitiveness of our offerings and has impacted and may in the future impact the growth of our industry and our business. Such government incentives and/or regulations may expire on a particular date, end when the allocated funding is exhausted or be reduced or terminated as renewable energy adoption rates increase or as a result of legal challenges, the adoption of new statutes or regulations or changes to existing regulations, new regulatory guidance, or the passage of time. Reductions, modification, terminations, or determination of inapplicability of government incentives and/or regulations may occur without warning. There is no guarantee that such policies, regulations, and incentives will continue to exist in current form, if at all. The reduction, modification, elimination, or expiration or the potential of any such reduction, elimination, modification, expiration, of such government incentives or regulations or determination of inapplicability of such government incentives or regulations has impacted and may in the future impact customer demand for our offerings, may lead to a loss of customers and potential customer projects, and has and may in the future harm our business, operating results, and cash flows.

Previous wording

For example, in August 2022, the United States passed the Inflation Reduction Act of 2022 (the “IRA”), which includes incentives that support the adoption of energy storage solutions and services, including the “technology neutral” Investment Tax Credit (ITC) and Production Tax Credit (PTC) for projects placed in service after calendar year 2024, and changes to the non-“technology neutral” ITC and PTC for projects that started construction prior to the end of calendar year 2024 and are placed in service after calendar year 2022. The ITC is available for investments in a qualified storage facility, a qualified renewable energy and storage facility, or a qualified renewable energy facility, and the PTC is available for investments in a qualified renewable energy and storage facility or a qualified renewable energy facility. Prevailing wage and apprenticeship requirements apply to receive the full ITC and PTC value, and the credit value can be further increased if the project also qualifies for the domestic content bonus credit, the energy communities bonus credit, or the low-income bonus credit (only projects less than 5 megawatts alternating current are eligible for the low-income bonus). The IRA also includes a manufacturing production tax credit for specific renewable energy and battery storage related products and components manufactured in the U.S. To date, the IRA regulations and guidance issued by the U.S. Department of Treasury and Internal Revenue Service associated with these various tax credits, including but not limited to the ITC/PTC, ITC/PTC prevailing wage and apprenticeship requirements, bonus credits, and manufacturing production tax credit, have provided substantive clarity; however, there continues to be some uncertainty on certain aspects of the IRA and the related guidance as well uncertainty relating to potential future changes to the IRA. Such uncertainty has in the past caused certain customers to take an extended period to evaluate, negotiate, and enter into a energy storage project and may cause customers to do so in the future or may cause customers to delay projects as they navigate such uncertainty regarding the IRA and the related guidance as well as uncertainty relating to potential future changes to the IRA, which could have a material negative effect on our results of operations.

Current wording

For example, in August 2022, the United States passed the Inflation Reduction Act of 2022 (the “IRA”), which included incentives that supported the adoption of energy storage solutions, including a new “technology neutral” Section 48E investment tax credit (the “ITC”) and Section 45Y production tax credit (the “PTC”), changes to the previous Section 48 non-“technology neutral” investment tax credit and Section 45 production tax credit, and a new Section 45X advanced manufacturing production tax credit (the “AMPC”). On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law, which significantly modified certain provisions of the IRA, including those related to energy storage. The OBBBA includes long-term continued availability of the ITC for energy storage projects and the AMPC for cells, modules, and inverters in energy storage systems. Certain tax credits, notably including the ITC for storage, will begin to phase down for projects beginning construction after 2033. The prevailing wage and apprenticeship requirements enacted under the IRA continue to apply under the OBBBA in order for the project owner to receive the full ITC value and the credit value can be further increased if the project owner also qualifies for a domestic content bonus credit and energy communities bonus credit. The OBBBA amended the provisions of the domestic content bonus credit for the ITC such that the project owner now must achieve higher minimum domestic content thresholds. In addition, the OBBBA amended the ITC and AMPC such that there are new foreign entity of concern (“FEOC”) requirements on such tax credits, which are intended to deny tax credits to projects that are owned or controlled by certain foreign entities, or that source components from or make payments to such entities, including, but not limited to, Chinese entities. There is continuing uncertainty on certain aspects of the IRA and related guidance and the OBBBA and forthcoming related guidance. Such uncertainty related to the IRA has in the past caused certain customers to take an extended period to evaluate, negotiate, and enter into energy storage arrangements, which has impacted our business and results of operations. Current uncertainty related to changes imposed by the OBBBA may in the future similarly cause customers to delay contracting decisions or may cause customers to delay or cancel existing projects as they navigate such uncertainty, which could have a material negative effect on our business and results of operations.

Previous wording

In addition, if we are unable to provide energy storage solutions that qualify our customers for the ITC/PTC domestic content bonus credit under the IRA on the timeline and in such quantities that we currently anticipate, then there may negative impact to our reputation, ability to compete in the market, demand from our customers, and our financial condition. Our competitors may be able to build a more robust domestic supply chain than Fluence and may be able to offer customers U.S. domestic content products in greater quantity and on a speedier timeline than we may be able to if our production of our battery components in the U.S. (e.g., modules, cells, enclosures, thermal management systems, and battery management systems) are delayed or hindered or otherwise negatively impacted. Such impacts would adversely impact our results of operations as well as our brand and ability to compete.

Current wording

If we are unable to provide energy storage solutions that qualify our customers for the domestic content bonus credit under the OBBBA on the timeline and in such quantities that we currently anticipate, then there may be negative impacts to our reputation, ability to compete in the market, demand from our customers, and our financial condition. Our competitors may be able to build a more robust domestic supply chain than us and may be able to offer customers U.S. domestic content products in greater quantity, with better pricing, and on a faster timeline than we may be able to if our production of our battery components in the U.S. (e.g., modules, cells, enclosures, and thermal management systems) is delayed or hindered or otherwise negatively impacted (including through the new FEOC restrictions under the OBBBA). Such impacts would adversely impact our brand and ability to compete, and in turn would adversely affect our results of operations.

Previous wording

The full impact of the tax credits in the IRA, its accompanying guidance, and potential future changes in law that may apply to our business and operations cannot be known with certainty and we may not recognize the full extent of benefits we currently anticipate. We are continuing to evaluate the potential overall impact and applicability of these tax credits and any potential future changes in law on our business and operations. To the extent that any impacts from the IRA tax credits are less beneficial than currently anticipated, it may materially and adversely impact our business, financial condition, and results of operations. For example, there is ongoing discussion in Congress regarding potential changes to the manufacturing production tax credit under the IRA that would place restrictions on eligibility if the taxpayer taking the manufacturing production tax credit is a “foreign entity of concern” (“FEOC”), which may include Chinese and Russian domiciled entities. How a FEOC is defined and what exact restrictions may be required are unknown at this time. If FEOC restrictions relating to the manufacturing production tax credit become law, it may have negative consequences on certain of our U.S. suppliers, due to their respective ownership structure, and/or pricing, depending on the structure and applicability of the restrictions. As a result, the direct risks to our business from FEOC status are uncertain at this time, but any such designation of our suppliers or manufacturers as an FEOC in the future may impact our supplier or manufacturer base and cost structure for components used in our domestic content offerings, may impact eligibility for our offerings to qualify as domestic content under the IRA and qualify for certain tax credits, and may cause us to fail to recognize the currently anticipated benefits of our domestic content production, which would have a negative impact on our business and results of operations.

Current wording

The full impact of the modifications to the tax credits and FEOC restrictions in the OBBBA, its accompanying guidance, and potential future changes in law that may apply to our business and operations as well as our customers’ and suppliers’ businesses cannot be known with certainty and we may not recognize the full extent of benefits we currently anticipate, which may materially and adversely impact our business, financial condition, and results of operations. We are continuing to evaluate the potential overall impact and applicability of these tax credits, as modified by the OBBBA, and any potential future changes in law on our business and operations.

Previous wording

The international markets in which we operate or may operate in the future have or may in the future put in place policies to promote renewable energy, including energy storage. These incentives and mechanisms vary from country to country. In seeking to achieve growth internationally, we have and may make investments that, to some extent, rely on governmental incentives and support in a new market. We may not be able to optimize the benefits offered by these incentives or realize the growth that we expect from investments in the incentives, particularly in relation to competitors whose products might benefit disproportionately from these incentives. There is no assurance that these governments will continue to provide sufficient incentives and support to the energy storage industry and that the industry in any particular country will not suffer significant downturns in the future as the result of changes in public policies or government interest in renewable energy, any of which would adversely affect demand for our energy storage solutions and services.

Current wording

The international markets in which we operate or may operate in the future have or may in the future put in place policies to promote renewable energy, including energy storage. These incentives and mechanisms vary from country to country. In seeking to achieve growth internationally, we have made and may in the future make investments that, to some extent, rely on governmental incentives and support in a new market. We may not be able to optimize the benefits offered by these incentives or realize the growth that we expect from investments in the incentives, particularly in relation to competitors whose products might benefit disproportionately from these incentives. There is no assurance that these governments will continue to provide sufficient incentives and support to the energy storage industry and that the industry in any particular country will not suffer significant downturns in the future as the result of changes in public policies or government interest in renewable energy, any of which would adversely affect demand for our energy storage solutions and services.

Previous wording

Changes in the global trade environment, including the imposition of new tariffs, changes to existing tariffs, and related general economic uncertainty, has impacted our business and operations and may adversely affect the amount or timing of our revenues, results of operations, and cash flows in the future.

Current wording

Changes in the global trade environment, including the imposition of new tariffs, changes to existing tariffs, and related general economic uncertainty, has impacted and may in the future impact our business and operations and has and may in the future adversely affect the amount or timing of our revenues, results of operations, and cash flows in the future.

Previous wording

In early 2025, the United States imposed significant new tariffs on nearly all products and components imported into the United States (including certain materials and components used in our energy storage solutions) and could propose additional tariffs or increases to those already in place, including current high tariffs on imports from China. The exact scope of any such tariffs that will remain in place or ultimately be implemented is not known at this time, and the ultimate impacts on our business and operations is uncertain.

Current wording

Beginning in early 2025, the United States government imposed significant new tariffs on nearly all products and components imported into the United States (including certain materials and components used in our energy storage solutions) from nearly all other countries and may propose additional tariffs, increases, or modifications to those currently in place. These new tariff rates have continued to fluctuate since the time of implementation in early 2025 and the exact scope of any such tariffs that will remain in place or ultimately be implemented is not known and the ultimate impacts on our business and operations is uncertain.

Previous wording

Prior to these most recently enacted tariffs, in May 2024, the Biden administration announced a significant shift in the tariff framework for the energy storage industry. Under this new structure, the Section 301 tariff rate on lithium-ion non-EV batteries imported from China will increase from the current 7.5% to 25%, effective January 1, 2026. This change specifically targeted "batteries" as defined by U.S. Customs and Border Protection, encompassing battery energy storage systems, modules, and certain types of cells, including those used in our energy storage solutions. Under the May 2024 structure announced by the Biden administration, the Section 301 tariff rate on battery "parts"–including separators, electrolytes, cans, and electrodes remains at its current 25% level.

Current wording

Additionally, in May 2024, the Biden administration announced a significant shift in the tariff framework for the energy storage industry. Under this May 2024 structure, the Section 301 tariff rate on lithium-ion non-EV batteries imported from China will increase from the current 7.5% to 25%, effective January 1, 2026. This change specifically targeted "batteries" as defined by U.S. Customs and Border Protection, encompassing battery energy storage systems, modules, and certain types of cells, including those used in our energy storage solutions. Under the May 2024 structure, the Section 301 tariff rate on battery "parts"–including separators, electrolytes, cans, and electrodes remains at its current 25% level.

Previous wording

As of the filing date of this Report, covered imports relevant to our energy storage systems will be subject to the 125% China-specific “reciprocal tariff”, plus the current China-specific 20% “fentanyl-related tariff”, plus the 3.4% base tariff on all countries, plus the applicable Section 301 tariff. We have exposure to these tariffs, as we currently import components, including battery cells from China, into the United States for customers and projects in the United

Current wording

As of the filing date of this Report, covered imports relevant to our energy storage systems will be subject to the 10% China-specific “reciprocal tariff”, plus the current China-specific 20% “fentanyl-related tariff”, plus the 3.4% base tariff on all countries, plus the applicable Section 301 tariff. We have exposure to these Chinese tariffs, as we currently import a number of components, including battery cells from China, into the United States for customers and projects in the United States. We also import other components for our energy storage solutions from other countries as well, including Vietnam and countries in Europe, that are subject to tariff uncertainty and/or increased tariffs from the U.S. over the course of the past year. Retaliatory tariffs imposed by the United States and by other countries in response and the uncertainties surrounding domestic and foreign tariffs have impacted, and could in the future adversely impact, demand for our solutions. A large portion of our current suppliers are located outside of the United States, including certain battery suppliers in China, and there continues to be uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, and government regulations. Changes to tariffs and trade policy have impacted our supply chain and supply chain strategies, both domestically and internationally, in the past, continue to have impacts on our supply chain and supply chain strategies, and may impact our supply chain and supply chain strategies in the future. These changes has had and may in the future have an adverse impact on our results of operations and business.

Previous wording

States. Retaliatory tariffs imposed by other countries and the uncertainties surrounding domestic and foreign tariffs could also adversely impact demand for our products. If we fail to manage these dynamics successfully or mitigate the impact of tariffs, our gross margins and results of operations could be adversely affected. Although we have taken steps to ramp up domestic production of key products and components of our energy storage solutions in the United States to try to mitigate our potential exposure, there is no guarantee we will be able to do so successfully. We have and we may in the future also face unanticipated costs and delays in developing our domestic supply chain, and there is no guarantee we will be able to scale domestic production to the degree both in volume and as quickly as would be required to avoid material adverse impacts to the business and our results of operations from changes in the trade environment.

Current wording

There is no guarantee that the steps we have taken to ramp up domestic production of key products and components of our energy storage solutions in the United States will proceed on the anticipated timeline nor that such steps will successfully mitigate the impacts of any tariffs. We have faced and we may in the future face unanticipated costs and delays in developing our domestic supply chain, and there is no guarantee we will be able to scale domestic production to the degree in regards to volume, quality, and as quickly as would be required to avoid material adverse impacts to the business and our results of operations from changes in the trade environment.

Previous wording

The economic uncertainty created by the rapid recent changes in tariff policy in the United States has and may continue to adversely impact the energy storage market and customer contracting activity. For instance, in response to this tariff-related uncertainty, we have mutually agreed with certain customers to delay entry into new energy storage solutions contracts and to pause active, currently signed contracts that are under project execution. We may also experience cancellation of customers’ orders of our energy storage solutions in the future due to such tariff uncertainty. Customer contracting behavior in response to the tariff-related uncertainty may in turn adversely impact our results of operations in the future.

Current wording

The economic uncertainty created by the rapid recent changes in tariff policy in the United States has impacted, and may continue to adversely impact our customer contracting activity. In response to this tariff-related uncertainty, we have mutually agreed, and may in the future agree, with certain customers to delay entry into new energy storage solutions contracts and to pause active, currently signed contracts that are under project execution until there exists better visibility and certainty on the tariff environment. We may also experience cancellation of customers’ orders of our energy storage solutions in the future due to such tariff uncertainty. Such customer contracting behavior in response to the tariff-related uncertainty has adversely impacted and may in the future adversely impact our business and results of operations.

Previous wording

In addition, currently there are ongoing investigations into certain additional tariffs on specific imports and trade practices that may result in tariffs and/or more restrictive trade duties and restrictions on components for our energy storage solutions that we import into the U.S. from overseas, including, but not limited to, an anti-circumvention and countervailing tariff investigation proceeding before the U.S. International Trade Commission and U.S. Department of Commerce regarding imported graphite active anode material (AAM) utilized in our energy storage solutions. Due to the uncertainty relating to the outcome of these various investigations, we cannot predict the ultimate impact the outcome of these investigations and any resulting tariffs or other trade actions could have to our business, financial condition, and results of operations.

Current wording

In addition, currently there are ongoing investigations into certain additional tariffs on specific imports and trade practices that may result in tariffs and/or more restrictive trade duties and restrictions on components for our energy storage solutions that we import into the U.S. from overseas. For example, there is an active anti-dumping/countervailing (“AD/CV”) proceeding before the U.S. International Trade Commission and U.S. Department of Commerce (“DOC”) regarding Chinese graphite active anode material (“AAM”) imports and downstream imports that utilize graphite AAM, which includes imports utilized in our energy storage systems. On May 20, 2025, there was a preliminary CV determination by the DOC that assigned a CV rate of 11.58%. On July 18, 2025, there was a preliminary AD determination by the DOC that assigned a “separate” AD tariff of 93.5% to certain entities and an adverse AD tariff of 102.72% to entities that are de facto controlled by the government of China. The AD/CV tariff rates and scope of imports subject to the tariffs may change at the final determination by DOC, which is expected on or by December 5, 2025. We may not be able to find alternative sourcing to replace or supplement any affected suppliers in a timely fashion and face higher pricing as a result. We are still assessing the ultimate impact these tariffs could have on our suppliers, our business, our suppliers’ pricing decisions, and are waiting for the final determination from the DOC to be issued later this calendar year. Due to the uncertainty relating to the final outcome of the various investigations, including the AD/CV proceeding described above, we cannot predict the ultimate impact the outcome of these investigations and any resulting tariffs or other trade actions could have to our business, financial condition, and results of operations.

Previous wording

The impact of the new tariffs announced in April 2025 is currently not reflected in our results of operations as of March 31, 2025. These existing or future tariffs or trade policy and resulting economic conditions may materially increase costs of certain components and our inventory costs, may increase our prices and reduce demand for our solutions, has and may further negatively affect our customers, suppliers, and manufacturing partners and their own respective businesses and operations, has and may further require significant attention from our management, and may significantly harm our business, prospects, financial condition, and operating results if we are unable to manage these impacts effectively.

Current wording

The current tariffs and trade policy as well as future tariffs and trade policy and resulting economic conditions as well as tariff uncertainty in the markets in which we operate may materially increase costs of certain components and our inventory costs, has and may in the future impact our strategy, has impacted and may continue to impact demand for our solutions, has affected and may further negatively affect our customers, suppliers, and manufacturing partners and their own respective businesses and operations, has required and may in the future require significant attention from our management, and may significantly harm our business, prospects, financial condition, and operating results if we are unable to manage these impacts effectively.

Previous wording

As of March 30, 2025, we had approximately $400.0 million of indebtedness outstanding under the 2030 Convertible Senior Notes, and no cash borrowings outstanding under the 2024 Revolver (excluding $67.5 million letters of credit outstanding thereunder), with remaining availability of $432.5 million, net of letters of credit issued. All borrowings and obligations under the 2024 Revolver will be effectively senior to our obligations under the 2030 Convertible Senior Notes to the extent of the value of the assets securing such borrowings and obligations, and structurally senior to the 2030 Convertible Senior Notes as the 2030 Convertible Senior Notes are not guaranteed by Fluence Energy, LLC, a borrower under the 2024 Revolver.

Current wording

As of June 30, 2025, we had approximately $400.0 million of indebtedness outstanding under the 2030 Convertible Senior Notes, and no cash borrowings outstanding under the 2024 Revolver (excluding $157.5 million letters of credit outstanding thereunder), with remaining availability of $342.5 million, net of letters of credit issued. All borrowings and obligations under the 2024 Revolver will be effectively senior to our obligations under the 2030 Convertible Senior Notes to the extent of the value of the assets securing such borrowings and obligations, and structurally senior to the 2030 Convertible Senior Notes as the 2030 Convertible Senior Notes are not guaranteed by Fluence Energy, LLC, a borrower under the 2024 Revolver.

Previous wording

Furthermore, if any of the conditions to the convertibility of the 2030 Convertible Senior Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the 2030

Current wording

Furthermore, if any of the conditions to the convertibility of the 2030 Convertible Senior Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the 2030 Convertible Senior Notes as a current, rather than a long-term liability. This reclassification could be required even if no noteholders convert their 2030 Convertible Senior Notes and could materially reduce our reported working capital.