Fluence Energy, Inc.

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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.

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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.

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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.

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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.

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The new FEOC restrictions apply to virtually all key tax credits under the OBBBA and come in two forms: (i) in tax years beginning after July 4, 2025, the taxpayer taking the tax credit may not be a prohibited foreign entity (“PFE”) or under “effective control” by a PFE and (ii) for ITC projects that begin construction after 2025 and AMPC eligible components that are sold in tax years beginning after July 4, 2025, the project must source a certain percentage of material (which increases over time) from non-PFEs (which is otherwise known as the material assistance component). On July 7, President Trump issued an executive order titled “Ending Market-Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources,” which, among other things, tasked the U.S. Department of Treasury with promptly implementing the enhanced FEOC restrictions established by the OBBBA to ensure FEOC ownership/control and material assistance restrictions are implemented within the compliance timeframe. We believe that under the current language of the OBBBA, which is subject to final rules and further guidance, certain of our US domestic suppliers may be impacted by these new FEOC restrictions. In the event any of our US domestic suppliers is unable to meet the FEOC requirements necessary to qualify for tax credits under the ITC and AMPC by the applicable deadlines set forth under the OBBBA, which remains subject to further implementing regulations and guidance, our reputation, ability to compete in the market, and our financial condition may be adversely impacted. There is no guarantee that the steps, plans, and/or strategy we and our U.S. domestic suppliers are implementing will be successful in mitigating the risks related to the FEOC requirements under the OBBBA, and any further related guidance or interpretation thereof or that any such actions taken to address these FEOC concerns will be implemented and completed prior to applicable compliance deadlines under the OBBBA for the applicable tax credits. Further, there are limited U.S. suppliers for certain components of our domestic content products. If a domestic supplier is unable to provide us with components that are free from any FEOC concerns and we cannot find a substitute source for such components from another U.S. supplier in a timely manner, at a competitive price, or in such quantities that we require that are OBBBA-compliant, then there may be negative impacts on the ability to qualify for the ITC and/or the AMPC and we may be unable to meet obligations under customer contracts for our projects. There would then be corresponding negative impacts to our business, results of operations, and reputation. In addition, there is currently uncertainty on how the FEOC restrictions will be implemented and interpreted by the administration. Forthcoming guidance related to the OBBBA and FEOC requirements from the U.S. Department of Treasury could be drafted in such manner that may be adverse to the Company’s int…

Excerpt shortened here; the source contains the full paragraph.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Risks Related to the 2030 Convertible Senior Notes

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Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition, and results of operations and impair our ability to satisfy our obligations under the 2030 Convertible Senior Notes.

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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.

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We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations, and financial condition by, among other things:

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•making it more difficult for us to satisfy our obligations with respect to our 2030 Convertible Senior Notes and our other debt;

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•increasing our cost of borrowing.

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Any additional indebtedness we incur will heighten the potential for the consequences discussed above and could negatively impact our credit ratings, if any, in the future.

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Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the 2030 Convertible Senior Notes, and our cash needs may increase in the future. In addition, the 2024 Revolver contains and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital, or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

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We conduct all of our operations through our subsidiaries, including Fluence Energy, LLC, and may not be able to receive dividends or other distributions in needed amounts from our subsidiaries; Fluence Energy, Inc. is a holding company.

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We conduct all of our operations through our subsidiaries, including Fluence Energy, LLC; Fluence Energy, Inc. is a holding company. Accordingly, payment of interest or repayment of principal on our indebtedness, including the 2030 Convertible Senior Notes, is significantly dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, interest payment on debt they owe to us (including interest payments on the 2.25% Intercompany Subordinated Convertible Note issued by Fluence Energy, LLC to Fluence Energy, Inc., dated December 12, 2024 (the “Intercompany Convertible Note”)), debt repayment, or otherwise. None of our subsidiaries will guarantee the 2030 Convertible Senior Notes and our subsidiaries will not have any obligation to pay amounts due on the 2030 Convertible Senior Notes or to make funds available for that purpose. Noteholders are not entitled to rights under the Intercompany Convertible Note. Fluence Energy, LLC’s failure to make interest payments thereunder will not itself constitute a default or event of default under the indenture governing the 2030 Convertible Senior Notes. We have pledged our interest in the Intercompany Convertible Note to secure our obligations under the 2024 Revolver, and the Intercompany Convertible Note is subordinated in right of payment to Fluence Energy, LLC’s obligations under the 2024 Revolver and its other indebtedness. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the 2030 Convertible Senior Notes. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the agreement governing our 2024 Revolver limits the ability of certain of our subsidiaries to incur restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. Additionally, the agreement governing our 2024 Revolver limits the ability of Fluence Energy, LLC to pay dividends or make other distributions to us, and substantially limits our ability to prepay or repay the principal amount of the 2030 Convertible Senior Notes with cash, upon conversion, maturity or otherwise. Furthermore, other holders of LLC Interests are entitled to participate pro rata with Fluence Energy, Inc. in dividends from Fluence Energy, LLC. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the 2030 Convertible Senior Notes.

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Higher interest rates could increase the cost of refinancing our indebtedness and could cause our debt service obligations to increase significantly.

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The current high interest rate environment could adversely impact us. If interest rates remain at their current elevated levels or continue to increase, this could adversely impact our ability to refinance existing indebtedness or obtain additional debt financing on acceptable terms or at all. In addition, we expect this refinancing effort will, and future debt refinancings may, increase our debt service obligations as we refinance lower interest rate debt with higher interest rate debt.

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The conditional conversion feature of the 2030 Convertible Senior Notes, if triggered, may adversely affect our financial condition and results of operations.

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In the event the conditional conversion feature of the 2030 Convertible Senior Notes is triggered, noteholders will be entitled to convert the 2030 Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their 2030 Convertible Senior Notes, we may, to the extent permitted by, and subject to compliance with the terms of, the agreement governing the 2024 Revolver and our other indebtedness in existence at such time, settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

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The issuance or sale of shares of our Class A common stock, or rights to acquire shares of our Class A common stock, could depress the trading price of our Class A common stock and the 2030 Convertible Senior Notes.

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We may conduct future offerings of our Class A common stock, preferred stock, or other securities that are convertible into or exercisable for our Class A common stock to finance our operations, fund acquisitions, or for other purposes. The sale of shares of our Class A common stock or other securities that are convertible into or exercisable for our Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. In addition, upon conversion of the 2030 Convertible Senior Notes, we will pay consideration that consists of cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock (together with cash in lieu of any fractional shares, if applicable), at our election. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of Class A common stock or other securities. We have also reserved 9,500,000 shares of our Class A common stock for issuance under our 2021 Incentive Award Plan (the “2021 Equity Plan”).

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The Indenture governing the 2030 Convertible Senior Notes does not restrict our ability to issue additional equity securities. If we issue additional shares of our Class A common stock or rights to acquire shares of our Class A common stock, if any of our existing stockholders sells a substantial amount of our Class A common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our Class A common stock, and, accordingly, the 2030 Convertible Senior Notes may significantly decline. In addition, our issuance of additional shares of Class A common stock will dilute the ownership interests of our existing common stockholders, including noteholders who have received shares of our Class A common stock upon conversion of their 2030 Convertible Senior Notes, and any Class A common stock issued upon conversion of the 2030 Convertible Senior Notes may dilute the interests of our existing common stockholders.

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The accounting method for the 2030 Convertible Senior Notes could adversely affect our reported financial condition and results.

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The accounting method for reflecting the 2030 Convertible Senior Notes on our balance sheet, accruing interest expense for the 2030 Convertible Senior Notes and reflecting the underlying shares of our Class A common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.

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In accordance with applicable accounting standards, the 2030 Convertible Senior Notes are reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the 2030 Convertible Senior Notes, net of issuance costs. The issuance costs are treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the 2030 Convertible Senior Notes. As a result of this amortization, the interest expense that we expect to recognize for the 2030 Convertible Senior Notes for accounting purposes will be greater than the cash interest payments we will pay on the 2030 Convertible Senior Notes, which will result in lower reported income.

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In addition, the potential dilutive shares underlying the 2030 Convertible Senior Notes are reflected in our diluted earnings per share using the “if converted” method. The denominator of diluted earnings per share for the 2030 Convertible Senior Notes is determined by multiplying the principal amount of the 2030 Convertible Senior Notes by the applicable conversion rate for the reporting period. The after-tax interest expense associated with the 2030 Convertible Senior Notes is added back to the numerator of the diluted earnings per share calculation for these purposes. However, if reflecting the 2030 Convertible Senior Notes in diluted earnings per share in this manner is anti-dilutive, then the shares underlying the 2030 Convertible Senior Notes will not be reflected in our diluted earnings per share. The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.

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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.

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Provisions in the 2030 Convertible Senior Notes and the Indenture governing the 2030 Convertible Senior Notes could delay or prevent an otherwise beneficial takeover of us.

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Certain provisions in the 2030 Convertible Senior Notes and its Indenture could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a “fundamental change”, then noteholders will have the right to require us to repurchase their 2030 Convertible Senior Notes for cash. In addition, if a takeover constitutes a “make-whole fundamental change” (as defined in the Indenture), then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the 2030 Convertible Senior Notes and the Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our Class A common stock may view as favorable.

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The capped call transactions may affect the value of the 2030 Convertible Senior Notes and our Class A common stock.