Dr. Shawn Qu, Chairman and CEO, commented, "I am pleased to report another strong set of results for the third quarter. We continued to focus on executing our strategy, overcoming market challenges and delivering long-term returns. During the third quarter, we took a major step forward with the successful pre-IPO equity raising of CSI Solar Co., Ltd. ("CSI Solar"), Canadian Solar's MSS subsidiary, which received overwhelming support and participation from strategic partners as we secured the capital required to expand our capacity with the latest technology. We are well on track to achieve our target of submitting the official IPO application by the second quarter of next year.
"Another highlight from last month was the signing of our first large scale energy storage system supply and service agreement, strongly positioning Canadian Solar in the solar plus energy storage market. We expect energy storage will increasingly contribute to Company revenue and profit starting in 2021, setting the stage to become an important earnings driver going forward. Our integrated business model gives us the competitive advantage to deliver bankable, end-to-end solar plus energy storage solutions, which will unlock further growth opportunities.
"We have also made progress in identifying opportunities in localized large-scale project investment vehicles to hold grid-connected solar, energy storage and other clean energy projects developed by our Energy business, leveraging the successful publicly traded investment fund in Japan, which we have sponsored since 2017. We are targeting to launch similar vehicles in Latin America and Europe within the next 12 to 24 months."
Yan Zhuang, President of CSI Solar Co., Ltd. ("CSI Solar"), Canadian Solar's MSS subsidiary, said, "As solar energy enters a new era of higher growth driven by grid parity and accelerating supply side consolidation, we see a window of opportunity to grow global market share by leveraging our leadership position across premium and distributed generation markets, investing in state-of-the-art and highly cost-competitive capacity, and increasing the level of vertical integration of our manufacturing process to better control manufacturing costs and capture value. This is reflected in our updated capacity expansion plan, which we are already implementing.
"At the same time, we face near-term challenges driven by a confluence of factors, namely, the temporary shortage of raw material supply driving approximately 50% to 100% price increases of critical inputs, such as polysilicon, solar glass and EVA; the sharp increase in shipping costs; and the depreciation of the U.S. Dollar. While we benefit from the sharp recovery of global solar demand since July, this also caused input material shortages. As a result, we are expecting pressure on our short-term profitability. We are taking active measures to mitigate these micro and macro factors. Over the longer term, however, we believe these changes will ultimately favor Canadian Solar as a market leader with a differentiated technological offering, strong brand and market leadership position."
Ismael Guerrero, Corporate VP and President of Canadian Solar's Energy business, said, "While the widespread impact of COVID-19 created project uncertainties, our teams worked relentlessly to support customers, maintain project timelines wherever possible and overcome major challenges, such as substantially securing tax equity for our U.S. projects. We started construction on the Maplewood and Pflugerville projects in the U.S., as well as on the Tastiota project in Mexico. In terms of project sales, we closed various sales across the U.S., Canada, Japan and China. We also continue to expand our high-quality project pipeline. A few days ago, we secured 862 MWp in new PPAs in Brazil and we were awarded 22 MWp in the latest solar auction in Japan, solidifying our leadership position in two key markets. We remain committed to growing our pipeline and will continue to focus on optimizing the use of cash through capital partnerships and partial ownership of select solar and storage projects."
Dr. Huifeng Chang, Senior VP and CFO, added, "We delivered revenue growth and modest underlying profitability during the third quarter. Given strong operating cash generation, the recent convertible bond issuance and MSS pre-IPO equity raising, we have strengthened our capital reserves. This puts us in a financially strong position to manage any unexpected market changes. Our total cash position at the end of September was $1.6 billion, well above our usual average, although we have since deployed some of this cash in support of long-term growth opportunities. As always, we remain disciplined in our capital allocation decisions and will continue to monitor and adjust to market conditions."
Total module shipments in the third quarter of 2020 grew by 33% year-over-year ("yoy") and 9% quarter-over-quarter ("qoq") to 3,169 MW driven by strong global demand growth. Of the total, 278 MW was shipped to the Company's own utility-scale solar power projects.
Net revenue in the third quarter of 2020 grew by 20% yoy and 31% qoq to $914 million. Growth was driven by higher module shipments and project sales, partly offset by a lower module average selling price ("ASP").
Gross profit in the third quarter of 2020 was $178 million, up 21% sequentially. Gross margin in the third quarter of 2020 was 19.5%, compared to guidance of 14% to 16%, and 21.2% in the second quarter of 2020. The gross margin decline was mainly driven by the previously anticipated module ASP pressure and increased manufacturing input costs, but the magnitude of the fluctuations was smaller than expected.
Total operating expenses in the third quarter of 2020 were $119 million, up from $102 million in the second quarter of 2020. The increase was primarily driven by higher research and development spending and increased shipping and handling expenses.
Income from operations in the third quarter of 2020 was $59 million, up 30% sequentially.
Non-cash depreciation and amortization charges in the third quarter of 2020 were $56 million, compared to $48 million in the second quarter of 2020, and $37 million in the third quarter of 2019.
The net foreign exchange loss in the third quarter of 2020 was $13 million, compared to a net loss of $4.5 million in the second quarter of 2020 and a $0.6 million net gain in the third quarter of 2019. The higher foreign exchange loss was mainly due to the depreciation of the U.S. Dollar relative to the Chinese Renminbi.
Income tax expense in the third quarter of 2020 was $21 million, compared to an income tax expense of $9 million in the second quarter of 2020 and an income tax expense of $10 million in the third quarter of 2019. The increase in the tax expense was mainly driven by a $12.6 million withholding tax expense in China related to a $126 million special dividend distribution from CSI Solar to the parent Company in the third quarter.
Net income attributable to Canadian Solar in the third quarter of 2020 was $8.8 million, or $0.15 per diluted share, compared to net income of $20.6 million, or $0.34 per diluted share in the second quarter of 2020.
Net cash provided by operating activities in the third quarter of 2020 was a positive $47 million, compared to $114 million used in the second quarter of 2020.