SolarEdge Technologies (SEDG) Risk Analysis

National, state and local government bodies in many countries, including the United States, have provided incentives in the form of rebates, tax credits, tax incentives and others to manufacturers, system owners, distributors and installers of solar PV systems and battery energy storage systems. In August 2022, the IRA was signed into federal law. The IRA provides for, among other things, certain incentives, including certain tax credits for solar energy, that are significant to the Company and its U.S. based customers. On July 4, 2025, the OBBB was enacted into law, introducing amendments to clean energy tax credits contained in the IRA. The OBBB accelerates the phase-out timeline for certain credits and imposes new eligibility criteria. The Company has invested significant  resources in establishing our manufacturing presence in the U.S. to benefit from the incentives available under the IRA, including incentives and tax credits available to us for manufacturing in the U.S. and credits and incentives available to certain of our US customers. The Company established manufacturing capabilities in the U.S. in 2023 and further expanded such capabilities in 2024 and 2025. Moreover, we incorporate into our planning and agreements with our customers and suppliers certain assumptions regarding U.S. tax incentives. Material changes thereto could adversely affect our revenue, our eligibility for certain tax credits, tax credits available to our customers, competitiveness and demand for our products and our financial condition. Section 45X of the Code, as enacted by the IRA, offers Advanced Manufacturing Production Tax Credits ("AMPTC"s) that incentivize the manufacturing of eligible components within the U.S. Of particular relevance to the Company are the tax credits that we generate as a result of rules concerning the qualification and measurement of AMPTCs to Residential Inverters, Commercial Inverters and DC-Optimized Inverter Systems that we manufacture in the United States. The OBBB does not shorten the term of such Section 45X credits. Among other changes, the OBBB shortens the term of the investment tax credit and production tax credit under Section 48E and 45Y of the Code, available to the Company's customers, who are engaged in third-party ownership ("TPO") models, such as residential solar leases and power purchase agreements, and commercial solar customers and developers, shortening the end date from 2034 to 2027. The OBBB also includes a 12-month window in which such customers can begin construction, giving them four years to complete their projects. Projects begun after twelve months from enactment of the OBBB must be placed in service by December 31, 2027, to receive the credit. The OBBB also amends the domestic content bonus credit rules for Section 48E projects: Projects commencing construction after June 16, 2025 must meet a 45% domestic cost threshold, up from 40%, and the threshold thereafter increases on an annual basis until 2029. The OBBB eliminates the individual residential tax credit under Section 25D of the Code at the end of 2025. These changes may negatively impact the eligibility of our customers and individuals to obtain tax credits, which may negatively affect the overall demand for our products. The OBBB has also introduced new Foreign Entity of Concern ("FEOC") requirements for Sections 45X, 45Y, and 48E of the Code. These restrictions will require threshold percentages of non-FEOC material that increase over time, beginning in 2026. On July 7, 2025, the President issued an Executive Order titled "Ending Market Distorting Subsidies for Unreliable, Foreign Controlled Energy Sources." This directive instructs the U.S. Department of the Treasury to issue revised guidance within 45 days. There are multiple areas of the OBBB that require the U.S. Treasury Department to provide guidance, and such guidance may impact beginning of  construction requirements applicable to our customers or create challenges for the Company or its customers to meet the FEOC requirements. If we are unable to meet the requirements this may adversely affect our  revenue, our or our customers eligibility to obtain  certain tax credits, the overall demand for our products, our results of operations and cash flows. Any unfavorable regulatory treatment, or guidance, expiration of or changes to the benefits made available, which we relied upon in structuring certain projects and investments, or any adverse impacts on our ability to ramp up production in the U.S. in a timely manner to benefit from the incentives available under the IRA and the OBBB, could adversely impact our business and financial condition.