晶科能源 (JKS) 2010 Q2 法說會逐字稿

Hello, ladies and gentlemen and thank you for standing by for JinkoSolar Holding Co.

Ltd.

Second Quarter 2010 Earnings Conference Call.

At this time all participants are in listen-only mode.

After Management's prepared remarks there will be a question-and-answer session.

As a reminder, today's conference call is being recorded.

I would now like to turn the meeting over to your host for today's call, Ms.

Yvonne Young, JinkoSolar's Investor Relations.

Please proceed, Yvonne.

Thank you, Maria.

Hello everyone.

Thank you for joining us today for JinkoSolar second quarter 2010 earnings conference call, our first earnings conference call as a newly listed public company.

The Company's results were released earlier today and available on the Company's IR website at www.jinkosolar.com, as well as on newswire service.

We have already provided supplemental presentations for today's earnings call, which can also be found on our Company's IR website.

On the call today from JinkoSolar are Mr.

Kangping Chen, Chief Executive Officer, Mr.

Arturo Herrero, Chief Strategy Officer and Mr.

Longgen Zhang, or Sam, Chief Financial Officer.

Mr.

Chen will discuss JinkoSolar's business operations and Company highlights, followed by Mr.

Herrero who will talk about the Company's business strategies.

And then Mr.

Zhang will go through the financials and guidance.

They will all be available to answer your questions during the q-and-a session that follows.

Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties.

As such, our future results may be materially different from the views expressed today.

Further information regarding this and other risks and uncertainties is included in our registration statement on Form F-1 as a mandate and other documents filed with the US Securities and Exchange Commission.

JinkoSolar Holding Co., Ltd.

does not assume any obligation to update any forward-looking statements, except as required under the applicable law.

It is now my pleasure to introduce Mr.

Kangping Chen, CEO of JinkoSolar.

Mr.

Chen will speak in Mandarin and his comments will be translated by his assistant Florine.

Please go ahead, Mr.

Chen.

(interpreted) Thank you, Yvonne.

Welcome everyone and thank you for joining us today for our first earnings announcement as a public company.

The second quarter of 2010 was a historical quarter for our Company, particularly due to our listing on the New York Stock Exchange in May.

Our Initial Public Offering has been a huge success and I would like to thank the investment community for its support.

In the second quarter we continue to deliver strong financial results and value to our shareholder as our net income increased nearly 150%, as compared to the previous quarter.

In addition to realizing our strongest quarter, financial wise, we made substantial progress in transitioning from a wafer manufacturer to a downstream module producer.

This was particularly demonstrated into our second quarter accomplishments.

Firstly, growing global demand for our solar products resulted in record total shipment of approximately 100 megawatts in this past quarter, including 54.3 megawatts of solar module shipments.

We have gained considerable traction in our solar module business since we commenced in August 2009.

Secondly, during the quarter we increased our new solar cell and solar module manufacturing capacities from approximately 200 megawatts each as of the end of last quarter to approximately 300 megawatts each.

As a result, we substantially increased the vertical integration of our manufacturing process.

This allowed us to better control our operational cost, reduce volatility across the value chain and enlarge our margins by driving down our average non-silicon cost and capitalizing on economics of scale.

Our competitive advantage in cost, in combination with the resources, and proceeds from our IPO positions us strongly as we look to become a leader in the solar industry.

Throughout the quarter we maintained focus on driving down our average cost, as well as improving the efficiency of our solar products and this resulted in a record gross margin of 26.9%.

Our success in driving down our average cost has allowed us to improve our gross margin despite a slightly declining average selling price of our module products from $1.71 in the previous quarter to $1.70 as a result of a decline in the euro related to the US dollar.

We do see an upside in our average selling price in the second half of the year, supported by strong market demand and improved sales capabilities.

We are very optimistic about the future growth and are actively exploring new markets, including the US, Canada, Australia, India and Israel.

Although we expect some markets such as Germany to remain stable or slightly decline, we believe we will see an increase in demand in 2010 compared to 2009.

On that note, I would like to pass you over to our CFO, Arturo, who will go into further detail on our business expansion and our current strategies.

Thank you, Mr.

Chen.

From my position as Chief Strategic Officer for JinkoSolar since March this year, I am glad to point out our business strategies as well as highlight some of the achievements realized during the first quarter.

In terms of a strategy, our initial focus has been to develop a strong brand awareness based on our high quality standards, new and technologically advanced equipment, vertical integration and automatic module assembly lines.

Our second focus has been on the rapid market development through diversification and expansion of our business in both consolidated and emerging PV markets covering residential, commercial and utility segments.

Our strategy is to take a local approach in each of the countries where we are doing business.

Third, we continue building a strong partnership, network with distributors, PV developers and EPC contractors across the globe.

Fourth, we are creating value-added differentiation by offering flexibility to our customers, including JinkoSolar branded and OEM white label modules and local services, such as warehouse and logistics solutions.

Lastly, we plan to increase our marketing activities through exhibitions, advertisements, banner marketing and extensive communication.

Our communications are focused on the quality and competitive costs of our products, as well as our reliable service and underlining JinkoSolar's efforts in regard to social responsibility and respect for the environment.

Now I would to provide an update on our second quarter achievements which reflect our strong execution of the strategies I just mentioned before.

During the second quarter we have substantially improved our sales and deliveries across a broad range of markets, expanding step by step our geographical diversification and increasing revenues from both new and established customers in our wafer, cell and module businesses.

In the second quarter, we delivered approximately 30 megawatts of wafers to Asia, including 25% megawatts to the local market in China.

In Europe we delivered approximately 47 megawatts of modules, including 35 megawatts to Germany, with our remaining module shipments sent to the USA and the rest of the world.

During the quarter our sales team signed several important contracts with more than 15 customers, including an important agreement with Enfinity to supply 24 megawatts of solar modules during this year, 2010, and two agreements with two blue chip customers in Germany to supply 60 megawatts of solar modules, also for 2010, mainly for rooftop installations in residential and commercial segments.

With regard to large scale utility segment, JinkoSolar became the exclusive module supplier for Tozzi Renewable Energy's 35 megawatt ground-mounted solar power plant in Emilia-Romagna in Italy, which will be one of the largest projects this year, not only in Italy, but also throughout Europe.

This Tozzi project is an example of the increase of bankability for JinkoSolar modules.

Our factories successfully passed several complete technical due diligence and our financial strength and recent successful listing on the New York Stock Exchange both bolstered our standings.

Besides European and American banks, in the second quarter we became bankable in two major banks in Israel.

Our OEM, or white label business, accounted in Q2 for around 40% of our shipments, lower than in the first quarter and includes contracts with important customers such as IBC, [Margay] and AP Solar.

While our OEM services play a role in our overall business strategy, we are working to enhance JinkoSolar's brand and improve its recognition in order to increase demand from our solar products.

We plan to achieve this by expanding our sales network, investing in marketing activities, improving our services and maintaining a high level of commitment to our customers.

Going forward, we expect our OEM business to account for no more than 20% to 30% of our overall revenues, while our JinkoSolar branded products will serve the majority of our customers.

In line with our commitment to becoming closer to our markets so that we may provide our customers with better service, we have established our European subsidiary and headquarters in Munich, Germany this past quarter.

We have also selected new offices in San Francisco, California and Italy to be opened in the current quarter.

These offices will facilitate the growth of our European and US business by attracting new customers, as well as strengthening relationships with existing customers.

We have continued diversifying our customer base while maintaining existing customers.

So far, we have established a strong commercial agreement with more than 40 customers across more than 15 countries.

Among the biggest customers in the second quarter I would like to mention IBC, Tozzi, Margay, Enfinity and Solar Australia, each of them an important player in its own market, further to underline the quality and reliability of our products.

We are in a strong position to maintain growth as a result of several important agreements with strategic partners, not only for 2010, but also for 2011 in residential, commercial and utility sectors.

In the second quarter, we made significant progress to improve the bankability of our modules.

Our white quality modules are produced at a competitive cost, mainly due to increased vertical integration in our value chain and better control of our cost structure and strong efficiencies.

In previous months, in terms of certification, we obtained the main PV module certification for our products, including TUF and CUL for the North American market.

We are also in the process of receiving additional certifications such as MCS and CQC certificates that would allow us to enter in new countries such as the UK and meet greater market demand.

Now I would like to turn the call over the Sam, who will introduce financial results and guidance for the third quarter and full year 2010.

Thank you, Herrero.

Good morning and good evening to everyone on the call.

Thank you for being with us today.

Before I go into the line items, let me give you a quick overview of our second quarter performance.

We have achieved very strong second quarter results with almost all of our financial measures reaching historical heights.

Total solar product shipments increased by more than 20.4% and our gross margin continued to improve, increasing from 23.7% in the first quarter to 26.9% in this quarter.

During the second quarter our operating profit increased by 55.2% and net income increased to $26.6 million with fully diluted earnings per ADS of $1.39, which is equal to fully diluted earnings per share of $0.35.

Now let me run through the details of our financial results.

Total solar product shipments in the second quarter were 99.9 megawatts, consisting of 29.6 megawatts of silicon wafers, 16 megawatts of solar cells and 64.3 megawatts of solar modules, an increase of 20.4% over the previous quarter and 190.4% over the same period of last year.

Shipments of solar modules increased significantly while shipments of silicon wafers decreased, reflecting the implementation of our strategy to transition from a silicon wafer manufacturer to the leading vertically integrated solid module manufacturer.

Total revenues for the second quarter of 2010 were $132.8 million, an increase of 64.1% sequentially and 307.1% year-over-year.

The revenue increase was primarily due to increased global demand for our solar products and a significant increase in the shipment of solid modules attributable to our enhanced sales and marketing campaigns.

Second quarter gross margin, gross profit margin was also a record 26.9%, compared to 23.7% for the first quarter of 2010 and 6.7% for the second quarter of last year, even though our ASP slightly declined.

The significant increase was mainly due to our continued improvement in reducing average in non-silicon cost through the increased vertical integration of our production process.

In the second quarter, our average non-polysilicon cost, including depreciation, decreased to $0.83 per watt from $0.88 per watt in the first quarter.

This decrease demonstrates our strong execution capabilities to continuously improve the year rate, our operating efficiency and R&D capabilities.

Our total in-house module cost in the second quarter was further reduced from $1.18 to $1.14 per watt, giving us one of the lowest module manufacturing costs in the industry.

Operating profit in the second quarter of 2010 was $22.2 million, an increase of 55.2%, sequentially, and 680.8% year-over-year.

Total operating expenses in the second quarter of 2010 were $13.5 million.

The sequential increase in operating expenses was due to share-based compensation expenses of $2.4 million, a provision for bad debt of $1.2 million recognized for amounts due from a module customer, a significant increase in shipping and handling costs of $1.7 million and an increase of $1.62 million in materials used for R&D purposes in the second quarter, as compared to the first quarter.

Second quarter operating margin was 16.7%, compared to an operating margin of 17.7% in the first quarter of 2010 and 8.7% in the second quarter of 2009.

We recognized tax expenses of $4.4 million for the second quarter, compared with a tax expense of $1.76 million for the first quarter of this year and no tax expense in the second quarter of last year.

For the full year of 2010 we still expect our tax rate to maintain at 14.2%.

Net income attributable to ordinary shareholders for the second quarter of 2010 was $24.4 million, compared to net income of $6.27 million for the first quarter of 2010, an increase of 286%.

Please note that we benefited from a gain of $11 million as a result of change in fair market value of foreign exchange forward contract derivatives.

This translates into basic and diluted earnings per ADS of $1.40 and $1.39, respectively, for the second quarter of 2010.

Now I would like to move on to the balance sheet.

As of June 30, 2010, we had $81.6 million in cash and restricted cash, compared to $33 million as of December 31, 2009.

The significant increase in cash and restricted cash was primarily due to the Company's IPO proceeds of approximately $59.1 million.

As of June 30, 2010, our working capital balance was $41.5 million and total short-term banking borrowings, including the current portion of long-term banking borrowings were $111.6 million, as compared to $84.4 million of total short-term borrowings as of December 31, 2009.

As of June 30, 2010, we had total long-term borrowings of $51.5 million, our long-term banking borrowings to be repaid in installments until their maturities in 2011, 2012 and 2013.

Capital expenditure in the second quarter of 2010 is $33.6 million, primarily for the addition of new silicon ingot, silicon wafer, solar cell and solar module manufacturing equipments.

We have entered into foreign currency forward contracts which are with local banks to hedge our exposure to foreign currency risks.

In the second quarter of 2010, we recorded in the Company's consolidated financial statements of operating, operations a change in fair market value of forward contract derivatives of $11 million, as a result of the depreciation of the euro and the US dollar against renminbi.

Now, let me turn to our guidance.

For the third quarter of 2010, we expect total solar product shipments to in the range of 100 megawatts to 110 megawatts with module shipments expected to be between 65 megawatts to 70 megawatts.

Total revenues are expected to be in the range of $145 million to $155 million.

We expect to increase our in-house annual silicon ingot, wafer, solar cell and solar module production capacities to approximately 400 megawatts, 400 megawatts, 300 megawatts and 400 megawatts, respectively, by the third quarter of 2010.

We expect our full year 2010 total solar product shipments to be in the range of 395 megawatts to 415 megawatts, with module shipments expected to be between 195 megawatts to 205 megawatts.

We expect full year 2010 revenues to be in the range of $500 million to $525 million.

We expect to expand our annual silicon ingot, silicon wafer, silicon -- solar cell and solar module production capacities to approximately 500 megawatts each by the end of 2010.

At this time we are happy to take your questions.

Operator?

We will now begin the question-and-answer session.

If you wish to ask a question please press star followed by the number one on your telephone keypad and wait for your name to be announced.

If you wish to cancel your request, please press the star key followed by the number two.

Your first question comes from the line of Satya Kumar from Credit Suisse.

Please go ahead.

Yes, hi.

Can you hear me?

Yes.

Hi.

Can you hear me?

Yes, Satya, we can hear you.

Yes, hi.

First off, to the entire Jinko team, congratulations on your successful IPO and very strong results.

I have a few questions.

I was wondering if you could give a sense of the raw material costs you expect for the second half of the year and how we should model gross margins for the second half.

Okay, Satya.

Your question is the raw materials cost for the second quarter then, the forward, going forward in the second half of the year.

For the second quarter, of this quarter, our silicon cost is around -- average purchase cost is around $51 per Q1.

And for the next half of the year, really we are near -- we see the price is slightly up, so we are expecting for the third quarter maybe around $55.

Then to the fourth quarter we think the price will go down a little.

So it is -- the range maybe is around $53, $54 to $55, $56.

Very good.

Now that you have completed your IPO, I would expect you would get some reduction in the SG&A.

I was wondering how we should model OpEx in the second half, if you can break out the things, R&D and SG&A.

And also, if you can give the correct share count we should use for Q3.

And what -- do you have any plans for expanding capacity beyond the 500 megawatts by you looking at 2011?

For your first question is about SG&A.

And for this quarter our SG&A is a little high compared the percentage.

The reason is, why really is we mentioned that on my speaking is that the option, employee-based compensation, share-based compensation because we are adopting accelerated method, so we recognized almost $2.4 million for this quarter.

And this is including before the IPO and after IPO and to the end of this quarter.

And for the third quarter our -- the share-based compensation will reduce to only $700,000.

And the -- for the fourth quarter we are -- we continue reduce to $600,000.

And speaking of our R&D, you can see that in this quarter we used -- in the IPO proceeds almost we spend $1.2 million on R&D.

We will continue at the same level to a steady R&D.

And what is the --?

The share count for Q3?

The FMD -- for the capacity beyond the 500 megawatts?

Is that what I say the beyond?

What is the second half of the question?

I'm sorry, Satya.

No.

I had a couple questions.

But I had, what was the correct share count for Q3 and what is the capacity beyond 500 megawatts?

Do you have any plans in 2011?

Share compensation, I already said that.

Share compensation expense for Q3 is $700,000.

No, share count, so --

Share count?

Share count should be, remain no change.

The only diluted, fully diluted just that you add a couple hundred shares.

It is not too much.

It is not a material effect.

And for your question on that 2011 capacity, we give guidance for the rest of the year.

If our organic growth will continue to grow at the year's pace, operational organic growth, we think next year we will continue to grow at the capacity around 20% to 30%.

Thank you very much, and congratulations on a strong quarter.

Thank you.

Thank you.

Your next question comes from the line of Mark Bachman from Auriga.

Congratulations on your first quarter out of the box here with your very strong results.

It is a welcome surprise here.

I want to go back to Satya's question on the share count.

You went public in the middle of Q2, right in the middle of May, and so you only had to report a partial share count in Q2 of about, if we look at it on the ADF numbers about, what is it, about 17 million shares.

And if you look on the ordinary shares it is about 70 million.

We need to clarify this as to what the share count is going to be for Q3 because it will make a meaningful difference to your EPS.

So the question then is what is the full diluted share count for Q3?

Shouldn't it be closer something like 92 million ordinary shares?

With the average for now in Q2 is 69 million shares.

So it is easy for you to divide by four.

It is around 20 million, less than 22.5 million is the ADS by the end of Q2.

For Q3 it should be the same, just including partial is the stock option vested.

But that is only a small faction.

It is not too much.

Okay.

So Q3, let me get a calculation.

It will be around 21.73 million ADS.

Perfect.

That is the number that we are looking for, 21.73 million.

Thank you.

Can we talk about your 2010 guidance a little bit here?

You are roughly guiding to 400 megawatts in total shipments, but you are only guiding to about 200 megawatts in module shipments.

It was my understanding that you should be winding down the remainder of your wafer contracts, and so I am hoping that you can give us some color then on the other 200 megawatts that you expect to ship this year from that total 400 megawatt guidance.

Mark, if you looked at -- our second quarter shipment is almost -- total shipment is 100 megawatts and of which the module shipments is -- the module is around 55 -- the shipment is around 54 megawatts.

So, also on the Q1 all the shipments is 11 megawatts.

So we were in the Q3 and the Q4 we will ship more.

We give you guidance is around 65 to 70, so total shipments for the module, for all this year is around 200, I give you the guidance, is around 200, I give you the guidance, is around 195 to 205 megawatts.

The rest of them we are going to mix the products to sell wafer and cell.

Basically, for the third quarter and the fourth quarter we still will sell partially the wafer because the wafer capacity still is the higher than, the cell and the module, essentially higher than the cell.

Okay.

So, then if we think about your long-term strategy here to build a fully integrated model, it would be my impression that you wouldn't be selling, once you fulfill your wafer contracts this year, that you wouldn't be selling any wafers next year.

Is that a valid assumption to assume that you won't be selling any wafers or cells next year into the open market?

It is almost correct.

By the end of this year we will reach nearly 500 megawatts fully integrated, but if we are continuing expansion, so it is always now a balance between the wafer sale and the module.

So we always maybe go into expansion of the wafer first, so we always have extra wafer capacity.

So maybe we still see some partial, the wafer.

But the majority for the next year, the majority of our mixed products should be more than 90% is the module.

Excellent.

And then, just my last question on CapEx, if you can kind of give us your thoughts on just initial capacity expansion for 2011 in terms of megawatts, and then how do we think about that in terms of capital expenditures this year versus what you might spend next year and then your thoughts also on how you might be able to fund that, those capital expenditures.

This is a good question.

Actually, for this year, for the first half of this year we already spent around $59.6 million on the CapEx.

And we are planning to spend $111 million in the second half of the year.

So for this year we were total expenses on the CapEx is around $170 million and the -- basically to increase our capacity by the end of this year nearly 500 megawatts each on the ingots, wafer, cell and the module.

And, organically, we will continue to expansion for the next year if organically we continue to spend around let's say in a more than $100 million.

I cannot give you the precisely figure, but if we are going to by the end of next year to increase our capacity to let's say 700 megawatts, we still have to put more on the CapEx.

That is what will come, OpEx on the operating side, yes.

Excellent.

Now I can say that --

Excellent.

-- continuing equity fund earning.

Okay.

Thank you so much and, again, congratulations on a great quarter.

Thank you, Mark.

Your next question comes from the line of Dan Ries from Collins Stewart.

Please go ahead.

Thanks for taking my question, great first quarter out of the gate.

A couple questions here, the currency, you had a large gain this quarter.

Would you expect that to be a gain or a loss in the third quarter if the euro were to stay at about the current levels?

And could you perhaps tell us what portion of your sales during the quarter occurred in euros versus US dollars versus RMB?

Dan, this is a good question.

Okay, by the end of the Q2 we still have forward, in the foreign exchange currency forward contracts outstanding for the US dollar against renminbi is $388 million against renminbi.

Then we also have forward contracts EUR89 million against renminbi.

This is covered from July 1 of this year to the end of next year.

The foreign exchange forward, the fixed rate, average fixed rate for US dollar to renminbi is 6.71.

For the euro the renminbi is 8.82.

These forward -- because you see this all depends on the foreign exchange, fair market value of foreign exchange, the change on their fair market value.

It all depends on the currency, the variation between the foreign exchange between the euro, US dollar against renminbi.

If by the end of third quarter the euro and the US dollar against renminbi continued to appreciation, then the situation will regress.

We have to recognize some loss on the fair market value change.

If the euro and the US dollar to depreciation against renminbi compared between those two periods, then we still continue to recognize some revenue.

So this is really a function of the forward contracts, the currency going, but a certain recoveries and those can recover at a high foreign exchange rate.

We will recognize some gains on the calculation in our regular in the foreign exchange gains.

That is another item on the -- between the operating income and income before tax.

Okay.

Just, if you could, maybe what portion of total sales occurred in euros during the quarter, during Q2?

Q2?

I didn't have the figure on hand, but I can tell you that we, right now our current US foreign exchange cover -- the US revenue is around 35%.

The euro is around 83% recovered.

Okay.

And then just a question on R&D with the big jump this quarter, was -- did you hire a lot of people?

Maybe if you could tell us the personnel in R&D today versus pre-IPO, or was there a lot of external spending or something to get the rise of the $2 million, sequentially?

On the head, sorry -- it was -- let me, Dan, just translate into some.

Okay.

Dan, the majority cost is the -- we buy some materials, equipment and machines for the R&D center --

Okay.

-- that is almost for this quarter almost is -- it is around $1.7 million for the second quarter.

Okay, great.

Well, thank you very much.

Your next question comes from the line of [Philip Shin] from Roth Capital Partners.

Please go ahead.

Good morning, everyone and good even to those of you in Shanghai.

I wanted to start by asking if you could walk us through your Q2 non-silicon costs for wafer, cell and modules.

Philip, let me just go through the cost and so for the Q2 non-silicon costs we are total $0.83 and the sales cost is $0.27.

And I am sorry.

The wafer is $0.27.

The cell is $0.18 and the module is $0.37.

Great.

And then, what do you guys expect perhaps in Q3 or the back half of this year?

We will continue to work on that.

Our target in Q4 is $0.79.

Okay.

And as you guys look forward to 2011, I am -- you are having conversations now with potential customers and perhaps even locking down some contracts.

Can you give us a sense for what 2011 ASPs might look like and what they are looking like versus ASPs today?

Okay, this is Arturo.

I will answer your question.

Mainly from our strategy point of view we are now conducting -- our sales department is in process of negotiation for contracts for 2011.

We have the advantage to leverage the capacity available that we have for the end of the year in order to secure these contracts for next year.

So, in terms of contracts, already we have more than 200 megawatts in our pipeline for 2011.

But of course the price is something that we cannot lock until we have a little bit more visibility on which is the fitting tariff in certain of the markets that is still is in negotiation.

So, our expectations this year, as were mentioned before, is that we will see a slightly reduction in the ASP by Q4, not before.

And then, for next year, probably we will be seeing a reduction on the ASP.

Our positioning is strong in order to get market share during next year, hence to our cost structure.

Okay.

From some of the other companies I am speaking with it sounds like ASPs in 2011 might be in the direction of $1.50 to $1.65 per watt.

Does that sound kind of in line with what you guys are experiencing as well?

Yes.

Of course, it depends on quarter-by-quarter because, as you know, they have some market very strong in Europe like Italy that the reduction on this actually is becoming lower every quarter.

So still Q1 and Q2 still is very strong compared to Q3 and Q4.

Okay, great.

And can you just give us, or walk us through, your overall outlook for 2011?

In terms of sales expectations?

That's right.

Yes.

As I told you before, we already lock 200 megawatts roughly, and the prices now we have more than five months to close these contracts into fixed prices.

Okay.

And in some of your materials in the past you have talked about having silicon utilization be about 6 grams per watt.

You are shooting to get that lower.

Can you give us a sense for how much lower that could go perhaps this year and even into next year?

Philip, let me give you some figures.

In Q1 our average silicon consumption is 6 grams per watt.

For Q3, Q2, actually, they are only 5.9, reduced to 5.9 grams per watt.

So basically we are nearer -- the average purchase price for silicon is $51, so for Q2 our silicon cost is $0.31 per watt.

For the second half of this year, we continue estimating, planning it is 5.9 grams per watt.

Okay, great.

Thanks very much.

Once again if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced.

Your next question comes from the line of Gary Hsueh from Oppenheimer & Co.

Please go ahead.

Great.

Thank you for taking my question and another round of congratulations for a successful US listing, and welcome.

Thank you.

Great.

Quick question here -- as you looked at 2011 and strategically positioning yourselves for perhaps what might be a little bit choppier, 2011, could you discuss where your efforts are in terms of bankability and achieving listed status with financing institutions?

I saw that you did a relatively good job in Belgium here in netting the Enfinity deal.

Anything else in the hopper here and what kind of efforts or what kind of holes do you look to fill in terms of bankability for 2011?

I have got a few more follow-ups as well.

Yes.

Thank you for this first question.

We feel really comfortable on this situation right now.

It has been a very good quarter for the Company in terms of approaching the banks with certainly very good names supporting us.

So contracts like, as you mentioned, Enfinity, or especially Tozzi in Italy that we announced in our road show, it is a 35 megawatt project in one sole site with JinkoSolar brand modules, so to get these projects, this scale utility projects, we have mainly three banks supporting us in Italy and we asked two companies to do -- to conducting due diligence, technical due diligence.

So we did report that we backed successfully.

We could convince many of the banks that we have been in touch, not only in Italy, but also in Belgium, as you mentioned before, also in Spain and in Germany.

We have been also conducting different conversations and convincing banks in the United States in order to our current move in selling in USA.

So we can consider that so far we are in the let's say widely of main banks for a lot of utility scale projects.

Okay, great, fantastic.

A few questions here for Sam, Sam I noticed here on the balance sheet that in terms of long-term advances to suppliers that went down considerably on the asset side, my understanding was a lot of that $33 million in Q1 going to $16 million in Q2, a lot of that was with Hoku for polysilicon.

Did you work that significantly down due to some kind of recognition of products and volume coming out of Hoku, or what drove that decline and advances to suppliers and what is the expectation going forward, particularly in regards to the long-term supply contract with Hoku?

Okay, Gary, for the Hoku contracts we still have a prepayment, $20 million.

And as you can see the news, Hoku stays very strong, financially supported by their price majority by Tim Wei, as in one of the biggest Chinese A-listed companies.

So we are very comfortable with Hoku.

They are planning to deliver the polysilicon by the end of this year and we continue working with them, and on the price.

This is one of them.

And the other, prepayments go down in the period because you see we buy materials from some suppliers and reduce the prepayments to improve that.

Okay, fantastic.

And so the expectation is, is that there is roughly around let's say $15 million, or maybe a little bit less than $15 million in terms of prepayments from Hoku that you think you can recognize in terms of volume poly deliveries over the next 12 months?

Is that -- that is pretty much the understanding here?

Yes.

You can estimate it, yes, that way, yes.

Okay, great, fantastic.

And I heard the commentary about CapEx plans and capacity expansion plans for 2011, just wanted to kind of streamline my model here for 2010 in the second half.

Is there any expectation for further debt financing in the second half?

And roughly what magnitude should we expect in terms of incremental debt financing for the second half?

Basically right now we see our planning for the second half for the CapEx, also the organic cash from operating and we do not think we are to increase the borrowing dramatically or materially.

Today, basically by the end of the Q2 we still have banking facilities around RMB690 million available.

So what I want to say is we may be slightly increase but we are not increase a lot.

So, did that -- is that to answer to your question?

Yes, it does, Sam.

Thank you.

Congratulations to everybody.

Thank you very much.

Operator?

Again, thank you for joining us today.

If you have any further questions, please do not hesitate to contact us.

You will find all the contact details on our Company's IR website at www.jinkosolar.com.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.