晶科能源 (JKS) 2010 Q4 法說會逐字稿

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

Fourth Quarter and Full Year 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 is being recorded.

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

Yvonne Young, JinkoSolar's Head of Investor Relations.

Please, proceed, Yvonne.

Thank you.

Hello, everyone.

Thank you for joining us today for JinkoSolar's fourth quarter and full year 2010 earnings conference call.

The Company's results were released earlier today and are available on the Company's IR website at www.jinkosolar.com, as well as on news wire services.

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

On the call today, from JinkoSolar, Mr.

Kangping Chen, Chief Executive Officer, Mr.

Arturo Herrero, Chief Marketing Officer, and Mr.

Longgen Zhang, 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, who will go through the financials and guidance.

They will all be available to answer your questions during the Q&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 A-1, as amended, 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 applicable law.

It's now my pleasure to introduce Mr.

Kangping Chen, CEO of JinkoSolar.

Mr.

Chen will speak in Mandarin.

I will translate his comments into English.

Please, go ahead, Mr.

Chen.

(interpreted) Thank you, Yvonne.

Hello, everyone.

Thank you for joining us today.

We delivered another set of record results in the fourth quarter of 2010, with revenues and shipments significantly beating guidance and net income increasing more than 40%, sequentially.

We continue to focus on our solar module business to meet strong market demand, resulting in record solar module shipments of 111.6 megawatts in the fourth quarter, compared to only 13 megawatts in the fourth quarter of 2009.

Full year 2010 total solar shipments reached 480.3 megawatts, up 116.3% from 2009.

Continuing to capitalize on the strong market demand of 2010, we increased our solar cell and solar module capacities in the fourth quarter to achieve vertically integrated capacity of 600 megawatts each for solar module, solar cells, and silicon wafers and ingots.

Vertical integration, a systemized capacity expansion, has been management's vision for some time now, and we are proud of our achievement.

This accomplishment reflects the strong execution capabilities of our management team.

The increased vertical integration in 2010 has provided cost efficiencies and improved margins that filter through to our bottom line, which, with full net income growth of over 900% year over year.

Throughout 2010, we maintained our focus on three significant areas, including diversifying our customer base, enhancing our product quality and working efficiency, and continuing to improve our cost structure.

I am pleased to say that we made significant progress in each of these areas.

Our dedicated sales and marketing teams, which have new offices in Munich and San Francisco, established a number of long-term partnerships with leading solar companies in Europe and North America.

At the same time, we have also captured opportunities in such fast growing markets as Australia, Israel, and India.

Arturo will elaborate on our achievements on strengthening our sales and marketing efforts in 2010 and discuss our initiatives and dynamics in some key markets for 2011 later on in his speech.

In addition to expanding our sales network, we continued to improve product quality, while lowering costs, to maintain our position as a leading low cost solar company.

It's worth mentioning that despite that we have relatively short history to our peers in solar cell and solar module manufacturing, JinkoSolar's products are recognized as high quality, all with sustainable performance and reliability, by system installers and our customers, who recognize -- categorize Jinko as a tier one player, not only due to our faster than expected expanded capacity, as mentioned, but also, due to our product quality.

Since early 2010, we have increased our mono-crystalline and multi-crystalline solar cell efficiencies, from 16.5% and 15% in 2009, to 18% and 16.8%, respectively, and we expect to recognize additional efficiencies through our partnership with Innovalight.

At the same time, we are investing in new R&D initiatives, which we will update you on in the future.

Our vertical integration and improvements in technology and operating efficiencies helped us reduce our non-silicon cost from $0.89 per watt at the end of 2009 to $0.75 per watt at the end of 2010, which is another testament to our execution capabilities.

We expect additional cost reductions in 2011 by lowering manufacturing costs while improving product quality.

We have maintained our position as a leading low cost solar Company.

Our successful IPO and follow-on offering in 2010 not only supported our operational improvements, but also significantly increased our brand awareness and helped us to increase our market share, strengthen our balance sheet, and improve our bankability.

Looking to 2011, despite concerns over the PV market, we continue to see strong pulling effect in the amount, due to the expectation of feed-in tariff reduction in Germany and Italy.

We expect continued strong momentum in the first half of 2011, and we are seeing more orders flowing in the second half.

We will exercise our capacity expansion to capitalize on the strong market demand, and as a result, we target to increase our integrated capacity to 1.5 gigawatts of ingots, silicon wafers, solar cells, and solar modules.

Our recently announced bond of financing and credit agreement with Bank of China will further help us in meeting our growth targets, including 1.5 gigawatts of integrated capacity and 950 megawatts to 1 gigawatt of solar module shipments for 2011.

Lastly, I'm pleased to inform you all that after one year of dedication and excellent performance, the Board of Directors has elected to promote Arturo Herrero from the role of CSO to the position of CMO, our Chief Marketing Officer, effective on February 25, 2011, mainly responsible for sales and marketing management of JinkoSolar's global sales network.

We sincerely appreciate Arturo's contributions as CSO during the past year, which helped define JinkoSolar's overall strategy in both established and emerging markets.

Given his tremendous experience in the solar industry, he will continue to be actively involved in formulating and designing our long-term strategies, while implementing our current initiatives.

We believe that his new role as CMO and his ongoing strategy guidance will assure the continued growth and success of the Company.

Arturo will now discuss our major achievements for the fourth quarter and 2010 in further detail, as well as our outlook on 2011 markets in key countries and regions, our goals for 2011, and our execution strategy.

Thank you, Mr.

Chen.

I am glad now to review the successful implementation of our business strategies and highlight achievements from the fourth quarter and the full year 2010, while also providing our views on 2011.

In 2010, we witnessed our successful listing on the New York Stock Exchange, as well as our successful follow-on offering.

These important achievements allowed us to win both recognition and credibility from the PV market, and over the course of the year, we successfully transitioned from a pure upstream supplier, based in ingots and silicon wafers, to a vertically integrated leader in solar models, worldwide recognized.

We also shifted from a little known, non-bankable brand, mainly producing OEM solar modules, to a well respected branded solar module Company.

Our focus on rapid market development continues, and we have broadly expanded our customer portfolio, diversifying geographically and rapidly penetrating industrial, commercial, and residential segments.

During the fourth quarter, we continued to gain modest share, while diversifying our customer base and maintaining existing customers in both consolidated and emerging markets.

Our JinkoSolar modules have been sold to approximately 50 customers across 20 countries through our well-known distributors, PV developers, and installers.

We have also established a strong commercial relationship in more than 25 countries.

We have gained rapid growth in measured PV markets, such as Germany, Italy, Belgium, and France, and we have also increased our sales in the United States, Israel, Australia, in Spain, and in Slovakia.

In the fourth quarter last year, total solar product shipments were 162.6 megawatts, consisting of 39 megawatts in silicon wafers, 12 megawatts in solar cells, and 111.6 megawatts in solar modules.

We delivered approximately 88% of total solar modules to Europe, including 50% to Italy markets, 28% to Germany, with our remaining solar module shipments sent to Belgium, accounting for 10%, and 3% to the United States -- sorry, 12% to the United States and the rest of the world.

This compares to [70%] (company corrected after call) of total solar module shipments to Europe, including over 29% to Germany, in the third quarter.

For 2011, we'll keep expanding our customer portfolio and diversifying geographically by capitalizing on our good reputation and growing market share in measured and emerging PV markets.

We are seeing a strong potential in the USA, and it is an important focus for us.

Our office in San Francisco helps us cover the important West Coast market and our plans to open an office in New Jersey in 2011 will help us serve the East Coast.

Outside the US, we have established the foundations for expanding in new and emerging markets, such as Australia, India, Israel, and the UK.

Regarding the UK, we have recruited a good professional with the strong industry experience to help to develop and lead this promising market.

We have rapidly gained market share, diversifying and expanding in both consolidated and emerging markets.

For 2011, we have entered into new contracts with new and existing partners in our portfolio, including Enel, Enfinity, Saint-Gobain, Technosport, Enereco, Volteo, Tonello, M+W, Premier Power, Centrosolar, Mage Solar, Invictus and Tozzi, covering markets such importance as Germany, Italy, Belgium, France, and the USA.

Regarding Tozzi, we delivered timely our Jinko models for 35 megawatt project that was already connected in Q4.

It represents one of the largest projects in Italy and Europe.

For 2011, we have renewed contracts with our existing partners, as a signal of their trust in our quality, deliveries, and competitive conditions.

Recently, we announced for 2011 an important contract with Payom Solar for 35 megawatts, covering operations in both USA and Germany.

It represents a new important partner, an EPC developer in California, with very big potential plans and a good pipeline of projects.

We continue to offer flexibility to our customers through OEM or white label solar modules.

Our OEM contracts include customers such as Mage Solar and Up Solar.

In the fourth quarter of 2010, our OEM business accounted for no more than 16% of shipments, a sign that we are enhancing the Jinko brand and raising the demand for our solar products.

For 2011, we'll keep our strategy to partially offer this flexibility of white label solar modules production to well recognized customers, while reducing our OEM business to 15 -- from 15% to 20% of overall shipments during the year.

In terms of marketing, as Mr.

Chen mentioned earlier, I am very glad to be now serving JinkoSolar as Chief Marketing Officer.

My focus will be to further execute our department expansions and optimize our structures and procedures.

We are continuing to improve on this trend in our group, including hiring additional experienced professionals for my teams in sales, marketing, business development, planning, and customer service.

First of all, in our well directed marketing activities, we are making significant gains in expanding our brand globally.

We participated in more than 12 exhibitions and conferences in the year, including Solar Power in the USA, Intersolar in Germany, and Solar Expo in Italy.

We also focused some of our sales force on the Middle East, Taiwan, India, Israel, France, and China.

For 2011, we are now putting our focus on more novelty from proactive marketing that will include further communication and intensive PR.

We are also -- we have also confirmed the participation of JinkoSolar in more than 15 exhibitions and conferences.

Regarding subsidiaries, we continue to focus on establishing subsidiaries in important markets, as a way of remaining close to our customers and providing excellent service.

During the year, we established representative offices in Munich and San Francisco, thus offering sales and marketing activities locally, both in the US and Europe.

Promotion by sales and marketing office will cover Jinko back office needs and sales activities Asia Pacific, where we have seen good improvements.

Our next effort for 2011 is to announce the opening of our office in Bologna, in Italy, and as I mentioned earlier, New Jersey in the USA, which will help us capitalize on the numbers of opportunities we are seeing in the East Coast.

Regarding bankability, during the fourth quarter, we continued to make significant steps in the bankability of our solar modules.

The successful follow-on offering during the quarter was important in gaining even greater recognition from the market and from the banks worldwide.

As a result, more than 20 banks have now financed our Jinko branded solar modules versus a total of 15 banks in the last quarter.

Our goal in 2011 is to expand on our products in the USA, and we will be conducting several road shows with US banks to further strengthen and grow our relationship with them.

Finally, let me now turn to our ASPs.

Solar module ASPs increased during the fourth quarter, as compared to the third quarter, as a result of a strong market demand and an increasing brand recognition for Jinko's high quality solar modules and service.

In Q1 2011, we expect a lower decline in ASPs, while Q2 will likely remain flattish.

We feel we have good visibility for this year, supported by signed and prepaid contracts and growing demand from Italy, Germany, and Belgium, in advance of reductions in feed-in tariffs.

For the second half of 2011, we are seeing extra demand from a Spanish, American, and non-European partners, who are beginning to confirm and commit to now ship volumes at somewhat lower prices than in first half.

Now, I would like to turn the call over Sam, our CFO, who will introduce our financial results and guidance for the first quarter 2011.

Thank you.

Thank you, Arturo.

Good morning and good evening to everyone on the call.

Thank you for being with us today.

First, I would like to walk you through our financial results for the fourth quarter and full year 2010, followed by the first quarter and the full year 2011 guidance.

Before I go into the line items, let me give you a quick overview of our fourth quarter and full year 2010 performance.

We delivered impressive results for both the fourth quarter and full year, achieving record highs across most of financial metrics and exceeding fourth quarter revenues and shipment guidance by more than 20%.

For the fourth quarter of 2010, shipments were up more than 20%, sequentially, and approximately 66%, year over year, and the revenues were up 23%, sequentially, and 157%, year over year.

Net income grew at an even faster rate of 42%, with fully diluted earnings, per American depository share, of $2.36 in the fourth quarter.

For the full year 2010, net income rose more than 900%, when compared to 2009, a testament to our business growth and improvements in cost savings to deliver substantial bottom line results.

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

Total solar product shipments for the fourth quarter of 2010 were 162.6 megawatts, consisting of 39 megawatts of silicon wafers, 12 megawatts of solar cells, and 111.6 megawatts of solar modules, an increase of 20.6% over the previous quarter.

Total revenues in the fourth quarter of 2010 were a record of $267.7 million, an increase of 22.9%, sequentially, and 156.9%, year over year.

The sequential increase in revenues were primarily due to the increase in solar module sales volume, coupled with an increase in the ASP of the Company solar modules, as a result of strong demand in European markets, particularly Italy and Germany.

Gross product margin was 28.5% in the fourth quarter of 2010, a decrease from 33.5% in the third quarter and an increase from 16.2% in the fourth quarter of 2009.

The sequential decrease in gross margin is mainly due to an increase in the average cost of polysilicon and an increase in the purchase of silicon wafers and solar cells from third party suppliers in order to meet the demand from our solar module manufacturing, while our in-house gross margin, which refers to in-house silicon wafer and solar cell production to solar module production, was 34.7%.

We continued to lower our average non-silicon costs in the fourth quarter, supported by our vertically integrated manufacturing capacities and improvements in technology and operating efficiencies, and our silicon costs decreased to $0.75 per watt from $0.77 per watt in the third quarter.

In addition, an average branded silicon costs increased dramatically as a result of rising polysilicon prices in the fourth quarter, we expect to further reduce our average non-silicon costs as we ramp up capacity to an integrated 900 megawatts each at the end of first quarter of 2011 and 1.5 gigawatts each at the end of 2011.

Income from operations in the fourth quarter of 2010 was $55 million, a decrease of 4.4%, sequentially, and an increase of 406.7%, year over year.

Total operating expenses in the fourth quarter of 2010 were $21.3 million, an increase of 37.1%, sequentially, and 250.9%, year over year.

Operating expenses represented 8% of total revenues in the fourth quarter of 2010, an increase from 7.1%, sequentially, and 5.8%, year over year.

The quarter over quarter increase in the total operating expenses was primarily due to an increase in payroll and employee welfare and disposal of silicon wafer equipment that had become obsolete, and an increase in entertainment and other miscellaneous expenses as we expanded our operations.

The year over year increase was primarily due to an increase in share based compensation, transportation, commission, and insurance premiums related to increase sales and marketing efforts, an increase in general and administration expenses, as we expanded our operations, an increase in general and administration expenses, as we expanded our operations, and an increase in R&D expenses, as we increased R&D efforts.

Operating margin in the fourth quarter of 2010 was 20.5%, compared to 26.4%, sequentially, and 10.4%, year over year.

We continued our foreign currency hedging during the fourth quarter of 2010 and will continue to do so in 2011 to mitigate our exposure to foreign currency risks, particularly those related to US dollar and Europe.

We had a gain in foreign currency exchange of $13 million in the fourth quarter of 2010, which was net of change in the fair value of forward contracts.

By comparison, we had a net loss of $11 million in the third quarter of 2010, resulting from the depreciation of the Euro and the US dollar against RMB.

We recognized a tax expense of $10 million in the fourth quarter in 2010, compared to tax expense of $5.7 million in third quarter of 2010 and a tax gain of $0.2 million in fourth quarter of 2009.

Net income in the fourth quarter of 2010 was a record of $55.8 million, an increase of 41.9% from the third quarter of 2010 and 340% from the fourth quarter of 2009.

This translates into basic diluted earnings per ADS of $2.43 and $2.36, respectively.

Now, I will talk about financial performance for the full year 2010.

Total solar product shipments for the full year 2010 were 480.3 megawatts, consisting of 155.7 megawatts of silicon wafers, 56 megawatts of solar cells, and 268.6 megawatts of solar modules, increased by 1765.3% compared to 2009.

Total revenues for the full year 2010 were a record of $705.3 million, an increase of 196.9% from 2009.

The increase in revenues was primarily due to an increase in the sales of solar cells and solar modules, as the Company only commenced manufacturing and selling solar cells and solar modules in the second half of 2009.

The significant increase in the sales of our solar cells and solar modules also reflected an increase in demand for solar products in the global market.

Gross margin -- gross profit margin for the full year 2010 was 29.2%, compared to 14.7% in the full year 2009, while the in-house gross margin was [37.0%] (company corrected after call).

The significant increase in gross margin was primarily due to our increased vertical integration, which extends our product mix to downstream solar cell and solar modules, helped drive down our average manufacturing cost per watt.

Income from operating for the full year 2010 was $150 million, an increase of 708.1% from 2009.

Total operating expenses in 2010 were $55.7 million, an increase of 241.2% from 2009.

Operating expenses represented 7.9% of total revenues for the full year 2010, compared to 6.9% for the full year 2009.

Operating margin for the full year 2010 was 21.3%, compared to 7.8% for the full year 2009.

For full year 2010, we had a gain in foreign currency exchange of $13.3 million, which was net of changes in the fair value of forward contracts resulting from the depreciation of the Euro and the US dollar against RMB.

This compares to a net loss of $0.3 million in 2009.

We recognized a tax expense of $22.1 million for the full year 2010, compared to a tax gain, $0.2 million, in 2009.

Net income for the full year 2010 was a record $133.6 million, an increase of 932.7% from 2009.

This translates into basic and diluted earnings per ADS of $6.76 and $6.62, respectively.

Next, I would like to take a quick look at our balance sheet.

As of December 31, 2010, we had $142.1 million in cash and restricted cash.

Our working capital balance was $38.3 million.

Total short-term bank borrowings, including the current portion of long-term banking borrowings, were $177.5 million.

We had total long-term borrowings of $40.8 million as of December 31, 2010.

Our long-term bank borrowings are to be repaid in installments until their maturities in 2010, 2012, and 2013.

Capital expenditures in the fourth quarter of 2010 were $78.2 million, primarily for purchase of additional silicon wafer, cell, and module equipment to expand our product capacity.

Now, let me turn to our guidance.

For the first quarter of 2011, we expect total solar module shipments to be in the range of 155 megawatts to 160 megawatts.

Total revenues are expected to be in the range of $280 million to $290 million.

For the full year 2011, total solar module shipments are expected to be in the range of 950 megawatts to 1 gigawatt.

Total revenues are expected to be in the range of $1.4 billion to $1.5 billion.

We have also raised our guidance on capacity expansion and expect to increase in-house annual silicon ingot wafer, cell, and module production capacities to approximately 900 megawatts each by the end of first quarter of 2011 and 1.5 gigawatts each by the end of 2011.

At this time, we are happy to take your questions.

Operator?

The Q&A session of this conference call will start in a moment.

In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller.

If you have more than one question, please request to join the question queue again after your first question has been addressed.

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster.

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

Yes, hi.

Thanks for taking my question.

I was wondering -- congratulations on the strong results on execution, first.

I was wondering if you have a target for the wafer production and cell production as well.

I noticed that you guided 950 megawatts to 1 gigawatt for modules for 2011.

And secondly, I was wondering if you can talk about your silicon positioning for 2011, between the portion that is on long-term contracts versus spot market contracts.

Thank you.

Thank you, I'll take that, Satya.

First of all, I think we gave guidance on the modules.

The whole year is 950 megawatts to 1 gigawatt, and which -- not including the cell and wafer.

And basically, it's difficult for us right now give guidance, because based on the market situation, we'll maybe buy and sell some.

So, basically, I think, in the extension processing, we maybe have extra wafer and the cell, but based -- all based on the market situation, where we'll control the expansion process.

But at this moment, we just give guidance on the module shipments.

Second question is on the silicon cost -- silicon contracts.

We already this year signed contracts, 2,210, and of which, half is fixed price, half is not fixed price.

Then also, we buy silicon from market sold at spot price.

Our philosophy -- our biggest module is through the value chain -- vertically integrated value chain to manage the volatility of silicon price and also the module price.

So that's why, I think, all our philosophy.

Of course, respecting the silicon price is going to go down, maybe, in the second half of the year.

Maybe it's a lower price then.

We maybe also fixed some forward contracts on the silicon side without too much pay -- too much down payment.

All right.

Thank you.

I'll queue back in.

Thank you.

Thank you.

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

Hi, Dan.

Your line is open.

Hello.

Can you hear me now?

Yes.

Sorry about that.

The -- you mentioned -- I think you said something about pricing down a bit in the first quarter, but potentially flat in 2Q.

Can you help us -- how much has been booked at this point for 2Q, with price set?

And we're hearing some strength in the market.

Is there a chance that pricing could be up in 2Q?

Thank you, Dan.

This is Arturo, the new CMO right now.

So, I will answer your question.

Mainly, we are sold out almost until May, so mainly for Q2, 80% of our books are booked, and we have visibility in the price in this Q2.

So, what I was saying during my speech is that we have seen very strong increase on ASP in the last two quarters, so Q3 has been better than Q2, and Q4 has been better than Q3.

What we have seen in Q1, we are seeing that slightly decline, so it's in the range of 5% to 8% in Q1 decline of ASPs.

And then, Q2, we are seeing flattish or even slightly increased, because of the pressure of developing these markets before the feed-in tariff cuts in Germany and Italy.

Do you have price set for any of your third quarter volume at this point?

Yes, we do.

We do have.

We have, for second half of the year, around 60% is contracted of our target, and we have around -- of this 60%, around 20% is fixed prices.

So this is decline from the first half in Q3 and another decline in Q4.

We have quite nice roadmap of visibility for these contracts.

Great.

Thank you very much.

Congratulations.

You're welcome.

Thank you, Dan.

Your next question comes from the line of Philip Shen of Roth Capital.

Hello.

Thank you for taking my questions.

Thank you, Philip.

Thank you.

My -- the first topic I'd like to explore is about non-silicon processing costs.

Can you give us a sense for what you're targeting for year-end '11?

And what was the split in Q4, and how do you expect to achieve the decrease throughout the year until the end of 2011?

Philip, thank you.

This is Longgen.

And in Q4, our non-silicon cost is around $0.75 per watt, of which $0.24 on wafer, $0.16 on cell, $0.35 on modules, and we think, by continue to improve, I think, the equipment, especially the efficiency on wafer segment, especially we also increase the percentage of multi-wafers, and also, by ramping up the volume on the modules.

And we will continue to reduce -- by Q4 of this year, reduce the wafer cost from Q4 last year to this year to $0.19.

The cell maybe continue on the $0.16, and the modules are targeted at $0.32.

So our target in our non-silicon costs in Q4 is $0.67.

Great.

Thank you.

(Operator Instructions).

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

Good evening.

Thanks for taking my question, and congratulations here on your record earnings.

Thank you.

Can -- on your shipment guidance, if I heard you correctly, you guided only module shipments when you gave the guidance of 950 megawatts to 1 gigawatt.

Is that correct?

Yes.

So, I was under the impression that previously, you also had some wafer contracts into 2011.

Do you have any of those remaining wafer contracts, either for wafer or cells, that you plan to deliver again in 2011?

Basically, Dan, we are right now vertical integrating, and only -- we didn't have any long-term contracts on wafer and cell and only one contract on the -- I think, on the wafer segment -- it's already canceled, actually, according -- I think, we show in Q1.

Basically -- so, we basically sell -- maybe sell some wafer and cell based on the sport price.

Then also, may buy some back.

So, in Q1, maybe still have some volume, but as our volume continue to go up, and we think of that volume -- compare the whole shipment on module is irrelevant, is potentially small.

So, that's why -- if you look at our guidance, you see the revenue side.

You cannot simply just divide -- you see all the revenue, divide by the shipments, because Q1, we still have -- buy and sell some wafer and cell, but as the volume continue go up, that (inaudible) would go down.

On -- thank you for that, Sam.

On the wafer contract that was canceled, did you receive any compensation for that?

Yes, one of the contracts.

We will release that news -- I think we'll release that on the Q1.

Actually, we've got several million dollars here.

Okay.

So, any dollars that you would receive in compensation would actually appear in other income, then, in Q1.

Is that correct?

Yes.

And then, can you put a possible estimate on that?

Yes, that's the contract we already have.

I think -- yes, it's around $5 million.

Excellent.

Thank you so much, and again, congratulations.

Thank you, Mark.

Thank you.

Your next question comes from the line of Christine Hersey of Wedbush.

Hi.

Thanks for taking my question.

Can you let us know what the blended polysilicon cost was for Q4, and also, how much silicon you were using in Q4, in grams per watt?

This is Longgen.

The silicon cost in Q4 -- average price is around $82 per kilogram.

So, our consumption is around -- average speaking, is 5.9 grams per watt.

So, silicon cost is $0.49 per watt.

Okay.

And do you see any potential to decrease that silicon use in 2011?

Basically, yes.

I think, by -- use the new technology.

As you'll see, we signed a contract with Innovalight.

And we will continue, I think, to help us on the Q3, to improve the efficiency.

That consumption of cost, if -- will help us continue to increase the efficiency and reduce the consumption.

Then, also, from another side, that we think the silicon price is no way -- as the ASP module continue -- I think, on Q1, go down, compared with Q4.

We don't think -- we not believe the silicon cost will continue to go up.

Okay, great.

Thank you.

Thank you.

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

Yes.

Hi.

Thanks for taking my follow-up question.

Just wanted to go through a little bit more detail.

I was wondering if you could quantify what portion of your Q4 sales were to distribution versus EPC developer channel, and how do you expect that to track for the first half this year?

Thank you, Satya.

This is Arturo again.

So, I will answer your question.

Mainly, I would tell you that we are quite well diversified in the three main segments, the distributors, EPC contractors, and sellers.

Now we are targeting, also, large utilities for the future.

So, this percentage will be changing.

So, I would say right now, we are around 40% is EPC -- EPC installers, contractors, shore developers, and around 30%, 35% is for distribution.

The rest are installers.

And going forward, we will have, I would say, half/half.

So we will have the same level distribution on EPC contractors, and then, we will increase much more utilities, once we are entering much more aggressively in new contracts in the USA.

Okay, good.

Thanks.

And, Longgen, I was wondering if you could detail any external equity or new debt financing.

Will you need anything to complete your current expansion plan to 1.5 gigawatts, or do you feel you are self funded already with that?

This is Longgen -- that is a good question.

And you can see there, one side, we expanded our capacity from last year -- end of the year, 600 megawatts each to -- increase to 1.5 gigawatts, and some equipment were already paid in advance, especially on the wafer equipment.

And then, also, some -- in the wafer equipment, especially, the motor -- furnaces -- we are planning to use the domestic to replace the import, because the technology is already achieved, I think, the import furnaces.

All these together.

And this year we think our CapEx will be around $450 million.

And if you look at Q4, our -- I think the EBITDA -- it's almost $70 million, and we think, through the inside, our cash flow EBITDA for this year -- I think we can provide, I think, a sufficient cash, maybe around $250 million to $300 million.

Also, as you know there, we were just approved by the Chinese government.

We can issue the bond -- is RMB600 million.

We did that -- RMB300 million half in this last year, and we were going to issue another half -- RMB300 million next month.

But also, from banking facilities side, by the end of last year, we had banking facilities -- those facilitiesin the years we can withdraw anytime.

The total is $530 million, and we only used $271 million.

We still have $260 million available.

So, added together, we think, this moment -- and we think our inside cash flow and our outside banking loan facilities and also, our bonds available is supporting us to continue expansion to our guidance.

Okay, thank you.

And one last question on technology.

I know you mentioned that you're working with Innovalight on trying to increase the efficiency and some other R&D programs.

I was wondering what sort of -- how far you've gotten along on the Innovalight program.

Are you currently running any module in production at the moment, and do you have any target for how much modules you might be able to run with Innovalight and how that track might look like through the end of this year?

Thank you.

This is Longgen again.

Yes, we -- thank you, Satya.

We have the plan.

We still right now in the, I think, primary stage this moment.

We signed contract with Innovalight, but we have planning is in Q3 to starting 100 megawatt production -- full production line -- the sale production line to starting for that.

And we calculated, I think, the benefits and the cost, and we think we still can use that technology to improve the conversion efficiency by per watt.

We still can say around $0.07 per watt.

Your next question comes from the line of [Adam Leichman] of Luminous.

Hey, guys.

Just a quick housekeeping question.

OpEx picked up a little in Q4.

What do you expect that to be for 2011?

Adam, this is Longgen.

Thank you for the question.

For Q4, our operating expense is jumping to 8%.

Basically, I think, some extra items there.

One is the (inaudible), the equipments we will write off.

And also, year end, the salary expenses and any bonus -- all these.

I think, in the future -- I think, next year, our target is around 7%.

Great.

Thank you.

Your next question comes from the line of Vishal Shah of Barclays Capital.

Yes, hi.

Thanks for taking my question.

Sorry, I joined your call late, so apologize if this was already asked, but can you maybe talk about your exposure to the European market, in general, in the first half?

And of the discussions that you are having today with your customers, what percentage of your products are going to, specifically, the Italian market?

Thank you.

Thank you very much.

This is Arturo again.

So, mainly for Q4, this is what we [delivered] in our speech.

We are progressing in our diversified portfolio, geographically, and this is very good trend, in order to reduce the exposure and the risk in any of the countries.

So, for Q4, mainly around 50% work in Italy.

Germany was around 30% and Belgium, around 10%, and the rest was for the rest of the world, including USA.

Going forward, and this is the main focus that we are now doing.

Thanks to our operations in USA, we're including a lot in USA activities, doing sales for the next quarter and the rest of the year.

So, our roadmap, according to our contracts are already signed, give us some visibility in the following terms.

So, Italy will be from 25% to 28% of the total portfolio for the 2011.

Germany will be the same, in the range of 25% to 28%, and then, Belgium will be around 12%, Spain, around 7%, the same as France.

UK will be also increasing, thanks to our team and our operations there, and USA should be from 9% to 10% of our revenues for 2011.

Did I answer your questions?

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

Hi.

Just a quick follow-up.

On the line -- on your production capacity, can you say what you're using for a lines production?

Are you using nameplate, or are you using an effective rate?

What, approximately, are you getting per line on an annual basis of megawatts production?

Dan, you mean the cell, or you mean the module?

I guess the cell lines.

Cell lines -- okay, the design is 25 megawatts per production line, but sometime you use -- have [in a motor -- in an improvement of] efficiency.

Sometimes you can't even manufacture in 30 megawatts.

We keep the capacity right now is all based on 25 megawatts, standard, per line.

Okay.

Thank you.

Thank you.

Thank you, Dan.

Your next question comes from the line of Jon Schwartz of Crosslink Capital.

Yes.

Hi, guys.

Thanks for taking the question.

Just a quick clarification on your module shipment guidance of 950 megawatts to 1,000 megawatts.

Does that assume all integrated modules?

John, this is Longgen.

We -- I think that guidance of 950 megawatts to 1 gigawatt is based on the -- all module, but some -- maybe some cell and wafer.

We may be buying the cell.

Yes, you can say is all vertically integrated.

Yes.

Our own wafer and cell.

Yes.

Okay.

Thank you.

So, just looking at your shipment and processing cost guidance, you've been making pretty conservative assumptions on pricing.

It seems like you'd pretty easily get north of $7.00 in EPS in 2011.

Do you agree with that?

Because -- Jon, I didn't give a gross margin, so basically, if you believe in our old business module.

I'm just reminding you.

We are managing volatility of -- the up and down on the module side and also, the price on the silicon side, and it's based on new judgments.

Okay, thanks a lot, and congrats on a nice quarter, guys.

Thank you.

Thank you.

(Operator Instructions).

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

Yes, hi.

Sam, can you go over your polysilicon cost again?

I believe, in an answer to a previous question, you said it was $82 a kilogram in Q2.

Where spot pricing was, that suggests that you were buying almost everything in the spot market in Q4, and then, as we move forward, you said that there's 2,200 metric tons of long-term contracts that, at 5.9 grams a watt, is about 370 megawatts worth of poly that you've contracted for.

How do those poly contracts come on in 2011, and what should we be modeling for your poly cost per kilogram in both Q1 and Q2?

Mark, this is Longgen.

I think -- yes, I think, for Q4, your figure is correct.

Our average poly cost is $82, and our consumption average is 5.9 grams per watt.

So, the silicon cost is $0.49 per watt.

And going forward, this year, we see that, Q1, the poly price is little slight up, and also, the whole year, we contracted 2,200 tons, and of which, only 1,100 tons is fixed price, and then, another half also is now fixed price.

Only the quantity is guaranteed, it's based on a contract.

So our philosophy is still based on the most -- I think we are exposing almost 80% to 90% of poly is spot price, because we believe -- so, as the market -- the ASP continue go down, then the poly price also should go down.

That's the future of the solar -- to go to good parody.

And for us, Jinko is vertically integrated.

We only earn in a reasonable consistency gross margin.

That's our -- in our philosophy.

So, basically, I cannot give you the -- how much is in the future -- the tendency of silicon price, what go up or down.

It's all based on the module.

If the module continue go down, that's when I think polysilicon will go down.

If you look at the supply and the situation -- the supply and demand situation, you were calculating that.

Okay.

So, Sam, if I just heard you correctly, though, your poly price in Q1 here has actually ticked up.

I've actually been seeing poly prices actually tick up over the past 15 days, and so, my point being on this is your poly price, versus what you're going to be able to get through your contracts, is really starting to trend up a little bit in Q1, and then, we're going to guess at Q2, Q3, and Q4.

Is that correct?

Yes.

In other words, let's put it other words.

Because in Q3, we 100% at spot price.

So, in Q1, we see -- I think, last week the poly price go up a little, but we also see right now is slow down also.

So, we think the poly price, because we have -- still have -- like, 20% is fixed price lower than market price, we think, in Q1, the poly cost may be the same as Q4, at this moment.

Excellent.

Okay.

Thank you so much, Sam.

Thank you.

Thank you.

Your next question comes from the line of Jesse Pichel of Jefferies.

Hi.

Congratulations on your quarter.

Could you please review the CapEx expenditures required to meet your raised capacity in 2011?

And then, I have a follow-up question.

I think, Jesse, if you look -- our history cost, per hundred megawatts, from ingots wafer, cell, and module, is around $53 million, and right now, especially from now on, the new expansion -- we were reduced by $5 million, around $47 million for 100 megawatts.

So, basically, what I say is this year we are trying to increase almost 900 megawatts, but CapEx -- we are spending -- I think, is going this year, because we have spent some next year expansion.

Then also, some wafer increments were already paid the last Q4 2009.

So, this year our targeted CapEx is around $450 million to $460 million, maybe a little high.

So that's our CapEx.

That includes wafers and ingots?

Including everything.

What is that per watt?

The per watt is $0.47 per watt.

$0.47.

And what type of ingot equipment are you using today?

Chinese equipment or Western equipment?

Most, in the history, we bought from GT Solar -- furnaces, but from now on, we buy from Chinese producer.

Yes.

Furnaces producer.

And is that because of cost, or is that because of capacity?

Because of cost -- the quality always matched.

It's a 500 gram (inaudible) furnaces -- multi furnaces -- it's a high quality.

We -- it's our -- only Jinko's other players -- public company already used for a little while, and we see their product is very stable and also, yield a high quality.

Okay.

One more last question.

Did you say your exposure to Italy in the last quarter?

Yes.

Last quarter, in Q4, we were at around 50% for revenues.

In Q1, we are revising that exposure, so that the total year, 2011, is where I say it will be no more than 25%.

Arturo, do you have any opinion, with regards to the latest EU drafts that have been submitted?

Yes, definitely.

I don't believe at all that in Italy, they could be installing 5.4 gigawatts, as the [DOC] was assuming, and also, I cannot believe we -- and we don't believe -- I mean, I have been in touch with several big players in the Italian market, that at least 4G applications to be connected in June.

That's -- makes a situation quite difficult to believe.

So, in our understanding, and it's not only my opinion, but also, people in the [GC] and the solar association in Italy, is that we will definitely not reach the cap of eight gigawatts until next year in the Italian market.

So, obviously, as you know, the Italian market has a very generous feed-in tariff, and there is possibility that they come to an agreement with the government in order to renew this feed-in tariff, and, in fact, today they have a meeting with the Minister of Energy and the solar association to see what they can do in order to relax a little bit of tension.

But definitely, the cap will not be reached this year, so I wouldn't say -- I would not expect any reduction during this year, 2011, on the country.

We are expecting a big, big rush in order to finalize as much installations before the cap.

Does that answer your question?

Your next question --

Operator?

Hi, this is Yvonne.

We will take the last question and then close the call.

Your next question comes from the line of Vishal Shah of Barclays.

Yes.

Hi.

Thanks just for taking my question.

Arturo, just wanted to clarify.

Italian market exposure, 25% to 28%.

Is that all going to be first half loaded?

I mean, are you expecting shipments to Italy to increase sequentially in Q1 and Q2?

Thank you.

No, it will be in this range.

As you know, we will see a lot of pressure to deliver -- to ship in the Italian market in the first half of the year, so this is what -- so we are seeing, mainly, Q4 and Q1.

So, Q4, last year, Q1, this year, mainly, because also, winter is making more difficult to do installations in Germany.

Going forward, as I was mentioning, for Q3, Q4, we'll have much more impact of our revenues coming from countries like USA, like Spain, France, UK, and rest of the world.

So, why are you not able to pass on some of the higher silicon costs to your customers?

Can you repeat again the question?

Why you cannot pass the high polysilicon to your client?

No, we do.

In fact, we have -- I think we had one of the highest ASPs in this sector during Q4 and Q3 last year, and we are seeing a reduction in Q1, but not so big one.

So, obviously, the feelings are is not reducing as much as we are reducing our cost in our operations.

Thank you very much.

You're welcome.

Thank you.

We are now approaching the end of the conference call.

I will now turn the conference over to JinkoSolar's head of investor relations, Ms.

Yvonne Young, for her closing remarks.

Thank you.

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.

Thank you.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day.

Thank you.

Thank you.

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.