晶科能源 (JKS) 2011 Q1 法說會逐字稿

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

First Quarter 2011 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, operator.

Hello, everyone.

Thank you for joining us today for JinkoSolar's first quarter 2011 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 NewsWire's release.

We have also 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 are Mr.

Kangping Chen, Chief Executive Officer, Mr.

Arturo Herrero, Chief Marketing Officer, and Mr.

Longgen Zhang, or Sam, Chief Financial Officer.

Mr.

Chen will discuss our JinkoSolar's business operations and the 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 F-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 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.

I'm pleased to announce a successful start to 2011, despite uncertainties and the weaker demand surrounding Italian solar policies.

In March, we were able to beat our high-end guidance, in terms of module shipments and total revenues, to achieve record highs for both.

In the first quarter, we shipped 208.4 megawatts of solar products, of which 166.6 megawatts were solar modules, as compared to 162.6 megawatts, of which 111.6 megawatts were solar modules in the first quarter of 2010, achieving a sequential increase of approximately 50% for solar module shipments.

This substantial increase in module shipments contributed to total revenues of $326.7 million, beating our guidance of $280 million to $290 million.

Our timely deliveries and excellent customer service, particularly during the time of heightened uncertainty in Europe, continued to win new clients and strengthened existing relations during the quarter.

At the same time, we continued to execute our strategy to diversify our customer base and expand geographically.

We have gained market share in a number of growing markets, with new contracts in the United States, France, Slovakia, and the United Kingdom.

Among the larger module contracts in those countries are a six megawatt contract with Lumos Solar in the United States, a 24 megawatt contract with Solairedirect in France, and recently announced a 50 megawatt contract with BULL PowerTech near Austria, which also has a strong presence in Germany.

This is the first between the two companies, which further expands our penetration into Western Europe.

In addition to this contract, we have gained a bidding to supply JinkoSolar modules for a government sponsored program, which will install solar panels on rooftops for a majority of schools and universities in the capital of Israel, Tel Aviv.

As you can see, we have continued to diversify our customer base during the quarter.

This has reduced our exposure to markets such as Italy.

We also solidified relations with our existing customers, which have come to rely on the quality of our modules and the customer service.

In the first quarter, we continued to make shipments to several of our marquee customers, including Tozzi, Enel, SAINT-GOBAIN, Enfinity, and M+W.

Our long-term relations with these customers are an integral part of our business and position us well in attracting new customers and gaining additional market share.

As we have stressed in previous quarters, we see enormous potential in the US markets.

Our research firm Solarbuzz is projecting the US PV market will also double in 2011.

We have already established a US subsidiary to capitalize on the chance.

We have had several client wins already, including Lumos Solar US shipments, contributing significant revenues, accounting for approximately 3% of the total shipments, up from less than 1% in the fourth quarter of 2010.

For 2011, we expect to gain additional market share in the United States, with JinkoSolar modules.

Now I'd like to especially discuss our polysilicon strategy, as I know it has been a big concern of investors for the past two quarters.

While a number of our peers engage in long-term contracts to lock in their polysilicon cost, which has risen over the past couple of quarters, it has been our strategy not to engage in any long-term contracts, though we have actually locked up approximately 20% of 2011's total poly demand at a lower and reasonable fixed price.

The reason is that we believe the polysilicon price will decrease, going forward, a trend we have already started to see in the second quarter and expect to see up in the second half of the year, with falling module ASPs.

The higher polysilicon price has put pressure on margins in the short term.

However, we expect to benefit in the long-term, as the polysilicon price begins to decrease at a rate in line with the modules or faster than module ASP decreases, which we believe will happen in the second half of the year.

Additionally, I'd like to point out that long-term polysilicon contracts typically require a considerable down payment We'd much put the money towards increasing our capacity to meet the growing demands we are facing.

We continue to focus on cutting down costs.

In the first quarter, our enhanced vertical integration, combined with our R&D developments, including producing bigger percentage of our 180 micron wafers and improvement in conversion efficiency, has helped to reduce our non-silicon cost from $0.75 per watt in the fourth quarter of 2010 to $0.73 per watt in the first quarter of 2011, while we essentially deal with non-silicon cost throughout the year, toward our target of $0.57 per watt, through further improvements in technology and operating efficiencies, while we also manage our consumable materials costs.

For instance, we are exploring new suppliers to offer the same quality of products, such as silver paste at lower cost.

By doing so, we can mitigate the risk of rising material costs to some degree.

Additionally, we set up a wholly-owned subsidiary at the end of 2010 to internally produce accessory materials for solar products, such as the solar aluminum screens, solar junction boxes, and aluminum windows.

We expect to begin production of such updates in materials in the second quarter of 2011, which will further help us drive down manufacturing costs.

In 2011, one of our key focuses will be improving cell converting efficiencies and to continue to bring down our unit costs and maintain our position as a leading low-cost solar Company.

We have several R&D initiatives in place, we took steps towards that, so we already made meaningful progress in the first quarter.

In addition to our recent endeavor with Innovalight to produce high efficiency cells, which will start production in May, we have successfully been able to produce thinner wafers, which reduce our cost per watt.

We expect to further produce thinner wafers throughout the year.

Perhaps, our most exciting R&D project with the multicrystalline wafers we are recently developing, which we call Cast Mono or Pseudo Mono.

Cast Mono is a monocrystalline ingot technology to produce a multicrystalline ingot and wafer.

resulting in a lower non-silicon cost but higher cell efficiency.

It's currently in trial production, and we expect to begin commercial production in the second half of the year.

With the help of the new technology, through R&D, we believe we can achieve higher average conversion efficiencies for both monocrystalline and multicrystalline cells by the end of 2011.

Not only did we make remarkable progress in our physical developments, we're also took step forward in our commitments to developing sustainable energy solutions.

In March, we joined the PV CYCLE, an organization for the voluntary take back and recycling of PV modules.

The program, which includes more than 70 of the world's leading energy companies, is a testament to the ability of our industry.

We are proud to get behind such a cause, as well as advance our own recycling technology.

Recent developments in Italy have revealed that the government will not put a cap on "small systems," meaning systems smaller than 1MW, as well as the ten interconnections that line, for three months, until the end of August.

This could help us continue to gain market shares in Italy, as many of our customers project open rooftop installations, within the definition of small systems.

We have already begun conversation with our existing customers and are confident we will remain strong in Italy for the remainder of the year.

Nevertheless, we still plan to diversify geographically to mitigate potential risks and to customize other emerging solar markets.

We were successful in doing so in the first quarter, reducing our exposure in Italy, from 50% of solar module shipments in the fourth quarter of 2010 to 30% in the first quarter of 2011.

Overall, we have positioned ourselves well for 2011.

The sector is expected to expand from 18 GW in 2010 to 20 GW in 2011.

In order to capitalize on this growth and gain additional market share, we will continue to execute on our strategies to lower costs and diversify our customer base, both in terms of projects and geography location.

We are currently on track to toward achieving our goals of shipments and revenues for 2011.

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

Please welcome Mr.

Arturo.

Thank you, Mr.

Chen.

Once again, we beat our targets for the first quarter 2011.

During this first quarter, we continued to build recognition and rapidly increasing our market share across geographically diverse PV market.

Our high quality, cost leading Jinko products and our successful and well executed sales and marketing strategies continued to give its fruits by attracting new and existing customers and expanding our Jinko business, both in size and geographic reach.

We continued to diversify our customers' portfolio and market during the first quarter, expanding geographically and rapidly gaining market share in industrial, commercial, and residential segments.

The demand in the first quarter was lower than expected, mainly due to the long winter in Germany, historically, a leading solar market and also in the United States.

Nevertheless, we were still able to achieve our growth targets and continue to grow rapidly in Germany and other markets, such as Italy, Belgium, France, and the United States, while, at the same time, expanding in several new markets, including New Zealand, Slovakia, Israel, United Kingdom, Greece, Sweden, or even, Japan.

During the quarter, we made sales to over 30 customers in more than 15 countries.

Our presence in Germany and Italy remained strong, despite anticipated changes in subsidies and the feed-in tariff on the whole situation in Italy.

While uncertainty regarding the new feed-in tariff have been impacting last month of the quarter in Italian markets, we have overcome successfully the difficulty by reallocating some of the -- our shipments to other countries or renegotiating our Italian contracts, so that our sales volume was unaffected in the first quarter.

As a result, we managed to reduce our exposure to Italy and still keep 30% of our total shipments.

We expect to achieve similar results for the full year, as we believe we will benefit from the shortened midterm deadlines feed-in tariffs cause.

As these affect mainly larger projects, we can say today that most of our customers, either developers, distributors or EPC, focus on rooftop installations and small projects below one megawatt size.

In France, during the quarter, we signed a 25 megawatt contract with Solairedirect, one of the leading and best recognized companies in France PV industry.

Over the past few quarters, we have made progress in France and we expect more shipments with establishment of our new local sales office there.

We also expanded into several new markets at the beginning of 2011.

During the quarter, we shipped several megawatts of modules to Slovakia, bringing total shipments in Eastern Europe to more than 10 megawatts.

We shipped (inaudible) to United Kingdom, another promising PV solar market.

Our sales in force have led to fruitful relationships with well-known developers and investing entities in the United Kingdom, where we see growing demand and expect more business through the year.

With regards to the United States, we are increasing our focus substantially.

This has not just been in California, but also in other states, such as New Jersey or Colorado.

With winter over, the US market is ramping up, especially in the residential and commercial sectors, and we expect to capitalize fully on these opportunities.

I am very pleased also to announce that we have appointed Ron Kenedi as President of our US subsidiary.

With over 30 years of solar industry experience, Ron will be a great addition to our team.

Prior to joining us, he worked for Sharp Solar Energy Solutions, the US solar arm of Sharp Electronics, for nine years.

While at Sharp, he spearheaded the North American business, which grew tremendously over his leadership.

They became one of the first companies to assemble solar modules in the USA and led the US solar market for several consecutive years.

We are confident he will have similar success, or even greater, with JinkoSolar.

With our low cost, high quality solar products, we are well positioned to capitalize on the fast growing US market.

We look forward to working with Mr.

Kenedi, as we ramp up our business and gaining market share in the United States.

In the first quarter 2011, total solar product shipments were 210 megawatts, consisting of 34 megawatts of silicon wafers, 6.6 megawatts in solar cells, and over 166 megawatts in solar modules.

We delivered approximately 92% of total solar modules' shipments to Europe, including 49% to Germany, 30% to Italy, 3% to the USA, and 3% to Slovakia and the rest of the world.

This compares to 50% to Italy and 28% to Germany during the last fourth quarter of 2010.

For 2011, we will continue to capitalize on the growing recognition of the JinkoSolar brand and localized sales and marketing services to expand our market and diversify our customer and geographic portfolio.

We continue to build a strong partnership network with distributors PV developers, EPC constructors across the globe, including Enel, Enereco (inaudible) in Italy, Invictus or Enfinity for Belgium, Mage Solar or Centrosolar for the USA, Payom Solar, (inaudible) Saint Gobain for Germany.

For 2011, we have signed several new contracts, including long-term contracts with Lumos Solar, a leading solar design, development, and distribution company based in Colorado.

We have also signed new contracts with companies like Energio for Slovakia, SunConnex, very well reputed company in the Netherlands, Gehrlicher, a root power tech for Germany, Solairedirect for France, and Ontility for USA.

We are also very proud to renew contracts with our existing customers, who have seen in JinkoSolar a trustful long-term partner, flexible to market changes, excellent provider of services and high quality products, despite the uncertainties of closed share market landscape in Europe.

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

In the first quarter of 2011, our OEM business accounted for no more than 30% of our revenues, in line with our strategy and commitment to promote our Jinko brand.

For 2011, we'll keep our strategy to partially offer the flexibility of white label solar modules' production to well recognized customers, while reducing our OEM business to approximately 20% to 30% of total revenues.

In terms of marketing, the rapid global expansion of our business has provided excellent exposure for the JinkoSolar brand, particularly in Europe and the United States, where we have been active engaged in marketing campaigns.

For the second quarter and full year 2011, we plan to initiate an intensive sphere of activities, as well as we keep attending approximately 15 solar and renewal energy exhibitions and conferences during this year.

Among our most important marketing actions, we will sponsor the solar power international conference in San Francisco, Intersolar in Europe, in Germany, and North America.

And also, we are sponsoring SolarPV.TV, the first worldwide internet TV portal completely devoted to solar PV technology and business.

We are increasing our marketing budget in 2011 to further expand the Jinko brand, and I am personally devoting myself toward this cause in my new role of the Chief Marketing Officer.

In terms of subsidiaries, establishing local sales service remains one of our key strategies in developing long-term customer relationships and expanding our business in portal local markets.

In the first quarter, we established a sales and marketing office in Bologna, Italy, still, the second largest and most important market in solar, as proof of our positive views on Italian further development.

We also expect to open representative offices in France and New Jersey in the United States in the second half of this year to support our rapid global expansions and provide customers with local support in the most promising market.

In terms of bankability, we continue to make steps towards improving the bankability of our solar Jinko modules.

In the first quarter, we improved our exposure to US banks through a wide reaching road show opportunity to more than 40 banks, and we gained the support of several more European banks, bringing the total to 25 banks that have now financed Jinko branded solar modules versus 20 banks at the end of 2010.

We believe we are in the right direction, in terms of bankability, positioning JinkoSolar well for potential project opportunities.

In terms of ASPs, solar module prices decreased, in line with our previous guidance, reducing ASP no more than 10% during the quarter, as compared to the fourth quarter, mainly due to both seasonality effect of winter and which affected Europe and the US.

Currently, ASP has been relatively strong, but we expect a decrease, lower -- in relation to the reduction of the feed-in tariff in countries like Italy.

We see this as an opportunity for JinkoSolar to keep rapidly expanding and gaining market share, as we are well positioned and clear cost-leader in the industry, mainly due to our vertical integration model and having gained significant brand recognition in Europe and USA.

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

Thank you, Arturo.

Good morning and good evening to everyone on the call.

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

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

We kicked off the year with a solid quarter in terms of operating and financial metrics.

We surpassed the guidance, in terms of revenues and shipments, achieving record highs for both, given the murky environmental variety in Italy's solar policy.

We consider this a great accomplishment.

We also maintained a relatively healthy gross margin, despite increases in polysilicon costs and decreases in the solar module ASP.

This can be attributed to our lower cost manufacturing, supported by our vertical integration, which we expect to further lower costs as we build our capacities.

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

Total solar product shipments in the first quarter of 2011 were 208.4 megawatts, consisting of 74.3 megawatts of silicon wafers, 7.5 megawatts of solar cells, and 166.6 megawatts of solar modules, an increase of 28.2% over the previous quarter.

Total revenues in the first quarter of 2011 were a record of $326.7 million, an increase of 21.1%, sequentially, and 289.8%, year over year, exceeding our guidance of $280 million to $290 million.

The sequential increase in revenues was primarily due to the increase in the sales volume of solar modules, as a result of our strengthened brand recognition, combined with strong demand, stimulated by a rush to beat feed-in tariff reductions in the second half of the year, especially in Germany.

Gross margin was 26.2% in the first quarter of 2011, a decrease from 28.5% in the fourth quarter of 2010 and an increase from 23.7% in the first quarter of 2010.

The sequential decrease in gross margin was primarily due to the slight increase in the average polysilicon cost and a decrease in solar module ASP.

In-house gross margin, which refers to in-house silicon wafer, solar cell, solar module production, was 31% in the first quarter of 2011.

We continued to lower our average non-silicon cost in the first quarter, supported by our vertically integrated manufacturing capabilities and improvements in technology and operating efficiency.

Now, silicon cost decreased to $0.73 per watt in the first quarter of 2011 from $0.75 per watt in the fourth quarter of last year.

In addition, our average branded silicon cost increased slightly, as a result of rising polysilicon prices in the first quarter.

We expect to further reduce our average non-silicon costs as we ramp up capacity to an integrated one kilowatt each at the end of second quarter of 2011 and 1.5 gigawatts each at the end of 2011.

Income from operations in the first quarter of 2011 was $64 million, an increase of 15.6%, sequentially, and an increase of 331.9%, year over year.

Total operating expenses in the first quarter of 2011 were $21.4 million, a decrease of 0.3%, sequentially, and an increase of 329.1%, year over year.

Operating expenses represented 6.6% of total revenues in the first quarter of this year, a decrease from 8% in the fourth quarter of last year and an increase from 6% in the first quarter of 2010.

The quarter over quarter decrease in the total operating expenses was primarily due to the disposal of our obsolete silicon wafer equipment in the fourth quarter of 2010, while the year over year increase was primarily due to the growth in the shipments and expansions in our global sales and marketing efforts.

Operating margin in the first quarter of 2011 was 19.6%, compared to 20.5% in the fourth quarter of last year and 17.7% the first quarter of last year.

We had a loss in foreign exchange -- foreign currency exchange of $4.5 million in the first quarter of 2011, primarily due to the loss of $5.2 million in change in the fair value of forward contracts, resulting from the appreciation of the Euro against Renminbi, partially offset by a gain from depreciation of the US dollar against Renminbi.

By comparison, we had a net gain of $13 million in the fourth quarter of 2010.

Other income in the first quarter of this year was $4.9 million, compared to $0.1 million in the fourth quarter of last year and $0.01 million in the first quarter of last year, because one of our wafer customers that defaulted on its contract with us.

We recognized a tax expense of $8.1 million in the first quarter of 2011, compared to tax expenses of $10 million in the fourth quarter of 2010 and a tax expense of $1.8 million in the first quarter of 2010.

Net income in the first quarter of 2011 was $51.4 million, a decrease of 8.6% from the fourth quarter of last year and an increase of 358.6% from the first quarter of 2010.

The sequential decrease was primarily due to the loss in change in fair value of derivatives, as well as an increase in interest expense.

This translates into basic and diluted earnings per ADS of $2.16 and $2.10, respectively.

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

As of March 31, 2011, we had $186.9 million in cash and restricted cash.

Our working capital balance was negative $19.5 million.

Total short-term bank borrowings, including the current portion of long-term bank borrowings, were $304.5 million.

We had a total long-term borrowings of $41.1 million, as of March 31, 2011.

Our long-term bank borrowings are to be repaid in installments until the maturity dates in 2011, 2012, and 2013.

Capital expenditures in the first quarter of 2011 were $108.2 million, primarily for the purchase of additional silicon wafer, solar cell, and solar module equipment to expand our production capacity.

Now, let me turn to our guidance.

For the second quarter of 2011, we expect total solar module shipments to be in the range of 190 megawatts to 200 megawatts.

Total revenues are expected to be in the range of $330 million to $350 million.

We expect to increase our in-house gross margin silicon wafer, silicon -- solar cell, and solar module production capacities to approach -- approximately 1 gigawatt each by the end of second quarter of 2011.

For the full year 2011, we maintain our guidance range of 950 megawatts to 1 gigawatt for total solar module shipments and $1.4 billion to $1.5 billion for total revenues.

We also continue to expect to -- expect our in-house annual silicon wafer, solar cell, solar module production capacity to reach approximately 1.5 gigawatts each by the end of 2011.

At this moment, 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).

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

Good evening.

Thanks for taking my question.

I'd like to get your perspective on module ASPs and shipments, especially since the feed-in tariff regime is extended by three months now, and Q2 outlook, in general, has been across the board for everyone, not just you, relatively weak, or expected to be relatively weak.

Can you give us a sense for how your outlook for shipments and ASPs has changed, and then -- and how that might affect volumes and ASPs in the back half of the year?

Thanks.

Hello, Shen.

This is Arturo, the CMO.

I will answer your question.

In fact, you are right.

This is good news, that the Italian feed-in tariff is extended until August, because it will represent that it will be a rush for many companies to fulfill their installations of projects before this deadline.

So it will mean -- it will represent an increase on demand and, probably, activity on the ASPs.

Also, we have seen that after winter and a very Q1 -- a very weak, I would say, Q1 -- that for Jinko, it hasn't been so difficult, generally, in the market.

What we are seeing right now is both Germany and US are picking up rapidly, so we are seeing much more demand coming for Q2.

So it will also affect ASP for Q2.

Can you kind of walk us through how low ASPs might get in the back half, and also, maybe, what Q2 ASPs might look like.

I think even estimation in a range, so mainly, what we are forecasting is a range for Q2 between $1.58 to $1.67 per watt.

Great.

And then, for the back half?

And then, going forward, Q3, we'll see a decrease, probably, around 6% to 10% of these ASPs.

Yes.

And then, I noticed in the guidance, your volumes for Q2 look relatively light, relative to your capacity that you have online.

Can you give a sense if there is some upside to those numbers, given the recent news?

Well, we aren't -- you guys reading our -- hearing our conference call would reduce our exposure to Italy from 50% in Q4 last year to just at 30% in Q1.

Going forward finally, the draft of the feed-in tariff is approved, that it will be very good news.

Probably we will still keep 30% to 40% of our revenues into Italian market for the next coming quarters.

Okay, great.

And then, one other quick question, if I may.

I know you guys have been talking about having exclusive module sales in 2011 in Q1.

Obviously, you had wafer and cell sales as well.

In your guidance of 950 megawatts to 1 gigawatt, can you give us a sense for whether wafer and cell shipments will taper down and go to zero, as had been expected, or do you still expect wafer and cell shipments?

: I think -- thank you question -- I think, first of all, because Q1 -- we still beginning to increase the capacity, so mostly from 600 megawatts each from wafer, cell, and the module to -- by the end of the quarter, Q1, to 900 megawatts.

So, in the Q, the capacity is not balanced, so we still have to buy and sell some wafer and cell, and that's why, I think, in the Q1, so total shipments is 208 megawatts, and the wafer we sold is 34 megawatts, and the cell is 7 megawatts, and module is 166 megawatts.

But, looking forward, we are more, I think, balanced, so the percentage of the wafer and the cell will go down, less than 10%, 5%.

Even in terms of revenue, actually, our -- in Q1, the module revenue was more than 90%.

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

Yes, hi.

Thanks for taking my question.

Just a clarification question Arturo comments on Italy.

Sure.

You mentioned that you think 30% to 40% of your Q2 shipments could be to Italy.

I guess my understanding is that, at this point, there is still some controversy on whether the systems will be -- the extension is defined based on the connection date [or in the end of works].

I was wondering, of the 190 megawatts to 200 megawatts guidance, how much cushion do you have in the non-Italy pipeline at this point?

Could you potentially move volumes from Italy to other markets in Q2 if the resolution is less favorable?

Yes.

Thank you, Satya.

I think it's really a very good question.

In fact, when I was speaking about 30% to 40% to the Italian market, I was ensuring that this drop that we get so -- is bullish in the next two, three weeks, and I think that we will have good news to believe that they will be bullish in the next two, three weeks.

Also, I would like to mention that most of our customers, excluding Tozzi -- most of our customers we have a portfolio are doing projects on the roof and mainly are -- is more projects on the range of below 200 kilowatts or even below, to 1 megawatt.

So, is this no cap for these kind of projects, so it's good news for our customers.

But in case doesn't happen and this drop is not bullish or is delayed or is changed in the way we have seen that, we have a (inaudible), as we did in Q1.

We have many other potential customers that, still, we are facing, or we are negotiating, we are approaching in other markets.

So we are increasing our diversification geographically in markets like Eastern Europe or mainly, like France, Belgium, and also, the USA, with announcement of Ron Kenedi, that he will be leading our operations there in the United States.

Yes, thank you.

That's good clarification.

Couple of more questions on non-silicon cost.

Recently -- good job on that, by the way.

I think, recently, there's been some concern with the way silver prices have gone, and you've been able to reduce the non-silicon cost in spite of that.

I was wondering if you could talk a little bit about what you were paying for silver in Q1, and is that a potential headwind, as you head into Q2, for the non-silicon cost trend?

Okay, I think, in Q1, our non-silicon cost total is $0.73.

(inaudible) a lot matures -- the costs continue to go down.

So, example, like [EDA] -- we -- on the Q1, our average EDA purchase price is like $2.36 per square meter.

Compare the last quarter, Q4, it's $2.46.

The glasses we got -- $7.76 per square meter.

Compare with the last quarter is $9.08.

And also, (inaudible) is almost equal, even though we know some materials -- the price go up, but we still -- so -- in a scale -- ramping up our volume to reduce a per cubic cost and to -- I think, to place a big order, try to achieve the lower -- the price target.

We think these (inaudible) -- Jinko still have the advantage continue in the next half of the year.

So we will continue focus on the non-silicon cost.

Our target is US$0.67.

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

Hi.

Congratulations on the quarter, as well as the hire in the US.

Great to see that team filled out -- or filling out, I should say.

Question for you.

When you look at the German market, which, I guess, was fairly sluggish in the first quarter, how would you describe its comeback in 2Q, and would you expect the German market to be up or down, sequentially, in 3Q, given that there's a feed-in tariff cut?

This is Arturo again -- the CMO.

You have seen the German market -- always, in terms of seasonality, it's very slow in the first quarter of the year, mainly due to the snow and winter impact.

We have seen a very improvement -- very good improvement and ramp up of demand in the last month of April.

Going forward, what we are seeing is that the feed-in tariff cut is only 3%, so it means it still -- module (inaudible) are lower than that.

So it means that the IRR of the investments of the systems in Germany are looking very interesting.

So we are seeing Germany as still as the leader worldwide in the PV solar market, and we will see JinkoSolar as still being very active in the German market, with the new announcements of contracts we have signed recently, including our existing customers.

Okay.

And then, accounts receivable rose, in the -- in 1Q, from something below 30 days to about 55 days.

Is that a change in policy, or just -- was it linearity in the quarter?

What led to that increase?

The accounts receivable -- this is Longgen, CFO -- [the reason is] because if you compare the Q4, the shipments in December is slow, so you have to consider, especially, some big clients in Europe -- we have some [credit tenants] there.

So, in Q1 -- in March, our shipments almost accounted for 50% of the whole Q1 shipments, so that's why I think that the momentum -- why the [end of] -- March 31 our accounts receivable is jumping up.

I think we will continue to improve that in the future.

So, what would be a normal target range for accounts receivable dates, then, based on what your contracts are -- how you're writing your contracts at this point?

I think the contract is a run, like, from 30 days to, I think -- 30 days to 60 days.

Okay.

Okay.

Well, thank you very much.

Thank you.

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

Hello.

Congratulations on the quarter and for your strengthening US team.

Seems like your shipments to Italy continue to be strong and only down slightly in the first quarter.

Can you give us some color on what types of customers you ship to in the region, and what type of inventory you think there is in the channel, sitting in inventory?

Thank you very much.

Thank you, Jesse.

Thanks for this question.

Mainly, we have, as I said before, customers in Italy that are very strong in rooftop installations, so not so much in large scale projects, so it gives us some benefits.

So, in Q1, to answer your question, mainly, for Italy, we have still ship megawatts to Enel, or to [Enerventi] or to Tecnospot or Enereco -- that these are mainly distributors and also, EPC's contractor that they are doing projects on the roof, below, to kind of kilowatts.

So, this is why we did quite well in Italy, and we keep this 30% of our sales in Q1.

Do they have a lot of inventory -- these distributors and EPC contractors?

Most of them -- as you know, they have to finalize their systems installations before May 31.

That was original deadline of feed-in tariff cut.

So most of them fulfilled their commitments by [timing this stuff] on time.

Also, you have to remember that we have (inaudible), so we move very fast some of these goods to Italy for the fast installations of these customers.

So there is not so much inventory.

I think there still -- there were some inventory by March, and April has been proven.

Also, we moved part of these goods to other markets, like Germany or Belgium or Slovakia.

If we get the new regulations signed by Romani and the ministers on Wednesday, and it moves into the -- it becomes final either the next day, do you think the solar market can pick up immediately in Italy, or will it take some time?

Well, we are seeing some of our customers asking immediately for some megawatts, in order to try to get the deadlines, either by May 31 or by August.

But usually, some of the banks' investors have been a little bit reluctant to invest until they have the draft implemented.

And I think, until the next two weeks, we will not see so much movement, but every customer is prepared, and right now -- tomorrow is starting the solar expo in Verona in Italy, and most of the customers are just waiting to have this new draft, I believe, in order to place their orders.

Jesse, I just want to add -- this is Longgen, CFO -- add one comment.

In the Q2 guidance, even without consider the Italy shipments, we still can keep the shipments the same as Q1.

Wow.

That's great.

Congratulations.

Thank you.

Thank you.

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

Yes.

Hi, gentlemen.

Congratulations on your results.

Sam, can you break down the non-silicon costs for us real quick, between module, cell, and wafer, for the quarter?

Yes.

The non-silicon cost for the wafer -- in Q1, $0.22.

The cell is $0.17.

The module is $0.34.

Add together -- $0.73.

Excellent.

And can you reiterate where you think you're going to be at the end of the year, and then break those down the same?

We think -- the end of the year we will continue to improve.

Especially, I think, on the module side, we will go down to $0.32.

Then, the wafers -- two segments will maybe going -- continue to $0.20.

Our target is $0.67.

Our target.

Okay.

Excellent.

And can you talk a little bit about poly costs in Q1?

Where did you end up on your average poly cost, and how do you see this trending now in Q2?

Okay.

This is a good question.

I think that's always (inaudible).

That's our long-term strategy.

Also, I will give this module.

We're a vertical integrator from ingot wafer cell and to manage volatility -- both sides -- the price of poly and the price of ASP to deliver consistent gross margin.

And as you can see that, in history, we also have some contracts, but we didn't do any new long-term silicon contracts.

And today -- this year, we're still like [20%] with contract.

Now, most of our silicon is the short-term contract.

And we see, in the Q1, especially January, February continued go up, then the March -- from there, where we see the polysilicon price go down.

And in Q1, our average moving silicon cost is $85 per kilogram.

Today, is around $75 -- around.

So, we see -- that, I think, is a healthy trend.

The polysilicon price continue to go down, the ASP module also continue to go down, and we can see more emerging market to come out.

That's our philosophy [we stick on].

Okay.

So, Sam, along those lines -- I haven't seen the short-term or the spot poly price come down all that much to suggest a $10 decrease here in Q2.

So, are you doing -- have you been able to sign some other long-term contracts at all, in order to bring your silicon cost down?

We don't think it's a good time (inaudible) long-term contracts.

If you consider the silicon cost is $85 per kilogram, and right now, the selling price is $75, $80, and we see -- I think, the tendency continued going down, and if the long-term contract price is around $50, $45, we'll maybe consider that.

Okay.

But not right now.

Excellent.

And then, Arturo, you had made some comments on ASPs.

Can you give us your ASP on the modules for Q1?

And then, I just wanted to clarify -- I think, if I worked through your, kind of, Q2 and your Q3 assumptions, you're suggesting that maybe, 10% lower, that you get below $1.50 in Q3.

Is that assumption correct and -- if my math is right?

Mark, let me give you the Q1.

We cannot give you ASP Q1, but I can give you something you can figure out.

Our in-house gross margin is 31%.

Our cost of module is $1.20.

So you can calculation what the ASP of Q1.

Then I'll let Arturo to answer the next question.

Thank you.

Mark, we had very high ASP in Q4, mainly due to the end of the year rush of the market, and also, because our brand has been improved, in terms of recognition.

So, in Q1, we -- as I mentioned, we get a reduction in 5% -- around 10% -- no more than 10% for Q1.

So, what we see in Q2 is I would be surprised -- it still could be slightly reduced to levels of $1.58 to $1.63 per watt for the Q2.

And this is mainly assuming that we have to do some extra efforts to get the status of 200 megawatts in our revenues.

Okay.

And so, Arturo, just to lastly follow up on this, do you -- last week Renesola made some startling comments that they thought that module ASP would reach $1.10 by Q4 of this year.

Do you buy into that -- into their comments from last week?

I will let Sam to answer, but just -- let me tell you that I think Renesola is a good company for the upstream, and they know a lot about ingots and wafers.

This is their -- specifically, their business.

But also, Bachman, I just want to remind you, okay, we always, on the road shows, are also talking.

When the business is so good, the gross margin is in the later segments.

When (inaudible) continue go down, the frontier segments gross margin will go down.

If you look at Jinko, we continue, I think -- our shipments, quarter by quarter, increase more than 22%.

Look at some, I think, wafer producer (inaudible) -- their Q1, compared to Q4, the module shipments dropped more than [30 %].

So, of course, we will say something -- module price continues to go down, maybe (inaudible), we don't know.

Yes, you know that brand and bankability are playing a very big important part, and JinkoSolar has been building this partnership with key players -- key customers in this market, and I think we are getting their fruit and the benefit of these partnerships and these brand recognitions.

Okay.

So, as a module supplier -- again, I recognize that Renesola is an upstream supplier.

As a module supplier, it doesn't sound like you buy into their comments, then, that module prices will reach $1.10 by the end of the year.

Is that a fair statement?

I think they mention -- they should be mention Euro instead of dollar.

Okay.

Fair enough.

Thank you so much, guys.

Congratulations again on the good results.

Yes.

Thank you.

Your next question comes from the line of Adam Weissman of Luminous.

Hey, guys.

Good quarter.

Just a few questions here.

For the Q2 guidance, how much should we assume you ship in wafers and cells?

Adam, I think the guidance 190 MW -200 MW is all modules -- is not including the wafer and the call.

(inaudible)

Okay.

Do you anticipate shipping wafers and cells in Q2 as well?

Maybe only a little.

I cannot give you the exact figure.

Maybe like 10 megawatts, 20 megawatts.

Okay.

Understood.

Also, to get to 1.5 gigawatts -- is that able to be done all from internal cash flows and debt, or will you need equity there?

It's a good question, okay?

Basically, I think, maybe last time.

Basically, this year our CapEx is around more than 400 -- around $430 million, and as you can see, the Q1, we spend, like 108 million, and last Q4, we spend, like, more than $100 million.

And if you look our -- the cash flow for this year -- the EBITDA, I think, is either -- I'm not giving guidance.

It's either -- it's about more $200 million for this year, but our banking facilities available today -- we do have, like, more than $300 million.

And, specifically speaking, yes, we can use our -- use all the cash flow, and also, the banking facilities continue to grow.

But you have to consider today's situation, and we want to reach -- [typically], reach to the scale of 1.5 gigawatts and also, continue to grow our business.

The working capital and all these -- we will evaluation from time to time to consider all the possibilities, and it's a value to us at lower cost for Jinko.

Okay.

Great.

And also, Arturo, you mentioned that now, 25 banks have financed Jinko modules.

How many banks finance solar?

The top tier module companies -- how many banks do you think have financed their modules?

It depends on the type of banks.

There are some banks like Union Credit that they have a lease of more than -- I would say, more than 15 suppliers.

But they are all the banks that we were very glad to be working with them and to be in the REIT.

And they're very restricted, so they don't allow so many suppliers in their portfolio.

So, right now, we have banks in France, like Natixis, (inaudible).

Banks in Germany, like Berliner Bank or Deutsche Bank, (inaudible).

Banks in Israel, even, or in (inaudible).

So there are banks that are mainly very active in solar projects, below 3 megawatts, below 5 megawatts.

And then, in Italy, for larger scale projects, we have also been awarded by being in the [lead] of several big banks, like Intesa Sanpaolo, Central Banco, Banca Popolare Di Milano.

It was helping a lot to Jinko to be building these portfolios of projects and references.

Okay, great.

Thanks a lot, guys.

Thank you, Adam.

Your next question comes from the line of Wayne Chang of BMC.

Hey, guys.

Thanks for taking my call.

Just quickly, I understand that, obviously, the Italy exposure for the quarter was fairly resilient because of the exposure to [sub] 200 kilowatts type projects and customers.

Can you talk a little bit about what the potential is and -- from the -- on the demand side, in the event it does get lifted, (inaudible) up to about 1 megawatt?

I mean, what does that do to your business, going forward, at least, in the near term, in May and June?

So, mainly, it still, for the next coming quarters -- if this drop that we have seen is approved, Italy will still be the second largest market in the world, as it is today.

So, the (inaudible) portfolio of customers, as it's quite diversified, is mainly dedicated to the residential and commercial roofs.

So, projects below 200 kilowatts, or even now, with the new announcement of the drop, that they are increasing the [lien] to 1 megawatt, is very beneficial for Jinko.

So, customers like Enerventi or Enel or Tecnosport or Enereco or Terrano -- all these customers are doing a lot of distribution and EPCs for small residential and utilities scale -- sorry, utility -- industrial scale and commercial projects on the roof.

So it's helping at Jinko.

The thing is that, obviously, the feed-in tariff reduction will also be, for Jinko, an opportunity if these customers will look for lower prices in the market, and many customers will sign with Jinko, and we can offer them the competitive prices that we have been offering in the last month.

And other suppliers will be out of the market, mainly, from Europe or US, that they cannot be competitive, as Jinko is.

I see.

And just under the assumption that the 1 megawatt does go through, does that suggest that your -- it becomes sort of an existing -- all your existing customers begin to sort of build out [some more] large scale type commercial projects, or does that mean you guys enter into, perhaps, new customer engagements?

How does -- how do you quantify what the market potential is, with that kind of a drop proposal?

And is that kind of baked into your relatively conservative guidance of 190 megawatts to 200 megawatts for Q2?

Yes.

As we said, most of our customers in Italy -- mainly 80% of our megawatts for Italy is for the tuition on residential commercial roofs.

So we don't need to find new partners in Italy to make this 30% of our target for Q2.

There are also customers that were focused on larger scale projects, and they will already have been changing their strategy, in order to be more involved on roof installations instead of larger scale projects.

And this is the case -- like, for example, Tozzi.

Understood.

Thank you.

I think -- this is Longghen.

I think I will just explain for the guidance, Q2.

In the guidance, we are very cautiously, and that's why I say, it's causing the Italy, if we can, to keep the same shipments as Q1.

Okay, great.

Thanks a lot, guys.

Hi, operator.

This is Yvonne.

Due to -- we are closing -- we are close to the end of the call, so we'll take the questions from the last caller and then close the call.

Thank you.

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

Thanks for taking my question.

This question is for Arturo.

I think you mentioned that you expect a feed-in tariff cut in Germany would only be 3%.

Could you talk about, I guess, what gives you confidence that the installation rate between March and May will be less than, say, 1.1 gigawatts?

You -- if you check the information regarding the feed-in tariff in different markets, as I have [on my tables at work], you will see that for Germany, the expectations of the general market is to reduce quite a big reduction at the end of the year.

It will be around 16%, depending, obviously, on how much of installation has been successful putting in place.

So, for Germany, the end of the year is the main reduction on the target (inaudible), but before end of the year, there's only a reduction in July -- at the end of July, 2011, by 3% of mainly rooftops.

That is mainly the basic 90% business in Germany.

And then there will be, by September, another 3% reduction in commercial on ground installations.

So, what we expect is by the end of the year, would be something between 16% to 20%, depending on how many megawatts are installed during the year, 2011.

Okay.

And then, just as a follow-up, can you talk about any differences you're seeing in ASPs right now, between Germany, Italy, and US?

Well, still US is asking for a lower ASPs, and mainly, because -- obviously, now the exchange rate of the euro versus dollar has been impacting a lot for euro buyers.

So, euro is physically more -- much more stronger than US dollar.

In Europe, the difference between ASP -- between countries like Italy, France, or Germany is not so different right now.

Okay, great.

Thank you.

You're welcome.

I will now turn the call back over to JinkoSolar's head of Investor Relations, Ms.

Yvonne Young, for her closing remarks.

Thank you for joining us today.

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

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

Thank you.

Goodbye.

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.