晶科能源 (JKS) 2013 Q4 法說會逐字稿

Thank you for standing by.

And welcome to the JinkoSolar Holdings Limited Fourth Quarter and Full Year Earnings Conference Call.

(Operator Instructions)

I must advise you that this conference call is being recorded today, March 3, 2014.

I would now like to hand the conference over to your first speaker today, Sebastian Liu, Investor Relations Director.

Please go ahead, Mr. Liu.

Thank you, Operator.

Thank you everyone for joining us today for JinkoSolar's fourth quarter and full year 2013 earnings conference call.

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

We have also provided a supplemental presentation for today's conference call which can also be found on IR's website.

On the call today from JinkoSolar are Mr. Chen Kangping, chief executive officer; Mr. Arturo Herrero, chief strategy officer; and Mr. Zhang Longgen, chief financial officer.

Mr. Chen will discuss Jinko's business operations and the Company's highlights, followed by Mr. Herrero, who will talk about the company's business and market strategies and 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 is included in JinkoSolar's public filings with the Securities and Exchange Commission.

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

Please also note that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles or GAAP, Jinko use certain non-GAAP financial numbers.

The company believes that the use of non-GAAP information is useful for analysts and the investors to evaluate Jinko's current and future performances based on a more meaningful comparison of the net income and diluted net income per ADS, when compared with its peers and historical results from prior period.

These measures are not intended to present -- represent or substitute numbers as measured under GAAP.

The submission of non-GAAP numbers is voluntary and should be reviewed together with GAAP results.

It is now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar.

Mr. Chen will speak in Mandarin and I will translate his comments into English.

Please go ahead Mr. Chen.

(Interpreted) Thank you, Sebastian.

Good morning and good evening to everyone.

Thank you for joining us today.

Having recorded our third straight quarter of profitability, I am proud to report another strong performance as we continue to focus on building other manufacturing and industrial business.

From the third quarter, we delivered our promise to achieve net profitability for the entire year.

We closed out 2013 on an even stronger footing by further cutting costs and improving our gross margin for the fourth quarter to an industry-leading 24.7%.

With total product shipment for the year reaching an all-time high for approximately 2-gigawatt and a new revenue stream from our rapidly expanding downstream business, we have only increased our ambitions.

While some more exciting developments continue to be our aggressive expansion downstream and the substantial amount of our resource we are devoting towards our transformation into a one stop energy solution provider, during the quarter, we successfully connected 108-megawatt worth of solar PV projects to the grid through five projects in China's Xinjiang Uyghur Autonomous Region and Gansu Province.

We have now connected more than 213-megawatt to the grid at December 31, 2013 allowing us to achieve our 2013 target.

Currently, we are busy preparing for more than 400-megawatt in projects, we have earmarked for 2014, as well as a total project pipeline which consist of more than 700-megawatt in utility scale and more than 400-megawatt in distributed systems.

China National Energy Administration officially released a new 14-gigawatt installation target for 2014 and the target to be further subdivided among China's various provinces and regions.

This, along with the strong interest and support we have seen from local governments in China, give us a great confidence that the demand for solar energy in China will continue to grow.

China's environmental problems continue to make headlines, putting clean energy and in particular solar energy, in a very strong position for future growth.

We are extremely well-positioned to capitalize on these opportunities and directly benefit our project business which will yield gross and net margins that exceed 60% and 30%, respectively.

It is with this in mind that our Board of Directors recently authorized the exploration of strategic alternatives to other downstream business.

The global market continued to gain momentum in what we anticipate will become a 45-gigawatt robust market this year.

With our share of orders growing steadily, the important markets such as US and Japan and maintaining our established advantages in China, Europe and South Africa, we are managing to make our geographic mix more balanced and sustainable.

We continue to leverage our leadership role in China where we have seen good payment terms and better prices as we shipped record high volumes, especially during the fourth quarter rush of installations.

I would like Arturo to go over our geographic sales in more detail, but I want to reiterate that even with the success we have seen in China, we won't become overly reliant on one market or like the success in China [that will slow our drive to] diversify.

We have recently increased our capacity by beginning to operate Topoint's manufacturing assets, which will help us to meet a growing demand and further increase our vertical integration.

On the technology front, we established a new R&D centre during the quarter with the team of approximately 100 talented employees which will help us maintain our technology [advantage].

Having already innovate a new solar products such as our next-generation high-efficiency cells, super PID-free technology, the smartphone -- the Smart Modules we recently unveiled at the PV Expo in Japan and soon to begin mass production, Eagle II modules, we are determined to maintain our technological leadership position.

We raised approximately $272 million in net proceeds during the quarter from the concurrent offerings of ADSs and convertible senior notes.

The proceeds will be used to supplement the working capital needed for project investment and manufacturing.

I am confident that we will see sustainable and long-term return on this capital.

With another strong quarter behind us and a solid finish to the year, the vote of confidence in us by both investors and customers has further energized our ambition to build our position as one of the global leaders in the solar PV industry.

We also look forward to leveraging our investments we made in our downstream expansion technology, client relationships, cost structure and brand equity to drive future growth.

Arturo Herrero, our Chief Strategy Officer will now discuss our major achievements in sales and marketing for the fourth quarter in further detail as well as our strategy and market outlook for the first quarter in key countries and regions.

Thank you.

Thank you very much.

Thank you to all of you.

Q4 2013 has been an exciting quarter for the PV industry as we continue to see both challenges and opportunities.

In several countries, there have been drastic reductions and even outright cancellations of subsidiaries for the renewable energy.

The implementation of the strong anti-dumping measures continues to negatively impact profits for larger scale processing in Europe, which considerably produces demand and attractiveness for the solar projects.

However, fortunately, some other important countries have been continuing to adopt initiatives, therefore solar demand has been growing rapidly since 2013.

Countries such as China, Japan, India, USA, South Africa are good examples.

We are also excited to see the cost of solar power reaching grid parity where solar electricity can now compete openly in the spot market with the conventional sources of power generation.

It has been truly in demand in new and emerging PV market such as Chile and Mexico.

Both the consolidation of supply and increase in demand has helped the global PV market to reach balance.

I think we are seeing, right now, the final days of global over supply as model prices recover and margins increase.

For JinkoSolar, this [downturn] has provided a unique opportunity to differentiate ourselves in front of our competitors and our strategy has been solidifying and positioning JinkoSolar as a global leader.

We continue our efforts to transform into a one-stop energy solution provider.

We also continue to pursue our wide geographic mix diversification giving us balance and sustainable growth.

We are increasingly flexible and lean, allowing us to move rapidly and gain our first mover advantage in number of countries.

We are shifting resources from countries where demand is shrinking and investing them in markets where we expect strong growth.

At the same time, the improvement in JinkoSolar's brand awareness is supported by banks and (inaudible) customers.

This is a testament to our high quality modes, continuous improvements in technologies, good customer service and dedication to our international and local teams that have already established in most of the important PV market.

This has contributed to the growth in our revenues, demand and average selling price.

Regarding the markets, according to the analysis, based on several well-recognized resources, the European PV market in 2013 decreased, falling from 17 gigawatts to approximately 10 to 11 in 2013.

Against this background, we have adopted our business through market diversification and expansion into new and emerging PV market.

With our successful reviews, our exposure to the European market and are now much more focused in promising PV market such as China, USA, Japan, South Africa, India and countries in Latin America.

During the fourth quarter, we continue to diversify our customer base, entering into utility-scale projects, commercial and residential power generation.

We have kept good relationships with our major customers that despite their struggling of the situation in the market, they have been entering also strong developments in new emerging markets.

By the end of 2013, we had a strong commercial relationship with over 200 clients in more than 35 countries.

During Q4, we improve our sales and sales and deliveries across the range of markets.

We continue to excel in China and leverage a leading position to take advantage of the rush for orders in the quarter.

As planned, by the end of December 2013, we had connected 213 megawatts worth of solar projects to the grid.

China has started for this year 14 gigawatt and we are very proud to become the market leader in terms of shipments and market share.

And our downstream business has become more promising, following the Chinese government's strong and sustainable support to renewable energies.

As a result, we expect connect to more than 400 megawatts this year with the support of major financial partners such as China Development Bank.

We have expanded our business with new construction in Japan, India, South Africa and Latin American countries.

We are becoming more and more diversified as we develop new markets with a clear long-term strategic approach.

In Asia, for example, we shipped over 60 megawatt in Q4 representing for the whole year approximately 300 megawatts mainly to Japan, India and Australia.

Shipments to Japan look promising also this year, thanks to the booming market and our strong focus on this market.

We are one of the first Chinese solar PV companies to have obtained both JIS Q 8901 Certification and JPEC that is also important certification for the residential and utility-scale projects.

In Q4, we -- our also important market has been the USA where we ship over 90 megawatts in the second half of the year.

While the prevailing anti-dumping investigation brings with it uncertainties, we are very confident that with the great future potential in the US and our ever growing market share.

In South Africa, we signed over 300 megawatts for the first round two and second round.

We are very close to signing another contract, so we will be representing 40% of the market share for the first two rounds.

This volume includes 94 megawatts for the project with Acciona, our partner.

As part of the large five-year strategic contract that we signed with them for over 470 megawatt last year.

With respect to South Africa, we shipped 50 megawatts in Q4 bringing the total for the year over 180.

This comes under our contract to deliver a total of 300 megawatts between round two and rounds second of the public tender reaching at least over 30 to 40 market share.

We have also made good products in South American countries in 2013.

We established legal entities in Chile and Brazil.

Following our localization strategy, we are now increasing our local teams and establishing physical presence in more than 19 countries.

With our partner, SolaireDirect, who established the first 1.4 megawatt project for our mine in Chile and we supply PV modules for the rooftop projects in Pepsi installation in Honduras.

Most important is the contract awarded by [Yennau] to JinkoSolar for 60 megawatts that will be started to run during the second and third quarter of 2014.

In Q4, total solar product shipments were 586 megawatts, a new record for Jingko, consisting of 7 megawatt in wafers, 45 megawatt in cells and 535 megawatt in modules, this represents an increase of 13% from Q3 and almost double from last year 2012.

Regarding marketing, we have increased our global footprint and brand recognition, thanks also to our marketing events worldwide and localized market in major activities.

Solarplaza and SolarPV.

TV has been good partners for JinkoSolar to make a successful story in our communication strategy.

During Q4, we placed advertisements is Times Square in Manhattan, New York for Christmas and in the main railway station across China.

Those are good examples of branding and awareness campaigns to help and expand public knowledge regarding renewable energies.

We have been attending conferences and testing the market in the Middle East with our meetings in Riyadh, Saudi Arabia, Qatar and Kuwait recently, where we've seen important goals for renewable energy and a huge potential in the next coming years.

And we are currently attending during last week, the Japan exhibition in Tokyo where we launched our smart modules that integrates microinverters and optimizers.

They are key for residential markets and also suitable for utility-scale projects.

Regarding exhibitions in the USA, in Bangladesh, in Canada and in Romania, attending Solar Power International, Solar Power UK, RENEXPO, [Tenth Power] and Solar Canada during Q4 last year.

Regarding ASP for the year, thanks to our focus on countries with higher government support and margins such as Japan, South Africa, and the USA, our ASP has been improved.

In China also, we have seen improvement and this increase in ASP is a reflection of a better brand recognition, higher quality, better communication, branding and recovery in demand in the whole market.

Model ASP increased through the year as well through $0.62 and we expect ASPs in 2014 to be stable.

We are in a strong position to maintain growth as a result of several important agreements with our strategic partners for 2014.

We have built credibility with our customers with our excellent service and reliability as well as a high-quality solar products, mainly thanks to the support from our vertical integration strategy.

Our bankability places us at an advantage in front of our competitors and we have the ability to supply PV products for future products and large PV systems in a very hard condition, thanks to our PID free modules.

Now, I would like to turn the call over to Zhang, our CFO, who will introduce our financial results and guidance for the first quarter and year 2014.

Thank you very much.

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 fourth quarter and full year 2013 followed by the first quarter and the full year 2014 guidance.

As Mr. Chen mentioned earlier, total solar product shipments in the fourth quarter of 2013 were 586.3 megawatts.

Total revenues in the fourth quarter of 2013 were $361.4 million, an increase of 11.5% sequentially and an increase of 87.5% year-over-year.

Gross margin was 24.7% in the fourth quarter of 2013, compared with 22.3% in the third quarter of 2013 and 3.8% in the fourth quarter of 2012.

The sequential increase in gross margins was primarily attributable to further non-silicon cost reduction.

The year-over-year increase in gross margin was mainly due to improvement in operating efficiency and continued cost reductions for the company's polysilicon and auxiliary materials, improved ASPs, and the higher gross margin from the electricity revenues.

In-house gross margin relating to the in-house silicon wafer, solar cell, and solar module production was 24.3% in the fourth quarter of 2013, compared with 20.6% in the third quarter of 2013 and 5.6% in the fourth quarter of 2012.

Income from operations in the fourth quarter of 2013 was $43.3 million, compared with income from operations of $39.9 million in the third quarter of 2013 and loss from operations of $117.8 million in the fourth quarter of 2012.

Total operating expenses in the fourth quarter of 2013 were $46 million, an increase of 44.1% sequentially and a decrease of 64.2% year-over-year.

The sequential increase was primarily due to reversal of provisions for bad debt in the third quarter of 2013, which was recognized as a reduction of G&A expense, and an increase in research and development expenses, share-based compensation and shipping and warranty costs resulting from the increase in solar module shipments.

The year-over-year decrease in operating expenses was mainly due to the significant non-cash charges in the fourth quarter of 2012, consisting of provisioning for bad debts, an impairment of long-lived assets, a write-off for equipment prepayment and a provision for the inventory purchase prepayment under long-term polysilicon supply contracts.

Total operating expenses excluding non-cash charges as a percentage of total net revenues were 12.3% in the fourth quarter of 2013, compared to 11.3% in the third quarter of 2013 and 18.1% in the fourth quarter of 2012.

Operating margin in the fourth quarter of 2013 was a positive 12%, compared with a positive 12.4% in the third quarter of 2013 and a negative 62.9% in the fourth quarter of last year.

Net interest expense in the fourth quarter of 2013 was $8.8 million, a decrease of 5.2% sequentially and a decrease of 5.2% year-over-year.

We have recorded an exchange gain of $1.5 million in the fourth quarter of 2013, primarily due to a foreign currency exchange loss of $1.1 million and a gain in fair value of forward contracts of $2.6 million.

We recognized a loss of $8.6 million in exchange in fair value of convertible senior notes and capped call options.

The company recognized an income tax expense in the fourth quarter of 2013 of approximately $0.06 million compared with a tax expense of approximately $3 million in the third quarter of 2013, and an income tax expense of approximately of $0.01 million during the fourth quarter of 2012.

Net income in the fourth quarter of 2013 was $27.1 million compared with a net income of $16.9 million in the third quarter of 2013 and a net loss of $122.2 million in the fourth quarter of 2012.

This translates into basic and diluted earnings per ADS of $1 and $96 respectively.

Non-GAAP net income in fourth quarter of 2013 was $36.1 million compared with non-GAAP net income of $32.2 million in the third quarter of 2013 and a non-GAAP net loss of $25.3 million in the fourth quarter of 2012.

This translates into non-GAAP basic and diluted earnings per ADS of $1.36 and $1.28 respectively.

Now, I will briefly review our full year 2013 financial results.

Total revenues for the full year 2013 were $1.17 billion, an increase of 47.6% from $769.6 million in 2012.

Income from operations for the full year 2013 was $106.6 million, compared with a loss from operations of $198 million for the full year 2012.

Operating margin for the full year 2013 was positive 9.1%, compared with a negative 25.7% for the full year 2012.

Total operating expenses in 2013 were $130.8 million, a decrease of 46% from $235.3 million in 2012.

Operating expenses represented 11.2% of total revenue for the full year 2013 compared to 30.6% for the full year 2012.

The company recognized tax expenses of $3.1 million for the full year 2013, compared to a tax benefit of $1.4 million in 2012.

Net income for the full year 2013 was $31.1 million compared with a net loss of $247.6 million in 2012.

This translates into basic and diluted earnings per ADS of $1.32 and $1.28 respectively.

Non-GAAP net income in 2013 was $68.4 million compared with non-GAAP net loss of $227.2 million in 2012.

This translates into non-GAAP basic and diluted income per ADS of $2.92 and $2.84 respectively.

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

As of December 31, 2013, the company had $141.2 million in cash and cash equivalent and restricted cash.

As of December 31, 2013, total shipment volumes including the current portion of long term bank borrowings were $326.2 million compared with $360.4 million as of December 31, 2012.

Total long term borrowings were $59.8 million as of December 31, 2013, compared with $26.8 million as of December 31, 2012.

As of December 31, 2013, the company's working capital cash flow was negative $312.9 million compared with that of $361.6 million as of December 31, 2013.

As of the end of the year 2013, the working capital was negative.

The major cause is the [CD in our move to] current liability and also around the $230 million invested in the downstream project.

For the first quarter of 2014, total solar module shipments were expected to be between 440 megawatts and 470 megawatts.

For the full year 2014, total solar module shipments are expected to be in a range of 2.3 gigawatts to 2.5 gigawatts, with total project development scale expected to be about 400.

That means we have to manufacture more -- between the modules -- between 2.7 gigawatts to 2.9 gigawatts.

At this moment, we are happy to take any questions.

Operator?

Thank you very much.

(Operator Instructions).

Your first question comes from Philip Shen, ROTH Capital.

Please go ahead.

Hey, guys.

Congrats on the continuing good progress with execution.

Thank you.

I'd like to start by asking just a few questions on the topline asset.

Can you give us an update as to when you expect to officially take ownership of the assets, and can you help us know how much acquired the assets for and what is the non-silicon cost structure of these assets?

I think -- Philip, I think it's a good question about topline assets.

Okay, according to Chinese -- think of the local laws, basically you know, the top line assets is [we call at the US Chapter11], the only thing different, you know, in China, you have to first lease the equipment, the asset, for the assets running on a lease term three months to six months and awaiting for [order] to working with all the best.

So basically right now, we already started leasing, operating the assets right now currently.

The assets, as we mentioned last time we are on the roadshow, I think is around the 500 megawatts in wafer and cells and modules at 1 megawatt.

And basically, I think formally, we were a similar liability.

Total, I think cost will be around one third of the replacement costs, new one.

So does that answer your question?

Yeah.

And do you have a sense for when you will officially take ownership and you will stop leasing?

I think that is around the three months to six amounts.

It's all based on the negotiations of the costs with the -- I think the debt.

So basically, I think hopefully, we also want to close deal as soon as possible --three months.

So basically right now, I think within three to six months I think, with the debt.

Okay.

Great.

And then --

And then also just further, I think total costs may be around RMB800 million to RMB900 million.

But that's just the estimate of the range.

Okay.

And as we look ahead into 2014 and even beyond, how do you think about capacity expansion, do you want to always do it in an fully vertically integrated way or, and how much do you want to expand [volume] in 2014 and 2015?

Basically, I think if you look at our guidance for whole this year, our module shipments is around 2.3 gigawatts to 2.5 gigawatts, plus we have to also supply for our own, you know, projects around the 400 megawatts.

So it's almost, I think 2.7 to 2.9 gigawatts for the output is the guidance that we've given out.

So, we are always looking forward because currently, right now, I think, we have capacity.

I think [we got] module is around the 2.3 gigawatts because partially is Topoint, 500 and plus our own, I think more efficiently will increase.

So we can touch to 2.3-gigawatt on the (inaudible) sale, and the module is around 2.5 gigawatts.

So basically, we will continue to keep an eye on the opportunities in China, the distressed assets and looking for opportunities and speaking for that kind of assets, so we can finish those assets at lower costs and continue to reduce our, I think non-silicon costs then to increase our scale.

Okay.

Great.

One more question and I will jump back in queue.

What's your view on the latest US-China Trade Case?

We are hearing -- what is the probability that this solution has developed to avoid tariffs and we are actually hearing that there could be a retroactive tariff and modules must clear customs by call it, the end of March?

Are you guys --- do you guys continue to ship into the US and what do you see happening to US ASPs?

Thanks.

I think maybe you know I'll answer the question first.

I think maybe, I think Arturo or maybe Chen can be you know, maybe more comments.

But basically for Jinko, we feel very -- optimism on the US and China, the trading issue, you know, we solved, I think smoothly and based on the history, we do not think retroactive in the scenario will happen

Secondly, as we can go in the right direction right now to issue -- to solve the issue, for example to charge -- I think to pay the per watt cents to the farms and to refarm I think the US manufacturers or like minimum quotas.

All these I think solution is very positive sign I think for the future, I think the trading between US and China, because this issue is not only the solar product, it is the whole relationship, trading in Asia between the two countries I think.

These governments pay more attention to that, so that's why we believe it's very positive right now that issue will be solved.

For Jinko, we still continue, I think, to increase the market in the US market, you see we're continuing to ship, you see.

So we think the fact you see Jinko as you know that, our market I think geographic mixture exported to US is not too much, it is a small portion.

So basically this does not affect us too much.

Okay.

Thank you, Zhang, and the rest of the management team.

I will jump back in queue.

Thank you.

Chief Financial Officer Thank you.

The next question comes from Brandon Heiken from Credit Suisse.

Please go ahead, sir.

Thanks for taking the question and congratulations.

Thank you, Brandon.

I just wanted to double check the 400 megawatts of projects guided for this year, that's been increased from what would have been a 300 megawatts roughly of incremental projects than previous guidance, I think before, you said 500 megawatt of cumulative projects.

Is that right?

Yes, I think what we're doing is we finished I think 230 megawatts by the end of last year.

So this year, we give the guidance I think last time on the road we -- by the end of this year definitely will connect at least 300 megawatts additional.

So then 100 megawatts is under construction, that's our guidance right now so far.

But it's possible, I think, we'd be -- because I think the marketing situation and the cash flow situation as also will be -- maybe you know, the increase or even stimulate the scale in the future.

Okay, great.

And what are your thoughts on the potential IPO of the project business or yieldco maybe later this year or next year?

Basically, right now, we're still working on some big I think potential, I think strategic partner together.

I think that the certain time, we will come out.

We're very optimistic right now, the processing right now.

So if that works, I think it will help us I think -- to (inaudible) think our continued expansion on the downstream products and also I think to come out our downstream products to IPO.

So the ball is already given, I think the resolution -- give the resolution to IPO.

So we believe the earliest, you know, as a timing schedule is, you know, end of this year, beginning of next year either in US market or in Hong Kong market.

Okay, great.

And for the 2.7 gigawatts to 2.9 gigawatts of production this year, can you do that with your existing assets and with the 2 point assets or do you need to do some outsourcing, how do you produce that much?

If without -- continue to expand our capacity on wafer and cells segments, I think definitely I think with still time to looking for some good assets to expansion, but definitely, I think it will build up -- increase our module capacity, you know, by the end of this year, maybe to 3 gigawatt to 3.5 gigawatts by the end of this year on the module side, but to wafer and cell, we're very, I think, cautious.

Great, congratulations, and thank you.

The next question comes from Amit Shah from Nomura.

Please go ahead, sir.

Hello.

Mr. Shah just disconnected.

The next question is from Gordon Johnson from Annex Capital Management.

Please go ahead.

Thanks for taking my call or question.

Thank you.

Thank you.

Can you guys talk a little bit about the mix of your shipments by country this year and also can you talk about if the shipments are back-end loaded or if you expect them to be more linear?

Okay.

Basically I think I'll give you some history figure then, I think Arturo, maybe give some future, 2014 actually.

But I think in 2013 basically we shipped to China is around 49%, Asia Pacific was 22%, and the Europe is 12% and Emerging Market is 10% and North America is 7%.

We're going to forecast in 2014, the China is around 35% to 40%, I think Asia Pacific countries is 20% to 25%, and Europe is 12% to 15% and Emerging Market 10% and North America is 12% to 15%.

Arturo, do you have any comments?

Yes, we will see how it's the evolution during the year 2014.

We are focusing a lot in and expecting a lot from USA and Asia Pacific, but also there is some expectations from South American countries and emerging market, that is difficult to forecast to be honest.

So we're planning something between 300 megawatt to 400 megawatt only for these emerging markets.

And therefore, Asia Pacific around also another 400 megawatts, and US could be also in the level of 300 megawatts.

There is no surprise with anti-dumping news.

So overall, this is a quite balanced mix.

Okay, that's helpful.

Can you talk about the linearity of your shipments with respect to the first half and second half?

Do you expect the bulk to happen in the second half?

In 2014?

Yes.

For the first half of 2014, yes probably the mix is still more in for the Q1 and Q2, mainly US and South African markets will take a few remaining contracts already signed.

And then for the second half, it will be mainly Asia Pacific markets and probably something coming also from the contracts in Japan and US

Okay.

And then I just want to be clear on this, with respect to the capacity additions, it sounded like you guys are saying that the bulk of that is going to be via acquisition and not necessarily I guess buying new equipment to build out existing capacity, I guess one question, is that right, is the assumption there right that I am making?

And also could you talk about what your current CapEx per watt is of the new capacity you're going to add?

Do you mean the CapEx on the new capacity?

Yes.

Okay.

Basically I think watt a day if you want to increase per watt from I think with a set module, is around $0.50, the cost, okay, for the new equipments.

And Jinko for the top point and we will be maybe pay one-third of that.

So as of today just I mentioned that, we have a capacity on the wafer cell is around 2.3 gigawatts and the module is around 2.5 gigawatts and we will continue looking for some assets opportunities, but mean time, as you know that we also have to you know, the possibility of [selling] some of the wafer and cell and the manufacturing the module.

So basically the module capacity by the end of this year definitely will be increased to 3 gigawatts or 3.5 gigawatts.

Okay.

And that module increase, is that going to be via acquisition of distressed assets existing in China?

They are not going to be new green field capacity expansion at Jinko?

Basically to increase the capacity on the module side does not cost too much.

So basically it will depend on our own to increase that because at least the automatic machine you see, the CapEx is more, but the major production line is manually -- semi-automatic so it will be cheaper.

Okay.

And then last question, it looks clearly there has been increase in polysilicon prices at least we had available avenues we have to check and it looks like module prices have been flat to down if you're looking at some of these different reporting sites.

What are you guys seeing there, are you seeing poly prices rising right now, and when do you expect that to stop or do you think that's going to continue to be risked over the near term for you?

Thanks for the question.

I think that's a good question you see.

A lot of people right now thinking the poly price, yes the poly price during the December -- during the January-February has go up slightly to 22, 21, 23, but in this month it will go down to 21, 22 from 23 the peak.

So in Jinko, if you see that in Q4 still the cost is around $18 is $0.09 per watt.

So Q1 definitely will increase a little, I think around $0.015 per watt on silicon cost.

To answer your question, we do not think the poly price will jump in above $25, that's basically we thinking right now DaQu, the [Jingxing] new trend, you see the cost is around $11 and [Shepien], another Chinese producer also cost is around the $12, $13 and GCL, they claimed, I think their cash cost is even below $10.

So all these right now I think the Chinese producer is there.

So think of all that, if the poly price continue keeping above $20, I think the profitability is too -- [the loss] is much.

So the capacity definitely will increase in China.

Then also look overall the polysilicon capacity right now, I think supply, the second figure maybe around I think 270,000 tonnes there.

So that -- it can easily support around more than 60 gigawatts.

Of course, some capacity right now maybe cost is higher, though they maybe -- is not fully running, but the existing capacity I do think enough to supply right now, the product to the market.

So I do not think the poly price will go above $25.

Okay.

Thanks a lot.

The next question comes from [John Ficht] from Dialectic Capital Management.

Please go ahead, sir.

Just one clarification on the previous question.

Is the new capacity that you're adding green field or do you think you will acquire it?

That new capacity major, we're not going to add a new capacity on the wafer to green field, add wafer and cell.

We definitely will not do anything, even module, we're not, because the module existing plan you see we already have the building and plan.

So it's easy for us to increase the module capacity, I think it costs as much because increase 100 megawatts, on the module side you maybe invest CapEx around $5 million to $8 million.

So it's not too much.

So definitely we are continued looking for distressed assets on the wafer and the cell settlements like Topoint.

So we are just going to pay one-third or even 25% the replacement cost if we.

So I think that's our target.

Okay.

We think the opportunity is there.

And on the electricity producing, power producing revenue, is the government paying, are you receiving the cash flow for those or is it still just an agreement and we're still waiting to get the payment for those?

No.

The, okay, basically, all the revenue we'll recognize is already we have agreements and stated grids already, I think connected, received the power we generated, okay.

So we already issue the invoice to them, so they are -- we are eligible for those accounts receivable.

And right now, [currently] -- we all received all arena accounts receivable.

By the end of 2012,they already paid, the government already paid to us.

So starting the January 1, 2013, based on the new government regulations, I think they should bi-monthly, okay.

But, right now, I think it will be late but we think the payments will be around three months to six months in the future.

Okay.

And what was your cash flow for 2013 and what do you think your operating cash flow will be 2014?

Okay.

The cash flow 2013, because we've started to make money on the second quarter.

So the total operating cash from the operation side is $35 million in 2013.

But I think in 2014, therefore for the whole year, we didn't have the forecast, okay.

But basically right now, I think, should be, we estimated it should be around $150 million, around the -- lets give you a range of $100 million to $200 million.

Okay.

And you paid down bank lines in Q3 in China.

Was there a reason you paid down those bank lines or the banks or the banks requiring you to pay back the bank loans now or is that voluntary and what is the lending situation like in China today?

Okay.

Basically, I think, this is a good question.

How, why Jinko become step by step, the major player in China.

The reason is because a lot of company actually in these consolidation -- industrial consolidation, you can see LDK, Suntech go to, we call reconstruction or whatever that must be.

I think some companies feel, I think, frustration, the reason is because the industry, the gross margin, the average is still around 13% to 15%.

Jinko can achieve better 5% to 8% above the industry.

So the banking, the government see that, so that's why you can see that CDB continue to support us to go to downstream project to feed us the loans.

Also in other banking like Industrial ICBC and Agriculture Bank of China and The Bank of China, all the state banks.

They actually tightened the power solar, I think manufacturing companies, but opened the door to the major player, the future player.

So like Jinko as of December 31, 2013, those banking give us credit line of $700 million.

We only withdraw right now $446 million.

So we still have $253 million available.

As you can see that in the first quarter, the CDB also award us around a RMB3.3 billion loan to 15 years to our downstream projects, for 15 years, the projects loan, that's besides the credit line.

So there you see the banking loan, short-term is around the 5.4%.

Long-term is around the 6.9%.

So we do think that with the banking support, Jinko will become, I think the top three players.

I think that's the margin for Jinko, because a lot of people don't understand what's going on in China on the banking scenario.

But CDB extended loans, but the other banks called their loans, why were you paying them the ...

CDB has given us -- award us new loans to continue support the downstream projects.

So in Q -- as you can see that in Q1, they awarded us $3.3 billion on the project side, the loans.

But for other banks, we have credit lines of $700 million, the credit lines you see, what we are doing in China, because the banking loans (inaudible) You borrow one year, so after one year, maturity has a payback then you can't renew.

Jinko always, no problem, we can continue to extend or renew our loans but other player maybe difficult.

You see what I'm talking?

Yes, but you paid down your loan, so you chose not to renew them.

Yeah, because we have the cash you see.

We needed to withdraw the credit lines.

Why we needed?

On one side, we have a lot of cash sitting there.

Then another side, we go ahead and borrow a lot of loans.

It's meaningless to us because we can withdraw loan anytime you see.

For the cash [management] purpose, you see, we need them to keep the high cash volumes because that's [the cost].

That's exactly look at Jinko, that interest expenses is around $800 million, accounted for revenue only 3%.

But in the whole industry right now in the Chinese manufacturing company, I think Jinko is the top one.

I think interest expenses account for revenue is the lowest, I think the percent is lower.

If you look at Yingli, I'm not -- maybe just one of the company, okay, you can look at how much percentage they own, they own around a 6% and 7%.

Does that answer your question, John?

Yes.

Thank you.

The next question comes from Paul Strigler, Esplanade Capital.

Please go ahead.

Hey guys, great quarter.

Just following up quickly on Gordon's question, so you guys didn't comment on Q1 ASPs or Q1 margins, can you just sort of -- if you provide a little direction there?

Okay.

Basically, if you look at our Q4, our ASP is around $0.63.

Our non-silicon cost is, I think $0.39 and plus the silicon cost $0.09 is around the $0.48.

We achieved excellent quarter Q4.

In Q1, I'm not giving guidance to you but we believe, I think the ASP because geographically, our mixture selling and we were selling more percentage, I think in US market.

So we do not think the ASP will go down, I think.

And for the cost side, yes, I think the silicon cost maybe go up a little but we continue to improve on the non-silicon cost side.

So basically, we're very optimistic I think on gross margin.

But we've not given guidance to the Street.

Great.

And then on retainage, when do you guys expect to actually recognize some of that?

I t keeps accruing on your balance sheet, but when do you think you can actually start to recognize some of that?

Okay.

I think, basically, we still thought we still have like RMB160 million, I think recall the retainage, the cost of the retainage.

So we will recognize revenue starting Q1 as we correct those retainage, you see.

So as soon as we connect those retaining, that's actually the profit we can recognize.

Great.

And then just one last question, sort of housekeeping question.

On your balance sheet, the restricted short-term investments, what are those?

Or is that cash like, can you convert that to cash, what is it?

We issue -- I think issue that they will see, we have to put some you know, sort of like 10% to 15%, so that's the money there.

And (inaudible) I think it's notes payable, yeah, it's also issue some notes payable.

For example, if we buy from supply, we should -- either we pay cash, accounts payable or we just, you know, issue notes payable, let's say 60 days, 90 days and we pay you.

But then notes payable is issued by some of the banker.

The banking should have to put at it like 10% deposit there.

It's all for the cash management.

It's good policy because that's also we can use the banking facilities, you see.

Either let's say you own people, you buy materials, you have to pay $100, right now if you are not going to pay right now, you pay later let's say, 60 days, 90 days later.

So you go to banking, you just put $10 there, so they can have the issue like notes payable like $100 six months later.

So it's all -- that is why, Jinko manage the cash very well.

Paul Strigler: Got you.

Paul, I want to get one point that it's just restricted cash, but we put that's short-term investment, we can earn more interest.

But that money is sitting in any of those trusts in China, right, is that sitting...

It's just a deposits, you know?

Got you.

Thanks a lot guys.

Great quarter.

Thank you, Paul.

The next question comes from Wei Feng, Luminus Management.

Please go ahead.

Hey guys, just one simple question on the operating expense line.

Can you give us some guidance for 2014, how we think about it as a percentage of revenue, please?

I think, if you look at -- I think operating expense in Q4, definitely we're slightly up.

I think we had a lot of reason because I think R&D expenses go up and also, I think employee stock option and other issue -- but definitely for 2014, we will continue -- I think as the revenue continue to increase and where we I think the key -- the operating expenses stick below 10%, that's our target.

Thank you.

Thank you.

I think just one more normal question.

Thank you, Operator.

Hello, Operator.

There are no further questions.

I'd now like to hand the call back to Sebastian Liu.

Please go ahead.

So on behalf of the entire JinkoSolar's management team, I want to thank you for your interest and participation on this call.

If you have any further questions or concerns, please feel free to contact us.

Have a good day.

Thank you and good bye.

END