Emeren Group Ltd (SOL) 2008 Q1 法說會逐字稿

Good evening and thank you for standing by for the RenaSola Limited First Quarter 2008 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. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to your host for today's conference, Mr. Derek Mitchell, IR Consultant from Ogilvy Financial. Please proceed, sir.

Hello, everyone, and welcome to RenaSola's first quarter 2008 earnings conference call. The company's first quarter 2008 earnings results were released earlier today and are available on the company's website as well as on newswire services. You can follow along with today's call by downloading a short slide presentation, which can also be found on RenaSola's website at www.renasola.com.

With me today from RenaSola are Mr. Xian Shou Li, Chief Executive Officer, Mr. Charles Bi, Chief Financial Officer, and Mr. Cheng-Hsien Yeh, Chief Operating Officer. Charles will be discussing the business and financial results and all four company representatives will be available to answer your questions during the Q&A session that follows.

Before we continue, please note that today's discussion will contain forward looking statements made under the safe harbor provisions of the U.S. private securities litigation reform act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today.

Further information regarding these and other risks and uncertainties is included in the company's registration statement on form F1 and other documents filed with the U.S. Securities and Exchange Commission. RenaSola does not assume any obligation to update any forward looking statements except as required under applicable law.

Before I turn the call over to Charles, please be reminded that unless otherwise noted, all figures mentioned during this conference call are in U.S. dollars. It is now my pleasure to introduce Charles Bi, CFO of RenaSola. Charles, go ahead.

Thank you, Derek, and thank you, everyone, for participating in today's earnings call. Before we begin, on behalf of everyone at RenaSola, I would like to offer our sincere condolences to all of those affected by the tragic earthquake in China's Sichuan Province. There are still many people who need help and our thoughts and prayers are with all of them. RenaSola is planning to make a monetary donation to assist in recovery reports and help victims of the earthquake.

As many of you probably know, RenaSola is in the process of building a polysilicon plant in Sichuan Province. I'll go into more detail about the project a little later. But to update everyone, the project did not suffer any damage from the earthquake, we do not expect it to have any material effect on our operations and the construction is on schedule.

Now, let's move into our first quarter review. Please turn to page four of our presentation for summary of our business and financial highlights.

I'm pleased to announce that the first quarter of 2008 marked another quarter of record revenues and a net profit with a solid margin improvement for RenaSola. We achieved a total net revenues of $123 million, the increase of 28% quarter over quarter and a 242.4% year over year. Strong demands for our polywafer product continue to drive growth as we enjoyed higher volumes and increasing ASPs.

Year end quarter, we successfully increased our production output to 6.5 megawatts -- 6.5 megawatts, exceeding our previously issued guidance by 4.5 megawatts. First quarter shipment grew to 63.7 megawatts, representing an increase of approximately 25.9% sequentially and 313.6% year over year.

The increase in production output was primarily due to the smooth ramp of our model monocrystalline and the multicrystalline production at the [Yi chauer cha shen] production facilities.

Looking at our monocrystalline and multicrystalline production in more detail. Another of the monocrystalline furnaces remain unchanged in Q1 after significant expansion at the end of the last year when we installed an additional 40 monocrystalline furnaces. This gave us a total of 226 monocrystalline furnaces and expanded our total monocrystalline ingot manufacturing capacity to 280 megawatts.

This capacity make us one of the largest monocrystalline wafer producers in China. At the end of the last year, we had installed 32 new multicrystalline furnaces with the combined capacity of 160 megawatts, which are now fully operational. The implementation of this new segment has allowed us to offer a more comprehensive product mix to help address strongly growing customer demand.

Additionally, we have been able to achieve our objectives by utilizing [scrapcidic] materials from our mono and multicrystalline production to help reduce production costs and provide additional synergies between our mono and multicrystalline production lines.

This helped further reduce our silicon consumption rate from 6.5 grams per watt achieved in Q4 2007, to an average of 6.3 grams per watt in the first quarter of 2008. And it helped improve our gross margin in the first quarter despite the continued rising of these stock costs.

While demand has remained strong for our polywafer products, polysilicon continues to be in short supply across the globe and raw material prices remain high. We believe one answer to maintaining and improving gross margins and ensuring a stable supply of a polysilicon feedstock is to diversify our feedstock sourcing and move upstream in a solar (inaudible). Please turn to page six of the presentation to see our feedstock sources.

In 2007 we announced our plan to develop a wholly owned polysilicon facility in Sichuan Province with an annualized capacity of 1,500 pounds. Due to robust industry demands for solar wafers, wafer supplies are secured under various long term contracts and a strong customer interest for additional long term wafer supply contracts. We have decided to increase the previous amounts 1,500 tons of annual polysilicon manufacturing to 300 tons.

Land leveling has been completed and the construction has commenced with the completion expected in early 2009. As part of the project, we have signed purchase contracts and made down payments for major [capital] payments from work class international implement suppliers. The facility expected to be operational in the first half of 2009.

We believe the increase of a polysilicon manufacturing capacity will provide us with a more long term, stable, and a cost effective source of polysilicon feedstock, will help further reduce feedstock procurement expense and will streamline our competitiveness as a low cost solar wafer producer.

In addition, late last year we signed a two long term polysilicon purchase contract for a total supply of 4,650 tons of virgin polysilicon over the next three years. This contracts are expected to come into effect in mid 2008 and will provide a stable supply for our schedule to ramp up on production output. To this end, we have secured sufficient feedstock needed for our project output in 2008. And together with the project (inaudible) polysilicon over 1,200 tons, we expect to have secured over 2,000 tons of polysilicon for 2009.

Cost reduction, RenaSola is utilizing innovative new technologies to mitigate the effects of the rising raw material prices and we have made substantial productivity gains. Cost reduction has been recognized through reduced silicon consumption realized via closed loop recycling of scrap silicon materials generated internally, utilizing thinner wear wires to reduce curve loss, utilizing thinner wafers, diversifying procurement sources of a consumables that will have significant cost impacts in other production efficiencies.

Various process innovations such as closed loop polysilicon recycling and increases in slicing efficiency has proven successful and have helped to further reduce polysilicon consumption.

Our silicon consumption rate us of 6.3 grams per watt as of here in the first quarter 2008, is one of the lowest in the industry. This efforts have also helped us decrease processing costs from an approximately average of $0.42 per watt in Q4 2007 to an approximately average of $0.40 per watt in the first quarter of 2008.

Plant update. Please turn to page seven for our capacity expansion and output OpEx. RenaSola capacity expansion plan is on track to achieve our previously announced full year 2008 ingot production capacity target of 645 megawatts.

Construction of our new monocrystalline wafer plant which will hold an additional 80 monocrystalline furnaces is complete and is ready for the installation of the furnaces. The [letter] rate of the furnaces will begin in the second quarter in a plant expected to deliver annualized capacity of 107 megawatts by the year end.

Construction at our new multicrystalline wafer plant is on track and with a delivery of new multicrystalline furnaces is expected to generate annualized capacity of 160 megawatts by the year end. With our current facilities running full capacity, the new wafer plant will provide important ramp up capabilities as we look to increase our productions capacity and output.

Wafer sales, let's move to page eight for a look at our new supply contracts. As we mentioned earlier, demand for our quality wafer products remains very, very high. We continue to expand our strong base of customers through additional long term wafer supply contracts as recently announced.

We witnessed strong sales for both our monocrystalline and multicrystalline wafer lines highlighted by the signing of three significant long term contracts with an (inaudible), and a top reseller, which further expands and it enhances our existing customer network.

The three deals form a combined total of 315 megawatts, 105 megawatts for each customers over the next six years. And in addition to the multiyear wafer sales contract we signed late last year with the long term industry leaders.

In addition, tonight we announced a new six years 525 megawatt wafer supply contract with a Gentech Energy Corporation. As of today, 270 megawatts of our production capacity is contracted out under various wafer sales contracts and processing services for 2008. This contract demonstrates the strength of demand for our quality wafers and improved visibility for future revenues.

Financials, now I will like to walk you through the contributors to our first quarter 2008 results and some financial highlights. You can find a snapshot of our financial statements on page 10 to 13 of the presentation.

Revenues. Revenues for the first quarter of 2008 were $123 million, an increase of 28% sequentially and 242.4% year over year. The rise in the first quarter 2008 revenue was primarily attributable to net increase in output from the successful ramp up of production capacity installed during Q4 2007 and an increase of the wafer SP. Average wafer ASPs increased from $2.37 per watt in Q4 2007 to $2.56 per watt in the first quarter of 2008 due to increasing industry demand in general and a continued strong demand for our product wafer in particular.

The total wafer shipment in the first quarter was 6.7 - 63.7 megawatts, consisting of 41.8 megawatts of wafer sales. Wafer shipment under total arrangements was 21.9 megawatts during the quarter. Gross profit. First quarter 2008 gross profit was $27.2 million, a 38.8% increase sequentially and 234.1% year over year.

The gross margin for the first quarter 2008 was 22.1% compared to 20.4% in the fourth quarter 2007. The [solar growth] margin improvement was primarily attributable to increases in average wafer ASPs, reduction in silicon consumption rate and decreases in processing costs. Which, together, all paced over 20% sequentially and 70% year over year increases in average feedstock costs.

As previously mentioned, increasing feedstock costs were mitigated by a reduction in silicon consumption from an average of 6.5 gram per watt in Q4, 2007 to an average of 6.3 grams per watt during the first quarter of 2008. Through in-house closed loop scraps recycling, productivity gains improvements in wafer slicing and a reduction in non-raw material related production costs. The processing cost was reduced from $0.42 per watt in Q4 2007, to $0.40 per watt in first quarter of 2008.

Operating profits. Operating profit in the first quarter of 2008 was $23.2 million, an increase of 54.6% sequentially and 234.2% year over year. Operating margin was 18.9% in the first quarter compared to 15.6% in the fourth quarter of 2007.

Total operating expenses. In the first quarter of 2008 were $4 million, down from $4.6 million in the fourth quarter of 2007, reflecting primarily decreases in professional services fees and reserves for non-performing debt.

Profit before tax. Profit before tax in the first quarter was $21.3 million, a 72.2% increase sequentially and 215% increase year over year. Finance costs increased by 26.9% sequentially reflecting an increase bank borrowing and the interest rate. Finance costs as a percentage of net revenue decreased from 1.8% in the fourth quarter of 2007 to 1.7% in the first quarter of 2008.

The first quarter - the first quarter foreign exchange loss was $56,000 compared to a foreign exchange loss of $1.2 million in the fourth quarter of 2007 as a result of the improved foreign exchange exposure management during the quarter.

Taxation. Our income tax for the first quarter 2008 was primarily attributable to the corporate income tax paid by RenaSola's subsidiary (inaudible), which recognized a transfer expense of $3.6 million in the first quarter of 2008 at a corporate tax income - corporate income tax rate of 12.5% compared to a tax credit of $5.2 million in the fourth quarter of 2007.

Net profit. First quarter 2008 net profit increased 1.2% sequentially and 160.6% year over year to $17.7 million.

Second quarter and the full year guidance, turning to our guidance, we believe our growth margins will remain stable and expect production output to be in the same - to be in the range of 75 to 80 megawatts compared to 23 megawatts in the second quarter of 2007 and 66.5 megawatts in the first quarter of 2008.

On April 18th -- 17th, 2008, we revised our production output guidance upwards due to increased sale -- wafer production capacity to be in a range of 310 and 320 megawatts from 300 megawatts previously. With a positive industry outlook for the remainder of the year and a clear visibility on robust sales growth for our high quality wafer products, we are revising our annual production output to be in the range of 330 to 340 megawatt.

We reiterate our annualized ingot production capacity target of 645 megawatts by the end of 2008 and a target and annualized ingot production capacity of 1,000 megawatts by the end of 2009.

Annual net revenues for 2008 are now expected to be in a range of $570 million to $590 million, representing annual growth of 112.9% to 120.9% over full fiscal year 2007. At this time, we're happy to take your questions. Operator?

(OPERATOR INSTRUCTIONS). And your first question comes from the line of Jesse Pichel with Piper Jaffray. Please proceed.

Good evening Mr. Li, Mr. Bi. Congratulations on results on the new contract wins. Are your wafer deals with Gentech and the other suppliers are market price or fixed price and can you discuss your ability to further increase prices for the balance of 2008?

(spoken in Chinese)

Mr. Li, the CEO says that the contracted signed with Gentech is at a fixed price.

Okay, excuse me. Charles, how do you see margins progressing through 2008? Gross margins?

Yes, will be the productivity gains in a continuous effort in the reduction of the silicon consumption rate and also the outlook of the strengthening wafer SP, we feel that the 2008 gross margin remains to be stable.

So, just to reiterate, that -- you're saying flattish gross margin from here for the balance of the year?

Yes.

And under that assumption, what are you assuming happens to poly costs for the balance of the year and what was the cost for the quarter?

(spoken in Chinese)

Both Mr. Li, and the CEO, Mr. Chung have made comments to your question. Mr. Li says that we do not have any exposure to any further increases in polysilicon prices for the rest of the year.

Mr. Chung, the COO commented that our average poly - our average poly purchase price was $261 per kilogram. He gave - in terms of visibility over the next two quarters, Mr. Chang commented that he does not see aggressive price rises relative to what we have been seeing over the last few quarters.

Okay, my final question, I guess, based on that answer. Charles, is there then the ability to upside your gross margin to the balance of the year if poly is flat and even if prices are flat, assuming you keep on this cost curve, shouldn't you eek out another point or two of gross margins for the balance of the year?

Obviously, Jesse, we are working hard to realize more upsides through various measures we're putting in place. Obviously, we look at the further reduction of a polysilicon consumption rate and a further reduction of a processing cost to - really to create upside from what - where we've seen.

Great. Well, thanks very much and we wish everyone at your [Cheng du] facility all the health and --

Yes. Well, I mean we -

And good luck to the disaster here.

Thank you.

Yes.

Your next question comes from the line of Sanjay Shrestha with Lazard Capital Markets. Please proceed.

Great. Thank you again. Congratulations on a great quarter and an execution here guys. Just a couple of quick questions. Number one, when you talk about 2000 metric ton of poly coverage in 2009, are you accounting for anything coming from your wholly owned subsidiary on that - in that number?

Yes, we do consider that to be the contribution of our wholly owned subsidiary in Sechuan to the 2000 tons of polysilicon next year.

Okay, so that's 2000 coming from a wholly owned subsidiary, but when you talk about 2000 poly coverage for 2009 -

No, I'm sorry, Sanjay, just sorry for the jump here. Its 2000 is considered the different sources and obviously we look at the expected output from our wholly owned subsidiary in Sechuan, that contribution where we will have - we expect the contribution to be in the range of 1,200 tons to 1,500 tons.

Got it. Okay, great. And then, in terms of - in terms of looking at the pricing here, right? Not so much for '08 necessarily, but looking into 2009, I know you guys have sort of this flexible strategy of getting into both long term as well as keeping some cushions.

So when we think about some of the fixed price negotiation that you guys are having for '09. What sort of an ESP reduction are we seeing, number one. And number two, with that ESP reduction, what kind of a reduction are we seeing in your existing poly contract? And I have one more follow up question after that.

Okay. I'll refer this question to Mr. Li.

Of course.

(spoken in Chinese)

Well, actually Sanjay, to just add one point here, our long term contract obviously consists of different types - different types of pricing.

Sure.

And some of the long term contracts have the pricing restating the [change again] to reflect the true color of our production and also the prevailing market price.

Okay. But based on the fixed price contracts, they are usually have a maximum of $0.05 discount to market price.

In 2009. So then, is it fair to say - because you guys have done a great job of reducing your processing cost, silicon utilization down to 6.3 and I think you guys have plans to reduce that further by recycling as well. So is it fair to say that we should see some pretty nice growth in your - nice increase in your gross margin during 2009, after the stable performance in 2008?

Yes, we - with the contribution - part of the contribution from our own in-house polysilicon production. We do expect the margin improvement in 2009 compared to where - what we achieved in 2008.

Got it. Great. Once again, congratulations on a great quarter, guys.

Thanks, Sanjay.

Your next question comes from the line of Mike Chou, Deutsche Bank. Please proceed.

Hi, good evening Charles. I would like to ask, what is the OpEx in Q2 and until year end?

You mean OpEx or CapEx?

Yes, OpEx.

It's operating expenses, we have in the Q4, we had about $4 million.

Yes. How about the Q2?

Q2, we obviously expect the somewhat increase from there as the result of further investment in R&D. For example and there will still be more hiring on the [similar to me] management professional.

Is it possible you can give us some color regarding maybe some kind of a number. I mean because the things that you're R&D expensing in Q1 has been quite low. How about a [Q2] on Q4. Seems that you -

Well, I think -- sorry, I think that the -- in terms of R&D expenses in the Q4 -- the Q1 sorry, compared to Q1 -- Q4 last year. There was reduction. But we have -- we have really key part of our R&D efforts and number of projects along the different project line and we have hired additional number of professional staffers to join our strong team.

Now, obviously we look at the also the additional purchase of equipment for the R&D lab. I think on the -- sort of the 2000 -- in the second quarter, compared to the first quarter. I think that in first quarter, you're looking at a probably 3.3% operating margin. I would expect that it would goes up like around 4%.

4%. Is that fair to say that - I'm sorry, is that fair to say that? Your R&D expense will increase to $2 million to $3 million of the closure going forward?

We have - we have been finalizing our R&D expenditure yar plan and we were - we will introduce more highlights next time we talk.

Okay, thank you.

Yes, welcome.

(OPERATOR INSTRUCTIONS). And your next question comes from the line of [Joe Stencil] with Hazel Capital. Please, proceed.

Hi, congratulations on the quarter. I just have a question with regard to your further reductions in the grams per watt, to what extent do you think, can you keep on going down at the current rate in the cost reduction you're currently achieving? I mean its really quite incredible how you're going at the moment.

Yes, we are - we set a target as we talk about - talk about it during a not conference call, and our target is set to six gram per watt by the end of this year. So this is our plan for this year.

Okay. And then one question just specific on to the tolling. What is the percentage of tolling you expect for the full year? It seems like for the first quarter you had quite a substantial contribution there?

I refer this question to Mr. Li.

Mr. Chang, the COO, says that in the first quarter our tolling represented 32% and expects that to be controlled within 13% to 35% for the rest of the year.

Okay, great. Thanks a lot.

Your next question comes from the line of Mary Anne Dolan with Moon Capital. Please proceed.

Yes, hi Charles and everyone else. Great quarter. Congratulations on the excellent execution and our sympathies to everybody in the region as well with the earthquake. So, best wishes.

I just had a question on the SG&A, which seems low relative to the revenues you're generating. Can you just discuss a little bit about how sales and marketing, or particularly sales works for the company and what that number may rise to overtime, or maybe not at all.

Mary, thank you very much. The obvious thing, we look at the sales and marketing numbers is - is really low compared to probably some other companies, which actually reflect that the one of the characteristics of the industry, in terms of demand and supply, and obviously the usually there's very strong demand for wafers and our marketing then and sales efforts is limited. But going forward, we do realize that the increased competition of the marketplace and we have put a lot of effort to hire a professional sales and the marketing people to our team.

So, I think that a number, although it's low - I think they would gradually increase somewhat, but I don't think there will be a drastic jump in terms of the sales and the marketing expenses going forward.

Okay, that's great. Thank you. And also, on the ASP increase, could you just discuss a little bit about some of the dynamics behind that and that was a pretty big jump for one quarter.

Yes, well ASP, I think that the - when you looked at the interest its like 8%. Obviously, the - because most of our sales are made in China and R&D have been appreciating. So the bulk of the 8% is really contributed by the favorable foreign exchange movement.

Okay, great. Good. Well, thank you very much. And again, excellent job. Thank you.

Thank you.

Your next question comes from the line of Jesse Pichel with Piper Jaffray.

Charles, just some housekeeping. I'm trying to get the megawatts for mono versus multi for the wafer business and then for the tolling business as well.

Yes, are you talking about on an output basis or a shipment basis?

I guess output.

Well, on the output basis, actually 60.6 -- 60.5 the megawatts really consist of a split of mono and multi, where monowafer production is about 37 megawatts compared to roughly 30 megawatts in multi.

And so this [a spate] of product type. In terms of the tolling, obviously we have approximately [20 wong] megawatts in manufacturing segment in the first quarter. Compared to 6.5 megawatts in the total output.

And so, there's a further split of mono versus multi within tolling segment, which is roughly the same split of mono and the multi wafer production under tolling.

Okay. And just finally, what is RenaSola's position on upgrading metallurgical silicon? How many vendors have you samples metallurgical silicon and what is your findings?

Yes, I refer this question to Mr. Li.

(spoken in Chinese)

We have tested, Mr. Li says, that we have tested both metallurgical silicon from international manufacturers and from manufacturers in China - our R&D -- we have R&D experts in this area and we are still in the process of analyzing the data.

Okay, fair enough. Thank you very much.

Your next question comes from the line of [Philip Tromony] with Evolution Securities. Please proceed.

Hi, Charles. Just could you shed, perhaps, a bit more light as to how - I think we've discussed ASP a bit and you did mention that R&D appreciation was the bulk of basically the 8% increase.

However you do have a much more blended ASP with regards to mono and multi in Q1 '08 than you did in the fourth quarter of last year. What's the evolution there between the two products? Am I correct in thinking that mono is increasing and - well, multi isn't decreasing for you because you didn't have a good quarter, but it's much lower?

Well, yes, I think the - in terms of ASP the - in the mono ASP did increase and we're at the - and the multi is relatively flat.

Okay, but this is in R&D terms, yes?

That's in dollar terms.

And perhaps, just a quick question with regards to your cash flows. You're obviously increasing your targets in terms of both capacity going forward, but also for the polysilicon production in the Sichuan production site.

That's right.

So, what expectations can we actually model nowadays in our model, both for full year '08 and full year '09 because I presume you're going to have a lot of down payments to be made on equipment in '08 for the implementation of all this capacity and reactors for '09.

Sure. I think probably to - I think probably give you a little bit - the breakdown here for you to understand, the CapEx situation. The Sichuan project, we expect that the CapEx to be approximately $325 million, where in 2008 we look at approximately $228 million to 230 million and 2009 is an additional $73 million and 2010 is like $25 million.

So that - about $25 million is essentially is the held back by us to increment the manufacturers. If the equipment is running on specs and we will be paying out an amount. So, this is -- this is the situation of -- in terms of 2008, out of the $227 million, we have paid our already $40 million with remaining of $187 million to be paid this year. So --

This is just for the polysilicon plant?

That's just polysilicon. Another actually, a major CapEx is existing wafer capacity expansion which is because before it for 2008 and we mentioned that the CapEx roughly is $100 million for this year to reach the target of 645 megawatts by the end of the year. And out of this $100 million we paid approximately $45 million already, with the remaining $55 million to be paid.

Obviously, we have set as a target for further wafer capacity expansion to reach one gigawatt by the end of next year and the total CapEx of that is approximately $130 million to $140 million. And out of that, probably $42 million, $45 million is going to be paid this year. So we look at the total cash out for this year, on a CapEx of -- is approximately $285 million. So this is 2008 CapEx. For 2009, we're looking at approximately $465 million.

That's a lot.

Well, it is the -- it is not a small amount, but however we have -- we do have the existing facility, a [bank] facility available for us. One of the Chinese banks, just yesterday, increased our bank [subsidiary] to RMB1 billion from RMB500 million.

Obviously, it was to kind of cash - but in of the net Q1, got about $67 million. The late of last week we have - we had about $86 million in cash and obviously that's the $87 million. And obviously, in the (inaudible) is that as such, that we're able to command or collect customer payments, which is a - known in the market.

So, we look at these - we have been continuously evaluating our funding options internally with a goal to really to obviously not only to support our growth plan by also to strengthen or increase your order value.

Okay. But I mean, looking at the cash flow for the fist quarter of 2008, I mean I've also noted and perhaps this is just a seasonal issue, but there is a very sizeable increase in terms of working capsule requirements. Am I right in thinking that that is only seasonal or are we expecting for something quite considerable for full year 2008 because of all these investments?

Well, yes, you are right. I think the - we have - we build up a quite significant capacity last year by the end of the last year which will be really operational starting from this year, early this year. And accordingly, we have to build up the inventory, we have - the source - raw material -- more raw material to support the plant production and we have been seeing the roughly three months of outputting inventory as the practice.

So, because of the build up, the capacity by the end of last year and we did really need more raw material for the support, for the production output and as a result of that, our working capital increased.

Okay. Just one last quick question, if I may. The tax rate for the full year '08. Should we expect something in the region of what was paid in the first quarter?

Well, the -- we have -- the (inaudible) is still in the 50% reduction in the - last three tax holidays and 2008 is - is a year where we have a 50% of the [statutory] of 25%, which is a total of 5%.

Yes.

So, 25% is going to be applicable to us this year and 2009 and starting from 2010, we'll see like 25% statutory tax applicable onto us.

Okay, thank you.

Your next question comes from the line of Mike Chou with Deutsche Bank. Please proceed. Hello, Mr. Chou, your line is now open.

I'm sorry. Charles, it seems my question has been answered regarding the CapEx, so I will pass on my line. Thank you.

Thanks.

Your next question comes from the line of Colin Rusch with Broadpoint Capital. Please proceed.

Good evening. Can you give us an update on the progress you've made with producing eight inch diameter ingots and give us just a sense of the customer interest on those larger wafers.

I refer this question to Mr. Li.

(spoken in Chinese)

Mr. Li would first like to differentiate between multi and monowafers. In terms of the multiwafers, we continue to make diameters 165 by 165. On the mono side, predominantly we are producing 125 by 125. In terms of our customer demand, it still - it still is predominantly in that range.

Excellent. And can you give us a sense of how prepayments are trending with these new agreements? Are you seeing prepayments increase or decrease as you sign new customer agreements?

(spoken in Chinese)

In previous years, we have been signing one year contracts and receiving 25% of the value of that contract in prepayments. Presently, we are doing multi year and much larger contracts. So on a ratio basis, our prepayments have dropped at least 25%.

Excellent. Thank you so much.

Your next question comes from the line of [Tom Ocalo] with Eaton Vance. Please proceed.

Yes, hello Charles and Mr. Li. Thanks for taking my question. I just had a couple questions. The first of all, on the customers - on the sales contracts. I was just wondering if there a wide range from sort of the best price contract to the worst price contract that you have?

(spoken in Chinese)

Our long term contract, Mr. Li, the CEO mentions that our long term contracts are generally in the form from five year plus one year contracts. Our 2008 contracts were fairly in line in an ASP basis and in 2009, we will start moving inline with international players.

So your AS - okay. All right thanks. And then another question on the capacity ramp in 2009, by year end you're going to be at one gigawatt, is that very heavily weighted to the second half?

(spoken in Chinese)

We expect - Mr. Li states that we expect our CapEx to be mainly - our CapEx, our production ramp up to be done by the middle of the year.

For that one gigawatt?

For the one gigawatt, yes.

Yes, the net increase panel the - is like a 355 megawatts because we will have in store capacity of 645 by the end of this year.

Right.

So, the net increase is 355.

Okay. So then, if you decide to add more capacity later on, you could even start in 2009 to add one?

(spoken in Chinese)

Yes.

Okay, and then - thank you. And last question, the Gentech deliveries for the contract that you just announced, are those - do those ramp quickly? I mean are the initial deliveries very small or is it kind of even over the five years - or the six years?

It's a ramp. In the - we look at the year on the mid 2008 to mid 2009, the first contract year. And the first two years delivery is relatively small compared to later years.

Okay. All right. Thank you.

Thanks.

Your next question comes from the line of Kent Holden with [Ham Funds]. Please proceed.

Yes, thank you very much. On the new polysilicon plant, the staffing for that, will that be included in SG&A, will those cots be capitalized? How will you account for that?

(spoken in Chinese)

Well, the - the SG&A has incurred in Sechuan project obviously, including some of these different causes, right now its expensed out rather than capitalized.

Okay. And then the ASP in RMB, what was that Q4 to Q1?

I refer this question to Mr. Sin Yeh.

(spoken in Chinese)

He says a bit of confusion over your question. Can I just re-ask the question - can you just restate the question? Are you asking about RMB prices or -

Yes, the RMB price in Q4 average compared to Q1.

Okay, thank you.

Yes, there is - there was actually further interest given our RMB term.

Okay, can you quantify that?

It's --

(spoken in Chinese)

It's around 2%.

2%. Okay. Thank you.

Your next question comes form the line of Arthur Friedman with Friedman Asset Management. Please proceed.

Good morning. Excellent quarter and excellent execution. Can you discuss what you're viewing in specific areas of the world market in terms of increasing demand, for example Spain or Germany or Taiwan and can you share with us any new markets you're looking at? Thank you.

(spoken in Chinese)

Mr. Li obviously is talking from the perspective of a wafer manufacturer. And in terms of demand for wafers, we're seeing still fairly strong demand in Europe. Demand for our wafers are definitely growing in Europe. Countries like Korea are showing to be very good signs of growth for RenaSola and countries like Taiwan are also showing very strong signs of growth.

Thank you.

And you have no further questions at this time.

Well, to conclude, in summary, we posted an outstanding first quarter highlighted by record revenues and improved gross margins and are continuing to ramp up production to meet front demand. Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thanks.

Thank you for your participation in today's first conference. This concludes the presentation, you may now disconnect. Good day.