Emeren Group Ltd (SOL) 2009 Q1 法說會逐字稿

Thank you, everyone, for joining us to the first quarter 2009 ReneSola earnings conference call. My name is Erica and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. (Operator Instructions). At this time, I would like to hand the call over to Ms. Julia Xu, Vice President of Corporate Finance and Communications. You may proceed, ma'am.

Hello, everyone, and welcome to ReneSola's first quarter 2009 earnings conference call. First of all, thank you, everyone, for waiting. We apologize for the slight delay here.

Our first quarter 2009 earnings results were released earlier today and are available on Company's website, as well as on newswire services. You can follow along with today's call by downloading a short presentation which can also be found on our website, at www.renesola.com.

With me today are Mr. Li Xianshou, Chief Executive Officer, and Mr. Charles Bai, Chief Financial Officer. Charles will be discussing the financial and business results, and we will all 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 US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherit 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 annual report on Form 20-F and other documents filed with the US Securities and Exchange Commission. ReneSola 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 US dollars.

It is now my pleasure to introduce Charles Bai, CFO of ReneSola. Charles, please go ahead.

Thank you, Julia, and thank you, everyone, for participating in today's call.

I'd like to begin today with the business and financial highlights for the first quarter of 2009. Following that, I'll share with you our vertical integration strategy and current market conditions. Then, I'll move on to our outlook for the year, followed by the Q&A. If you have a copy of our presentation, you can find the first quarter 2009 financial and business highlights on page four through page five of the presentation.

We performed well in the first quarter, achieving a solid wafer shipment of 90.5 megawatts. Some of our notable achievements during the quarter included reducing our processing costs to $0.36 per watt, from $0.39 per watt in Q4 '08. This keeps us on track to reach our targeted reduction in processing costs for 2009.

Reducing our silicon consumption rate to 6 grams per watt. Increasing our gross margin to 15.9%, excluding inventory write-down. Strengthening our balance sheet by retiring CNY270m of our convertible bonds, while increasing our total onshore bank credit facility to $577m. We also achieved 60% export sales under our efforts to further diversify our customer base. And development of our Sichuan polysilicon project is on schedule to commence trial production in the beginning of Q3.

However, overall, it was a challenging quarter for the solar industry as the difficult macroeconomic conditions that presided over the industry at the end of 2008 persisted throughout the first quarter of 2009. Financing available for projects remained very difficult for downstream companies to obtain, resulting in a softened demand throughout the value chain, while oversupply pressured ASPs and margins.

Softened demand, coupled with increased polysilicon supply, resulted in sharp decreases in wafer ASPs and polysilicon prices, which contributed to our $68m inventory write-down for the quarter. But we still recorded net revenue of $106.9m in the first quarter, representing a decrease of approximately 13% from $123m in Q1 2008 and a decrease of 32.6% from $158.6m in the fourth quarter 2008.

Total wafer shipments in the first quarter were strong relative to a market marred with weak demand. Total shipments of 90.5 megawatts consisted of 70.7 megawatts primarily from wafer cells and 19.8 megawatts from tolling arrangements. This compares to fourth quarter of 2008 total wafer shipments of 101 megawatts, consisting of 58 megawatts primarily from wafer cells and 43 megawatts from tolling arrangements.

Wafer ASPs decreased from $2.16 per watt in the fourth quarter of 2008 to $1.27 per watt in the first quarter of 2009. Although ASPs declined radically during most of the first quarter, reduction showed signs of deceleration towards the end of the quarter. We are hopeful that pricing will continue to decelerate and stabilize over the course of the second quarter and into the second half of the year.

Cost cutting remains a key initiative for ReneSola. This is supported by technological advancement through investments in R&D. Although our R&D expenses increased 24% sequentially, our investment resulted in additional reductions to our crop and kerf loss and further minimized the scrap yield during the production process, leading to a decrease in silicon consumption to 6 grams per watt in Q1 '09 from 6.05 grams per watt recorded in Q4 '08. This is in line with the target that we set out to achieve at the beginning of the year, which is to reduce our silicon consumption rate by 2% to 3% by the end of 2009.

Likewise, we also stated a goal of driving down processing costs by up to 20% from $0.39 per watt at the end of last year. As guided, the processing cost is now at $0.36 per watt. I'm pleased to see our research and development efforts continued to solidify our cost leadership position in wafer manufacturing space.

Now, turning to slide number six for a look at our balance sheet. During the quarter, we made steady progress in liquidity management and generated another quarter of positive operating cash flows. In January, we announced that our long-term bank facilities were bolstered by the addition of CNY800m five-year project loan agreement with China Construction Bank, to support the construction of our polysilicon production facility in Sichuan province. This reflects our initiative to increase the percentage of mid to long-term maturity debt as a percentage of our total bank debt.

As a result, our cash position at the end of the first quarter of 2009 rose to $174.4m. In addition, at the end of the first quarter of 2009, our credit facility lines from local banks increased to $577m from $450m at the end of the fourth quarter 2008. As such, we had undrawn facilities of $164m at the end of Q1.

We also recently announced that during the second quarter we purchased CNY270m aggregate principal amount of our CNY928m settled 1% convertible bonds due March 26, 2012 with a book value of 103.47% for a total consideration of approximately CNY186m. The total consideration was paid approximately 76% by cash and 24% by shares.

The addition of new credit facilities and restructuring of existing debt into a higher percentage of longer-term loans combined with our convertible bond repurchase strengthened our balance sheet and substantially reduced ReneSola's liquidity risk. Our ability to repurchase debt during the challenging period such as the one we're facing demonstrates the strength of our cash position and positive attributes of our business model.

Moving on to our customer base, on slide seven. As promised, in terms of customer base, we have achieved significant milestones in diversifying our customer base globally. As of March 31, 2009, the US, Europe and rest of Asia represented 30%, 25% and 8% of ReneSola's total sales respectively. By comparison, in 2008 our export sales accounted for roughly 30% of our total sales.

Turning to slide number eight/nine for a look at our production update. As of March 31, 2009, our capacity was 645 megawatts, which is the same as the end of Q4 2008. Our installed wafer and ingot production capacity target for 2009 remains unchanged, at 825 megawatts, which we're on track to achieve by July 2009 upon completion of a wafer production ramp-up.

Now for an update on our polysilicon production facilities. Phase one of our Sichuan polysilicon facility is progressing smoothly and at an advanced stage of completion. Mechanical completion of this first phase is scheduled for end of the second quarter of 2009 and commencement of production will take place immediately thereafter. The mechanical completion of phase two we expect at the end of the third quarter of 2009. Each phase represents polysilicon production capacity of 1,500 metric tons and provides us with a stable cost-effective flow of polysilicon going forward.

In terms of our current polysilicon needs, the supply shortage that existed in 2007 and early 2008 has diminished and should not be an obstacle over the near term. In fact, we saw another sharp drop in polysilicon prices during the first quarter of 2009 as a result of the weak end-user demand. We have been purchasing virgin polysilicon under various supply contracts, based on spot prices. And we believe that this is the best strategy, given current industry dynamics, and with our own internal supply scheduled to come online during the second half of the year.

Now, I would like to spend a few minutes on our vertical integration strategy on slides 10 to 13. As production costs continue to decline, the PV industry is becoming increasingly competitive. As such, a full vertical integration from polysilicon to module manufacturing becomes key in maintaining cost competitiveness and subsequently gaining market share. After careful consideration of the market conditions and a thorough evaluation of current and future industry trends, ReneSola has decided to enter into the downstream segment of the solar supply chain.

We are very pleased to announce today our two-pronged downstream strategy. First, with the acquisition of JC Solar, which I will go into details in a minute, and commencement of our in-house polysilicon production, we will soon become the first fully vertically integrated solar company with manufacturing capacities spanning from polysilicon to modules. Based on this foundation, we're on course to become one of the most cost-competitive solar suppliers in the world, achievable after we reach out our goal of reaching 1 gigawatt capacity in modules and production costs of close to $1 per watt in three years.

As we disclosed in today's press release, our China operating subsidiary, Zhejiang Yuhui, entered into an agreement to acquire solar cell and module manufacturer Wuxi Jiacheng Solar Energy Technology Company, or JC Solar, located in Jiangsu province. It is an established cell and module manufacturer with approximately 300 employees and current annual cell and module production capacity of 25 megawatts and 50 megawatts respectively. The total consideration for the acquisition was CNY118m paid in cash. The purchase consideration represents 1.2 times book value and 2.5 times of 2009 estimated net profit of $7m.

Second part of downstream strategy is to actively seek and evaluate valuable solar projects in China, to fully capitalize on the announced government subsidies and gain a strong foothold in China's market. This strategy is increasingly important following the Chinese government's plan of reaching installed capacity of 2 gigawatts by 2020, as disclosed in the media.

As part of the second strategy of seeking valuable solar projects in China, last week we announced that we have received approval from Zhejiang's provincial government to pioneer a 5 megawatt BIPV rooftop project in Zhejiang province. The project has a total planned area of 80,400 square meters on several government buildings in Jiashan County, Zhejiang province and is subject to final approval from the Ministries of Finance and Housing and Urban-Rural Development.

This project is a good example of how quickly government subsidies in China materialize into quantifiable results, and also demonstrates the increasing importance both national and local governments are placing in developing clean renewable solar energy.

Let's turn to page 14 of our presentation for a look at our current market conditions. As mentioned in our earnings press release, conditions remained incredibly challenging during the first quarter. The good news is that once we overcome the short-term challenges, the future of the solar industry remains bright. Pricing adjustments currently taking place along the solar value chain are ushering in a new era for the solar sector. And we look forward to the not too distant future when solar energy reaches grid parity and is a viable replacement of traditional sources of energy.

While we continue to make advancements in the march to grid parity, we are encouraged by the efforts made by the governments of the major global economies in support of the industry, especially in China and the US, the two highest energy consuming countries in the world.

In China, towards the end of the first quarter, the central government's Ministry of Finance announced a CNY20 per watt subsidy program for domestic solar installations. We also saw in media recently the Chinese government plans to further raise its long-term goal for domestic PV system installations from 1.8 gigawatts, as it stands currently, to 10 gigawatts or even 20 gigawatts by 2020.

And in the US, on the heels of President Obama's speech to Congress in which he said government will double the amount of renewable energy available over the next three years, the state of Texas in April approved a $500m solar subsidy program. This is a positive sign for the industry and proof that local governments in the US are starting to recognize the benefits of going green.

I will now spend a few minutes going through our financial results in more detail, before moving on to our guidance. Please turn to slides 16 to 18 of our presentation.

As a result of the falling price of polysilicon and wafer ASPs, we incurred a $68m inventory write-down against the net realizable value of the inventories in the first quarter and our margins were impacted accordingly. Net revenues for the first quarter of 2009 were $106.9m, a decrease of 13% year-over-year and 32.6% sequentially. Inventory write-down amounted to $68m in Q1 2009, with an inventory average price of approximately $85 per [kilo].

Gross loss for the first quarter of 2009 was $51.1m, compared to a fourth quarter 2008 gross loss of $130.1m and a first quarter 2008 gross profit of $27.2m. But I do want to stress that, excluding the inventory write-down, adjusted gross profit for the first quarter 2009 was $17m and the gross profit margin was near 16%, which I consider a remarkable achievement against this volatile market.

Gross margin for the first quarter of 2009 was negative 47.8%, compared to negative 82% in fourth quarter of 2008 and positive 22.1% in the first quarter of 2008.

Operating loss for the first quarter of 2009 was $58.3m. This compares to operating loss of $143.1m in the fourth quarter 2008 and operating profit of $23.2m in the first quarter of 2008. Excluding the inventory write-down, adjusted first quarter 2009 operating profit was $9.7m.

The first quarter 2009 operating margin was negative 54.6%, compared to an operating margin of negative 90.2% in the fourth quarter of 2008 and a positive operating margin of 18.9% in the first quarter of 2008. Excluding the inventory write-down, adjusted first quarter operating margin was 9.1%.

Total operating expenses in the first quarter 2009 decreased to $7.3m, down from $13m in the first quarter 2008. The large drop was mainly due to a percentage decrease of over 40% in general and admin expenses during the quarter, slightly mitigated by a $675,000 increase in R&D expenses.

We recognized a tax benefit of $32.8m in the first quarter 2009, up from $18.3m in the fourth quarter 2008. The sizeable tax benefit in first quarter of 2009 and fourth quarter 2008 was mainly attributable to the $68m and $137.1m inventory write-downs during the first quarter 2009 and fourth quarter 2008, respectively.

Net loss attributable to holders of ordinary shares for the first quarter 2009 was $30m, compared to $128.3m for the fourth quarter 2008 and $17.7m in the first quarter of 2008. Excluding the inventory write-down, adjusted first quarter 2009 net income attributable to the holders of ordinary shares was $2.1m.

CapEx spending in 2009 is reduced to $172m as we scaled back our wafer production capacity expansion target from 1 gigawatt to 825 megawatts for 2009, of which approximately $127m is earmarked for the Sichuan polysilicon project and the remaining $46m is for expansion of our wafer capacity to 825 megawatts from the current 645 megawatts. Our remaining CapEx spending from Q2 to the end of the year stands at approximately $102m.

Moving to page 19 of our presentation and giving some color on 2009. In the near term, we are looking forward to an improvement in industry dynamics in the second quarter and a rebound during the second half of the year. As I mentioned, ASPs are beginning to stabilize. Once excess supply moves through the value chain, cheaper raw materials and stronger demand will lead to improved conditions for solar manufacturers.

Longer term, we believe that as global financial institutions stabilize and as the industry approaches grid parity, lending will increase and the demand will take off. In the meantime, we remain focused on continuing to improve our operational efficiency and enhancing our position as a leading low-cost solar manufacturer through our two-pronged vertical integration strategy.

That brings us to our guidance for the second quarter and full year 2009 on slide -- page 20. Let me begin with the Q2 guidance. We expect Q2 shipments to be in a range of 85 to 95 megawatts, with a blended ASP of $0.90 per watt to $1 per watt. We expect gross profit margin to be in low single digits. For the full year 2009, we estimate net shipments to be in a range of 450 to 500 megawatts and revenue in a range of $500m to -- $500m(Sic-see press release).

At this time, we're happy to take your questions. Operator, please.

Thank you. (Operator Instructions) And your first question comes from the line of Satya Kumar from Credit Suisse. You may proceed.

Hi. Can you hear me? Hello?

Yes. Hi, Satya.

Hi, (inaudible) over here. I just wanted to ask about your ASPs. What will be the ASP in the second quarter?

Second quarter we said is a range of $0.90 to $1.

And how do we look forward in the next -- in the rest of the year, 2H '09 and the second quarter?

I'll leave this question to my CEO.

(Interpreted). We estimate the average will probably be around $1, taking into consideration first quarter is $1.27.

Just to confirm, first quarter is $1.27, right?

Yes.

Okay. And the second. And for the update on China you mentioned a 2 gigawatt by 2020 target and the presentation said 20 gigawatts for 2020. So can I have a clarification on that?

It's 2 gigawatts by 2020.

Okay. And for the inventories, what percentage would be the breakup for raw materials and so on?

Raw material accounts for approximately 55% of the inventory and the rest would be finished goods, probably IT and some other consumables and spare parts.

Okay. And you said that the inventory is around $1.80 per -- $1.85 per kilowatt (inaudible), right? So how do you look for -- sorry?

Go ahead. Go ahead. Satya, go ahead.

Yes. So how do you look at forward as in the spot price in this quarter and your inventory prices in the coming quarter?

We anticipate that the current quarter we will have average [price] of approximately $135 per kilo.

You said before --

Oh, I'm sorry. I was talking about the first quarter, for the raw material costs. So your question is about the second quarter, right?

Yes. But in the first quarter you said $85, right? Or is it $135?

No. $85 was the end amount that was written down to. $135 was the average inventory that we used as our cost.

Yes.

Okay, okay. And for the coming quarter, the spot prices you are seeing?

(Interpreted). We expect stabilization of polysilicon prices in the remaining of the year, perhaps in a range of $60 to $80 per kilogram.

Okay, great. Thanks a lot. That's all.

Thank you, Satya.

Your next question comes from the line of Jesse Pichel from Piper Jaffray. You may proceed.

Hi. Good evening, Charles. How are your customers going to react to your vertical integration strategy?

I'll leave this question to our CEO.

(Interpreted). At the moment, our cell and module production capacity is still fairly small and it will not pose serious threat to our existing customers.

And so that means you have no plans to ramp it further? You're obviously going to ramp it much greater than 25 megawatts, so.

(Interpreted). For the remaining of 2009, we only are going to ramp it up to 100 megawatts. Of course, in the long run, we will ramp it up to 1 gigawatt in three years' time.

Well, don't you think that's threatening to your existing customers? A 1 gigawatt target is bigger than some of your customers. It's the same size as Suntech.

(Interpreted). Well, at the moment, we still have quite a few long-term collaboration contracts with our customers. So, from our perspective, I think that we could still maintain an amicable relationship with our existing customers. Just like Suntech and JA Solar, they all have their own wafer manufacturing capability.

What was the last part of that?

JA Solar and Suntech both have their own wafer manufacturing capabilities (multiple speakers).

Well, Suntech owns 18% of a wafer facility. So I don't think that's exactly a fair comparison, since you're going to own 100% of the cell. Let me ask you this - you're intending to have these modules exported or this is just for the Chinese market?

(Interpreted). Mostly will be exported.

And is there any technology differentiation in the company that you bought? Do they have selective-emitter technology or any other technology that can compete with the next generation of cells coming out?

(Interpreted). Okay. We strive to produce high-efficiency modules -- products, capitalizing our vertical integration. And we are able to supply to our downstream module manufacturers very high-quality wafers. So we are confident that we can turn out high-efficiency products.

All right. I'll come back into the question queue. Thank you.

Thanks.

Thanks, Jesse.

Your next question comes from the line of Lu Yeung from Banc of America. You may proceed.

Hi, Mr. Li. Hi, Charles. Hi, Julia. Some questions on the wafer pricing between mono and multi. What are you seeing? What are the price differentials [between the two]? Will it be converging any time soon?

(Interpreted). Looking back, from the beginning of this year we have noticed that monocrystalline prices were lower than the multicrystalline prices. However, in the beginning of June, we expect to increase the prices of our mono wafers.

Also, your processing cost in Q1 was slightly lower. Was that because of your shipment is more towards the [mix shift] of multi or how does that change going forward?

(Interpreted). This is really due to an overall reduction of cost, not necessarily related to the production of multicrystalline wafers.

So, based on your demand and orders, do you think the multi part will continue to be quite strong, going forward?

(Interpreted). The -- just judging from the current market conditions, we have noticed that there is a demand -- strong demand coming in for multi mono -- for mono wafers. As a result, we will increase our ASP in the beginning of June.

Last question I have is on the vertical integration. Do you intend to keep your cell capacity much smaller than your module capacity, going forward?

(Interpreted). Due to the high CapEx spending that we have budgeted for '09, without the completion of the Sichuan product -- Sichuan plant, we will not invest more in the cell capacity.

So are you looking to outsource some of the cell processing to your customers, then?

(Interpreted). Yes. We will do some OEMs. We will ask OEMs for the cells.

Okay. Thank you.

Your next question comes from the line of Sunil Gupta from Morgan Stanley. You may proceed.

Hello, Mr. Li, Charles. I have two questions. In terms of your ASP, I'm not sure I'm quite following your comments about ASP. So you said in Q2 you would realize a blended ASP of between $0.90 to $1. What do you expect this ASP to do from June? Is it just that the mix is changing, or you think both mono and multi ASPs could go up in Q3?

(Interpreted). We -- I think in particular, judging from the market conditions, we think there is a very strong demand coming from the mono. So we expect at the moment to increase mono wafer prices.

So quarter to quarter -- quarter on quarter, your mono wafer prices you expect to increase. It's not just a change in mix in Q3?

Correct. Correct. Correct.

Okay. And how about multi wafers?

(Interpreted). We expect multi wafers to be stable.

Okay. And what exactly was your non-silicone manufacturing cost in Q1? And what kind of cost do you expect to achieve in Q2? And if you could please separate it for both mono and multi.

(Interpreted). We -- the non-polysilicon production cost for Q1 was $0.36.

Okay. And for Q2, what do you expect that to be?

(Interpreted). For Q2, we expect the production cost to be slightly higher on a sequential basis. That is because we have not produced as much in Q2. But from a full year perspective, we expect production cost to be decreased, as we guided in the beginning of the year.

Okay. And my last question is regarding your inventory. So you mentioned that you have marked down your polysilicon inventory cost to $85 a KG. How about your finished goods?

Well, the -- let me explain maybe here, Sunil. What we do is decide on -- the basis to decide on the inventory write-down is essentially to use the point where decide to write down where there's a wafer ASP. And then we will look at what would be the gross margin we look at, and then we look at the [COGS]. And then the COGS we compare to our carry value of the inventory and we decide whether it's going to be a write-down. So that is on a blended basis, instead of pure raw material.

Okay. So when you've done that, what gross margin do you assume?

We're looking at low single digit for the Q2, as we disclosed in the press release, as we talked about earlier, yes.

And what wafer price did you assume? Did you assume your $0.90 to $1?

That's correct.

Okay. Thank you.

Thank you.

Your next question comes from the line of Sanjay Shrestha from Lazard Capital Markets. You may proceed.

Hello. This is Jenny calling for Sanjay. My first question is regarding the utilization rate during the first quarter. What are the utilization rates for the first three months? And also, what are the improvements during the second quarter? What do you expect in the second half of '09?

(Interpreted). In Q1 our utilization rate was very high, at 80%. We experienced a drop in April, which resulted in a utilization rate as low as 20% to 30%. However, there was a pickup in May. And for the remaining of the year, we expect to go back to 80%.

Just follow up to that. Why in April it dropped so sharply, to 20% to 30%?

(Interpreted). That is because in Q1 some of the customers delayed their -- delayed the shipments. As a result, we had more finished goods in our inventory, subsequently that we reduced our production.

Okay. And my second question regarding the acquisition. What are the CapEx you are expecting for ramping up this module capacity?

(Interpreted). For every 50 megawatts of increase, it's about CNY10m capital expenditure.

And also, for the Company, what's the sales strategy for the new cells and module company?

Sorry. Could you repeat your question again? What's our what?

The strategy for sales. How do you sell your product, the finished module product? Like you will ramp up your sales force or what's the focus, like to Europe or to China or to other regions?

(Interpreted). At the moment, what we have noticed is from JC Solar's contracted sales the 50 megawatts is not sufficient to supply to all its existing customers. The contract -- the pre-sale contract has already amounted to 68 megawatts.

Okay. And a follow-up on that. Those are mainly for export, right, for European market?

(Interpreted). Yes.

Thank you.

Your next question comes from the line of Sam Dubinsky from Oppenheimer and Company. You may proceed.

Hi, guys. Some quick housekeeping questions. Could you just break out what percentage of your shipments for mono, multi and tolling?

Approximately, Sam -- why don't I just give you a heads up here? In terms of the split between mono and multi, in the first quarter we have about 33% of mono and 67% in multi. That's in combination of our own wafer cells and also the tolling.

Okay. What about -- how much was tolling by itself?

The tolling, we have 19.7 that's for tolling. And within that, there's a 50%/50% split, equal split.

Okay. And then, how should we think about the BP relationship, going forward? Is that going to be a tolling or is that going to be straight wafer shipments? And has the relationship with BP changed at all over the past couple -- over the past quarter?

(Interpreted). Yes. Our relationship with BP will remain as a tolling customer and that has not changed.

Okay. So how many megawatts should we model in for tolling this year? I believe -- did you announce the 100 megawatt deal with BP or what was the exact number?

(Interpreted). We still expect -- the guidance in the beginning of the year was to expect 120 megawatts in tolling business.

Okay. And what percentage of that is BP?

We don't really disclose that information.

Okay. And should we expect that tolling ASPs will also decline? What will the margin profile of tolling be, going forward?

(Interpreted). Sorry, unfortunately it's a bit sensitive, so we would rather not disclose pricing information on tolling business.

Okay. Could you maybe give a clarification? Does your new guidance include the acquisition?

Yes, it does.

Okay. So how many megawatts should we model in for module and cell shipments this year?

(Interpreted). For our wafer megawatts, it's around 450 to 500, whereas for the module we expect somewhere between 30 to 40.

30 through 40, okay. And could you just give an update on -- I may have missed this in the call, so I apologize. But can you give an update on your poly plant expansion, in terms of how many metric tons this year and what the cost structure will be as it ramps?

(Interpreted). We expect we'll start the production commencement by the end of June. We'll have first batch of products made in the beginning of July. We still maintain our target guidance of 600 metric tons for the remaining of this year, with an average cost price of $60 per kilogram.

Okay. It seems like, last year, and maybe this isn't a question for you but more for the industry, people were targeting initial cost structure of $80 to $120. And now, over the past quarter or so, every new poly entrant is targeting a cost structure of $50. What has changed recently that's made the industry a little bit more optimistic on the ability to lower the poly costs on initial ramps?

(Interpreted). It's basically attributable to two major reasons. Number one, due to the financial crisis, all raw materials have coming off prices in terms of -- for example, in this case, the gas prices are coming off as well. And secondly, it's because we use a closed-loop production which is much cost efficient than any other method of production.

Sam, may I just add one point here? As you know that some new entrants, last year you saw they did not have a closed loop and they ended up buying, for example, TCS from the sources and the pricing was very expensive. Right now, on those raw materials or consumables, the pricing has come down significantly.

Okay. Great, guys. Thanks. Much appreciated. Good luck.

Thanks, Sam.

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

Sorry, we have no further questions at this time.

Your next question comes from the line of John-Marc Bunce from Nomura. You may proceed.

Hi, Charles, Julia. I had some questions on poly prices. I think most of those have been answered. But can you just clarify the current spot pricing that you're seeing now in the second quarter?

(Interpreted). At the moment, it's $70 to $80.

Okay. Thanks. And also, what do you expect the proportion of sales to be under tolling contracts in the second quarter?

John, I'm sorry, were you talking about the sales in terms of tolling?

Yes. What proportion of sales will be under tolling contracts for the second quarter?

(Interpreted). Around 15%.

Around 15%. Okay. Thank you very much.

(Operator Instructions). Your next question comes from the line of Barney Gray from Hanson Westhouse. You may proceed.

Hi there. Just a question on the CapEx. It's -- out of the $172m for this year, how much did you spend in the first quarter? And are you expecting CapEx to decline quite significantly in the second half of the year?

Hi, Barney.

Hi, Charles.

Yes. We -- for the whole year, we're looking at $172m total CapEx spending, as we talked about earlier. And in the first quarter, we have spent $70m. So from the Q2 to the end of the year, we'll have remaining $102m for CapEx.

And is most of that going to be in the second quarter and then tail off as you get towards the end of the year?

Well, actually, when you look at the mix, they are primarily in the first half. For the second half, we'll have less than $50m in CapEx.

Great. Thank you.

You're welcome.

Your next question comes from the line of Jesse Pichel from Piper Jaffray. You may proceed.

Yes. Thank you for the follow-up question. Does the $70m of CapEx in Q1, does that cover the acquisition price of JC?

No, it's not. It's pure CapEx for Sichuan and our wafer plant.

And what was the acquisition price of JC?

CNY118m.

RMB, okay. And regarding JC, were any officers, directors or investors in ReneSola invested in JC prior to the acquisition?

No.

Okay. And out of the $172m, can you break that out for me between cells and poly and wafers, maybe?

Sure. Out of this $172m, for the poly plant the total is $127m, okay, out of which $47m is paid in Q1 and we expect to have $34m to be paid in Q2. Okay? So, the second half will be the total of $45m, $46m. Okay?

Now, let me move to the wafer plant. The total wafer plant CapEx is about $46m, and we -- out of which, $23m was paid out in first quarter and $20m for second quarter. So for the third and the fourth quarter the total is nearly $2.2m.

Okay. Can you review with us how much have you spent to date? I kind of lost track on the poly plant, including -- let's say, how much will you have spent in '08 and '09 on the poly plant?

Poly plant, the total CapEx is $330m. And we spent approximately $180m in '08. And the -- for '09, as I said earlier, it's about $127m. And the total payment in 2010 is approximately $20m.

I can't remember from our visit, whose reactors are you using?

Reactors is MSA.

MSA. And the TCS plant is up now or --?

Well, right now we're in advanced stage of development. As Mr. Li said, we're ready for trial production at end of June.

Yes. Just a high-level question for Mr. Li is that it doesn't appear that any polysilicon company in China is making money. And it's clear that the costs are not coming down as quickly for Chinese polysilicon manufacturers, at least from the ones that we're in touch with. And given the sudden fall in price of poly, how can this division make money for you and not be a losing proposition?

(Interpreted). Yes, you're right, Jesse. Most of Chinese poly players don't make money. And as a matter of fact, their qualities are quite bad. But we are confident because we use the complete closed-loop processes from the beginning of the TCS gas all the way to the gas recycled. And thirdly, we have installed all 16 reactors all together at once.

Okay. Every polysilicon player I've met claims to use closed loop as well. Where do you get your technology from on the closed loop or hydrochlorination unit?

Hello?

(Interpreted). In reality, I think many of the Chinese companies are not really using the true closed-loop processes. We actually produce our own TCS. As far as I understand, I think there is only one company, called [Daco], in China who uses the complete closed-loop technology.

Okay. Thank you very much. Good luck.

Thank you.

Okay. Thanks. Thank you, everyone, and thanks for participating for today's call.

In summary, we believe the difficult operating conditions within the industry are showing signs of a plateau and the most difficult phase of recalibration cycle has passed. We also believe that the recent drop in ASPs has paved the way for the industry to reach grid parity more quickly. Going forward, we will maintain our focus on driving down production costs while improving operational efficiency, to ensure ReneSola's long-term competitiveness as a fully integrated solar manufacturer.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact myself, Julia or any of our Investor Relations representatives. Thank you.

Thank you.

Bye, bye.

Thank you for your participation. You may now disconnect and have a wonderful day.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.