Emeren Group Ltd (SOL) 2009 Q2 法說會逐字稿

Hello, ladies and gentlemen, and thank you for standing by for ReneSola Limited's second quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. After management's prepared remarks there will be a question and answer session. As a reminder, today's conference is being recorded.

I would now like to turn the meeting over to your host for today's call, Ms. Julia Xu, ReneSola's Vice President, International Corporate Finance and Corporate Communications. Please proceed.

Hello, everyone, and welcome to ReneSola's second quarter 2009 earnings conference call. Our second quarter 2009 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 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 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 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 Mr. Charles Bai, CFO of ReneSola. Charles, please go ahead.

Thank you, Julia, and hello to everyone participating in today's call. If you have a copy of our presentation, you can find the second quarter 2009 business development on page -- from pages four through to page five.

The second quarter of 2009 was an historic quarter for ReneSola's evolution as a Solar Company. During the quarter we transformed ourselves from one of the world's largest manufacturers of Solar Wafers into a low-cost, fully integrated producer of Solar products.

In addition we were able to generate positive gross profit margin, despite an overall challenging market, demonstrating our strong capability to deliver results in an adverse macroeconomic and industry environment. We've focused the effort in cost reduction and efficiency improvement. With upstream segment prices stabilizing, we hope to return to profitability in Q2 along with a fully integrated operation that will help enhance our competitiveness going forward.

Before I run through our results for the quarter, I would like to discuss some of our business developments in more detail. Firstly, as promised, we successfully commenced polysilicon trial production in Phase 1 of our 3,000 metric tonnes polysilicon manufacturing facility in China's Sichuan province.

The quality of the polysilicon from the first trial batch produced was high. And we expect to be able to rely on this facility for approximately 400 metric tonnes to 500 metric tonnes of polysilicon in 2009, and between 2,800 metric tonnes and 2,900 metric tonnes in 2010, following the launch of the second 1,500 metric tonnes phase in Q4 of this year.

The addition of in-house polysilicon production enhances our upstream capabilities, helps diversify raw material procurement risk and provides us with a greater control of our production costs in each segment in our operations. We expect to quickly reduce our polysilicon production cost to below $40 to $45 per kilo in the first half of 2010.

Second, at the end of May we successfully closed the acquisition of JC Solar, our own -- our wholly-owned Solar Cell and Module manufacturer in Jiangsu province. At the time of the acquisition JC Solar had 25 megawatts of annualized Cell production capacity and 50 megawatts of annualized Module manufacturing capacity.

I am pleased to report that JC Solar's integration into ReneSola has gone very well and we're already recognizing the benefits of our newly-added business. JC Solar is currently producing cells with efficiency in the range of 17.2% to 17.3%, which we aim to increase to between 17.5% and 17.6% by the year end. We have maintained strong customer relations with low customer attrition. And in June we shipped 2.7 megawatts of modules with a gross margin over 30%.

The successful launch of our polysilicon plant, combined with our leading Wafer production capabilities, and the addition of JC Solar's Cell and Module manufacturing capabilities positions ReneSola as one of the first fully integrated Solar companies in China. This provides us with the platform we need to ensure cost competitiveness, as total cost to produce a Module if everything is made in-house as a fully integrated Company will be substantially lower. We aim to drive our fully integrated Module cost to around $1.15 per watt in 2010 and close to $1 per watt in 2011.

Before I start on Q2 results I would like to briefly mention our present liquidity. We have increased our bank facilities to $634m as of today, compared with $577m in Q1 2009. Recently our wholly-owned subsidiary, Zhejiang Yuhui Solar Energy Source Company Limited, signed a strategic cooperation agreement with the Bank of China. Under the terms of the agreement the bank plans to grant us with a total credit facility of $249m in Q3, subject to final approval from its provincial branch. The facility includes $115m in existing credit lines.

In addition to above credit line, Bank of China intends to grant new credit lines to part fund Solar projects that we have been developing in China. I will elaborate on the Company's liquidity situation later on.

Now let's move to slide six for a snapshot of our operating results for the quarter.

Overall, as with the first quarter of 2009, the second quarter remained challenging while the industry experienced soft demand conditions in general. We were able to capitalize on our diversified customer base and a gradual demand improvement to make up for the shortfall.

Oversupply again pressured gross margin and ASPs across the industry during the second quarter. But as a low-cost Solar Company, we were able to leverage our cost competitiveness, industry relations and flexibility in our sales and [tooling map] to maintain market share.

Under the circumstances, and after two consecutive quarters of inventory write-downs, we were very pleased to see a return to positive gross profit margin for ReneSola to 5.1%, through a great and effective effort in managing our costs and an improvement in conditions along the Solar value chain. We expect a gradual gross margin improvement for the remainder of the year, along with current $85 per kilo inventory to both flow through to resemble spot polysilicon price in the second half of 2009.

Total product shipments in the second quarter of 2009 were solid under the circumstances. The total Wafer shipments for the quarter was 83.2 megawatts and total Module shipments was 2.7 megawatts.

As expected, Wafer ASPs decreased during the quarter, falling from $2.2 -- $1.27 per watt in the first quarter 2009 to $0.93 per watt in the second quarter of 2009. Although ASPs declined once again during the second quarter, the reduction was less severe in Q2 and we have witnessed stabilization in Wafer pricing.

Please turn to slide number seven for a look at our production update.

As of today our Wafer capacity reached 825 megawatts. We now have 500 megawatts of multi-capacity and 325 megawatts of mono-capacity at our Wafer manufacturing facilities in Jiashan. Along with our successful launch of polysilicon production, our upstream leadership is further enhanced, and this upstream leadership will help ReneSola to better control costs in each segment of our operations and increase our competitiveness in the global Solar industry.

As of June 30 JC Solar had annual Solar Cell and Module manufacturing capacity of 25 megawatts and 50 megawatts respectively. And we plan to increase end use Solar Cell manufacturing capacity to 100 megawatts and Module capacity to 250 megawatts by the end of 2009. We are confident that our in-house supply of quality, low-cost wafers and increasing Cell efficiencies will allow us to effectively expand our Module OEM business.

I will now spend a few minutes going through our financial results in more detail. Please turn to slide nine to eleven of our presentation.

Net revenues for the second quarter of 2009 were $82.6m, a decrease of 22.7% sequentially and a decrease of 52.2% year-over-year. The decline in net revenue was primarily contributable to a combination of a decrease in both Wafer ASP and Wafer shipment. ASP of wafers in Q2 decreased to $0.93 per watt from $1.27 per watt in Q1 2009.

Gross profit for Q2 was $4.3m, compared to a gross loss of $51.1m in Q1 2009 and a gross profit of $42.8m in Q2 2008. Gross margin for the first quarter of 2009 was 5.1%, compared to a negative 47.8% in the first quarter of 2009 and a positive 24.7% in the second quarter of 2008.

Operating loss for the second quarter of 2009 was $4m. This compared to operating loss of $58.3m in the first quarter of 2009 and an operating profit of $34.5m in the second quarter of 2008.

Second quarter 2009 operating margin was negative 4.8%, compared to operating margin of negative 54.6% in the first quarter of 2009 and a positive operating margin of 20% in the second quarter of 2008.

Total operating expenses in the second quarter of 2009 were $8.2m, up from $7.3m in the first quarter of 2009, mainly contributable to an $800,000 amortization of intangible assets charge of customer relations and order backlog from JC Solar acquisition.

Our R&D expenses for the quarter were maintained at $3.4m.

We recognized a tax expense of $700,000 for Q2 2009, compared with the tax benefit of $32.8m for the first quarter of 2009, of which $37.1m of the total tax benefit was attributable to the first quarter 2009 inventory write-downs.

Net loss attributable to holders of ordinary shares for the second quarter of 2009 was $3.6m, compared to a net loss of $30m for the first quarter of 2009. This translates into earnings per share loss of $0.03 per share and $0.05 per ADS.

Let's turn to page twelve to look at the -- to take a closer look at our balance sheet.

During the quarter we made further progress in liquidity management by retiring approximately $40m in convertible bonds, resulting in a debt conversion profit of $5.4m. As of June 30, 2009 the Company's bank debt comprised of approximately $348m in short-term borrowing and approximately $160m in long-term borrowing, and $99m in convertible bonds which is due in March 2012.

As of today we increased our credit facilities to $634m, up from $578m in Q1. And in more recent news our wholly-owned subsidiary, Zhejiang Yuhui Solar Energy Source Company Limited, recently signed a strategic cooperation agreement with the Jiaxing branch of the Bank of China.

Under the terms of the agreement, the bank will grant us with a total credit facility of $249m. The new credit facilities include the existing credit facilities of $133m (sic - see presentation) that the bank has already grant us, which, when combined, makes us the largest customer of Bank of -- of the bank's Jiaxing branch. I'm sorry, let me make one correction here. The existing credit facility from the Bank of China is $116m.

These credit facilities include short-term credit lines for working capital, mid to long-term project loans, loans to partially fund acquisitions and domestic and international trade finance. In addition to the credit facilities the bank also intends to provide mid to long-term financing to Solar projects that we are developing. I should point out that agreement with the Bank of China is subject to final approval by the Bank of China's provincial branch.

Let's turn to page 13 for CapEx. For the first half of 2009 our capital expenditure spending totaled $146m. This was mainly due to investments made in capacity expansion at our Jiashan Wafer manufacturing facilities as well as the Phase 1 of our polysilicon manufacturing plant in Sichuan province.

Capital expenditure spending for the second half of 2009 is expected to be approximately $95m, bringing annual CapEx for 2009 to $241m. 2010 CapEx is estimated to be $63m for our polysilicon manufacturing project and the capacity expansion of JC Solar.

Let's turn to page 14 of our presentation for a look at our current market conditions.

As we mentioned in our earlier press release, we've recently observed some degree of stabilization in upstream pricing, which will hopefully lead to increasing profitability in the second half of the year. An additional factor that should help with profitability is that we expect to work through our inventory with a carry value of $85 per kilo and expect to start using raw material that closely resembles market spot prices.

We're encouraged by the government-backed stimulus plans of major economies, particularly in the United States and China. We feel confident in the future of the PV industry in China as the central government is providing significant Solar policy and the domestic banks strong interest to provide funding to Solar projects. We are actively seeking and evaluating viable Solar projects in China to fully capitalize on government subsidies and gain a strong foothold in China's market.

We signed a letter of intent in July with the Yancheng city government in Jiangsu province for a 500 megawatt Solar project and the Panzhihua East District government for a 5 megawatt Solar rooftop project. We are confident that our experience gained in winning these projects will ideally position us to take advantage of future government subsidies in China.

This brings us to our guidance for the third quarter and the full-year 2009 on slide 15. Let me begin with the Q3 guidance. We expect Q3 revenue to increase in the range of 60% to 70% sequentially. We maintain our full-year revenue guidance between $500m to $550m and product shipment between 450 megawatts to 500 megawatts.

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

Thank you. (Operator Instructions). Your first question comes from the line of Satya Kumar, representing Credit Suisse. Please proceed.

Yes, hi, thanks. Hello Charles. Several questions on the model.

First off, on the Wafer business, what is your grams per watt and the polysilicon to Wafer conversion cost in Q2?

The silicon consumption rate stayed at 6 grams per watt in Q2.

And the Wafer conversion costs?

The Wafer conversion cost is approximately $0.93 per watt.

Sorry, just the polysilicon to Wafer conversion cost.

Well, this is -- the Wafer conversion processing cost is approximately $0.40 per watt.

$0.40 per watt, okay. How do you expect that to trend in Q3 with the increasing utilization?

We look at the approximately $0.35 per watt in Q3.

Okay. You mentioned that you'll produce 400 tonnes to 500 tonnes of polysilicon.

That's right.

Is that coming mostly in Q4, or is there any production in Q3?

I'll refer this question to Mr. Li.

(Interpreted). Our estimate is about 90 metric tonnes in Q3 and around slightly over 300 tonnes in Q4.

Okay. What is the cost -- manufacturing cost of polysilicon we should assume in Q3 and Q4?

(Interpreted). It's a little not indicative to look at Q3 because production is still fairly low in terms of production. But when we get to Q4 we should see our costs at around $50 to $55 per kilogram.

Okay. How much inventory of polysilicon do you have at the end of Q2? How much do you think you will have at the end of Q3?

Just a second, please, Satya.

Satya, why don't I just give you a breakdown? Out of the total inventory in Q2 we have raw material approximately 58%, which is raw material. And, combined with some spare parts and consumables, we have about 68%. Now the Wafer is about 10% and finished goods is about 22%.

Okay. So I can assume the $85 per kilogram to figure out the silicon inventory. How should we think the ASPs for wafers in Q3? And how should we think about volume and ASPs in Q4 for wafers?

(Interpreted). ASP for Q3 is around $0.85 to $0.90. We expect this price to be maintained until November.

Okay. How much should we model for Cell and Module volume in Q3 and Q4? And how should we think about pricing for those?

(Interpreted). For Q3 it's 10 to 15. And for Q4 it's about 20 to 30.

Is that Cell or Module? What is that?

Module.

All right. Thank you very much.

Okay.

Your next question comes from the line of Jesse Pichel, representing Piper Jaffray. Please proceed.

Hi, this is Ming Xu for Jesse Pichel. Good evening, Li-zong, Bai-zong and Julia. Can you give us some color on your long-term poly production cost?

And the second question, what is your utilization right now? And what do you think the utilization will be in the next two quarters?

(Interpreted). In terms of polysilicon manufacturing costs we expect $40 to $45 per kilogram in first half of 2010 and $35 to $40 per kilogram in second half of 2010.

In terms of the capacity utilization, out of the 645 megawatts we have had in first half, in Q3 that utilization has reached 90%. We have added 180 megawatts of capacities in Q4 -- in July of this year. And we expect -- right now it's in the trial production. We expect to be fully utilized in Q4 of this year.

Great. That's really helpful. Thanks.

Excuse me?

Thanks. I appreciate it.

Okay.

Your next question comes from the line of Lu Yeung, representing Bank of American-Merrill Lynch. Please proceed.

Hi, Mr. Li, hi Charles, hi, Julia. My question would be, given that the mono pricing has probably recovered in the last month or two, how does that help your ASP margin in the third quarter? And, going forward in the third quarter, what is the split between mono and multi production?

Sorry, Lu. Your question was, since there has been a slight pickup in mono price, you wanted to see how is that going to affect our margin in Q3? What was your question? I missed the first part.

The margin and pricing, as well as what is the split of mono and multi between second and third quarter.

Okay.

(Interpreted). In terms of ASP, for the mono and mono products we have witnessed a 10% ASP rise since July of this year. Right now the pricing is approaching $0.90 per watt. For the multi I am going to give you the price that is per piece of the Wafer. It's $3.2 to $3.4 per each piece of multi Wafer.

In the past month our production split is 50%/50%. Starting September, our multi production reaches 90 -- 60%.

And how is that going to help your margin [when] mono prices stabilize this quarter?

(Interpreted). So, because of this, we do expect a gradual improvement of gross profit margin.

Have you guided third quarter margins?

(Interpreted). No, we have not.

Would that be directionally up from second quarter?

(Interpreted). Yes, we should see a gradual improvement of margins. We do expect the $85 per kilograms of inventory will be consumed by September.

And what is the planned silicon costs in the third quarter compared to second quarter.

(Interpreted). At the moment it's still at $85 -- from an accounting perspective, at the moment we're still using $85 per kilogram poly raw material. This will continue in Q3. In Q4 we expect that number to drop down to $65 to $70 per kilogram.

And what was it in the second quarter?

$85.

And third quarter it's still $85?

$85, that was the amount that that we've written down to at the end of Q1.

I see. And you said it will trend down to $65 to $70. That will include your own polysilicon production. Is that correct?

(Interpreted). Yes. No, it will not be reflected in the $65 to $70 per kilogram number that I just gave to you, because we adopt an inventory policy of FIFO. As such, we must consume the inventory that was purchased previously rather than during the quarter purchased.

I see. All right, thanks. Congratulations.

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

Thank you. Good evening, guys. A couple of quick questions. First off, how much do you expect tolling to represent as your overall revenue mix in '09? And how should we think about that trend going into 2010?

(Interpreted). At the moment we guide the market no tolling business for second half of 2009. In 2010 we do aim to add OEM business in our Module sales.

Okay. Okay. Kind of a follow-up on that then, so when we think about the 2010, right, with your 100 megawatt Cell capacity, 250 megawatt Module capacity here by the end of this year, how should we think about your mix of Wafer, Cell and the Module business during 2010?

(Interpreted). At the moment we do expect to reach shipment of about 500 megawatts in 2010 in Wafer and 250 in Module.

Got it. Got it, okay. And that Module, obviously, will be your in-house Wafer and maybe some of that Cell processing will be outsourced, and that's how you get to that 250 megawatt number.

That's right.

Okay. Okay. I've got a couple of follow-ups. Another one is where do you guys expect the spot poly prices to be when you talk about this $65 to $70 blended average cost of poly in Q4? What is that taking into consideration where the spot market is?

(Interpreted). Because we do expect resilience in the market -- in market continuing into October and November, as such, we do not expect declining ASP prices in November -- into November.

Okay. So it would probably stay somewhere around that $65 to $70 level also in Q4?

Right, right. Spot market level, yes.

Okay. Okay, one last question, then, guys. So when you talk about 2010, a pretty impressive potential for your in-house poly production number, 35 to 40, and 40 to 45 out of the gate, so how should we think about your blended average cost of poly for that year? What's your expectation for what the spot market is going to look [like]? And could you also give us a level of comfort as what gives you guys the confidence that you can actually get to such a load number almost out of the gate, if you would?

(Interpreted). We expect our poly cost in 2010 to fluctuate between $40 and $60, taken into the consideration of our Cell production as well as the market purchase.

Okay. Okay, that's helpful. Thank you, guys.

Your next question comes from the line of Sophie Lu, representing Morgan Stanley. Please proceed.

Hi. Thank you for taking my question. I have two questions. One is for the polysilicon production. What's the electricity consumption at --?

Sorry, sorry. Sophie, can you speak up a little bit? We can't hear you from this end.

Okay, sure. Can you hear me now?

Yes. Great, thank you.

Okay. So I have two questions. First one is about the internal polysilicon production. I would like to understand the electricity consumption for the initial phase of the production, and also the electricity cost for the poly plant.

(Interpreted). In Q3 our electricity charge as a percentage of the total poly manufacturing cost is 34%. And it will gradually rise up to about 40% to 50%.

So how much is the electricity tariff you pay, like renminbi per kilowatt hour?

(Interpreted). We have an average 40 cents per kilowatt hour.

Okay. Okay. Another question is about the Module pricing. How do you see about the Module pricing going into the second half of this year?

(Interpreted). In Q3 there has been a rapid decrease in Module price. It has gone down from July's EUR1.60 per watt to about EUR1.30 to EUR1.40 per watt currently.

So is the gross margin of 30% sustainable for the rest of this year, since the SE climb so fast?

(Interpreted). At the current moment we actually outsource -- we actually purchase sales from external parties to satisfy our Module sales. So as we gradually increase our in-house production of cells, as well as using our in-house Wafer, as a vertically integrated Company we feel there is much space in the gross margin -- in the gross profit margin region. And we definitely think that we can retain our margin above 30%.

Okay, one quick follow-up question. Can you help me to understand the cost structure in your presentation, slide -- page five? I would like to understand the breakdown for the 2010 from poly to Module cost (inaudible).

(Interpreted). Our non-poly cost, the breakdown is $0.28 per watt for Wafer, $0.22 per watt for Cell and $0.37 per watt for Module. And in 2011 we are able to -- we aim to reduce that cost to $0.80 per watt.

Okay. Was that mainly from the Wafer and Cell part, or from Module part?

(Interpreted). Yes, you are right. The reductions mainly come from the Wafer as well as cells. It's mainly attributable to the increase in production efficiency.

Okay. Yes, great. Thank you.

Your next question comes from the line of Sam Dubinsky, representing Oppenheimer. Please proceed.

Hi, guys, just some quick ones. Could you guys discuss your pricing strategy for modules? Are you pricing in line with the Tier 1 Chinese companies or at a discount to them? And I have some follow-ups.

(Interpreted). At the moment, because our capacity is not large enough yet, so there is no need for us to reduce our ASP in order to gain market share.

Okay. So you view EUR1.30 to EUR1.40, that's pretty much the market rate for the Tier 1 Chinese, and you're selling at that rate?

(Interpreted). Yes.

Okay. And just a clarification in terms of your vertical integration strategy, it seems like you guys are still underutilized for wafers. Why would you be purchasing cells from the external market rather than toll them through a partner?

(Interpreted). Just one slight correction here, we are actually running at full capacities for our Wafer production. And, in terms of cells, we do actually produce ourselves. For the portion that we purchase from third parties, it's mainly because for particular reasons. Some certain products require cells from particular producers.

Okay. And then, on the China stimulus wins, just can you give us some more detail? When do you expect these LLIs to be finalized? And how's the government determining things like ASPs and timeframe for deployment?

And, lastly, what's also the bidding process in some of these China projects?

(Interpreted). We expect the -- if you remember, there has been a first run of application that was submitted in May. We expect the results to be released in Q4 of 2009. However, there have been a lot of discussions around the topic of feed-in tariffs. At the moment we do not expect a very quick release of the feed-in tariffs by the government.

Okay. So, for your Module sales for next year, are you assuming that those projects are sold into China for some of the stimulus wins, or is it to external customers in Europe?

(Interpreted). That's right. We do not consider sales in China.

Okay, great. Thank you very much.

Your next question comes from the line of Vishal Shah, representing Barclays Capital. Please proceed.

Yes. Thanks for taking my question. Can you maybe just help us understand how -- what kind of quality of polysilicon product that you've so far produced? Have you quantified what the cost structure looks like and have you been able to use some of that?

(Interpreted). Okay. We have already turned our first batch of polysilicon into wafers and now it's sitting with our customers, so there is no concern with our quality.

Okay. And, I'm sorry if I missed this, but have you talked about what kind of cost structure you're producing that polysilicon for?

Yes, I think we talked about that earlier.

Let me just repeat what Mr. Li's answer to the previous question was.

(Interpreted). Because the production is not yet significant in Q3, so it's not very indicative to talk about the cost in Q3. In Q4 the cost is around $50 per kilogram.

Very good. Thank you. And then, I apologize again if I missed this, but can you maybe talk about your visibility into Q4 around your Module shipments to European customers?

(Interpreted). Before even we acquired JC Solar, JC Solar has already had quite a bit of long-term contracts. However, those contracts' pricing are being negotiated on a monthly basis. So therefore we cannot guarantee if all the backlog orders will be carried out as scheduled.

Okay. So you're looking at 20 to 30 megawatts in Q4 at this point?

That's right, 20 to 30 megawatts in Q4.

Okay, thank you. And any plans of further expansion, capacity expansion of your Module business?

(Interpreted). We aim to increase our Cell line production to 100 megawatts by the end of this year, and our Module to 250 and, in 2010, cells by 250 and Module by 375.

Okay, great. Thank you.

Thank you.

Your next question comes as a follow-up from the line of Satya Kumar, representing Credit Suisse. Please proceed. Mr. Kumar, your line is open.

Your final question comes from the line of Edwin Mok, representing Needham & Company. Please proceed.

Thanks for taking my question. A question about the China market. I think Mr. Li mentioned that he expects the rooftop result to be released in the fourth quarter. Two of my questions. First is how much does ReneSola expect to get from that?

And then, I guess a follow-up. In 2010, how does Mr. Li view the 2010 market in China?

(Interpreted). Okay. There are two projects that we are fairly confident of gaining the approval. The first is the very first 5 megawatt rooftop project we have announced in Jiashan here in the Zhejiang province. However, due to the large number of applications submitted to the government, the government now has limited each project to -- at a maximum of 2 megawatts. So we expect to win that 2 megawatt project. That's the first project.

The second project is the JC Solar also has a collaboration project with the local government to sell 1.37 megawatts for local -- a local project. And we also expect to get that in the fourth quarter.

We do expect very robust growth in 2010. Various government agencies have announced subsidy programs, including the newly-announced Golden Sun program. And in addition the Jiangsu province already announced its own feed-in tariffs program. And we also do expect Zhejiang province to follow suit very shortly. And at the moment we also expect the major IPPs of China also will get -- be very active in the Solar market.

Great, and then just a follow-up. What do you expect your CapEx to be next year? And how does that break out between Wafer, Cell, Module and polysilicon?

We get the total CapEx of approximately $65m next year, and out of which about $40m is going to be for Cell and Module expansion plan, and the remaining approximately $22m is for toll payment for our polysilicon factory.

So does that imply that you don't plan to increase your Wafering capacity next year?

No, currently we don't.

Great. That's all I have. Thank you.

Thank you.

We are now approaching the end of today's conference call. I would now like to turn the call back to ReneSola's Chief Financial Officer, Mr. Charles Bai, for closing remarks.

In summary, going forward, we will maintain our focus of strict cost control to stay ahead of the curve in terms of pricing. We will also work to ensure the seamless integration of our Sichuan polysilicon plant and the JC Solar Cell and Module facilities with our Wafer facilities, as we consolidate ReneSola's long-term position as one of the world's leading low-cost Solar companies.

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. Bye.

Thank you.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your presentation. You may now disconnect.

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.