Emeren Group Ltd (SOL) 2010 Q3 法說會逐字稿

Hello, ladies and gentlemen, and thank you for standing by for the ReneSola Limited third quarter 2010 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, Mr. Derek Mitchell, ReneSola's Investor Relations consultant from Ogilvy Financial. Please proceed, Derek.

Thank you. Hello, everyone, and welcome to ReneSola's third quarter 2010 earnings conference call.

ReneSola's third quarter 2010 earnings results were released earlier today, and are available on the Company's website, as well on newswire services. You can follow along with today's call by downloading a short presentation, which can also be found on the Company's website at www.renesola.com.

On the call today from ReneSola are Mr. Xianshou Li, Chief Executive Officer; and Miss Julia Xu, Chief Financial Officer. Mr. Li will discuss ReneSola's business highlights and strategy, and Miss Xu will go through the financials and guidance; and they will be both available to answer during 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 Mr. Li, 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. Xianshou Li, CEO of ReneSola. Mr. Li will give his remarks in Mandarin, and Miss Xu will translate into English. Please go ahead, Mr. Li.

(Interpreted). Thank you to everyone for participating in today's third quarter results call. If you have downloaded our presentation, please turn to page five for a snapshot of the highlights for the quarter.

We continued to capitalize on the strong market demand in the third quarter, delivering record shipments, and achieving record revenues. Our steadfast focus on improving production efficiency and reducing costs, has led to improved margins against record net revenues.

Throughout the quarter, we continued to provide our customers with Module Services, as well as increase the production of our in-house polysilicon to hedge our upstream risks.

With a healthy balance sheet and strong cash position, we believe we are poised to capitalize on our cost competitive solar products to deliver impressive results for the fourth quarter, as well as 2011.

Total solar wafer in the module shipments in the third quarter of 2010 were a record of 324.9 megawatts, an increase of 25.8% from 258.3 megawatts in the second quarter of 2010.

Overall, gross profit margin improved some 30.2% in the second quarter of 2010 to 32.5% in the third quarter of 2010 as a result of continued cost cutting efforts and well managed polysilicon sourcing.

Net profit reached $60.1 million in the third quarter, an impressive jump of 66.7% when compared to the second quarter of 2010.

Please turn to page seven for an update on our polysilicon production.

Polysilicon ramp-up and cost reduction will remain one of our top priorities in the coming quarters in our efforts to mitigate raw material volatility and diversify procurement risks. We've produced 269 metric tonnes of polysilicon in the third quarter compared to 162 metric tonnes in the second quarter.

We currently produce about 5 metric tonnes to 7 metric tonnes per day, with an expectation to produce 500 metric tonnes to 600 metric tonnes in the fourth quarter, with production costs of $45 per kilogram by the end of 2010.

We will continue to increase production, and are on target to produce 3,000 metric tonnes to 3,500 metric tonnes, and achieve production costs below $35 per kilogram by the end of the first half of next year.

Please turn to page eight for an overview of our Wafer business results for the quarter.

We continued to execute our strategy to drive down production costs, steadily lowering our average wafer processing costs to $0.25 per watt in the third quarter of 2010 from $0.20 per watt in the second quarter. We are confident that we will reach $0.24 per watt by fourth quarter of this year, and $0.18 by the end of 2011.

Wafer ASP, excluding Tolling business in the third quarter, was $0.84 per watt compared to $0.82 per watt in the second quarter. We expect fourth quarter ASP to be around $0.85 per watt.

Please now to turn to page nine for an overview of the Module business results for the quarter.

Our Module business continues to support our primary Wafer business. In the third quarter, we delivered module shipments of 98.3 megawatts, with an average selling price of $1.85 per watt. compared to module shipments of 50.6 megawatts, with an ASP of $1.75 per watt in the second quarter.

Our downstream platform is an important piece of our overall strategy, enhancing existing customer relationships, and attracting new customers by offering a value-added service alongside our traditional wafer services.

We expect to ship 100 megawatts to 110 megawatts of modules in the fourth quarter for a total of 265 megawatts, to 275 megawatts for the full year of 2010.

Please turn to page 10 for an update on our over-capacity expansion.

We are currently operating at full capacity of 1.2 gigawatts for wafers, and 375 megawatts for modules. To meet the growing market demand, we plan to invest $150 million in 2011 to expand wafer production capacities to 1.8 gigawatts, and module production capacity to 200 megawatts.

Finally, please turn to page 11, as I discuss our de-listing from the AIM market of the London Stock Exchange.

On August 20, we announced that we passed a resolution to cancel our AIM quotation, effective November 30, 2010. Since our New York Stock Exchange listing, we have seen an increasing number of shareholders move their holdings in ReneSola from AIM, to the New York Stock Exchange, since the NYSE offers higher levels of liquidity.

There are significant costs associated with maintaining our AIM quotation, including annual fees payable to the London Stock Exchange, adviser and broker fees, and other related professional costs. By canceling our AIM listing, we will reduce recurring and administrative overheads.

I'd like to take this time to remind shareholders whose shares are not currently held in ADS, to take necessary steps to cover their shares to ADS prior to November 30, 2010. after which shares will no longer be tradable on AIM.

More information can be found in our delisting and AIM circular, which can be found on the AGM summary page in the investor relations section of our website.

Thank you, Mr. Li. Please turn to page 13, for a snapshot of our financial highlights.

We delivered excellent financial results in the third quarter, achieving record revenues, and a record net income. We continued to focus on driving down costs, leading to record growth and operating margins.

Strong operating cash flow during the quarter has further improved our capital structure, and positioned us well for capacity expansions in the next year.

Now I'd like to run through the details of the financial results. Please refer to pages 14 to 16 for historical comparisons of some key figures from our third quarter financial statement.

Net revenues for the third quarter of 2010 were $358.7 million, an increase of 41.3% sequentially, driven primarily by higher wafer ASPs, and strong growth in our Module business.

Third quarter gross profit margin was 32.5%, compared to a gross profit margin of 30.2% in the second quarter, mainly due to higher ASPs, lower processing costs, and prudent control of polysilicon sourcing.

Operating income for the third quarter of 2010 was $86.4 million. This compares to operating income of $52.5 million in the second quarter of 2010, an increase of 64.7%.

Total operating expenses in the third quarter of 2010 were $30.3 million. The sequential increase in operating expenses was primarily attributable to AIM delisting fees of $2 million as a result of the cost of conversion of shares into ADS, and increases the research and development costs of $1.8 million for the improvement of wafer production.

Third quarter operating margin was 24.1% compared to an operating margin of 20.6% in the second quarter.

We recognized a tax expense of $18 million for the third quarter compared with a tax expense of $11.6 million for the second quarter of 2010.

Net income attributable to holders of ordinary shares of the third quarter of 2010 was $60.1 million compared to the net income of $36.1 million for the second quarter of 2010. This translates into earnings of $0.35 per ordinary share, and $0.70 per ADS for the third quarter.

On the balance sheet, as of September 30, 2010, we had reduced our overall debt to $542.2 million, lowering short term debt to $353.6 million from $388 million at the end of the second quarter, and decreasing long term debt to $188.6 million from $189.1 million at the end of the second quarter.

As of September 30, 2010, we had approximately over $800 million in committed credit lines.

We generated strong operating cash flows of $118.3 million in the third quarter, with a net cash and cash equivalent position of $211.6 million, and total cash, including restrictive cash, of $286.6 million. compared to net cash and cash equivalents position of $171.2 million, and total cash, including restrictive cash of $246.6 million at the end of the second quarter.

Over the past three quarters, we have generated free cash flows of approximately $185 million, steadily reducing our net debt to equity ratio to below 50%.

We continue to expect to generate strong operating cash flows during the fourth quarter of 2010.

Now please turn to page 18, for a discussion on our capital expenditures.

Our capital expenditure for the first nine months of 2010 was $86.7 million, and is expected to be $51.1 million during the fourth quarter. We are currently budgeting $150 million in capital expenditure in 2011 to further expand wafer and module capacities to 1.8 gigawatts and 600 megawatts respectively.

We expect demand to remain strong in the fourth quarter of 2010, with slightly higher ASPs and strong shipments for the remainder of the year.

For the fourth quarter, we expect revenues to be in the range of $340 million to $350 million, and shipments to be in the range of 310 megawatts to 300 megawatts, with gross profit margin to be in the range of 30% to 32%.

For 2011, we also expect to shift between 1.6 gigawatts to 1.7 gigawatts of total solar wafers and modules in 2011.

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

Thank you. (Operator Instructions). And our first question comes from the line of Vishal Shah representing Barclays Capital. Please proceed.

Yes, hi. Thanks for taking my questions; two questions. First, can you provide some color on wafer pricing beyond Q4? What do you think prices are for Q1 for the contracts that you've signed?

And secondly, what percentage of your Q3 shipments were tolling, if you can say, if you can talk about that?

Thank you.

(Interpreted). We expect the resilience in the market demand to continue well into the first half of next year. Therefore, we don't anticipate a very large percentage drop in terms of wafer ASPs, at least for the first half of 2011.

In terms of tolling for -- just give me one second. It's about 15% of our wafer sales.

15%?

Yes.

Okay. So you said --

15% of wafer shipment, I should say.

Okay. That's very helpful. Thank you. So you said wafer prices will decline. Some of the margins companies are talking about are flat to maybe slightly down pricing in Q1. Are you talking about similar trends? Are you talking about less than 10% decline, 5% to 10%; and can you give us a range?

Thank you.

5% to 10% in Q1, you said?

Correct. Sequential decline in pricing.

Okay.

(Interpreted). We also agree with your previous -- with your former scenario whereby the module companies think the pricing will remain relatively flat against where we are today.

Okay, thank you.

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

Yes, hi. Thanks for taking my question. I just wanted to follow up on that point. Are you expecting your module pricing to be up in Q4?

What volume trends do you expect for modules and wafers in Q1 compared to Q4?

And is your pricing for Q1 100% locked in at this point, or can it be subject to spot market changes in pricing?

Okay.

(Interpreted). In terms of the modules, we are actually bound by our capacities, so we do expect Q4 volumes to be resilient, and we expect to ship between 100 megawatts to 110 megawatts compared with the 98 megawatts in Q3.

And in terms of ASPs, we expect flat ASPs Q4 versus Q3. Q1 2011 versus Q4 will see slight declines for module pricing.

Okay. I just wanted to confirm this point. Your Q4 revenue and gross margin guidance is down sequentially. but you're guiding volumes up in the Module business in Q4, pricing flat, and wafer pricing you're actually also optimistic in Q4. Is that a degree of conservatism in your Q4 guidance, or is there something else that we need to think about for Q4?

I think that we just give a little bit of range for the Q4 guidance. I don't think our guidance is sequentially down.

All right.

Because our Q4 -- Q3 shipment was 325 megawatts and our guidance is between 310 megawatts and 330 megawatts, so I don't think we are guiding it down.

Okay. Okay, fair enough. And then in terms of your 2011 capital needs, you've generated obviously good cash flow the first nine months of this year, $185 million. You have $200 million or more of gross cash now. You should generate some additional free cash flow over the next few quarters.

It would seem like you have sufficient cash to cover your $150 million CapEx for 2011. I just wanted to see if you can talk about sources and uses of cash, and specifically whether you would think you'll need to issue any equity to finance any of your expansion plans.

Sure.

(Interpreted). As you have rightly pointed out, we have been generating very strong operative cash flows, so we will rely on the positive operating cash flows and also free cash flows to support our capital expenditures in 2011; and we have no equity raise initiatives right now planned.

Thank you.

Your next question comes from the line of Kelly Dougherty representing Macquarie. Please proceed.

Hi, guys. Thanks for the question and great results. I just wanted to talk about the OEM business. You're expecting 400 megawatts of module sales next year. Are they already under contract? And maybe you could give us a little bit of detail about who some of your customers are, where they're located; just some basic questions like that.

Sure, Kelly.

(Interpreted). We have contracted most of our Q1 volumes, and for the first half, we do expect the resilience to continue as we expect, so we -- in terms of price and the volumes we've contracted for Q1.

And in terms of specific customers, we'd rather not disclose too much of our customer information.

Can you give us maybe just an idea of where they're located? If you're selling to Asian customers, if you're selling more to European customers, just to get an idea of where the modules are going?

Sure.

(Interpreted). Europe, America and also Korea.

Okay, thanks. And then for your wafer demand, you talk about having 68% under fixed priced contracts. Do you have contracts for the remaining 32% where pricing is just not yet fixed at this point?

Sure.

(Interpreted). For the 68% contracts we mention in the release, yes, these contracts are fixed pricing and fixed volume. For the remaining 32% out of the 1.2 gigawatts we expect to ship out of the wafer side of the business, these are reserved for our historical long term customers where they typically fix pricing on a quarterly basis. So the volume has been contracted, yet the pricing are floating on a quarterly basis.

And another 400 megawatts we expect to ship, which brings our total shipment to at least 1.6 gigawatts, is reserved for our Module business.

Perfect, thanks. Then I just have one quick follow-up. So if we're sitting in November and you guys have all of your capacity for next year already spoken for, just wondering if you could talk to us about your expansion plans. If you look ahead and seeing that there's a good amount more of wafer capacity coming on line, and you're comfortable with the 1.8 gigawatts, or if you have a specific capital budget based on your cash flow expectations. Just trying to get a feel about how you make your CapEx or your capacity plans.

Okay.

(Interpreted). We are comfortable at the moment with 600 megawatts of expansion plans that we have spoken about; and whether or not to expand beyond that, a lot of it depends on the market dynamics, and we will adjust that according to market situations as we go along in 2011. But at the moment, we are comfortable with the 600 megawatts expansion.

And you think you'll be able to generate free cash flow at that expanse rate next year?

Yes.

Thank you very much.

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

Thank you. Good evening, guys. And first of all, congratulations on a great quarter. A couple of quick questions. First, what do you think is going to be the Wafer Tolling business for you guys in Q4?

Wafer Tolling business will be around -- give me one second. I'll give you the numbers.

(Interpreted). Around 20%.

Okay, thanks. All right, perfect. And in terms of your poly cost management rate, it is expected to go up a bit from Q3 to Q4. You guys have your in-house poly which will tremendously help from a cost endpoint. So for 2011, how much polysilicon do you guys have under long term contract and what is your potential spot exposure?

Okay.

(Interpreted). Based upon the 1.6 gigawatts of product shipment that we expect in 2011, we need about 9,000 metric tonnes of polysilicon, of which -- 3,500 metric tonnes of which we will be producing internally from our polysilicon plant.

Okay.

(Interpreted). And also, we have one third comes from our OEMs -- I'm sorry, not OEMs, tolling partners, and we have under long term contract close to about 2,000 metric tonnes. So we have less than 1,000 metric tonnes which will have exposure to the spot market.

Okay. Terrific, terrific. One last question for me then. So there's a lot of talk recently about how pricing is starting to fall, especially in Q1, and demand and especially outlook in Germany seems to be softening, so a two-part question on that for me.

One, are you guys seeing that in terms of your module ASP? Because you're saying it's pretty stable in Q4 and you guys are a new entrant in the module market.

And second, in the 68% coverage, is that really all skewed to first half, or do you guys actually have pricing visibility for your wafer through the end of 2011, and another 32% is really more allocated to the long term customer and pricing negotiated on a quarterly basis?

Okay, sure.

(Interpreted). The module pricing for Q1 is approximately EUR1.25 to EUR1.30, slightly down from current level. For the wafer 68% that we spoke about, these are fixed prices, with 5% up and downward flexibility, adjustable according to then market prices. So those are fairly fixed pricing as well.

Terrific, but then that extent, how far does that go? So from a shipment standpoint, is that all reflective of first half, or does that go all the way through end of 2011?

That goes all the way through to the end of 2011.

Okay, okay. And where do you see then exiting wafer ASP under those contracts in Q4 of 2011?

(Interpreted). It's around $0.70.

Okay, terrific. Once again, congratulations, guys.

Thank you.

Your next question comes from the line of Sunil Gupta representing Morgan Stanley. Please proceed.

Thank you. Hello, Mr. Li and Julia. I just wanted to follow up on all the questions about wafer contracts, 820 megawatts. I just wanted to see when you sign these contracts from the customers, are they paying deposits for any of these contracts?

(Interpreted). Most of these contracts have some form of a prepayment.

And what kind of magnitude is this in terms of value of the contract? And also, if you have fixed the prices, what is the average price that you're going to realize for the whole year on this 800-odd megawatts?

(Interpreted). The average price for 2011 is around $0.75, and in terms of prepayments, it is not that significant; somewhere between 3% to 5%.

Okay. And in terms of your contracts, you mentioned earlier that you'll either fix prices, and it can be maximum plus/minus 5% depending on the spot market. Are there any clauses at all in these contracts? Are there any conditions where the customer may be able to ask for a larger deviation more than plus/minus 5%?

(Interpreted). No, there is no such mechanism embedded for which to -- which allows the customer to negotiate more than 5% fluctuation.

Okay, excellent. And then I had a question on the Module business. Could you share with us your shipments by geography for Q3 and Q4 and if there's any change in the mix particularly between those two quarters?

Sorry, Sunil, I don't have that information on hand, but I'll get back to you.

Okay, all right, no problem. Thank you very much, and congratulations on very good results.

Thank you.

Thank you.

Your next question comes from the line of Sam Dubinsky representing Wells Fargo. Please proceed.

Hey, guys; congrats from me on the good quarter. Just wondered, do you guys plan any expanded capacity in your poly plant since you guys are just starting to hit your cost targets?

And how fast could you bring on incremental capacity, and what would the CapEx be for, let's say, 1,000 metric tonnes if you want to expand?

(Interpreted). It probably will take about 12 months to build the capacity, and 15 months to make it reach production targets. And the cost is around $200 million for a 5,000 tonne plant.

Great. Then I have a follow-up question. Sorry if I missed this, but what should we model in for the blended poly costs for 2011? And if you were to ship above your 1.7 gigawatt target, should we assume you'd be a spot purchaser, or would your suppliers extend long term contract pricing terms?

(Interpreted). We expect 2011 average poly input costs to be around $50 per kilogram, and if we do ship beyond 1.7 gigawatts, we would have to take it from the spot market.

Okay. And then my last question is just on terms of cell pricing, what are you seeing in the market, and do you have any plan to move your Module business more integrated?

(Interpreted). For the cell pricing, it is around $1.40 and $1.50 per watt.

How do you see that trending, and because it's so high, do you think you'll move capacity in house, or do you plan to still be a purchaser of cells next year?

Probably be more of a purchaser in the market.

Okay. Thank you very much. Congrats again.

Your next question comes from the line of Eric Cheng with Deutsche Bank. Please proceed.

Hello Julia; (spoken in Mandarin). I think my question is pretty much covered, but I just have some small questions on the P&L.

I just saw an investment income, or investment loss of $2.6 million. Can you give us a little bit more color on what's that related to?

Yes, sure. This is related to realized FX loss due to the hedges that we did in third quarter -- in second quarter and then (inaudible) in third quarter. It's related to FX.

FX gain or loss with [580 to 1,000], so --

Right. It was right.

That [2,578] is also related to FX?

Correct.

Okay.

Your next question comes from the line of Catharina Saponar with Nomura. Please proceed.

Hello, Julia, and everybody. Thank you for taking my question. Could you just confirm where your current poly cash and full cost of your production actually stand in Q3?

And also, could you give us some better idea for modeling about which time in 2011 you actually expect to be at full ramp and full utilization of your pro rata 1,800 megawatts of wafer capacity?

And then I guess my last question on cell capacity; are you not planning to increase cell capacity beyond the current level for the foreseeable future?

(Interpreted). In terms of our own production plan for the polysilicon in Q3, our cost was between $50 to $60 per kilogram. We are expecting to reach 1.8 gigawatts of wafer capacity by Q2 of 2011, and at the moment, we have no plans to expand our cell capacity.

Thank you very much.

Your next question comes from the line of Ahmar Zaman representing Piper Jaffray. Please proceed.

Hello, good morning, and congratulations on a great quarter. Most of my questions have been answered. I just had a few minor ones.

Can you give us your break-out of the mix between mono and multi wafers in this quarter, and how we should model that for next quarter?

It's 400 mono and 800 multi.

Okay. And then in terms of your -- can you tell us what your tolling ASP was this quarter and how it should trend for the next few quarters?

Sorry, we don't disclose our tolling ASPs because it's fairly sensitive information.

Okay. And then if I may quickly, just more a high level. There's a lot of confusion about global demand for 2011, whether it's up or down or flat. What are you seeing from -- what indication are you getting from your customers when they sign contracts with you in terms of global demand for 2011?

(Interpreted). Judging from our customers' indications, we still feel that the resilience of -- the (inaudible) in supply will probably continue well into the first half of 2011. It's difficult to gauge what will happen in the second half of 2011.

In terms of our own expansion plans and our business plans, I think a lot of it is depending upon the abilities of signing these contracts prior to expansion.

Okay. Thank you and congratulations again.

Your next question comes from the line of Pranab Sarmah with Daiwa Capital Markets. Please proceed.

Hi, good afternoon, Mr. Li and Julia, this is Pranab from Daiwa. I have two questions. The first one is on your capacity expansion for 2011 at 1.8 gigawatts. How many percentage will be on the mono versus multi of that incremental 600 megawatts?

It's all multi.

All multi, okay. Then secondly, have you started using diamond wire on your -- with your Slicing business? If so, do you expect any cost reductions from that angle?

(Interpreted). It has not been used in our slicing part of the manufacturing, but is being used in breaking -- I don't know what that word is, but cutting the ingot into the blocks. We've been using the diamond wires for that side of the production.

Currently, we've also established an R&D division with a local university to study and to research into producing the cheaper -- to lower the cost of the diamond wires.

Okay. Any particular reason why you are not using the diamond wire for wafer slicing at this point? Is it not cost competitive or --?

That's correct. It's too expensive. That's why we established an R&D division to find ways of lowering the cost of producing the diamond wires.

Okay, got it. And my last question is on your 2010 long term contract you have for next year. Is it -- do you have any flexibility to adjust your price if -- due to some reason prices fall below, say, $50?

(Interpreted). No, there is no mechanism for which we can adjust prices.

And how does 2012 pricing look like? Is there any flexibility out there?

(Interpreted). No.

Okay. So it's quite fixed. Okay, got it. Okay, thank you very much.

Your next question comes from the line of Mark Davis representing Panmure Gordon. Please proceed.

Hello, hi. A couple of questions for you, really points of clarification, please, just again pricing for wafers next year. You said in Q2, in your Q2 results, that the contracts for next year were for 10% price decline, plus or minus 5%. I just wanted to clarify that that is still the case with those contracts which represent 68% of shipments next year. Is that the case?

(Spoken in Mandarin). Yes, that's right. That's correct.

Okay, great. And then, for the remaining 32% which is your older, longer-standing customers, that's just going to be on a quarterly basis, and that could be -- it just depends where the market goes. So it could be much greater than 10%/15%. Is that fair to say?

That's correct.

Okay. And could you give us any of the --? You talk about nine wafer contracts which have been signed year-to-date. You mentioned two in August, so Neo Solar and Solartech. Can you give us a few of the other names that have been signed year-to-date?

Sorry, we'd rather to remain confidential on these customer names.

Okay, no problem. And then the second line of questioning was on your polysilicon facility. You talk on slide seven about you're targeted to produce 3,500 metric tonnes, with production costs below $35 a kilogram by the end of first half 2011. So correct me if I'm wrong, but I thought your capacity was 3,000 metric tonnes. So are you saying here that you're going to be at full capacity, or even 115% of full capacity by midway through next year? Is that what you're saying?

Okay, maybe that needs to need to be revised. The cost is $35 per kilogram by the first half of 2011. 3,000 metric tonnes to 3,500 metric tonnes production target is for the full year of 2011.

Okay. So your nameplate capacity is 3,000 metric tonnes, is that right? So you're suggesting that you're going to be --

That's right.

Okay, so you're going to be at 100% to 115%. Fine, okay. But you've got no -- at the moment, you've got no plans of expanding that just yet?

Correct.

Okay, that's good. And then just finally, are you using wafers which are based on your own polysilicon, purely on your polysilicon, or are they blended with externally sourced polysilicon?

(Interpreted). Yes, we use our own polysilicon for wafers. We do not need to blend with externally sourced polysilicon.

Okay. And are all your customers using those wafers?

(Interpreted). Of course.

Okay, great. Thanks very much.

Your next question comes from the line of Timothy Lam, representing Citigroup. Please proceed.

Hi. Congratulations for a strong quarter, and thank you for taking my question. I just have a quick question on your 2011 guidance for 1.6 gigawatts to 1.7 gigawatts. Could you give us a breakdown for the percentage on wafers and modules?

1.2 gigawatts for wafers, 400 megawatts for modules.

Thank you. And my second question is on that I see that you're looking to lower your wafer production costs to $0.18 next year, which seems to be among the lowest in the supply chain. Would you mind letting us know what are main areas that you're reducing the wafer production costs?

(Interpreted). Our multiprocessing cost is actually close to $0.20 per watt right now, so as we continue to expand our multi productions, given the percentage change tilting slightly over to multi, it will continue to help us to drive down the blended cost down.

Secondly, the new factories that we're building require less amount of CapEx and higher electricity and less -- higher efficiencies, less electricity consumption. Therefore, we -- the cost of productions from the new factories will be less than the previous ones; and thirdly, through the better supply chain management. So we are very confident of reaching $0.18 per watt by the end of next year.

Thank you very much. My next question here is about module costs. You mentioned earlier that you do see the euro prices fall first quarter. When do you expect that price to be confirmed by your customers?

Thank you very much.

It has already been confirmed by our customers for Q1 module prices.

Is this still subject to change (multiple speakers) -- ?

No, no; it is not subject -- no, it is not.

Thank you.

We have a follow-up question from the line of Ahmar Zaman with Piper Jaffray. Please proceed.

Just quickly, what are you seeing in terms of lead times for wafering equipment?

(Interpreted). Around four months.

Four months? And this is for wire saws?

Including furnaces and wire saws.

Okay. Thank you.

We have a follow-up question from the line of Vishal Shah, representing Barclays Capital. Please proceed.

Yes, hi. Thanks for taking my follow-up. Can you clarify how many megawatts of cells you purchased during the quarter? And you said [$135 million/$140 million], was that the procurement price?

I'm so sorry, Vishal, can you repeat your question again?

How many megawatts of external cell purchases during the quarter.

During the third quarter?

Yes.

Well, we only had a capacity of 240 megawatts, so we produced probably around 55 megawatts to 60 megawatts internally, and all the rest is procured outside.

Okay. And cell prices are flat in Q4?

From our [sourcing], yes.

And the reason you're not adding more cell capacity is because you think prices are going to go down? Or you don't have enough cash and --?

It's because we don't really have -- either the cost advantage is not -- we have technological advantages. So we'd rather spend money on our core competencies.

Okay, great. Thank you. And then just can you clarify your OpEx guide for Q4? You had some one-time items in Q3, $2 million, and I think your R&D expenses are also up because of some processing costs, so can you clarify what Q4 OpEx will be?

The R&D will always grow in line with our revenue, which is around 3% of our revenue, and the other one-off items we don't anticipate in fourth quarter.

And your tax rate guidance for next year, is it 13%, or is it going to be --?

Next year it's about 18.5%.

Okay. One last question; what is your processing cost at the cell and module level?

Cell and module level combined is between $0.50 to $0.52.

And is that going to come down, or is that going to remain at these levels?

It will probably come down slightly. But for the modules, it depends on the raw material input prices.

Great. Thank you very much.

Your next question comes from the line of Lu Yeung representing UBS. Please proceed.

Thanks for taking my questions I have on the module shipment next year. Can you talk about how much of a percentage would go to like top three customers, and what is the geographic split for the same module customers for next year?

(Interpreted). As we explained earlier, we'd rather not disclose our customer information. And secondly, in terms of geographic breakdown, we ship to Europe, America, and Korea.

I see. Follow-up to pricing for wafer next year, given the spot price is higher, it's more than $1 per watt, do you think there will be more upside to adjust your wafer prices contract for next year, or some of the wafer contracts to get them signed, and you're going to sign, would that going to be slightly higher price than the ones you have signed before?

(Interpreted). For the first half of next year, we probably expect that there is a high probability that we might be able to adjust pricing upwards, given the tight supply situation. At the moment, we have no more capacities to add new contracts.

All right, thank you. Congratulations.

Thank you.

We have a follow-up question from the line of Satya Kumar representing Credit Suisse. Please proceed.

Yes; hi, thanks. I just have a quick question on your overall economics in terms of capital intensity and your cost of conversion. You're adding about 600 megawatts of incremental wafer capacity, and you're saying it's going to cost about $150 million. Is the CapEx per watt basically $0.25 per watt right now for wafers, or is there any CapEx that you've already spent for this expansion that's already in there? What's the wafer cost per watt, CapEx per watt?

Wafer CapEx of $0.20 per watt for equipment and the remaining is for land and the building.

Okay, so it's $0.20 per -- if you invest $0.20 per watt CapEx in six months, you can build a facility which has a cost of conversion that's substantially less than $0.18 per watt because you're saying that your average cost is going to be around $0.18 per watt.

Correct.

All right. Thank you very much.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to ReneSola's Chief Financial Officer, Ms. Julia Xu, for closing remarks. You may proceed.

In conclusion, we nearly doubled our net income in the third quarter, delivering significant value to our shareholders. As we finish out the year and move into 2011, we will continue to focus on cost competitors' wafer production, supported by downstream services and in house polysilicon to remain a leading a provide of clean solar energy.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact us.

Thank you.

Thank you.

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

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.