Emeren Group Ltd (SOL) 2010 Q4 法說會逐字稿

Hello, ladies and gentlemen, and thank you for standing by for ReneSola Limited's fourth quarter and full year 2010 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks there will be a question and answer session. 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. Justin [Raybeck], ReneSola's Investor Relations Consultant from Ogilvy Financial. Please proceed, Justin.

Hello, everyone, and welcome to ReneSola's fourth quarter and full year 2010 earnings conference call. ReneSola's fourth quarter and full year 2010 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 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; Miss Xu will go through the financials and guidance. They will both 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 risk 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 20F and other documents filed with the US Securities & 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.

Thanks. (interpreted) Good morning, ladies and gentlemen. Thank you for participating in today's fourth quarter and full year's earnings call for ReneSola.

Please turn to page 5, if you have downloaded our presentation, to go through our business highlights. 2010 was an important year for ReneSola, and we rebounded from net losses in a challenging macro environment in 2009, to record net revenues of $1.2 billion and net income of $169 million in 2010. This translated into a return on equity of 34.4% for our shareholders.

Supported by healthy market demand and cost reductions, we were able to raise gross profit margins for our Wafer business throughout the year. We continue to take advantage of our downstream capabilities to expand our Module business, as well as increase in-house polysilicon production to hedge our upstream risk, both of which have significantly helped boost our profitability. With a healthy net debt to equity ratio of 33.8%, we are well positioned to grow our business, capture additional market share and maintain our position as a leading, cost-competitive, solar company.

If you turn to page 5 for a quick snapshot of our shipments and financial progress. Total solar wafers and module shipments in the fourth quarter of 2010 were a record 349.4 megawatts, an increase of 7.5% from 324.9 megawatts in the third quarter of 2010. Full year shipments rose to 1.2 gigawatts, also a record; an increase of 124.6% from 526.6 megawatts for the full year of 2009. This growth is a reflection of robust market demand, a substantial boost in our downstream Module business and our ability to capture wafer market share globally.

Increased shipments, along with rising ASPs, contributed to record revenues of $386.4 million for the fourth quarter, with a record gross profit of $119.3 million, supported by a strategy of effective cost control. Full year revenues rose to over $1.2 billion, with a gross margin of 28.9%, and a record net income of $169 million, up substantially from a net loss of $71.9 million in 2009, due to polysilicon inventory write-downs.

As promised previously, we placed a great emphasis on our polysilicon production in the fourth quarter. I am happy to report that we produced approximately 610 metric tons of polysilicon in the fourth quarter, above previous expectations, and up from approximately 269 metric tons in the third quarter.

Our production costs were approximately $55 to $60 per kilogram in the fourth quarter. As of the end of February, we have reduced the cost per kilogram to $45, and achieved a monthly production of 246 metric tons, which we expect to significantly help shield us from rising spot polysilicon prices.

As we increase our polysilicon production from 3,000 to 3,500 metric tons through the debottlenecking of existing facilities in 2011, we expect to drive down production costs to $35 per kilogram by the end of this year.

We have decided to add an additional 5,000 metric ton of polysilicon production facility in 2011, in order to meet the growing demand of our Wafer business. This will bring our annual polysilicon production capacity to 8,500 metric tons by the end of 2011, and includes 500 metric tons that will be added through the debottlenecking of existing facilities, without additional capital expenditure.

Our Wafer business flourished in 2010, with total wafer shipments of 887.6 megawatts, up 79.2%, when compared to 2009. We drove down costs throughout the year from the average wafer processing cost of $0.34 (sic - see presentation) per watt in the fourth quarter of 2009, to $0.24 per watt in the fourth quarter of 2010.

Our low-cost, high quality wafers attracted a number of new customers in 2010. We now have over 20 long-term wafer contracts, representing 1.3 gigawatts of sales volume in 2011. We will continue to reduce costs, through technological advancement and improvement in manufacturing efficiencies, to decrease processing costs to $0.18 per watt by the end of this year.

With regards to technological advancements, the newly unveiled multi-wafer, the Virtus wafer, will commence commercial production this year. The Virtus wafer achieves an average cell conversion efficiency rate of 17.5%, more than 1% higher than the industry standard. We expect it to be well received by both existing and new customers, and should contribute to some shipments in 2011.

Wafer ASP, excluding processing services, was $0.88 per watt in the fourth quarter, compared to $0.84 in the third quarter. We expect first quarter 2011's ASP to be around $0.85 per watt; better than our previous expectations.

Page 8 is an overview of our Module business results for the quarter. We continue to expand our downstream Module business to meet demand in the fourth quarter, delivering record module shipments of 126.8 megawatts, exceeding our guidance, and up from 98.3 megawatts in the third quarter, and 14.6 megawatts in the fourth quarter of 2009.

In the fourth quarter, we shipped 26.7 megawatts of modules to Italy, 34.2 megawatts to Germany and 54.4 megawatts to the rest of the world. Our downstream strategy will remain important in 2011, as we look to expand and strengthen our customer base through both branded and non-branded module services, to ship between 400 megawatts to 450 megawatts for the full year 2011.

Finally, I will remind you that, last quarter, we canceled our admission to trading on the alternative investment market of the London Stock Exchange, and are now solely listed on the New York Stock Exchange, a market we believe offers higher levels of liquidity to our shareholders.

Now I will discuss our financial results for the quarter. Thank you, Mr. Li.

Please turn to page 10 for a glance at our financial highlights. We delivered sound financial results in the fourth quarter and the full year 2010, operating well, across the board, with record fourth quarter shipments, revenues and gross profit. For the full year, we achieved record revenues of over $1.2 billion, and record shipments of 1.2 gigawatts, while significantly lowering costs and improving our operating and net margins.

We continued to generate strong operating cash flow during the quarter, further reduced our debt balances, and improved our balance sheet, positioning us well for our planned capacity expansion in 2011 and beyond.

Now, I'd like to run through the details of our financial results. Please refer to pages 11 to 16 for historical comparisons, for some key figures from our fourth quarter and full year 2010 financial statements.

Net revenues for the fourth quarter of 2010 were a record, $386.4 million, exceeding Company's guidance, and a sequential increase of 7.5% (sic - see presentation), from $358.7 million. Full year 2010 net revenues were a record $1.2 billion, exceeding also Company's guidance, an increase of 136.2%, from $510.4 million in 2009. Record high revenues were driven by rising wafer ASPs, and strong growth in our Module businesses.

Gross profit for the fourth quarter of 2010 was a record $119.3 million, compared to a gross profit of $116.7 million sequentially. Our full year 2010 gross profit was a record $348 million, compared to gross loss of $43 million in 2009. Gross profit margin for the fourth quarter was 30.9%, compared to gross margin of 32.5% sequentially. Full year 2010 gross profit margin was 28.9%, compared to a gross margin of negative 8.5% in 2009.

The year-over-year increase in gross profit margin was due to the driving down of overall wafer processing costs, and a large decrease in polysilicon costs. The slight decrease in gross profit margin quarter over quarter was mainly due to increased sales of modules in the revenue mix.

Operating income for the fourth quarter 2010 was $85.9 million, compared to operating income of $86.4 million sequentially.

Total operating expenses for the fourth quarter were $33.4 million, up 10.1% from $30.3 million in the third quarter. Sequential increases in operating expenses were primarily due to a $5.1 million increase in other expenses as a result of a one-off sale of recyclable polysilicon accumulated during the Company's early years of operation when it was producing wafers using reclaimed polysilicon. Operating expenses represented 8.6% of total revenues in Q4 2010, in line with 8.5% in Q3 2010.

Full-year operating income was $245.9 million, compared to an operating loss of $90.6 million in 2009.

Full-year operating expenses were $102 million, a 115% increase from $47.4 million in '09. The sequential increase in operating expenses was primarily attributable to increases in R&D, and SG&A growth, in line with sales.

Operating margin for the fourth quarter 2010 was 22.2%, compared to an operating margin of 24.1% sequentially. Full-year operating margin was 20.4%, compared to an operating margin of negative 17.7% in 2009.

We recognized a tax expense of $26.7 million for the fourth quarter, inflated by a writeback of deferred tax liability of $5.5 million, and compared with a tax expense of $18 million sequentially. For the full year of 2010 we recognized tax expense of $60 million compared with a tax gain of $41.2 million in '09.

Net income attributable to holders of ordinary shares for the fourth quarter of 2010 was $61 million, compared to net income of $60.1 million for the third quarter. This represents basic and diluted earnings per share of $0.35 and $0.34 respectively, and basic and diluted earnings per ADS of $0.70 and $0.69 respectively.

Net income attributable to holders of ordinary shares for the full year 2010 was a record $169 million, compared to a net loss of $71.9 million in '09. This represents basic and diluted earnings per share of $0.98 and $0.97 respectively, and basic and diluted earnings per ADS of $1.96 and $1.93 respectively.

On the balance sheet, as at December 31, 2010, we had reduced our overall debt to $522.3 million. Total bank borrowing decreased by approximately $19.8 million sequentially, with short-term borrowings increased from $353.6 million to $400.8 million at the end of fourth quarter, primarily due to $93.8 million of long-term borrowings maturing at the end of 2011.

At the end of 2010 short-term borrowings consisted of $117.9 million in trade finance, $189.1 in revolving short-term facilities, and $93.8 million as the short-term portion of the long-term debt.

We generated strong operating cash flow of $403.2 million in the full year of 2010, with net cash and cash equivalents position of $290.7 million, and total cash, including restricted cash, of $324.3 million at the end of the fourth quarter, compared to a net cash and cash equivalents position of $211.6 million and total cash, including restricted cash, of $286.6 million at the end of the third quarter.

In 2010 we generated free cash flows of approximately $262.3 million, steadily reducing our net debt to equity ratio to 33.8%.

Our capital expenditures for the fourth quarter of 2010 were $56.3 million, bringing total capital expenditure to $140.9 million for the full year 2010.

We are currently budgeting $350 million in capital expenditure in 2011 to further expand our wafer capacity from the current 1.3 gigawatts to 1.9 gigawatts, up from our previous target of 1.8 gigawatts, while increasing module capacity from the current 400 megawatts to 600 megawatts, and expanding polysilicon capacity from the current 3,000 metric tons to 8,500 metric tons, approximately 500 metric tons of which we do not expect to incur additional capital expenditure as it will be achieved through debottlenecking of existing facilities.

Due to limited [cell] production capabilities and increased raw material pricing, we expect to reduce module shipments from 126.8 megawatts in fourth quarter of 2010 to approximately 90 megawatts in the first quarter of 2011, resulting in lower quarterly shipments of 320 megawatts to 330 megawatts, and revenues in the range of $310 million to $330 million for the first quarter. However, we do expect gross profit margin to be similar to that of in the fourth quarter of 2010.

For the full year 2011 guidance, we maintain 1.6 gigawatts to 1.7 gigawatts to solar wafer and module shipments, which represents an increase of 35% to 44% year on year.

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

Thank you. (Operator Instructions) Satya Kumar, Credit Suisse.

This is Brandon Heiken speaking on behalf of Satya Kumar. I was wondering if you could explain why the module guidance is down in the first quarter.

(interpreted) We have reduced our module shipment guidance for a few reasons. Firstly, because there is a very strong demand for the wafer shipments and our additional capacities will not be added until second quarter of this year, so we need to ship all of our wafer production to our existing customers to satisfy our wafer customers. Therefore, we don't have that much wafers to support our Module business.

And secondly, we also see a moderation in module demands from our customers, so we have been even more selective with our module customers.

Sorry for the technical difficulty. I was wondering if your wafer production is actually up from calendar Q4 to calendar Q1, or is the wafer production also down from Q4 to Q1?

Production is flat.

(interpreted) It's flat because February, we are short of two days.

Okay, understood. What assumptions are you making for wafer and module pricing in Q1? And what are you seeing in terms of trends in Q2?

(interpreted) Let me talk a little bit on the Module ASP first. In Q1 we expect module pricing to be between $1.55 to $1.70, and we expect some declines in Q2. For Q1 wafer pricing, it is very strong. We guided, in our release, at around $0.85, and we expect that trend to continue in Q2.

Thank you.

Kelly Dougherty, Macquarie Research.

I'm just hoping to get a little bit more detail on the expanded poly plants. If I heard correctly, you expect the plant to be completed by the end of 2011. So just wondering when you started, and what you're doing to be able to expand it so quickly.

(interpreted) We have started on some of the preparatory work for the polysilicon expansion. We have gotten the approval for the additional capacities as well from the government. We expect to begin constructions in April of this year.

Because of the previous 3,000 metric tons that we have been running for the past couple of years, we have accumulated a lot of experiences and, therefore, allowing us to reduce the amount of constructions in this new phase that we are building.

Okay, great. Can you help us think about your poly CapEx on a per ton basis? And then, you're significantly increasing the scale of the facility, so just wondering what your cost expectations are beyond the $35 that you expect to attain at the end of the year.

(interpreted) For this additional 5,000 metric tons that we're building, we expect CapEx to be about $150 million to $170 million, which equates to about $34 per kilogram. The cost target for this new 5,000 metric tons, because of the improved efficiencies, is expected around $20 per kilogram.

And when do you expect to get to the $20? Is that a 2012 number?

(interpreted) We expect to reach that by midyear of 2012.

Great. Just one more for me on the poly, and then I'll jump back in the queue.

Is the rationale here, because obviously, many people see an oversupply of poly, at least in 2012, so is the rationale here looking out at your biggest competitor, seeing the cost advantage they have for making their own poly, looking at your ability to move down the cost curve with what you've done so far and then, maybe, an internal target of 30-plus-% of your own? Is that the way we're thinking about your expansion plans?

(interpreted) Yes, Kelly, you're right.

Great. Thanks very much.

Vishal Shah, Barclays Capital.

Julia, can you talk about your expectations for gross margins for the Module business in Q1?

And also, can you remind us again what your cell capacity was in Q4, and then what it will be in Q1 and the rest of the year? Thank you.

Cell capacity was at 240 megawatts the end of last year, and we are not adding any. And that's why our shipment also this year is constrained by the amount of cell capacity that we have in terms of our module shipments.

In terms of Q1 margin expectations, we expect to have very similar margins, compared with Q4.

For the Module business?

Similarly, yes.

Okay. What percentage of your shipments in Q4 were Tolling -- of wafer shipments were Tolling?

I don't have the exact numbers on hand. I think it might have been 25%. I have to get back to you; I don't know the exact number.

(interpreted) Around 25%, Vishal.

And that would be the same for Q1 and the rest of the year?

For Q1 we'll see a slight increase, probably approaching 30% for the Tolling business.

And how about 2011?

That's 2011 Q1. For the full year we expect Tolling to be about close to 40% of our third party wafer sales.

40% of your Tolling overall 2011. So that means [you're going to] ---

Yes.

-- [ease your shipments] in the back of the year. Okay.

And just one other question, your capacity -- you're buying cells, and cell prices have started to go up and you're talking about module prices of $1.65, $1.70, and margins are flattish. What's going on? Are you able to improve your processing costs for the in-house wafer cells? And can you talk about what are the factors that are driving your Module margins? Thank you.

Well, we expect Module margins to be flat, because we will use the majority of self-produced cells using our own self-produced wafers. So we are not too much influenced by the rising cell prices from the market.

Okay. Thank you.

Sanjay Shrestha, Lazard Capital Markets.

A quick question on your 1.3 gigawatts of wafer contract that you guys sold out for 2011. What pricing visibility do you have on that? And can you again remind us how much have you received in down payment from some of your long-term customers?

(interpreted) In terms of down payments, we have received between 3% to 5% in terms of down payments.

In terms of visibility on pricing, there are some customers who fix their prices on a quarterly basis. But out of this 1.3 gigawatts, close to 800 megawatts of the long-term contracts have fixed pricing with 5% flexibility adjusted up and down, according to the spot prices. But these 800 megawatts of contracts all have pre-set prices.

Okay. And do we have any visibility on where those pricing would be for Q3 and Q4 of 2011?

(interpreted) Q3, about $0.75 and Q4, around $0.70.

Okay. So that really hasn't changed. Great. Can I come back to this Module question a little bit, because you guys are seeing a decline from Q4 to Q1 for your Module ASP, and is that because you don't have any exposure in the Italian market? Or is that because you're not seeing the pull in demand from the Italian market?

And how should we think about that Module ASP for your guys versus some of the other comments and, maybe, even some of the spot market dynamics here recently? So can you talk about that a little bit?

What was your question? You're saying that our -- I missed the first part of your question, sorry.

So your Module ASP in Q1 you said is going to be in the range of $1.55 to $1.70, correct?

$1.65 to $1.70.

Okay. So I was coming at $1.55. Okay, that's fair.

Then one other question on the module side. You said that you were being selective with your customers, so did you have anybody walk out, or did you walk away from any of the potential customer, or -- ?

And, two, what is you exposure to the Italian market for 2011 for your module

(interpreted) So we are being selective of our customers because there are many distributors in Europe, as you are aware. So we are being selective with customers who offer better payment terms, who are, relatively speaking, a little larger in scale.

And, in terms of our exposure to the Italian market, it's similarly to fourth quarter, represents about 20% to 25% of all shipments.

Okay. And is that first half skewed, or is that for the full year 2011?

We don't have that many long-term contracts for the Module business, so it is fairly evenly distributed for the 2011.

Okay, great. One last question from me then guys. The CapEx for 2011 you expect, obviously, that to be funded from the internally generated cash flow, correct?

(interpreted) We have been quite conservative in estimating the growth for this year. Based on the conservative estimations, we believe that we have the ability to fund our expansion ourselves, but we are, also, evaluating all potential possible financing platforms.

One point, since you stock has sort of indicated what it is in the pre-market, the reason why your Q1 revenue guidance is what it is, because you guys have decided to ship more wafers, rather than ship more modules in Q1, so that it's basically a capital and a resource allocation decision, and nothing more than that?

That is correct.

Okay, great. Thank you.

Sam Dubinsky, Wells Fargo.

A couple of quick questions. It seems like your capacity addition to wafering have been fairly slow, compared to peers. Why does it take so long to add wafer capacity? And then I have a follow-up.

(interpreted) We still believe the solar industry is, relatively speaking, a very young industry. There are still often technologies, innovations and advancements we see, so therefore, we are prudent in adding capacity. We wanted to make sure that we don't add [obsolete] capacity.

Also, in 2011 we are more conservative than competitors in the industry. We take a prudent approach, as we always have.

Okay. And then, in terms of your OpEx [and tax] you've been pretty volatile. On your tax rate, do you still expect that to decline next year? And then, what's a good OpEx percentage as a percent of sales?

OpEx for 2011 is expected between 7% to 8%, and tax is expected between 18% to 19%.

Thank you very much.

Eric Cheng, Deutsche Bank.

Just a quick one regarding the [first telephone call]. Is there any rough figure regarding your blended (inaudible - technical problem) for Q1, 2011.

Eric, can you repeat your question, please, we can barely hear you.

Sure, just a quick question on the poly cost for Q4. What's the blended cost, roughly, for Q4, and also any guidance for 2011, Q1 and Q2?

(interpreted) In Q4 we had poly blended costs around $58 per kilogram, and in Q1 of this year we expect to be around $60 per kilogram.

Thank you.

Lu Yeung, UBS.

Can you share with us, of your wafer capacity increase, how much of that is going to be mono and multi? And, also, how do you see the demand for your Legacy 5 inch wafers? And whether you'll be thinking about extending more into mono in the future?

(interpreted) For the 600 megawatts of additional capacity that we're adding, it's all multi-wafer capacity. In the future we don't have any plans to add additional mono capacities either.

Our equipments are fully equipped to produce 8 inch mono wafers at the moment, and only to satisfy a small portion of customers do we continue to produce 5 inch mono.

Can you also share with us what kind of wafer capacity we'll be looking at, at the end of second quarter and end of third quarter?

(interpreted) We'll be at 1.9 gigawatts by the end of second quarter, and that will be maintained for the remaining of 2011.

Okay. Thanks a lot.

Mark Bachman, Auriga.

First off, Julia, can you tell us what is your expected module shipments for all of 2011?

400 to 450 megawatts.

Okay. If I just put that in at around 400, that suggests -- and, then, did I hear you correctly, you're going to do 40% of all shipments on the Tolling side of the business?

That's just for the third party wafer cells.

Correct. So if I think about this, 400 megawatts going into Modules. You're guidance is between 1.6 and 1.7 gigawatts, so you're going to do 40% on the Tolling business, another 25% on modules, and about 35% on wafers. Is that correct then?

No. It is about 400 -- so if you take 1.7 gigawatts minus 400 megawatts, you have 1.3 megawatts. Out of that --

Correct.

So yes, the 40% it was part of the third party sales, so it's not 40% of the 1.3 gigawatts.

It's not 40% of the 1.3 gigawatts?

No. It's 40% of the third party wafer sales.

40% of your third party wafer sales would be for your Tolling customers. Is that the correct way to think about that?

That's correct.

Okay. On the poly side of the business, can you -- at 8500 metric tons, that supplies you almost 1.5 gigawatts worth of wafers out there.

Do you expect to -- if you put that with your contracts right now, will you be oversupplied on poly? Do you expect to sell any of this on the open market, or do you expect to consume it all yourself?

No, we do not expect to sell the polys externally. Just to give you a better percentage of the previous percentage of Tolling, it's 30% of our wafer shipment in total.

Okay. So you're going to consume all the polys (multiple speakers). Okay, the bottom line is you're going to produce 1.6 to 1.7 gigawatts. You're going to allow 400 megawatts off the top of that to put into your Module, somewhere around there. And then, of that, 30% of all the wafers will actually be tolled?

That's correct.

Okay. Got it. At 30%. Do you have any 10% customers now? Do any customers make up more than 10% of your revenues?

No.

Okay. Thanks for your time.

Pranab Sarmah, Daiwa.

I have a couple of questions. The first one is, could you tell us what is the combined long-term contract you have at the end of 2010? I think for 2011 you said 1.3 gigawatts, but some are five years contract, right?

We have a total of over 20 long-term contracts, and those were all signed previously and in 2010.

If we add together all those contracts, would that translate out to be 15 gigawatts, 12 gigawatts?

I don't know what the total is. Those range from one to five years.

Okay. Then, secondly, on CapEx side, could you give some color? Out of $350 million, $150 million is going to the polysilicon side, and how much will go to the wafer and module side?

(interpreted) For the poly plants we expect to incur between $150 million to $170 million of CapEx, and for the wafer it's around $110 million to $120 million. The remaining is for miscellaneous class module business.

And my last question is on the first quarter gross-margin guidance. What I'm seeing like your product mix is moving towards the wafer side; wafer prices are strong; your polysilicon costs are relatively pretty -- remain unchanged. Then your non-wafer cost is also declining. Then why your margins are not improving?

(interpreted) There are a couple of reasons for margins to be flat quarter on quarter. Firstly, we do see a slight decline in pricing of ASP; in fourth quarter our ASP was $0.88 and in first quarter that's $0.85. That's the $0.03 differential.

And secondly, we see a slight uptick for the polysilicon pricing as well, so although our non-poly pricing is declining slightly, we expect to maintain our margins, quarter on quarter.

Okay, thank you very much.

Vishal Shah, Barclays Capital.

Julia, I just wanted to clarify a few things. Your cell capacity is 240 megawatts, right?

Correct.

Okay. So you're going to use 240 megawatts of in-house wafers for your internal module production?

That's correct.

So why is your guidance, then, for 1.2 to 1.3 gigawatts of third party wafer sales when you have a capacity of 1.9 gigawatts by the end of Q2?

Say again, why do we have a guidance of 1.3 gigawatts (multiple speakers)?

1.2. to 1.3 gigawatts of wafer sales, right? That's what you're saying. And you are only going to use 250 megawatts, let's say, of your in-house wafers?

Sure, that's a very good question. Thank you, Vishal, for bringing that up. It's because there is a possibility that wafer sales could be higher than that. In the past our experiences, especially in 2011, the third party sales market was very tight in the market. So we actually had to sell the wafers to cell makers in order to buy back the cells. So that's why some of them have been consumed that way.

Okay. And can you just [drive by] again what your total percentage would be in 2011. Is it 30% or 40%?

30% of our third party wafer sales. 30% of external wafer sales.

Okay, so it's not 40%. Thank you.

Sorry about the confusion.

Kelly Dougherty, Macquarie Research.

Just one more question on the Module business. Can you help us think about what percentage of that 400 to 450 megawatts would be branded versus your OEM modules?

(interpreted) We expect mostly to be self-branded.

Mostly self-branded. In a market where there's likely to be an oversupply in the second half, and you've got companies that have already established a brand, and established a distribution channel, can you just help us think about your desire to get into the module branded business versus the OEM business?

(interpreted) The objective of the Company really is to maximize our margins. In 2011 we do see the overcapacity situation in the downstream so therefore, we actually are budgeted to be very moderate in terms of our module sales. We feel 400 megawatts is the reasonable amount at which we can sell, capitalizing on our quality wafer and our cost structure.

Okay great. Just one more quick clarification. I think earlier you had said that your poly production costs by mid-2012 was going to be $20 a kilogram, was that an all in cost?

(interpreted) For the new 5,000 metric ton capacity we're building, this is the all in cost that we are expecting.

How do you do that? If you look at the cost structure of some of the largest players right now, are you guys using much more domestic equipment and, therefore, depreciation is lower, are you getting favorable rates for electricity?

(interpreted) A couple of reasons. Number one is for the CapEx we are budgeted; the CapEx per kilogram is a lot less than what we see from the market. And, therefore, depreciation we expect to be decreased from the previous [2010] of $10 per kilogram to down about $3 per kilogram. And we are also planning to use much larger furnaces, which will really reduce the electricity consumption per kilogram as well.

And lastly, for the new capacity that we are building will be able to use hydrochlorination rather than hydrogenation and which will enable us to recycle most of the byproducts back into the system, thereby reducing the cost per kilogram.

Perfect, thanks 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, Miss Julia Xu for her closing remarks.

Overall, we have delivered excellent value to our shareholders with a return on equity of 34.4% for the full year of 2010. In 2011 we will continue to focus on cost reduction in our wafer manufacturing while capturing opportunities in downstream module services and increasing our upstream polysilicon production to improve profitability, and maintain our position as a leading provider of cost competitive solar products.

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

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