Emeren Group Ltd (SOL) 2012 Q1 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for ReneSola Ltd. first-quarter 2012 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 call over to your host for today, Mr. Tony Hung, ReneSola's Vice President of International Corporate Finance and Corporate Communications. Please proceed, Mr. Hung.

Hello, everyone, and welcome to ReneSola's first-quarter 2012 earnings conference call. ReneSola's first-quarter 2012 earnings results were released earlier today, and are available on the Company's website as well as on news wire services. You can follow along with today's call by downloading a short presentation available on the Company's website, at www.renesola.com.

On the call today are Mr. Xianshou Li, our Chief Executive Officer; and Mr. Henry Wang, our Chief Financial Officer. Mr. Lee will discuss ReneSola's business highlights and strategy; and Mr. Wang will go through the financials and guidance. They will both be available to answer your questions during the Q&A session.

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 I will translate into English. Please go ahead, Mr. Li.

(interpreted) Thank you for joining today's 2012 first-quarter earnings call. If you have downloaded our presentation, please turn to page 3 for our Company highlights.

Despite persistent challenging global solar market conditions, which are marked by oversupply and declining ASPs, we delivered record shipments and continue to lower our cost of both modules and wafers. We continue to develop our strengths in research and development, and have made strong progress in our Virtus wafers and modules. As such, we have been able to withstand the difficult pricing conditions and the resulting margin pressure, which should position us well once market conditions normalize.

While we have maintained our leadership position in wafer manufacturing, we have increasingly focused on our module business; which is growing, in large part, due to our regional sales teams.

I will now quickly review our shipments. Please turn to page 5 for a snapshot of our shipments and financial progress. Total solar product shipments in the first quarter of 2012 were 466 megawatts. Wafer shipments rose 52.9% quarter over quarter, as a result of strong demand for our wafers from Europe, especially Germany, ahead of expected cuts in the country's feed-in tariff.

Module shipments also remained strong, at 90.9 megawatts.

ASPs dropped significantly throughout the quarter, with wafer ASPs dropping to $0.33 per watt, and module ASPs dropping to $0.84 per watt in the first quarter. First-quarter revenues were $211.5 million, up 12.7% from $187.7 million in the fourth quarter.

Please turn to page 6 for an update on our research and development. We are continuing improve and develop our proprietary Virtus technology and transferring the high-conversion efficiency advantages of our Virtus wafers into our Virtus modules. Our high-efficiency Virtus wafers are now exhibiting conversion efficiencies of 18.2%. And our high-efficiency Virtus modules are generating outputs of 245 watts to 255 watts.

In addition, we have recently developed new in-house polysilicon recycling techniques, which will further reduce polysilicon costs. We are also continuing research and development into carbon composite materials, and are continuing to invest in developing low-oxygen concentration solar wafers. We have also begun producing diamond-steel wires and begun using them in-house with our own wafer manufacturing. We are planning to market the diamond-steel wires for sale soon.

In conclusion, we remain committed to our research and development to advance our technology and manufacturing methods, as well as to lower our overall costs. We are looking forward to formally announcing our high-efficiency modules and diamond wire products on May 17 at the SNEC PV Power Expo.

Please turn to page 7 for an overview of our module business. We have gradually improved our module business, which has been substantially impacted by Europe's financing environment and rapidly evolving solar policies. Through our strong research and development, the transfer of our technological advantages; in producing Virtus wafers into producing Virtus modules; and increased sales and marketing efforts; we have delivered module shipments of 90.9 megawatts and expect to ship 150 megawatts to 170 megawatts of solar modules in the second quarter of 2012, of which 55 megawatts are expected to be Virtus modules.

Despite what remains a challenging market, flooded with oversupply, we have sold out our current capacity and have accumulated a backlog of solar module orders. We anticipate selling 600 megawatts of modules for the full-year 2012, of which approximately 200 megawatts will be Virtus modules, as we expect to see strong demand for our high-efficiency, high-quality products.

Due to the strong demand, we are increasing our capacity to 1.2 gigawatts by the end of second-quarter 2012. In addition to our technological advantages and expertise, as well as our new sales and marketing strategy, we also improved upon our low processing costs. Our total module manufacturing cost is now $0.74 per watt. And we expect to decrease our total module manufacturing to under $0.70 per watt in the second quarter of 2012.

Please turn to page 8 of an overview of our wafer business results for the quarter. Demand for our wafers was strong in the first quarter of 2012, due in no small part to the high demand for our high-efficiency Virtus wafers, which are exhibiting conversion efficiencies of 18.2%. In addition, we have further reduced blended processing costs to $0.19 per watt.

However, our margins have been significantly impacted by declining ASPs, which are down to $0.33 per watt in the first quarter. Fortunately, we have been able to reduce our processing costs further. At present, our blended wafer processing cost is about $0.18 per watt. We will continue to execute on our strategy to lower our costs, which will position us well, very well, once macro conditions stabilize. We expect to lower our blended wafer processing costs to $0.17 per watt by end of the second quarter 2012; and $0.15 per watt by the end of this year.

We will also continue to invest in research and development to improve the technology and manufacturing process of our wafers, with the primary goal of improving wafer efficiency. Our R&D will not only enhance our wafer business, but also improve our module business, as wafers are the key component of our modules.

Please turn to page 9 for an update on our polysilicon production. Our polysilicon plans progress remains on schedule, and is central to our long-term manufacturing cost reduction strategy. In the first quarter, production costs increased, due to upgrades and maintenance on the state-owned power grid connected to our plant. This impacted our production costs for the quarter. In the first quarter we produced approximately 900 metric tons of polysilicon; above expectations, but lower than our fourth-quarter production of 1089 metric tons.

Production costs were up to $33 per kilogram in the first quarter, compared to $30 per kilogram in the fourth quarter. As of April, our production costs have dropped back to $30 per kilogram. We expect our production cost to decrease further this year, reaching approximately $25 per kilogram by the end of the second quarter; or a cash cost of $18 per kilogram, due to a development of several in-house cost reduction techniques.

Also, upon completion of Phase II of our polysilicon plant, we expect to expand polysilicon production capacity to 10,000 metric tons by the end of the year; with total blended costs with both phases of $22 per kilogram, and under $20 per kilogram for Phase II on a standalone basis.

I will now turn the call over to Henry, who will discuss our financial results for the quarter.

Thanks, Mr. Li. Please turn to page 11 through 14 for a look at our financial progress. As Mr. Li mentioned earlier, our revenue and margins were again impacted by the decline in solar wafer and module ASPs. We also took a new inventory write-down of $12.2 million in the first quarter, primarily to reflecting the decline the price of polysilicon. And this resulted in negative gross margin. Without the inventory write-down, our gross margin would have been 2%.

Margins for our module business, however, are quite strong, given the low ASPs. And they were about 9.5% in the first quarter. This is due largely to our cost reduction strategy, which have helped lessen the impact of declining prices for both modules and wafers. Although we delivered a negative gross margin in the first quarter, we are confident our cost reduction will enable us to generate gross profit in the second quarter.

Now I'd like to run through the details of our financial results. Net revenues for the first quarter were $211.5 million, exceeding our guidance and representing a sequential increase of 12.7% from $187.7 million, primarily due to strong demand from Europe -- particularly Germany -- for our solar products; offset by decreases in ASPs.

Gross loss for the first quarter was $8.0 million compared to a gross loss of $43.4 million in the fourth quarter, primarily due to the lowering costs and improving margins on our solar products, offset by inventory write-down of $12.2 million, primarily as a result of the decline in price for polysilicon. Without the inventory write-down, gross profit would have been $4.2 million.

Gross margin for the first quarter of 2012 was negative 3.8%, compared to a gross margin of negative 23.1% in the fourth quarter of 2011. Without the write-down, gross margin would have been [2%].

Operating loss for the first quarter was $37.8 million compared to an operating loss of $52.7 million in the fourth quarter of 2011. Total operating expenses for the first quarter were $29.8 million, up 220.4% from $9.3 million in the fourth quarter. Sequential increases in operating expenses were primarily due to the one-time gain of $13.5 million, arising from the forfeiture of a prepaid deposit resulting from the breach of a wafer contract by one of Company's clients in the fourth quarter of 2011; and to a bonus accrual reversal in the fourth quarter of 2011.

Operating expenses represented 14.1% of total revenues in the first quarter 2012, a decrease from 5% in the fourth quarter 2011. Operating margin for the first quarter 2012 was negative 17.9%, compared to an operating margin of negative 28.1% in the fourth quarter.

We recognized a tax benefit of $6.2 million for the first quarter, compared with a tax benefit of $13.1 million in the fourth quarter.

Net loss attributable to holders of ordinary shares for the first quarter of 2012 was $40.2 million compared to a net loss of $36.7 million for the fourth quarter of 2011. This represents basic and diluted loss per share of $0.23; and basic and diluted loss per American depositary shares, or ADS, for $0.47.

On the balance sheet, as of March 31 we had increased our overall debt to $800.8 million, excluding $111.6 million senior convertible notes. Total bank borrowings increased by $85.2 million sequentially, with short-term borrowings increased from $570.9 million at the end of fourth quarter to $662.6 million at the end of first quarter. At the end of March 2012, short-term borrowings consisted of $239.6 million in [traded] finance, $334.4 million in short-term facilities, and $88.6 million of the short-term portion of the long-term debt.

Our net cash and cash equivalents position was $338.9 million in total cash; including restricted cash, was $388.3 million at the end of the first quarter -- compared to net cash and cash equivalents position of $379 million; and total cash, including restricted cash, of $437.4 million at the end of fourth quarter of 2011.

Our CapEx plans remained relatively conservative for the year. We expect to spend $70 million in the second quarter to expand our solar module and polysilicon production capacity, as well as to improve our manufacturing process.

Now, listen to our guidance, which could be found on page 15. We expect the overall solar market to remain challenging in the second quarter of 2012. We expect the shipments to be in the range of 460 megawatt to 480 megawatts, and the revenues to be the in the range of $200 million to $220 million. We also take expect positive gross margins through further cost reduction in the second quarter, assuming there are no additional inventory write-offs.

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

(Operator Instructions). Philip Shen, Roth Capital Partners.

LDK recently discussed that they announced some substantial layoffs. Are you guys conducting any layoffs at all? And if not, are you contemplating them?

(Spoken in Mandarin).

Actually, I'm not sure if you understood that, but we're not going to have any layoffs, and there are no plans for layoffs. On the contrary, actually, we are going to increase the number of our employees by about 1000, and this is due primarily to increases on our module division.

Great. Thanks for the color. Can you tell us what your utilization is currently for your ingot capacity, and then also for your wafer capacity? I'd like to get a sense for -- are the utilization rates balanced between the two segments in the value chain?

(Spoken in Mandarin).

Okay. So Phil, as Mr. Li just indicated, right now pretty much for everything, we're running at 100%. And, in the case of wafers, it's running at exactly about 100%; poly as well. I know you didn't ask this, but also for our sales and modules, we're actually running above 100% as we are doing some outsourcing.

Great.

Operator, give us your next question. Oh, sorry Phil, go ahead.

Squeeze in one more. What was your average poly price in Q1? We've been hearing that poly suppliers such as Wacker are -- they're maintaining contract pricing; but from marginal volume, they're pricing at potentially as low as $10 per kilogram. Are you guys experiencing anything like this?

So you want our -- do you want our internal total blended cost? Or do you want the cost that we bought poly at, on average, in the first quarter?

The latter -- so, the external purchase price.

Okay.

$28 from external.

Yes. So Phil, that would be the average for the first quarter; which, as I'm sure you know, started off a bit higher and ended up a bit lower.

Right, right. And what do you think you're seeing today?

$24 to $26, right?

Yes, that's correct -- what Henry said, $24 to $26 external poly pricing.

Thanks, Henry. Thanks, Tony.

Operator, can you get us the next question?

Satya Kumar, Credit Suisse.

What were the geographical mix of your shipments for modules in the March quarter? And what do you expect that shipment mix to be in June, by geography from (technical difficulty)?

Okay, so for the March quarter -- so, basically, you're asking for the first quarter and the second quarter geographical mix. Okay.

(Spoken in Mandarin).

So Satya, Mr. Li has said that for the first quarter, we're looking at something like 70 megawatts to Europe and about 20 megawatts to Australia. And for the second quarter, we're looking at something like 130 megawatts to 150 megawatts to Europe, and another 20 megawatts to Australia.

Okay. Do you have the sense as to what portion of the European shipments are to Germany? What visibility do you have for module orders from specifically your German customers? And when do you expect the shipments to perhaps go down in Germany, which month of the year? Because the feed-in tariff cut will take effect at some point.

(Spoken in Mandarin).

Okay. Yes, Satya, so Mr. Li indicated for the first quarter, the shipments to Germany was about 30 megawatts; the remainder to places like Eastern Europe, Italy, et cetera. For the second quarter about 40% of the European shipments will be to Germany, and the rest to Italy and other places in Europe -- as well as other places in Eastern Europe, rather. And, overall, we are seeing strong demand out of those other places in Europe in the second quarter. Overall, in terms of the visibility, right now we what we think we're seeing is that there's going to be relatively weaker shipments in Germany in June. And then, after that it may drop further.

Okay. And then on polysilicon -- basically, your cost number that you gave out, that's $25 for Phase I and Phase II, looks to be close to $20. I'm just taking the average in estimating that. Is that the gross or cash cost? And right now, the polysilicon spot price seems to be at or below that $25 level. If poly stays here or gets a little weaker, would you look to scale back production partially in Phase I, and run the Phase II more?

Yes, so the first question, I can answer that. That's definitely the fully loaded number that includes depreciation. But the second part, let me direct that part to Mr. Li and the team.

(Spoken in Mandarin).

Okay. So, Satya, Mr. Li indicated that, obviously, the market price is the cash price, so that's $24 to $26 cash price. So at something like $25 as noted, that's $18 cash cost for us. If the poly spot price drops to below our cash cost, then we would strongly consider shutting down our Phase I. But, otherwise, no. We will continue to operate it.

And just one quick small question on capacity. Sounds like module capacity is going from 1 to 1.2 by the end of the year. Where is your cell capacity? Any plans to change that? And what are you seeing in terms of tolling cost for the cells? It looks like you're tolling some of your Virtus wafers from two cells.

(Spoken in Mandarin).

So Satya, with regards to the cell capacity -- no, there's no plans to increase the capacity there. I think the market recognizes that there is not as much value there. In terms of the tolling cost, it's about $0.16. But for Virtus, yes, it's going to cost a little bit more, like maybe $0.01 more.

Thank you.

Operator, can you get us the next question?

Kelly Dougherty, Macquarie.

The revenue guidance of $200 million to $220 million implies that the ASP pressure remains pretty intense. So, just wondering if you can give us a sense of what you are expecting for the second quarter, and then maybe a little further out. Any thoughts for where wafer and module pricing go over the next few quarters?

(interpreted) All right, Kelly, for the second quarter we're predicting $0.75 per watt on modules. For wafers we're producing -- predicting $0.30 per watt. And for further out, we're going to have to take a pass on that, as the market conditions continue to make it challenging to make predictions on ASPs.

Understood. Maybe let me ask it a little bit differently. We are hearing chatter in the market about wafer ASPs that could be well below $0.25 by the end of the year. Maybe -- can you tell us how you price, relative to some of your peers? Maybe what kind of premium are you able to command for Virtus and for the mono wafers?

(interpreted) Yes, so, Kelly -- in terms of our premium -- typically, our premium would be something like 5% to 10% over the market. So, in essence, we've always priced above that. So even if something goes lower, we'll probably still command that premium. Now, overall, in terms of where we stand to market, I mean obviously we're going to use a lot of the wafers ourselves. But we also produce a lot of mono wafers now. So that will affect our pricing as well as our processing costs. And of course, we have more high-efficiency products; and we're in the process of developing even higher-efficiency products.

Okay, so that 5% to 10% includes the higher efficiency? Or, on an apples-to-apples basis, you can sell 5% to 10% higher, and then maybe it's even more, because you offer higher-efficiency products?

Yes, let me -- I think I know the answer to that, but let me double check.

(Spoken in Mandarin).

Yes, Kelly, Mr. Li is saying that, I think this is something that we've converted our capacity to producing only high-efficiency wafers. As a result, we don't really have low-efficiency products in general. So I suppose, to answer your question more directly, the premium would be on high-efficiency products -- which, typically, is our only products -- over the products in the market.

Okay, great, thanks. And then maybe on OpEx -- as you continue to focus on high-efficiency, on the R&D side, and then transition more into the module business, how should we think about OpEx trending? I don't know if you have a target percent of revenue or maybe an absolute dollar amount we can think of for this year, and maybe even as we look ahead?

Sure, let me check with Henry and Mr. Li.

Okay, actually we invest a lot of expense on R&D. And we are saying we will, per our projection, we will keep about almost 1000 -- $10 million per quarter. That would add up to be $40 million per year for R&D expenses.

(spoken in Mandarin).

For the overall operating expenses, currently we are almost about $30 million per quarter. We almost keep the same level throughout the year. But it probably maybe $1 million or $2 million more in the second half of the year, per quarter.

Kelly, one other thing worth pointing out is that we already spent a lot on R&D. So right now we'll spend a little bit more. But, basically, our level has already been historically pretty high.

Okay, great. That's helpful. And then just one last clarification question. On the 20-F, there is mention of some financial covenants associated with the long-term debt. Can you give us any detail on what those covenants are? And given what's going on in the pricing environment, if there's any concerns about being at risk to breach them?

We -- currently, we have two kinds of liability long-term loan. One is from one foreign bank. This foreign bank to loan us about $35 million. And then if you can look at it, the covenant -- breached covenant. It would be -- there the term is really not so [tidy]. And at this moment, I don't think we would trigger ending covenant. And the other long-term is from the local banks. And the one is related as a solely poly plant. The terms also related to everything -- marketing price. So it will also not trigger these kind of terms.

Okay. Can you give us an idea what the metrics are that those covenants are based on? (Multiple speakers). Coverage ratios, ASPs?

There's no ASP [limited]. It's just a -- the average price, such as the average -- the price we offered to the poly plant cannot be lower than the average, the average market price.

Okay.

And they -- such as the -- before they are allowing it once, we cannot open any bank account with other banks, (inaudible) these kind of terms.

Okay. Thank you very much.

Operator, can you give us the next question?

(Operator Instructions). Ahmar Zaman, Piper Jaffray.

This is Karen calling on behalf of Ahmar. Thanks for taking my question. I had a question on your cost reduction effort. You did a great job on reducing your cost down to $0.74 for your total module costs; and then your target being $0.70 next quarter. Can you just give us a breakdown on your cell and module processing costs, in addition to the wafer processing cost targets that you get out?

Sure, that's no problem. (Spoken in Mandarin).

Actually, the cost comparison for the module -- there's almost $0.02 from wafers and another $0.02 from module. For the module cost reduction contribution, there is $0.01 from external materials reduction, and $0.01 from internal efficiency improvement.

Yes, so, it'll probably be something like -- in the second quarter, something like $0.14, plus maybe $0.24, $0.26.

Okay. And then, some of your peers are going further downstream on the total solutions or the systems business. Are you guys also considering that, with the project going down to projects? Can you elaborate on what your strategy is?

Sure, let me check with the team on that.

(Spoken in Mandarin).

Yes, Karen, I think you understood that. But just for everyone, what Mr. Li said is that -- as everyone knows from our prior announcements -- we have a 20-megawatt project in Qinghai. We've also done some work recently in Bulgaria. But the project business is not our primary focus. We are doing it to gain some better understanding of our end markets. And we're certainly not going to be developing a lot of power plants in the near future. But we will be taking a look at the business. But no, there's no big plans, if you will, to go further downstream.

Okay. And then can you talk about your tolling in the quarter? And the other revenue that comes from Other.

Sure. By tolling, are you referring to our wafer tolling or some of the cell tolling that we do? As in, we have others do our cell tolling.

Your wafer tolling. Revenues from your wafer tolling.

Okay, so we actually don't any wafer tolling for this past quarter. For your other questions on the Other materials or Other sales, I can say that it's probably some slurry; and, if you will, other waste materials, by-products that we can sell, but let me double check with the team here.

(Spoken in Mandarin).

So yes, Karen, I checked with the team and that pretty much confirms that, yes, the Other sales, which is something like I think $10 million or so, that's primarily, if you will, other materials.

Okay. And then what about in the second half of the year, when you're trying to ramp up your diamond wire business? And can you just elaborate on what you're trying to do on that side?

Sure.

(Spoken in Mandarin).

Yes, so -- I think, Karen, you understood that. Again, what Mr. Li is saying is that because it's a new very new product, it's something that we're experimenting with and we're going to go out and market, so it's a little hard to say at this stage.

Okay. Thank you.

Operator, can you get us the next question?

Aaron Chew, Maxim Group.

First, wondering if you could just provide a little color on what's driving the discrepancy in growth, at least in terms of 1Q on the wafer and module fronts. I mean, you clearly had much more sizable growth on a wafer and -- then on the module and while I -- your Q2 guidance suggests that may revert to the mean a bit. Just wondering if there is an explicit change in strategy there, if that's driven by a large customer or just representative of end user demand.

And secondly, could you just clarify your earlier response, I believe, to Kelly's question on a price premium of 10%? I assume that's in reference only to wafers. Is it safe to assume your module is probably priced at a slight discount to the Tier 1 guys? And, roughly, what discount is that? Thank you.

Sure.

(Spoken in Mandarin).

As for these discrepancies on the growth, the reason is actually something very fundamental. There is a lot of demand out there for quality, high-efficiency products. So as a result, we saw very, very strong demand for our quality, high-efficiency wafers, which other people then made into quality, high-efficient modules. And in the second quarter, we'll be taking more of our quality, high-efficiency wafers and making them into our own high-quality efficiency modules, and selling those. So that's basically the funny discrepancy, if you will, on growth.

On this second question, let me ask that of that team now.

(Spoken in Mandarin).

Okay, so Erin on your second question -- to clarify on that wafers, yes, there's the premium. It's a premium because of our high-efficiency products. On the modules there's a discount. And, as you know, in the second -- in the first quarter, rather, we sold at $0.84 per watt. And part of that may be due to the fact that we sell more to middle-year -- middle-peer, rather, customers. But as we become more familiar with the module selling environment, we think that while there is a discount, it's a little unclear what that discount really is; or even if there is one.

Because, apparently, some of our competitors in the module space -- they sell through distributors or other third parties, or sell with contracts that have certain future price adjustments. Those price adjustments might hit the SG&A line as opposed to the gross margin line later on. We're not clear, exactly, what the final ASPs look like. But we suspect that the premium they have over us may, in fact, be not significant.

Okay, that's fair. If I could just have one quick follow-up on that? I understand the reluctance to forecast pricing following June. But following your pretty famous -- or now famous prediction of $1.00 a watt in the fourth quarter, made in the second quarter last year, could you at least maybe speak generally what do you think happens in the second half? I mean, if you're already seeing modules, maybe, around $0.75 per watt, maybe generally what you think happens following that cuts in Germany and Italy at June 30. I mean, is there some type of floor you see? Are you seeing another 10% plus decline? Where, roughly, do you think things shake out by year end? Thank you.

Sure. I think this is one that, thanks to the prediction from last year, we'll get every once in a while.

(Spoken in Mandarin).

Aaron, so Mr. Li has hazarded a guess. And he's saying that, in essence, based on what we know right now at the current level of techniques, the bottom for pricing is probably something like $0.65 to $0.70, so there might not be too much room, if any, after that.

Okay. Thanks, guys.

No problem. Operator, can you get us the next question?

(Operator Instructions). Pranab Sarmah, Daiwa Capital.

My first question is on Q1 -- out of the 375-megawatt wafer shipment, how many percentage were on Virtus wafer?

(interpreted) About a third of the wafers shipped were Virtus.

And how do you expect to Virtus wafer will fan out in second quarter, and maybe end of the year?

(Spoken in Mandarin).

So, Pranab, Mr. Li has indicated that the trend is probably going to continue in the same way. And the actual trend is about a third Virtus, a third mono, and about a third more regular multi.

Okay, got you.

Yes, so that would be for the second quarter, as well as for the full year.

Full year, (inaudible), got it. Second question is on your diamond wafer side. You indicated like your diamond wafer-based -- diamond wire cut-based wafer was to be able to be in the market. Is the diamond wafer -- is in-house build, or it is externally sourced at this point?

You mean the diamond wire?

Diamond wire.

It's definitely in-house.

Diamond wire is in-house, right?

Yes. Yes, we make our diamond wires in-house.

And when do you think that cost will be competitive, compared to normal wafer cutting versus diamond wafer cutting?

I think we do, but let me get the more official answer from the team.

(Spoken in Mandarin).

Okay. So, Pranab, what Mr. Li is saying is that right now, based on our work and experiments and the R&D that we've done, we think that we can sell our version of the diamond-steel wires at a price that is the same as regular steel wires. So, obviously, that would make it very competitive. It should make things something like 15% more efficient.

I just had the one comment to Mr. Li's comments. What Mr. Li mentioned is the same cost from the common wire and the diamond wire, which means for the cutting expenses, that is the cost for the diamond wire and the common wire only.

Yes, yes. I understand, yes.

Yes, yes.

Got it. Yes. Thank you, Tony. And thank you, Mr. Li, for your questions.

No problem. Operator, can you get us the next question?

Amy Song, Goldman Sachs.

I just have one follow-up question on the demand visibility. Can you talk about how -- I believe you talked about Germany. But what about any other country and regions? And maybe as early as next month or [starting from] the quarter, please.

Is there any particular market you would like us to talk about? Or maybe should we just go to the usual ones, Amy? (Multiple speakers) Like, Europe, US, and China?

Yes, US and also Japan; and Australia, it seems like you guys already penetrating into, so please.

Okay. Let me direct that to the team.

(Spoken in Mandarin).

Yes, Amy, I'm sure you understood that. But just for everyone else on the call, Mr. Li views the world market in this way -- there is Europe, US, places like Japan and Australia, which we view as good markets that we'll focus on. We've done well in Europe, historically and now. We're hoping to do better in the US very, very soon. We've done very, very well in Australia, as announced earlier on this call; and we're in the top three there. We're hoping to make progress in Japan later in the year, maybe in the fourth quarter.

Now, for other markets -- such as China, India, Thailand, South America -- we view that as new markets; and markets that are, unfortunately, not as good. And, hence, we will not focus on those markets as much.

So do you have a particular forecast or any -- those countries that you mentioned, [in your mind]. I'm sure you have a internal model, just like everybody else does. So, do you have some numerical figure you can share with us?

Sure, let me ask the team.

(Spoken in Mandarin).

Mr. Li has indicated that the view here is that the European market should be something like 15 gigawatts; US, 2 to 3 gigawatts; Australia, we're thinking 600 to 800 megawatts. Japan is a little uncertain, but it's looking like it's going to be pretty good. Now, China -- the numbers are very unstable and there's all sorts of things being announced all the time. But based on what's out there, people have been saying 9 gigawatts. But, again, it's a bit unstable.

There's been similarly big numbers -- but perhaps not nearly as big -- announced out of India, South America, Thailand, even South Africa. If you put all those together, from these markets that are not as good, there might be something like 20 gigawatts that's announced out there. But we're not sure about how reliable that demand really will be. That's the view, if you will, from here, Amy.

Amy, does that answer your question? I think we might have lost Amy.

Operator, can you get us the next question?

Stephen Zhang, China International Capital.

This is Chad, from China International Capital Corporation, on behalf of Stephen Zhang. I just have one quick question on the convertible bonds. I mean, over the past quarters you guys have done a great job in terms of the non-operating measures. I mean, you've repurchased over 90 million convertible bonds and recorded significant gains on the bond repurchase.

So, given that the bond is trading at roughly 60% of face value in the market, just wondering -- what's your strategy going forward? I mean, maybe, you guys can give us some color on the -- to what extent you guys will consider the nonoperation operation measures in terms of bond repurchase? Thank you.

Sure, let me direct that to the team.

(Spoken in Mandarin).

Yes, actually they're letting me answer this question. Actually, we buy a lot of convertible bonds before. Until now, we already buy back about 80 million -- $89 million. After that, starting from this year, we do -- first line is that we don't sell anymore at without a chance to buy back the convertible bond. And the second line is that we also consider the cash. Actually we try to -- we still have a few projects ongoing for further financing. So if we get more money, and if there's some chance for a higher discount in convertible bond, we will try to buy it back further.

All right. That was very helpful. Thank you.

Thank you. Operator, I guess we are done with questions.

We are now approaching the end of the conference call. I will now turn the call over to ReneSola's Chief Financial officer, Mr. Henry Wang, for his closing remarks.

Thanks, everyone. In conclusion, we continue to experience severe pricing pressure as a result of the macro conditions and the market oversupply. While declining ASPs still hurt our margins, our costs reductions have allowed us to maintain reasonable margins under the (inaudible). Furthermore, our increased sales and marketing efforts are starting to show their value, with recent success of our module business.

We will continue to invest heavily in our module business, as we expect to grow substantially this year, we will also invest in R&D to improve our technology and manufacturing process, as well as lower cost.

We are confident our strategies position us well, and will allow us to give positive returns to our shareholders, once the market conditions pick up. Thank you again for joining us today. If you have additional questions, please do not hesitate to contact us.

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.