Thank you for standing by and welcome to the JinkoSolar First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, 28 May, 2015. I would now like to hand the conference over to your first speaker today, Mr. Sebastian Liu, Director of JinkoSolar. Please go ahead, Mr. Liu.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's first quarter 2015 earnings conference call. The company's results were released earlier today and available on the company's IR Web site at www.jinkosolar.com, as well as on the newswire services. We have also provided supplemental presentation for today's earnings call, which can also be found on IR's Web site. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Arturo Herrero, Chief Strategy Officer; and Mr. Cao Haiyun, Chief Financial Officer. Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Herrero, who will talk about the company's business strategies. And then, Mr. Cao will go through the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future result may be materially different from the views expressed today. Further information regarding these and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law. Please be noted that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles or GAAP, JinkoSolar uses certain non-GAAP financial measures. The company believes that the use of non-GAAP information is useful for analysts and investors to evaluate JinkoSolar's current and future performances based on the more meaningful comparison of net income and diluted net income per ADS when compared with its peers and historical result from prior periods. These measures are not intended to represent or substitute numbers as measured under GAAP. The submission of non-GAAP numbers is voluntary and should be reviewed together with GAAP results. It is now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar. Mr. Chen will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Chen.

[Foreign Language] Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us today. [Foreign Language] We had another great quarter with total revenue up 36.5% over the same period of last year and module shipments to the third party reaching 703.5 megawatt exceeding the high-end of our guidance of 600 megawatts. Let's begin to you today from our new production facility in Penang, Malaysia, which just began operations earlier this week. I'm excited to say this facility come to life and eagerly look forward to the opportunities as added capacity were delivered during the second quarter and second half of the year. [Foreign Language] Our Malaysia facility was conceived as an important part of our global production distribution strategy. With production just began, the facility capacity of 500 megawatts of cells and 450 megawatts of modules that's already being fully booked. With a strong support of Penang local government and the Malaysia Industrial Development Authority and access to the strong local supply chain, the facility will have a competitive core structure. Looking ahead, we anticipate that our overall gross margin will gradually increase throughout the year as we quickly ramp up operations to reach full production capacity. [Foreign Language] Turning to our downstream business, solar power output during the first quarter reached 115 million KWh with revenue reaching RMB1 million or RMB 2 million representing an increase of 26.9% from the first quarter of 2014. We expect to generate 190 million to 200 million KWh of power in the second quarter. With our project capacity continuing to grow, we expect to say this is a high margin business contribute more meaningfully to our net profits and total revenues going forward. [Foreign Language] 114 megawatts of solar project were connected to the grid during the…

Thank you, Mr. Chen. Our reputation as a reliable and bankable company that offers high quality and competitive products with a proven track record resulted in a strong growth during Q1. We expect to see this continue in coming quarters in 2015 and we further build out upon the brand recognition with that and continue implementing a successful sales and marketing strategy. Especially these days our healthy financial and operational position and a strong balance sheet differentiate us when compared to some of our competitors. We continue to build our business around our loyal customers and we attract new ones by expanding our commercial operations both in size and geographic. We are growing our market share across diverse market including China, Europe, USA, Asia Pacific and emerging markets. Despite the seasonality in Q1, demand for JinkoSolar modules grew faster than expected with strong sales in China, the U.K., Japan, the USA, Turkey and Australia. We also enter into new countries in emerging markets in Q1. So module sales exceeded 700 megawatts that represents 16% more than the top-end of our guidance. We continue to diversify our customer portfolio as we rapidly expand our market share among the industrial, commercial and residential segments. This was on top of making inroads into several new markets including Turkey, Brazil, Central America and South American markets. During the first quarter 2015, we had sales in over 40 countries. Our presence in Europe and the USA continues to be strong despite anti-ramping and countervailing duties. Over 100 megawatt were sold in the U.K. alone. Another big portion of our shipments went to China allowing us to maintain the leading position there. We expect to achieve similar resource for the full year 2015 as we believe we will benefit from the Chinese government's continuous support and…

Thank you, Arturo. Good morning and evening to everyone on the call. First, I would like to walk through our financial results for the first quarter of 2015 followed by guidance for the second quarter and full year 2015. As Mr. Chen mentioned earlier, total solar products shipments in the first quarter of 2015 were 789.2 megawatts. Total revenues were $443.5 million a decrease of 7.5% an increase of 36.5% year-over-year. Gross margin was 20.3% compared to 22.8% in the first quarter of 2014 and 24% in the first quarter of 2014. The sequential decrease was primarily attributable to the decrease of ASP due to the depreciation of euro and Japanese yen. In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 24.1% in the first quarter of 2015 compared to 24.3% in the first quarter of 2014 and 26.6% in the first quarter of 2014. Income from operations was $37.1 million compared to $38.1 million in the first quarter 2014 and $32.7 million in the first quarter of 2014. Total operating expenses were $53 million, a decrease of 25.6% sequentially and an increase of 17.5% year-over-year. The sequential decrease in operating expenses was mainly due to the decrease in shipping and warranty costs and the reversal of provision for [bad debts] [ph] in the first quarter 2015. The total – the company's operating expenses excluding stock-based compensation, the change in provision for doubtful accounts, the impairments and disposal loss on obsolete fixed assets represented 12.5% of the total revenues representing a decrease from 13.1% sequentially and a decrease from 12.7% year-over-year. Operating margin was 8.4% fell to 8% in the first quarter of 2014 and 10.1% in the first quarter of last year. Net interest expense was $10.2 million decrease of 23.3% sequentially an…

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Philip Shen from ROTH Capital Partners. Your line is open. Please go ahead.

Hi, everyone. Thank you for taking my questions.

Thank you, Philip.

I would like to explore ASPs; can you share with us what the ASPs were by region in Q1, and then can you talk about how you expect ASPs in China to trend as we go through the year?

Philip, this is Charlie. The ASP in the first quarter was $0.58 down from $0.60 from the first quarter of last year due to the continued currency depreciations particularly for the euro and Japanese yen. We expect ASP in the second quarter will be stable or go down slightly. If you want to look at ASP by regions, in China the ASP is the range of $0.53 to $0.55 quite stable and we estimate the ASP in China in the second half of the year will continue to be stabilized. The ASP, the market price in China may go up slightly in the second half of the year due to the anticipated strong demand. For the U.S., the ASP in the first quarter is $0.70 stable compared to the last quarter. We estimate that U.S. ASP will go down very slightly in the range of $0.65 to $0.70 due to the anticipated lower tariff rate to be announced in July this year. The U.S. market is pretty strong and the overseas capacity available is very limited, so we believe that ASP in U.S. will be quite stable rest of the year. Japan's ASP is quite stable in terms of local currency. In the first quarter, the Japan ASP is in a range of $0.58 to $0.60. We estimate that second quarter ASP will be in a range of $0.55 to $0.58. Europe as you know the minimum import price go up to €0.56, so the ASP will go up in the second quarter.

Great. Thanks Charlie. You had a decrease in bad debt expense in Q1 as well; can you tell us what the size of the expense was in Q1?

In the first quarter we reserved U.S. dollar -- $7 million for provision for doubtful accounts. We continued to closely monitoring our account receivables, so we don't expect any significant increase for provision for the doubtful accounts.

Great. One last one from me, in terms of margins, I know you mentioned you expect them to improve as we go through the year, can you give us a sense of the magnitude of the improvement in Q2?

In the second quarter, we expect gross margin will be stable or go up slightly, but for the second half year 2015, we estimate the gross margin will improve a lot. Firstly, we continue to cut our module cost and we believe we can continue cut our module cost from both polysilicon side and non-silicon side. The polysilicon price now it's up to $16 to $17 and we estimate the polysilicon price will be stable in the rest of the year. And for the non-polysilicon side we are operating our equipments in China to improve the production efficiency and automatic level and we continue to invest in R&D including the [perk] [ph] and black silicon technology to improve the solar module efficiencies. And last not but not least, we are streamlining our supply chain and we continue to believe, we can reduce our material purchase price. And in the second half of the year, we have started our productions in Malaysia factories. And we plan to produce and ship around 250 megawatts in the second half of the year to the U.S. market. The cost of the Malaysia factory is very competitive thanks to the strong infrastructure abundant human resource and advanced supply chain. So for that part, we estimate that gross margin is in a range of 25% to 30%.

Great. Thank you, Charlie. I will jump back in the queue.

Thank you.

Thank you, Philip.

Your next question comes from Patrick Jobin from Credit Suisse. Your line is open. Please go ahead.

Thanks for taking the question and good evening. Nice work on the quarter. Two questions from me, first, if you look at Q2 volume guidance, volume is down slightly to third party, I guess which markets are you seeing that sequential change?

Patrick, firstly, in terms of the guidance we guide 850 megawatts to 950 megawatts for the total module shipments including third party shipments of 750 megawatt to 800 megawatts. If you compare to our first quarter total shipments its around 750 megawatts, third party is around 703 megawatt. So we estimate quarter-by-quarter over 7% increase and we expect a significant shipments in U.S. markets and the China market and also we expect that our emerging market shipments will increase as well. Due to the reduction of feed-in tariff, we estimate our shipment to Japan and U.K. will go down in the second quarter.

Okay. Thank you. That makes sense. Lastly on JinkoSolar Power spin-off expectations as far as timing or next steps, what is the current thought process?

For the Jinko Power IPO we are moving the IPO process forward, the SEC rules do not allow us to make detailed comments. We plan to communicate with investors when we reach significant milestone and in the near term. And China is implementing the favorable solar policies and anticipated interest rates will also help to increase project returns. We plan to reach 750 megawatts to 800 megawatts in operation by second quarter and 1.1 gigawatts to 1.3 gigawatts by end of this year. So we are very confident, our IPO will be successful in 2015 thanks to our large project scale in operating high-quality projects and favorable policies in China.

Thank you. Just last simple question on the Malaysia facility, you mentioned that it's fully reserved out, how far have you committed that capacity or how does that order book look?

As of today we have 1.1 gigawatts sales contract for the U.S. market including 2015 and 2016. So it's a very – I think good questions. And actually, the overseas factories we have the first mover advantage, which showed our strong executing capabilities and disclaim the capacity expansion approach. And we estimate that the total investment for the Malaysia factory will be paid off within six months to eight months. And we continue to see the U.S. orders coming in.

Great. Thank you.

Okay.

Patrick, do we have other questions?

Our next question comes from Shen Zhong from Morgan Stanley. Your line is open. Please go ahead.

Hi. Thank you for taking my question. My first one is, I noted that your internal shipment had is slowing down in the first quarter, it is because of your capacity constraint?

Yes. We are running the capacity at 100% utilization. Due to the capacity constraints and the strong shipments in Japan and U.K. and better than expected shipment in China, we controlled our shipment to downstream in the first quarter. And we rescheduled the shipment to earlier or second quarter.

Okay. So do you consider, expanding your capacity using the – like the outsourcing format?

The capacity expansion for the first quarter – by the end of the first quarter, our total capacity was 3 gigawatts for wafer, 2 gigawatts for cell and 3.5 gigawatts for module and we are looking to expand the capacity to 3 gigawatts, 2.5 gigawatts and 4 gigawatts for the module side. The increase will form our overseas factory in Malaysia. We may expand capacities of module site in China, if the demand is stronger than what we expected because the CapEx is very small.

Yes. So do you consider some other ways like the OEM or something to expand your capacity in the next quarter?

We take the asset like approach. We may consider the OEM approach, but assumption we want to – the OEM supplier is high quality, we cannot control deposits to make sure the high-quality of our solar modules.

Shen, this is Sebastian. So in terms of OEM, we are very cautious because first, it may have some quality constraint, second, it may have some negative impact of our margins, but, if the demand is very strong because in the way we consider, but we are very cautious in general.

Yes. And my next question is about the – you are investing in the R&D, you mentioned the black polysilicon technology and so do you have – have you started mass production of this black polysilicon module?

We take a prudent approach in terms of the R&D and we want to invest in our R&D, technology which kind of implemented through the mass productions with cost effective. For the black silicon technology and the product technology, we plan to implement the technology in certain lines this year.

This year. Okay. So how much efficiency, the effect should be improved this technology?

It expect to increase to 0.5% to 0.6%.

Yes. Okay. Thanks. That's my question.

Okay.

Your next question comes from Frank He from Goldman Sachs. Your line is open. Please go ahead.

Thank you. So my first question is regarding the project in China, so could management generally comment the project approval progress from [NDRC] [ph] and also the subsidy distributions from [MoS] [ph] recently?

The timing of feed-in tariff payment is still critical for the solar markets in China. We expect China will accelerate the approval process for the solar projects on the subsidy catalog. The next one on subsidy catalog we expect to be approved in the second quarter or the third quarter. And the government is fighting out well of the bottleneck, and NDRC is possible to increase the renewable surcharge. The recent talk from the government is to pay for the outstanding feed-in tariff by 2014 and start paying the feed-in tariff for the projects 2015. So for our downstream the DSO is in a range of 6 months to 9 months. We expect our DSO will improve a lot in the second half of the year 2015.

Hi, Frank. This is Sebastian. Just one comment, in fact this or we are to good say that in late April, the NDRC asked all the company to submit a list of your project which haven't been paid feed-in tariff yet. So we see it has a strong sign that NDRC may consider to accelerate the whole process.

Got it. And then my second question is about the ASP churn in China, as you just mentioned that China may enter into an early peak season in Q2. However, we see the ASP in China is still on the dollar to churn. So just wonder your thoughts on this situation whether it is because of the silicon and polysilicon product decline or about the issues in the supply side. Thank you.

Well, for the China demand firstly, we are very optimistic and China we achieved or beat the 18 gigawatts installation target. In terms of the ASP, I think for the Tier 1 companies, the ASP is quite stabilized, which is in a range of $0.53 to $0.55. And I think you are right, as polysilicon continue to price soft may provide additional room for the price reductions. And I believe in the second half of the year of 2015 we anticipated a very strong demand, the ASP will be at least to be stable.

And Frank as you know that order pools from each province is now still in the process of releasing, already some province has – already released the pool. But, still I think the real peak season just began. So I think you will see quite strong demand from downstream shortly.

And I can add more color to some of the Chinese market. Firstly, the financing environment is improving a lot, those policy banks and commercial banks are active in providing loans. And secondly, the National Energy Administration is implementing the monthly monitoring and cost adjustment mechanism to import 18 gigawatts installation target. We are seeing more and more Chinese companies coming into solar sectors including a state owned enterprise, public companies in the Chinese, Hong Kong capital markets and private equity investment funds.

Got it. That's very helpful. Thank you.

Thank you, Frank.

Thank you.

Hello, operator?

Your next question comes from the line of [indiscernible]. Your line is open. Please go ahead.

Hi. I have a couple of questions regarding downstream. So in the Q4 call, you mentioned that in Q4 you completed at least 270 megawatts of project of which 150 was connected in Q4, so that leaves about 120 to be connected and I assume that was the amount – basically the amount that was connected in Q1. So on top of that, the 600 to 800 full year guidance that you are giving for projects is that on top of the 120 that was left over from Q4?

Maybe I can talk this way. We connected 114 megawatts in the first quarter and we had cumulative 617 megawatts in operation by end of the first quarter. And we have – on top of that we have 360 megawatts under constructions. And as of today, for the – we have to get around 500 megawatts permitting for the projects in 2015. And we target to get around 800 megawatts the permitting by the end of [Technical Difficulty]. So we are very confident we can achieve our project connection plan in this year which is in the range of 600 megawatts to 800 megawatts.

This is Sebastian. To answer your question carefully that include that 120.

Okay. That includes.

Okay.

Okay. And then the second question is, can you give some color as to the system installation costs that you are seeing right now, is that about 7.5 or R&D or so or and also what type of lever and unlever IRRs are you seeing?

In terms of system cost, around in a range, I think RMB7.5 per watt. And in terms of IRR, for Jinko because we built projects from the greenfield and which make sure the lower of the system cost and higher project returns. Our IRR was on leverage is in a range of 8% to 12% and IRR with leverage in general 17% leverage, it's in a range of 15% to 20%.

One comment – just one – 7.5 including the VAT, so that is deductible from our total revenue.

Got it. Thank you.

[Operator Instructions] We have no further questions at this time, Mr. Sebastian Liu, please continue.

Okay. So on behalf of the entire JinkoSolar's management team, I want to thank you for your interest and participation on this call. If you have further questions or concerns, please feel free to contact us. Have a good day and good evening. Thank you and good-bye.