Good day, and welcome to the Daqo New Energy Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mr. Bing Sun, CFO. Please go ahead.

Thank you, Emily. Thank you, everyone for joining us today for Daqo New Energy’s fourth quarter and fiscal year 2013 unaudited financial results conference call. Daqo New Energy issued its financial results for the fourth quarter and the fiscal year 2013 earlier today, which can be found on the company’s website. To facilitate today’s conference call we put together a PPT presentation. Today, attending the conference call we have Dr. Yao, our CEO, and myself. The call today will feature a remark from Dr. Yao covering business and operational developments, and then I will discuss the company’s financial performance for fourth quarter and for fiscal year 2013. After that we will open floor to Q&A from the audience. With no further delay, I will turn the call over to Dr. Yao.

Thank you, Bing. In 2013, according to industry analyst reports, global solar PV installations were around 37 gigawatts of which the China market alone contributed approximately 11 gigawatts. Most industry research analysts estimate global installations in 2014 to be around 45 gigawatts, which represent a year-on-year growth of 22%. This growth is expected to accelerate in the years to come. Solar PV is rapidly approaching great parity in increasing number of regions. We believe that as the key raw material for the most widely used crystal silicon solar PV cells, polysilicon demand will continue its rapid growth going forward. With one of the lowest cost structure and excellent reputation for the first-class quality in the industry, we are confident that we will be able to enjoy the benefit -- and the benefit from the robust growth in the next growing cycle. Since the fourth quarter of 2013, demand in the polysilicon and the wafer market has remained strong. In the fourth quarter of 2013, we shipped 1,271 metric ton of polysilicon to our customers, and 216 metric tons to our internal wafer facilities. In the fourth quarter, we produced 1,445 metric ton of polysilicon in our Xinjiang facility, compared to 1,311 metric ton in the third quarter. 99.5% meet solar grade 1, the highest level solar grade according to China’s industry standard, in which 95.7% meets the electronic grade and 53.6% meets electronic grade 1, the highest level for the electronic grade according to China’s industry standard. As the solar industry remains in its upward trend, our ASP for polysilicon increased around 24% in the past six months. In the fourth quarter of 2013, EBITDA margin was 21.9% compared to 22.9% in the third quarter of 2013 and a negative 754% in the fourth quarter of 2012. We also achieved a positive gross margin of 2.6% in the fourth quarter of 2013, the first time since 2011. On a standalone basis, our Xinjiang facility achieved a positive gross margin of 18.9%. We expect our Xinjiang standalone gross margin will further improve exceeding 25% in the first quarter of 2014. Meanwhile, our wafer facility in Wanzhou achieved a positive gross margin of 18.4%. We expect the standalone gross margin for our wafer facility to further improve to above 20% in the first quarter of 2014. At the end of 2013, we have successfully completed the bottlenecking projects in the Xinjiang facility. We expect the polysilicon offer in 2014 to be very close to nameplate capacity of 6,150 metric tons. We are working hard to complete the construction and the installation of our expansion project in Xinjiang by end of 2014. The company will utilize some of the existing equipment which is being relocated from Chongqing line, where production is no longer taking place. And as a result, a capital expenditure required will be less than that of the equivalent to complete a new build. Simultaneously, we plan to upgrade our off-gas treatment process from traditional hydrogenation technology to hydrochlorination technology. We expect to increase capacity to 12,150 metric ton and to reduce total production cost to the level of the $12 per kilo when we fully ramp up the capacity in the early part of the second quarter of 2015. As for our wafer business, we successfully ramped up our capacity to 6 million pieces per months in November 2013. In the first quarter of 2013, we shipped 16.7 million pieces to our customers. In addition, we are in the process of installing a (indiscernible) recovering system in our wafer facilities to further reduce the production cost. We plan to complete the project in May 2014. For the first quarter of 2014, we expect to ship 1,350 metric tons to 1,400 metric tons of polysilicon and 16.7 million to 17 million pieces of wafers. This almost reflects our current and preliminary view and maybe subject to change. I will now turn the call to Mr. Sun Bing for financial performance update.

Thank you, Dr. Yao. Let’s now work through the Q4 performance first and then we can discuss fiscal year 2013 results. Revenue in Q4 was $37 million compared to $29.6 million in the third quarter of 2013, and $6.2 million in the fourth quarter of 2012. The company generated revenue of $24.2 million from polysilicon compared to $22.9 million in the third quarter. The increase from the third quarter was primarily due to higher polysilicon ASP, which increased from $17.99 per kilo in Q3 to $18.67 per kilo in Q4. The company generated $11 million from sales of wafer in Q4 compared to $6 million in the third quarter. The increase from the third quarter was primarily due to higher sales volume. Total wafer sold increased from 7 million pieces in Q3 to 16 million pieces in Q4. Note that in November 2013, we fully ramped up our wafer capacity to 6 million pieces per month. The company also generated the $1.8 million from wafer OEM business. EBITDA was $8.1 million compared to $6.8 million in the third quarter. EBITDA margin was 21.9% compared to 22.9% in the third quarter of 2013, and negative 754.9% in the fourth quarter of 2012. Gross margin in Q4 was approximately $1 million compared to a gross loss of $3.9 million in the third quarter and a gross loss of $11.1 million in the fourth quarter of 2012. Gross margin was 2.6% compared to negative 13.3% in the third quarter of 2013, and a negative 178.5% in the fourth quarter of 2012. It is the first time that we have been able to achieve positive gross margin since the third quarter of 2011. Improvement in gross margin was primarily due to increased sales volume, higher average selling prices, and the reduced production cost for both polysilicon and wafer. On a standalone basis, gross margin of our Xinjiang polysilicon facility in Q4 was 18.9%. Gross margin of our Chongqing wafer facility was 18.4%. As Dr. Yao previously mentioned, we expect the gross margin of our both polysilicon and wafer business will further improve in Q1 of 2014. Operating loss was $4.1 million compared to $5 million in the third quarter of 2013, and $55.9 million in the fourth quarter of 2012. Note that even though incentives received from local government authorities decreased by $3.5 million, operating loss decreased by $900,000 in fourth quarter compared to Q3. In the fourth quarter of 2012, we incurred $42.8 million of long-lived assets impairment loss of our wafer facility in Chongqing and halted our polysilicon production in Chongqing. Operating margin was negative 11% compared to negative 16.8% in the third quarter of 2013, and negative 902.5% in the fourth quarter of 2012. As a result of the above, net loss attributable to Daqo New Energy shareholder was $8 million in the fourth quarter of 2013 compared to $10.3 million in the third quarter of 2013, and $75.6 million in the fourth quarter of 2012. Earnings per diluted ADS was negative $1.16 in the fourth quarter, compared to negative $1.49 in the third quarter and negative $10.76 in the fourth quarter of 2012. Now let’s talk about the P&L for the fiscal year 2013. For the fiscal year 2013, revenue was $109 million compared to $86.9 million in 2012. The increase was primarily due to higher sales volume both in polysilicon and wafer. The company shipped approximately 4,240 metric ton of polysilicon and 33.5 million pieces of wafer during 2013, compared to 3,585 metric ton of polysilicon and 15.1 million pieces of wafer during 2012. The company also shipped approximately 119.6 metric ton of ingots and the blocks during 2013, compared to 500 metric ton during the 2012. Note that we have halted polysilicon production in our Chongqing facility since October 2012. The sales proceeds from our Xinjiang polysilicon facility during its trial run in 2012 were not recorded as revenue. In 2013 almost all of our polysilicon sold was from our Xinjiang facilities. In 2013, our wafer utilization increased significantly compared to 2012. In addition, we fully ramped up our wafer capacity to 6 million pieces per month in November 2013. Gross loss for 2013 was $26.1 million compared to a loss of $37.4 million in 2012. Gross margin was negative 23.9% for 2013 compared to negative 43.1% for 2012. The decrease in gross loss from 2012 was primarily due to improved cost structures in both polysilicon and wafer. In 2013, our output of polysilicon and wafer facilities both increased, which enabled us to reduce the fixed cost allocation on unit basis. SG&A expenses were $18.1 million in 2013, compared to $12.9 million in 2012. The increase was primarily due to bad debt provision. In 2013, we only shipped the polysilicon after we received payments from our customers. Therefore, there was no additional bad debt related to polysilicon sales incurred in 2013. Long-lived assets impairment charge. The company recognized $158.4 million impairment loss for the long-lived assets of our polysilicon facility in the second quarter of 2013. The impairment loss was made to reflect the adverse effects market challenges had on the profit-generating ability of the assets. The company recognized a $42.8 million impairment loss for long-lived assets of our wafer facilities in the fourth quarter of 2012. Operating loss was $200.6 million in 2013, compared to operating loss of $88.5 million in 2012. Excluding fixed asset impairment loss both in 2013 and 2012, the non-GAAP operating loss in 2013 and 2012 were $41.8 million and $45.8 million respectively. The non-GAAP operating loss decreased by $4 million in 2013 compared to 2012, even though the government incentives decreased by $3.3 million in 2013. Excluding fixed assets impairment charges both in 2013 and 2012, the non-GAAP operating margin in 2013 and 2012 were negative 38.7% and negative 52.7% respectively. As a result of the above, the net loss attributed to Daqo shareholders in 2013 was $70.9 million, compared to $111.9 million in 2012. The earnings per diluted ADS were negative $10.25, compared to negative $15.92 in 2012. Now let’s take a look at our balance sheet. There are two topics that I want to talk about regarding our balance sheet. First of all, on December 30, 2013, Chongqing Daqo and Daqo New Material terminated a lease agreement as majority of the polysilicon machineries and equipment at Wanzhou polysilicon facility will be transferred to our Xinjiang location. As a result, the company deconsolidated Daqo New Material on December 31, 2013. There is no P&L impact on the deconsolidation, but on the balance sheet total amount of approximately $17 million of PP&E per $6 million of land use rights on the asset side as well as amount due to related parties on the liability side were removed from the consolidated the balance sheet. Secondly, I want you to pay attention to our line item on the balance sheet call the notes receivable. Notes receivable balance was $15.9 million as of December 31, 2013, compared to $11.9 million as of September 30, and $4.6 million as of December 31, 2012. Just like any of our peers in the solar industry, we’ll receive customer payments mostly in the form of notes receivable with maturity dates less than six months. But we need the cash to pay our bills. We normally cash out notes receivable with a bank charge. So from liquidity perspective, management considers these notes receivable the same as cash. When we cash out these notes receivables before maturity date, the proceeds is considered as cash from financing activities on the cash flow statement. With that in mind, let’s take a look at our cash flow statement for the year ended December 31, 2013. For the 12 months ended December 31, 2013, cash used in operating activities is $16.5 million compared to $10.3 million for 2012. Although during 2013, our overall operating cash flow was still negative, from quarter to quarter perspective our operating cash flow has been improved significantly. We generated positive cash flow of $8.8 million and 300,000 in the third and fourth quarter of 2013, which is significant improvement from the first and the second quarter of 2013. The improvement in operating cash flow was primarily due to the increase in average sales prices and our continuous cost down assets. We expect our operating cash flow to continue to improve in 2014. Net cash used in investing activities is $30.7 million compared to $102.9 million in 2012. In 2013, the net cash used in investing activities decreased significantly compared to 2011 and 2012, which was primarily related to the wrapping up of our construction of our Xinjiang Phase 2a Polysilicon facility by the end of third quarter of 2012. Net cash provided by financing activities for the year ended December 31, 2013 was $48.4 million primarily resulting from cash received from related parties in the month of $87.9 million and proceeds received from short-term bank borrowings and other bank borrowings in the month of $74.6 million, offset by the repayment of bank borrowings in the month of $113.7 million. Net cash provided by financing activities in the same period for 2012 was $27.1 million. The increase was primarily due to continues financial support from DQ Group and the notes receivable being cashed out before their maturity dates in 2013. DQ Group and their affiliates will not require us to repay the debt before January 1, 2015. Now let’s have the Q&A session. Emily.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Paul Strigler of Esplanade. Please go ahead.

Hey, guys. So looking at your poly price in Q4, is $18.67 your actually recognized price? That seems awfully low. And I guess for Q1, it seems like your prices should be meaningfully higher than that?

This is Bing. I’ll try to answer your question first, and then Dr. Yao can add on to my comment. First of all, for Q1 our average ASP was $18.67. And in Q4, the price -- actual price increased actually significantly. If you look back in October, the price was still relatively low and people got to the impression that the average price should be higher, it was actually because in November and December the price increased significantly compared to October. And to answer the second part of your question, you are right. If we compare Q1 of this year's ASP, it’s approximately 15% higher than the average sales price of Q4.

Yes Paul, so I’d like to end on -- this is Gongda. I think the price we are reflecting in our ASP normally is one-month delay for our shipment, so normally because of the contract we signed with customer is the price is determined by previous -- end of previous month.

Yes.

So, what you see, the December price actually reflects our January sales, and January decided prices will reflects in February. So there is one month delay. So your feeling is correct, and as Bing has already told you is we actually see from Q4 to Q1 the price ASP is steadily increasing.

And then I’ve been hearing from some folks over in China that at least in the past, call it a week or so, prices of poly have not so much decreased, but sort of demand has softened just a little bit. Have you guys seen any noticeable change in poly demand in the past, call it a week or two or any impact on pricing?

We do not see weak demand, but we notice that in the other sector of the -- our future channel of the PV, actually we see the wafer pricing little bit softer compared with a month ago. The poly price is the same. We do not see any changes. Actually, we do not have much inventory as of today compared with a few weeks ago. But we really don’t see much change yet. We see April -- at least at this moment, we see -- we can see very clearly April demand is very strong, yes.

Great. And then just one clarification on the balance sheet, Bing, I think you may have answered this, but I got a little lost. So the decrease in the amount owed to your parent company, DQ Group, can you just talk about sort of that change? I think you may have answered that in the script, but I missed it, why did it go down $20 million?

Yes, it’s like accounting concept of VIE, Variable Interest Entity, and I think I should refresh the memory of our investors. There is a company called Daqo New Material, which has been historically consolidated into the balance sheet and the P&L of the listing company, but the owner of that Daqo New Material is actually DQ Group. But for accounting perspective, because most of their cash flow was generated from the lease, we leased their facilities, and the land therefore for accounting perspective, their balance sheet was consolidated into ours. But because of as of December 31, 2013, we are moving most of our equipment to Xinjiang facility, so we terminated the lease. So such lease no longer exists and the VIE structure no longer exists. Therefore, they will no longer be consolidated into the listing company's balance sheet starting from 2014. Therefore, their liability as well as their assets and their negative equity will all be removed from the consolidated balance sheet, and there is no P&L impact of this accounting treatment. So, it’s pure accounting treatment of VIE structure, and this is being de-consolidated. Hope that answers your question, Paul.

Just on a cash flow basis, the change in amount due to related party, there is no cash flow impact there, it’s strictly a balance sheet item?

Yes. That’s correct. There is no cash flow impact at all and there is no P&L impact.

And in terms of financing the expansion, is your parent company still going to -- are they still going to provide a loan to you, a shareholder loan to finance the expansion, is that still the plan?

I will try to answer your question first and Dr. Yao can add. Right now, we are evaluating our options. We have a lot of different options, and the management believe this expansion plan is good use of capital. First of all, we are still considering debt financing because we still have -- we communicated a lot, (inaudible) China in Xinjiang. Right now, we are still in the discussion and we are looking at -- we are trying to get around RMB250 million to RMB300 million like a project loan, but it’s still in discussion. Secondly, we are looking at our positive operating cash flow starting from third quarter of 2013 and we believe the operating cash flow will also help us on this expansion in funding. And third of course just like you mentioned and we talked about it in previous quarters and if we still need additional cash DQ Group is still committed to provide us with additional funding.

Okay. Great. And just one aside, clear the point, but when I think about your amount due to related parties on your balance sheet, is it fair to think of that as debt, or is that -- should we think of that as something else?

You can think of that as debt, yes.

Right.

Other than very small piece, we do purchase very few equipment from subsidiaries of DQ Group, but the majority of that is debt yes.

Great. Thanks a lot guys. Great quarter.

Thank you, Paul.

Our next question is from Vincent Yu of SWS Research. Please go ahead.

Hi. This is a Vincent of SWS Research and I have two questions. First what’s your latest view on the policies for price change and for the year and for next quarter?

Okay. So we still -- our view is still the same. As you know the ASP price for the polysilicon have been changed a lot in last six months. Our view is still the same. We believe polysilicon price in 2014 will be in the range of from $20 to $25 range. Of course there may be small amount of -- it varies from period to period. And we see the demand is still very strong. Especially we think second half of 2014, the market is very strong for PV industry, and because the forecast of 45 gigawatts installation and forecast by many industry analysts. So we’re very confident. But meanwhile saying that our company is still focused in 2014 is still reduced our cost, manufacture cost. We believe our cost would be further improved in the second quarter and we've realized benefit for the remaining time of 2014.

Okay. Thank you. And do you think that China will ban the raw material process contract to fill in the loophole of polysilicon antidumping against the U.S.?

Well as you know because of this loophole of the antidumping for ploy for United States has been talking a lot by all the people in the industry and also Chinese Government definitely notice that. I think regarding the dispute in the trade, right now two government's relative parties have been working on that issue for long period of time. We believe eventually, the solution will be provided. But the meanwhile during the dispute is still there. I think if -- before we reach the agreement between two countries, I think the government will try to find a solution how to stop the loopholes in this antidumping practice. Of course this is very, very sensitive issue. It’s regarding political party involved there. We just believe that this loophole is really impacted the effectiveness of the antidumping measures proposed by government. Yeah, we believe this will have high attention from the government and from also China industry-wide and this is the issue of the -- in the major which is right now carried on by the government. Yes.

Okay. Okay. Thank you. And one more question is that when we will be through the 12,000 MT capacity get ready?

The readiness of the expansion, right. So the product would be finished by 2014 and we will starting to try production by end of this year, and we expecting ramping up the finish will be in some time in the second quarter of 2015.

Second quarter of 2015, right?

Yeah.

Okay. Okay. Thank you again. That's all for my questions.

Thank you.

I’m showing no further questions. This concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Bing Sun for any closing remarks.

Okay. Thanks again for everybody for joining this conference call. And like always, if you guys have any further questions, just feel free to contact me or contact our IR Manager, Kevin He. Have a good weekend guys. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.