ReneSola Ltd (SOL) Q3 2012 Earnings Call Transcript

Anthony Hung - Vice President of Capital Markets Xianshou Li - Chief Executive Officer and Director Henry Wang - Chief Financial officer

Timothy Lam - Citigroup Inc, Research Division Brandon Heiken - Crédit Suisse AG, Research Division Cheng Yang - China International Capital Corporation Limited, Research Division Kelly A. Dougherty - Macquarie Research Philip Shen - Roth Capital Partners, LLC, Research Division Sanjay Shrestha - Lazard Capital Markets LLC, Research Division

Hello, ladies and gentlemen. Thank you for standing by for ReneSola Ltd's Third Quarter 2012 Earnings Conference Call. [Operator Instructions] 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 Third Quarter 2012 Earnings Conference Call. ReneSola's third quarter 2012 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 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. Li 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 U.S. 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 U.S. 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 U.S. 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 read the translation. Please go ahead, Mr. Li.

[Chinese]

Hello, and thank you for joining today's 2012 third quarter earnings call.

[Chinese]

If you have downloaded our presentation, please turn to Slide 4 for our company highlights.

[Chinese]

Challenging market conditions persisted in the third quarter of 2012. The market's fast declining ASPs have a substantial impact on our gross margin, and we were forced to take a large write-down for inventory in the quarter. Despite the difficult macro environment, we continue to execute on our strategies of lowering costs, developing superior technology and growing our module business. In the third quarter, we delivered record total shipments and also lowered costs significantly for our core wafer business and supporting polysilicon production. At the same time, our module business has shown tremendous growth over the last year. We have successfully leveraged our leading wafer technology to develop highly efficient solar modules that attract the customers in key markets across the globe. We expect module shipments to increase significantly in the fourth quarter, over 75% quarter-over-quarter, as we continue to grow our module business.

[Chinese]

I will now quickly review our shipments. Please turn to Slide 6 for a snapshot of our shipments and financial progress.

[Chinese]

Total solar product shipments in the third quarter 2012 were a record 532.8 megawatts, an increase of 5.8% from 503.7 megawatts in the second quarter. Wafer shipments rose 12.6% quarter-over-quarter primarily due to increased demand for our high-efficiency wafers from Asia-Pacific customers. Module shipments decreased 9% due to seasonality, as the third quarter is typically slower than other quarters.

[Chinese]

ASPs continued to decline in the third quarter, with wafer ASPs dropping to $0.28 per watt and module ASPs dropping to $0.67 per watt compared to $0.31 and $0.75 per watt in the second quarter. As a result, third quarter revenues were $218.2 million, down 6.4% from $233 million in the second quarter.

[Chinese]

Please turn to Slide 7 for an update on our research and development.

[Chinese]

Although we spent less on R&D in the third quarter to save on costs, it remained a central area of focus. During the quarter, we made progress with the development of our Virtus II products, which are currently in full production. Our Virtus II modules can now achieve an average efficiency of 15.7% and a 60-cell Virtus II module now produces an average of 255 watts. Our proprietary in-house Virtus A++ manufacturing process, which allows for the production of more distributed ingots with a greater percentage of high-efficiency wafers, is now producing wafers, with non-silicon processing costs below $0.12 per watt, with a target of $0.11 per watt by the end of this year.

[Chinese]

In the third quarter, our new microinverter, Micro Replus, successfully completed its initial testing phase in the United States, Australia and Europe. Additionally, we began research on small-scale storage systems and an AC-OC optimizer with the hopes of introducing these products to the market in the second half and towards the end of next year, respectively. We will continue to invest in R&D to advance the technology behind our products and manufacturing, as well as capitalize on current market opportunities.

[Chinese]

Please turn to Slide 8 for an overview of our module business results for the quarter.

[Chinese]

We have placed enormous emphasis on building up our module business this year and successfully transform the company into a large-scale module supplier through our leading technology and our experienced localized sales teams. Our module business has performed well in Europe and Australia, while at the same time, has capitalized on emerging opportunities in the United States and Australia. Year-over-year, our module shipments are up more than 330%. In the third quarter, module shipments were 145.3 megawatts, down slightly from 159.7 megawatts in the second quarter due to seasonality. 101.7 megawatts of these were Virtus modules, up approximately 34% quarter-over-quarter. In the fourth quarter, however, we expect to increase our module shipments significantly to a range of 250 megawatts to 270 megawatts. Although the overall market remains oversupplied, we are operating at 100% capacity utilization as we continue to win new business.

[Chinese]

We slightly decreased our module processing costs in the third quarter as compared to second quarter. In combination with the lower ASPs, this resulted in gross margin of approximately 1% for our module business. We are confident, however, that we can continue to drive down costs and deliver improved margins for our module business in the fourth quarter.

[Chinese]

Please turn to Slide 9 for an overview of our wafer business results for the quarter.

[Chinese]

We continue to be a leader in the wafer space, and our wafer processing cost is among the lowest in the industry. In the third quarter, wafer processing cost decreased to $0.15 per watt, our previous year-end goal, down from $0.17 per watt in the second quarter of 2012, as a result of improvements in our manufacturing methods as well as reduction in material cost. We now expect to further lower our wafer processing cost to $0.12 per watt by the end of this year. Our wafer business will become more profitable once the polysilicon price stabilizes.

[Chinese]

Please turn to Slide 10 for an update on our polysilicon production.

[Chinese]

In the third quarter, we produced approximately 1,176 metric tons of polysilicon compared to 1,119 metric tons in the second quarter. Production costs were $23.57 per kilogram in the third quarter compared to $25.80 per kilogram in the second quarter. We expect our production cost to further decrease this year and reach $18 per kilogram by the end of the first quarter 2013.

[Chinese]

We now expect to complete Phase 2 of our polysilicon plan at the end of the first quarter of 2013, as opposed to the end of this year as previously announced. And this will expand our polysilicon production capacity to 10,000 metric tons. At the beginning of November, we decided to temporarily halt polysilicon production to upgrade our facilities and equipment, as well as to integrate Phase 1 and Phase 2. Electricity prices in the area of our Sichuan plant have been relatively high in the fourth quarter, so we see this as an ideal time to make upgrades, and actually saving money compared to continuing production without the upgrades. We will complete the equipment installations in January 2013 and begin trial production accordingly.

[Chinese]

Please turn to Slide 11 for an update on our systems and project business.

[Chinese]

Today, ReneSola has 40 megawatts of projects under construction in China and 6 megawatts of projects under construction in Romania. China Development Bank has in the past indicated its support for our additional solar power projects. We will remain highly selective in how we choose power projects and continue to focus on due diligence when evaluating project opportunities.

[Chinese]

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

Thanks to Mr. Li. Please turn to Slides 13 through 16 to look at our financial progress. As Mr. Li mentioned, our revenue and the margins were again impacted by declines in solar wafer and module ASPs. The fast declining ASPs resulted in an inventory write-down of $31.6 million in the third quarter. Our bottom line has further hurt by a bad debt provision, impairment on our long-lived assets and a goodwill impairment charge. Nevertheless, we continued to drive down costs to minimize the impact on our margins and our position [ph] as well once macro conditions improve. You can see our balance sheet remains comparable to that of our peers, and we're spiking [ph] credit for solar companies, especially with regards to capacity. We believe we are in a relatively good financial shape to withstand difficult market condition and still grow our business. Now let me run you through the details of our financial results. Revenues for the third quarter of 2012 were $218.2 million, in line with our guidance and representing a sequential decrease of 6.4% from $233 million primarily due to a decrease in the ASPs of solar wafers and modules. Gross loss for the third quarter of 2012 was $39.2 million compared to a gross profit of $1.3 million in the third quarter of 2012, primarily due to the inventory write-down of $31.6 million to reflect the large decline in the price of solar wafers and polysilicon. Gross margin for the second quarter of 2012 was negative 18% compared to a gross margin of 0.6% in the second quarter of 2012. Gross margin not including the inventory write-down would have been negative 3.5%. Operating loss for the third quarter of 2012 was $82.8 million compared to an operating loss of $34.6 million in the second quarter. Total operating expenses for the third quarter were $43.6 million, up 21.2% from $35.9 million in the same quarter. The sequential increase in operating expenses was primarily due to an increase in sales and marketing expenses in conjunction with the expansion of our business outside of China; and expenses in general and administrative expenses as a result of our $1.8 million bad debt provision for difficulty collecting receivables; an impairment loss on long-lived assets of $6.1 million related to 200 megawatts of mono wafer furnace production capacity we discontinued in the year 2011; and it was a previous [indiscernible] assets held for sale; and a goodwill impairment charge of $5.8 million related to the acquisition of our solar cell and module business in the year 2009, offset by a decrease of $5.6 million on research and development expenses in order to save costs. Operating expenses represented 20% of total revenue in the third quarter of 2012, an increase from 15.4% in the second quarter of 2012. Operating margin for the second quarter -- for the third quarter of 2012 was negative 38% compared to an operating margin of negative 14.9% in the second quarter. We recognized a tax benefit of $30.6 -- $13.6 million for the third quarter of 2012 compared with a tax benefit of $16.3 million in the second quarter of 2012. Net loss attributable to holders of ordinary shares for the third quarter of 2012 was $78.6 million compared to a net loss of $34.8 million for the second quarter of 2012. This represents basic and diluted loss per share of $0.46 and the basic and diluted loss per ADS of $0.91. At this time, I'd like to point out that in light of the large decrease in our share price over the past year, our Board of Directors have approved the repricing of our common employees' stock option exercise price, adding $1.47 per ADS, which was the closing stock price of our ADS on August 8 of 2012. We hope this repricing further motivate our employees to help us build our business and deliver positive results. On the balance sheet, as of September 30, 2012, we had increased our overall debt to $850.3 million, excluding $111.6 million in convertible notes. Total bank borrowings increased by about $29 million sequentially, with short-term borrowing increase from $691.1 million at the end of the third quarter to $715.8 million at the end of third quarter. Our net cash and cash equivalents position was $265.4 million, and the total cash, including the restricted cash, was $335.2 million at the end of the third quarter of 2012 compared to a net cash and cash equivalents position of $314.2 million and total cash, including the restricted cash, of $394.2 million at the end of third (sic) [second] quarter of 2012. Our CapEx plan remains conservative for the year. We expect to spend $14.8 million in the first quarter to expand our polysilicon production capacity and to integrate Phase 2 of our polysilicon plant, as well as build up horizontal and project businesses. Please turn to our guidance, which can be found on Slide 17. We expect the overall solar market to remain challenging in the first quarter. We expect total shipments to be about 635 megawatts to 675 megawatts, with module shipments in the range of 250 megawatts to 270 megawatts. Revenues are expected to be in the range from $240 million to $260 million. Gross margin is expected to be positive. For the full year of 2012, we expect total solar wafer and module shipments to be close to 2.2 gigawatts. At this time, we are happy to take your questions. Operator, please.

[Operator Instructions] Your first question comes from Timothy Lam from Citigroup. Timothy Lam - Citigroup Inc, Research Division: I have a couple questions about module shipments the company is guiding. The company is certainly seeing a very strong demand in fourth quarter. Could the company give us an idea of where that demand is coming from and which market that is driving the growth? And also, is there any extension to the payment terms to drive such a strong growth in terms of the modules? That's the first question. And the second question I have is on the cost reduction for both your poly and wafer cost reduction. It's very impressive the company is able to reduce the cost very quickly towards the year-end. Could the company give us some color on what is driving the cost reduction in both the poly and the wafers?

Sure, no problem, Tim. Let me translate the question first, and I guess we'll answer each in turn. [Chinese]

[Chinese]

Okay. I think, Tim, you understood that. But for others on the call, so in the fourth quarter, we're expecting strong demand out of China and also, out of the U.S., where historically we haven't had much in the way of sales. We'll continue to have strength in Europe and Australia, where we had done very, very well. That's really these other markets coming along that's going to add to our module revenue mix and increase the shipments. In terms of the extension of terms, we maintain continued tight credit terms, relatively speaking, and essentially, there shouldn't be an extension of the payment days. And now let me translate the second question that you had. [Chinese]

[Chinese]

Okay. So I think, Tim, you understood that as well. On the wafer side, as you know, we're basically operating at 100% utilization or close to now. We've been continuously improving the processes in our manufacturing, as noted, with our Virtus II product lines and beneath that, the Virtus A++ production technology. We've always historically been the leader when it comes to wafer processing technology. Other companies hire their people from us, not the other way around. So it's perhaps to be expected that we can continue to do this. On the poly side, for the future, as we combine Phase 1 and Phase 2, the costs are definitely going to continue to go down. Now within solar cells, there tends to be lower electricity costs, and as we improve the processes, the material costs will go down as well. But as we integrate Phase 1 and Phase 2 and put more of the hydrochlorination process into place, we expect these costs to continue to combine to bring both phases down, and there will also less appreciation spread out. Timothy Lam - Citigroup Inc, Research Division: Okay. Just the other one, some comments with the polysilicon cost reduction. Do you have some more specific numbers here?

As Mr. Li mentioned, he said we -- for our Phase 2, the indicated consumption volume would increase about 20 -- 40 degrees, which will have the electricity expenses saving about USD 3.50 per kilogram. And for the depreciation, because of the net investment and the high output, the depreciation will be still be near to USD 5.00, something like that, compared to our Phase 1 polysilicon production costs. Timothy Lam - Citigroup Inc, Research Division: Okay. And just a follow-up for the poly production, so for both Phase 1 and Phase 2 is going to be combined and will be starting the trial run from January. Is that correct?

Yes. The trial production is in January. And then certainly, by the end of the first quarter, it should be in full production.

Your next question comes from Satya Kumar from Crédit Suisse. Brandon Heiken - Crédit Suisse AG, Research Division: This is Brandon speaking on behalf of Satya. I was wondering if you could talk about your expectations for your own costs next year, and what that could mean for pricing both in modules and wafers, please.

Sure, so you're talking about estimates for costs? I guess you would want modules, wafers, as well as polysilicon, right? Brandon Heiken - Crédit Suisse AG, Research Division: Sure, please.

Okay. [Chinese]

[Chinese]

Okay. So Brandon, in terms of -- what we can say at this point is that for next year, what we can see right now, as mentioned early in the call, we think that we can definitely get to $18 on the polysilicon side. It would probably be difficult to go lower than that. On the wafer side, thanks to our Virtus A++ technology, we can get to $0.11 per watt on the processing cost. It may be difficult at this stage to see additional cost improvements beyond that. On the module side, we think there might actually be room for some additional cost improvements, and it can go to down to as low as, say, $0.52, $0.53. So does that answer your question? Brandon Heiken - Crédit Suisse AG, Research Division: I'm having trouble hearing. Are you able to repeat that?

Sure. Let me say again that the polysilicon, we think, as previously discussed, we can get to $18. There's probably very limited additional room for improvement on that, as far as what we can see right now. Similarly, with the wafer, we can get to $0.11 processing cost, perhaps not much too much beyond that. And on the module side, $0.52 to $0.53. We think there's additional room, so we think it can go down to that low.

Your next question comes from Cheng Yang from China International. Cheng Yang - China International Capital Corporation Limited, Research Division: My first question is a follow-up to your module guidance for 4Q. Can Mr. Li give us a rough geographic breakdown of modules shipment in 4Q?

[Chinese]

[Chinese]

Okay. So I think you understood that. But for everyone else on the call, we're expecting Europe will be 120 to 130, the U.S. to be 30, Australia to be another 30 and China to make up the difference and the remainder. Cheng Yang - China International Capital Corporation Limited, Research Division: Okay. That was very helpful. My second question was on your poly production side. Since the production was temporarily halted starting November, so I assume you'll actually start to outsource poly from the spot market. So could Mr. Li give us roughly what blended poly production cost would be in fourth quarter, I mean, taking consideration of the spot prices?

Do you mean blended production? Or do you mean blended total sourcing cost, as in our internally produced [indiscernible] ... Cheng Yang - China International Capital Corporation Limited, Research Division: Well, the blended poly.

Or do you mean the cost that was buying by -- from -- sorry. Cheng Yang - China International Capital Corporation Limited, Research Division: Right, just the blended poly cost in fourth quarter.

So the price we're buying from the market? Cheng Yang - China International Capital Corporation Limited, Research Division: Yes.

Okay. Actually, let me try to get you a couple of numbers there. [Chinese]

[Chinese]

Okay, I think you heard that. But essentially for both cases, it'll probably end up to averaging at around $20, if you round up or round down. So the external source right now, unfortunately, due to the fact that we certain long-term contracts and we're not buying much right now in the spot market because of that, would be at around $20. And the limited production that we have had in the fourth quarter blended in, our overall cost would still be at around $20 per kilogram.

Your next question comes from Kelly Dougherty from Macquarie. Kelly A. Dougherty - Macquarie Research: Just wanted to talk about your module pricing strategy. If you look at the ASPs of some of your public peers, it seems ReneSola has been pretty aggressive with pricing to gain share. I'm just wondering if that remains the plan going forward. And if so, how do we think about margins in the module business? Like what do you think are sustainable module margins and when might we get there?

[Chinese]

[Chinese]

Okay. So Kelly, Mr. Li said that with regards to the pricing, your first question, compared to some of the best products or the more established brands out there, we've been slightly lower in the past. And in the third quarter, that difference has been narrowing. In the fourth quarter, we believe that overall in most of the markets that everyone participates in and where we are as well, we should be more or less equal or perhaps even higher priced than many of our peers and competitors. Now a lot of the differences, unfortunately, are actually due to geographies or where people have established channels. So, for example, as we make more U.S. sales, which historically we haven't done much of, and in the future perhaps as we make Japanese sales as well, our overall blended ASPs will appear higher as well, just like many of our peers. With regards to your second question on the margin side, right now, unfortunately, we're being negatively impacted by certain long-term polysilicon contracts, without which, our margins would, in fact, be much better. And hopefully, we're thinking that next year, things will improve on this front. And we believe that we could get to something like a 10% gross margin, which will perhaps be the answer you're looking to as to what would be normal. And we think, again, that this is something that we could get to sometime next year. Kelly A. Dougherty - Macquarie Research: Okay. That was helpful. I guess, the next one is a little bit more strategic. When you think about the competitive pressures in the market, cash drains, debt, things like that, what's the rationale for branching out into new products, micro-inverter, storage? You're involved poly, wafer, module, inverters in many different places, and you say you want to cut back on R&D spend. So I'm just trying to understand what the rationale is behind that.

[Chinese]

[Chinese]

I think, Kelly, it's worth pointing out how not too long ago, we were primarily a wafer company and most of our revenues, margins, et cetera, came from wafers. So certainly, if you look at where we are now, where we transformed ourself over the past year, we're now effectively more of a module company, with modules making up something like half of our revenues, et cetera, and never mind margins. And at the rate that we're developing, next year, certainly, we will be one of the top brands and have over 1 gigawatts of modules being produced and sold out there in the market. So I think the development, if you will, in these auxiliary products is a normal part of our development, which would help the overall market and also, the sales of our products. I think also, I know that some of our other colleagues would point out, many of the things that we're developing and doing out there is, in fact, still done by some of our peers. And some of these products, as you probably know, are produced by, say, companies like SunPower, et cetera. So I think that's a little bit I would like to add as well. Kelly A. Dougherty - Macquarie Research: Is this going to cost more CapEx to produce next year, though? And I'm thinking about the debt levels and the amount of money that you've may have to dedicate to produce these products. Or is this something you're developing the technology and then will outsource it or license it? How should we think about that?

Okay. Let me -- actually, just in, there's one other part Mr. Li mentioned that I forgot to mention, which is that, obviously, the conditions in the market cannot persist this way. Sooner or later, things will have to turn around. So we're essentially preparing for that day as well. Let me translate your question just now for Mr. Li as well. [Chinese]

[Chinese]

Okay. So Kelly, in terms of where we've been historically, of course, we've been primarily a manufacturer, whether it's been wafers, modules or polysilicon. And it's something that we've had enormous success as well as experience in. But going forward for, perhaps if you will, the next 10 years, certainly, we would like, as many other Chinese businesses would like to evolve towards, is to have greater R&D, greater branding, superior sales channels, et cetera. And that's perhaps, if you will, part of the normal evolution. So perhaps it's safe to say that over time, we'll move, if you will, away from manufacturing and production and more towards, shall we say, more flexible ways of growth. Kelly A. Dougherty - Macquarie Research: So I shouldn't assume -- I guess, maybe a better question is how should I think about CapEx for next year?

I think it's probably early to say. But I would say it's safe to say that if it requires substantial CapEx, we probably would not spend it. So perhaps you can model it out that way. Kelly A. Dougherty - Macquarie Research: All right. One more question for me then on the projects. So 46 megawatts going on right now, can you give us some detail, do you have buyers, what do the economics look like, what the revenue recognition will look like and then maybe how we can think about the magnitude of the project business for 2013?

Sure. [Chinese]

[Chinese]

Okay. Actually, for the projects in China, currently the IRR will be about 15%, something like that. For the project in Romania, it depends how much -- what the price for the green certificate we can sell. But if we set mostly conservative price at this moment, it's going to be about -- the IRR will be about 20%, something like that.

[Chinese]

[Chinese]

Okay. So I think overall, we're continuing to, shall we say, be prudent and perhaps do things on a small scale on the project side. I think in terms of the revenue recognition, what comes out of this for all of next year will be something like under $20 million or around $20 million. Right now, we'll probably hold on to the solar power plants for a bit longer until there's, shall we say, more suitable market for selling them. So again, I would say that big picture compared to some of our peers, who, shall we say, are doing things much more aggressively and are focusing on the power business a lot more, we're going to go about it much more prudently and on a smaller scale. Kelly A. Dougherty - Macquarie Research: But you're building them without having buyers identified. Is that right? So the 46 megawatts...

I think that's fair to say, but let me double-check. [Chinese]

[Chinese]

Yes, I think, what we do perhaps in China is that, shall we say, a little bit different than what people would do, say, in the U.S., where you identify a buyer before you build it. As you might have noticed, not just with our peers but also some other related industries, more often than not, you have a situation where you build the power plant first and then you find actually financing for it, which then, if you will, allows you to take cash out of the project and then you find a buyer. So to answer your question more directly, no, we don't have a buyer at this point for the projects that we're building. Kelly A. Dougherty - Macquarie Research: So I guess, the reason that it'll only be $20 million in revenue recognition is because you're owning the projects. So can you help us think about maybe 2013 from a megawatt perspective, like what -- if you're doing 46 megawatts right now, how many do you think you'll do next year? Because I'm just worrying about what the impact will be on the balance sheet.

I think that the 46 megawatts when it gets done, it'll be next year. But let me double check with the team for you on that. [Chinese]

[Chinese]

[Chinese]

Okay. So Mr. Li and Henry said that if there is adequate and appropriate financing, which, shall we say, limits our CapEx significantly, then we're thinking of maybe doing 80 to 100 megawatts next year, but that's only if we can find appropriate financing.

Your next question comes from Philip Shen from Roth Capital. Philip Shen - Roth Capital Partners, LLC, Research Division: All my questions have been asked already, so just a couple of housekeeping questions. In terms of OpEx, what should we look -- what should we expect for OpEx in Q4? And how do you expect it to trend in 2013?

Okay. [Chinese]

[Chinese]

So Henry said it should be something along the lines of $36 million per quarter now. And even for next year, it should be around $36 million, $37 million. Philip Shen - Roth Capital Partners, LLC, Research Division: Okay, great. And then in terms of cash flow from operations, can you tell us what it was in Q3 and then what do you expect in Q4?

Yes. I think actually we have a cash flow statement provided, so you should have that information readily available. But let me ask Henry Wang on Q4. [Chinese]

We try to achieve the operating cash flow for balance of Q4.

Breakeven?

Yes, breakeven.

So, yes, breakeven, hopefully, in Q4.

Your next question comes from Sanjay Shrestha from Lazard Capital Markets. Sanjay Shrestha - Lazard Capital Markets LLC, Research Division: A few specific questions. First, wanted to get a sense from you guys what are you seeing in terms of the consolidation of capacity in China and how many companies are really producing versus how many companies have actually shut doors compared to 12 months ago.

Okay. [Chinese]

[Chinese]

Okay. So Sanjay, Mr. Li says that a lot of the information is out there publicly that you see, in particular with regards to the bigger names. So when it comes to the smaller names, they are less obvious. He estimates that there may be something like 70% to 80% of the companies out there that came into existence, let's say, last year or in the recent 2 years. About 70% to 80% of them are now gone or at least have shut down production altogether. So there's definitely been a major reduction in the number of smaller players in the industry. Sanjay Shrestha - Lazard Capital Markets LLC, Research Division: Okay, that's good. I mean, obviously, that was more what I was asking as well. So in terms of the dynamics of the demand in China, right, what are you guys expecting as to how big the market is this year or how big the market could be next year? And given, I guess, the change in the government, which really doesn't change the philosophy, but do you see any real changes to the energy policy and how that might end up impacting their view of how big they want solar to be in next 5 years?

Okay. Let me break that into 2 questions for you for Mr. Li. [Chinese]

[Chinese]

Okay. Sanjay, for your first question, for 2012, a lot of the demand has been towards the end of the third quarter and fourth quarter. So it's only, added up, total to something like 2.5 to 3 gigawatts. But oddly enough, there's actually been a lot of projects that's been out there that was supposedly for this year that have been approved but they're not getting done, and they might get done something like in March or April of next year. With regards to 2013, and this will lead to your second question, which I haven't asked Mr. Li yet, so for 2013, Mr. Li indicated that there's actually a lot of uncertainty. There's something like 3 gigawatts under the Golden Sun, 2 gigawatts under other programs, as well as some rooftop programs, et cetera, combining to something like 4.3 gigawatts of, shall we say, approvals being sought that's out there. Combined there's some other, shall we say, projects going on out there for 1 to 2 gigawatts. Overall, if you put everything together among all the different programs, there's going to be something like 6 gigawatts-plus for next year. But there's a lot of pending approvals. There's a lot of uncertainties. There's a lot of conditions. And as a result, some of this may or may not come into fruition, but there is a lot of things that are certainly out there. And he thinks that come 2014, a lot of these other installations might get done. So that might be a big year instead. But overall, next year, if you put everything together, it looks something like 6 to 7 gigawatts. Now let me ask Mr. Li your second question. [Chinese]

[Chinese]

Okay, so Mr. Li said that there's this policy out there with regards to the grid, and you're going to have to excuse my bad translation, there would be certain parts of the grid up and this new policy that's out there for the different installations, the policy has been proposed. It's not been finalized. And knowing a little about how these things work in China, it could take a while for, not just all the policy conditions, et cetera, to become finalized, but also for the appropriate financing to be put into place. As a result, it's quite likely that all these things at the government macro level only comes together over the course of an entire year. So he would not be surprised if these things only come together in 2014. Now that said, if all these things do come together, all the conditions are finalized, financing, et cetera, are provided, he would not be surprised either to see China becoming the biggest solar market in the world after that. So I think there's tremendous potential there for everyone.

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.

While difficult macro conditions continue to affect our business, we remain steadfast in our strategies to lower our costs, developing leading technology and improving our module business. We are confident these strategies will position ourselves once marketing conditions improve, allowing us to capitalize on the long-term potential of solar power and deliver long-term value to our shareholders. 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.