Laura Chen; ReneSola Ltd – IR Director Daniel Lee; ReneSola Ltd – CFO Xianshou Li; ReneSola Ltd – CEO

Patrick Jobin – Credit Suisse Philip Shen – Roth Capital Wei Fang – Luminus Management Gordon Johnson – Axiom Capital Management Paul Strigler – Esplanade Capital

Hello, ladies and gentlemen. Thank you for standing by for ReneSola Limited's second quarter 2014 earnings conference call. [Operator Instructions]. As a reminder, today's conference is being recorded. I will now turn the call over to Ms. Laura Chen, ReneSola's Investor Relations Director. Please go ahead, Ms. Chen.

Hello, everyone. Welcome to the Company's earnings conference call. ReneSola's second quarter results were released earlier today and are available on the Company's website as well as from newswire services. You can also follow along with today's call by downloading a short presentation available on the Company's website at www.renesola.com. Joining the call today are Mr. Li Xianshou, our Chief Executive Officer; and Mr. Daniel Lee, our Chief Financial Officer. I will read Mr. Li's prepared remarks regarding ReneSola's operational highlights and strategy and Daniel will then review our shipments and financials after which we’ll all be available to answer your questions. 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. Please note that unless otherwise stated all figures mentioned during this conference call are in US dollars. I will now begin with our second quarter business highlights. Our second results were highlighted by a net profitability and improved gross margin, which we're very proud of and which we expect will sustain into the coming quarters. Our gross margin of 14.7%, which beats both our guidance and consensus was the result of fundamental improvements to our business model and in our approaches to business development, which have set the foundation for what we expect to be strong results through the end of this year. Our total solar module shipments in Q2 were 499 megawatts, which was at the high end of our guidance. The current international business environment for Chinese solar manufacturers has become more challenging with an increasing number of trade cases in different markets around the world. However, having positioned ourselves as a global player, we are able to leverage our differentiated business model, which comprises robust and localized international operations and an extensive international manufacturing network through our OEM partnerships and generates 1.1 gigawatts of module capacity from 11 factories in 7 countries. We expect to further expand our OEM capacity to 1.2 gigawatts by the end of 2014 and to 1.5 gigawatts by mid 2015. Our globalized structure enables us to demand changes quickly, be they the result of market forces or changes in trade policies. Furthermore, continued investment in our global network has yielded new client wins and industry recognition for a wide range of solar products. We continue to see high-growth potential in the commercial and retail distributed generation markets across our international target markets. Compared to traditional utility-scale project markets, DG markets are seeing a more sustainable demand growth and are less affected by the macro financial environment. With our extensive and expanding global network, we expect increasing opportunities among commercial and retail markets with comparatively higher ASPs and better payment terms. Take Europe as an example. With the substantial cuts in local feed-in tariffs there, the market has to rely more and more on the DG market with project sizes of kilowatt magnitude rather than megawatt. We have become a leading brand in Europe as well as in the US, Japan and Australia and have shipped modules and solar system products to projects ranging in size from a few kilowatts to several hundred kilowatts. We are replicating our success in developed markets now in new and emerging markets including South Africa, Mexico, Turkey, India and China. As of the end of Q2 2014, we have 26 sales offices and 42 warehouses around the world and have sold altogether 14 gigawatts of solar PV products to over 1,800 customers in 77 countries. With our big advantage in being able to provide local technical support and logistical services, we are able to sell to customers at a higher price than our competitors. We will continue to aggressively grow our large client base in the second half of this year and to provide the full suite of ReneSola branded solar and renewable energy products to our rapidly growing numbers of retail-focused clients. I will now give you an update on our polysilicon production. Our total output of polysilicon in Q2 was 1,816 metric tons compared to an output of 375 metric tons in Q1 of this year. Operations at our Sichuan polysilicon plant remained at 100% capacity after a temporary shutdown in Q1 for maintenance and improvement. With the overall stability in polysilicon prices and production cost reductions resulting from seasonally lower electricity prices, we expect to continue to benefit from our in-house polysilicon production capabilities in Q3. I will now review our R&D developments. In Q2 we continued to invest in improving our technology, products and manufacturing. Our commitment to quality and innovation continues to produce great results most recently in the form of our top rankings in the PV Evolution Lab Solar Modules Performance rankings. In detail, mass production was achieved for our A+++ wafer, which has an average efficiency rate 0.15% higher than the A++ wafer. We continue to obtain applicable certification for inverters across several international markets including the United States, Italy, the United Kingdom and Australia. We have completed research and development for 3 more energy storage system product lines and currently feature 5 categories and 11 series of 146 energy storage system products which are now available for purchase. Additional certification across different continents has been completed for 3 categories of our LED products including bulbs, indoor lighting and outdoor lighting. I will now turn the call over to our CFO, Mr. Daniel Lee who will provide details regarding our shipments and financials.

Thanks Laura and thank you everybody for joining the call today. I will first go over our product shipments. Total solar module shipments in Q2 were 499 megawatts compared to 434 megawatts in the same period last year and 521 megawatts in Q1. Our wafer shipments totaled 200 megawatts in Q2 compared to 415 megawatts a year ago and 189 megawatts in Q1. Module shipments met our guidance, which had factored in our expectations of a temporary shipping decrease in the US and Europe in Q2. The sharp decrease in wafer shipments year over year was the result of our strategic decision to use the majority of our wafers for our own module production. The geographic breakdown of module shipments is as follows. Europe represents 31% of our total shipments in Q2. Japan represents 23%; China 15%; the US 11% and the rest of the world represents 19%. Our module ASPs declined from $0.69 per watt in Q1 to $0.66 per watt in Q2, due to an overall downward trend in module prices around the world. The negative impact to our business performance was more than offset by an even quicker pace of the execution of our cost reduction plan. Our cost reduction efforts have been successful in both our domestic and international OEM operations helping us to achieve industry competitive gross margins in Q2. This was aided by our fully operational in-house polysilicon production capabilities and more efficient process control. Going forward we will look to further reduce our production costs and to improve our profitability. I will now walk you through our financial results for Q2 2014. Net revenues were $387 million, compared to $377 million last year and $415 million in Q1. Gross profit was $56.9 million, up from $30.4 million last year and $44 million in Q1. Gross margin was 14.7% up from 8% last year and 10.6% in Q1. The sequential increase in the Company's gross margin was a result of full capacity in-house polysilicon production, a more efficient manufacturing process, a decrease in [indiscernible] prices and a drop in the prices of Taiwan-made solar cells. Total operating expenses were $46.3 million, representing 12% of our total revenues, compared to $52.8 million and 12.7% in Q1. The sequential decrease in operating expenses was mainly the result of a reversal of allowance for doubtful accounts provided in Q1, which was subsequently collected in Q2, as well as impact of our cost control efforts over other general and administrative expenses. Our operating income was $10.6 million, compared to an operating loss of $8.7 million in Q1. Our operating margin was 2.7%, compared to our operating margin of negative 2.1% in Q1. Net income attributable to holders of ordinary shares was $757,000, which represents basic and diluted earnings per share of $0.00 and basic and diluted earnings per ADS of $0.01. As of June 30 the Company has debt of $760 million, compared to $724 million as of the end of Q1 and excluding $112 million in convertible notes. Our net cash position, including cash and cash equivalents plus cash was $219 million as of end of Q2, compared to $250 million at the end of Q1. Net cash outflow from operating activities was $40.6 million in Q2, compared to net cash outflow of $112.3 million in Q1. Our Q2 results demonstrate effectiveness of our global business infrastructure to deal with the solar industry's increasingly complex trade dynamics and to position ourselves favorably for a sustainable balanced and diversified revenue mix. Our international strategy is in line with our prudent financial approach and asset-light operating strategy. We expect to continue to expand our international platform and improve our financial metrics in the second half of the year. Turning now to our guidance. For Q3 2014 we expect our total module shipments to be in the range of 530 megawatts to 550 megawatts and our overall gross margin to be in the range of 15% to 17%. We will now open the line for questions. Operator, please go ahead.

[Operator Instructions]. Your first question comes from the line of Patrick Jobin from Credit Suisse. Please ask your question. Patrick Jobin – Credit Suisse: Hi. Good morning, good evening and congrats on the gross margin improvement. First question, just thinking about the OEM capacity, the 1.1 gigawatts, how much of that is capable of going to the US market, and what's your plan to expand that capacity? And then can you maybe update us on the cost per watt between OEM and internal? And then I have a follow-up. Thanks.

Yes. Thanks, Patrick. Let me give the first question to Mr. Li.

[Foreign Language]

Yes, Patrick. So currently we have 25 megawatts per month capacity, which we can use to ship to US, and we are still negotiating with some other suppliers and we hope to expand to 40 megawatts per month by the end of this year. So, next year, it will be around 500 megawatts totally to US. Patrick Jobin – Credit Suisse: Okay. I've got a second part.

Yes.

Hey, Patrick, regarding the cost, internal and OEM cost, in Q1 we have announced that our internal processing cost was $0.53 and OEM cost was $0.63. We have reduced the cost on both sides. Internally, we have reduced cost by more than a penny, so it's between $0.51 and $0.52, and OEM we have reduced it to $0.60. And we intend to reduce the cost even more in this area in Q3. Patrick Jobin – Credit Suisse: Thanks. And then just my last question, on 2014 guidance. I think last quarter you gave a module shipment target of 2.3 to 2.5 and provided some ASP color one quarter out. I'm just taking guidance for Q3 and it implies a rather substantial Q4 ramp, if that guidance is still in effect. So what are you thinking about today, as far as full-year shipments? And then any color on ASP expectations into Q3 would be helpful. Thanks, guys.

Yes. Sure, Patrick. I'll give that to Mr. Li.

[Foreign Language]

So, Patrick, to answer your question about the guidance, the full-year guidance, we actually have adjusted our strategy regarding the shipments. We don't really now focus too much on the quantity, the total shipments for a full year. Rather, we would focus on the profitability. So, actually, recently or already we have reduced our – refused to take some orders with very low ASP and low profitability; for example, the orders from China and India. We focus more on the high ASP markets. So, all in all, we just focus on the profitability rather than the quantity. And Mr. Li gave some color on the ASP in the next quarter. It will be a bit higher than Q2. It will be around $0.67. Patrick Jobin – Credit Suisse: Thank you so much.

Thank you.

Thank you for your question. Your next question comes from the line of Philip Shen from Roth Capital. Please, ask your question. Philip Shen – Roth Capital: Hi. Thank you for taking my questions. I'll start with your overall thinking of your strategy. As you take a step back away from upstream manufacturing capacity, what's your view of your capacity that exists today, going forward, and how does your business model evolve over the next 2 to 5 years? And would you ever consider selling some of your internal capacity, for example?

Right, Philip. Let me give this to Mr. Li.

Right, Phil. So, Phil, currently we have under our PPA about $800 million in PPA assets, and currently the whole depreciation is around $100 per year. So, in 3 to 5 years, if you're counting the depreciation expense, we can have cash back around $300 to $500 per year. So going forward, our total asset, the scale of our total assets will be smaller and smaller, so we will not expand any of our internal capacity. Yes, that's what Mr. Li said.

Great. That's helpful. With your greater emphasis on OEM partnerships and your distribution footprint in a number of countries, what kind of investments do you expect that you'll need to make in operating expenses and inventory? Obviously, with your de-emphasis upstream there's much less CapEx, but how do you expect operating expenses to trend going forward? We saw that they were lower in Q2, with the reversal. And then also, inventory, we've noticed that there was an increase in the quarter relative to the prior quarter and to the year-ago period. I think, based on our calculations, days were up to 108 days versus 92 in Q1. What do you see ahead for your investments in inventories, as you provide a diversified product offering on an almost global basis?

Yes. Phil, to answer your first question about operating expense, yes, as you can see that the last couple of quarters our SG&A has been pretty much higher than the industry average. This really is much in line with our business strategy of really building out our global infrastructure that being the sales, after-sales support, technical support and also logistics. So we expect this type of high SG&A to continue over the next couple of quarters. However, we expect it to be around $50 million, and in terms of percentage it will be around 12% of our sales, and we're going to start seeing operating leverage going through next year. So that's the operating expense part. Regarding inventory, yes, we have seen increased inventory in the second quarter. That's mainly because there was a slowdown in Europe. And we have been building up inventory to ready ourselves for the pickup in demand in Europe, and we have seen it already in the second – starting second half of August. And Europe will be a very strong market for us in the rest of the year, especially in the third quarter. Patrick Jobin – Credit Suisse: Okay. Great. Thank you. I'll jump back in queue.

Thanks, Phil.

[Operator Instructions]. Your next question comes from the line Wei Feng from Luminus Management. Please ask your question. Wei Feng – Luminus Management: Hi, Daniel. Just one question on the US strategy. If you can't ship anything from China anymore and then you cannot use Taiwanese cell, even if Taiwanese cell prices are falling it's not really helping you, where do you source your cell for your US market? And you're targeting 40 megawatts per month expansion on US; is that your target for US shipments? And how's the cell cost from third country after China and Taiwan?

Okay. There are 2 parts, the US market and the European market. For the US market we have about, as Mr. Li mentioned before, about 23 megawatts per month. They are our products. They are 100% US compliant, which means they are 100% non-Chinese and non-Taiwanese cells. Yes, we've been looking at different parts of the world, looking to expand this cell capacity, but in the meantime really this US policy of anti-dumping has really affected the Taiwanese cells. The price of Taiwanese cells has really been dropping precipitously. Before, just a couple of months ago, the price of Taiwanese cell was about $0.41, $0.42. Now the price has dropped to about $0.33, $0.34. So we've been fully benefiting from this by using these lower-priced cells for our European market.

[Foreign Language]

Yes, Feng Wei. So Mr. Li actually added we have the cell coming from Korea, Turkey and India, and also Europe. Wei Feng – Luminus Management: How much is the current cell price from those countries?

[Foreign Language]

Yes, it's $0.42, around $0.42. Wei Feng – Luminus Management: Thank you very much. Can I have another follow-up question?

Yes, please. Wei Feng – Luminus Management: Yes. On the module side, basically OEM total cost is down, $0.62 per watt. How much is from the module processing cost?

[Foreign Language]

Yes. Mr. Li said it actually differs from different countries, around $0.22 to $0.23 of production cost. Wei Feng – Luminus Management: And since US have this anti-dumping tariff against the Chinese module, do you see your OEM cost trending up or it's kind of flattish? I'm just wondering what's your peers' strategy at this point. Are they also following your strategy, or they stick to their 100% Chinese model?

[Foreign Language]

So, yes, Mr. Li has just answered. There's not a lot of cell capacity outside China and Taiwan. So the Chinese manufacturers may just stick to what they get, the tariff for 2012, around 23-something-percent, and the total cost is around $0.70. Wei Feng – Luminus Management: Got you. So what is your estimate on cell capacity outside China and Taiwan?

[Foreign Language]

2 gigawatts. Wei Feng – Luminus Management: Thank you very much.

Thank you.

Thank you.

Thank you for your question. Your next question comes from the line of Gordon Johnson from Axiom Capital Management. Please ask your question. Gordon Johnson – Axiom Capital Management: Thank you for taking my question. Congrats on a good quarter. I guess firstly I wanted to see if you guys could give us some insights into what you're seeing with respect to module ASPs in different markets, China, Japan, US and Europe right now, if you could give us that breakup.

Okay. Why don't I just give you the ASP for Q2? For the US, it was $0.71, Europe $0.72, Japan $0.66, China $0.56, for… Gordon Johnson – Axiom Capital Management: I'm sorry, Japan?

Japan, $0.66. Gordon Johnson – Axiom Capital Management: I'm sorry. I didn't get that. $0.66. And China?

China, $0.56. Gordon Johnson – Axiom Capital Management: Okay.

And for the rest of the world – [$0.60]. Gordon Johnson – Axiom Capital Management: Okay. And that's for Q2. And then we're hearing that specifically in Japan, in Q3, prices are trending around the $0.56 level. Is that accurate, based on what you're seeing?

Well, for us, our products might not reflect the rest of the market. We have relatively steady business partners in Japan. So for us the rest of the year is relatively stable, around $0.65. Gordon Johnson – Axiom Capital Management: Okay. And then you guys gave pretty robust gross margin guidance for Q3. Should we interpret that as you're benefiting from your internal polysilicon wafer capacity, or is that more so related to your stable ASPs and cost gains?

Well, it will be a combination of four factors. The coming back of the polysilicon plant, coming into full production; that's one. We have seen that in Q2. But going forward, we're going to see a continued decrease in BOM prices, mainly through global procurement. We're going to see, of course, through manufacturing, just more efficiency in our manufacturing process. And more importantly, lastly, is the dropping of the prices of Taiwanese cells. It used to be $0.41, $0.42. Now it's around $0.33 and $0.34. We are one of the few guys that can really capitalize on these dropping prices. We tend to ship about 500 to 600 megawatts of modules to the European market, and within this 600, as you can imagine, if they're dropping $0.07, $0.08, that's huge to us in terms of our cost savings. Gordon Johnson – Axiom Capital Management: All right. So I may have missed this because I jumped on the call late, but you guys, you're procuring – you're continuing to procure modules from Taiwan at a large clip?

Yes. For our…

They're actually cell, not module.

Cells, yes. Cell. Gordon Johnson – Axiom Capital Management: Sorry, cell. Okay. Because I guess in general the assumption was with the – I'm sorry. In general the assumption was that with the US tariffs, the Taiwanese modules would see a decline in demand. But you're saying you're using Taiwanese modules not just for the US, but other markets as well.

Well, not for the US market, for the European market, because we have overseas capacity that we can effectively use like these lower-priced Taiwanese cells. Gordon Johnson – Axiom Capital Management: Okay. I'm sorry. Taiwanese cells, you guys are using Taiwanese cells for the European market. Would you say that's similar to the other players in the market? Some of your peers, are they using Taiwanese cells, some of your other Chinese peers, or would you say that's something specific to ReneSola?

I would say more specific to us, because we can utilize our OEM capacity basically to comply with the European policies regarding MIP. Gordon Johnson – Axiom Capital Management: Okay. And can you just remind me again what your costs – if you guys have provided this, what your costs to produce polysilicon are in your facility?

Right now, the total cost is about $21.

Yes. Cash cost is around $17.5, but it doesn't actually include the subsidy we can get from the Sichuan government. Actually, if you add that, actually, the cash cost, the real cash cost is around $16 something, or $15 to $16. Gordon Johnson – Axiom Capital Management: Okay. And did you guys provide what your all-in cost to produce module and cell was for Q2, and what you expect for Q3?

Yes. It was pretty much, in Q1, just to refresh what we just said, in Q1 we announced that our internal processing cost was $0.53 and OEM cost was $0.63, and we have lowered that in Q2. The internal processing cost lowered to $0.52 to $0.51, and our OEM cost lowered down to $0.60. And we expect to continue to reduce costs, especially in the OEM area, in the third quarter. Gordon Johnson – Axiom Capital Management: Okay. Perfect. Then lastly, did you guys provide the mix of business you expect by geography for Q3?

Okay. I think I mentioned it in the announcement, but yes. For us, basically for the whole year, Europe will represent about 40% of our total revenues and Japan will be about between 20% to 25%, US 10% to 15%, China 10% to 15%, and the rest of the world about 15% to 20%. Gordon Johnson – Axiom Capital Management: Perfect. Thanks a lot for the questions and congrats on a good quarter.

Right. Thank you.

Thank you for your question. Your next question comes from the line of Paul Strigler from Esplanade. Please ask your question Paul Strigler – Esplanade Capital: Hey, guys. Congrats on a nice quarter. Just 2 questions on Europe, and they're sort of related. I recall earlier this summer SolarWorld petitioned the EU Commission to investigate Chinese manufacturers importing below the price floor into Europe, and as a company that has a lot of OEM capacity outside of China, you don't have to worry about that. Have you heard anything from the EU Commission, or have you even heard any rumors about what might be the outcome of that? Is there going to be an investigation? Are they ignoring it? Are your Chinese competitors still allowed to import seamlessly into the EU? And then I have a quick follow-up.

Right, Paul. So I'll ask Mr. Li about this.

[Foreign Language]

Mr. Li said he has no idea. And then…

Yes, we wouldn't want to speculate at this point. Paul Strigler – Esplanade Capital: But you have not been contacted by the EU Commission to do anything at all? There's been no even outreach from the EU Commission yet?

Well, the EU, they have their regular reviews. They come over to the top Chinese solar companies and do the reviews, to ensure that the companies are complying with their MIP policies. Paul Strigler – Esplanade Capital: Great. And then one quick other one, and just – so I also read that potentially the EU was thinking about lowering the Chinese import floor, which obviously would be, I guess, an interesting conclusion after – with SolarWorld petition. Are you guys – I guess you have the pull and capacity. Are you guys aware of the EU potentially lowering the Chinese import floor, and how does that make you think about OEM versus exporting directly from China?

[Foreign Language]

Yes. Mr. Li said actually there was a little concern over the exchange rate. That's why they probably would have to adjust it. But that's it. He said we didn't hear anything, either from China or from Europe, that they're going to lower the floor price. Paul Strigler – Esplanade Capital: Great. Thanks a lot, guys. Congrats on the great guidance too.

Thanks, Paul.

Thank you.

Thank you for your question. There are no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.