Thank you for standing by and welcome to JinkoSolar Second Quarter 2014 Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, August 18, 2014. I'd now like to turn the conference over to your first speaker today, Mr. Sebastian Liu. Please go ahead, sir.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's second quarter 2014 earnings conference call. The company's results were released earlier today and available on the company's IR website 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 website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Arturo Herrero, Chief Strategy Officer; and Mr. Longgen Zhang, Chief Financial Officer. Mr. Chen will discuss Jinko's business operations and company highlights, followed by Mr. Herrero who will talk about the company's business strategies and then Mr. Zhang who will go through the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Please be noted 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 results may be materially different from the views expressed today. Further information regarding this 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 Jinko's current and future performances based on a more meaningful comparison of net income and diluted net income per ADS when compared with its peers and historical results 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.

Thank you, Sebastian. Good morning and good evening to everyone and thank you for joining us today. I am pleased to report our fifth consecutive quarter of profitability and we confidently look forward to second half of the year. We gained considerable momentum during the quarter as we expanded our sales and downstream business, increased our geographic reach, secured financial support of some globally respected financial institutions and solidify our position in important emerging markets where we have made continued investments such as South Africa and Latin America. Total revenues increased 20.8% sequentially and 37.8% year-over-year with total solar product shipment increasing 13.5% sequentially and 34.8% year-over-year to 659.5 megawatts. We are confident in our ability to continue to deliver solid result for the rest of the year. Our revenue streams continued to diversify with continued growth of our downstream business. Revenue from power generation increased 26.1% sequentially to RMB61 million, and we generated 53.48 million kWh of energy in the quarter. We secured $225 million in private equity financing for Jinko Power, our subsidiary that develops and operates our downstream sort of power project business. This builds confidence in our management team and the long-term prospects for our downstream business by China Development Bank International, Macquarie Greater China and New Horizon will not only contribute capital to further expand our project development capabilities, but will also provide a wide range of support to achieve future growth. This is in addition to RMB1 billion strategic financing agreement we signed with China Minsheng Bank mainly for our distributed PV generation systems. These agreements underscore our continued success in expanding our market share to also demonstrate the maturity of China's solar power downstream framework as the market enters a rapid growth phase and attracts interest from domestic Chinese capital. This added strength…

Thank you, Mr. Chen. Q2 2014 has been another good quarter for JinkoSolar. We once again reached our shipment and profitability targets for the quarter, helping to once again bring forth our confidence to meet our whole year guidance. Despite the good Chinese PV demand that amounted to only 3.3 gigawatts in the first half, we managed to ship more than 210 megawatt. And we expect to achieve strong recovery during the second half in order to meet the 13 gigawatt annual target. JinkoSolar has positioned itself as leader in the Chinese PV market over strong customer base, big team and good brand recognition. We announced the connection of two solar PV projects totaling 39 megawatt in Jiangsu province following our downstream progress in China. JinkoSolar has become also the market leader in this country in terms of shipment and market share. And our downstream business has become more promising for the second half. So we can proudly announce our target increase from 400 megawatts to 600 megawatts for our own development from Jinko Power in 2014. In the USA, we have also been very successful with another quarter of record shipments totaling 157 megawatts for Q2 and accounting for 255 megawatts during the first half this year. We expect to achieve total installations for this year reaching over 6 gigawatt in the USA. (inaudible) were surprised of the high level of preliminary duties that were announced. That will affect both Chinese and Taiwanese brothers enter into the US market. Regarding the decision of the US Department of Commerce, we are disappointed by the announcement that we consider completely unfair. We assure, as this is also happening in Europe, this measure will negatively impact the solar industry, job creation and end up increasing the electricity bill for the end consumer.…

Thank you, Arturo. Good morning and good evening to everyone on the call. First I would like to walk you through our financial results for the second quarter of 2014, followed by third quarter and full year 2014 guidance. As Mr. Chen mentioned earlier, our total product shipment in the second quarter of 2014 were 659.5 megawatts. Total revenues in the second quarter of 2014 were $392.1 million, an increase of 20.8% sequentially and an increase of 37.8% year-over-year. Gross margin was 22.6% in the second quarter of 2014 compared with 24% in the first quarter of 2014 and 17.7% in the second quarter of last year. The slide decrease in our gross margin compared with the first quarter of 2014 was due to a slight decline in solar module ASPs. The year-over-year increase in gross margins was mainly due to improvements in operating efficiency and continued cost reductions for the company's polysilicon and auxiliary materials and improved ASPs. The company also enjoyed higher gross margins generated by solar products revenues. In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 25.4% in the second quarter of 2014 compared with 26.6% in the first quarter of 2014 compared with 18.3% in the second quarter of 2013. Income from operations in the second quarter was $40.6 million compared with $32.7 million in the first quarter of 2014 and $25.4 million in the second quarter of last year. Total operating expenses in the second quarter of 2014 were $48.1 million, an increase of 6.8% sequentially and an increase of 91.7% year-over-year. The year-over-year increase in operating expenses was mainly due to the increase in shipping and warranty costs and the research and development expenses. The company's operating expenses excluding non-cash charge represented 12.1% of its total revenues…

(Operator Instructions) Your first question comes from Philip Shen from ROTH Capital Partners.

You just mentioned about the top assets. I want to make sure I heard you clearly. It sounds like you've lost and there's somebody who outbid you. How do you expect to replace that capacity? And additionally in your PowerPoint, I think between Q2 and year-end, you expect to increase your capacity 900 megawatts for module with the 120 megawatts coming from South Africa. Is the remaining 780 megawatts module capacity going to be based domestically in China or do you expect to have some capacity internationally as well and if so which countries?

In China, I think for the (inaudible) Chapter 11 is a little different from the US. Basically we are doing the processing. We are on the operation lease contracts. And actually today the Topoint assets the actually production capacity is around the 270 and the cell is around 150 megawatts. And we believe because we lost the bid, the reason because the solar bid actually comes from the [Wensheng Group]. And they are, I think, a bit out of our reasonable price. So therefore we dropped the bid. The third party got the assets and we are in the second position. In terms of the capacity, today without the Topoint, we're also starting to buy some used assets from market, especially on the wafer and cell production line. So we already estimated without Topoint by the end of the Q3, our wafer capacity will reach 2.3 kilowatts and cell is around 1.8 gigawatt and the module is 2.8 gigawatts. So we believe with that capacity, we believe we can beat our targets, the guidance.

And what is your utilization in Q3? How has it changed relative to Q2 and how do you expect it to trend throughout Q3?

Definitely Q3, given the guidance, you see the shipments and also some modules used on downstream, we think the capacity will be used, even to some extent exceeding the theoretical design capacity. So therefore, I think I've already given that by the end of the Q3, our design capacity 2.3, 1.8, 2.8 under wafer, cell and module capacity level.

Your next question comes from Patrick Jobin from Credit Suisse.

Just thinking about the mix outlook, clearly some pull-in into the US in Q2. Just thinking about how the mix will change and how that should impact ASPs and margins given the AD now in the US, just hope for any color on mix.

So mainly ASPs has been quite stable. As we announced for Q2, we have US (inaudible). As you mentioned, yeah, we are compensating the low ASP prices in China for higher ASP prices in USA and in Europe, mainly Europe, as you know, is €0.53 per watt. So it's around $0.72, $0.73 per watt. So going forward, our sales in UK, for example, is a big market for Jinko, will continue. So we will see higher ASPs coming from these regions from Europe. And also, our ASP in emerging market is quite stable at around $0.62 to $0.63 per watts. In the future probably will be reduction on these ASPs by $0.02 or $0.03. And the sales in North America and USA will compensate also with higher ASPs. So overall, we expect Q3 to be stable ASPs in the line of Q2.

And then a follow-up question just on the balance sheet, looking at the working capital change, it seems like it was driven really by receivables line. How much of the receivables are part of the projects and how much of it for the manufacturing business?

I think majority is the manufacturing, right now $438 million. I think for the utility, I think it is $24 million. So the major comes from manufacturing side.

Are there any specific regions where you're seeing degradation in payment terms?

The reasons of accounts receivable increase is because for the second quarter, most shipment comes from June, May, end of the second quarter. Second is shipments to China. So that's why the accounts receivable increase is just (inaudible).

The increase of accounts receivable primarily due to the increase of shipments in the second quarter. And we may tend the DSO add to the 90 days, which is the same with last quarter.

Your next question comes from Gordon Johnson from Axiom Capital.

I just wanted to maybe make sure I understand something. It looks like your total debt balance was up roughly $154 million sequentially. Last quarter was up $60 million. When I look at the change in your cash balance, your cash balance was $8 million or roughly $9 million. This quarter it's up roughly $9 million again. Can you help us understand the puts and takes around where the increase in debt is being primarily focused.

This balance sheet, we combine and consolidate it. I think with manufacturing also downstream (inaudible). For this year, we continued to invest on the downstream projects. So that's why you can see that this year, we already connect with grid (inaudible) 39 and then we have also on the construction around more than 200 megawatts. All these investments were (inaudible) on the construction will increase more investments on the current assets and the finished assets. So that's why also we increased the debt, the size.

On the electricity revenues generated this quarter, it was $9.8 million. You guys have $252 million of total projects installed. We heard that there were some issues associated with the recent crack down on fraud investigations in China and the ability to collect cash from actual projects, they're taking a little longer as the paperwork to get projects approved is taking longer. Have you guys seen any issues with cash collection on projects you have connected to the grid from the government?

So far, I think we have to finish the 252 megawatts downstream project, of which 58 megawatt actually is joint venture with [Jingsan] Group. We own minority interest. For the tariff, I think for the first one, (inaudible), we also collect the feed-in tariff for this quarter is more than RMB40 million and collect until end of May 2014. For the rest of products and we finished connecting with grids (inaudible) approved, I think because they have actually approved by the State Energy Bureau. And we believe I think this approval is in the line. So in the future, we think the collection is certain. So that's why we use accrue method to recognize whatever electricity we generate to connect with the grids and ask revenue and also the accounts receivable and both accounts receivable and cash. So we're very comfortable. I think the governments will step-by-step streamline all the processing, and I think it's the timing for the second quarter and the collection would become more streamlined.

Should we expect gross margins to be up sequentially in Q3 or down, given some of the issues? And then given your projects appear to have certain payments, do you guys have any updated plans for launching a potential yield co?

I think Arturo mentioned that we believe that ASP in the third quarter may be slight down. The reason is because I think in China, the ASP will go down. But we also diversify the sales to other countries like US and Japan and other countries where the ASP is higher. We come back in terms of gross margin, because you sell to US. The ASP is high, but cost is also high. For Jinko, we are the cost leader. We still make efforts. The gross margin is about 20%. So we've given ranges around 19% to 21% on the gross margin.

It seems like you're saying that your project payments to the Chinese government are much more certain moving forward. So do you have any updated plan with respect to launching a potential yield co on the projects you have?

We just finished equity. And as you can see, Macquarie and CDB International and also New Horizon and all those famous strategic investors, invested total $225 million in downstream. That means this is really, I think, the (inaudible) in China is really hot. And also we see the market to seek the yield co is very (inaudible). So we right now are focused and continue to develop the downstream podia. So that's why increased our target for this year from 400 megawatts to 600 megawatts. In time, we will consider the market window when it's opened. Yes, we will consider that and valuation to decide when we go to IPO.

The next question comes from Colin Rusch from Northland Capital Markets.

Can you talk a little bit about potential for season of imports into China on polysilicon and what your plans are for strategically moving around with those sourcing imports going forward? I am talking about the potential for China's imports of polysilicon into China.

Because of anti-dumping issue raised by the US and maybe other countries would follow, and Chinese government also is taking action, for the second quarter, our average is silicon cost is around $21.5 per kilograms. And we do not think the market price will go up. The reason is because we see a lot of Chinese producers like (inaudible) is going to increase prices for example (inaudible). And also you see that in earlier release, they're also going to start full capacity. So today as the technology continues to improve and the cost continues to reduce and then some imports from OCI, we do not think the polysilicon price will go up. We believe maybe just around $20 to $21. I even think in the fourth quarter, the silicon price will go down.

And then just thinking about all your exposure into emerging markets, can you talk a little bit about the project finance market environment for these emerging markets, Latin America and Africa and the numbers of sources and how material those capital sources are? And then what sort of risk that poses to your business in those regions?

We have to distinguish the countries in Africa that has already submitted some tenders, public tenders like the case of South Africa. It's quite stable and even with some delays, but there is a visibility around. So in South Africa, as you are following Jinko, we were selected as a major supplier for the modules in most of the projects that have submitted in round one and round two. So we gained thanks to our customers for a 300 megawatt we have already signed. And we are still negotiating one more that probably will be reaching another 90 megawatt for the round one and round one. And then going forward, in fact today, the deadline for the submission of the round four for the South African tender and even the price will be lower, but we expect to be awarded by some of these projects with our partners, with our customers. And then there are other countries that are not South Africa, there are countries of North of Africa or Central Africa that still the volumes are very small. We have seen some good deals and we are participating in some of the developments in Kenya. And we expect something to happen also in other countries in Africa in the next coming years. But mainly our focus has been South Africa, Namibia, Botswana where there are some public tenders and we are participating with our partners.

The utilities in the government are the real source of agreements in these countries you're now obtaining anything in (inaudible) of the utilities at this point?

Well, there are programs that are public programs with public tenders for PV companies. And then there is private initiatives that as long as they have CPA signed with mining companies, for example, they are quite promising also. You can understand that in Africa, especially the countries that are developing like South Africa, they got a huge need of energy and it is not easy to put in place so much production in a short time. So they are using these generation that represents in some of these countries more than 3 gigawatts annually. So these are big potential for substitution with solar solutions.

The next question comes from (inaudible).

I wanted to confirm the gross margins you're saying for the next quarter should be 19% to 20% and that is driven mostly by, would you say, the US or could you give a little bit more color on that?

I have not given guidance on the gross margin. The reason is because it's very complex, because you're selling the product, the ASP for different country is different. And then also associated cost also is different. So basically, we were making efforts. I think we believe the gross margin will be about 20%. So if you want me to give you range, then maybe around 19% to 22% or whatever.

Regarding your electrical production, how much do you expect that to be in kilowatt-hour, what was it during the quarter?

Revenues are roughly $9 million. Electricity we generated in the second quarter is around 60 kilowatt-hours.

We generated about RMB61 million during the quarter. Definitely next quarter we expect to lower the increase, because we have more capacity online.

And then regarding your 600 megawatt project business, in terms of modeling, should we say that 55% belongs to Jinko, or when does that take effect?

Yes, you are right.

Starting Q3, we consolidated financial statements. So we should have the minority interest there. So we've taken 45% as a separate item.

Out of the 600 megawatt, right?

It's not 600 megawatts, it's total order putting together. Actually it is not 600 megawatts, because you also add another 200 megawatts we already finished. So it at the end of this year, we connect with grid, it should be more than 800 megawatts.

The next question comes from Alex Liu from Goldman Sachs.

My first question is for the overseas capacity, you've already set up South Africa capacity. So will you consider adding more capacity in other regions? And the second question is for bad debt provision in the second quarter, is it recurring issue in the following quarters?

We already said the module capacity, 100 megawatts, in South Africa. We also are looking for other opportunities, especially I think considering the (inaudible), because in the future, we will not only sell the module. We already built up downstream projects in China. We're also looking for other options overseas, especially in US and other countries. It's also possible to provide a one-stop solution on the EPC side. So therefore, yes, we are looking for opportunities in US. That's possible because of anti-dumping issue. So the best way for us is to set cell and module capacity in US to meet the US demand.

For the bad debt provision this quarter, is it a recurring item for the next quarters?

Right now, the reserve is just based on the accounts receivable.

We put on the provision for accounts receivable in prior years.

The bad debt for reserve provision is based on the accounts receivable, then also based on possible we cannot collect. So therefore, this provision is there. So we based on the accounting US GAAP to the bad debt.

Your next question comes from Jonathan Fishman from PTT Research.

(Question inaudible)

We have three other strategic partner investors. So we also have to consider the capital market situation, also the execution of our project ability, then also the future of the financial model and the capital needs. So all these, we think, are going to evaluation, then to make decision. Of course, from our side, we also want to make efforts to go to maximize the JinkoSolar shareholders' value to spin off the downstream projects at the high value possible and as early as possible to meet the capital needs for the future in our growth.

And the second question is about the cost targets for year-end 2014. What are the potential cost reductions we can see next quarters?

For Q2, our silicon cost is around $0.105 and our silicon cost is around less than $0.37. Total is $0.47 compared with last quarter Q1, it's stable. And we believe in Q3, Q4, if on the silicon cost side, we will continue to go down maybe $0.01, $0.02. And on the silicon side, we just mentioned that maybe in Q3 maybe still is around $0.11 and hopefully Q4 will go down a little, because silicon price, we expect, to go down. So basically, I think by the end of this year, we believe we can reach the (inaudible) around $0.34 to $0.35 and on the silicon side maybe around $0.09 to $0.11.

The next question comes from Pranab Sarmah from AM Capital.

I have some questions on your downstream project. The projects you are taking, what type of IRR you're expecting with all these new funds you have put in? What is your cost of capital of this fund?

The existing projects, we connect with grids, so far have 252 megawatts of projects. Without leverage, our IRR is around 8% to 12%. Average is around like 10%, 11%. With leverage right now, because we got the loans from China Development Bank and we can leverage up to 70%. But actual leverage should be higher than 70%. The reason is because you see the loan arrangement with the CDB is 15 years. For the first five years, we wouldn't pay the principal. Then starting the sixth year, we're going to pay principal equal to the end of 15 years. So the actual leverage is higher than 70%. So with leverage, our IRR right now is 18% to 22%. So far, our process is we're going to develop the projects first. As soon as we finish the projects, connect with grids, then we are apprised loan from CDB. So for the capital, we already financed from three strategic investments. It's around $225 million. Along with our Jinko own capital $190 million plus the early return earnings, we believe the leverage is 70%. With the cost right now is around 8.6%, 9%. We think we can build theoretically around 1.1 gigawatts. But as I've mentioned, because we need to build the projects first with our private loans, the capital is enough to support to finish additional 600 megawatts to existing right now beginning of the year 200 megawatts. That means by the end of this year, we will finish more than 800 megawatts connected with the grids. Then we still have 100 megawatts to 300 megawatts under construction.

Relative to that, there is a process acquisition cost as well. I think build-up cost is below RMB9 million, but project acquisition cost, how much are you paying now?

Two years ago, those licenses we see just like we did with the projects maybe is cheaper, because not much people are interested in that. As you can see, in China right now, the project is very attractive part of investors. Frankly speaking right now, even for those licenses we have right now, I think if we go to market, we maybe need to pay a $0.50 to $0.60 per watt. So you can see that maybe you only pay nothing, maybe only $0.10. The good news is Jinko, we have strong team and also we have the pipeline there. So most projects as we develop by ourselves. Yes, possible we may go to market to acquire some projects, but major of the projects is developed by own self.

And my last question on the power side. I guess China is going to announce some new policies by end of this month. Do you have any idea like what type of things we might expect on these power promotion policies from China?

The distribution generation, the new policy has come out. The old policy does not allow the people to do the DG in the eastern coast area. The reason is because relating to third-party credit ability, the credit risk. So the government right now is with that. I think right now, the governments try to change to the new policy, as you can see, people are already with that. First of all, it's not third-party to pay us. It's all the state grid to pay us to avoid the third-party credit risk. Secondly, the governments in order to encourage people to do the DG in the eastern coast area, encourage at government level to give more stimulus to the DG. As you can see, a lot of provinces like Shanghai, Jiangsu and (inaudible), even local governments also give more subsidized to encourage that. So that's why we see that generation, the power plan in the eastern coast area also is one of very attractive for Jinko. And as you can see there, we already have several projects right now in the pipeline there. We believe maybe for the additional 600 megawatts, we may be account for around more than 25% in the DG.

The next question comes from Gordon Johnson from Axiom Capital.

Just one question on your silicon cost, you said they're roughly $0.10 this quarter. Using 5.5 grams a watt, does that indicate that you guys are paying roughly $0.18 in polysilicon this year? Is that the right way to think about that?

The average cost this quarter, Q2, is around $21, $25 per kilograms. Our consumption in average is around 4.8 grams per watt. So that's why our silicon cost is $0.105 per watt.

There are no more further questions at this time. I'd like to hand back over to Sebastian Liu for any closing remarks.

Thank you, everyone, for joining us today. And if you have further questions, you can go to our website. Have a good day.