JinkoSolar Holding Co., Ltd. (JKS) Q4 2015 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Q4 2015 JinkoSolar Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, 1st March, 2016. I would now like to hand the conference over to your host today, Sebastian Liu. Please go ahead, Mr. Liu.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's fourth quarter 2015 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. Cao Haiyun, Chief Financial Officer and Mr. Gener Miao, VP of Global Sales and Marketing. Mr. Chen will discuss JinkoSolar's business operations and company's highlights, followed by Mr. Gener Miao who will talk about the sales and marketing. And then, Mr. Cao, will go through the financials. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future result may be materially different from the views expressed today. Further information regarding these and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law. Please be noted that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles or GAAP, JinkoSolar uses certain non-GAAP financial numbers. The Company believes that the use of non-GAAP information is useful for analysts and investors to evaluate JinkoSolar's current and future performances based on the more meaningful comparison of the net income and diluted net income per ADS when compared with its peers and historical result from prior periods. These measures are not intended to represent or substitute numbers as measured under GAAP. The submission of non-GAAP [indiscernible] 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'm pleased to report a strong finish for the year with record high in margin shipment in revenue, global demand remains strong especially in key solar markets which give us good visibility to the entire year and leave us very confident about our future prospects. Total margin shipment during the quarter reached record high 710 megawatts, which translates into module shipments for the entire year 4.5 gigawatt, a 53.3 increase over 2014. Revenue during the fourth quarter reached $937.7 million representing an increase of 104.4% over the same period last year, which translates into revenue for the entire year of $2.5 billion, an increase of 61% over the last year. Non-GAAP net income for the year reached the $177 million. During the fourth quarter electricity outputs was 154.4 gigawatts, down 78% sequentially. Electricity revenue generates RMB176.3 million. We connect a 161 megawatts of projects to the grid during this quarter, which brings our total capacity of connected projects of a 1,007 megawatts. Excluding the factor of seasonality power output was impacted by consumers in China Western regions mainly in Shenzhen and Gansu and stronger-than-usual rainfall in eastern regions, which reduced power output to some extent. And due to some events beyond our control, such as delays in subsidy catalog and retake in land rental and the grid connection process in China eastern provinces, we fell short of our connection target of the year. We are confident however that we have the assets and the development experience in place to rapidly make up for the shortfall in 2016. We have a unique strategy and a view in place that leverages the competitive advantage of our downstream business. And we are focused on long-term sustainability rather than speculating in short-term. We are now accelerating the spin-off process in order to maximize shareholders value. The depreciation of RMB over the past half year has caused considerable turmoil in global markets. We have also been increasing our hedge ratio to ensure its impact on us is limited. We have also put in place detailed plans to redeem or pay back our convertible bonds in 2016, which Charlie will go through later. We have all been hearing a lot about the possibility of a hard landing of the Chinese economy, deep problems in China's banking system and local financial systems. Despite these concerns, we remain positive about China's long-term development. Employment remains stable, the economy, although it gears down a little, continues to grow, and the PBOC still has monetary policy tools at its disposal to use. We should be more confident, rather than panic. With China only going through the first year of its new five-year plan with deeper structural reform of supply side policies expected. Despite steep drop in the price of crude oil and other economic volatilities, global demand for solar is growing steadily. We remain the market in leader China where payment terms have improved significantly and the larger number of rush orders have been coming in before the FIT cut due at end of June, this well make the first and second quarters stronger than usual and the whole year demand more balance. Especially for our high-end products which are already in short supply. In the U.S. we have already signed the big orders with good ASPs in 2015 which will help us further expand market share and generate larger profits. With the execution of ITC the biggest market uncertainty has been removed in the U.S. market which provided us with good visibility on the market stability well into 2018. Strong demand also has the positive impact in keeping ASPs stable globally. In particular ASPs in major markets are expected to further stabilize during the first quarter of 2016. We have always remained cautious when it comes to the competitive expansion and we have decided to expand production capacity to 3.5 gigawatts for wafer, 3.5 gigawatts for sale and 6.3 gigawatts for margin in 2016. This expansion should only allow us to meet the minimum expectation for the market demand in the future. On the technology front, we continue to optimize our cost structure. We're constantly working to overcome technological barriers in order to create real breakthrough in the manufacturing. We are honored to become the first solar module manufacturer in China to receive Top Runner Program’s level 1 certification from the China quality certification center. JinkoSolar's consistency on maintaining of the highest quality control standard in the industry allows us to provide our customers with reliable and high-efficiency PV products. In conclusion, we finished off the year on a very strong footing with record shipment in revenues that demonstrate the efficiency of our operations and value that our customers all over the world place in our brand and products. I am confident that our gross prospects will further expand as we continue to deliver long-term value to our shareholders. Finally, I'll go over the guidance of the first quarter and the full year 2016. In the first quarter of 2016, the Company estimates total solar market shipment to be in the range of 1.3 gigawatts to1.4 gigawatts which include 1.2 gigawatts to 1.3 gigawatts market shipments to third parties. For the full year 2016, the Company expects total solar market shipments to be in the range of 6 gigawatts to 6.5 gigawatts, which includes 5.4 gigawatts to 5.7 gigawatts shipments to the third party. The company expects to connect solar power projects with the new capacity of 600 megawatts to 800 megawatts in 2016. With that, I will now like to hand the call over to our recently appointed Vice President of Global Sales and Marketing, Mr. Gener Miao. Gener has been with JinkoSolar for more than five years, previously serving as the Chief of Staff to our Chairman. He is experienced in our business and operations and I am confident and he will benefit the company greatly in his new role, Gener, please?

Thank you for the warm introduction, Mr. Chen. I am pleased as we report another great quarter of sales results, which allowed us to finish the year on a strong note. We also have good visibility on the first half of the year, leading us to be very confident that 2016 will be another strong year. We shipped 1,670 megawatts to third parties during the quarter and have further diversified our geographical distribution as we increased our market share in any key markets. Taking a closer look, we shipped about 37% to China, 74% to North America, 40% to Asia-Pacific, 13% to Europe and 12% to emerging markets. Looking at full year, we shipped a total of 4.5 gigawatts to 836 customers in 64 countries including 604 megawatts to our own project. Total module shipment represents a 53.3% increased from 2014. This includes around 500 megawatt each for Europe, the emerging markets and the Asia-Pacific region as well as over 1 gigawatts to North America and the 1.5 gigawatts to China. I will now going to a bit more detail for each of this important market and provide you with some insights into our strategy and outlook going forward. With good customer reputations and higher ASPs, the U.S. market remains one of our most important priorities. With ITC extended, one of the biggest market uncertainty has been renewed, though we will continue to keep an eye on the tariff issues as things more forward. While ITC extension factor out some rush orders. 2016 U.S. market will still be quite strong, and those orders will move to 2017, making 2017 more predictable and the marketing growth more steady. We already have about 1.5 gigwatts in orders earmarked for the U.S. market in 2016. Therefore, we expect to reach record-high shipments there. And we also plan to increase our market share in rooftop markets for both commercial and residential segments, with our partners [indiscernible]. China retained is position as our largest market in 2015, while ASPs here remain stable. Payment terms have improved significantly. Rush orders have been coming in before the feed-in tariff cut by the end of June 2016. So traditionally slow Q1 and Q2 are expected to be quite strong, as our higher end productions are already in short supply. Given this trend, we expect China’s growth to become more balanced in this year, as it embarks the first year of the new national five-year plan. While European markets growing, we maintain our strong presence in key countries. Demand from major European markets remain such as the UK, Germany and France as rooftops increasingly taking a larger share of the market over ground-mounted projects. We are focused on increasing our market share in non-EU regions, such as Turkey where we are number one in terms of the shipment. I would also like to emphasize that facing a slowing down market, our European customers are very active in developing new markets especially emerging markets such as Latin America and the Middle East. Thanks to their loyalty to JinkoSolar brand, we have great opportunities to work hand-in-hand with them again to tap those markets and may success. The Asia-Pacific regions with a mix of both rapid growth and flat. Demand from previously ramped-you Japan has begun to cool off a little. But it’s been offset by other markets in the region that are growing rapidly such as India. We have already begun redistributing resources to this market to meet the strong demand that we expect. Our continuous efforts on increasing JinkoSolar brand recognition in emerging markets especially in Latin America have begun to take effect. We have taken the leading position in and almost 20% share of the market in Latin America. This is particularly pronounced that in major markets such as Chile, Mexico, and Brazil. We also maintained our market leading condition in South Africa and are very active across the Middle East countries such Kuwait, Jordan, Egypt and the UAE. ASPs have remained stable globally as a result of strong demand despite pronounced currency fluctuations. Our ASP during the quarter was $0.56 per watt the same as the last quarter. ASPs in major markets as opposed to further stabilized during the first quarter of 2016. Moving to market and branding, we participated in a number of events exhibitions and conferences. In October Chairman of JinkoSolar Mr. Xiande Li participated in Sino-UK Energy Dialgoue during Chinese President Xi Jinping's paid a visit to the UK. In December we were awarded Today’s Transformation for 2015 by the United Nation and China. In January JinkoSolar was invited to Business 20 summit in Beijing that promote the energy reform act and agenda items for the G20 summit held this year. We attended close to 100 industry conferences and exhibitions around the world in 30 countries during 2015. For example during [indiscernible] in July 2015 we launched our Eagle black and Eagle Dual product. To tap the residential market in Japan we also launched 48-Cell mono module. During September’s SPI in US, we launched the Jinko MX smart module. Through this those events JinkoSolar further strengthens its leading position in brand value and recognition. Now I would like to turn the call over to Charlie who will go over our financial results of the fourth quarter and full year 2015.

Thank you, Gener. Our Q4 2015 and annual results sets record for the Company total solar module shipments in the fourth quarter of 2015 were 1.7 gigawatts, up 31% sequentially and up 39% year-over-year. Total revenue was $938 million, up 30% sequentially and up 104% year-over-year. Gross margin was 19.5% compared to 21.3% in the third quarter of 2015, the sequential decrease was from lower gross margin of existing revenues due to the technology and curtailment of projects in the west region of China. ASP was $0.56 per watt, the same as last quarter. We continued to cut our in house manufacturing cost to $0.39 per watt from $0.41 in the third quarter. The blended cost included in the U.S. power cost was $0.45 per watt the same as the last quarter. Our operating expenses excluding stock based compensation, the change in provision for doubtful accounts and the retirement of fixed assets represented 9.7% of its total revenues compared to 12.2% in the third quarter of 2015. We recorded an exchange gain of $11 million including changes in fair value of total contracts due to the anticipated depreciation of RMB we have taken proactive hedging strategy to minimize the foreign exchange impact. I also want to emphasis here again that almost all our cost is RMB were revenues are global, the depreciation on RMB if continues is positive from operational perspective. Now we have two outstanding convertible bonds by the end of December 2015. The first one is $100 million due to May 2016 and second one is $150 million due in 2019, we’ve put out in February of 2017 during the fourth quarter we repurchased $23 million of the first one, with the time in place to redeem or payback those convertible bonds thanks to our healthy balance sheets, strong operating cash flows and the financing capabilities. Net income was $54 million which translates into basic and diluted earnings per ADS of $1.72 and $1.68 respectively. Non-GAAP net income was $78 million which translates into non-GAAP basic and diluted earnings per ADS of $2.48 and $2.44 respectively. Now I'll briefly review our full year 2015 financial results. We concluded our 2015 with total solar margin shipments of 4.5 gigawatts, reaching the high end of the company's guidance. Total revenues for 2015 were at $2.5 million, up 61% from 1.6 million in 2014. Gross margin for 2015 was 20.3% compared to 22.4% for 2014. Operating expenses represented 12% of total revenues for 2015 compared with 13.1% for 2014. Net income for 2015 was $106 million compared to $109 million in 2014 which translates into basic and diluted earnings per ADS of $3.40 and $3.32 respectively. Non-GAAP net income in 2015 was $177 million compared to $129 million in 2014 which translates in to non-GAAP basic and diluted earnings per ADS of $5.68 and $5.52 respectively. Now, I'd like to take a look at our balance sheet. As of December 31, 2015, the company had $654 million in cash, cash equivalents and restricted cash. The total debts were at $1.6 billion of which $760 million were from JinkoPower. The company's working capital was negative $85 million compared to a deficit of $160 million as of September 30, 2015. Without consolidation at JinkoPower working capital is positive $131 million. At this moment, we're happy to take your questions. Operator?

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

It seems like your seasonality in Q1 is better than typical with the strength in the U.S. Can you talk about the visibility you have into Q2? How much of your production have you sold or booked and also the visibility into Q3?

Hi, Philip this is Gener. So M&A for the first half, our book are almost fully booked. We would like to say at around 80% to 90% are fully booked and as for the whole year we can see the visibility of around 60% to 70%.

Great. And how do you expect your geographic mix to evolve in the year?

You mean for 2016 or 2015?

For 2016.

Okay. So for 2016, we are expecting that both North America and the China market will still be the top market for Jinko, the shipment numbers will takes around by 20% to 25% for China and 25% to 30% for North America and the rest, Asia Pacific, Europe and the emerging market taking around 10% to 15% each.

I think fair just like Gener said, we believe 2016 is very swamped and the key drivers is is the United States, China and India and other emerging markets, we believe it’s more balanced in terms of allocation of first half year and the second half year.

Okay, great. And then in terms of margin too, you had this impact from the curtailment in Q4. What's the margin outlook for Q1 and how do you expect margins to evolve throughout 2016 as well?

Looking to the outlook for the gross margin, we expect that the Q1 gross margin we have improved slightly and for the module business the gross margin is pretty stable. It's in the range of 18% to 20% and for the downstream Q4 the gross margins were low, it's only 34% and we explained in the prepared remarks, it's due to the seasonality and curtailment of projects in the west region. We experienced extreme weather conditions in the fourth quarter including strong rainfall and snowstorm, and we expect our existing revenue will grow by 30% in the first quarter and then in terms of gross margin for the downstream, we estimate within the first quarter it's in the range of 40% to 45% and we expect with the improvement of curtailment situations for the projects in the west region and additional projects connected in the east and south China we expect the gross margin for the power units in the second quarter will be in the range of 55% to 60%. So look at the 2016 now the trend of gross margin for module payment for the first half year we believe it stable but in the second half year it's more shipments to the U.S. markets from our oversea capacities. We believe the module business gross margin may improve during the second half of the year.

Okay, great. Thank you, Charlie; thank you, Gener. And I'll jump back in the queue.

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

Just a few form my side. I just want to follow up first on the gross margin expectations thinking about Q1 and Q2. Given what we're seeing in wafer pricing coming up and being short of some wafer capacity from the Jinko side. Did I hear correctly you think 18% to 20% gross margin for the module business in the near term? And then I have a few follow ups. Thanks.

Okay. With module business you are right I think we are seeing strong wafer and cell price particularly in the fourth quarter wafer and cell price increased a lot of during to time competitive and we expect the wafer and cell price is stable in the first half year and may go down flat in the second half year with more capacity on pricing units in the middle of 2016. So looking to the gross margin for module business such as that rate increase in the gross margin in the first half year is in the range it's quite stable 18% to 20% and therefore second half year, because we have the capacity expansion plan. And for the fourth quarter to just give you an example we shift around 450 megawatts to U.S. markets along from that only 20% is from our Malaysia factories, but we expect in the second half year with more capacities we will ship over 60% from our oversea factories where U.S. market. So that is why I'm saying I expect the gross margin where improve in the second half year from all of them.

Just one point. Hi, this is Sebastian, Patrick. So if we ship into U.S. from our oversea factory we can generate more than 13% gross margins so that's why like Charlie said in the second half of the year we think we can maintain or even slightly increase our gross margin for the module business.

Got it. So just two follow-ups if I can. First, the U.S. order book, I think you mentioned 1.5 gigawatts after some push-outs had occurred. Can you quantify how much volume had pushed out from 2016 to 2017? And then related to that I know previously you shared the view of some fixed pricing within that order book, has that remained firm after the ITC extension? That's my first question. And then the second question just really simply on the capacity expansion targeted for 2016, how much of that would be overseas in Malaysia or is that all within China? Thank you.

Thank you, Patrick, this is Gener. Let me answer your question regarding the U.S. demand side. As I mentioned previously our current book about 1.5 gigawatts for U.S. market in 2016 and actually we have seen around 200 megawatts to 300 megawatts have been pushed from 2016 to 2017. And for the pricing side, we have seen that the U.S. market is stable compared in Q1 but for the midterm we have seen because of oil price because of natural gas pricing we're expecting the price to come in down little bit.

So for the capacity expansion, we expect to expand our wafer by 500 megawatts, sale by 1 gigawatt and module and 2 gigawatts. The wafer capacity addition is in China and the module capacity is from both China and overseas factories. We plan to disclose the detail capacity by locating in middle of 2016 and all the capacity expansion would be completed in the first half of the year.

Our next question comes from the line of Vishal Shah, Deutsche Bank. Please go ahead.

Two questions, first, can you talk about your expectations for wafer pricing in the back half of the year? Do you expect or even for that matter Q2, do you expect pricing to continue to go up given the strong demand ahead of the June expiration of the ITC -- of the feed-in tariff? And also can you talk about how you're looking at your balance sheet especially given the weakness of the RMB. Are you seeing any impact of your dollar debt? Thank you.

Regarding the wafer price, after Chinese New Year due to the low inventory level for wafer and cell we're seeing a level of price increase for wafer and cell. So we expect that wafer and cell price will be stable in the rest of the first half of the year and in the second half of the year it's more capacity in the market, we expect the price will go down. And regarding the anticipated depreciation of RMB, we've taken proactive hedging strategies and if you look at our Q4 financial results, we recorded $11 million gain through exchange.com. And in general, we believe the deprecation RMB is positive because just as I said we have over 60% overseas payoffs and our comp is in RMB, so we don't expect any negative impact if the RMB continued it’s depreciation.

Vishal, this is Sebastian. I think as Charlie and also Mr. Chen just mentioned, we have increased our hedge issue in fourth quarter now we cover almost 100% of our oversea, all I see U.S. order exposure especially from the debt side. So just depreciation of RMB almost have nothing, no impact to us.

In addition to the increased hedging activities, actually we are maintaining more cash position in U.S. dollars. At the same time, we're accelerating the payment on U.S. loans and some of the loans we plan to replace -- to be replaced by RMB loan.

That's helpful. And just one other question. You mentioned payment terms in China have improved. Can you also talk about what you've seen on the feed-in tariff front? When do you expect the next catalog, subsidy catalog to be announced and what sort of [indiscernible] you're seeing on projects right now? Thank you.

We're seeing very positive progress and China increase renewable surcharge fund by 30%. I think in the last quarter and ministry of finance request other solar chip operators to submit applications by the end of last month and for the projects, all the projects connected by the end of February 2015. We expect China will approve the next round subsidy catalog in the second quarter and we will repeat with cash payments in the second half year.

Our next question comes from the line of Shen Zhong, Morgan Stanley. Please go ahead your line is open.

My first question is about the module business. So, what’s your production cost outlook for 2016? And, if there were some cost reductions, can you also give some more color on where the reduction from?

The cost reduction target for 2016 is 5% to 8% by the end of 2016, and Q4 our in-house module cost was $0.39 down $0.02 quarter-on-quarter. The reduction of the cost is coming from different factors including the the continued improvement of sale conversing efficiencies and production efficiencies through improving the automatic levels and new materials and new process we are also doing R&D research just like we turn to use the diamond wire technology to cut the matching wafers. So we are confident we can achieve our target in 2016.

To make that clear 5% to 8% of non-silicon costs.

And some question about the downstream business. And you mentioned that your target for 2016 will be 600 megawatt to 800 megawatt so how much of the -- you expect to be connected in the first half, and how much in the second half?

By the end of last year we have 1 gigawatt in operating and around 500 megawatts in constructions and ahead of the feed-in tariff reductions. By the end of June 2015 our target is to connect another 500 megawatts in the first half year. And I just want to explain more for our target for 2016. We don’t want to over-strain our parent company from the project business, so our projects still target 600 megawatts to 800 megawatts is more prudent. We target to reach to major 1.6 gigawatts to 1.8 gigawatts by the end of 2016, which is based on our current financing and anticipated operating cash flow the current financing is sufficient for cumulative 1.4 gigawatts and we expect in the second half year we will receive over $100 million from subsidy payments from the new subsidy catalog projects. And we also have the bridge loan arrangement in place, to help, to support the constructions in 2016.

Understand. That is quite nice. So as mentioned that in the western region there were some curtailments. So we see lots of activities from the government that are trying to help the renewable energy. And some method may be the direct supply, but looks like that the price will be -- I mean the tariff will be impacted. So what's your -- what's the Company's view on the coming some government policy, especially the -- especially like the direct power supply, if that will impact your IRR or your electricity price in the future?

This is Gener, so regarding the direct supply agreement we have seen the current news release recently. From our point of view the feed-in tariff is a kind of fixed price for the next 20 years and is the commitment from the central government and the NDRC which we do not expect to change in electricity price goal to direct supply electricity we really feel are really competitive. And from our point of view in the long term we are expecting the solar electricity coming from solar project in the -- becoming lower and lower compared with what do we have now and previously. But in the short term we are believing that the government will stick to its commitments and trying to find out other solutions. One way is to solve the curtailments. You have seen the direct supply agreement, the high voltage transmission line, et cetera. And on other side we have seen the China government has transitioned to solve the catalog issues and the payment for the feed-in tariff by increasing the surcharge, et cetera. So from our point of view we do not see any significant change to the electricity price that we have right now. But in the future we are expecting the electricity price of feed-in tariff in China or all over the world will become lower and more competitive.

And the exposure to curtailment for Jinko is going to become smaller and smaller. We shift our focus to even from China in 2015. All the target development in 2015 and 2016 will be in the events of China And in terms of the percentage for the projects in the west region, as of the total capacity we expect it will drop from 30% by the end of last year to 20% in middle of this year.

Understood. And my last question is you mentioned that you are accelerating the spin-off process of the downstream business. So maybe can you give some update on this?

Okay. The capital market is still volatile, that why we are taking steps to accelerate the spin-off process, our target is to complete the spin-off process as quickly as possible in 2016 to maximize the shareholder value. The detailed plan is being evaluated for certain times and we are confident that the plan is doable and we plan to communicate with investors in detail when the process reaches significant milestone in the near future.

Our target is to finish this year, so it's one of the management's priorities.

Your next question comes from the line of Frank He, Goldman Sachs. Please go ahead.

So just a follow-up question on the curtailment situation right now in China. So we understand that Xinjiang has already been curtailing 100% during the winter heating period. And so just wonder if there's any recent pick-up in the power supply to the state grid since March or April or you have received any notice officially from the state or municipal government regarding the power supply to the grid recently?

We didn’t received any official communications from the local grid, but the situation it Xinjiang projects is improving and so far in the first quarter progress in Xinjiang Province for Jinko can generates 30% to 40% of capacity. We expect after the winter season, the curtailment situation will continue to improving. Just like we said it's a hard process to stabilize the heating system in the winter season.

Okay. And also regarding the subsidy catalog, so you mentioned the project that by end of February last year could be able to receive the subsidy in Q2. So how much capacity Jinko has submitted to MOF so far for the subsidy catalog?

It's around 400 megawatt. So after approval, we will reach cumulative 500 megawatts in the subsidy catalog, we have 100 megawatt. So, 400 megawatts, we will have 500 megawatts in the subsidy catalog.

After [indiscernible].

Yes.

Okay, got it. And also last question is about the investor communities in the solar in China right now. Given we face the curtailment and also the receivables delayed payment, are you seeing changes in the investor profiles in China's solar investment side. I mean the downstream side or operation.

Okay. I don't see any significant change and China is expected to continue to ease the monetary policies and the last week, the G20 is calling for the green financing which is supported by the Chinese government. And thanks to the stable cash flow and the low risk of solar project. We continuously see the policy bank, commercial banks and financial leasing company are very active in providing the loans for the solar project.

This is Gener, one more point here is for the Chinese -- especially for the Chinese solar assets, the any investors are always the joint group or joint investors because the power business is always dominated by the sizable company instead of short term investors. So from our point of view currently the customer -- sorry, the investor portfolio are stable.

Okay, that's helpful. Thank you.

Our next question is comes from the line of Pierre Maccagno, Northland. Please go ahead. Your line is open.

Congratulations on the quarter. Most of my questions are answered here, any comments on the silicon pricing. Do you expect a pick-up during the year?

The polysilicon price dropped to$13 to $14 in the fourth quarter, so after the Chinese New Year, the price increased a little bit by 3% due to the -- I think the low inventory levels in China. We don't expect upward pressure for the polysilicon price due to the oversupply situations and continued cost reduction for the Tier 1 polysilicon suppliers. We expect the polysilicon price will be stable in the first half of the year. And then they go down slightly in the second half of the year.

Okay. And can you go a little bit over again on the gross margin decrease? I didn't quite understand. You talk about some seasonality in the quarter regarding the electricity revenues.

Looking to the gross margin, we expected Q1 blended gross margin will improve. And so if you breaks down the two business module and downstream, the module business is pretty stable and with improvements in curtailment situations, we expect the gross margin for downstream will increase in the first quarter.

Okay. Well, thank you very much.

Your next question is comes from the line of Andrew Thorne, Platform. Please go ahead your line is open.

I just wanted to come back again on the question of the spin-off that you mention in the press release to maximize shareholder value. It sounds -- well, you said it was a management priority for 2016. Can you tell us what decisions have clearly been made there? Is it going to be a listed entity and if so is that listed in Hong Kong or could it be a sale?

We're not in position to discussing the planning details but the Chinese capital market is the first option and we have the plan in place with assessments of our consultants and which we believe is doable. And I think we will complete the process as soon as possible in 2016.

Okay, thank you.

There are no further questions at this time. I will now turn the call back to Sebastian. Sebastian, please proceed.

Thank you, everyone. On behalf of the entire JinkoSolar Management team. I want to thank you for your interest and participation on this call. If you have any further questions or concerns please feel free to contact us. Have a good day or good evening. Thank you, everyone. Goodbye.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.