JinkoSolar to expand solar module capacity as fully booked into 2H14

Speaking during the company’s third quarter conference call, Arturo Herrero, chief strategy officer at JinkoSolar said: “[We are] moving forward in our transformation, from a module supplier into a producer of electricity and providing also service first to our own PV project developments. Our mission is to be a leader in providing clean energy solutions by not only selling products, but also providing full services.”

Management said in the call that the company was increasing its downstream project business both for utility-scale and distributed generation (DG) markets and importantly selecting high IRR projects to be kept rather than sold (retained value), with the aim of offering bundled projects into stock market offered, along the same lines as those recently outlined by SunEdison.

Zhang Longgen, JinkoSolar’s CFO, noted in the call that PV projects totalling around 230MW had IRRs of around 12%. “I think we are planning to hold the project[s] rather than to sell the project[s],” said Longgen.

He added: “We will consider the window and the cash flow window and the [possibility] to spin-off either in US market or Hong Kong market… it depends on the regulations and also capital market. But to maximise Jinko’s shareholders the value profit, I think we will consider the timing and also the valuation in our go [sic] to the market.”

JinkoSolar noted that it had connected 105MW of projects in the third quarter and expected a further 108MW during the fourth quarter of 2013. This would be followed by an additional 300MW earmarked to be connected by the end of 2014. Project finance was being provided by partners such as China Development Bank, according to the company.

The company also said that its PV project pipeline included 700MW in utility-scale projects and more than 400MW in DG systems.

Capacity expansions in 2014

Management suggested in the call that that approximately US$50 million out of a total of US$70 million allocated to capital spending in the third quarter had been allocated to increasing its module manufacturing capacity, a significant increase in its CapEx allocation for the year.

“The manufacturing side I think as of September 30, we have the capacity on the ingots, wafer, cell is 1.5GW and on the module is 1.8GW. And we also right now [are] looking for some distressed assets on the wafer and the cell segements. If it’s appropriate…we will also do expansion slightly. But on the module side we will continue maybe by the end of this year to continue to increase maybe to 2GW or even above 2GW,” noted Longgen.

The need for increased module capacity was said to be due to continued strong orders and project plans in 2014, which had provided the company with improved visibility into next year.

The company guided fourth quarter PV module shipments to be between 500MW and 530MW, up from 489MW in the third quarter of 2013.

Full-year 2013 total module shipments guidance was revised upwards from 1.5-1.7GW to between 1.7GW and 1.8GW, matching nameplate capacity.

JinkoSolar’s CFO noted in the call that because of the guidance and continued strong demand, almost all its module capacity was “contracted out” through the first half of next year.

The company is therefore adding module capacity as soon as possible, while selecting possible opportunities to purchase used equipment in wafer and cell manufacturing to keep CapEx down as much as possible.

Third quarter financial results

JinkoSolar reported revenue of US$320.7 million, an increase of 11.2% from the second quarter of 2013 and an increase of 47.6% from the third quarter of 2012. Electricity revenues generated from solar projects were US$6.5 million, an increase of 717.8% from the second quarter of 2013.

The sequential increase in revenues was said to be primarily attributable to the increase in shipments, improving PV module ASPs and the increase in electricity revenues from solar projects.

Gross profit in the third quarter of 2013 was US$71.5 million, compared with a gross profit of RMB311.6 million in the second quarter of 2013 and a gross profit of RMB77.6 million in the third quarter of 2012.

Gross margin was 22.3% in the quarter, compared with 17.7% in the second quarter of 2013 and 5.8% in the third quarter of 2012.

In-house gross margin relating to in-house silicon wafer, solar cell, and solar module production was 21% in the third quarter of 2013, compared with 18.3% in the second quarter of 2013 and 12.6% in the third quarter of 2012.

JinkoSolar reported total solar product shipments in the quarter were 518.9MW, consisting of 489.3MW of solar modules, 10.9MW of silicon wafers and 18.7MW of solar cells.

“The visibility we have today is much better than definitely one year ago,” said Herrero. “So we have already contracts signed for 2014 in some markets and we are seeing the demand is still strong, especially in China, Japan, markets like South Africa for Jinko, especially USA and it helps also that in Europe there is a high price for the agreement between the European Commission and the Chinese government. So definitely next year if we see the growth of emerging markets like South America, Africa and Middle East, definitely we will see much more demand that will increase the ASP at least for the next two quarters.”