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I've asked ReneSola IR about their capacity structure to better understand the 2.9 GW PV product shipments and retained 2.0 GW wafer capacity guidance. The discrepancy explanation is that they outsource supervised third party manufacturing of ReneSola branded wafers. These wafers are in high demand and get premium pricing, while modern efficient wafer equipment in the industry is plenty available. It makes sense to use existing equipment out there to exploit the ReneSola brand and proprietary production method for high quality yield to get this equipment optimally utilized instead of ReneSola adding more wafer capacity, thus increasing the industry redundancy at this point of very low outsourcing costs.

The module capacity was stated to be at 2000 MW now. It carries very low capital cost, so it makes sense to have the extra capacity there to meet a jump in demand. The 400 MW overseas module tolling arrangements secured for potential EU tariff shipments might not include other foreign outsourcing announcements made after that (South Africa) and other local content requirement arrangements made previously (India).

Below I break down their current structure. Poly applies to second half, while in first half they outsource the majority during plant upgrade, but this is during the basement-pricing period. Actual wafer capacity seems to be a bit above nameplate. Cell capacity I'm not sure if it is 240 or 300 MW. Small diff, I'm using 300 MW for simple well rounded number. Resulting 2013 outsourcing based on 1.6 GW module and 1.3 GW wafer shipments is also broken down with the tariff cost impact comments. All but the poly should be supervised tolling.

Renesola in-house capacity:

• Poly 1800 MW (potential China tariff free)
• Wafer 2100 MW
• Cell 300 MW
• Module 2000 MW

Outsourcing 2013:

• Poly 1100 MW (all foreign, potential EU poly tariff free, potentially potential China tariff free for exported modules)
• Wafer 800 MW (significant foreign portion*, potential EU wafer tariff free)
• Cell 1300 MW (significant foreign portion*, US cell tariff free and potential EU cell tariff free)
• Module 400+ MW (all foreign, potential EU module tariff free)

*Depending on tariff risk situation

I have no idea how a potential EU tariff would be designed, but I can imagine, if practically traceable, that they want a certain amount of the value-chain to be EU or non-China rather than China. So say that poly comes from EU, wafer from China, cell from Taiwan and module from EU - that might be considered better than a GCL + pack all China module.

The important point about the structure is the balance of underutilization cost risk, unnecessary outsourcing cost risk and ability to meet demand in different markets without high tariff costs. I think they've balanced this well for their expected geographical sales footprint and I think that they only risk idling module capacity in China, which is no big cost. If EU decides to not impose tariffs they'll instead use their own module capacity for their 1.6 GW guidance to avoid outsourcing cost (that would no longer be offset by higher ASP in EU).

The way I see it ReneSola has turned into a major brand exploiting company that can make money on outsourcing supervised manufacturing of its branded products to the excess of modern low cost capacity out there lacking brand and sales channels. By doing this they also keep all markets open to meet the demand of their products in the current tariff risk scenario.

It's an interesting structure they've put in place for the current political/tariff risk and excess capacity scenario.

Quoted from "Boss"

I wrote IR from Renesola too. The outsourced module cost the same $ 0.55 then the inhouse production module.

Thanks. That confirms the impression I've gotten from cost guidance. It seems they are managing things very well to minimize cost. Despite outsourcing majority of cell processing and quite a lot of other processing they still have leading production costs.

solarcat, yes it is evident that ReneSola is in a good business position when they run 100% utilization (all ReneSola branded production, no white label processing business anymore) with 30% outsourcing on top of that to meet demand, while others are still running below 100% utilization. It makes a big difference in covering the fixed costs like depreciation, opex and interest.

SOL is having others toll for them to meet demand for ReneSola branded products. HSOL is doing 30-35% tolling for others to increase utilization of its capacity. The condition diagnostics is that simple.

Believer, I have no info on the outsourcing cost. Boss had gotten some numbers from SOL IR. What I think I can conclude now is that their cost guidaince that they call total module selling cost is including outsourcing penalty. The outsourcing penalty now is very low. Note that this does not mean they can idle their own capacity. Example with the poly plant up:

Wafer cash production cost: 15 cents (7 cents poly + 8 cents wafer)
Wafer fully loaded production cost: 21 cents (3 cent depreciation each for poly and wafer equipment)

If they can outsource wafers at 21 cents total cost, there's no point in adding capacity (the brandless tolling partner is happy to just cover its cash production cost and some extra in this excess capacity situation). If they could outsource at 15 cents then there would be no point using own capacity for production.

If they produce 2100 MW at 21 cents by 2H and outsource 800 MW at 23 cents, that's 21.5 cents blended cost. This is what I think SOL means. They're blended production cost is almost as low as their full in-house production cost on the fully loaded basis, not on the cash production cost basis.

You always want to utilize the capacity you have, but if (for some exception companies) you have more business than capacity, then now is the perfect time to outsource to desparate idle capacity instead of spending capital on adding own capacity.

Note that shipping and handling (AKA freight) cost for procurement is included in COGS, while for sales it is included in selling expenses part of opex.

Quoted from "Boss"

As forecasted in the third quarter earnings release, the company ramped up its capacity to 10,000 MT by the end of Q1 2013. Trial production was delayed as the company was still making upgrades and integrating Phase I with II.

Thanks for sharing this as well. No reason for panick over having to buy poly yet.

Quoted from "redsolar"

2GW in-house module capacity? are you sure about this? When did they get this built to 2GW?

That is a good question. I was surprised by this too (info came from their IR).

ReneSola makes low cost diamond wires too, so I've thought about your point of them outsourcing slicing and supplying ingot and wires, but I didn't hear anything indicating that their nameplate ingot capacity was higher than 2.0 gw.