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Guest eysteinh

My assumption (confirmed by examples I've seen) is that the distribution curve for power yield in module production is bell shaped. So when product sheets show a range of powers available I assume that the average is the mid-point (as it is for normal distributions).

This is my suspicion also.

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Explo. certainly this is the case of brand building and has a promotional aspect attached to it. Accepting explanation, I am not convinced with the perception that particular module rating is responsible or present in ones modules sales. We do not have this visibility. I think however that it is possible to extract it from module shipment data. The only needed ingredient is the physical account of the shipment, like containers, pallets. I contacted Jason for some info on this. By understanding this average for various destinations, you can average company's efficiency for overall shipment number and build a better understanding of efficiency in its capacities. View we do not have today. Yet I am getting ahead of myself, may not be possible or have too many variables to compile. I will have to wait for his response.

I agree with eystein, that's would be very valuable data. Once you've identified type of module (e.g. 6x60 or 6x72) and number of modules and the total watts for a container the actual average conversion efficiency of exported modules would be visible. Right now I'm just basing numbers on plausibility using normal distribution assumptions. I think the current simple and assumed model still has decent enough confidence to place the weight I do on it in stock pick evaluations.

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I am referring to Q3 or Q2 processing costs written in Supplemental PDF.. There is clear difference between cost of 0.67 (as per Q3) and in all processing from the COGS. When you analyze the inventory, you will see three very distinct concepts. Obsolete inventory, inventory effect due to market adjustment and the cost of carrying it (storing it, cleaning it etc). The first one is written off, others are adjustments. This is the part which should grab your attention as write off is basically stuff declared as not usable. Sole fact off various ranges and names for virtus is fancy recognition of randomness of the process, and HP % required to produce 255 to 260W virtus modules is low, and it is not 100%. Nothing has changed here. The overall bar went up, but this is the section of the production only. If it was 100%,why would you have anything else sold, it costs the same if not less? Freight has been out for 3 years, i am not sure what this is coming back. The processing of .11 or whatever does not have disposal of obsolete inventory. When demand is driving efficiency requirement, and you sell wafers, you sell portion what you produce, since the "process" does not produce 100% efficient line. You cannot sell the rest, it is obsolete. How is the company which produces poly can write off basic material to zero, it can be simply reprocessed, yes? Because it is wafers which are sub rated. Why cannot they call it for what it is, it would be so simple this way. Your assumption about module penetration of certain range is unfounded and cannot be supported by any of the data I seen. I rather not discuss this as it is not a fact. I just want to add. This is a great discussion but i do not want to carry on with this as we are discussing elements which are very hard to identify with precision or fully understood by application of data. I have written an article about Trina for PVM. There reason I bring this up, it was the most difficult piece of writing as I happened to consult the company. From that point on it was edited number of times that it almost lost its key points. Companies, all of them not just Chinese, will be very secretive on aspect of their business. I would not write SPVI article in the same fashion as I write here as there is a lot which is just a statement on my part based on my experience to date with thus far dealings with solar businesses. I am making points not expectations that you Explo or anyone else will stop liking SOL. I am hinting why I do not put as much into SOL today. I put things into TSL and as you may note I also not put this firm into a first row. My opinion. Good discussion, and you are very knowledgeable on the subject.

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I'm still very confused.

My investment case is simple. SOL has stated 3 things:

[*]Average power rating of modules using wafers made with the Virtus A++ manufacturing method is now 255w (with vanilla cell process)

[*]Their all-in cost to make these modules will reach 52 cents this year (57 cents in 12Q4)

[*]All their 1.8 GW multi wafer lines can be configured to use the Virtus A++ manufacturing method

Those 3 points together with input cost control from in-house poly and diamond wires is why I think they are well positioned to make gross profits.

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I thought I was very clear. It sounds like I cannot explain this so I will give up after this.

    [*]Renesola put together a module which they call Virtus II. The average rating of it is 255W. They use wafers from Virtus A++ method in this module. Where does it say that "every" wafer produced by this method has rating qualifying for this module? Show this statement to me? Even mono ingots have ranges of power. this has been my point all a long.

    [*]2. They are "expecting total selling cost" to be 0.57. What is the obsolete inventory cost? What is obsolete inventory : "Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down". I personally believe that poly manufacturer will take adjustments instead of write off inventory. Write off inventory of finished goods means product does not sell.

    [*]I have never indicated anything in regards of transfer of production ability. I said that bar went up in efficiency, but even if all of it is A++, that does not mean that 100% is virtus II module rating designation, due to ranges of power output.

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Okey, I think we're starting to pin this down.

My two last points you seem to not object to, since my second point applies to production to be made in 2013, which by sourcing poly in-house and producing at low processing can avoid the write down effects of higher procurement cost in prior quarters causing the discrepancy for SOL and others in cost of goods sold and cost of goods manufactured in a single quarter during 2012. So this inventory management issue from volatile raw material market prices is something I see SOL better positioned to manage in 2013 and forward than others. Not talking about 12Q4 and 13H1 as lingering effects will remain.

The first point is what you think is not true. I think you agree that Virtus II average 255w as this has been explicitly confirmed multiple times. What you don't agree with is that this implies that the average wafer coming out of the Virtus A++ wafer manufacturing method is also corresponding to 255w. I agree that this has not been as clear, but from mathematical reasons I conclude it has to be close. Here's what I base this on:

[*]Wafer quality yield from ingots tends to have a bell shaped curve and the standard deviation is quite low (seems to apply even more for A++). This means that the majority volume is very close to the average quality.

[*]It looks like SOL will use around 50% of their Virtus A++ wafers in their Virtus II modules

I think product portfolio strength is evident if you compare product sheets. SOL don't have a single product sheet that is not at least at the same level as TSL's best (and more expensive?) product sheet (Honey). While TSL volume products (standard multi) are much below SOL's volume product (Virtus II). Only explaination that would mean that SOL does not have a much stronger product offering would be that their product sheets don't properly reflect what they have, i.e. misrepresentation. It's a risk, but quite small I think since everything they've said is consistent with their product sheets.

Still I would like to be convincingly proved wrong by explicit reference to company statements or similar contradicting my view, since that can save me a lot of money.

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Guest larryvand

explo, and now add to that the fact that SOL modules are actually measuring even higher that their spec sheet power outputs. SOL technology is awesome and I hope they've patent it. And who knows what they can do with the new state of the art cell technologies using their wafers. I think that's going to be the next step. http://www.dailymarkets.com/stock/2013/01/14/renesola-modules-achieve-high-scores-on-newest-industry-simulator/

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Guest eysteinh

explo, and now add to that the fact that SOL modules are actually measuring even higher that their spec sheet power outputs. SOL technology is awesome and I hope they've patent it. And who knows what they can do with the new state of the art cell technologies using their wafers. I think that's going to be the next step. http://www.dailymarkets.com/stock/2013/01/14/renesola-modules-achieve-high-scores-on-newest-industry-simulator/

While i dont know if some of the virtus process is patented (probably is) I can tell that the engineering know how to make the ingots in a way to make them produce as high as they do when they become virtus wafers is hard to replicate. (but not impossible.) Hopefully they will have combinened it with some patents and that should make for a very strong case for having a superior product going forward now. I belive odyd12 makes a point about the spread of wafer quality and that perhaps inventory writedowns is because they cannot produce all wafers of the same quality. I think both me and expo have discussed that the spread is probably bell curved. In rec they are now looking at dramatically increasing the average of the bell curve, i think the same thing is happening in SOL.

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While i dont know if some of the virtus process is patented (probably is) I can tell that the engineering know how to make the ingots in a way to make them produce as high as they do when they become virtus wafers is hard to replicate. (but not impossible.) Hopefully they will have combinened it with some patents and that should make for a very strong case for having a superior product going forward now. I belive odyd12 makes a point about the spread of wafer quality and that perhaps inventory writedowns is because they cannot produce all wafers of the same quality. I think both me and expo have discussed that the spread is probably bell curved. In rec they are now looking at dramatically increasing the average of the bell curve, i think the same thing is happening in SOL.
larry, that was a scary well-timed PR of SOL, considering the discussions here. With up to 8 watts better actual than spec output, they might be close to another update of the specs. This was what caught my attention and bullish sentiment initially. During periods the past year (when I analyzed the product portfolio strengths of the solar 11) I noticed that SOL was upgrading their sheets frequently and almost upping them 5w on a monthly basis at one point. The conclusion from this was that they were in a technology breakthrough momentum phase and continuously confirmed even better results than they dared claim and kept aligning their datasheets with actual verified properties. eystein, odyd, in what's been finanicially reported so far, no effect of Virtus II can be seen, since the launch of it was PR:ed as recently as mid October. The R&D achievement was first mentioned in August. If anything, what we've seen this year is rather the opposite, i.e. sales, write down, maybe even dumping of old obsolete tech built inventory to make ground for the new strong portfolio going into 2013. In Q4 we might see a mixed effect. My guess is that the majority of inventory built in Q4 will have these beneficial cost and quality properties (depending on how much time they need to reconfigure 1.8 GW of lines to Virtus A++ and on fixed contract situations), but most of the inventory sold will be Virtus I and old standard multi. The guidance they'll give should reflect this recent breakthrough though and I'm trying to get ahead of that curve.

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Guest Klothilde

Hi explo, I'm still trying to understand the SOL tech migration. Do you know how much of the 1.8 GW multi wafer lines they have already upgraded to A++ and by when they want to complete the whole upgrade? Also I noticed that they don't show data sheets for the regular multi-modules 230-250 Wp on their homepage, however these modules are still being sold in Germany at dumping prices: http://ap-solar.de/ Is this just a sell-off of old stock? Or are they still manufacturing regular multis but not advertising them? In Q3 SOL had the lowest ASP among the solar 9 at 0,67 $ per watt. Would you expect SOL to move up to an average level in Q4 relative to peers?

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Guest eysteinh

The guidance they'll give should reflect this recent breakthrough though and I'm trying to get ahead of that curve.

Bingo. This is what happens when they radically increase the average of the bell curve spread for wafer effiencies. It takes a while before the financial statment will show this. So you will get "ahead of the curve" in the stock market if you realise the technological benifit they have recived before it is shown in the financial results.

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Hi Klothilde,

Hi explo, I'm still trying to understand the SOL tech migration. Do you know how much of the 1.8 GW multi wafer lines they have already upgraded to A++ and by when they want to complete the whole upgrade?

End of 2011 they upgraded all their 1.8 GW multi furnaces to support Virtus I growth (monocasting). They could be configured to either quasi or multi growth after that. After this their multi module performance started to see performance increases too. I think the result of that furnace upgrade has led to that the furnaces now also can be configured to the new Virtus A++ growth method. All furnaces are enabled, so no upgrade or capex are required at this point. It's just a matter of switching the configuration of each line to use this method instead. I think that that is process-wise and technically quickly done and if their contracts for Q4 and Q1 shipments have old multi specs I think they can change that with a win-win discounted taste for customers as it doesn't cost much more for SOL to make a A++ wafer than a standard multi wafer (per Watt it costs 1-2 cents less) - it's just much higher quality and the customer can use it the same way as a standard multi wafer.

Also I noticed that they don't show data sheets for the regular multi-modules 230-250 Wp on their homepage, however these modules are still being sold in Germany at dumping prices: http://ap-solar.de/ Is this just a sell-off of old stock? Or are they still manufacturing regular multis but not advertising them?

Yes I think this is part of the confusion with SOL. As recent as a year ago SOL wasn't a strong module player at all. Their multi modules averaged 230w and they only had 10 persons in the module sales (it's said that they hired 1000 in 2012 as they saw the new opportunity). The module division was built in 2009-2010 and was only intended to sell with little efforts during shortages. Then in 2011 they made the Virtus I breakthrough with Quasi-mono panel reaching 245w average, triggering start of increased focus on the module business from this differentiation (partially driven by the wafers powering this being less standard and thus not having a mature cell maker market for this type of wafers). In 2012 they discovered that they don't need to do the seeded monocast to reach same conversion efficiency level, reducing cost and increasing market for SOL's HP wafers. So to answer your question, I think a lot of the sales in 2012 has been about getting rid of as much as possible of inventories of weaker products ahead of worst price declines, to have a good start for 2013 with their new low cost high quality product portfolio and no legacy product inventories. The ASP we've seen so far (only selling to low ASP markets Europe and Australia) is probably a result of a mix of dumping old multi "junk" and getting a premium for Virtus I. Note that this is not just SOL at the factory gate. It's also remaining channel inventory at distributors of SOL modules that needs to empty before losing value as new shinier 2013 SOL collection arrives. The channel inventory might have a production date dating back quite long. After the Virtus II breakthrough they've so far continued on the module path, but I'm curious on what their next step will be. I think they'll expand (even if that sounds mad in these days) to exploit the opportunity gained and I'm quite sure it won't be on cell and poly (although they have a cost breakthrough on poly in 2012 as well), but not fully sure if they will grow module or wafer business. Module is cheap and they have a big opportunity here to become one of the big ones and it diversifies and stabilizes their business structure. Wafer on the other hand is where they bring most value to the industry and their core business and they have a good opportunity to increase their claim on this market too.

In Q3 SOL had the lowest ASP among the solar 9 at 0,67 $ per watt. Would you expect SOL to move up to an average level in Q4 relative to peers?

SOL has guided that the ASP gap to Chinese tier1 module brands will narrow or invert in Q4. That's on an apples to apples comparison, i.e. within individual markets. On the fruit basket comparison they'll also narrow the gap, by selling more into the high ASP geographies in Q4 vs the opposite so far. I expect peers will see bigger QoQ ASP drops than SOL in Q4.

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Guest Uncle Chang

So far the top 3 performers year-to-date are LDK, HSOL and SOL; it makes sense to me since all 3 are Polisilicon Producers. Taiwan Green, Delsolar are also topping the Cells producers, both make Wafers. Don't know if it's all conincident, but it does make sense to me. The 3rd and 4th places are CSIQ and TSL, honestly I've been treating them as twin brothers, I think they basically do the same things with silimar capacities, except CSIQ is doing more overseas? YGE was the one on headline news when it was reported with more than 2.2Gw shipment last year, it doesn't seem to help it much. JASO should've done better once people figure out they can still sell their cells domestically? That's a question, not an answer for now. JKS, CSUN, STP, DQ are falling behind, can't figure out why for now, especially DQ which even makes Polycilicon. Will keep monitoring..

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Guest abcdefgjoho

i see one thing happening here again which I know from yahoo board. alot on technicals of modules not much on branding and standing of companies. sol is still a clear tier2 module supplier as far as brand name is concerned. they will have todo quite alot of marketing, sales to get to a tier1 status which then allows higher asps. if you do a search on solar installer forums you get ten thousand hits for stp, yge e.g. - not much for renesola modules. sol has to close that gap and that wont happen overnight i fear. it is not only about module output and technicals - in the end solar modules are a 20-50K$ product on a standard rooftop install and people only install what they know.

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Abc, You're right, Renesola has not invested anything into brand building. They've rather claimed that the amounts spent on sponerships and similar by other names are not prudent capital management in this low ASP environment. Before 2012 they were basically tier3. I think in 2012 they rose looking a market-share in Q4 to a tier2 name. What they are investing a lot in now is sales. They'll also attend several shows every month from looking at their event schedule. I don't expect pricing of SOL modules to be based on other things than power output quality, warranty and insurance quality. They produce most kWh (ranking highest in tests like Photon does, having among lowest PID, LID, temparature coefficient and low light condition loss), best warranty conditions (linear+, 25 years for included microinverter) and warranty insurance by independent third-party insurance company. These properties increase projected returns from the modules and reduce the risk and will thus render a price premium on that basis. But they will not get a brand awareness price premium like Yingli can (could?) get. After awhile (years) that could be earned from big market-share and good reviews and word of mouth instead of advertising. Advertising is often a quicker route to a price premium, but in PV which is an economic investment not a product to use for better life quality, I think advertising ROI is more uncertain. It will be interesting to see if this view remains after SOL's increased market-share in Q4 and as I expect in 2013. The higher market-share you have the less the relative cost to protect it with advertising and the more to lose. I'm not sure, which is best at that point, but SOL hasn't chosen the brand avenue yet (perhaps it's an easier decision to enter than exit that path). Abc I also think that the reason that branding between STP, YGE, TSL, CSIQ and HSOL has mattered as much as it has was that there were very little other difference between their modules. They all produced something like 90% Skoda and 10% high cost BMW. Now Renesola produces 100% BMW quality at Skoda cost. Quality in this case is different though, since it doesn't decide how fun, convenient or safe it is to drive, it decides how rich you'll get on your investment in PV, and that's easier to put a price on. It might still be fun to have a well recognized brand on your roof, but it's not the same thing as with other products. With strong insurance coverage of the expected economic return now, the brand also means little from the economic perspective, while before these insurance were introduced in 2011 the brand could play a big role here, even among the bankable names. In my view the industry has changed significantly the past 2 years and the valuable strengths of the past might not be the most valuable strengths today. I actually think there is quite a big risk with investing in a name like YGE or TSL over names like JKS, HSOL or CSIQ, since the big weapons the former have (brand name as a soft insurance of the panel ROI) have be rendered virtually useless by the new hard insurance innovations in the industry. Tier2 has managed to neutralize the tier1 advantage. Note that CSIQ was one of the first to do this and just look (in their presentations) how quickly they climbed to join TSL in market-share after introducing their insurance solution. With risk I mean that the first two still have market caps in the 400-500m while the latter have market caps in the 100-200m and those market cap diffs are still reflecting a significant brand component, since market-share difference is not as big (best comparison here is CSIQ and TSL), while my view is that the actual business impact of the brand component has lost a lot of its former significance in today's PV market. IMHO (I know that this view can be perceived as quite upsetting - and it's just my view, it might not be very accurate or even correct).

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Guest spiritcraft

Not that it matters, and I don't know the validity of his numbers in the slightest, Boss from the yahoo board predicts a $.02 profit from SOL in Q2. I certainly don't take a yahoo members post with anything but a grain of salt, I did find it interesting since he has been so negative for so long. Also the Chinese story that was posted in another thread has TSL apparently claiming a profit later this year was a bit unexpected. I suppose the gist of all this again is that when these companies start going into the black in this low cost, demand drive by price environment global market we may see some real price appreciation for our various holdings. Profit rumblings, even without details are a welcome relief after two years of bleak doom. One thing is certain, not all will ever be tied to what Germany installs again. And I must again thank the country of Germany for basically giving the world Solar PV in a meaningful way through their bold fit and dedication to renewables. As to the point above, I think brand matters, especially concerning bankability and the perception that a company will be around for the guarantee is more important than ever.

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Guest Boss

My SOL numbers for Q2 2013. 300MW wafer sales ASP $0.25 300MW module sales ASP $0.65 wafer cost $0.21 module cost $0.52 opex 36 mio interest 12.5 mio EPS $0.02 (Of course if ASP are lower then SOL will post a loss.)

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Guest spiritcraft

HI Boss... Welcome. Please don't take any offense with the above... I didn't know you were here and can't of course take your numbers as gospel. I am sure we all appreciate your taking time to analyze and post numbers.

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Guest Boss

No problem spiritcraft. I just signed up here on this board,because yahoo board sucks big time now.

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Guest singular

No problem spiritcraft. I just signed up here on this board,because yahoo board sucks big time now.

Yes, welcome Boss, Nice to see you. I agree about Yahoo. I have never seen message boards go to the crapper as fast as Yahoo did.

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