Changzhou, Jiangsu Nov 23, 2015 (Thomson StreetEvents) -- Edited Transcript of Trina Solar Ltd earnings conference call or presentation Monday, November 23, 2015 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Yvonne Young Trina Solar Limited - IR Director * Jifan Gao Trina Solar Limited - Chairman & CEO\ * Teresa Tan Trina Solar Limited - CFO ================================================================================ Conference Call Participants ================================================================================ * Jerimiah Booream Deutsche Bank - Analyst * Patrick Jobin Credit Suisse - Analyst * Philip Shen Roth Capital Partners - Analyst * Sheng Zhong Morgan Stanley - Analyst * Gordon Johnson Axiom Capital - Analyst * Yang Lu - Analyst * Pavel Molchanov Deutsche Bank - Analyst * Jeff Osborne Cowen and Company - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning. My name is Marianna and I will be your conference operator today. At this time I would like to welcome everyone to the Trina Solar third-quarter 2015 earnings conference call. (Operator Instructions). I would now like to turn the call over to Yvonne Young, Trina Solar's Investor Relations Director. You may begin your conference. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [2] -------------------------------------------------------------------------------- Thank you, Marianna. Good morning, everyone, and welcome to Trina Solar's third-quarter 2015 earnings conference call. This is Yvonne Young, Trina Solar's Investor Relations Director. With us today are Trina Solar's Chairman and CEO, Mr. Jifan Gao, and Chief Financial Officer, Ms. Teresa Tan. Before I turn the call over to Mr. Gao, may I remind our listeners that on this call management's prepared remarks contain forward-looking statements which are subject to risks and uncertainties. And management may take additional forward-looking statements in response to your questions. Therefore the Company claims the protection of Safe Harbor for forward-looking statements that's contained in Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today. And, therefore, we refer you to a more detailed discussion of the risks and uncertainties in the Company's filing with the Securities and Exchange Commission. In addition, there will be discussion of non-GAAP financial measures in this call. Please refer to our earnings release for cautionary statements and reconciliation to direct-comparable GAAP measures relating to the use of such non-GAAP financial measures. For those of you who are unable to listen to the entire call at this time, a recording will be made available via webcast for 90 days at the Investor Relations section of the Company's website at www.trinasolar.com. With that, it's my pleasure to turn the call over to Trina Solar Chairman and CEO Mr. Jifan Gao for our third quarter opening remarks. Mr. Gao will speak Mandarin; I will translate his speech into English. Mr. Gao, please. -------------------------------------------------------------------------------- Jifan Gao, Trina Solar Limited - Chairman & CEO\ [3] -------------------------------------------------------------------------------- Good morning, everyone. (Interpreted). Good morning, everyone, and welcome to our third-quarter 2015 earnings call. We recorded 1.7 gigawatts of module shipments this quarter. Our cumulative shipments have exceeded 15 gigawatts over the past 10 years, achieving a CAGR of over 90%. This marks a significant milestone in our history, and is a testament to Trina Solar's leading position as the largest solar-module manufacturer in the world. Downstream we have managed to stay ahead of the competition to grow our business significantly. We connected to the grid a total of 251.9 megawatts of projects this quarter, including 38.9 megawatts of DG, exceeding our guidance of 190 megawatts, boosting our total retained projects to 610 megawatts. This has positioned us well to becoming a world-class solar project developer and operator. Given our current scale in China, we shifted our downstream strategy from retaining all China projects to a combination of build-to-hold and build-to-sell in 2016, which will allow us to better monetize project value, maintain adequate cash flow and achieve sustainable development. In term of the market, we continue to see strong demand in our key -- in key markets, including China and the US. We had record shipments to both countries. We are able to capture growing opportunities in emerging markets, thanks to our global resources deployment, in particular in Indian and Thailand. Emerging markets in Asia Pacific and Middle East have become the new driver for our growth, which compensated for the shortage of demand from Europe and Japan. On the R&D side, we have continued to improve cell efficiency. This November the high-efficiency, p-type, multi-crystalline silicon solar cell developed by our researchers at the State Key laboratory reached a total area efficiency of 21.25%, breaking our previous world record of 20.76% that we set last year at around this time. We remain strongly committed to driving the application of innovative technology. Our new high-efficiency, silicon PERC module has entered into mass production. Additionally, tailored for desert climate, we have introduced a Desert Double Glass module for hot, dry climate, equipped with a very proprietary technology and a frameless body; it will generate electricity than standard modules. We believe our progress in these initiatives will be rewarded and drive growth in the long run. We remain committed to reducing our carbon footprint throughout the whole lifecycle of our products, as the leading solar module company dedicated to a greener world. The Silicon Valley Toxics Coalition, SVTC Solar Scorecard has ranked Trina Solar number one globally for three consecutive years since 2012, highlighting our commitment to environmental protection and social responsibility. Also in the third quarter we were successfully certified by the Energy Management System ISO 50001 and published our 2014 Corporate Social Responsibility Report. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- (Operator Instructions). -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [5] -------------------------------------------------------------------------------- I'm sorry, the line was cut off. So Mr. Gao will continue his speech. -------------------------------------------------------------------------------- Jifan Gao, Trina Solar Limited - Chairman & CEO\ [6] -------------------------------------------------------------------------------- (Interpreted). Looking into 2016, China and US, will continue to lead and drive strong growth in global demand. We're confident, that with our leading technology, cost advantage, diversified financial channels and asset-light manufacturing model globally, along with our first-class development capabilities for our downstream projects, Trina Solar is poised to capture these growing opportunities to achieve continued success through all this period of the industry consolidation. Our growth prospects will remain robust to render another record-breaking year for Trina Solar and deliver healthy growth in 2016. With that I would like now to turn the call over to Teresa to review our financial and operational results, update the lawsuit with Solyndra and its impact on our Q3 financials, as well as to provide our guidance for Q4 and 2015. Thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [7] -------------------------------------------------------------------------------- Thank you, Mr. Gao, and hello, everyone. Today I will start with an update on our module manufacturing business and then I will discuss our financial results, along with an update on the Solyndra case. Starting this quarter, we will also provide financial updates on our downstream business. As for Mr. Gao mentioned, we continued to see strong demand for our products in our key markets in the third quarter. We shipped a record 1.35 gigawatts of modules to external customers, an increase of 35.2% from last quarter. Shipments of our flagship products, such as our Duomax, Honey and Trinasmart modules also increased sequentially to 245.9 megawatt, accounting for 18.2% of the total. China continues to be the largest contributor to our Q3 volumes. We shipped a record 484.9 megawatts to China. We secured a series of large orders, with favorable payments terms, from a variety of state-owned enterprises, and the other leading renewable-energy enterprises. The differentiation strategy that we adopted in China has started to bear fruit. We have become the leading dual glass supplier in China with an accumulative installation of 300 megawatts in various projects, and up to 168.9 megawatts shipments in Q3. We will continue to expand our diverse product line to further solidify our high-quality customer mix in each market segment. Our shipments to the US also hit a new record high, increasing 39% quarter over quarter, to 449.9 megawatts, and making it our second largest region after China. Benefiting from the ongoing strong demand for solar and our brand recognition in the US, we are fully booked for Q4 and have a strong backlog for Q1 of next year. We are expecting market demand to continue growing in 2016 and we will strive to consolidate our position by further expanding our sales network to residential and commercial segments. Moving over to Japan, shipments increased 28.3% from Q2. We launched a line of Spacemax modules in September that are customized for the residential market. The products have been very well received and we have been able to realize premium pricing for the differentiated product. We are prepared for a seasonal increase in orders that are typical in the fourth quarters in Japan, which is calendar year first quarter, due to the expected annual reduction of FIT. Our strategic deployment in various emerging markets also yielded positive results. Shipments to India reached a record high of 160.5 megawatts. We are happy to see solid breakthrough in Thailand, where our shipments increased significantly and accounted for 3.6% of the total. Looking ahead, we will also see increasing contributions from other emerging markets such as the Philippines and other countries in South East Asia. In terms of our execution of overseas capacity expansion under our relative asset-light approach, we continue to make solid progress. Our Malaysia OEM plan installed with Trina Solar's equipment, has been progressing as scheduled. And output is increasing quarter over quarter. Meanwhile our OEM partner in Vietnam is ramping up production to meet demand from nearby countries. We will continue to build a flexible, capital-efficient manufacturing model in more diverse and cost-efficient countries. As a part of our continued effort to strengthen our global presence, by the end of 2016 we expect (technical difficulty). -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Please go ahead, Ms. Young. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [9] -------------------------------------------------------------------------------- Hello? -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Please go ahead; you're live. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [11] -------------------------------------------------------------------------------- Yes. Are we on the main conference room now? -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- That's correct. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [13] -------------------------------------------------------------------------------- Okay. So we can go ahead with our speech, right? -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [15] -------------------------------------------------------------------------------- Correct? Okay, thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [16] -------------------------------------------------------------------------------- Well, I apologize there appears to be major technical difficulties here, so let's continue. As a part of our continued efforts in -- to strengthen our global presence by the end of 2016, we expect to expand our in-house annualized manufacturing capacity for ingots to 2.4 gigawatts, for wafers to 1.9 gigawatts, for cells to 4.8 gigawatts, and for modules to 6.1 gigawatts, that is to the end of next year, 2016. Now I would like to move on to Trina's Q3 financials. Starting off, as we discussed in the earnings release, we have disclosed in our previous 20-F and our press release dated October 13, 2012 that Solyndra LLC, a manufacturer of solar panels based in California, filed a lawsuit against us asserting antitrust and related state-law claims. We want to update you with the report that we have entered into a settlement with Solyndra last week for a total amount of $45m, payable no later than December 31, 2015. While we have not admitted to any wrongdoing in this matter, and consider Solyndra's claim without merit, the costs of litigation and the amount of time and energy that management and team has been spending on this matter, led us to review our options and conclude that it is to the best interests of the Company and its shareholders to put this matter behind us, so we can better focus on the tremendous growth opportunities ahead. As a result, while we have been producing good results, both from operation and financially over the past year, this one-off charge has brought us to a loss for the third quarter. Since the settlement was finalized last week, we recorded a provision in the third quarter and we will settle the payment in the fourth quarter. Again, this is one-time, non-recurring cash charge and it does not affect the strength of our underlying business in any way. In fact it will allow us to focus better on the operations and move forward. Also, before I continue, I would point out that we will use non-GAAP measures based on US GAAP in this quarter to help our investors better understand our underlying business performance. For a reconciliation of GAAP to non-GAAP measures, please refer to our earnings release. Our total shipments for the third quarter reached 1.703 megawatt, beating our guidance of 1.45 to 1.5 gigawatts. Net revenues for the quarter were $792.6m, an increase of 9.6% sequentially, and an increase of 28.5% year over year. The revenue included $15.3m of electricity revenue from downstream solar projects. Gross margins in Q3 were 17.4%, compared with 20% last quarter and 16.7% in Q3 of 2014. Gross profit for electricity revenues generated from build-to-own solar power projects was $10.2m, representing a gross margin of 66.9%. The sequential decrease in gross margin was mainly attributable to the decline in ASP in most of our major markets, which outweighed the drop in cost per watt that we achieved. Conversely we saw a year-over-year increase in gross margins due to the decline in our cost per watt, which outweighed the decline in ASP that we saw over the course of the year. Greater economies of scale and improvement in operating efficiency helped improve our cost structure. Operating expenses were $132.3m, an increase of 57.2% sequentially and 97.1% year over year. The sequential increase was primarily due to the provision provided for the settlement of Solyndra lawsuit of $45m and an increase in G&A expenses, primarily resulted from an increase of accounts receivable provision. The Company's operating expenses represented 16.7% of the third quarter net revenues, an increase from 11.6% in the second quarter of 2015 and 10.9% in the third quarter of 2014. Excluding the Solyndra settlement provision, our operating expenses were $87.3m representing 11% of net revenues of Q3, a decrease from 11.6% in the second quarter of 2015 and an increase from 10.9% in the third quarter of 2014. As a result, operating income was $5.8m compared with $60.7m in the second quarter of 2015 and $35.6m in the third quarter of 2014. Non-GAAP operating income, which excluded the impact of the Solyndra settlement provision, was $50.8m. EBITDA in Q3 was $26.6m compared with $99.5m last quarter. Net loss attributable to ordinary shareholders of Trina Solar was $20m. Non-GAAP net income attributable to Trina Solar's ordinary shareholders which excluded the impact of the Solyndra provision was $18.3m. We continue to maintain a healthy balance sheet. Our cash balance, including cash and cash equivalents and restricted cash was $486.1m at the end of the third quarter. Total bank borrowings were $1,173.7m consisting of $1.005b in short-term borrowing and $168.4m in long-term borrowings. The short-term borrowings included $844.9m and $160.4m for our module business and our downstream business respectively while our long-term borrowings comprised of $23m for our module business and $145.4m for our downstream business. The increase in long-term borrowings was in line with our expectations as we establish more long-term project finance in China. In terms of CapEx, as of September 30, our total CapEx on a balance sheet basis was $794.4m of which $156.9m was related to module business and the rest was related to downstream business. The expectation of this year's CapEx needed for our module and downstream business that we mentioned in prior quarters remained unchanged. As for 2016, we will continue to strategically expand our global manufacturing footprint to support our robust shipment outlook and currently we expect the CapEx budget to be approximately $300m for capacity expansion and existing facilities upgrade. Now looking at our downstream business, we have successfully connected to the grid, two-thirds of 300 megawatts ground-mounted solar project in Yunnan and 23 megawatts of DG projects in Xinjiang by the end of Q3. In particular, we have made a breakthrough in expanding financing avenues for this DG project in Xinjiang and signed $24m in financial leasing agreements. In addition to progress in securing financing for our downstream business, we have recently introduced solar cloud platform into our downstream business. This platform gives us access to intelligently monitoring and allows us to manage the full lifecycle of projects. It also allows big data analysis and overall project performance evaluation. This system will help to dramatically reduce the [all-in] cost for solar projects. In addition, our continued efforts to develop new sources of funding to meet our capital needs has started to yield tangible results. We signed a total of RMB10b in strategic cooperation financing agreements with CITIC and two of our overseas subsidiaries secured a total of $90m in financing facilities with Wells Fargo and Barclays. We are confident that this credit facility plus others will facilitate the execution of our growth strategy. Now I would like to move on to discuss our non-GAAP adjustments. As we've mentioned before we use non-GAAP disclosure to move -- to more accurately present our module business and downstream business. In Q3, we shipped 1.35 gigawatts of module on a GAAP basis. We shipped an additional 350 megawatts to our downstream projects. So on an non-GAAP basis, our total module shipments were 1.7 gigawatts. Using the same approach our non-GAAP revenues for Q3 would have been $978.2, our cost of goods sold would have been $800.2m and our gross profit would have been $178m and our gross margin would have been 18.2%. In terms of retained project assets, as of the end of Q3, we have 588.2 megawatts of projects in China retained on our balance sheet that are currently operating. This includes 513 megawatts of utility projects and a total of 75.2 megawatts of DG projects. The estimated retained value of those 588.2 megawatts of solar projects is $749.1m, using an 8% discount or $779.8m, using a 7.5% discount rate. Finally, turning to our guidance for Q4 2015 and the whole year. I will summarize briefly here and the full details can be found in our earnings release. For Q4 2015, we expect our total shipments of PV modules to be between 1.5 to 1.65 gigawatts, of which 1.35 to 1.45 gigawatts will be shipped to third party customers. As for downstream projects, we expect to connect 280 to 340 -- 320 megawatts of PV projects to the grid. Given the stronger-than-expected demand for our products, we are once again raising our full-year 2015 module shipment target to between 5.5 to 5.6 gigawatts of which 4.6 to 4.7 gigawatts will be shipped to third party customers. We reiterate our guidance to connect to the grid between 700 megawatts and 750 megawatts of downstream PV power projects across the world, of which 30% to 40% will be DG projects in China. With that operator, please open up the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Vishal Shah. -------------------------------------------------------------------------------- Jerimiah Booream, Deutsche Bank - Analyst [2] -------------------------------------------------------------------------------- Hi, this is Jerimiah Booream on the line for Vishal. I just wanted to talk about 2016 and as you're thinking about project shipments for next year, what kind of working capital requirements would that need and what volume are you targeting? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [3] -------------------------------------------------------------------------------- You mean 2016? -------------------------------------------------------------------------------- Jerimiah Booream, Deutsche Bank - Analyst [4] -------------------------------------------------------------------------------- Yes, for 2016. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [5] -------------------------------------------------------------------------------- Okay. For 2016, right now we are still working on the projections and business forecast for 2016. And as Mr. Gao has mentioned, we are going to -- as we have accumulated a critical mass of projects on our balance sheet, we are going to not only build and hold, but also we will build and sell. So we are expecting the downstream projects to be at least at the level of this year, but hopefully more. But at this time, we would hold off on giving the guidance for the next year's project development. And we're hoping to have a more definitive expectation that we can communicate with you all very soon. -------------------------------------------------------------------------------- Jerimiah Booream, Deutsche Bank - Analyst [6] -------------------------------------------------------------------------------- Okay, thanks. And one follow-up. On those downstream projects that you already have connected to the grid, have you seen any change or acceleration in payments for the full feed-in tariff? I know you've spoken about issues there in China in the past. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [7] -------------------------------------------------------------------------------- Yes, we are -- recently there's a lot of activities with the government and a lot of communications and also this is from the various companies as well communications and discussions, very active discussions regarding this tariff issue. As you know that the government is very, very committed to promote clean energy including solar energy. And we have been getting very encouraging information that we are expecting the FIT payment delay issue will be resolved pretty soon. And we have reason to believe that the resolution will come soon, most likely first half of next year. -------------------------------------------------------------------------------- Jerimiah Booream, Deutsche Bank - Analyst [8] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [9] -------------------------------------------------------------------------------- You're welcome. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Patrick Jobin. -------------------------------------------------------------------------------- Patrick Jobin, Credit Suisse - Analyst [11] -------------------------------------------------------------------------------- Hi, thanks for taking my question. A few from my side. So first, you're still doing the forecasting for 2016. But at this point do you plan on expanding manufacturing capacity beyond the plans that you've already announced similar to other Tier 1 producer announcements? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [12] -------------------------------------------------------------------------------- Yes. As we have discussed, the demand for our product is very robust in various markets, especially the key markets that we are having a presence and expanding. And so except, besides the current capacity that we have, including in China and also in Thailand, which will start production very, very soon and start the output to climb up in the first quarter of next year, we are expecting to expand additional module capacity as well as cell capacity still in a strategic way. For instance, for the module capacity we are expecting to expand from the current level or the level at the end of the year would be 4.8 gigawatts to about 6 gigawatts by the end of next year. And for the cell capacity we're expecting to expand from our current 3.8 gigawatts to about 4.8 gigawatts. So with those expansions and the upgrades that we made, the CapEx is expected at around $300m as I have previously mentioned. -------------------------------------------------------------------------------- Patrick Jobin, Credit Suisse - Analyst [13] -------------------------------------------------------------------------------- That's helpful. And then just a follow-up question specifically about Q4 guidance. So just looking at your guidance for the geographic mix, it appears when we run the math that your mix into China is declining for module sales into Q4. So I guess it's a two part question. One, that seems to contradict what other companies are saying as far as Q4 strength in module delivery within China. And then two, do you expect gross margins therefore to improve for Trina overall in Q4 relative to Q3 given the mix shift away from China? Thanks. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [14] -------------------------------------------------------------------------------- You mean the next year? -------------------------------------------------------------------------------- Patrick Jobin, Credit Suisse - Analyst [15] -------------------------------------------------------------------------------- So looking at the geographic mix for 2015, backing into your geographic guidance it seems to imply China is declining as a mix for you in Q4. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [16] -------------------------------------------------------------------------------- Okay. Okay, yes. Let me discuss this a little bit. As you know that China, volume-wise, China is still the largest shipments in third quarter and it's the biggest contributor for our total shipments. And we believe that China will continue to be a very, very strong market for us. As far as the mix, we balance our capacity. As you know, we are very short of our capacity right now and we are balancing our capacity and making sure we allocate the capacity in various markets because we are very much playing a very important role in various markets. And we have to allocate our capacity in such a way, so that we can maximize the mix, the sales mix in a way that maximize our ASPs. And so I would not say that the China -- going into next year, the China percentage will increase or decrease. But I will just definitely tell you that the market is very, very important for us and also contributes significantly to our bottom line. So we are expecting to continue our presence in China and also make sure that we increase our market share at the same time. -------------------------------------------------------------------------------- Patrick Jobin, Credit Suisse - Analyst [17] -------------------------------------------------------------------------------- Okay. And any comment on gross margins into Q4? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [18] -------------------------------------------------------------------------------- Sure. As far as gross margins, we have guided the margins that this year, we are targeting a high-teens gross margin for the whole year. And as you know we have done quite well so far maintaining, even including Q3 this quarter, we reached over 17%. Which usually Q3 and Q4 percentage-wise from gross margin percentage-wise is lower compared to first two quarters, just because of the sales mix and greater sales into countries like India and China. But now gross margin is certainly a very key factor for measuring our business. But at the same time I want to stress again that our focus is to make sure our net profit at the end increases for what we are selling. So for the whole year, we continue to expect our gross margins to be at the high teens and we expect the gross margin in the fourth quarter to be at the similar level as Q3. -------------------------------------------------------------------------------- Patrick Jobin, Credit Suisse - Analyst [19] -------------------------------------------------------------------------------- Thank you so much. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [20] -------------------------------------------------------------------------------- You're welcome. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Philip Shen. -------------------------------------------------------------------------------- Philip Shen, Roth Capital Partners - Analyst [22] -------------------------------------------------------------------------------- Hi. Thank you for taking my questions. Just a few follow-ups here. With the downstream goals for 2016, if you're targeting something similar given your current forecasting to 2015, how much could be sold and how much could you keep? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [23] -------------------------------------------------------------------------------- Well, as you know, that this is going through a transition year. In the past we have been building and holding and we need to look at the market and making sure that we get the best for our projects. And so we still have some work to do as far as understanding the market better and making sure that we reach the kind of targeted profit level for our projects. So it really depends on the study that we are currently conducting as we are making the budget for next year, we're making the targets for next year. But from what we are seeing at this point, I'm confident to say that our total development in the downstream business sector would continue to grow and we will continue to develop more projects not only in utility, but also in DG. And so and then coming up some of the projects will be sold. So as far as percentage, how much will be sold and how much will be built, and the total amount that we're targeting, I will have to refer to a later date to communicate with you guys. -------------------------------------------------------------------------------- Philip Shen, Roth Capital Partners - Analyst [24] -------------------------------------------------------------------------------- Okay. Thanks, Teresa. You mentioned DG. What kind of mix of DG could we see in 2016? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [25] -------------------------------------------------------------------------------- I would say that from the DG perspective, this is a very important area for, especially in China, that the government is promoting. So of course we are also wanting to see more development in financing activities to support DG business. As you know that the DG business is relatively new compared to the utility and financing activities that are supported from the financial institutions are still warming up to this business. And although we have been very fortunate for the projects we connected, we were able to obtain financing but we still want to see more financial institutions to participate in this area as we are -- as we make plans to expand. But all in all, I would say maintaining 30% to 40% of our total development in DG business is very possible. -------------------------------------------------------------------------------- Philip Shen, Roth Capital Partners - Analyst [26] -------------------------------------------------------------------------------- Okay, great. Historically you've had a nice balance sheet, with the net debt, the cap ratio as well as 25%, 27%. As you've expanded and pursued your downstream strategy, that's grown. As you look to 2016, is there a target or a targeted debt to cap ratio that you think you would max out at or would not want to exceed? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [27] -------------------------------------------------------------------------------- Well, okay. When we come to -- actually what we use is total liability over total asset ratio. I want to make sure that I have -- I take this opportunity again to communicate with everyone that from a business perspective, we manage our business in two segments. One is the manufacturing segment and the other is downstream segment. For the manufacturing segment, we have been able to maintain total liability over total assets at about 70%. And as a matter of fact the cash generated from the manufacturing segment has been able to support its capital expenditure and we expect that to continue to be the case. And so we are expecting the ratio to maintain at a very similar ratio or may even be lower for the manufacturing side. But now coming to the other segment, for the downstream business, because those are project based and the financing will be secured by the project, supported by the long-term cash stream or the revenue coming from the project operation. So for that segment we are expecting the total leverage to be at about 70% to 80% secured by our project. So overall you will see an increase of our leverage from what we used to have at about 69% or 70% to maybe higher to maybe 75%. For this quarter we have reached the 73%. But I want to make sure that we separate the two segments and we want to discuss them separately so you can see that we are managing our balance sheet for manufacturing, it continues to be the way as we did before or maybe improving. And on the downstream we are increasing our leverage because of the new projects we develop, but at the same time as you know that those projects, those financing are very much secured by our downstream projects. I hope that helps. -------------------------------------------------------------------------------- Philip Shen, Roth Capital Partners - Analyst [28] -------------------------------------------------------------------------------- It does. Thanks, Teresa. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [29] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- Sheng Zhong. -------------------------------------------------------------------------------- Sheng Zhong, Morgan Stanley - Analyst [31] -------------------------------------------------------------------------------- Thank you for taking my question. The first is also about the downstream projects. You have a target of around 750 total project in this year. And the mix of DG is 30% to 40%. But based on -- that means based on your current, your third quarter's progress, I think you will have a very aggressive, very high connection of the DG in fourth quarter. So can you comment on this? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [32] -------------------------------------------------------------------------------- Right. As we have discussed in the previous quarters, we are dedicating resources to the DG side of the business and we're very happy to see the progress that we made in this segment. And in the third quarter -- in the second quarter we have connected over 30 megawatts. Actually in the third quarter we connected almost 40 megawatts for the downstream business -- for the DG business. And we are expecting more in the fourth quarter as we are seeing the construction that are in progress. So basically what we are saying is that the fourth quarter is the quarter that will have the highest -- a lot of times will have the highest grid connections because of the cycle of the construction for the project. So we, like I said, the DG business is very much supported by the government incentives, not only the incentives from the central government piece, but also a lot of local incentives as well. So the returns for the projects a lot of times are higher compared to utilities in many other places. So we want to secure and we want to develop and secure those projects that will generate high returns and we want to make sure that we establish ourselves as one of the leaders in this segment. So you will see the continued effort in this, in the DG business as we dedicate more resources to further expand. -------------------------------------------------------------------------------- Sheng Zhong, Morgan Stanley - Analyst [33] -------------------------------------------------------------------------------- Thank you. And to follow up this, do you have different payment, subsidy payment on the DG with -- do you have a different subsidy payment of your DG project comparing with your PP project at the current stage? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [34] -------------------------------------------------------------------------------- Yes. As we previously mentioned, there was a delay in subsidy payments especially on the utility side, but we are expecting a resolution coming in the near future. But now on the DG side, we are actually seeing more encouraging signs for much quicker payments, especially in the area where we have selected to develop our DG projects. So, so far, for the number of projects that have been connected on the DG side, some of them have already gone through the process of being -- pocketing the -- receiving the incentive and we are receiving on a regular basis for the incentives payments. So we are very happy and encouraged to see that and we're expecting more connected projects to be receiving the incentives on the DG side. -------------------------------------------------------------------------------- Sheng Zhong, Morgan Stanley - Analyst [35] -------------------------------------------------------------------------------- Thank you, Teresa. That's very helpful. And one last question is can you give us some update of your Thailand plant progress? Thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [36] -------------------------------------------------------------------------------- Sure, I'd be happy to. For Thailand plant, we have, as we communicated in the past, we have started the construction early this year and the progress has been made very nicely. And we are expecting to have the -- will increase quickly especially in the first quarter. So we are fully expecting the production to come online on schedule and produce the product as we expected. -------------------------------------------------------------------------------- Sheng Zhong, Morgan Stanley - Analyst [37] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [38] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- Gordon Johnson. -------------------------------------------------------------------------------- Gordon Johnson, Axiom Capital - Analyst [40] -------------------------------------------------------------------------------- Thanks for taking my questions. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [41] -------------------------------------------------------------------------------- Sure, Gordon. -------------------------------------------------------------------------------- Gordon Johnson, Axiom Capital - Analyst [42] -------------------------------------------------------------------------------- So I guess the first question centers on the cash balance and we were looking specifically in addition to that at the accounts payable that went up significantly. It just seems like the cash balance is down. I guess the question is looking at project sales, looking into next year, is there an expectation on how much you guys are going to sell with respect to projects. And if, in addition to that question, whether there'd be any potential capital requirement, additional capital requirement next year. And I have a follow-up. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [43] -------------------------------------------------------------------------------- Yes, definitely. I think that there are a couple of points that are included in your questions. First of all, from the cash basis, I would say that the operating cash continues to be strong. And from this quarter, although this quarter, the operating cash went down from the previous quarters, but overall it's basically just the business cycle as we are progressing into the third quarter because the third quarter as you know that the shipment is the highest. And of course, all the purchase and payments are suddenly increased as well, especially some of the items we need for instance to sell, because more of a shorter term payment term as we're increasing our purchases. So as you know that the -- based on the Q3 and Q4 increased manufacturing needs, the cash needs increases as well. But we are confident that the cash collection is progressing very well, actually ahead of schedule, because of the very tight demand for -- very high demand for our products and the payment terms on our customers are also increased. So from cash perspective, we are -- we do see the payments increase, but that's very much in line with our business cycle, and we also are seeing the ARs increase, as well, just because there is a payment terms for other customers that the payment terms in general have been improving not only in the US but also in other countries, as we mentioned in the earlier discussion. So that's number one part of the cash discussion that I want to share with you. Secondly, I think I touched on that capacity increase earlier, which we plan to increase our modules capacity to about 6 gigawatts and cell capacity to about 4.8 gigawatts from current levels, so that will require CapEx in 2016. And also, we will continue to upgrade our equipment -- existing equipment and existing facilities -- so that we can produce the higher-efficiency modules that we need to produce for the market. So total expected CapEx, as we know right now, for 2016 on the module business is about $300m, which is at about similar level as we had for 2015 this year. I hope this helps, Gordon. -------------------------------------------------------------------------------- Gordon Johnson, Axiom Capital - Analyst [44] -------------------------------------------------------------------------------- No, no, that's extremely helpful. And I guess the follow up would be if you could give us what your operating cash flow was this quarter? And then a separate question would be, it seems like the margins for a lot of module companies that have reported are now on the decline so one could argue that margins have peaked. And when we look at what you guys have said and some others have said with respect to ASPs being down against a backdrop of everybody expanding capacity, is there any risk in your view that we could enter back into an oversupplied situation, or do you see that not as a risk? Thanks for the questions, and congrats on the good quarter. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [45] -------------------------------------------------------------------------------- Thanks, Gordon. I think it's an excellent question. That's why I discussed a little bit earlier that our strategy of expanding capacity to be a very strategic one and very careful one. Not only we see that the demand in the market to be very robust, but we want to meet our customers' needs in various markets, especially the strategic markets where we have significant trade. But at the same time, we also want to be very cautious, and we want to make sure we manage our balance sheet in a prudent way, and that's why we are not expanding our capacity, all internal capacity, to meet a demand from the customers but we are engaging outsourcing as well, which will provide a flexible capacity at the time we need it to increase our (technical difficulty). But at the same time, we will be flexible enough to reduce in time when it's also needed. So as you can see, we sacrifice a little bit on the cost side, because we have to pay the cost might be -- our blended cost might be a little bit higher. As you know that we have disclosed that the cost from our vertically integrated manufacturing process, the cost has continued reducing as we have been able to (technical difficulty) achieving. So, for this quarter, we achieved a $0.38 for our internal manufacturing, but the blended cost is a bit higher, because we utilized outsourcing capacity for meeting the customer needs, so that's one thing. And so we want to continue to be very, very careful in maintaining our capacity increase. So as far as the capacity short -- oversupply, I also believe that our industry is going through a consolidation, which is still ongoing, and you will continue to see that the premier producer like Trina will continue to have high demand for its products. And at the same time, companies simply cannot keep up with the technology who do not have the brand name and who do not have the service to follow up with their product selling, may not be able to capture the demand and maybe eventually have to reduce or may end up in an overcapacity issue where they cannot run their plant at the full capacity. As a matter of fact, at this point, we are seeing that the first-tier companies are running at the full capacity or more than full, but at the same time, many companies are not running at that 100 level for the operations. So I come back to your question -- I do see that 2016 to be a very strong year, but at the same time, we are trying to be very careful in expanding our capacity, making sure that we protect ourselves in the event that there is any change in the market. -------------------------------------------------------------------------------- Gordon Johnson, Axiom Capital - Analyst [46] -------------------------------------------------------------------------------- Thank you so much. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [47] -------------------------------------------------------------------------------- Sure, Gordon. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Mahesh Sanganeria. -------------------------------------------------------------------------------- Unidentified Participant [49] -------------------------------------------------------------------------------- Hi, this is [Sean] here for Mahesh. Thanks for taking my questions. First, on the downstream projects, I guess there are a lot of discussions earlier about 2016 project retention versus sales. I'm just wondering, can you talk a little bit more about the rationale behind this strategy shift? And is it because of the economy, and if possible, can you discuss any analysis you have done regarding the different economics in project retention versus sales? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [50] -------------------------------------------------------------------------------- Yes, I will be happy to discuss with you on this and the rest of the people on the call. This is a significant change for our Company. As we discussed in the past, we are very much interested in becoming the -- one of the first-tier downstream operators and developers. So we worked very, very hard dedicating resources and dedicating money as well and people, team, as well to develop the projects. And we want to build up our level of profits kept on our balance sheet for operations. And so by the end of this year, if we reach the target of 700 to 750 megawatts of projects connected to the grid, including the projects we had connected in the past years, we will reach to about 1 gigawatt of projects on our balance sheet. Now, this is a critical moment for us to evaluate our options and how best to capture the market, the growing market upon that -- at the same time, to have a sustainable growth on the going forward basis, so we're not looking at just one year. We're looking at long term. So with that, we are looking at not only to work very hard with our financial institution partners to secure financing for the downstream projects. We also are looking at how best to provide equity portion of the support for our downstream business. And so we believe that by switching to the build-and-hold -- mix of hold and sell models will allow us to have the cash -- sufficient cash to not only allow us to develop more projects but also to bring the current financial benefits from selling the projects. So we believe that this mix level of mixed strategy of working on the downstream business will allow us to have -- better position ourselves to be a long-term player, and on a going-forward basis, that will be not only helping us, because there is the equity front that we need. But also, we believe that this will secure us a strategic partnership, as well, to work with significant players in this industry. So not only we will introduce the equity by potentially in the near future list our downstream project business with an IPO option, but at the same time, we will also work with potential partners to increase equity portion at the project level. So with this mix of strategy, and the funds that we raised from selling the projects, we will provide ourselves with better option to have a sustainable growth pattern. So that provides the opportunity for us to make the switch, and we certainly hope this will benefit the Company and benefit the shareholders, as well. -------------------------------------------------------------------------------- Unidentified Participant [51] -------------------------------------------------------------------------------- Thanks. That's very helpful, Teresa. And one follow up, looking at next year, can you talk about what are the criterias when you determine if a project is to be sold or retained? Is there any specific metrics you're looking at, or it's just an overall market decision? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [52] -------------------------------------------------------------------------------- Well, as I mentioned earlier, this is going to be a new transition year for us, and not only we need to understand better the markets, but at the same time, we need to understand the customers and their need -- there are actually various partners potentially we can work on this sale model of or downstream business. So it will be -- I think that it will be various criteria that we will engage to depend on the customers that are -- that we will be working with. And as a matter of fact, we are formulating our criteria to make sure that we not only benefit from operation perspectives on the projects but also from a selling perspective, bring the benefits to the financial statements in the -- right away, from the selling proceeds. So the criteria will be a very compact one, depending on the market, and we are still formulating, and we would be happy to discuss this further in a later day. -------------------------------------------------------------------------------- Unidentified Participant [53] -------------------------------------------------------------------------------- Great. And then one last question for me. You touched this a little bit earlier, regarding -- so by the end of this year, you will have approximately 1 gigawatt of projects on the balance sheet. And you previously talked about a potential yieldco or an [ITP] spin-off. Just any update on that front? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [54] -------------------------------------------------------------------------------- Right. Obviously, this is very much in our plans, and we believe that this will provide a better financing platform for our downstream business. And so from our perspective, the timing and the location of listing the downstream business will be very critical, and at this point, we're still evaluating. Obviously, the market could be US and Hong Kong or China shares, but from where we can see right now, listing in US is relatively difficult, because of the various [measures], as you guys are probably familiar with, as well. So looking at Hong Kong or China markets are currently still being evaluated, but we very much want to keep our options open at this time, before a decision can be made. But obviously, different markets have different requirements as to what kind of level of operation that you have achieved before you can list your business and we want to be able to list successfully, and at a time when this is the best for the Company and for the shareholders, as well, to reach the benefits for all those hard works and projects that we have been able to develop and successfully complete and operate. -------------------------------------------------------------------------------- Unidentified Participant [55] -------------------------------------------------------------------------------- Thank you very much, Teresa. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [56] -------------------------------------------------------------------------------- Thank you, Mahesh. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- [Yang Lu]. -------------------------------------------------------------------------------- Yang Lu, - Analyst [58] -------------------------------------------------------------------------------- Thank you for sharing with us the internal costs of the (inaudible) cents per watt. Wondering if we can know about the blended cost, as well as the next year's projection. Thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [59] -------------------------------------------------------------------------------- Okay. There's -- the internal cost has been reducing significantly, actually, from the beginning of the year to right now, at $0.38 per watt. But then, for the blended cost, we have for this quarter is at $0.46 -- $0.46, right? $0.47 per watt basis for the blended total all-in cost for this quarter. -------------------------------------------------------------------------------- Yang Lu, - Analyst [60] -------------------------------------------------------------------------------- Thank you, and do we expect it to decline next year, as well? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [61] -------------------------------------------------------------------------------- We do expect the cost to continue to go down, but of course, at this point, we are seeing the fourth quarter to be flattish because of the demand and high demand for cell and wafer, the cost has been as a matter of fact, for those two items, have been increasing compared to last quarter. And so -- but overall, we are very determined to reduce the cost, because this is the trend, and this is the competitiveness that we can provide not only through our technology but also through our operations efficiency, as well as the economy of scale that we are able to achieve. So we are expecting the cost to continue to decrease on a going-forward basis at about 5% to 10%. So we will work very hard, even with the fluctuation on the cost for the supplies that we use in our products, but we also believe that the cost reduction will be our target, and we will continue to work very hard to achieve that. -------------------------------------------------------------------------------- Yang Lu, - Analyst [62] -------------------------------------------------------------------------------- Thank you, and are we adding more wafer capacities, as well, because -- thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [63] -------------------------------------------------------------------------------- No. On upstream, as far as ingots and wafers, we basically have our existing strategy, and we may increase a little bit through equipment upgrades but not through large-scale investment. -------------------------------------------------------------------------------- Yang Lu, - Analyst [64] -------------------------------------------------------------------------------- Sure, thank you. And my next question is about the ASP. Can you share with us the ASP and probably the geographic breakdown? Thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [65] -------------------------------------------------------------------------------- Sure. The ASP has been decreasing slowly in all major markets that we are selling our products. So in the first two quarters, by mixing our sales in different regions, we have been able to maintain $0.60 for the first and second quarter. However, for third quarter, because of the larger sales in China and also India and some of the markets with a little bit lower ASP, our ASP for Q3 is at $0.57. And we continue to see the ASP to be on the downward trend on a going-forward basis. But we also hope that the cost reduction rate will outpace the ASP reduction, so that we could maintain or improve our margins as we go forward. -------------------------------------------------------------------------------- Yang Lu, - Analyst [66] -------------------------------------------------------------------------------- Thank you. My last question is about the foreign exchange loss. Is it mainly because of the USD loans and how much percent, and how do we see the trend going forward? Thank you very much. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [67] -------------------------------------------------------------------------------- Right. Unfortunately, working as a global company, working in multiple jurisdictions, the foreign currency exposure is ever present, and in this quarter, we have recorded a $13m FX loss due to largely the R&D depreciation that happens in the quarter. Those exposures are -- especially the exposures from multiple currencies from other regions have been very well maintained and covered through our hedging program. RMB hedging is a little bit challenging in the way that we -- the costs of hedging for RMB is relatively higher because of the interest rates. And so what we are doing to reduce the exposure is that the FX loss coming from RMB depreciation, largely because of our exposure, some of those are created because our inter-company ARAP due to the AR in a different currency or AT in a different currency from the functional currency. So from that perspective, we have been working very hard to reduce this kind of exposure to make sure that we have limited our exposure for this kind of currency fluctuation. At the same time, we are also very actively looking at the financing that we obtained that creates exposure. So hopefully, we will have more of a progress that we can report to you on R&D hedging, but at this time, unfortunately, for the third quarter, the R&D fluctuation has created this FX loss for the quarter. -------------------------------------------------------------------------------- Yang Lu, - Analyst [68] -------------------------------------------------------------------------------- Thank you very much. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [69] -------------------------------------------------------------------------------- You're welcome. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- Pavel Molchanov. -------------------------------------------------------------------------------- Pavel Molchanov, Deutsche Bank - Analyst [71] -------------------------------------------------------------------------------- Thanks for taking my question. Kind of a macro industry question if I may. China last month raised its 2015 target to more than 20 gigawatts. I'm curious, what do you think a realistic level of installations is for next year? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [72] -------------------------------------------------------------------------------- Sure. I'd be happy to discuss that. China's government is very committed -- like I said, very committed to renewable energy, and solar energy has provided a unique flexibility to use and install versus other clean energy, and also, China manufacturers are among the best and largest in the world to produce modules for solar energy adoption. So this is a very unique opportunity for China to increase the adoption for clean energy. As a matter of fact, as we have pointed out, that for 2015, the original target of 17.8 gigawatts was increased by 5 gigawatts to 23 gigawatts for this year, and we are expecting another strong year next year, to about 20 gigawatts. So we have confidence that this will provide opportunity for companies like Trina, which is a very well recognized brand, and also very much has the capacity to serve the customers, and we expect that this will present the opportunity for us to play in this market, in this high-demand country. -------------------------------------------------------------------------------- Pavel Molchanov, Deutsche Bank - Analyst [73] -------------------------------------------------------------------------------- Sorry, just to clarify, did you say that China should be down a little bit next year from the 23 this year? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [74] -------------------------------------------------------------------------------- Well, for the 23 gigawatts target that was set for this year, part of it was especially the new -- new target for the 5 gigawatts, we are allowed or the developers are allowed to connect them not by end of this year but through next year. So those will -- those will be -- some of the capacity will be carried over to next year. So that's why we believe at the -- average of 20 a year, also, is very much at the same [goal] kind of demand for the next year and maybe even the year after. But, of course, it depends on the government's determination, and this could vary, but we're expecting -- from our perspective, we are expecting that demand will be very strong. -------------------------------------------------------------------------------- Pavel Molchanov, Deutsche Bank - Analyst [75] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [76] -------------------------------------------------------------------------------- You're welcome. -------------------------------------------------------------------------------- Operator [77] -------------------------------------------------------------------------------- (Operator Instructions). Jeff Osborne. -------------------------------------------------------------------------------- Jeff Osborne, Cowen and Company - Analyst [78] -------------------------------------------------------------------------------- Yes, good evening, Teresa, and thanks for all the details on the call. Just given the change in strategy to selling projects, I think the estimates for 2016 will certainly be varied from the analysts based on our assumptions of how many projects you're going to be selling. So I just wanted to get a sense of, first of all, will you be selling a portion of the gigawatt of projects that are already going to be interconnected this year in 2015, or are you looking to sell projects that you're developing next year that are new projects? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [79] -------------------------------------------------------------------------------- Yes. Like I said, the strategy for next year is still being formulated, and also, we have better studied the market before we are assured of making the target for ourselves for next year, but I would say that it is possible that some of the projects that we have currently or that we will have by the end of the year might be available for sale, depending on the interest and depending on at the end, the strategy that we formulate. But next year, as we develop more, some of the projects will probably be developed. At the same time, knowingly, that will be held for sale, but some of them we will probably hold, because we will continue to have the mix, not selling everything that we develop. So to answer your questions, I think it is nice -- it is possible that some of the projects we have that could be for sale. -------------------------------------------------------------------------------- Jeff Osborne, Cowen and Company - Analyst [80] -------------------------------------------------------------------------------- Great. Thanks for the detail there. Do you have a sense of globally that developers typically see a 15% to 20% gross margin on project development and selling them, if that was their intent from the beginning? Is that a reasonable margin expectation for your projects to be sold? Do you have a handle on what market pricing is in China relative to your cost structure? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [81] -------------------------------------------------------------------------------- Well, for the projects to be sold, from the preliminary information that we have, we know that there is very different gross margins depending on the countries, because we do have countries that we're operating in the UK and Japan and maybe other countries, as well, as we enter. But for China, I believe 15% to 20% gross margins could be very challenging gross margins. But we are still, like I said -- we are still studying the markets and try to get a better handle. And therefore, we can set our targets in a more reasonable manner. -------------------------------------------------------------------------------- Jeff Osborne, Cowen and Company - Analyst [82] -------------------------------------------------------------------------------- Got it. And the last question, I think you mentioned on the call in your prepared remarks that G&A was up as a percentage of revenue because of some accounts receivable write-offs. Can you just address the nature of those, what the size was and the area geographically that it was for? -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [83] -------------------------------------------------------------------------------- In general, the accounts receivable has been pretty well managed, but what happened is we had a customer in India that was behind in making payments, and so -- and we have been negotiating with them for a long time, until they had finally came up with a payment plan. So now they were not able to come through in the third quarter, and now we are in active discussing with them again. And so as far as AR provision-wise, this is basically -- from other regions, there's really not a whole lot of AR increases -- small amounts, from countries like in Europe that we still have AR that we have not been able to collect and we're still going through the litigation. And we have a little bit of AR that have been behind and still collecting in Japan, but in China, in general, the AR has been -- the term may be a little bit long, especially in the past. Recently, things have improved quite a bit, but from a DSO perspective, we have basically reached about 77 days for the quarter, and so it's not a significant issue right now. Of course, we are very much -- pay very close attention to the AR and also provisions that potentially need to be set up or written of. -------------------------------------------------------------------------------- Jeff Osborne, Cowen and Company - Analyst [84] -------------------------------------------------------------------------------- Got it. Thanks for all the details. I appreciate it. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [85] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Operator [86] -------------------------------------------------------------------------------- There are no further questions at this Time. I would now like to turn the call over to Yvonne Young for closing remarks. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [87] -------------------------------------------------------------------------------- Thank you, operator. On behalf of the Trina Solar management team, we want to thank you for your interest and participation to our Q3 earnings call. If you are interested in visiting Trina Solar PV park, please feel free to get in touch. This concludes Trina Soar's third-quarter 2015 earnings conference call. Thank you, operator. You may now disconnect. -------------------------------------------------------------------------------- Teresa Tan, Trina Solar Limited - CFO [88] -------------------------------------------------------------------------------- Thank you, Yvonne. -------------------------------------------------------------------------------- Yvonne Young, Trina Solar Limited - IR Director [89] -------------------------------------------------------------------------------- Thank you.
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