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Executives

Elaine Li – Investor Relations

Stephen Zhifang Cai – Chief Executive Officer

Yongfei Chen – Acting Chief Financial Officer

Robert A. Rice – Chief Sales, Marketing and Strategy Officer

John Wong – Financial Controller

Analysts

Kelly Dougherty – Macquarie Research Equities

Daniel Ries – Collins Stewart LLC

Sanjay Shrestha – Lazard Capital Markets

James Medvedev – Cowen and Company

Nick Xue – Goldman Sachs

China Sunergy Co., Ltd. (CSUN) Q3 2011 Earnings Call November 17, 2011 8:00 AM ET

Operator

Welcome to China Sunergy’s Third Quarter 2011 Earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Ms. Elaine Li, Senior Investor Relations Manager, you may begin your conference.

Elaine Li

Thank you, operator and welcome to China Sunergy’s third quarter 2011 earnings conference call. This is Elaine Li speaking, China Sunergy’s Senior Investor Relations Manager. With us today are China Sunergy’s CEO, Mr. Stephen Cai; Co-founder and CTO, Dr. Jianhua Zhao. Our New Chief Strategy Officer Mr. Bob Rice; Acting CFO, Mr. Yongfei Chen; and Financial Controller, Mr. John Wong.

Today before the market opens, the company issued a press release announcing our third quarter financial results, and our guidance update for the fourth quarter and full year 2011. This press release is also available on the investor section of the company website at www.chinasunenergy.com. In addition, we have posted a presentation for this call on our website.

Today, we’ll be closely following and referring to that presentation in our prepared remarks. Stephen will first present an overview of our third quarter results and discuss the growth strategy. And our CFO, Mr. Chen will explain our financial result in more detail and offer an updated guidance for 2011. Then, you will here from our CSO, Bob Rice afterwards, our Senior Management team will all be here available to take questions.

Before I turn the call over to Stephen may I remind all the listeners that management prepared remarks include forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risk and uncertainties. And as such, our results may be materially different from the views expressed here today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. China Sunergy does not undertake any obligation to update any forward-looking statements, except as required under applicable law. As a reminder, this conference is being recorded.

Now, I’d like to turn the call over to our CEO, Mr. Stephen Cai. Stephen?

Stephen Zhifang Cai

Thank you, Elaine. And let me thank everyone for taking the time to join us today. I will begin by introducing Bob Rice, our newly appointed Chief Strategy Officer.

In an industry this complex, we’re glad to be adding strength to our management team. Bob joined as our new CSO on September 15, an American who speak Mandarin and has lead and done business in China for many years. Bob is overseeing international expansion and the sales and marketing, and is actively recruiting additions to our sales team. I will invite Bob to speak in few minutes.

Now, I will begin by discussing the solar industry at large, because macro industry issues have affected our ability to give meaningful guidance to the investors. I will briefly comment on four macro things in the industry related to: 1) Prices, 2) Demand, 3) Supply, and 4) Competitions.

First, prices; ASPs has 40 more than 35% this year and a 23% this quarter, more faster than anyone expected. As for demand, let me say that worldwide demand is real [vertical], materializing only when financing is available and the government subsidies are clear. Moreover, most our customers want to delay purchases and prices to fall as much as possible before they talk today and they can land up financing.

As for supply, there is not only overcapacity in the solar market industry, but it also has a lot of access in the inventory. We foresee an even more serious inventory sales through situation in the fourth quarter. However, not all companies production line are alike and that not all inventory is comparable.

This brings me to my final point, competition. Fierce competition is driving prices low and that it is also leading to some consolidation and the companies without good production and a strong financing options are more vulnerable. Today we will discuss our results in the context of this powerful industry forces and state why we believe China Sunergy can whether the storm.

Please refer to the slide 5. In third quarter of this year, we shipped a total of 116.2 megawatts, our strongest quarter this year, but are falling short of our original guidance of 140 megawatt. Some of the demand we forecast from Germany did not come through until September and October. At the same time, some European countries such as Italy are still experiencing financing troubles. The sale we predicted in U.S. and the China markets are taking longer to achieve.

Total revenues for the quarter were $145.8 million, a 1.3% sequential increase. We experienced a gross margin of negative 13.7% for the quarter and a net margin of negative 21.5%, although we originally guided to gross margins of 4% to 5%. Industry-wide pressure on ASPs and a high level of inventory at quarter end led to higher than expected inventory provisions. We incurred a loss in the quarter of $31.3 million and a net loss per ADS of $0.77.

On the bright side, our Chairman bought back by around 5% of share from the open market, demonstrating the confidence in the business. Our company also repurchased some of these previously issued convertible bonds as a less than par value, showing a bulk effort to protect shareholder interest. We have made some of the hard decisions in the fourth quarter to manage the market conditions and adjust risks in our own business.

We are temporarily operating as about 60% capacity in sales and a 30% of capacity in modules, in order to avoid a necessary running cost. Also, since September, we’ve been producing only what is our order to customer specifications. We want to avoid building up inventory, which is at risk of not selling. To adjust our existing inventory overhand and the rapidly falling ASP, we made $26.8 million in inventory provisions last quarter, and we’ve made good progress largely in clearing all inventories.

Please refer to the slide 6. In shorter, we are slowing capacity expansion, cutting costs and expenses, reducing inventory levels, preserving cash on hand, and are waiting for the market to get back to normal. It could be another two quarters before the amount increases to sustainable level.

Fortunately, we are in a strong position to whether this storm for three reasons. First, we have financial security in the form of the long-term and the short-term loans with the China Development Bank and others. We also recently set out a lawsuit with REC Wafer, which freed up $15 million in cash and that has been held in Escrow.

Secondly, we have some of the best technology in the industry and they have begun setting our unit Quasar cells on the commercial basis. Thirdly, our small scale, actually give us an advantage, because our ideal production line presents low fixed costs compared to the large companies. Let me discuss our technology, because it is a crucial factor that will allow China Sunergy to survive and that even strive.

Please refer to slide 7. In October, we made our first commercial sale of Quasar modules to our customer in Switzerland and as first of, many more to come. Our new Quasar cell production line is consistently trending out cells with an average efficiency rate of 18.6%. Our new R&D center will be launched within the next few months.

Our capacity for Quasar cell production is expected to reach 140 megawatts in the first quarter of the next year. And that we hope that next year about a quarter of our production will be of this high-tech cells. Most of the capacity expansion in that near future will be for Quasar cells, but we are slowing down our capacity expansion outside of the managing for the time being.

Please refer to slide 8 for our sales breakdown by region. For the third quarter, we sold around 60% to Europe and 40% to markets elsewhere in the world. We continue to actively pursue sales beyond our traditional markets in Europe to develop the new business in U.S., India and China.

In China, we are in discussions with large utility companies in Inner Mongolia, Qinghai, Xinjiang and our home province Jiangsu. We now view China solar market as a 1.5 gigawatt market this year and are expected to increase two or three times in 2012.

In the U.S., you will know that SolarWorld Industries filed a petition in October with the ITC and the Department of Commerce alleging that Chinese solar panel makers are deliberately dumping their panels in the U.S. and are receiving huge subsidies from the Chinese Government. We believe that these allegations will turn to be unfounded.

Forces bring panel prices down are market driven. As a U.S. listed company we are prepared to public articulate our on going state of hearing to fair international trade of practices and continue to insure business as usual.

Although, our short-term financial results continue to be poor, we believe we are doing all the right things to succeed in the long run. Minimizing cost and our expenses, cutting output, conserving cash and developing our Quasar Technology, so that what we sell is clearly differentiated from the competition.

Gross profit on the Quasar modules could be above $0.04 higher per watt, compared to our current modules. Our first quarter module cell was sold at a distance premier to industry ASPs. This technological advantage is hugely important to improving our gross margin in the medium and the long-term. We will survive the market up a hero and we will have a bright future.

And then with that, I will turn the call over to our CFO, Mr. Yongfei Chen, who will give more details on our third quarter financial results and announce our updated guidance for the year. Mr. Chen?

Yongfei Chen

Thank you, Stephen. I’m going to briefly talk about our third quarter 2011 results, which are prepared under U.S. GAAP and denominated in U.S. dollars.

Please turn to slide 9, where you will find our quarterly financial highlights. Stephen has already reported and discussed our total revenues, ASP levels and gross margins. I’d also like to provide further details.

Gross margin in the third quarter was negative 13.7%, this is mainly because of the inventory provision we accrued amounting to $26.8 million.

R&D expenses amounted to about $1.7 million demonstrating our continued investment in technology and new products.

SG&A expenses in the third quarter were $16.2 million compared to $13.5 million in the second quarter that increase was mainly due to the settlements experienced with icy weather. The settlement agreement was signed in October. For a consolidated accounting treatment we accrued the expense in Q3’s financial results.

In all, operating expenses were $17.9 million for the third quarter of 2011 representing 12.3% of total revenue. To further reduce expenses, we are working on reorganizing and reducing headcount. Interest expenses in the third quarter rose to $7 million, compared to $3.8 million last quarter resulting from increased bank loans.

Foreign exchange loss was about $6 million in this quarter offset by $2 million in Europe hedging gains.

Now, let’s look at the balance sheet on slide 10. I would like to provide further details on some of the items. Inventories at the end of the third quarter decreased 14.2% of the previous quarter to $84.9 million, which includes about $33.8 million providing balance.

Accounts receivable at the end of the third quarter reached $157.6 million, a 17.7% increase over the second quarter. We are determined to reduce our AR balance by the following methods. First, by further strengthening (inaudible) control through wholesales and finance departments. Second, we will increase the percentage of AR factoring financing. We have started factoring in the selling market, where our customers suffer the most from financing programs.

Our capital expenditure during the third quarter was $13.8 million. Under this challenging market environment, we are slowing down the expansion plan. The capital expenditure in the fourth quarter is forecasted to be above $15 million

Operating cash outflow in the third quarter was $92.8 million. As of the end of September, the company had a cash and cash equivalents of $188.1 million. Investing outflow was $10.3 million mainly due to the continued investment in capacity and expansion.

Financing inflow was $174.2 million due to short-term and long-term loan increases.

Wafer prices have falling dramatically from $0.79 to $0.54 in the past quarter. Other raw material prices have also decreased as ASP has fallen. Finally, I would like to provide our guidance for the fourth quarter and to update our guidance for the full year.

Please refer to slide 12. In the fourth quarter, we’re forecasting shipments to be between 95 megawatts and 110 megawatts. We expect to break-even at the gross margin level, but we expect a net loss. For the full year 2011 we revised total shipments to 395 megawatts to 410 megawatts compared to our previous guidance of 470 megawatts. Thank you.

Stephen Zhifang Cai

Thank you, Mr. Chen. At this point, I will turn the call over to our new CSO, Mr. Bob Rice, to talk about sales strategy. Please refer to the slides 13 and 14, Bob?

Robert A. Rice

Thank you, Stephen. I’m certainly excited to be on board at CSUN, I’ve got to tell you all this as we see here I didn’t think that China Sunergy had a very great future indeed.

When I first met Chairman, Stephen I was immediately impressed by what I know from personal experience are at exceptionally high levels of professionalism and trust at their senior executive levels, and I was very pleased to find the same trades within the CSUN sales team and other parts of the organization as well, very important for doing long-term business particularly outside of China. This coupled with the fact with CSUN’s relationship based approach to dealing with customers is in my mind a very valuable differentiator in our industry.

So I’m really enthusiastic about China Sunergy and its future potential. We here and the management team have an opportunity think out of the box, challenge ourselves and become an innovative leader in the PV industry.

Regarding our challenges, our goals are to build the CSUN brand, drive global sales, maximize the company’s commercial potential, and to be widely recognize as a leader in renewable energy.

Equal important is for CSUN to not only be perceived as but actually become a responsible corporate citizen in global market where we operate. This is particularly true these days in the United States, but equally true in Germany and other parts of the world.

China Sunergy needs to evolve marketing strategies suitable for each channel to market in order to communicate our value proportion and we are going to indicate that done. This will allow (inaudible) more effectively package itself for high-tech products.

Our sales team has really impressed me with their industry knowledge, professionalism, and their ability to create lasting robust relationships with key clients around the world.

CSUN is not only adding many top clients, international sales staff, but we’re also moving our key sales executives closer to customers in strategic markets for exploring options to move further downstream in the value chain and in short, we’ll do whatever it takes to grow sales, build a CSUN brand and maintain close ties to our client base. (Inaudible) is that China Sunergy is a very nimble and agile company. We will figure out the best trends going forward, we will take advantage of immediate opportunities and we’ll move fast.

Lastly, please understand that I’m new to the PV solar industry and I'm open to feedback on what you would like to hear, address in subsequent earnings calls. During the Q&A, I’d be pleased to chat further about our branding work in our efforts to build up the CSUN sales team. Thank you, Stephen.

Stephen Zhifang Cai

Now on behalf of all our executives, who I presented today, I will open this call up for questions. I would just say in closing that the macro environments have made it very difficult for us to predict precisely what our quarterly results will be. Please be assure that we want to continually improve our cost clarity and ability. We invite you to have a closer dialog with us in the future. Now, we will take your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is from the line of Kelly Dougherty with Macquarie.

Kelly Dougherty – Macquarie Research Equities

Hello gentlemen, thank you for taking my question (inaudible). I just had a question of about 95 megawatts to 110 megawatts you expect to ship in the fourth quarter, how much of that will come from inventory versus what you’ll actually be producing the quarter? So I’m just trying to get my head around the utilization you’ve been talking about?

John Wong

Okay. This is, John Wong here speaking. Hello, Kelly.

Kelly Dougherty – Macquarie Research Equities

Hi.

John Wong

We expect to – we view our inventory from our current level to around 20 something megawatts at the end of this quarter, and we would expect to clear most of our inventory from 66 megawatt, at this level to 70 something at the end of this quarter.

I can’t really see an upward from, actually it’s the same inventory although you required high course of actually due to, because we produce in early days when material cost are high. So basically, we will clear our inventory to our, by about 40 something megawatt. And also, there actually when I say 20 something, that also include some of the cells that we actually shipping to customer or under CIF terms and other such terms which do not allow us to recognize the sale this year. Thank you.

Kelly Dougherty – Macquarie Research Equities

Okay. So I’m going to take that down, if you’re going to lower inventory by 40 megawatts, then you will actually be producing somewhere kind of 55 to 70 megawatts in the fourth quarter. Is that the right way to think about it?

Stephen Zhifang Cai

We are producing around 60 megawatts, actually 59 in the trend of cell and making about 61 megawatts of module, but actually if the cells in that go through, we actually tightly control this, so that we will sell the inventory first, unless the customers orders some more those that we don’t currently have or in different parts of the world and what they order.

Kelly Dougherty – Macquarie Research Equities

Great, that's helpful. And then maybe if you could help us quantify the impact of underutilization, something like a 10% decline in utilization would have an extent impact on production cost, just so we kind of think about what running at lower utilization was due to your peer cost?

Stephen Zhifang Cai

The path that is creating the most impact is the utilization of the cell line. I guess the variable cost of that cost is only about [$0.16], you can work the other part – because the other parts vary from periods to periods. With that being said, (inaudible) I would like to say a lot more, because when you look at the figure, if you take 15 out of the figure, it will be depreciation and labor cost, okay. Our module line, the [depreciation] is quite low because the cost of the equipment is quite low and we are more able to control the workforce as well, so we have a very tight control on that part.

Kelly Dougherty – Macquarie Research Equities

Okay, okay, thanks. Just one more question then, typically the seasonality you suggest at the first quarter is obviously weaker than the fourth. I know there is not a whole lot of visibility that into next year, but do you expect that to be the case again in 2012 or there maybe other things, maybe China developing that would make you think that it might be a little bit different.

Stephen Zhifang Cai

Okay. This is Stephen, thank you, Kelly for the questions. Everybody suffer from these difficult times, and I don’t think so there is anybody could or who can as to give us the clear vision for the next year. So that’s the – I think the next earning call I think to well share with you all my point of view for your question.

Kelly Dougherty – Macquarie Research Equities

Okay. Thank you very much.

Stephen Zhifang Cai

Thank you.

Operator

Your next question comes from the line of Dan Ries from Collins Stewart.

Daniel Ries – Collins Stewart LLC

Hi, thank you. The guidance that you gave, I'm not sure, I'm a little confused, I think you said gross margin would be expected to be breakeven on page 12, but then you said, ASP might be about $0.91 and the blended cost that you provided add up to $0.99. So I’m a little confused. You indicated that your cell non-silicon cost would be $0.29 per watt, was that supposed to be $0.20 per watt by any chance or is it, the cost you described add up to $0.99, but the ASP is $0.91, which would not lead to a breakeven gross margin?

Stephen Zhifang Cai

Okay. Let me start speaking and let me clarify the figures, the labor cost is excessively around $0.38, okay. Non-silicon cost for the sale was, we expected to be around $0.78 and the non-silicon cost for the modules would be around $0.30, so actually there is $0.01 for the warranty provision, I think polysilicon add this to the silicon cost, so that actually make about $0.98, $0.99, okay subject to rounding. What happened is, we had such a high cost because of the high idle cost due to the cell rise of about $0.05 to $0.06. And that we can avoid unless we make more cell and then good power of our inventory. However, because we have marked down our cost to around $0.89 of the carrying over inventory to around October cost. So basically, if you at least, if you extend in the $0.96, $0.97, you’ll actually get back to the $0.91, which is our ASP.

Daniel Ries – Collins Stewart LLC

So just I’m clear the inventory that you had on October 1 has been written down to below $0.90, and that’s what will bring the average down. Is that what you’re thinking?

Stephen Zhifang Cai

Yeah, yeah. According to our accounting policy, we make the provision in October as we use the October cost as the current value.

Daniel Ries – Collins Stewart LLC

Right. You’ve mentioned the CapEx of $13 million in 3Q, when you said 4Q what you’re saying, it will be $15 million in 4Q.

Stephen Zhifang Cai

$50 million, sorry, must be…

Daniel Ries – Collins Stewart LLC

$50 million. Okay.

Stephen Zhifang Cai

Yeah.

Daniel Ries – Collins Stewart LLC

And what was your capacity then, you initially had a plan for, a cell capacity plan for 2Q, I think it was over a gigawatt, where would you see your 2Q 2012 total capacity, given the change that you’ve done in your CapEx?

Stephen Zhifang Cai

Okay. If you’re talking about Q2, right, Q2 next year?

Daniel Ries – Collins Stewart LLC

Well, I think that’s when the original capacity was set to come online. But what capacity would you expect…

Stephen Zhifang Cai

Okay, our cell capacity will be 600, another 200 has increased.

Daniel Ries – Collins Stewart LLC

Great, okay. And did you say how many shares were repurchased by your Chairman?

Stephen Zhifang Cai

5%.

Daniel Ries – Collins Stewart LLC

5%, and then the bonds that were purchased, will we see an impact of that in 4Q?

Stephen Zhifang Cai

That’s was the great factor in Q3.

Daniel Ries – Collins Stewart LLC

Okay. Thank you very much.

Stephen Zhifang Cai

Thank you.

Operator

Your next question comes from the line of Sanjay Shrestha with Lazard Capital Markets.

Sanjay Shrestha – Lazard Capital Markets

Good evening, guys. Couple of questions. So, when we look at the negative gross margin given sort of at least the breakeven in Q4 which is helped by a bit of a inventory rate down you took in Q3, but Q1 pricing will probably fall, and if you slowdown your capacity expansion, your cost might not improve as much, so even that you guys are still going to be in the negative gross margin in Q1, how long are you willing to run your business with negative gross margin? And two, at what point you’re going to start to potentially get a push back from the banks and say, you know you either have to slow down the capacity expansion or we can’t keep on converting some of the short-term loan (inaudible)

Stephen Zhifang Cai

Okay, so this is Stephan, I’ll pass the question to Mr. Chen, we will translate it.

Yongfei Chen

(Foreign Language)

We are very confident about our cash position right now and we’re being prudent in how we use our cash. I think we will survive under the difficult times.

I would like to elaborate on four points. First of all, currently we have $188 million on hand and now there is $50 million just freed out from the REC Wafer dispute, and we would estimate that our Q4 CapEx will not exceed $15 million according to our solar expansion plan.

And from net income perspective actually Q3 is our worst quarter every, we expect we will not lose as much as we did in Q3 in coming quarters.

Currently, we are only using less than half of the credit facilities from banks, and we have more than roughly more than $300 million available.

(Foreign Language)

Thanks. I’ve been very supportive on the technology advantage and also a huge growth potential.

(Foreign Language)

In terms of CapEx, all the investments will be coming from bank loans. Current CapEx needs are already secured. For the future expansion, we will work it out further with the banks or we would just delay the progress until we get the best support.

Sanjay Shrestha – Lazard Capital Markets

Got it. If I could ask two quick follow-up questions. First one, how low can you take your fully integrated module cost I think about the wafer prices probably will continue to fall even below 37 than last year? So what is going to be, where can you take for the high efficiency (inaudible) I'm talking about which is a key differentiation for you guys, what could be a sell as the module processing cost for that in 2012 as you continue to start focus on taking cost out?

John Wong

Hello. It’s, John Wong speaking. Let me show you in about the cost, okay. We are currently running a higher number of cost saving programs mainly to look at the way we can use the left material and also to use the right material and we’ve silicon plate regardless of what the market prices are changing, we are looking a way of creatively using less silicon plate and then also to experimenting on new sources of supply to get $0.01 saving on the non-silicon cost.

Okay. On the module side, we are looking at all the major components and also on redesigning certain parts to save cost and we hope to get above $1.05 of that and of course the falling pricing of the material throughout this patch will also help, but the two matters, I mentioned earlier are more scientific and then we actually looking at different ways and going on okay and this program is not going to stop even pass our targets.

Sanjay Shrestha – Lazard Capital Markets

Then what I’m trying to get out on that trade is...

Stephen Zhifang Cai

Yeah.

Sanjay Shrestha – Lazard Capital Markets

$0.91 is kind like where the prices that is a bottom out trade and can you guys make healthy gross margin in that sort of a clearing price and still trying the company into net income positive and cash flow positive. is that in your cost reduction roadmap and if it is what’s included and that is kind of maybe what I was trying to get at?

Stephen Zhifang Cai

And also the other side is the capacity, we are adding is based on the Quasar, mainly based on the Quasar technology and we are hoping to get a better margin on that product, and as well as we are building up our expansion during a time when the equipment costs are lower than our competitors. so we hope to get a low depreciation rate in our non-silicon costs going forward.

Sanjay Shrestha – Lazard Capital Markets

One last question for me then guys. I’m sorry. Go ahead. Hello?

Robert A. Rice

We didn’t get the comment, please?

Sanjay Shrestha – Lazard Capital Markets

Again, one last question for me guys, right. So how much of a capacity do you think that is non-bankable and non-cost competitive has come out of the market in your opinion and how big do you think China market could be in 2012?

Stephen Zhifang Cai

This is Stephen. People already gave us numbers, but this is not precise. And I think see China – totally China PV industry capacity is over 40 gigawatt and some people say it’s already over to 60 gigawatt. So that is not precise number. but sure there is over capacity is the [tool]. So that is what I’m seeing that. In the China market this year’s number is the 1.5 gigawatts will be installations by end of this year. Next year as I know that the 2.1 gigawatt already allocated is the key utilities in China, but still there is a potential demand from China market. Possibly it’s two or three gigawatt will potentially come out. So some people, some expert in the industry say that possibly 3 gigawatt or possibly 5 gigawatt, that’s the range. So next year China market size, I think will be 3 or 5 gigawatt as the market size.

Sanjay Shrestha – Lazard Capital Markets

Okay. That’s very helpful. Thank you so much guys.

Stephen Zhifang Cai

Thank you.

Operator

(Operator Instructions) Your next question is from the line of James Medvedev with Cowen and Company.

James Medvedev – Cowen and Company

Good evening.

Stephen Zhifang Cai

Welcome.

James Medvedev – Cowen and Company

Lot of this has been answered already, but did you just say what D&A was in the quarter, depreciation and amortization?

Stephen Zhifang Cai

$5.4 million this quarter in the third quarter.

James Medvedev – Cowen and Company

When I look at the share count, I noticed it didn’t change at all by quarter-over-quarter and yet you said the Chairman bought back 5% and you retired some convertibles. I guess the question is how should we think about share count? Actually, why didn’t it change and are you using share based compensation and how much was that and how should we think about share come for Q4?

Elaine Li

Hi, James this is, Elaine. Immediately after we did the repurchase I mean, Chairman filed the certainty and as – probably it will take two to three months to reflect the shareholder account, so probably you can see that in the next month. And this is not a share-based compensation. Chairman used to keep own cash due to repurchase showing his confidence to the company and showing his support to all of the investors.

James Medvedev – Cowen and Company

So the 5% must have been done at the very end of the quarter as well as the convert?

Elaine Li

Yes. (Inaudible)

James Medvedev – Cowen and Company

Okay. On the $0.91 ASP that includes what mix of Quasar?

Stephen Zhifang Cai

I have not budgeted to Quasar for this quarter.

James Medvedev – Cowen and Company

Okay, thanks. So the $0.91 would be, it might be a little higher than that if there is a certain amount of Quasar are in there, but I’m thinking more about 2012 when 25% of your units are suppose to be are hopefully going to Quasar and it’s a $0.04 uplift. How should we think about pricing in Q1, is it actually, sequentially lower or maybe it holds firm?

Stephen Zhifang Cai

I think, yeah that just had to say some of the precise numbers of the Q1, ASP. I don’t have the clear vision of the ASP in Q1 next year.

James Medvedev – Cowen and Company

Okay.

Stephen Zhifang Cai

So maybe in the next earning call we could share with you about it. Sorry about that.

James Medvedev – Cowen and Company

How do you feel, how do you think your $0.91 that, I mean we’re two-thirds of the way through the quarter or more than half the way through the quarter so you have pretty good visibility on what’s happening in Q4. How do you think that $0.91 stacks up against some of the Tier 1 players, the bigger players?

Stephen Zhifang Cai

I think that is the ASP. I think it we will definitely close to averaging the total cost.

James Medvedev – Cowen and Company

Okay. All right. Thank you.

Operator

(Operator Instructions) Your next question is from the line of Nick Xue with Goldman Sachs.

Nick Xue – Goldman Sachs

Hello. Hi, management, thank you for taking my question. Actually I have two questions. First, could you tell us what’s your current utilization rate, and I have a follow-up?

Stephen Zhifang Cai

Okay. That question I’ll pass to, John.

John Wong

Hello, this is John Wong speaking. At current you mean quarter four, right rather than Q3, is that right.

Nick Xue – Goldman Sachs

Yes.

John Wong

I just want to clarify. Okay. Actually, I mentioned that we plan to manufacture roughly 60 megawatts of cell and also 60 megawatts of module. So, if you work that out, it is 60% on cell and roughly 30% utilization on the module capacity?

Nick Xue – Goldman Sachs

Okay. Thank you. And next question is about your new technology Quasar. I would like to know what’s the technology behind that, is it mono or quasi-mono meter and I want to know the CapEx for a while and maybe additional cost for this new technology?

John Wong

This new technology will be mainly for mono cells, but also it will be okay for the quasi-mono cells. We need a monotype of (inaudible) for that type of product.

Nick Xue – Goldman Sachs

And what’s the CapEx for this Quasar cell and what’s the additional cost per watt for that?

John Wong

The CapEx is slightly more for the pent up lines and also.

Elaine Li

Hi, Nick. This is, Elaine.

Nick Xue – Goldman Sachs

Hi.

Elaine Li

The CapEx will be around $0.22 per watt, and the cost for Quasar cells is about $0.01 higher than normal cells, but in general, it has $0.04 in gross profit compared to average cell products.

Nick Xue – Goldman Sachs

So I mean the ASP is 5% higher than the standard product, right?

Elaine Li

Yes. You’re right.

Nick Xue – Goldman Sachs

Okay, thank you. And the next question, you mentioned about 18.6 conversion rate for this quarter, and I want to know this is at the cell level or the module level?

Stephen Zhifang Cai

This is at the cell level.

Nick Xue – Goldman Sachs

Okay.

Stephen Zhifang Cai

The one we (inaudible) the cells into module, we got 265 watts. So including the efficiency can be fully incorporated into module output power.

Nick Xue – Goldman Sachs

Okay, thank you. Very helpful.

Stephen Zhifang Cai

Okay. Thank you.

Operator

(Operator Instructions) Ladies and gentlemen, that concludes the question-and-answer session. I will now turn the call over to Mr. Stephen Cai, the Company’s CEO for closing remarks.

Stephen Zhifang Cai

Okay. Thank you for participating in the today’s quarterly earning call. We look forward to speaking with you again on our next earning call or in between of course, either in on a phone, in person or during a road show, if you have further questions about today’s call, please do not hesitate to contact us. Thank you.

Operator

Ladies and gentlemen, this does conclude China Sunergy’s third quarter 2011 earnings call. You may now disconnect.

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