JinkoSolar Holding Co Ltd
NYSE:JKS
Earnings Call Analysis
Q3-2023 Analysis
JinkoSolar Holding Co Ltd
In an atmosphere of market uncertainty, our company has leveraged N-type TOPCon technology and extensive global operations to deliver impressive results. Module shipments doubled to 21.4 gigawatts year-over-year, contributing to a notable 140.7% increase in net income to USD 181.4 million, and a solid gross margin boost from 15.7% to 19.3%.
With technological innovation driving demand, the company's advanced N-type modules command a premium and make up 60% of shipments. This, alongside growth in key markets like the U.S. and Middle East, bolsters confidence in an expanding market share. A supply bottleneck is present, but capacity expansion plans are afoot to meet order books that exceed 75 gigawatts, thus outperforming the annual guidance.
An impressive generation of around RMB 11 billion in operating cash flows for the first nine months signals financial strength. The company envisions reducing its debt in several steps, underlining a strategic approach to financial management and investment in growth.
Stable shipments to the U.S. are forecasted, with increased earnings expected as production costs decline. The outlook for Europe remains positive despite temporarily higher inventories; demand is robust, and inventory levels are anticipated to normalize in a few months. Utility segments don't reflect significant inventory risk, underpinning strong demand in U.S. and European markets.
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Thank you for standing by, and welcome to the Third Quarter 2023 JinkoSolar Holding Company Limited Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.I would now like to hand the conference over to Stella Wang of Investor Relations.
Thank you, operator. Thank you everyone for joining us today for JinkoSolar's third quarter 2023 earnings conference call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com as well as on Newswire Services. We have also provided a supplemental presentation for today's earnings call which can also be found on the IR website.On the call today from JinkoSolar are Mr. Li Xiande, Chairman of the Board of Directors and the CEO of JinkoSolar Holding Company Limited; Mr. Gener Miao, Chief Marketing Officer of JinkoSolar Company Limited; Mr. Pan Li, Chief Financial Officer of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Co. Ltd. Mr. Li will discuss JinkoSolar's business operations and company's highlights; followed by Mr. Miao, who will talk about the sales and marketing; and then Mr. Pan Li, who will go through the financials. We will all be available to answer your questions during the Q&A session that follows.Please note that today's discussion will contain 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 risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements, except as required under the applicable law.It's now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li.
[Interpreted]We are pleased that we were able to overcome the challenges with this due to market volatility and delivered a strong third quarter. We did so by leveraging our advantages in N-type TOPCon technology, extensive global operation network and advanced integrated capacity structure. And our module shipments gross margin and net income all increased significantly year-over-year. Total module shipments were approximately 21.4 gigawatts, an increase of 107.9% year-over-year. Polysilicon costs decreased sequentially. High-efficient N-type products that command a premium accounted for over 60% of total module shipments. And module shipments to the U.S. market recorded sequential growth in the third quarter, all contributing to improved profitability. Year-over-year, our net income increased by 140.7% to USD 181.4 million and adjusted net income increased by 215.1% to USD 184.6 million. Diluted earnings per order share increased by 188.7% to USD 0.63 and gross margin increased from 15.7% to 19.3%.Since the third quarter, price declines in the supply chain have stimulated end market demand. For the first 9 months, newly added installations of PV in the domestic market reached 128.9 gigawatts, nearly 50% more than the full year installations in 2022. As one of the new 3 products to boost China's export, solar has become a new driving force for China's economy and also contributes to global energy transition. Meanwhile, intensified competition brought by changes in supply and demand accelerated technical iterations, high interest rates in some regions and geopolitical tensions caused some volatility in the global PV market, which tested all industry players. We believe that we as the industry leader will become even stronger as the competition intensifies.At the end of the third quarter, we became the first module manufacturer in the world to have delivered a total of 190 gigawatts solar modules, covering over 190 countries and regions. Our capabilities in globalized sales, operations and management added by continuous R&D accumulation and innovation help us build an all-round competition barrier. We are confident in our ability to navigate through the volatility cycle, achieve healthy and sustainable profitability and increase our shareholders' value.By the end of the third quarter, the mass-produce efficiency of N-type cells reached 25.6% and the N-type modules power output was 25 to 30wp higher than similar P-type modules. Demand for these products continued to increase globally as the LCOE is lower. N-type modules still retained a premium over similar P-type modules and the premium continued to exceed the market average.At the end of the third quarter, we already had over 55 gigawatts of N-type cell production capacity. And by the end of this year, our N-type cell production capacity is expected to reach about 70 gigawatts, a competitive capacity structure leading the industry. Recently, our integrated project in Shanxi, China started construction, Phase 1 and Phase 2 for a total of 28 gigawatts wafer, cell and module integrated capacity are expected to start production in the first half of 2024. In addition, we are optimistic about the growth potential brought by solar storage parity in the long run and our capacity build-up and the development of energy storage business are progressing steadily.Recently, our high-efficiency 182 N-Type TOPCon cell set a new record with maximum lab conversion efficiency of 26.89%, again, creating an important milestone in the innovation of our products and solutions. Thanks to our leadership in driving N-Type TOPCon technology, N-Type TOPCon products is expected to capture market share greater than 70% in the whole industry, achieving absolute dominance.With higher conversion efficiency, lower industrialization cost and other advantages, we firmly believe TOPCon technology will remain the mainstream technical path for now and in the future 3 to 5 years. We are confident to be ahead of the industry dynamically by about half a year in terms of power output, cost and product competitiveness through continuous technology iteration and leveraging our integrated capacity.As a responsible global company, we continued to make progress in sustainable development. This excellent performance in corporate social responsibility, we received the high rating from Ecovadis, outperforming the mainstream PV companies. We are dedicated to providing clean, high-efficient and reliable solar products and energy storage solutions to more and more countries and regions, making our contribution to global energy transition.Before turning it over to Gener, I would like to go over our guidance for the fourth quarter and full year of 2023. By the end of 2023, we expect to mass-produce the N-type cell efficiency to reach 25.8%. We are confident to exceed the full year module shipment guidance of 70 to 75 gigawatts with N-type module accounting for approximately 60% of total module shipments. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 85, 90 and 110 gigawatts respectively by the end of this year, with N-type accounting for over 75% of the total capacity. We expect the module shipments to be about 23 gigawatts for the fourth quarter of 2023. We are confident we will continue to lead the industry with our advanced technology and premium high-efficient products.
Thank you, Mr. Li. Total solar shipments were 22.6 gigawatts in the third quarter with module shipments accounting for 95%. As we continue to improve product quality and further develop our client service network, our brand inflows continue to grow. By end of the third quarter, our all-time accumulative global solar module shipments exceeded 190 gigawatts, covering over 190 countries and the regions.In response to market volatility, we [ flexible ] adjusted the geographic mix of our shipments during the quarter. The domestic market became the dominant area for our shipments, accounting to around 40%. Shipment to emerging markets remained stable sequentially, while Asia Pacific and North America increased compared to the last quarter. We are particularly pleased that the shipments of high-efficiency Tiger Neo modules exceeded 60% of total module shipments as Tiger Neo accelerated its market penetration, especially in China, Middle East and North Africa and Asia Pacific. Thanks to higher efficiency and high added value to customers, Tiger Neo products still carry a substantial premium compared to similar P-type products and continue to outperform the industry average.In terms of prices, lower upstream costs have been reflected in module prices which decreased compared to the second quarter. And prior to this decline, some clients have slowed the pace of new orders and some of the existing orders were delayed. However, lower module prices leading to greater economic benefits also drove plenty of demand, which filled the gap caused by delayed orders. We adjusted prices and market strategy timely to cope with market shifts and solidified real-time feedback from clients.Our order signing moves are steady as planned. With our globalized sales network and localized customer service infrastructure, we are committed to maximizing the value of products and services we provided to our clients. Recently, we signed 3.6 gigawatt module supply agreement with N-type Tiger Neo with ACWA Power. With industry-leading efficiency, reduced degradation and the temperature coefficient, enhanced bifacial factor, outstanding low-light performance and unparalleled yield per watt to reduce system lifetime energy cost, Tiger Neo delivers at least 3% of power generation gain to clients, particularly in the climate conditions of desert area in Middle East, the excellent temperature coefficient and bifacial factor will significantly raise power generation and project IRR.As industrial chain prices declined and started to stabilize, large-scale utility project accelerated the connection to the grid and we expect a new installation record in China this year. Relatively, high inventory in Europe is being gradually digested and demand remains strong in U.S. market under the Inflation Reduction Act. We are also optimistic about growing solar demand in Saudi Arabia and other Middle Eastern countries to support energy transition. With high demand certainty and the health of our high-efficient product and services, we are confident that we will expand our market share.With that, I will turn the call over to Pan.
Thank you, Gener. The significant growth in our module shipments, decrease in raw material costs as well as our continuous cost control helped our key financial metrics, including total revenue, gross margin, operating margin and net margin improved year-over-year. At the end of September, we declared a cash dividend of USD 1.5 per ADS, which is expected to be paid on or around December 6 this year. With the continuous expansion of our global industrial chain, market footprint and the power of our products, we're confident to maintain a healthy and sustainable profitability, meeting our commitment to shareholders.Let me go into more details now. Total revenue was USD 4.36 billion, flat sequentially and up 63% year-over-year. Gross margin was 19.3% compared with 15.6% in the second quarter this year and 15.7% in the third quarter last year. The sequential and year-over-year increases were mainly due to the decrease in the cost of raw materials. Total operating expenses accounted for 9.9% of total revenues compared with 10.6% in the second quarter this year and 15.4% in the third quarter last year, improving year-over-year.Income from operations was about USD 410 million compared with income from operations of USD 212 million in the second quarter this year and USD 8.8 million in the third quarter last year, improving both sequentially and year-over-year. Operating margin was 9.4% compared with 5% in the second quarter this year and 0.3% in the third quarter last year, improving sequentially and year-over-year.Net income attributed to JinkoSolar Holdings ordinary shareholders was USD 181.4 million, flat sequentially and compared to USD 77.3 million in the third quarter last year, improving year-over-year. Excluding the impact of a change in fair value of the notes and long-term investments and share-based compensation expenses, the adjusted net income was USD 184.6 million, flat sequentially and up 2x year-over-year.Let's move into balance sheet. At the end of the third quarter, our cash and cash equivalents were USD 1.93 billion compared with USD 2.35 billion in the second quarter. AR turnover days were 87 days compared with 79 days in the second quarter of 2023. Inventory turnover days decreased to 67 days in the third quarter from 70 days in the second quarter this year. At the end of the third quarter, total debt was USD 4.23 billion compared to USD 4.73 billion in the second quarter this year. Net debt was USD 2.29 billion compared to USD 2.38 billion in the second quarter this year. Our debt structure is improving.This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.
[Operator Instructions] Our first question today will come from Philip Shen of ROTH MKM.
You guys had a pretty nice margin in Q3 despite the collapse in module prices. It seems like you've been able to match your cost structure with your module pricing. So I was wondering if you could give us your sense of how you expect module pricing to trend in Q4 and then also Q1? And then also in terms of margins, do you expect similar margins in Q4 and Q1 versus Q3 or do you think there could be potential for even margin expansion in Q4 and Q1?
Philip, this is Charlie. And we did very good in the first 9 months, including the third quarter. And thanks to our strong order of visibility, we almost finished this year's target, 70 to 75 gigawatts. And regarding the module price, the trend is in the downward trend. And we are expecting the ASP in Q4 is in a downward trend versus the third quarter. And because we have more exposures to Chinese market in the fourth quarter, we expect the gross margin is possibly slightly down quarter-over-quarter. And next year, we believe the module price will be relatively stabilized.And regarding the -- it's very important for us to next year, we look up as quickly as possible the sales orders and we are in a good position. I think we have the largest N-type TOPCon capacities and we have the most largest integrated capacities out of China for the U.S. market. And we expect to have over 30% shipments to European market and the U.S. market together. And we are aiming to over 85% shipment on TOPCon next year. So we are confident we can deliver relatively better performance compared to our peers next year.
Okay. So Q4 margin could be down slightly because of the China mix. And then Q1, perhaps you could have some expansion beyond, so growth or expansion of the margin in Q1 and Q2?
It's too early to say, but this year, our performance in the U.S. market is not so good because the module was delayed, detained. And we expect next year everything is getting on the schedule and the margin contribution from the U.S. market will be quite significant starting from next year.
Okay. You mentioned, Charlie, just now the U.S. shipments. And so I was wondering, in Q3, was there a large benefit in margin from the healthy amount of U.S. shipments because you've been able to be released from detention very quickly? And then also next year, I think in the past you were talking about 10 gigawatts of shipments for the U.S. market in '24, but in your PowerPoint today, you highlighted 12-plus gigawatts by year end '23 of integrated capacity. So do you think '24 could actually be closer to 12 gigawatts? And we can leave it there.
Next year, yes, our target is over 10 gigawatts shipment in U.S. market and that's our best target. And the contribution -- earnings contribution from U.S. market in third quarter is not good because we shipped around 1.3, 1.4 gigawatts. But most of the modules were produced 6 to 9 months ago, and it's a relatively high cost, including the storage cost. So back to your question, it's improving quarter-by-quarter. I believe from beginning of next year and the earnings power from the U.S. will be quite significant for Jinko.
Got it. So you were able to generate 19% margin in Q3 despite the higher storage cost and the higher...
Right, right, yes.
That's very interesting. One last question and I'll pass it on. Can you compare the pre-impairment margins in Q3 versus Q4 actuals? In other words, what is the like-to-like margin trajectory?
You mean the impairment margin or the margin including impairment?
Right. The margin -- pre-impairment...
I know. And we did have some impairment -- inventory impairment in second quarter by the end of the June. But we don't expect any additional or significant impairment for both third quarter and the fourth quarter. We don't expect. And everything is ordered and we are in good position. And we believe our price is pretty nice if you compare our ASP with the small market price. And we don't expect the inventory impairment.
[Operator Instructions] Our next question today is from Brian Lee of Goldman Sachs.
This is Grace on for Brian. I guess, my first question, just to follow-up to the ASP questions earlier, I just wonder if you can talk about the ASP trends by maybe end markets and by different geography? Just asking because we have heard that some of the markets like, especially the DG market have seen really high channel inventory. So can you provide a bit more color on the ASP trends? And I have a follow-up.
Yes, sure. Normally, we see a DG market is relatively ASP higher than utility. That's what people think. But at the current stage, we see a special situation in the U.S. market especially. So the U.S. market, because of many reasons, the DG market is more pressured than the utility market. That's what we have observed. I think personally we believe a very important reason is because of the, let's say, the supply side. So if the supply side is using a fully traceable, let's say, raw material or they are just play the opportunity game on the spot market. So I guess, that's one of the reasons why we see just oversupply in the U.S. DG market in such short-term.For the rest of the world, we believe that the DG market is relatively healthy. So we still see a strong DG market. Even, for example, in Europe, right now there are some pressures from the inventory side, but in the long-term, we are still a big fan of European market no matter it's DG or utilities. So we believe that the pre-remarked speech we have is starting digesting. So it will take some time, but it will be there. That's what we believe.
Great. And then my second question on your shipment guide, your 4Q shipment guide of 23 gigawatts kind of implying a flattish quarter-over-quarter growth. But I think historically your 4Q is much higher than 3Q. Is this driven by the orders delay that you referenced on the prepared remarks or is there something else? And also, can you quantify how much of the delay was that? And when do you expect those orders to come back?
Yes. So we are relatively -- provide a relative conservative numbers which is I think is the high end of our annual guidance which will be around 75 gigawatts. Still, on the order book side, we have more than what we need, but we still have some supply bottleneck. That's one of the reasons why we continue to expand our capacity, try to fulfill all these commitments we are making. So overall, we are fully confident that we can beat our, let's say, guidance if needed. It depends on the supply side and the market trend.And your follow-up question is about if -- you're talking about next Q1 or next year's order book. Again, for this next year's total demand side, we are fully confident the market will go up by another 20%, even 25% compared with 2023. So in the key market, we still believe the high quality, high efficiency, N-type TOPCon product is still in some of the, let's say, some shortage. That's why we still have the confidence we will continue to build-up our order book and extend our market share next year.
[Operator Instructions] Our next question will come from Rajiv Chaudhri of Intrinsic Edge Capital Management.
Congratulations on a very strong quarter in what was a very difficult environment for the industry. I have a few questions. I want to start by asking if there were any charges -- inventory-related charges in the gross margin number in the third quarter?
Rajiv, the answer is no.
Okay. And were there any charges in the selling and marketing or general and administrative expenses that were one-time expenses?
Excuse me, can you repeat that again?
Yes. Were there any one-time charges in the SG&A line items?
We did have some, roughly, I think maybe USD 20 million, USD 25 million one-off pool for some previous litigation regarding one of the module contracts a long time ago. So it's one-time. I think it's in the other operating expenses not in the G&A expenses, but we did have some -- this USD 20 million one-off charge.
Okay. And going back to the gross margin, I'm trying to understand what your cost of polysilicon was for the quarter. And the number I'm coming up with is around USD 16 on average, USD 16 per kilo on average [Technical Difficulty] between Chinese polysilicon and the U.S. polysilicon. Is that a fair estimate?
Rajiv, we don't disclose the number, but you can look at the index and the China poly roughly I think in the range of RMB 60 per kg to RMB 90 per kg. But the polysilicon out of China is kind of I think 2x to 5x compared to China. It's different, the price.
Yes. Actually, DQ Energy just reported their ASP for the quarter was actually USD 7.60. So that is actually closer to RMB 50 per kg.
Yes, you're right. There's a public index, right, for the poly and the calculations. But think about, we have the -- inventory turnover days is roughly 60 to 80 days. We have production lead times. You need to think about the time difference to do the calculations. But you can do the calculation based on the train, but the detail, the numbers, I think we have the supply chain advantage compared to market price. But we have different mix for the U.S. market, which is the market out of U.S., the poly price is different.
So Charlie, is it fair to say that because you have 60 to 80 days of inventory that your poly prices are always lagging the spot market by 60 to 80 days?
Yes, you can do the estimation based on that.
Okay. My other question is about competition. At the prices where modules are right now, what percentage of the industry players between Tier 2 and Tier 3 do you think are losing money right now? And what percentage of these companies are cutting back on their production because they are below their -- the pricing is below their cash cost?
We have seen this situation in recent I think months for different utilization rates for different players in the industries. For Tier 1 integrated companies, like Jinko, we have order visibilities, very good mix for the N-type versus P-type. And we have good management cost. So for some orders with relatively low price, we are able to continue to deliver I think the reasonable margin of growth per [Indiscernible]. But for the Tier 2, Tier 3 players, even some, let's say, they are not integrated, they are not international companies, they are reducing their utilization rate. So it's going to be different. It's going to be different situation for different companies. I think the Tier 1 top tier company will take the advantage to get more market shares.
Right. Do you see that happening already that Tier 3 companies are cutting back their production right now?
Yes, they are doing the utilization for Tier 2, Tier 3. They are lowering their utilization rate.
So it is reasonable to think that your ASPs are going to be much higher than the spot market prices because you are selling into the utility market which is more contract-driven and a lot of the spot prices that Tier 3 companies are selling into really are fire sales?
It's fair to say that, but different companies have different mix to different countries and different mix to the DG-based utilities and different product mix. So I think for Jinko, we are confident. And we are -- combined together, our module price is relatively higher than the market price. It's not market price, it's small price you saw from the public website.
Charlie, can you also talk about what was the level of depreciation in the third quarter and the EBITDA for the third quarter?
Actually, we have disclosed the EBITDA. So including the details breakdown -- and you can look at the [Technical Difficulty] and we have detailed numbers, it's roughly USD 600 million. You can look at details including the calculation.
I see. Okay. Sorry, I have not had a chance to look at that. Can you also talk about what percentage of the market, not Jinko, but the market this year will be TOPCon? And what the percentage will be next year in terms of how much TOPCon will be produced by the other companies?
This is the first year for N-type TOPCon to penetrate the market. And we think that the overall market size is 20%, 25% this year. We delivered 60%. And next year, it's possible N-type will achieve 60%, 70%. We are able to achieve I think over 85%.
So if the market this year is over 400 gigawatts, you're saying that TOPCon this year is over 100 gigawatts?
Let me take it as the last follow-up. So roughly we estimate the total industry output for TOPCon in this year will be somewhere around 100 to 110 gigawatts. And so across which, Jinko will contribute around 70 gigawatt-ish. So next year the number definitely will be more than doubled for the total industries. We're expecting somewhere around 400 gigawatts. But definitely, Jinko will take a main part of it, but definitely not as big as this year.
Okay. And finally one last question on the interest-bearing debt. You made a point that the interest-bearing debt came down in the third quarter. Is that something that we should expect will continue in Q4 and Q1?
Yes, we are gradually decreasing the debt because our earnings increased gradually.
The operating cash flow for Asia company, we generated I think around this year -- for the first nine months it's around RMB 11 billion operating cash flows. That's significant improvement. So for the leverage, the total debt, we're expecting to continue to, let's say, decrease several steps.
Great, and congratulations again.
[Operator Instructions] Our next question today will come from Alan Lau of Jefferies.
So first of all, congratulations to the company and the very impressive results in 3Q and despite other peers are actually having declining profits quarter-over-quarter. So some of the questions on the details as to whether how is the U.S. shipment situation? So how much has the company shipped to the U.S.? And what is the view on 4Q shipment to the U.S.? And has the custom inspection improved, et cetera?
We just talked about the earnings contribution from the U.S. for Jinko in third quarter. And we have smooth earnings let's say, with CBP starting from July. In Q4, we delivered roughly 1.3, 1.4 gigawatts. And we are expecting stable shipments in Q4 versus Q3. And because a lot of inventory was detained in the first half year, so we shift a relatively high volume in third quarter. Fourth quarter, our production returned to normal standards and we shipped around similar numbers. But contributions -- earning contributions quarter-by-quarter improved. Third quarter, the contribution is not so big because of the inventory was produced 6 or 9 months ago. The cost, storage cost, production cost is relatively higher. But next year, we are expecting with some earnings from the U.S. shipments.
Understood. So what you mean is, because you have locked in the module price through the contract. And then as the input price is now declining, so you expect U.S. market will actually be improving a lot from Jinko's perspective, right?
Yes. If you look at the market, the market -- the module is high, because it was only can be supplied from the capacity out of China. There is a UFLPA issues for the industry in the last 12 months. And for Jinko specifically, because our inventory was produced long time ago and we get the process very smooth and starting from July and the relatively old inventory, the cost is very higher. So earning gross margin contribution is small for third quarter. But going forward, we expect the earning contribution will be improved very quickly quarter-by-quarter. And next year, Q1 will be in a very good position.
Understood. I think that is a very positive point that a lot of investors have not fully appreciated this. Thanks a lot for the clarity on this. And then my next question is, so everyone has been talking about the inventory in Europe. So how do we see it? And around how many days or months of inventory we have in Europe?
Yes. So approximately, in Europe market, that's our main DG-based market. So in that kind of segment, in my opinion, that's normally around two months of the local inventory plus the logistic time, maybe 1 month to 1.5 months should be reasonable. So total together, if you're taking from the manufacturer point of view, on average, it should take us 3 to 3.5 months of the volumes. That's the, let's say, normal or let's say the standard inventories across everyone. If you look into the seller's point or distributor's point, that's normally around approximately 2 months of the inventory.
Understood. So you think the current level is actually at 2 months and it is actually normal, right?
No, no, I'm saying for a DG-based distributor generated driven market, that's the market standard, let's say. At the current status, especially you mentioned in Europe, I think you know that because of the price is falling, so the end customer is having the hesitation to wait until the market price coming to the lower level. So that slows down the, let's say, the sales volume at the end customer side. That's the reason why from the channel's or the inventory's point of view, the inventory is higher than the normal situation. However, in my opinion, the end customer, the end market and demand is still there, but it just creates some hesitation. But I believe it takes maybe 1, 2 more months' time to observe, digest all the inventories across the whole channel, but the demand is still robust in Europe.
Understood. So could you share your view on the utility side of things in Europe? Because I think people have been focusing a lot on DG market in Europe. And actually inventory is mostly related to DG, but how about utility market in Europe?
In utility segment, not only in Europe, but across the whole globe, there's barely any inventories, a real inventory. So most of the inventory under the utility segment is more built [Indiscernible] deliver outside, but it's not a free inventory you can redirect to sell to others. So that's why even accounting basis, it is defined as inventory, but from a sales point of view, it is not available to sell. It's just the way to do the right timing or it's on the way to the destinations. That's why not only Europe, but across the whole world, that's more or less the situation in utility. Even if there's some inventory on the accounting basis, it should not be risky too much.
Yes, I see your point. I think we'd like to know how is the demand in utility side of things like in U.S. or in Europe as well? Because will the decline in module prices stimulate more installation in the utility side? And how does that compensate with the interest?
Yes. So firstly, the demand side, definitely, we see there's some more attractions for the end customer to continue to develop more solar projects in utility segment because IRR is becoming more and more attractive. The yield is higher and higher. However, it's a cycle. So when you develop a project, it doesn't happen at day one. It takes 12 months, 18 months, sometimes even 24 months, even more to have all this -- to finish the whole development cycle, even early financing to close the financing part to be ready to place orders to the module side. So it takes pretty long cycle. So my simple answer is yes, we see a very promising future, both U.S. and Europe, but it takes some time to have all those pipelines released to become a real order for the manufacturer like Jinko.And secondly for -- your question is regarding, sorry, I forgot your second question.
How does that compensate the increase in interest rate? Because in some of the earnings calls in the U.S. -- because banks like JPMorgan and Bank of America are saying that the increase in interest rate and also...
The interest rate, I randomly checked with some customers. I won't say that's 100%, but I checked some key clients of us, and most of them, their feedback is positive. So because for the existing projects, even if their financial is closed, so normally they secure a fixed interest rate across the whole life cycle of their projects, investment cycles. So for them it's safe. And even with the module price coming down and they have more, let's say, returns for their investments or the interest rate doesn't hurt that part. And for the ongoing projects, because the interest rate is higher and most of the clients can pass the majority of the interest rate, higher interest rate cost to the end customers, to the PPA customers who can sign a more attractive PPA price than before. But definitely that won't be 100%, but that's my -- I share that point from the customer feedback.
That's definitely part of the -- some of the cases may happen. So I think, yes, my final question will be in relation to what is your view on -- what is the progress of your U.S. expansion capacity? And what is your view as of now as to the chance of capping the IRA subsidies, because there has been quite a lot of market chatters as to there are some lobbying happening in Washington, et cetera, to target against Chinese players? So we'd like to know, do you have an update on those?
No, we don't have a clear -- we are waiting for this detailed guidance -- official detailed guidance release as well. So I think it's still not finalized yet. So we are waiting for that as well. But for the U.S. market, we believe that's a very promising market. We're still holding our bullish positions on that. And we are trying to do whatever we can to serve the U.S. market. But we will take more actions once all those details get released.
So your plan will complete by the end of this year, right?
We will see. But the previous plans stick to what we have. And if your question is regarding whether we have new plans, we have to wait until the detailed guidance releases.
Okay. So your plant in Jacksonville, your 1 gigawatt plant, will be completed on time, right?
Yes, yes.
At this time, we will conclude our question and answer session. For any additional questions, please contact ir@jinkosolar.com. The conference has now concluded. We thank you for attending today's presentation. And you may now disconnect your lines.[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]