Good morning, good afternoon, and good evening. First of all, thank you all for joining this conference call, and now we'll begin the conference on the fiscal year 2022 Q3 earnings results by OCI. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press Star and One, that is Star One on your phone during the Q&A. For cancellation, please press Star and two, that is Star two on your phone. Now, we shall commence the presentation on the fiscal year 2022 Q3 earnings results by OCI.
Good afternoon. Welcome to OCI's Q3 earnings release. My name is Woo-Hyun Lee. I'm representative director and vice chairman of the company. First, for the third quarter, OCI has recorded KRW 1.28 trillion of the revenue, and KRW 289 billion of operating income. This is for your reference, for the revenue of KRW 1.28 trillion. This is 22% improved quarter-over-quarter and 44% improvement compared to previous year's same quarter. This Q3 , we have experienced quite a series of events, but the most memorable event was Typhoon Hinnamnor.
This particular typhoon was one of the strongest typhoon ever Korea's experienced, and that typhoon left a lot of casualties and damage, especially in the southern part of Korea. Our Pohang factory, which is actually the second largest factory in Korea for OCI, we have experienced quite serious flood issue, so our entire factory was covered by the flood. That actually left us with a lot of damages because we have to shut down the factory, and it took actually several weeks to recover, bring it back to the factory operation in normal state. That actually occupy a lot of our time and money and some man-hours to recover this. Despite all this unexpected operating losses from the typhoon, we have recorded relatively strong performance in this quarter.
I will go to page five of our divisional performance review. First is our basic chemical sectors. Obviously, polysilicon is the one of the largest segments of this business segment. For this quarter, we have recorded over KRW 500 billion of revenue, and together with KRW 200 billion of operating income. This strong performance was driven by the stable operation after we complete 5,000 tons of debottlenecking of polysilicon factory in Malaysia, and that actually gave us additional volume and also the lower overall fixed cost of Malaysia factory. For this quarter, the volume increase was approximately 30%, went up, but in terms of sales volume, it went up by 36% quarter-over-quarter.
Fourth quarter, price for the solar-grade polysilicon remained quite high in Chinese renminbi. However, our U.S. product sales is based in the U.S. dollar, and due to the strong U.S. dollar appreciation, some condition, even though the renminbi price remains strong, however, we have recorded slightly lower sales price due to this exchange rate issue. However, overall, OCI is over 90% of revenue on U.S. dollar denominated and less than 50% of our costs are U.S. dollar denominated. That is so OCI in general are very dollar long the position. Due to the strong U.S. dollar strengthening, that actually help our export competitiveness and also that gave us somewhat higher margins.
I will go to page six on our petrochemical and carbon materials. As I mentioned earlier, this segment was hit negatively due to some Typhoon Hinnamnor. However, the division was able to manage their overall costs down and also due to strong activity of marketing and also pricing negotiation, we were able to increase our sales by 12% quarter-over-quarter on the most of main products. That give us the strong performance of KRW 530 billion sales revenue with KRW 40 billion of operating income. The Q4 , we are somewhat optimistic at this moment because normally we conduct the overall maintenance of our two major factory of Pohang and the Gwangyang.
However, due to the flood issue during September, while we are recovering our Pohang factory from the flood, we also did some overall maintenance during the same time, so we don't have to go through the annual turnaround in our Pohang factory. Even though we will actually conduct annual turnaround on our Gwangyang factory, overall, some production volume for Q4 would be higher than normal Q4 . So long as we keep this pricing competitiveness, we should be able to to target much higher than the performance in Q4 . I will go to page seven, the Energy Solution business. We have three somewhat different business in this segment.
One is we have the power generation business in Korea that our some subsidiary company named OCI Saemangeum Energy, OCI SE, we're making some the power generation business in Korea. In addition to that, we also have a power generation business in the U.S. by OCI Solar Power. This is 100% renewable energy, especially solar power plant business in the United States. We are doing 200 megawatts in the module production business by MSE, Mission Solar Energy. These three segments all of them did pretty well. For this quarter, we have recorded over KRW 200 billion of revenue, and we have recorded KRW 24 billion of the operating income.
It was fueled by the continuous increase of SMP, which is the base, the price factor for our energy sales to KEPCO and our strong price increase in REC, renewable energy credit, to the local power market. That give us some 21% increase in SMP and a 14% increase in REC actually provide us with strong some of the momentum for growth in this segment. Especially this September, SMP over KRW 235/kWh has been one of the highest price in Korean SMP history. Third, the sales and also the profit of module business in the U.S.
The solar power generation business remain very strong thanks to the strong policy support from the U.S. government and also strong market demand in the United States. The fourth quarter we will closely monitor the SMP and the REC movement try to maximize the profit in our OCI SE business. In addition to that, we will continue to look for business growth opportunity both in our solar power business in the U.S. and also the module business in the United States. I will come back to you after our earnings release report. We will go to separate section to go through some our some the new endeavor. I'll go to page eight.
On page eight, we have some slowdown in some of the business. 2021, in our first year of this urban development project, we have sold 3,750 apartment units in one year by three times of official sales process. However, due to some pending regulatory issue, we have not initiated any apartment sales in this year. We originally planned to sell over 4,000 apartment units in 2022. However, we could not meet those guidelines, so this has to be postponed to the first or at least the Q4 of next year.
However, when we think about the current actually weak condition in both the financial sectors and also housing sector, we believe the delaying in our apartment sales process will not actually entirely lower our performance. It actually give us some more breathing room to avoid any of those bad market conditions. Hopefully we can come back to the sales process again under much more improved market condition, both financially and also housing. Going to page nine, this is the financial position paper.
We used to call it balance sheet in old financial accounting terms, but after Korea adopted the IFRS, I mean, we changed the name to from balance sheet to financial position factors. When you look at cash and short-term financial asset, which is like a cash equivalent, we have increased KRW 288 billion of increase in cash, while in the meantime, our total debt stay about the same. That means our company has improved from our financial status quite, I mean, some dramatically. I can assure that OCI has maintained very solid, strong financials at this moment. Let me go through some of the stats in order to give some better reference. Page 10.
On page ten, in financial position, when you look at the first section, the net debt to equity position is only less than 14%. The debt to the EBITDA, which is a typical term loan reference point for the lenders, our net debt to EBITDA is actually 0.5x. Our net debt to EBITDA is even less than 1x. When you go to the EBITDA to interest coverage, we had over 30x EBITDA to interest coverage. This indicates the strong financial position of OCI. When you look at the bottom one, we have recorded about 13.7% ROA and 24% ROE.
That's what we care, and we try to improve our asset efficiency numbers, so in order to meet some of the expectations from the investors. That's about it for our earnings release issue, and go to the page 12. We would like to go through some of the market trend in the solar business. At this moment, the polysilicon price continued to remain strong throughout the quarter three. This is, I mean, due to several factors. The first is tightened supply from maintenance of major manufacturer in China, and the power shortage in Sichuan area of China, and also delay in the ramp-up of new capacity in several Chinese companies, has all added up to the slowing down in the supply of polysilicon.
Price of solar product continued to rise in China, but the price adjusted of those the product is actually a little bit lower due to the strong U.S. dollar. These are actually, it's a bit complicated as in the issue, but all of these the supply side slow down in the Chinese the solar value chain sectors actually caused or fueled some of the the supply shortage. We believe this strong some of the market condition, like the short supply situation will likely last a few more months. We believe, I mean, the market size of global solar business of last year was of 180 gigawatts.
We originally thought that this year's market size, it would be somewhat near 200 level. However, we need to upgrade from our market view of overall market size of somewhat between 232, as large as 250 gigawatts. That actually caused some of the major issue for the short supply situation. Next year, we are seeing minimum 270 gigawatts of the global size for the solar. However, if the market demand reached 300, overall, the supply shortage situation might last a little even much longer than we anticipated. I'll go to page 13. There has been some strong activity, both in the U.S.
Actually even recently, the European Union decided to set up some sort of independent value chain for solar power or other renewable energy sectors. However, when you look up these analysis data in our some this chart, it's not easy to set up some independent the supply chain in solar business without any Chinese involvement. When you look at it for polysilicon, close to 80% is still occupied by the Chinese player. Wafer is like a 97% occupied by the Chinese company. So when you look at the strong dominance of Chinese players, I think complete exclusion of Chinese player will not be realistic, even though they want to promote some their own the the their the manufacturing business in their own country.
However, it'll be very difficult to do it without any strong support from Chinese players. This will be more closely and objectively monitored in order to come with the right, actually, marketing decisions. Going for page 14. OCI has been running this, the module manufacturing business, our 100% owned subsidiary named MSE. It has been running about approximately 210 megawatts of capacity. We recently announced that we're going to extend our overall capacity to 1 gigawatt capacity in two years. One big difference between our expansion story and with other many other expansion story is we already have sufficient enough the space in our building that we can expand. No need for the building or structure-related investment.
All we need to do is reconfiguration and also retrofitting of our existing manufacturing facility. At best, we can come up with about 12 months of investment and commissioning phase. At least we should be able to bring our gigawatts of capacity within the next 14 months. With 1 gigawatt of the new capacity on stream, we should be able to expect quite actually positive cash compensation by the U.S. government based on the Inflation Reduction Act. This will currently be viewed as a very high profile and also high return investment for us. We will do our best to complete this expansion work in timely manner.
On page 15, I'm gonna go through some of our solar power development project. Our OCI Solar Power, which is U.S. subsidiary of OCI, focusing on some renewable energy power generation business. We're currently developing five solar power development project and one ESS from the project. The project total will be approximately 1.15 gigawatts, which is quite sizable from the project. In the meantime, we are currently running 60 megawatt of existing facility. For our this 1.15 gigawatt of some capacity project, it'll be difficult for OCI to continue to own this project because we do not have sufficient enough tax appetite. Likelihood is we indicated when we should be able to monetize these developed projects.
As soon as we are ready, we should be actively seeking some monetization, some opportunity for these projects, because that will give us not only for the profit, but will give us some more, some cushion for another expansion activity for us. Investors should be happy to invest in a good project with that they can fully utilize their some ITC-related tax position. On page 16 is just the brief that we have, we have started some construction of this project. This is a 49%-51% joint venture with the POSCO Chemical, which is Korea's largest manufacturer of battery-related key materials, especially for the anode and cathode, both some of the materials.
This P&O Chemical, which is joint JV between OCI and POSCO, are specialized the manufacturer both in the hydrogen peroxide for semiconductor uses, and another one is high softening point pitch products. High softening point pitch product is a key raw material that will actually be used for anode material for battery, lithium battery. POSCO, which is the mother company of POSCO Chemical, produce some of the cokes residue, which is a coal tar, that OCI brings this coal tar from POSCO, and we reprocess this the coal tar to making the binder pitch. That binder pitch mostly go into the aluminum and the silicon metal the manufacturing as a binder pitch.
If we actually use this, the binder pitch, go through another round of value-adding process, we be able to make actually 15,000 tons of highly specialized the carbon product that goes into the anode portion of the battery. This will give us great opportunity to growth, because currently Korea has 100% relying on the importation from both Germany and Japan. This would be very lucrative business for us and both for the win-win situation for both OCI and POSCO. This is it for our business update. If you have any question, we're happy to answer.
Now Q&A session will begin. Please press asterisk one, asterisk and one. If you have any question for translation, please press asterisk and two, that is asterisk two on your phone. Once again, if you have a question, please press asterisk one, asterisk and one.
The first question will be given by Rob Barnett from Bloomberg. Please go ahead. Rob Barnett from Bloomberg, please go ahead.
Hey, this is Rob Barnett. Can you hear me?
Yes, we can hear you.
Oh, sorry. I think we got a cross signal on the line. Rob Barnett, Senior Analyst at Bloomberg Intelligence. I was wondering if you could shed any more light on the Inflation Reduction Act and whether you're going to consider U.S. polysilicon production. I think there's a $3 per kilogram credit available on the solar-grade polysilicon side. Any thoughts on that?
Yes. I mean, right now, we do not have any plan to invest our polysilicon facility in the U.S. because maybe two, three reasons. First, investment cost in the United States for polysilicon is very expensive compared to our investment in Malaysia. This product, this facility is to produce pretty much identical products, but the overall investment cost in the United States is minimum two times or three times higher, and also the overall production or the construction time will be actually quite long for three years if we go with some brand-new greenfield project. Second, we can invest in the existing facility, but same issue. Many of these assets have not had proper maintenance or investment.
This is actually quite outdated, actually, factory. In order to upgrade it to where we need to be, I mean, first, we did not have chance to look at the facility closely, but this will be quite costly, and also this will be quite time-consuming. Due to the high price and also some much longer lead time, this wouldn't be seen as a good opportunity for us. It'll be better for us to focus on our expansion in Malaysia that can be on stream in less than 18 months. Together, an overall investment cost will be, I think, minimum one-third, almost one-third of if we invest in and elsewhere. At this moment, we do not plan of any investment in a polysilicon-related investment in the U.S.
However, if there's any other opportunity we can consider, sure that we will consider, but at least we do not have anything yet in our hands.
Thank you. One follow-up question, if I may. One item that we've been watching just generally on the polysilicon space is the potential for a reversion in polysilicon prices. I know our colleagues at BloombergNEF are quite bearish on where they could head over the next 12-18 months. Have you been taking any action to lock in higher polysilicon prices, or do you generally just take kind of the more of a spot pricing on polysilicon?
Our pretty much 100% of our customers are contract-based customers, and both our customer and us experience quite severe pricing fluctuation. Both we and our customer agree that no one is actually gaining anything whenever we go through too much fluctuation. In our contract, we have a mutual understanding of both some ceiling and some bottom arrangement. When the price go below bottom or it goes beyond the ceiling price, we'd again sit and discuss further. However, we haven't reached for the downside yet, one after we sign all of this floor and the ceiling concept.
I think, based upon our own experience, this should be discussed in good faith because not only us, but our customer, they all know that we need to go to the long run. I think our leads are also some negotiation based, some contract based, but both has some room to play with. If the price go below certain level, we can hold certain percentage of the downside. If you're experiencing somewhat higher pricing condition, then we are giving up some upside, but we are actually. This is more like the give and take for mutual protection. Difference is, at this starting point.
Despite actually high polysilicon price, all of these solar value chains are actually doing quite well. It'll be more of an issue rather than cheaper costs from China. I think more our buyers are focusing on whether these materials or these products are sourced from non-Chinese sources. I think that's what they care more about because IRA clearly provides a very strong incentive to use non-Chinese involved products or any value chain. I think that's a good plus for us.
Great. Thank you. Thanks a lot.
Yep.
As there are no further question, we'll now end the Q&A session. For any additional inquiries, please contact our IR department.
Thank you.
This concludes the fiscal year 2022 Q3 earnings released by OCI. Thank you for your participation.
Thank you so much. We look forward to seeing you in the next earnings release.