We also continue to monetize our pipeline as evidenced by our announcement yesterday on the sale of our 25-megawatt McHenry Solar Project to K Road Power, an independent power producer. The project will create up to 144 local jobs with power generated being sold to the Modesto Irrigation District under a 25-year PPA. We continue to see significant momentum in our U.S. residential lease program as we nearly doubled the number of leases signed in Q1 versus Q4. We are on track with our integration of Tenesol, and we see significant opportunities for the second half of 2012 in South Africa, as well as in the off-grid business.
In Asia Pacific, Japan remains our largest market where we shipped record volumes during the quarter. Our high efficiency panels are extremely well-suited for this market. We increased our lead in efficiency by starting production of our world record 21% efficient modules utilizing Gen 3 cell technology. These new products once again took the standard for the industry. Last month, we announced a strategic decision to consolidate our Philippines manufacturing footprint. This decision will drive supply chain efficiency, lower expenses and reduce cost per watt by at least $0.02 this year.
We met our accelerated cost targets for the quarter, and we are confident in achieving our 2012 goal of $0.86 per watt or better on an efficiency adjusted basis by the end of 2012. Our step reduction initiative is on track, with 2 lines at Fab 2 running the new process. Initial yields and efficiency are at or ahead of plan, and we expect all 12 lines in Fab 2 to be running on the new process by the end of this year.
Finally, we retired $199 million in convertible debt in Q1 and carefully managed our working capital resources.Moving on to Slide 5. As we mentioned last quarter, we are well-positioned to succeed as the solar industry moves closer to competing with traditional generation. We are focusing on 4 key strategic drivers: Our unique differentiated global go-to-market strategy, expanding our technology leadership position in cell and systems, accelerating our cost reduction roadmap and prudently managing our balance sheet and liquidity. Now let me provide specifics on each driver. Read the rest of this transcript for free on seekingalpha.com