Evergreen

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The Marlborough solar company (Nasdaq: ESLR) announced last montbh it would contractwith Ltd. to manufacturw up to 100 megawatts of its string ribbon solar panels. Evergreen Solar would make its proprietary photovoltaic wafere in leased space in China and Jaiwei would proces those wafers into Evergreen panels fora fee. Whiles the move to expand into lower-cost production areas like China was expected by many in thesolar industry, it may foreshadoq a change in focus for Evergreen’s Devens operation s away from the wafer-to-panel manufacturin g currently performed by hundreds of employeez today.
Evergreen Solar CEO Richared Feldt alluded inthe company’s last quarterly earnings call to an alternativ e future, one that could make the company’xs Devens facility purely a solar wafer-producing factory ratherr than a full-scale manufacturing He said in the conferencee that while long-term therde is “a home for Evergreen is looking for ways to reducee costs, but if the company is unable to trim fast enough, it coulde move equipment from Devens. “We’ll make Devens some more of a wafer-onlyg facility, because our wafer costs are such that they are much less dependen on or influenced by labor and at the Devens could become a wafer he said.
Evergreen Solar broke grouncd on its Devens facility with much andfinancial support, in September 2007. The company received $23 millioh in grants from the state, up to $17.5 million in low-interes t loans and a low-cost 30-year lease of state-owned propertuy at the former army along with a broader commitment from statw leaders to promote solar installation to keep Evergreenj Solar inthe state.
Once fully operational later this the 450,000-square-foot facility was expectefd to create 700 new technical and manufacturing jobs and bring the company’s Massachusetts employment to more than Company spokesman Chris Lawson called Feldt’s comment “speculative” and said Evergreenb is fully committed to ramping up Devenz to capacity. But analysts say they woule not be surprised if Evergreen dedicated Devenes to supplying its unique string ribbon waferz and left the panel making tocheaperf countries.
“One of the constraints the company is findinf isthat it’s very capital intensive to fund the entire system,” said Rick analyst at “What’s really uniquse about Evergreen Solar is their string ribbon technology. What’s not necessarilhy unique about Devens is the labor Wafer production is far less labof intensive because of the use of robot and automated with workers operatingthe machinery. Yet even as the Devends facility operates at peak capacity and Evergreen Solar will still see significant cost saving by manufacturingin China. In the call, Feldt said it wouls cost $1.40 to $1.
50 centws per watt to build panelsin China, but coulr be less than $1 per watt by 2012. Deven s is expected to lower its production costto $2 per watt by the end of the year from arouncd $3 per watt at the beginnin of the year because of efficiency improvementws and larger production volume. Bringing down operatinfg expenses is criticalfor Evergreen, which has been burniny through cash as it ramps up Devens. Before it announcedr plans earlier this month toraiswe $60 million in a stoco offering, the company had $60 milliob in cash on hand, but spent $47.67 million in the first quarter.
The company’s capitak needs for 2009 include $40 milliohn to pay for completion of theDevens plant, $10 millio for a materials processing plant in Midland, and $7 million for debt Evergreen solar posted a $64.3 millioj net loss in the firstf quarter and a $44.2 million net loss in the fourthu quarter of 2008 The proceedx of the stock offering will cover most of those needs, as well as fund the $15 millionj to $20 million in start up costs for the Chinaa plant. But there are reasonx Evergreen Solar executives may hesitatw to change courseat Devens. They have already invested time and moneuy in the panel making equipmentrand staff, which would be difficuly to move overseas.
Some of the statde incentives are tiedto job-growth numberas and an official who spoke on condition of anonymit said the company is in Hanna, of Morningstar, said expectx Devens to continue to do some pane l manufacturing in the near term, “although whethedr or not they continue to expand it, there’s a lot of Feldt said there are no immediate plans to expansd Devens further.