E•BOOM CAPITAL: Evergreen Solar U.S. Plant ‘Can’t Compete with Chinese’

Evergreen PV solar panel installation at Foxborough, Massachusetts (New England Patriots Hall of Fame & Patriots Place)

Solar panel manufacturer Evergreen Solar, Inc. (NASDAQ: ESLR) (NASDAQ: ESLRD), based in Marlboro, Massachusetts, said yesterday it was closing its nearby Devens manufacturer plant and laying off 800 employees by the end Q1 2011 because it can’t compete with low-cost Chinese manufacturers.

The company received $58 million in state aid in 2008 to build the Devens plant.

Evergreen will continue to develop and produce its String Ribbon solar power products using its proprietary, low-cost silicon wafer technology in Wuhan, China. 

Michael El-Hillow, President and Chief Executive Officer, said, “Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry. While the United States and other western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint.”

“During the month of December, we experienced a 10 percent decrease in average selling prices from the beginning of the fourth quarter. As industry selling prices continue their rapid declines into 2011, panel manufacturing in Devens, either fully or partially, is no longer economically feasible, consequently requiring a complete shutdown of the facility.”

In order to comply with NASDAQ’s $1 per share minimum price regulation, Evergreen completed a six-for-one share consolidation which began trading January 3, 2011 under symbol “ESLRD”. After 20 trading days, the company’s symbol will revert to its former symbol “ESLR”

Also on January 3, the company announced it was beginning a process to renegotiate and increase the amount of its outstanding convertible debt. 

Without the six-for-one share consolidation, Evergreen’s shares have slipped from $1.63 January 12, 2010 to $0.58 at closing Tuesday. 

Evergreen’s New Chinese-based Cost Strategy

Evergreen laid out its strategy in its nine-month financial results filed with the U.S. Securities and Exchange Commission October 2, 2010:

“Since opening in mid-2008, our Devens facility has continuously met or exceeded its key operation goals of rapid sequential production increases and significant manufacturing cost reductions. To date, we have produced and shipped approximately 233 megawatts of product from our Devens facility.

“Comparing our non-silicon wafer processing costs to the industry leaders in China today, we find ourselves modestly above their cost because we are operating at a much smaller scale and in one of the world’s highest cost of manufacturing regions. As we contrast our technology roadmaps with the world class leaders of today, we believe that our non-silicon processing costs will be well below their targets as we move into and beyond 2012 and produce in low cost regions.

“To illustrate this point, today our non-silicon processing costs in Devens are $0.35 per watt. This compares to $0.25 to $0.30 per watt for a large scale Chinese manufacturer today. Since we use about 3.7 grams of silicon today, and the rest of the industry generally uses six to seven grams, our silicon cost is substantially less, but we currently give some of this advantage back in non-silicon processing costs by being in a high cost region. To address this, we are currently ramping capacity in Wuhan, China.

“When our Wuhan facility reaches full operating metrics by mid-2011, our non-silicon processing costs are expected to be $0.23 per watt. This compares to an estimated $0.25 per watt for our still larger Chinese competitors, and then only the best of breed companies. Assuming silicon costs of $50 per kilogram, we expect to reduce our fully loaded wafer costs to $0.40 per watt, which compares to $0.55 per watt for our much larger competitors consisting of $0.30 per watt for silicon and $0.25 per watt for processing.

“Our target is to reduce non-silicon process cost further to $0.13 per watt by late 2012, which is substantially less than projected best of breed Chinese manufacturers. With silicon consumption projected at 2.8 grams per watt as we further improve our process and reduce consumable materials costs, our fully loaded wafer costs are expected to be $0.25 per watt by the end of 2012. 

“Our non-silicon process cost will ultimately be better than the best wafer manufacturers in the world.”

Photo credit: Evergreen Solar

DISCLOSURE: The writer has no positions in, or professional connections with, these companies.