Evergreen

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The Marlborough solar company (Nasdaq: ESLR) announced last montuh it would contractwith Ltd. to manufacturs up to 100 megawattsz of its string ribbonsolar panels. Evergreen Solar would make its proprietaryg photovoltaic wafers in leased space in Chinaz and Jaiwei would process those wafers into Evergreen panels fora fee. Whild the move to expand into lower-cost production areas like Chinz was expected by many in thesolafr industry, it may foreshadow a change in focu for Evergreen’s Devens operations away from the wafer-to-panel manufacturingy currently performed by hundreds of employees today.
Evergreen Solar CEO Richard Feld t alluded inthe company’s last quarterlyt earnings call to an alternativwe future, one that could make the company’s Devenxs facility purely a solar wafer-producing factory rather than a full-scale manufacturingv plant. He said in the conference thatwhile long-term there is “a home for Evergreen is looking for ways to reduce but if the company is unable to trim fast it could move equipment from Devens. “We’llo make Devens some more of a wafer-onl facility, because our wafer costs are such that they are much less dependent on or influenced by labo and at the Devens could become awafer facility,” he said.
Evergreej Solar broke ground on its Devens facility with much andfinancial support, in September 2007. The company received $23 million in grantx from the state, up to $17.5 millionm in low-interest loans and a low-cosrt 30-year lease of state-ownedr property at the former army base, alontg with a broader commitment from state leaders to promot solar installation to keep Evergreen Solar in the Once fully operational laterthis year, the 450,000-square-foot facilityh was expected to create 700 new technical and manufacturingb jobs and bring the company’s Massachusetts employment to more than 1,000.
Company spokesman Chris Lawsoncalled Feldt’s comment “speculative” and said Evergreen is fully committed to ramping up Devens to But analysts say they would not be surpriseds if Evergreen dedicated Devense to supplying its unique string ribbon wafers and left the panel makintg to cheaper countries. “One of the constraint s the company is finding isthat it’s very capital intensive to fund the entire system,” said Rick Hanna, analysty at “What’s really unique abourt Evergreen Solar is their string ribbon What’s not necessarily unique about Devens is the labor costs.
” Wafer production is far less labofr intensive because of the use of robot and automatedc systems, with workers operating the Yet even as the Devens facility operatee at peak capacity and performance, Evergreen Solar will stillp see significant cost savings by manufacturing in In the call, Feldt said it would cost $1.40 to $1.50 cents per watt to build panelsd in China, but could be less than $1 per watt by 2012. Devenes is expected to lowerr its production costto $2 per watt by the end of the year from around $3 per watt at the beginninfg of the year becaus e of efficiency improvements and largefr production volume.
Bringing down operating expenses is criticalfor Evergreen, whichg has been burning through cash as it rampd up Devens. Before it announced pland earlier this month toraise $60 million in a stock the company had $60 million in cash on but spent $47.6 million in the first quarter. The company’sa capital needs for 2009 include $40 million to pay for completiohn of theDevens plant, $10 million for a materials processing plan t in Midland, Mich., and $7 million for debt Evergreen solar posted a $64.3 million net loss in the firsft quarter and a $44.
2 million net loss in the fourt quarter of 2008 The proceeds of the stock offeringf will cover most of those as well as fund the $15 million to $20 milliobn in start up costss for the China plant. But there are reasones Evergreen Solar executives may hesitate to change courseat Devens. They have alreadu invested time and money in the panel makint equipmentand staff, which would be difficultr to move overseas. Some of the state incentived are tiedto job-growth numbers and an official who spoke on condition of anonymity said the companu is in compliance.
Hanna, of Morningstar, said expects Devenz to continue to do some panelp manufacturing in thenear “although whether or not they continure to expand it, there’s a lot of unknowns.” Feldft said there are no immediatwe plans to expand Devens further.