We've followed the travails of Evergreen Solar (NasdaqCM: ESLRD) over the last year and it hasn't been pretty. The company has had warnings from Nasdaq over delisting, painful debt restructuring plans and numerous successive money losing quarters. The firm has lost $54 million through the first nine months of 2010.
The firm does have an innovative "string-ribbon" silicon technology that significantly reduces the amount of silicon used in a solar panel. It's a formidable technology but it has been deployed in Massachusetts, a state with formidably high labor, energy and material costs. It's just about impossible to compete against China's silicon solar dragons like LDK, Yingli (NYSE:YGE), JK Solar, SolarFun (SOLF) and Suntech (NYSE:STP) from a module factory in New England.
The bad news is this is a loss of 800 manufacturing jobs, a substantial portion of Evergreen's workforce, in an already painful economy and jobs market. It's also a black-eye for the state and the decision making process that provided $58 million in state aid to the firm. Admittedly, the state's intentions were pure -- Massachusetts wanted to foster green manufacturing jobs.
The good news is that Evergreen is shutting down the Devens plant -- the firm had to take action to preserve liquidity and survive the onslaught of China's plummeting prices. Perhaps moving its technology to China will allow the string-ribbon technology's value proposition to flourish.
Shyam Mehta, Greentech Media Research's Senior Solar Analyst, is positive about the news and sees it as a proactive, rather than a reactive move and a good time to take the initiative. Brett Prior, another of our esteemed solar analysts said. "Although painful, shutting down Devens is the right move. For better or worse, Evergreen is now a Chinese wafer manufacturer with a headquarters in MA."
Evergreen's stock price was down 3 percent at the end of Tuesday's trading.
This news needs to be viewed through the lens of Evergreen's once high-flying history. Here are some highlights -- and lowlights -- from that saga:
The solar industry in 2000 was tiny compared to the current market, totaling somewhere in the 175 megawatt range, a figure that pales in comparison to the approximately 15 gigawatts that will ship in 2010. At the time, Evergreen's string ribbon technology seemed to offer an innovative, lower-cost alternative to conventional crystalline silicon growth with the potential to lower the amount of silicon per watt.
But a decade of scaling-up and innovation across the solar value chain would appear to have left the once-lauded Evergreen behind.
Sales for the year 2009 were $271.8 million. According to its annual report, total panel cost was about $2.05 per watt in the fourth quarter 2009, down from $3.19 in the first quarter of the year. And that's still too much.
In early 2010, Sovello, the Q-Cells-Evergreen-REC joint venture, on the verge of bankruptcy, was sold to German private equity firm Ventizz Capital.
Earlier this year, Evergreen "received a deficiency letter from the NASDAQ Stock Market stating that, based on the closing bid price of the Registrant’s common stock for the last 30 consecutive business days, the Registrant no longer meets the minimum $1.00 per share requirement for continued listing on the NASDAQ Global Market under Marketplace Rule 5450[a](1)" (this info was gleaned from the SEC 8K filing). Evergreen has a grace period of 180 calendar days, or until December 28, 2010, in which to regain compliance with the minimum bid price rule.
Also from the SEC filing:
As a possible means of regaining compliance, Evergreen's board of directors has asked that stockholders approve a 1-for-6 reverse stock split at the annual meeting of stockholders. If the reverse split is approved by the stockholders and then adopted by the board of directors, the bid price of the Registrant’s common stock should increase sufficiently to achieve compliance with the minimum bid requirements.
So, the reverse stock split will get the share price over a dollar, but will in no way address the fundamental deficiencies in Evergreen's cost structure.
The Evergreen saga is illustrative of the falling costs in this market, the questionable value and differentiation of an innovative process that doesn't come along with innovative pricing -- and a grave warning to any solar module company with stubbornly high cost structures.
Disclosure: No positions