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Evergreen Solar Inc. - OTC Markets

4/19/2014, 3:59 PM ET
Quote & Analysis StockTalk Description
Sector: Technology
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Country: United States

We develop, manufacture and market String Ribbon™ solar panels utilizing our proprietary wafer manufacturing technology. Our technology involves a unique process to produce multi-crystalline silicon wafers by growing thin strips of silicon that are then cut into wafers. This process substantially reduces the amount of silicon and other processing costs required to produce a wafer when compared to conventional sawing processes. Silicon is the key raw material in manufacturing multi-crystalline silicon wafers. With current silicon consumption of about 3.9 grams per watt, we believe we are the industry leader in efficient silicon consumption and use approximately half the silicon used by wafer manufacturers utilizing conventional sawing processes. The wafers we produce are the primary components of photovoltaic (“PV”) cells which, in turn, are used to produce solar panels. We believe that our proprietary and patented technologies offer significant cost and manufacturing advantages over competing silicon-based wafer manufacturing technologies.
Our revenues today are primarily derived from the sale of solar panels. We sell our products using distributors, systems integrators and other value-added resellers, who often add value through system design by incorporating our panels with electronics, structures and wiring systems. Applications for our products primarily include on-grid generation, in which supplemental electricity is provided to an electric utility grid. Our products are currently sold to customers primarily in Europe and the United States. As of December 31, 2009, we had approximately 830 megawatts (“MW”) of backlog remaining under our existing long-term contracts with deliveries scheduled through 2013. Our sales contracts allow for our customers to request price changes based upon current market conditions, and we may have to amend contracts for volumes or pricing, as we did in 2009, in order to remain competitive in the marketplace in the future.
Our wafer manufacturing technology is proven. Large-scale commercial application of our technology, using furnaces that grow two thin strips of multi-crystalline silicon, began in 2005 with the opening of Sovello AG (formally EverQ GmbH), our joint venture with Renewable Energy Corporation ASA (REC) and Q-Cells SE (Q-Cells). Since its opening, Sovello has produced and shipped over 200 MW of product using our wafer technology, but has faced significant financial difficulties as a result of the overwhelming recent market downturn in demand and pricing for its products.
Through on-going research and design efforts and process changes, we continuously improve our wafer manufacturing technology and our ability to manufacture multi-crystalline silicon wafers. Our manufacturing facility in Devens, Massachusetts uses our Quad wafer furnace equipment, which grows four thin strips of multi-crystalline silicon from one furnace and incorporates a state of the art automated laser cutting technology that further improves our wafer manufacturing process. To date, we have produced and shipped approximately 113 MW of product from our Devens facility.

Our Competitive Strengths
We believe we are well-positioned to be a leader in the solar power industry based on the following competitive strengths:
Proven Wafer Manufacturing Technology. Our wafer manufacturing technology enables continuous growth of thin multi-crystalline silicon strips that are cut into wafers eliminating the need for ingot formation, sectioning and wire sawing necessary in the conventional wafer manufacturing process. The elimination of the need for ingot formation, sectioning and wafer sawing provides us with significant advantages including increasing the speed of, and reducing costs related to, building new production facilities. Our proprietary technology enables us to produce wafers at industry-leading manufacturing cost. We have been developing and enhancing our patented wafer manufacturing technology since 1994 and have achieved the lowest silicon consumption rates in the industry with our quad wafer furnace, which currently consumes about 3.9 grams of silicon per watt produced or approximately half of the silicon used by wafer manufactures utilizing conventional sawing processes. Large-scale commercial application of our technology, using furnaces that grow two thin strips of multi-crystalline silicon, began in 2005 with the opening of Sovello. Since its opening, Sovello has produced and shipped over 200 MW of product.
Through on-going research and design efforts and process changes, we continuously improve our wafer manufacturing technology and our ability to manufacture multi-crystalline silicon wafers. Our manufacturing facility in Devens, Massachusetts uses our Quad wafer furnace equipment, which grows four thin strips of multi-crystalline silicon from one furnace and incorporates a state of the art automated laser cutting technology that further improves our wafer manufacturing process. To date, we have produced and shipped approximately 113 MW of product from our Devens facility.
Proven ability to execute on new factory expansion. We have consistently proven our ability to ramp substantial manufacturing operations that utilize our unique technology. Our management team, engineers and other support staff were responsible for the successful ramp of Sovello’s manufacturing facilities during 2005 to 2007. We also successfully ramped our Devens, Massachusetts facility which utilizes our quad ribbon furnace technology. Over two years ago, we established a cost target for our Devens facility of about $2.00 per watt and effectively achieved that cost during the fourth quarter of 2009.
Leveraging the strength of our Quad technology, we reduced our wafer cost to $0.69 per watt during the fourth quarter of 2009 from $0.75 per watt in the third quarter of 2009, as we reduced silicon consumption to an industry leading 3.9 grams per watt. We achieved this with a silicon cost of about $90 per kilogram. We believe Devens is producing wafers that are cost competitive with many of the larger Chinese wafer manufacturers today. We also believe that we have not yet realized the full benefits of our quad technology, which is in the early stage of its life cycle. Nor have we obtained the benefits that larger-scale manufacturing brings. Based upon these past experiences, we are confident in our ability to successfully ramp our new wafer manufacturing facility in Wuhan, China.
Established brand and recognized leader in quality and performance. Our solar panel products are globally recognized as leaders in quality and performance. Based upon the power attributes of our solar panels, our products have consistently performed among the highest in the industry in terms of electricity delivered per kilowatt installed. Further, our unique manufacturing process creates silicon wafers using a fraction of the energy required to make conventional silicon-based wafers. This means that the amount of carbon dioxide generated by making our panels is up to 30% less than other solar panels, resulting in a manufacturing process that has less impact on the environment.
Strong, Experienced Management Team. Richard Feldt, our President and Chief Executive Officer, and our other executive team members, have guided us from an innovative research and development-focused company to an emerging manufacturing leader in the solar energy industry. Mr. Feldt previously served as Senior Vice President and General Manager of Worldwide Operations at Symbol Technologies where he streamlined the complex supply chain and significantly reduced cycle times and material costs. His 30-year track record in successfully growing global technology and manufacturing businesses is instrumental to our long-term development plan to expand manufacturing capacity. Our executive officers are dedicated to the continuous development of our technologies, including our proprietary quad wafer furnace design, to enhance our competitive advantage in the cost-efficient production of solar cells. With this talented group of experienced executives from various technology manufacturing and other relevant backgrounds, we expect to execute on our current business plan and drive continued and rapid growth.

Our Growth Strategies
Our fundamental business objective is to use our technologies to become a leader in developing, manufacturing and marketing solar panels throughout the world. We are implementing the following strategies to meet this objective:
Innovate to Lower Cost of Solar to Achieve Grid Parity Cost Structure. The long-term challenge of solar energy is its higher cost compared to conventional sources of electricity such as fossil fuels. Solar-power product manufacturers who have the ability to manufacture products that can generate electricity at or close to grid parity will consequently have a distinct advantage, including the ability to sell into markets where government subsidies are minimal or non-existent. We expect that utilizing our proprietary wafer manufacturing technology as an integral part of solar panel manufacturing will result in industry-leading manufacturing cost and among the first of multi-crystalline silicon panel producers to achieve grid parity.
Maintain Our Leadership in Wafer Technology, through Continuous Innovation. We employ approximately 55 research and development employees at an approximately 40,000 square foot facility in Marlboro, Massachusetts primarily dedicated to wafer and cell development initiatives. We have also begun hiring technologists in China to also focus on these critical activities. Further enhancing and improving our manufacturing process is critical in allowing us to be able to produce solar power products that are at or below grid parity. Today, we are working on two major wafer projects:
•Optimizing the crystallization characteristics of the wafer to increase power performance, and

•Growing wider wafers in line with industry standard sizes.
We continue to believe we are at the early stages of commercial development of the technology we use to manufacture String Ribbon wafers and that there is substantial further progress to be made.
We are also working on projects geared toward improving cell conversion efficiency. Specifically, we have developed a multiwire and tabbing technology that we will begin piloting in China that we expect will increase our panel power by about 5%.
Proliferate Our Technology Commensurate With the Growing Demand for Solar. Based upon the success achieved thus far at our Devens facility, combined with the growing awareness and support for renewable energy worldwide, we expect to expand our manufacturing capabilities to accommodate the expected growth of the solar industry. While there are many options for expansion, the current condition of the credit markets has led us to broaden our options for growth, most notably subcontracting cell and panel manufacturing. We believe employing a subcontracting strategy for cell and panel manufacturing while maintaining our own wafer manufacturing will allow us to leverage our already industry-leading manufacturing capability for wafers combined with best-of-breed capabilities already employed by incumbent cell and panel manufacturers or other well-experienced subcontract manufacturers. As such, we believe we can increase our access to panel capacity faster, produce panels at a lower cost, and require substantially less capital than if we were to build a fully integrated wafer-to-panel factory on our own.

Our Products
Solar panels are generally composed of the following:
•Wafers. A crystalline silicon wafer is a flat piece of crystalline silicon that can be processed and assembled into a solar cell. Our rectangular wafers measure approximately 80 millimeters by 150 millimeters and are approximately 190 microns thick. We are currently developing wafers that we expect will be approximately 156 millimeters square, which is in line with industry standards.

•Cells. A solar cell is a device made from a silicon wafer that converts sunlight into electricity by means of a process known as the PV effect. Each of our solar cells currently produces approximately 1.8 watts of power. As the conversion efficiency of the solar cell improves, the power of the cell improves as well.

•Panels. A solar panel is an assembly of solar cells that have been electrically interconnected and laminated in a durable and weather-tight package. Our solar panels currently produce up to approximately 215 watts of power.
One or more solar panels can be assembled in a solar system (or solar array) by physically mounting and electrically interconnecting the panels, often with batteries or power electronics, including inverters, to produce electricity. Typical residential on-grid systems produce 2,000 to 6,000 watts of power. Solar panels are our primary product, although we may in the future also sell wafers, cells or systems. We believe our String Ribbon solar panels are very competitive with other products in the marketplace. They are certified to international standards of safety, reliability and quality. If our development programs are successful, we expect to see continued increases in conversion efficiency and power output from our solar panels as we rapidly expand our manufacturing capacity.

EMPLOYEES
As of December 31, 2009, we had approximately 729 full-time employees, including approximately 52 engaged in research and development and approximately 603 engaged in manufacturing. Approximately 66 of our employees have advanced degrees, including 18 with Ph.D.s. None of our employees are represented by any labor union nor are they organized under a collective bargaining agreement. We have never experienced a work stoppage due to labor disputes and believe that our relations with our employees are good. We also use a temporary employment agency to supplement our work force needs. At December 31, 2009, we had 279 temporary employees. Including the temporary employees, we have 975 employees in the United States, 24 in China and 9 in Germany.