Thursday, January 13, 2011

Liquidity concerns force closure of Evergreen Solar’s U.S. module manufacturing plant

‘String Ribbon’ technology pioneer Evergreen Solar said it will close its solar module manufacturing plant in Devens, citing the need to preserve liquidity as it faces renewed and consistent pricing competition, specifically from China-based c-Si module manufacturers. The Devens plant, which has a capacity of 180MW and is one of the largest solar panel manufacturing facilities in the U.S., is expected to be permanently closed by the end of the first quarter of 2011, affecting approximately 800 employees.
“Although production costs at our Devens facility have steadily decreased, and are now below originally planned levels and lower than most western manufacturers, they are still much higher than those of our low-cost competitors in China,” noted Michael El-Hillow, president and CEO. “During the month of December, we experienced a 10% 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.”
A non-cash charge of approximately US$340 million will be assigned to the write-off of existing building, facilities and equipment as well as approximately US$150 million of intangible and cash-related prepayments associated with silicon supply contracts under review due to closure.
Evergreen Solar said that it would continue to operate its high-temperature filament plant in Midland, Michigan, and its wafer facility in Wuhan, China, which now has a capacity of 75MW and will therefore become its only remaining module plant.
Despite the initial hype over the U.S.-developed String Ribbon solar wafer technology being a lower cost alternative to conventional c-Si production, Evergreen Solar has battled liquidity and cost competiveness issues for much of its short manufacturing life.
The drastic fall in polysilicon prices as new capacity came onstream made conventional c-Si production more competitive with the String Ribbon process, squeezing margins at Evergreen Solar. The credit crunch also limited the company's access to capital, while it attempted to build and ramp new manufacturing facilities that caused a cash burn rate that was unsustainable.
Problems also emerged over its ability to continue to cut manufacturing costs at the same rate as larger manufacturers, not necessarily just those from China. SolarWorld for example has production facilities in the U.S. and has been expanding capacity to meet demand in North America for over a year.
During its third-quarter conference call with financial analysts in November, executives noted that they expected to continue to lower costs at its Devens plant by gradually increasing the number of cells shipped to its China plant to be assembled into panels. Combined with other cost reduction initiatives, panel costs were claimed to reach approximately US$1.15 per watt, with a cash cost of US$1 per watt by the end of 2010.
The Devens plant manufacturing costs were down 3% to US$1.88 per watt, compared to $1.94 per watt in the second quarter. Silicon consumption was claimed to be an industry-leading 3.7 grams per watt.
Evergreen Solar also highlighted the need to adopt an industry-standard wafer size since potential customers of its wafers would experience additional costs in modifying module assembly equipment to enable the use of the String Ribbon product. The company was therefore forced to spend capital on modifying its existing quad ribbon furnaces that were also a new investment intended to lower manufacturing costs over the original dual ribbon furnace design.
“Our future expansion will be based on the industry-standard size wafer, which is central to our strategy of manufacturing the lowest cost wafer, in an industry standard form factor, and providing a wafer that would enable the lowest cost solar panel utilizing multicrystalline silicon wafers,” added El-Hillow.
The move strongly suggests that Evergreen Solar is shifting some of its emphasis towards becoming a wafer supplier, while continuing module production under a JV partnership in China.
The company claimed last year that its China manufacturing operations would become highly cost competitive with local module manufacturing rivals.
Evergreen Solar also noted that shipments for the fourth quarter of 2010 increased to approximately 47MW, a new record, at an average selling price of approximately US$1.90 per watt. In the third quarter, Evergreen had shipped 42.6MW, up from 39.8MW seen in the second quarter.

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