Evergreen Solar, Inc. (Nasdaq: ESLR) has executed a binding memorandum of understanding regarding new polysilicon supply agreements sufficient to allow its EverQ joint venture to increase its solar module production capacity.
EverQ currently expects to ramp production capacity from about 30MW this year to approximately 300MW by 2010 and possibly as early as the second half of 2009. The supply agreements are expected to be finalized and become effective early in the third quarter of 2006.
Under the proposed terms of a long-term supply agreement, Renewable Energy Corporation of Norway (OSEAX: REC.OL) will supply EverQ with a total of 7,400 metric tons of granular polysilicon over seven years beginning in 2008.
Shipments of approximately 400 metric tons are expected to begin in the second half of 2008 and increase to 1,200 metric tons annually by 2010, continuing through 2014. This is in addition to the 190 metric tons REC is supplying EverQ annually under an existing arrangement.
In conjunction with the implementation of today’s supply agreements and consistent with the existing joint venture documents, Evergreen Solar, Q-Cells AG of Germany (FSE: QCE) and REC have agreed to become equal partners in EverQ. It is anticipated that Evergreen Solar will continue to market and sell all modules manufactured by EverQ.
The binding memorandum of understanding also contemplates that EverQ will sign interim silicon supply guarantees to immediately enable the next phase of expansion of its facility in Thalheim, Germany, prior to 2008. Under the proposed terms of the interim supply agreements, Q-Cells and REC will each provide up to 150 metric tons of polysilicon, at near-term market pricing, to EverQ as required from mid 2007 to mid 2008.
With silicon secured, EverQ expects to expand its Thalheim operations with the construction of a second integrated wafer, cell and module factory with a capacity of approximately 50MW. Subject to final approval of investment grants, construction of this facility is anticipated to commence in the third quarter of 2006. Production is expected to begin in the first half of 2007 and reach full capacity by year-end 2007.
Evergreen Solar President and Chief Executive Officer Richard M. Feldt said, “Today’s announcement is a historic event for EverQ and its partner companies. As participants in EverQ, Evergreen Solar, Q-Cells and REC share a common vision – to rapidly advance photovoltaic technology and ultimately achieve economic parity with retail electricity. We each bring critical resources and competencies to this venture. Joining one of the global leaders in silicon production as well as the world’s largest independent manufacturer of high-efficiency solar cells as equal partners in advanced solar module production validates the significance of Evergreen’s String Ribbon technology and opens new doors to long-term accelerated growth for Evergreen Solar and our partners.”
The amended agreements, which will make Evergreen Solar, Q-Cells and REC equal partners at 33.33% ownership, are expected to be finalized early in the third quarter of 2006. As a result, Evergreen Solar expects that it will account for its share of EverQ’s financial results under the equity method of accounting beginning in the third quarter of 2006. Since there are no anticipated changes in the current distribution arrangements under which Evergreen Solar markets and sells all modules manufactured by EverQ, the Company expects to continue to report revenue resulting from 100% of EverQ’s module production.
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