Evergreen Solar Reaches Chinese Production Deal, Releases 1Q Report

Evergreen Solar, Inc. (NasdaqGM: ESLR) announced it has entered into a frame agreement to begin producing its String Ribbon solar wafers in Wuhan, China in 2010.

The company also released its 1Q09 financial report.

Massachusetts-based Evergreen Solar expects to finalize the terms of the manufacturing relationship with Jiawei Solar (Wuhan) Co. and the Wuhan Donghu New Technology Development Zone Management Committee over the next 90 days. This includes obtaining project financing and other approvals and permits to begin production in the second quarter of 2010.

Evergreen Solar will manufacture String Ribbon wafers using its Quad furnaces at a leased facility being built in Wuhan, China on Jiawei’s campus.

Jiawei will process String Ribbon wafers into Evergreen Solar-branded panels on a subcontract basis.

Evergreen Solar will reimburse Jiawei for its cell and panel conversion costs, plus subcontractor fee. The actual price paid to Jiawei will be negotiated annually.

The Wuhan government will provide, or coordinate with other Chinese governmental agencies, various incentives, including guarantees necessary to obtain third-party bank or other financing.

Initial capacity is expected to be approximately 100 megawatts (MW) and the parties intend to expand production capacity to approximately 500 MW by 2012, the timing and extent of which will be determined in 2010.

The company said the cost of the 100-MW wafer facility will be between $40 million and $50 million and that it will seek financing for about two thirds of that amount, reducing the portion of initial capital required to approximately $15 million to $20 million.

Richard M. Feldt, Chairman, CEO and President of Evergreen Solar said, "We expect that total manufacturing cost of String Ribbon panels produced in China, including Jiawei’s subcontractor fee, will be in the range of $1.40 per watt to $1.50 per watt. As the price of silicon returns to its historic level of about $50 per kilogram and as both companies work together to improve technologies and reduce manufacturing costs, we believe that total manufacturing cost could be reduced to approximately $1.00 per watt by the end of 2012."

1Q09 Results

Evergreen Solar posted a large net loss, even as it increased revenues for 1Q09.

Net loss was $64.3 million, or $0.40 per share, and includes charges of $43.9 million for the write-off of a loan receivable and related interest from a future silicon supplier, $3.5 million of facility start-up costs for the second phase of Devens and Midland string factory, and $1.8 million of on-going costs associated with the closure of the Marlboro pilot facility.

Revenues for the quarter were $55.8 million, including $1.4 million of fees from the company’s Sovello joint venture, compared to $44.2 million for 4Q08, including $3.1 million of fees and $22.9 million for 1Q08, including $4.7 million of fees.

Gross margin for 1Q09 was 1.2%, compared to 4.6% for 4Q08 and 33.6% for 1Q08. The decrease from last year was due to lower average selling prices and lower fees from Sovello, the company said.

Net loss for 4Q08 was $52.1 million, or $0.32 per share, and included charges of $23.1 million for the closure of the Marlboro pilot facility, $9.7 million of facility start-up costs for Devens and Midland and $8.0 million for the write-off of certain research and development equipment. Net loss for 1Q08 was $25,000.

"The capacity expansion of our Devens facility remains on the original schedule that we established in the summer of 2007," Feldt said. "For the first quarter of 2009, we produced 18.2 MW, more than double the 8.5 MW that we produced in the 4Q08, and we sold 17.3 MW at an average selling price of $3.13 per watt compared to $3.39 per watt for the 4Q08.

"While we could meet our second quarter production goal of approximately 30 MW, softness in demand due to tight credit markets and uncertain economic conditions will likely result in production and sales volume of 20 MW to 25 MW," continued Feldt.

"We still expect to have the capability to produce about 40 MW per quarter at Devens by the end of 2009 and achieve our target manufacturing costs of approximately $2 per watt at that production level," Feldt said.