Massachusetts-based solar company Evergreen Solar, Inc. (NasdaqCM: ESLRD) announced its intent to shut down operations at its Devens, Massachusetts manufacturing facility by the end of 1Q11. The company will layoff about 800 workers.
The announcement marks the end of a long struggle by the company to prove the financial vaibility of domestic manufacturing for a startup.
The company received $58 million in aid from the state, but falling prices, driven by high-capacity competition in China undermined the new facility–despite the fact that it produces a unique solar cell technology, called "string-ribbon" which requires less silicon to produce than standard crystalline solar cells.
The company lost $54 million over the first nine months of 2010–on top of millions lost in 2009. And it’s share price tumbled to below a dollar, forcing the company to delist from the Nasdaq Global Market.
Mr. El-Hillow added, “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. We have consistently stated during quarterly conference calls throughout 2010 that we would continue to manufacture in Devens as long as it was economically feasible. 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. We believe this is the right long-term decision for the Company, and better positions the Company to complete its previously announced recapitalization plan and pursue the Company’s strategy of becoming the low cost producer of industry standard size wafers.”
Evergreen Solar will continue to operate its high temperature filament plant in Midland, Michigan and its wafer facility in Wuhan, China. With approximately 75 megawatts of installed wafer capacity in Wuhan, the Company will continue to supply its outsourcing partner with wafers for conversion into Evergreen Solar branded solar panels.
Expected Financial Impact of Devens Closure
As a result of the closure of the Devens manufacturing facility, the Company expects to incur non-cash charges of approximately $340 million associated with the write-off of existing building, facilities and equipment. Furthermore, approximately $150 million of intangible and cash-related prepayments associated with various silicon contracts are under review to determine whether additional non-cash charges will be required. These charges are expected to impact both 4Q10 and 1Q11, and the amount of the charges will be determined during the Company’s preparation of its annual financial statements for the year ended December 31, 2010.
In addition to the non-cash charges mentioned above, the Company expects to incur approximately $15 million of costs associated with employee severance and out placement services, facility decommissioning and other costs required to close the facility.
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