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WIKI ANALYSIS
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| Table of Contents |
| Intro and Overview |
| Introduction |
| Business Overview |
| Trends and Forces |
| Key Trends and Forces |
| Competition |
| Competition and Market Share |
Evergreen Solar is a vertically integrated solar panel manufacturer that uses String Ribbon technology to produce solar cells with 50% less silicon[1] than is needed by its competition. Growth in solar panel efficiency from less than 10% before 1980 to more than 40% in 2009[2] has made the sun an increasingly appealing source of power; but the global recession of 2008 and 2009 has put the industry, and Evergreen into a slump. Germany and Spain, where the company earns almost one-third of its revenues,[3] have cut their solar subsidies by 10%[4] and 30%,[5] respectively, with plans to cut even more in the future. With subsidies on the decline, electricity prices falling because of the drop-off in demand for natural gas and coal,[6] and the price of CO2 emissions allowances in Europe falling by almost two-thirds from mid 2008 to February of 2009,[7] demand for solar power has been falling. Worse, the financial crisis has cut Evergreen's access to capital, forcing it to close its Marlboro plant and delay construction of its $800 million plant in Asia in 2008.[8] However, in 2008 Evergreen Solar entered into seven multi-year solar panel supply agreements and as of the second quarter of 2009 the company had a backlog of 935 MW remaining with deliveries scheduled through 2013. Also, at the end of the quarter the company announced that it had finalized agreements with Jiawei Solarchina Co., Ltd. and Hubei Science & Technology Investment Co., Ltd. to expand manufacturing operations into China.[9]
Within the solar industry, Evergreen Solar competes on the basis of cost - minimizing the cost of buying a solar system by lowering manufacturing costs, and minimizing the cost of running a system by increasing the conversion efficiency of its cells. At the end of 2009, the company expects to manufacture cells for $1.50-$2.00 per watt, which is still behind competitor First Solar, with costs of 98 cents per watt.[10][11] At the end of 2008, Evergreen's cells had a conversion efficiency of approximately 15%,[12] lower than many of its competitors, like 21.4% for Sanyo in Q1 2009,[13] and the average producer of single crystal cells in 2007, with an efficiency of 17%.[14] The solar sector is becoming more and more competitive; among ESLR's competition are such powerhouses as SunPower, SunTech, BP Solar, Sharp, Kyocera, and Q-Cells.
Business Overview Evergreen Solar is a vertically integrated company that operates through four stages of the solar power industry. The company produces multicrystalline ribbon silicon wafers from refined silicon. Evergreen's string ribbon PV technology lets the company form photovoltaic wafers with less silicon than the mono- and multicrystalline wafers made by other solar manufacturers - almost making them silicon versions of thin film. These wafers are then made into photovoltaic (PV) cells, that turn light energy (usually from the sun) into electricity. Evergreen's PV cells are put together into modules, which generate up to 190 watts of power.[15] Finally, Evergreen takes these modules and wires them together into solar power systems, which can generate thousands of watts of electricity. The company sells to installers in Europe and North America.
| 2006 | 2007 | 2008 | 2Q 2009 | |
|---|---|---|---|---|
| Total Revenue | $102,252.00 | $69,866.00 | $111,959.00 | $63,838 |
| Product Revenues | $102,252.00 | $58,334.00 | $95,245.00 | $62,697 |
| Royalty and Fee Revenues | $0 | $11,532.00 | $16,714.00 | $1,141 |
| Net Income (loss) | $(26,669.00) | $(16,602.00) | $(84,935.00) | $(20,338) |
Revenue for the second quarter of 2009 increased by 246% to $62.7 million, as compared to the same quarter in 2008. This was primarily due to increased sales volume generated from its new Devens facility, which started shipping product in the third quarter of 2008. However, the increase in volume was offset by lower average selling prices and a 75% drop in royalty revenue and marketing selling fees to $1.1 million, as compared to the same period in 2008.[18]
In 2008 Evergreen Solar entered into seven multi-year solar panel supply agreements and as of the second quarter of 2009 the company had a backlog of 935 MW remaining with deliveries scheduled through 2013. Also, at the end of the quarter the company announced that it had finalized agreements with Jiawei Solarchina Co., Ltd. and Hubei Science & Technology Investment Co., Ltd. to expand manufacturing operations into China.[9] At the beginning of September 2009 the companies began construction of a 100MW manufacturing plant in Wuhan, China.[19] Evergreen Solar expects manufacturing costs of its panels in China to be in the range of $1.40-$1.50 per watt.[20] Additionally, the company expects manufacturing costs to drop to $1.00 per watt by the end of 2012 by further expanding production in China to 500MW.[19]
Revenue and expenses decreased from 2006 to 2007, because in 2007, Evergreen cut its share in Sovello from two-thirds to one-third.[21] In the process, Evergreen stopped using Sovello's financials in its own accounting. From 2007 to 2008 product sales increased by 63%, as new production from the companies Devens facility boosted sales by 61%.[22] At the same time, costs in setting up the new facility brought down net income from -$16 million, to -$85 million.[16]
SovelloSovello is a German solar company that produces 30 megawatts of power per year and has a stated goal of increasing production to 300 megawatts by 2010.[23] In 2007 Evergreen reduced its ownership from two thirds to one third. Per accounting rules it is no longer consolidated on Evergreen's financial statements. In October 2007 Evergreen announced a plan for Sovello's IPO. In December of 2008 Evergreen re-affirmed it's intention for Sovello to have an IPO, at which point the company would generate much needed capital but lose primary access to the fast-growing German solar market.[23]
Evergreen Has Been Using Equity To Finance ExpansionEvergreen has lost 33% of its equity to stay competitive in 2007 and 2008. In order to lower costs the company has to create economies of scale by enlarging its manufacturing capacity. To raise and save money in order to do that, Evergreen has done two things. First, the company paid for its silicon contract with DC Chemical with a 13% equity stake in April of 2007.[24] Second, the company lent Lehman Brothers 30.9 million shares in order to raise capital.[25] When Lehman went bankrupt, it did not return the shares as it was supposed to, and so is facing legal action. If Lehman were to return the shares, Evergreen would have essentially completed a free buyback of 30.9 million shares. In absence of that, Evergreen's shares have been diluted approximately 20%, in addition to the 13% it gave to DC. These are not the first times the company has used equity to raise capital, and given its projected continued operating losses, will likely not be its last.[26] As long as Evergreen gets something of equal value in return that doesn't matter, but with both DC Chemical and Lehman the company lost out. The company's silicon contract with DC Chemical has lost value, as the price of silicon fell in late 2008 and early 2009, and Lehman went bankrupt before its transaction with Evergreen could be completed. (Read More about Evergreen Solar's Key Trends and Forces...)
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