Evergreen Solar

Evergreen Solar: A Financial Analysis

Company Background

Evergreen Solar (Nasdaq: ESLR) develops, manufactures, and markets solar cells, panels, and systems. The company’s competitive advantage is that it can produce silicon wafers, the raw material used in producing photovoltaic or solar cells, in a significantly cheaper, more efficient way. In contrast to the more common but wasteful “sawing” techniques for creating wafers from blocks of silicon, Evergreen’s novel approach, dubbed “String Ribbon”, involves pulling carbon strings (filaments) through molten silicon in order to form wafers, leveraging a common property of liquids referred to as surface tension. This particular approach is derived from a research project pioneered by Dr. Emanuel Sachs at MIT.

Following wafer production, the silicon substrate is etched with arrays of photodiodes, which generate electrical current via transduced light energy, then encased in durable, weather-tight packages called solar modules or panels. The distinct cost savings inherent in Evergreen’s manufacturing approach has enabled the company to produce these panels for a cost of approximately $2/watt,[1] which compares favorably to the average retail price per watt of $4.21 in May 2010.[2]

Evergreen first began large-scale wafer manufacturing in 2005 as part of a joint venture with Renewable Energy Corporation, and Q-Cells. That joint venture was initially named EverQ but then renamed Sovello AG in 2008 as part of a divestiture from the founding partners in preparation for an IPO. As will be discussed subsequently, Sovello is struggling financially, placing a significant burden on Evergreen’s current and future financial position.

Following that joint venture which proved Evergreen’s technology on a commercial scale, the company opened a facility in Devens, Massachusetts capable of producing finished solar modules. More recently and in response to disadvantageous market conditions, which...