Evergreen Solar, Inc. announced its intent to shut down operations at its Devens manufacturing facility to better position the company to pursue its industry standard size wafer strategy and preserve the company’s liquidity. The company also provided updates on its industry standard wafer development activities and selected preliminary results for the quarter ended December 31, 2010.
The company intends to completely shut down the Devens manufacturing facility by the end of the first quarter of 2011. Michael El-Hillow, President and Chief Executive Officer, explained the considerations behind the company’s decision. "While overall demand for solar may increase, we expect that significant capacity expansions in low cost manufacturing regions combined with potential adverse changes in government subsidies in several markets in Europe will likely result in continuing pressure on selling prices throughout 2011. Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry. While the United States and other western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint."
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 75MW 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.
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 the fourth quarter of 2010 and the first quarter of 2011, 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. These cash charges are expected to be incurred over a twelve month period. In total, the company expects that approximately 800 employees will be affected by this action.
