Evergreen Solar's CEO Discusses Q4 2010 Results - Earnings Call Transcript

Evergreen Solar (ESLR)

Q4 2010 Earnings Call

March 10, 2011 8:30 am ET

Executives

Donald Reilly - Chief Financial Officer

Michael El-Hillow - Chief Executive Officer, President and Director

Lawrence Felton - Chief Technology Officer

Michael McCarthy - Director Investor Relations & Governmental Affairs

Analysts

Theodore O'Neill - Wunderlich Securities Inc.

Timothy Arcuri - Citigroup Inc

Adam Krop - Ardour Capital Investments, LLC

Matthew Farwell

Christopher Blansett - JP Morgan Chase & Co

Presentation

Operator

Good day, everyone, and welcome to Evergreen Solar Fourth Quarter 2010 Conference Call. [Operator Instructions] At this time, for opening remarks, I would like to turn the call over to Mr. Michael McCarthy, Director of Investor Relations. Please go ahead, sir.

Michael McCarthy

Thank you, David, and good morning, everyone. I'm joined today by Mike El-Hillow, President and CEO; Don Riley, our Chief Financial Officer; and Dr. Larry Felton, our Chief Technology Officer.

In addition to the press release and 10-K that were filed, we have prepared several slides that may be referenced during this morning's call. If you've not already accessed them, you can do so by going to our website at evergreensolar.com, and clicking on the Invest tab at the top right part of the landing page.

Before we begin the call, we'd like to remind everyone that statements made in this conference call will include forward-looking statements made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934. Management will be discussing its current expectations, beliefs, strategies, goals, outlook and other non-historical matters. Such statements will include details regarding the company's wafer furnaces, the ramp of our factory in China, expected manufacturing costs and expectations regarding product demand and pricing and the company's cash requirements.

Certain risks and uncertainties will cause our actual results to differ from what we expect. These uncertainties arise from the inherent difficulties in predicting the benefits of new technologies, the often volatile market for solar-grade silicon and the difficulty in forecasting customer demand. We refer you to our SEC filings for more information regarding forward-looking statements and the risks associated with those statements and to our business.

I'll now turn the call over to Mike for his review of the fourth quarter. Mike?

Michael El-Hillow

Thanks, Mike, and good morning, everyone. On today's call, I will focus on two underlying themes. Our decision regarding closing of our Devens facility and the shift in our strategic focus of becoming a wafer manufacturer and supplier. Don will provide you the details regarding our fourth quarter financial results, including the impact of the Devens closure. He will also discuss our near-term liquidity needs.

As we announced in early January, we intend to completely shut down operations at our Devens manufacturing facility. The simple reason is that our costs at Devens cannot compete with those of our Chinese-based competitors who have built substantial scale and have benefited from significant local financial support.

Closing the manufacturing plant and having to let hundreds of people go was obviously painful. However, this unfortunate event was necessary to preserve the liquidity needed to operate our business as we pursue an industry standard -- standard-sized wafer strategy built on our proprietary technology.

We will also continue to ramp our 75-megawatt facility in Wuhan, China and produced Evergreen solar-branded modules to our subcontractor, Jiawei. We are making good progress there and expect to be at full capacity during the second quarter, assuming that such level of production's warranted by market demand.

In beginning the discussion about our low-cost wafer supplier strategy, I want to highlight a few key data points. By the end of 2010, worldwide cell processing capacity reached approximately 30 gigawatts, a growth rate exceeding 50% over the prior year. Another 50% increase in capacity is forecasted by many in 2011, enabling the solar industry to support more than 45 gigawatts of cell capacity in 2012.

The market is very large and is expected to continue to grow substantially over the long term. Conventional wafer manufacturing technologies have existed for more than 40 years and is rapidly nearing its limits in terms of wafer thickness and its ability to minimize the amount of silica needed.

Companies supplying wafers using this technology will continue struggling to find ways to significantly reduce costs further. While they may be able to produce thinner wafers, it would certainly be a downstream yield impact which would offset any savings from a thinner wafer.

Then of course, no matter how thin they can make a wafer, they will always be throwing away about half the silicon. This, we believe, creates a large and attractive opportunity for our proprietary technology.

As a merchant wafer supplier, we offer compelling economic value advantage. In fact, we believe that our technology is the only technology available today that can provide a step function improvement in wafer costs that can readily be implemented by existing low-cost cells and module manufacturing capacity. Our cost advantage is simple. We use half the silicon versus all other manufacturers of wafers and, and I want to stress this, our non-silicon process costs are lower due to an inherently simpler manufacturing process.

I'd like to recount to you a detailed explanation about our wafer costs as we provided on our last call, and I'll refer you to slides that we have posted on our website under the Investor Relations page that will give you some more detail about our current and expected wafer cost strategy.

The industry tends to characterize wafer costs into silicon costs and non-silicon process costs. Today, our silicon costs at Devens is about $0.20 per watt, based upon a cash silicon cost of about $55 per kilogram and a consumption of about 3.6 grams per watt. Our non-silicon process cost is about $0.35 per watt, which includes consumable materials, labor, overhead and depreciation. Therefore, today at Devens, we produce a wafer for a total cost of about $0.55 per watt based upon the cash silicon process of about $55 per kilogram.

Read the rest of this transcript for free on seekingalpha.com

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