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One of Evergreen Solar Inc.’s top finance executives told investors last week that all of the solar system maker’s future expansion will be in China to make the company more cost competitive with Asian solar companies. Mark Fidler, vice president of finance at the Marlborough-based solar firm (Nasdaq: ESLR), told investors attending the JPMorgan Small/Mid Cap Conference Dec. 3 that “it’s much, much (less) expensive inherently to produce the wafer and cells in China versus in Devens” because of lower
labor and capital costs, and that “all of our expansion beyond Devens will be in China.”
Evergreen Solar plans to grow its solar wafer manufacturing facility capacity in Wuhan, China, to 500 megawatts by 2012 from its initial plans for a 100 megawatt facilty. At that pace, the China plant would far eclipse the capacity at its plant in Devens, which has the capacity to produce 130 megawatts to 140 megawatts of solar cells per year.
The disclosure comes a month after Evergreen Solar announced it was moving the production of panels from Devens to a contract manufacturer in the Asian nation and focusing Devens on its specialized wafer and cell manufacturing.
“We’ll be doing that to take advantage of the low-cost manufacturing region of China and the manual and testing processes involving lower cost structure for panel assembly in China,” Fidler said. “So all of our expansion beyond Devens will be in China.”
Over 800 full-time and contract employees work in the Devens plant, and insiders say about 25 percent to 30 percent of that workforce could be impacted by the shift of panel work abroad. Yet state officials say Evergreen has exceeded their expectations of about 350 workers and have been assured that future expansion of the company in China will not have an additional adverse effect locally.
“I feel they’ve made a good deal with the state and they intend to hold up their end of the bargain,” said Ian Bowles, secretary of energy and environmental affairs.
Evergreen spokesman Chris Lawson said the company has yet to determine how many jobs will leave Devens for China, but that those jobs — as well as new ones in wafer and cell manufacturing — could grow if the market snaps back and capacity is tight.
Yet with average selling prices falling 40 percent in a year, "it's been very difficult for us to be cost competitive... It will always be the lowest cost in China."
Still, "We're committed to that $430 million investment at Devens," he said.
Bringing down costs is critical to keep Evergreen Solar cost competitive with other panel manufacturers in China and around the world. The company has a goal of reducing panel costs to $1 per watt by the end of 2010 from $2.24 a watt it now costs to produce a panel in Devens. Fidler said moving panel costs out of Devens will bring costs down to $1.90 per watt, and panels produced in China when its facility is operating at full scale will cost $1.35 per watt.
Evergreen also plans to implement a new cell processing technology in China that will help reduce costs, but the company has no plans to install that technology in Devens.
Yet some of the expansion in China will benefit Devens, particularly in reduced cost for silicon and other materials used in making solar cells. Ultimately, panels made with wafers and cells produced in Devens will cost about $1.55 per watt, Fidler said.
Lower costs will also play a large role in helping Evergreen Solar reach profitability. For the first nine months of 2009, the company lost about $167 million compared with $34 million in the same time period a year ago.
Evergreen Solar is due to receive $5 million in loans from the state through MassDevelopment, yet Bowles said that money is an unused portion of the original incentive package given to the company when it decided to build in Massachusetts and was approved by the quasi-public finance agency last winter.
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