We've followed the travails of Evergreen Solar (NasdaqCM: ESLRD) over the last year -- and it hasn't been pretty.  They've had warnings from Nasdaq over delisting, painful debt restructuring plans and numerous successive money-losing quarters. The firm lost $54 million through the first nine months of 2010.

Last month's news from the company was that they were closing down the Devens plant in Massachusetts. 

That represented a loss of 800 manufacturing jobs, a substantial portion of the company's workforce, in an already painful economy and jobs market.  It was also a black eye for the state and the decision-making process that provided $58 million in state aid to the firm.  Admittedly, the state's intentions were pure -- Massachusetts wanted to foster the growth of green manufacturing jobs.

And this week, the company's stock price hit its lowest value in more than ten years after investors essentially ignored a bond exchange offer. The company's stock is trading at $2.00 per share and the firm now has a market capitalization of $69.6 million. This comes after a recent 1-for-6 reverse stock split.

Evergreen was looking to exchange $200 million of the company's notes maturing in 2013 for new notes due seven years later but investors agreed to exchange only 23 percent ($45.4 million) of the targeted amount. Evergreen canceled another offer for $165 million of a different series of bonds due in 2015 because a minimum of $50 million was not tendered before the Feb. 11 deadline. 

Michael El-Hillow, President and CEO of Evergreen Solar said in a statement, "We are obviously disappointed that we were not able to convince a larger number of our note holders to accept our offer, but we are still well positioned to execute our strategy of supplying the lowest cost industry-standard-sized wafers to the world's leading solar module manufacturers."

The firm has an innovative "string-ribbon" silicon technology that significantly reduces the amount of silicon used in a solar panel.  It's a formidable technology but it has been deployed in Massachusetts, a state with formidably high labor, energy and material costs.  It's just about impossible to compete against China's silicon solar dragons like LDK, Yingli, JK Solar, SolarFun and Suntech from a module factory in New England.

Evergreen's new strategy makes them a wafer manufacturer, rather than a PV module manufacturer, a decision that might keep them as a going concern.

The company claimed in a presentation to investors last month that it will manufacture silicon wafers at a cost of 40 cents a watt in 2011, 27 percent less than the 55 cents a watt it estimates for makers of conventional wafers in China.

Read on for a summary of the battered firm's recent history.

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From late last year:

The stock price of Evergreen Solar plummeted well below a dollar on news of a re-structuring plan to deal with its debt.  The Massachusetts-based string-ribbon silicon wafer manufacturer remains faced with a delisting warning from NASDAQ from earlier this year.

Evergreen Solar's Board of Directors approved a recapitalization plan earlier this week with the goal of reducing the company’s debt load and interest expense.

The recapitalization plan entails:

  • Raising additional capital by seeking to sell up to $40,000,000 aggregate principal amount of Evergreen Solar’s new 4 percent Convertible Subordinated Additional Cash Notes due 2020
  • Implementing the previously approved 1-for-6 reverse stock split
  • Increasing Evergreen Solar’s authorized shares of common stock from 120,000,000 to 240,000,000 shares (after giving effect to the reverse stock split)

The Motley Fool weighed in on the company's stock performance here and recapitalization wisdom here. Michael W. McCarthy, Evergreen's Director of Investor Relations & Government Affairs sent me this comment in an email:

“Conditions in the capital markets have presented opportunities for Evergreen Solar to strengthen its capital structure and greatly increase the company’s overall financial flexibility.  During the past several months we have consulted with investment bankers as management considered all the options open to Evergreen.  In retaining Lazard to consider a detailed strategy for strengthening our capital structure, we determined that it was in the best interests of all the company’s constituents to move forward with the recapitalization plan that was announced on Monday.  As noted in the release, if fully executed it will substantially reduce the company’s indebtedness and annual interest expense; exchange a substantial portion of existing convertible securities debt for new debt with longer maturities and lower conversion prices; create a capital structure that should provide greater incentive to these convertible debt holders to convert their notes into common shares, thereby further reducing debt & interest expense; and enhance the company’s flexibility to manage its business by eliminating certain restrictive covenants and the security interest contained in existing debt instruments.”
 

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This news needs to be viewed through the lens of Evergreen's once high-flying history.  Here are some highlights -- and lowlights -- from that saga:

Ten years ago, Evergreen Solar had a successful IPO.  Venture investors like Nth Power did very well in that liquidity event.

The solar industry in 2000 was tiny compared to the current market, totaling somewhere in the 175 megawatt range, a figure that pales in comparison to the approximately 15 gigawatts that will ship in 2010.  At the time, Evergreen's string ribbon technology seemed to offer an innovative, lower-cost alternative to conventional crystalline silicon growth with the potential to lower the amount of silicon per watt. 

But a decade of scaling-up and innovation across the solar value chain would appear to have left the once-lauded Evergreen behind.

Sales for the year 2009 were $271.8 million.  According to their annual report, total panel cost was about $2.05 per watt in the fourth quarter 2009, down from $3.19 in the first quarter of the year.  And that's still too much.

In early 2010, Sovello, the Q-Cells-Evergreen-REC joint venture, on the verge of bankruptcy, was sold to German private equity firm Ventizz Capital.

Earlier this year, Evergreen "received a deficiency letter from the NASDAQ Stock Market stating that, based on the closing bid price of the Registrant’s common stock for the last 30 consecutive business days, the Registrant no longer meets the minimum $1.00 per share requirement for continued listing on the NASDAQ Global Market under Marketplace Rule 5450(a)(1)" (this info was gleaned from the SEC 8K filing).  Evergreen has a grace period of 180 calendar days, or until December 28, 2010, in which to regain compliance with the minimum bid price rule.  

Also from the SEC filing:

As a possible means of regaining compliance, Evergreen's board of directors has asked that stockholders approve a 1-for-6 reverse stock split at the annual meeting of stockholders. If the reverse split is approved by the stockholders and then adopted by the board of directors, the bid price of the Registrant’s common stock should increase sufficiently to achieve compliance with the minimum bid requirements.

So, the reverse stock split will get the share price over a dollar, but will in no way address the fundamental deficiencies in Evergreen's cost structure.

The Evergreen saga is illustrative of the falling costs in this market, the questionable value and differentiation of an innovative process that doesn't come along with innovative pricing -- and a grave warning to any solar module company with stubbornly high cost structures.