The End Arrives for ECD Solar

The long-struggling, never-profitable flexible amorphous silicon vendor gives up the ghost.

Eric Wesoff February 14, 2012

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

A few months ago we wrote that "It is difficult to envision ECD surviving much longer as an independent public entity."

Today, Energy Conversion Devices (Nasdaq:ENER), a long-struggling supplier of flexible amorphous silicon (a-Si) photovoltaic laminates and building-integrated photovoltaics (BIPV), dropped the bad news.

The firm filed for Chapter 11 protection in U.S. Bankruptcy Court, unable to negotiate a deal with its convertible bondholders, according to Michael E. Schostak, director of business development at Energy Conversion Devices, quoted in the WSJ.

With its typical level of denial, the firm's press release said that "ECD took these actions to facilitate a sale of the USO business in a manner that enables USO to be competitive and viable for the long run. During the bankruptcy and sale process, USO will continue to operate and serve its customers while moving forward on its development of advanced nanocrystalline silicon photovoltaics."

Late last year, ECD had entered a "Restructuring Plan," stating that ECD's high inventory levels were forcing a "suspension of the company's manufacturing operations." The company reported that it is holding "discussions with representatives of certain holders of [the] company's outstanding convertible notes" amidst "the postponement of the scheduled quarterly financial results conference call."

When I spoke with Michael E. Schostak at Energy Conversion Devices last year, he said, "This is a short-term measure to manage inventory. Given inventory on hand, we felt it was prudent to suspend production and manage cash -- in order to live to see another day." He saw some positive news in a diversifying geographic customer base and some technological innovation in their "nanocrystalline technology."

ECD has had a long history of technological promise, but a long string of money-losing quarters. The company's low-efficiency amorphous silicon solar product, combined with high manufacturing costs amidst a highly competitive global market with rising efficiencies and plunging costs, put it into a tight spot. A high cost structure and low conversion efficiency is a damning combination in today's market.

This is what a solar shakeout looks like. It's bad for employees and some firms, but good for the industry as a whole. And ECD won't be the last casualty.

Julian Hawkins, former Senior VP at Abound Solar, had recently joined the precariously functioning firm as CEO.