Delay String Ribbon Cutting Ceremony at Evergreen Solar

• The Company: Evergreen Solar, a manufacturer of String Ribbon solar power products.
• The Filing: FORM 8-K filed with the SEC on October 16, 2008.
• The Finding: Evergreen Solar signed two new long-term sales contracts totaling more than 160 MW last week, extending the company’s total contractual backlog to more than one-gigawatt (spanning over the next five years). The solar panels for these two contracts will be produced at the company’s Devens, Massachusetts’ facility. In order to meet manufacturing targets for 2010 - 2013, however, Evergreen will need to improve operating efficiencies, expand capacity at the Devens facility, and build a planned new factory — which will require additional working capital.

The Upshot: At the end of the third quarter, Evergreen had approximately $285.2 million in unrestricted cash, which Chairman and Chief Executive Richard Feld told analysts on the third-quarter 2008 earnings call should be sufficient complete the Devens manufacturing facility by early 2009, capable of reaching an anticipated quarterly run rate of 40 MW by mid-year.

In order to reach sales of 200 MW in 2010, 620 MW in 2011 and 850 MW in 2012, Evergreen will need to expand its internal ribbon capacity by building a second string factory. The company believes it can begin construction of the next factory as late as June of 2009 and still meet 2010 capacity expansion targets. Given the current turmoil of the financial markets, however, Feld admitted: “obtaining funding for factory expansions at a cost of capital commensurate with the expected financial return of those expansions was really not available.”

Given a cost structure in the $1.60 per watt range, management calculates the new 480 MW facility would require a total investment of about $800 million, of which the company expects to internally fund $400 million [which assumes the Devens facility is generating positive cash flow in 2009].

At September 27, the company owed about $449 million in long-tem contractual commitments and contingencies — more than eight times nine-months 2009 aggregate product sales.

The Question: Is the financial survival on Evergreen Solar dependent on too many “ifs” — such as capacity expansion tied to performance of capital markets?