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As most of the solar sector enjoys the bright lights that shined upon it during the fourth quarter of 2010, we were reminded yesterday that there are shadows in the industry as well. Once-promising Evergreen Solar (Nasdaq: ESLR ) announced audited results, and there isn't much to smile about at Evergreen headquarters.
The headlines were largely the same as preliminary results announced early in February. Sales were $89.3 million and the company had negative gross margins and $377.5 million in write-offs with more likely in the pipeline for the first quarter.
To put the net loss of $399.1 million in perspective, that's nearly six times the company's market cap. Management hopes the transition to manufacturing in China can be fast, but cash is draining quickly and creditors haven't shown much willingness to help the company out. After a failed exchange offer to debtors last month, the clock is ticking on Evergreen Solar.
Evergreen Solar is trying to ramp up its proprietary wafer technology in China and become a supplier to module manufacturers. The question becomes if the company has the cash to make a new business model a reality. Evergreen ended 2010 with $61.6 million in cash, down from $112.4 million last year. And there are $389.1 million of convertible notes and a $38.0 million loan outstanding.
The only hope is that module manufacturers such as JA Solar (Nasdaq: JASO ) and LDK Solar (NYSE: LDK ) will want to buy standard-sized wafers from Evergreen in the future and will finance the company in the mean time. But manufacturers in China such as JA Solar, LDK, and Suntech Power (NYSE: STP ) have been working to vertically integrate their own production, so outsourcing may be a tough sell at this point.
The writing is on the wall for Evergreen solar, and unless a major manufacturer can buy its technology or set up a huge supply agreement, I don't see how the company can survive.