A Tale of Two Companies

The strength of the PV market over the past year has enabled rapid growth for many companies and not just among the big boys. I am struck by the progress of Evergreen Solar and the similarity with a much smaller company, EPOD.

A year ago Evergreen was a small company whose revenues were growing fast – $23.5 million in 2004, up from $9.3 million the year before. They have grown again in 2005 to $44 million, but it is not the growth that attracts me – in last year’s climate, everyone with product to sell did that – rather it is some of the deals they have struck.

• In July, they broke ground on a 30MW solar wafer, cell and module manufacturing plant in Germany in a collaboration with Q-Cells called EverQ. Established in 1999, Q-Cells is one of the world’s largest solar cell manufacturers in terms of production output and is the largest group-independent manufacturer of crystalline silicon cells in the world. The plant is scheduled to come fully on stream this summer. Given the buoyancy of the German market this was a good move.

• In November, the Norwegian solar silicon manufacturer REC joined EverQ. In return for 15% equity REC, gave a 7 year supply guarantee (of solar grade silicon ) – 60 metric tons per year to Evergreen and 190 to EverQ, with potential to increase the supply. Given the current silicon supply pressure this seems an even better move!

• Then in between November and February they announced three impressive four year sales agreements:

o $70 million to Powerlight with potential to increase it to $170 million.

o $100 Million Sales Agreement with S.A.G. Solarstrom AG , builds and operates solar power stations, and sells the generated energy to corporations and utility companies. Sounds almost like a captive market.

o $88 Million Contract With Global Resource Options a Vermont-based solar power distributor and system integrator.

Before these deals, Evergreen had a fully fledged marketing department and was working on the design of new roofing applications. With their production apparently sold, they no longer need to make their own end products and the marketing team has been disbanded. Hard on the team, but good result in terms of lowering costs!

Now consider the case of EPOD – a very much smaller, Canadian company specializing in power management. Essentially a startup, they appear to have reported no revenues in 2004. Although operating on a different scale, here are the parallels with Evergreen:

• In July they set up a German subsidiary and formed a solar panel (amorphous silicon) and BIPV joint venture Heliodomi S.A. These are to give them manufacturing and marketing capability in Europe, especially Germany. Given the better profitability of the German market compared to North America. This should allow them to maximize whatever potential they have with their own PV product, inverters and power management expertise.

• While they have not secured any silicon supply guarantees, their dependence
on amorphous silicon makes this moot although their growth may be limited
by manufacturing capacity.

• In August they announced their first sale in Germany (100kW) and this was followed in January with their first California sale. In August they announced
that their production is committed through 2007.

Sales figures excite many, if not most but they are only part of the story. The robust growth demonstrated above, does not describe companies making big profits! Evergreen reported a net loss of $17.3 million last year and EPOD had a smaller loss only because its expenses were only a fraction of Evergreen’s.

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