Evergreen Solar Ships 31.9 Megawatts in the Fourth Quarter of 2009

MARLBORO, Mass.--Evergreen Solar, Inc. , a manufacturer of String Ribbon™ solar power products with its proprietary, low-cost silicon wafer technology, today announced financial results for the fourth quarter ended December 31, 2009.

“Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)”

Key accomplishments during the quarter were:

• Shipped 31.9 MW from our Devens facility at an average selling price of $2.32 per watt;
• Improved product gross margins to 11.9% from 7.1% for the third quarter of 2009;
• Reduced total manufacturing cost to $2.05 per watt, down 8.5% from $2.24 per watt for the third quarter of 2009;
• Reduced wafer manufacturing cost to approximately $0.69 per watt from $0.75 per watt in the third quarter of 2009;
• Generated $16.9 million of cash from operations, up from $11.2 million in the third quarter.

“Over two years ago, we established a cost target for our Devens facility of about two dollars per watt. We are pleased to have effectively achieved this cost target during the fourth quarter,” stated Richard M. Feldt, Chairman, CEO and President. “Our proven track record of manufacturing excellence is even more critical as we will relentlessly pursue additional operational efficiencies, further reduce our silicon and other materials costs and make progress on our technology roadmap to further reduce our costs at Devens to about $1.50 per watt in 2011 as we transition panel assembly to China.”

“Our China expansion remains on track,” added Mr. Feldt. “We have a strong Chinese management team and we are hiring experienced engineers and other support staff needed for the initial 100 megawatt facility. Equipment has been ordered, and we should be in a good position to ship our first product by this summer.”

“Demand for our product was robust throughout the fourth quarter of 2009, a trend which has continued so far in the first quarter of 2010. While incentive program modifications in Europe have resulted in some near-term uncertainty with respect to demand and selling prices, we remain focused on what we can directly control, namely continued operational improvements at Devens and our expansion in China, where we believe we will produce wafers at about $0.30 per watt and panels for about $1.00 per watt by 2012 through our relationship with Jiawei Solar,” concluded Feldt.

Fourth Quarter 2009 Financial Results

Revenues for the fourth quarter of 2009 were $74.5 million, compared to $77.7 million (inclusive of $2.2 million of fees from Sovello) for the third quarter of 2009.

Gross margin in the fourth quarter of 2009 was 11.9%, up from 9.7% in the third quarter of 2009. Product gross margin, which excludes fees from Sovello, was 11.9% in the fourth quarter of 2009 compared to 7.1% for the third quarter of 2009.

Operating loss for the fourth quarter was $21.1 million, compared to $6.0 million for the third quarter of 2009. The increase in operating loss was due mainly to non-cash charges of approximately $14.6 million associated with the acceleration of depreciation and other equipment write-offs relating to the planned transition of panel assembly at our Devens facility to our China facility, where we expect to recoup these charges through incremental cost savings.

Net loss for the fourth quarter of 2009 was $98.1 million compared to $82.4 million in the third quarter of 2009. Net loss includes $13.5 million of equity loss in the fourth quarter and $9.7 million in the third quarter from our share of Sovello’s losses. Net loss also includes approximately $56.1 million and $61.9 million (net of income tax benefits of $7.8 million) of impairment charges associated with our investment in Sovello for the fourth and third quarters of 2009, respectively.

As previously disclosed, Sovello has been in default under its bank loan agreement since the end of 2008. Throughout 2009, Sovello operated under waivers from its bank syndicate of certain loan covenant violations. On January 28, 2010, Sovello’s bank syndicate terminated their loan agreement but has not yet demanded repayment of the outstanding loan. Further, in light of a recent European Commission decision, Sovello may be required to return a portion of the grants it received from the German government. If these matters are not satisfactorily resolved, Sovello may need to declare insolvency which could result in further financial obligations for us. As such, we have recorded a non-cash charge of approximately $40.9 million, reflecting the write-off of our remaining investment in Sovello. Additionally, we recorded charges of approximately $8.1 million for payments under our guarantee (that was paid on February 8, 2010) and $7.3 million for estimated payments relating to undertakings with Sovello’s bank and for other expected costs.

Conference Call Information

Management will conduct a conference call at 8:30 a.m. (ET) tomorrow (February 9, 2010) to review the Company's fourth quarter financial results and highlights. The call will be webcast live over the Internet and can be accessed by logging on to the "Investors" section of Evergreen Solar's website, www.evergreensolar.com prior to the event.

The call also can be accessed by dialing 877-704-5378 or 913-312-1294 (International) prior to the start of the call and refer to confirmation code 5233604.

For those unable to join the live conference call, a webcast replay will be available from 11:00 a.m. (ET) on February 9 through 8:00 p.m. (ET) on February 19. To access the webcast replay, logon to the “Investors” section of Evergreen Solar’s website, www.evergreensolar.com.

About Evergreen Solar, Inc.

Evergreen Solar, Inc. develops, manufactures and markets String Ribbon™ solar power products using its proprietary, low-cost silicon wafer technology. The Company's patented wafer manufacturing technology uses significantly less polysilicon than conventional processes. Evergreen Solar's products provide reliable and environmentally clean electric power for residential and commercial applications globally. For more information about the Company, please visit www.evergreensolar.com. Evergreen Solar® and String Ribbon™ are trademarks of Evergreen Solar, Inc.

Safe Harbor Statement

This press release contains forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations or beliefs. Such forward-looking statements include, but are not limited to, those related to expectations regarding: our ability to improve operational efficiencies, further reduce our silicon and other materials costs and make progress on our technology roadmap; our ability to reduce our wafer manufacturing costs; hiring, operations and costs for our China expansion; potential cost savings from the transition of our panel operation to China; our ability generally to manufacture and sell our products; and the potential insolvency of Sovello and the resulting costs to Evergreen Solar. These statements are neither promises nor guarantees, and involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements, including: risks associated with the our ability to lower manufacturing costs and otherwise successfully manufacture and sell our products; uncertainties related to government regulations, subsidies and incentives; risks from various economic factors such as credit market conditions, fluctuations in currency exchange rates; uncertainties related to the German insolvency process and other risks and uncertainties identified in our periodic filings made with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements for any reason.

Evergreen Solar, Inc.
Consolidated Balance Sheets (a)
(in thousands, except share data)
(Unaudited)
		December 31,
			2008				2009
		(Adjusted)
Assets
Current assets:
Cash and cash equivalents		$	100,888			$	112,368
Marketable securities			76,621				-
Accounts receivable, net of allowances for doubtful accounts			35,458				53,295
Due from Sovello AG			1,949				-
Inventory			23,500				34,890
Prepaid cost of inventory			11,696				25,634
VAT receivable, net			1,474				8
Other current assets			7,684				11,662
Total current assets			259,270				237,857
Investment in and advances to Sovello AG			115,553				-
Restricted cash			212				3,134
Deferred financing costs			6,152				4,769
Loan receivable from silicon supplier			41,757				-
Prepaid cost of inventory			172,193				147,573
Fixed assets, net			406,191				430,681
Other assets			3,579				295
Total assets		$	1,004,907			$	824,309
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses		$	62,652			$	31,420
Due to Sovello AG and related guarantees			22,840				17,544
Accrued employee compensation			6,451				7,287
Accrued interest			7,392				7,004
Accrued warranty			1,182				2,368
Total current liabilities			100,517				65,623
Senior convertible notes, net of discount			311,531				323,276
Loan and related interest payable			-				34,152
Deferred income taxes			9,776				5,615
Total liabilities			421,824				428,666
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 250,000,000 and 450,000,000 shares authorized at December 31, 2008 and December 31, 2009, respectively, 164,874,850 and 207,809,919 shares issued and outstanding at December 31, 2008 and December 31, 2009, respectively			1,649				2,078
Additional paid-in capital			803,491				882,466
Accumulated deficit			(223,687	)			(488,895	)
Accumulated other comprehensive income (loss)			1,630				(6	)
Total stockholders' equity			583,083				395,643
Total liabilities and stockholders' equity		$	1,004,907			$	824,309
(a) On January 1, 2009, the Company adopted FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" which has been incorporated into Accounting Standards Codification 470. The rule requires restatement of prior periods to conform to current accounting.

Evergreen Solar, Inc.
Consolidated Statements of Operations (a)
(in thousands, except per share data)
(Unaudited)
		Quarter Ended								Year-to-Date Period Ended
		December 31,								December 31,
			2008				2009				2008				2009
		(Adjusted)								(Adjusted)
Product revenues		$	41,065			$	74,526			$	95,245			$	267,112
Royalty and fee revenues			3,124				20				16,714				4,736
Total revenues			44,189				74,546				111,959				271,848
Cost of revenues			42,159				65,642				93,073				253,484
Gross profit			2,030				8,904				18,886				18,364
Operating expenses:
Research and development			5,668				4,751				22,039				18,058
Selling, general and administrative			6,808				7,270				23,868				26,260
Write-off of loan receivable from silicon supplier			-				-				-				43,882
Equipment write-offs			8,034				6,008				8,034				6,008
Facility start-up			9,675				3,468				30,623				10,107
Restructuring charges			23,134				8,546				30,413				11,940
Total operating expenses			53,319				30,043				114,977				116,255
Operating loss			(51,289	)			(21,139	)			(96,091	)			(97,891	)
Other income (expense):
Foreign exchange gains (losses), net			(2,717	)			(810	)			(4,078	)			2,650
Interest income			2,691				1,056				12,695				4,728
Interest expense			(4,711	)			(7,638	)			(8,368	)			(26,980	)
Other income (expense), net			(4,737	)			(7,392	)			249				(19,602	)
Loss before equity income (loss) from interest in Sovello AG, impairment of equity investment and income tax benefit			(56,026	)			(28,531	)			(95,842	)			(117,493	)
Equity income (loss) from interest in Sovello AG			2,211				(13,546	)			8,435				(29,748	)
Impairment and other charges associated with equity investment in Sovello AG			-				(56,344	)			-				(126,057	)
Income tax benefit			-				(285	)			-				(8,090	)
Net loss		$	(53,815	)		$	(98,136	)		$	(87,407	)		$	(265,208	)
Net loss per share (basic and diluted)		$	(0.33	)		$	(0.48	)		$	(0.67	)		$	(1.41	)
Weighted average shares used in computing basic and diluted net loss per share			161,678				204,914				130,675				187,777
(a) On January 1, 2009, the Company adopted FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" concerning convertible debt accounting, which has been incorporated into Accounting Standards Codification ("ASC") 470, and FSP EITF 03-6-1 "Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities" concerning the calculation of earnings per share, which has been incorporated into ASC 260. These rules require restatement of prior periods to conform to current accounting.

Evergreen Solar, Inc.
Consolidated Statements of Cash Flows (a)
(in thousands)
(Unaudited)
		Year-to-Date Period Ended
		December 31,
			2008				2009
		(Adjusted)
Cash flows from operating activities:
Net loss		$	(87,407	)		$	(265,208	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense			(7	)			45
Imputed interest and accretion of bond premiums			(2,472	)			(478	)
Amortization of prepaid cost of inventory			3,694				11,240
Equity (income) loss from Sovello AG and impairment of investment			(8,435	)			155,805
Amortization of deferred debt financing costs			861				1,382
Loss on loan receivable from silicon supplier			-				43,882
Loss on disposal of fixed assets			34,496				5,719
Depreciation expense			18,156				46,086
Provision for warranty			585				1,335
Accretion of capped call discount			345				-
Amortization of debt discount			5,148				11,744
Provision for deferred income taxes			-				(8,090	)
Compensation expense associated with employee equity awards			7,246				6,669
Changes in operating assets and liabilities:
Accounts receivable			(26,168	)			(19,170	)
Grants receivable			19,908				-
Inventory			(15,406	)			(11,390	)
Prepaid cost of inventory			(43,012	)			(2,097	)
Other current assets			9,263				(5,205	)
Accounts payable and accrued expenses			15,902				(22,019	)
Interest payable			(237	)			6,253
Other			1,659				6,403
Net cash used in operating activities			(65,881	)			(37,094	)
Cash flows from investing activities:
Purchases of fixed assets and deposits on fixed assets under construction			(345,256	)			(110,820	)
Proceeds from the disposal of fixed assets			12				503
Decrease (increase) in restricted cash			41,178				(2,914	)
Increase in Sovello AG loan			(23,774	)			(11,750	)
Capital contribution to Sovello AG			-				(8,914	)
Increase in other loans			(22,164	)			-
Purchases of marketable securities			(98,500	)			-
Proceeds from sale and maturity of marketable securities			93,059				76,716
Net cash used in investing activities			(355,445	)			(57,179	)
Cash flows from financing activities:
Proceeds from issuances of common stock, net of offering costs			166,726				72,421
Proceeds from China government loan			-				33,000
Proceeds from issuance of senior convertible debt, net of offering costs			363,963				-
Payment of capped call up-front premium			(39,543	)			-
Proceeds from share lending agreement			3				-
Proceeds from exercise of stock options and warrants, and shares purchased under Employee Stock Purchase Plan			1,637				332
Net cash provided by financing activities			492,786				105,753
Net increase in cash and cash equivalents			71,460				11,480
Cash and cash equivalents at beginning of year			29,428				100,888
Cash and cash equivalents at end of year		$	100,888			$	112,368
(a) On January 1, 2009, the Company adopted FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" which has been incorporated into Accounting Standards Codification 470. The rule requires restatement of prior periods to conform to current accounting.