Analysts: Firms' Struggles Not Holding Back Green Industry
Two clean energy businesses in Central Massachusetts have had their fair share of struggles in the last year, and recent announcements from Marlborough’s Evergreen Solar and Devens-based AMSC raise questions about the future viability of both companies.
Evergreen, which faces increasingly aggressive competition in Asian countries for the solar panel parts it makes, filed for Chapter 11 bankruptcy protection last summer and has spent the past three months selling almost all its assets. The moves culminated with the firing of its top five executives, including former president and CEO Michael El-Hillow.
AMSC lost its largest single source of revenue when Chinese wind turbine company Sinovel stopped accepting parts it ordered earlier this year. Since then, AMSC has not been able to replace the revenue it lost from Sinovel. As a result, it has executed a savings plan that involves slashing 20 percent of the company’s workforce.
So what’s the future of these businesses and the Massachusetts clean energy market? Analysts who track the two firms seem to have more optimism about AMSC. And those who follow the industry closely are still high on Massachusetts as a hub for green energy innovations and businesses, despite the two companies’ struggles.
Craig Irwin, a green energy analyst with Wedbush Securities in New York, is surprised Evergreen is still around.
“Personally, I believe this company would have made a much more graceful exit sooner had it not been for stimulus funding (from the government),” he said.
Evergreen came under fire after it accepted loans and incentives from the state to build a manufacturing plant in Devens, which it closed this year, leaving hundreds of employees without jobs.
Jeffrey Bencik, a clean tech analyst for Kaufman Bros. in New York, said Evergreen didn’t have a sustainable business model. “At the end of the day it comes down to cost, and Evergreen just did not have a competitive cost structure,” he said, particularly when compared to Chinese solar power manufacturers.
Recent leadership transitions are happening at the same time the company restructures itself through Chapter 11 proceedings. This fall, the company sold its core wafer business for $6 million to a British Virgin Islands-based investment outfit. It also sold its claim to holdings from Lehman Bros. International Europe, which netted the company more than $20 million.
Officials from Evergreen did not return a call for this story.
AMSC, on the other hand, seems to have slightly more promise as a company, Irwin said. “I’m not saying it’s going to be smooth sailing, but AMSC is still viable into the future,” he said.
But the company will have major headwinds moving forward, Irwin predicts. Its business is structured so that savings are achieved most easily through cutting employees, he said. AMSC is an asset-light manufacturer; Irwin noted that most of the company’s investments are in its employees. “That means it’s basically an exercise in managing down the headcount to match expenses to revenues,” he said.
Company revenues have fallen precipitously in the past year since it lost the Sinovel business. AMSC (formerly American Superconductor) lost $89.3 million on just $29.8 million in revenue through the first half of its current fiscal year.
But the company does seem to be diversifying. Where Sinovel represented more than 70 percent of revenues last year, AMSC now seems to be selling more in its superconductor business compared to just wind turbine parts. High-temperature superconductors allow utility companies to move electricity more efficiently across a grid compared to traditional forms using copper wires.
Calling the recent cost reductions difficult yet prudent, AMSC spokesman Jason Fredette suggested in an email that global economic conditions played a part in the company’s decision to cut back on its workforce. He noted the increased diversification the business has achieved by collecting revenue from markets outside China, including India, South Korea and Australia. “AMSC has a bright future,” he wrote. “The wind power and power grid markets will continue to attract tens of billions of dollars in annual investment, and the demand for clean energy solutions will continue to be a global focus.”
Despite the two firms’ struggles, experts are still positive about Massachusetts as an innovation hub. Vincent DeVito of the Worcester-based law firm Bowditch & Dewey, for one, says there’s “an awful lot of activity” in his practice, which focuses on green energy issues. The entire green economy, he said, is still in its early stages and because of that, some firms will thrive and others won’t be as successful. Given that, he said, Massachusetts is uniquely positioned to take the U.S. lead in producing the technology in this industry.
WBJ Web Partners
Most Recent
Most Recent
0 Comments