(By Salman - iStockAnalyst Writer)Evergreen Solar Inc. (NASDAQ: ESLR), which makes silicon wafers for solar panels, is scheduled to release financial results for the fiscal third quarter before the market open on Tuesday, November 3, 2009. Analysts on average expect the company to report a loss of 8 cents a share on revenue of $73.47 million. In the year ago quarter, the company reported a loss of $0.18 per share on revenue of $22.07 million.

Evergreen Solar Inc. engages in the development, manufacture, and marketing of solar power products primarily in the United States and Europe.

The Marlborough, Massachusetts based-company reported a second-quarter net loss of $20.3 million or $0.11 per share, compared to a loss of $8.9 million or $0.08 per share in the same quarter last year. Revenues for the quarter were $63.8 million, up from $55.8 million in the comparable quarter last year. Analysts, on average, expected the company to report a loss of $0.08 per share on revenue of $63.37 million. The company managed to increase its gross margin to 1.9% from 1.2% in the first quarter thanks to the improved overhead absorption and improved yields. However, it was still way behind 34.7% gross margin achieved in the second quarter of 2008.

Solar stocks were hit hard by the turmoil in the credit market as financial players abandoned U.S. solar energy projects last year. The 2008 collapse of top solar financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the makers of systems that turn sunlight into electricity to slash prices for their products and sending their stocks crashing. The financial crisis cut Evergreen's access to capital, forcing it to close its Marlboro plant and delay construction of its $800 million plant in Asia in 2008. Though there has been a marked improvement in credit environment, the company has not been really able to recover from the shocks. During the second quarter, Average Selling Prices (ASPs) plunged to $2.70 per watt from $3.13 per watt in the first quarter of this year.

Globally, solar industry depends upon government subsidies and incentives. However, recent developments suggest that subsidies will inevitably be reduced or phased out. Evergreen Solar sells bulk of its panels in key European markets like Germany and Spain, where generous federal subsidies ensured high electricity rates for solar energy system. During the second quarter, approximately 61% of its product was sold in Europe, 24% in the United States, and 15% in Asia. In June, German legislators voted for steeper cuts to subsidized prices for electricity generated from solar panels. Last year the guaranteed price paid for solar-produced electricity was reduced by 5 percent. Some lawmakers had demanded a cut of as much as 30 percent in the subsidized rate. Spain too has taken similar steps. Evergreen Solar uses String Ribbon technology to produce solar cells with 50% less silicon, than is needed by its competition. However, higher manufacturing costs have eliminated the company's lower silicon usage advantage. At the end of 2009, the company expects to manufacture cells for $1.50-$2.00 per watt, which is still behind competitor First Solar (NASDAQ: FSLR), with costs of 98 cents per watt.

Still, there are few favorable signs for the industry. As part of the stimulus bill signed earlier this year, the federal government approved around $60 billion in loan guarantee authority and $30 billion in energy grants for renewable energy and transmission companies. Congress has also granted a 30% renewable-investment tax credit to help expand the development of alternative sources of energy. It is being expected that the federal money would become available in the second half of this year.

A couple of months back, Evergreen Solar signed an agreement with Jiawei Solar, and the Wuhan Donghu New Technology Zone Management Committee, i.e. the Chinese government which will enable the company to expand aggressively in China. Under the agreement, Evergreen will manufacture String Ribbon wafers using its state of the art Quad furnaces at a leased facility being built in Wuhan, China on Jiawei's campus. The Wuhan government is expected to guarantee the financing required from banks and other potential lending agencies in China as well as provide yet-to-be-revealed incentives for locating the operation in the province.

In terms of stock performance, Evergreen shares are down almost 95% since the beginning of the year.

Disclosure: Author doesn't own any of the stocks discussed here.