Hoku adjusts solar contract
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Hoku Scientific Inc. will be selling less polysilicon at higher prices to one of its major customers, the company said.
The Kapolei-based alternative-energy technology developer is exercising the option under its contract with Solar-Fabrik AG after the German company did not meet a September deadline to provide additional financing for Hoku's planned polysilicon plant in Pocatello, Idaho.
Hoku also said yesterday it has received a six-week extension from Japan-based Sanyo Electric Co. Ltd. to complete financing for the plant. Under the contract amendment, either company may end the supply agreement if Hoku has not secured financing by Feb. 15.
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Hoku Scientific Inc. yesterday announced changes to two of its polysilicon supply contracts, resulting in a price increase for one if its four major customers.
The Kapolei-based alternative-energy technology developer said subsidiary Hoku Materials Inc. will provide less polysilicon at higher prices in its agreement with Global Expertise Wafer Division, Ltd., a wholly owned subsidiary of Solar-Fabrik AG.
The Germany-based company, which entered into a supply agreement with Hoku in June, has already paid $2 million and provided a $25 million letter of credit for future deliveries from Hoku's planned polysilicon plant in Pocatello, Idaho.
Hoku is exercising an option under the agreement to reduce the amount of polysilicon and raise prices after Solar-Fabrik did not provide an additional $26 million letter of credit by Sept. 30, 2007.
"To keep our financing moving forward, we unfortunately had to cut back the volume allocation to Global Expertise Wafer Division," Hoku CEO Dustin Shindo said in a statement. "However, we will continue our discussions with the Solar Fabrik Group to possibly increase their allocation from our potential future expansions."
Hoku is relying on prepayments from customers Solar-Fabrik, Solarfun Power Hong Kong Ltd., China-based Suntech Power Holdings Co. Ltd. and Japan-based Sanyo Electric Co. Ltd. to finance the $290 million plant, which is expected to bring in up to $1.5 billion in revenue over 10 years from the contracts. Solar-Fabrik is the only customer that has a dual letter of credit with Hoku, he said.
The Solar-Fabrik agreement provided for $185 million in shipments over a seven-year period. After the raising the price by an undisclosed amount and cutting volume, the shipments will total $117 million.
Hoku is required to meet production and financing milestones prior to its first shipment of polysilicon, a key material used in making solar panels, in 2009.
Hoku also said yesterday it has received a six-week extension from Sanyo to complete financing for the plant. Under the contract amendment, either company may end the supply agreement if Hoku has not secured financing by February 15.
In early December, the company signed a non-binding agreement with financial management company Merrill Lynch & Co. to borrow up to $185 million for the construction and start-up of the plant. The loan could be used as part of the required financing, Shindo said in an interview.
Separately, Hoku said in a regulatory filing last week that Idaho Power Co. will construct a $14.8 million power substation for the plant. Hoku will make an initial payment of
$3.7 million on Tuesday. The substation is expected to be completed by February 2009.