Hoku takes a step forward to new plant
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Hoku Scientific Inc. has amended the last of its major supplier contracts to help it meet a financing deadline for its planned Idaho polysilicon plant.
It is the third contract extension for the Kapolei-based alternative-energy technology developer, which is trying to close a nonbinding deal with Merrill Lynch & Co. to borrow $185 million for the construction and start-up of the plant, scheduled to start making shipments next year.
The Merrill agreement will expire on May 31 if neither Hoku nor Merrill takes action.
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Hoku Scientific Inc. said yesterday it has won an extension from a third major customer on a deadline to line up financing for its planned polysilicon plant in Idaho.
The Kapolei-based alternative-energy technology developer said subsidiary Hoku Materials Inc. is amending its polysilicon supply agreement with Global Expertise Wafer Division, a wholly owned subsidiary of Germany-based Solar-Fabrik AG, to allow Hoku until May 31 to secure financing for the plant. It is a two-month extension from the previous deadline of March 31.
The extended deadline is the same as those set with two other Hoku customers, Japan-based Sanyo Electric Co. Ltd., and China-based Suntech Power Holdings Co. Ltd. Its other major customer, Solarfun Power Hong Kong Ltd., did not set a deadline.
"It aligns all of our contracts to have the same financing deadline," Chief Financial Officer Darryl Nakamoto said.
He declined to comment on the company's nonbinding deal with Merrill Lynch & Co. to borrow $185 million for the construction and start-up of the plant. Hoku said last week it will raise $25 million for the plant issuing more than 2.8 million shares of stock to Suntech and other investors. At that time, it also amended the agreement with Suntech to extend the financing deadline for the plant.
The funding, in addition to other cash commitments from its polysilicon clients, will satisfy a requirement under the letter of intent with Merrill signed in early December. Hoku was required to raise an additional $35 million in cash under the agreement, which will expire on May 31 if neither Hoku nor Merrill takes action.
"Financing is the first hurdle, and it has taken longer than expected for Hoku," New York-based Piper Jaffray & Co. analyst Jesse Pichel said in an e-mail interview. "We have a neutral rating until we get more clarity. We are not confident, but are cautiously optimistic."
Hoku is relying on prepayments from Solar-Fabrik, Solarfun, Suntech, and Sanyo to finance the plant, which is expected to bring in up to $1.6 billion in revenue in 10 years from the contracts. That funding, along with the stock sale, company contributions and the unfinalized Merrill loan would put the company over the $400 million needed to complete the plant, Nakamoto said last week.
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.