Hoku signs $390M contract for Idaho plant
STORY SUMMARY »
| READ THE FULL STORY
Kapolei-based alternative-energy company Hoku Scientific Inc. said yesterday it signed another contract for its planned $390 million Pocatello, Idaho, polysilicon plant, while dropping two others to make room for capacity.
The continued contracts are critical for the plant's financing. Hoku said it terminated its June agreement with UBS Securities LLC to offer up to $54 million in stock sales, of which it raised $7 million for 1 million shares.
"Considering these near-term prepayment receipts and our plan to sign at least one more supply agreement, we feel the (equity distribution agreement) is no longer the appropriate financing tool for Hoku," Chief Executive Dustin Shindo said in a statement.
Hoku now needs $20 million in additional funding this year, and $53 million in 2009. The company said these funds could come from additional prepayments from new customers and from additional debt or equity financing.
FULL STORY »
Hoku Scientific Inc.
said yesterday it has signed its third contract this year for polysilicon production from its planned Idaho polysilicon plant, dropping two expired contracts to handle the capacity.
Hoku Scientific Inc. has signed its fifth active contract for its planned Idaho polysilicon plant.
|Solargiga Energy Holdings Ltd., China
|Tianwei New Energy Holdings Co., China
|Jiangxi Kinko Energy Co., China
|Solarfun Power Hong Kong Ltd., China
|Suntech Power Holdings Co., China
|Source: Hoku Scientific Inc.
The Kapolei-based alternative-energy company signed a 10-year contract worth up to $455 million with Wealthy Rise International Ltd., a subsidiary of China-based ingot and wafer producer Solargiga Energy Holdings Ltd.
It is Hoku's fifth active contract for shipments from its $390 million Pocatello, Idaho, plant, set to start commercial shipments in early 2009. The contracts are now expected to generate total revenue of up to $2.1 billion, down from an estimated $2.3 billion earlier.
Hoku will return $2 million in prepayments each to Sanyo Electric Co. and Solar-Fabrik AG's Global Expertise Wafer Division after ending contract negotiations to make capacity for the Solargiga contract as well as a $284 million contract announced Aug. 5 with Tianwei New Energy Wafer Co., a subsidiary of China-based silicon products manufacturer Tianwei New Energy Holdings Co.
Japan-based Sanyo, the first company to sign with Hoku in January 2007, had a contract worth $530 million, while Germany-based Global Expertise's June 2007 contract was worth $117 million. Both expired May 31.
Prepayments for the plant now total $270 million, a $30 million increase when including $68 million from Solargiga and subtracting the Sanyo and Global Expertise prepayments.
Those two deals had financing and other milestones agreed on while Hoku was still in the preliminary engineering and construction phase of its polysilicon plant. Both parties had the right to pull out if certain financing targets were not reached, Hoku said.
"We resolved the issue of our plant being oversubscribed, and gained the flexibility to allocate that capacity to customers that are able to provide upfront capital for plant construction costs, which the Sanyo and GEWD contracts did not do," Chief Executive Dustin Shindo said in a statement. "Owing to Hoku's demonstrated progress, we are now able to secure contracts with more favorable prepayment and pricing terms."
The Solargiga contract provides for the delivery of predetermined volumes of polysilicon each year, with the first shipment in early 2010 and the remainder at prices set throughout the 10-year term.
Solargiga will make a deposit of $22 million to Hoku within 15 days, with additional deposits of $21 million by Dec. 20, $20 million by March 31, and $5 million upon the first shipment. Hoku also will grant Solargiga a security interest in its polysilicon assets to secure Hoku's obligation to repay $68 million to Solargiga as a credit against product shipments over time.
Hoku spokesman Jerrod Schreck declined to disclose what portion of the initial expected annual production of 3,500 metric tons the company has filled. Hoku is evaluating ways to increase production up to 4,000 metric tons by 2010 through upsizing the plant's vent gas recovery and production equipment "with little if any incremental capital costs," Shindo said.
Last week, the company obtained air permits to operate at 4,000 metric tons of capacity, he said.
The company is also shifting pilot production from late this year into 2009 to avoid an unnecessary allocation of resources and save approximately $4 million. No delays are expected from the shift, Shindo said.
As of June 30, the company had invested $58 million into the project, including $41 million of its own cash, and $17 million from customer prepayments.
Hoku plans to contribute $6 million in additional cash, which would bring its total cash contribution to $47 million and identified funding to $317 million when including prepayments. Hoku plans to finance the remaining $73 million of the project through additional prepayments from potential new customers and debt or equity financing.