Hoku signs its fourth major deal

Hoku Scientific Inc. has lined up its fourth multimillion-dollar contract for polysilicon from its planned factory in Idaho.

The $306 million deal with Solarfun Power Hong Kong Ltd. brings the total amount of Hoku's polysilicon contracts to about $1.5 billion.

Hoku is still seeking financing to build the plant, which it hopes to complete in the second half of 2008 and put into production in the second half of 2009.

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Hoku Scientific Inc., lining up its fourth major customer for its startup polysilicon business, said yesterday it has signed a definitive supply contract worth up to $306 million with the Chinese subsidiary of Solarfun Power Holdings Co. Ltd.

The latest deal sent Hoku's shares soaring about 40 percent, or $2.30, to $8.22 yesterday on the Nasdaq Stock Market.

Kapolei-based Hoku, which is in the process of building a $300 million polysilicon plant in Pocatello, Idaho, now has reached polysilicon supply contracts totaling approximately $1.5 billion over a seven- to 10-year period. Polysilicon is the material used in making solar panels.

Hoku also said it is moving ahead with expanding the planned 2,500-metric-ton annual capacity of its polysilicon plant.

Dustin Shindo, chairman, president and chief executive of Hoku, said the signing of Solarfun, which manufactures both photovoltaic cells and modules in China, represents the first order that Hoku has accepted for the second phase of its polysilicon business that will go beyond the current planned capacity of the plant.

The ultimate capacity of our Phase II expansion, in excess of the volumes we have committed to Solarfun, will be determined based on the total contracts we sign with other customers over the next several months, Shindo said.

Hoku's plant is scheduled to be completed in the second half of 2008 and begin deliveries of polysilicon in the second half of 2009.

Hoku earlier reached contracts with Japan-based Sanyo Electric Co. Ltd. ($370 million), China-based Suntech Power Holdings Co. Ltd. ($678 million) and Global Expertise Wafer Division Ltd. ($185 million), a subsidiary of Germany-based Solar-Fabrik AG.

The agreement with subsidiary Solarfun Power Hong Kong Ltd. calls for the delivery of predetermined volumes of polysilicon at set prices each year, with the first shipment in the second half of 2009 and continuing over an eight-year period from the first shipment. The prices will decline throughout the term of the agreement.

Hoku, which still is seeking financing for its plant, will receive an initial deposit of $10 million by Dec. 28 from Solarfun, with the Chinese company to make additional prepayments totaling $45 million that will be completed by March 31, 2010.

The Hoku contract will help Solarfun realize manufacturing cost advantages through vertical integration and expanded capacity, said Lu Yonghua, company chairman.