$185M funding for Hoku

Financing agreement signed with Merrill Lynch

Hoku Scientific Inc. said yesterday it has taken a major step toward securing $185 million in financing for its planned polysilicon plant in Pocatello, Idaho.

The Kapolei-based fuel-cell technology developer said it has entered a non-binding agreement with Merrill Lynch & Co. to borrow the money for the construction and start-up of the plant, set to start production in 2009. The closing of the loan is subject to terms including a requirement that Hoku raise an additional $35 million in cash for the plant.

The announcement comes two weeks after Hoku secured a $306 million contract with Solarfun Power Hong Kong Ltd., bringing the total 10-year revenue estimate for the plant to $1.5 billion from four major customers.

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Hoku Scientific Inc. yesterday announced that it has secured a major piece of funding for its planned polysilicon plant in Pocatello, Idaho.

The Kapolei-based alternative-energy technology developer said subsidiary Hoku Materials Inc. has 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. Polysilicon is a key material used in making solar panels.

The closing of the loan is subject to terms including the completion of due diligence by Merrill Lynch, the negotiation of definitive loan documents and third-party consents. Under the agreement, Hoku Scientific also must raise additional financing of $35 million in cash for the plant.

The $290 million plant is expected to bring in up to $1.5 billion in revenue over 10 years from contracts it has signed with Solarfun Power Hong Kong Ltd., Solar-Fabrik AG of Germany, China-based Suntech Power Holdings Co. Ltd. and Japan-based Sanyo Electric Co. Ltd.

The new agreement will expire on May 31 if neither Hoku nor Merrill takes action. Additional closing conditions may be added, because the agreement is preliminary and nonbinding, according to Hoku.

A request for comment left to Merrill Lynch's Houston office was not returned.

Hoku's stock fell 9.5 percent, or 93 cents, to $8.87 on the Nasdaq Stock Market yesterday. The announcement was made after the market closed.

Hoku's contracts include Solarfun, at $306 million; Sanyo, at $370 million; Suntech, at $678 million; and Global Expertise Wafer Division Ltd., a subsidiary of Solar-Fabrik, at $185 million. The four customers have committed to prepay a combined $240 million for future product shipments to support Hoku's construction and start-up costs.

Hoku said in October it expects to generate revenue of up to $140 million a year from the Idaho plant, which will produce 2,500 metric tons of polysilicon a year at full capacity. Construction is slated to finish in the second half of next year and start polysilicon deliveries in the second half of 2009.

The Solarfun contract represents the first order Hoku has accepted for a planned expansion of the plant's capacity. The size of the expansion will be based on contracts the company signs with customers during the next several months, Dustin Shindo, chairman, president and chief executive of Hoku, said late last month.