Hoku lands another contract

A subsidiary of Hoku Scientific Inc. has signed a second contract with the same Chinese company - this one worth $227 million - for polysilicon production, bolstering financing for the Kapolei-based company's new Idaho plant.

The latest agreement between Hoku Materials Inc. and China's Tianwei New Energy Wafer Co. Ltd. virtually doubles the order of polysilicon to Tianwei over a 10-year period beginning in the second quarter of 2010, bringing Tianwei's total orders from Hoku to about $511 million.

"We strive to develop solid relationships with suppliers who we view as long-term strategic partners for our mutual growth and success," said A. Guo, general manager of Tianwei, a Chinese company which manufactures silicon wafers, photovoltaic cells and modules.

In addition, Hoku recently secured air permits from the state of Idaho to operate its plant at 4,000 metric tons, up from 3,500 metric tons of capacity, said Hoku CEO Dustin Shindo.

The contract calls for a $10 million deposit to Hoku this month, and requires deposits in the amount of $12 million by Dec. 15; $12 million by April 30, 2009; and $2 million upon first shipment.

Under the agreement, Tianwei will receive a security interest in Hoku's assets related to its polysilicon business to secure Hoku's obligation to repay $36 million to Tianwei as a credit against product shipments over time.

Hoku has secured an aggregate of $306 million in prepayment commitments from its customers, including the $36 million prepayments from Tianwei and from Suntech Power Holdings Co., Solarfun Power Hong Kong Ltd., Jiangxi Kinko Energy Co. and Solargiga Energy Holdings Ltd.

The company also has invested $47 million of its own cash into its Pocatello, Idaho, plant, bringing total funding to about $353 million. The $390 million plant is scheduled to begin commercial shipments in 2009.

The company will continue to evaluate market conditions to determine the best time to raise additional project funds for 2009 through debt and/or equity, he said.