Hoku Scientific Inc., which reached a deal last month to relinquish 60 percent control of its company to one of its Chinese customers, said it has begun ramping up construction at its Pocatello, Idaho, polysilicon plant and expects to begin making shipments in the first quarter of the new calendar year.

The Honolulu-based alternative energy company updated the plant's status yesterday while reporting that its fiscal second-quarter loss for the period ended Sept. 30 narrowed to $1.2 million, or 6 cents a share, from a loss of $1.4 million, or 7 cents a share, a year ago.

Revenue, derived primarily from its Hawaii solar installation business, fell 19.9 percent to $1.5 million from $1.9 million a year ago.

Hoku, which had slowed production to preserve cash and was on the brink of Chapter 7 liquidation for its polysilicon subsidiary, said the deal with Tianwei New Energy Holdings is expected to close by the end of next week.

Polysilicon is the raw material used to make solar panels.

Under the agreement, Tianwei and China Construction Bank will provide $50 million in initial debt financing to Hoku, with $20 million expected next month and the remaining $30 million in December. Upon the deal closing, Tianwei will convert into Hoku common stock $50 million of $79 million that Tianwei prepaid to Hoku as part of their supply agreements.

Hoku also will provide Tianwei with warrants for an additional 10 million shares of Hoku's common stock.

Even though Hoku plans to begin shipments early next year, it said it still will need $71 million in additional funding to complete construction and reach planned full production capacity of 4,000 metric tons a year for the $390 million plant.

Hoku said it expects to reach that full capacity by the second half of 2010, but added that it will delay that additional funding until it makes initial shipments to its current customers in the first quarter.

“;In light of these developments, we are extremely pleased to be focused again on execution,”; said Dustin Shindo, chairman, president and chief executive officer of Hoku.

“;Having established a clear path forward, we expect our financing progress will not only benefit our polysilicon business, but that it will have a healthy effect on our PV (photovoltaic) systems integration business as well.”;

Hoku said that although Tianwei provided commitments to assist in securing the remaining funds, Hoku expected to complete the additional financing through a combination of prepayments from new customers, through other debt sources or possibly through U.S. federal loan guarantees and other qualified renewable-energy incentive programs.