Hoku Scientific Inc. is exploring formation of a solar project financing fund with its majority shareholder that could be as large as $50 million and provide funding for installing and operating large commercial, industrial and utility-scale photovoltaic projects in Hawaii.

“;If the fund is successfully closed, with the coming introduction of a feed-in tariff in Hawaii, we believe it could unlock (subsidiary) Hoku Solar's growth potential,”; said Dustin Shindo, chairman, president and chief executive officer of Hoku Scientific.

State regulators at the state Public Utilities Commission recently issued a ruling that starts a program allowing small and midsize energy projects to easily sell renewable electricity for use by Hawaii's power companies. The so-called feed-in tariff guarantees renewable energy producers a fixed price for their power for 20 years.

The Honolulu-based alternative energy company, which signed the solar project letter of intent with its 60 percent owner, China-based Tianwei New Energy Holdings Inc., announced the nonbinding agreement at the same time it reported that its fiscal third-quarter loss widened to $1.3 million from a loss of $863,000 a year earlier. Revenue fell 66.2 percent to $259,000 from $767,000.

Hoku said a belated $50 million debt financing payment from Tianwei intended to help pay for the polysilicon plant Hoku is building in Pocatello, Idaho, has postponed reactor demonstration testing three months to March and will delay product deliveries.

Shindo said that when Hoku signed financing agreements with Tianwei in September, it expected to receive the $50 million in 2009, complete reactor test demonstration in December and begin customer shipments by the end of March. Instead, Hoku received $20 million from Tianwei last week and expects to receive the remaining $30 million in February.

“;With the several months' delay in receiving the $50 million, our first priority is to pay our most overdue invoices from our vendors before spending money on new construction,”; Shindo said.

Hoku will begin its ramp-up to commercial production as soon as possible after reactor demonstration testing and expects to make its first commercial delivery in the June quarter, Shindo said.

The delay in receiving funding from Tianwei gives one of Hoku's customers, China-based Suntech Power, the right to terminate its polysilicon supply agreement and request a refund of its $2 million prepayment, the company said. Hoku said that it needed to have completed a reactor demonstration in 2009 to trigger Suntech's next prepayment of $15 million.

Shindo said, though, that he expects Suntech to work with Hoku to make the required adjustments to dates in the sales agreements.

“;Suntech invested $20 million in our common stock in calendar year 2008, and they have previously shown their willingness to be flexible when needed,”; he said.