Hoku Materials, Inc., a subsidiary of Hoku Scientific, Inc. (Nasdaq: HOKU), has signed a 10-year, $298 million polysilicon supply agreement with Jiangxi Kinko Energy Company, Ltd., a manufacturer of silicon ingots, wafers and related products in China.
The agreement contributes to the financing needed by
Hoku to complete its planned Idaho production facility. Previously,
Hoku had announced plans to fund the $390 million polysilicon plant
through $240 million from customer pre-payments and $40 million of its
own cash, with the remaining $110 million to come from a combination of
pre-payments from new customers, and from debt, equity and other
financing strategies. Under the terms of the agreement with Kinko, up
to $55 million could be applied toward this remaining $110 million,
potentially reducing it by half.
The contract also provides for an initial deposit of $10 million to
Hoku, and requires that Kinko Energy make additional prepayments for
products in the amount of $20 million by December 20, 2008 and an
additional $25 million by March 31, 2009. Under the agreement, Hoku
will grant to Kinko Energy a security interest in its polysilicon
assets to secure Hoku’s obligation to repay $55 million to Kinko Energy
as a credit against product shipments over time.
The take-or-pay contract provides for the delivery of predetermined volumes of polysilicon each year, with the first shipment in the second half of 2009 and the remainder over a ten-year period at set prices that will decline throughout the term of the agreement.
"We plan to continue with our equity distribution agreement and other funding strategies, but do not expect we will need to sell as many shares to complete our plant financing," Dustin Shindo, CEO of Hoku Scientific said. "The contract with Kinko Energy provides $10 million in near-term funds which will be deployed during our ramp-up to pilot production. And, with a total of $30 million expected from Kinko before the end of 2008, the agreement reduces our risk of not meeting the financing contingencies in some of our other customer supply contracts."
With the signing of the Kinko Energy agreement, Hoku also confirmed that the plant’s expected annual production of 3,500 metric tons (MT) of polysilicon had been fully allocated.
"Looking over a ten year period, we are actually slightly oversold at current planned capacity," said Shindo. "As we have previously stated, though, Hoku is in ongoing contract amendment discussions with both Sanyo and GEWD/Solar Fabrik. We are generally seeking to strengthen these two relationships, but we may adjust delivery amounts or timing to either Sanyo or GEWD, or both, to address this slight overage."
About Hoku Scientific, Inc.
Hoku Scientific, Inc. is a diversified clean energy technologies company with three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. Hoku Materials plans to manufacture, market, and sell polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho. Hoku Solar is a provider of turnkey photovoltaic systems in Hawaii. Hoku Fuel Cells has developed proprietary fuel cell membranes and membrane electrode assemblies for stationary and automotive proton exchange membrane fuel cells.
About Jiangxi Kinko Energy Company, Ltd.
Jiangxi Kinko Energy Co., Ltd. is one of the largest emerging manufacturers of solar industry silicon products and semiconducting materials in China. Specializing in the production of silicon ingots, blocks and wafers, Kinko Energy’s silicon industry assets currently include mono-crystalline furnaces, polycrystalline ingot casting furnaces, wire cutting and chipping equipment, and related production facilities, among others. Jiangxi Kinko Energy Company, Ltd. is affiliated with DeSun Solar Company, Ltd. (Group) and is a privately held, overseas funded, high technology enterprise whose investors include Hong Kong Paker Technology Company, Ltd. For more information, visit www.kinkosolar.com.
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