Hoku announces new $455m contract, cancels two others

Hoku Materials announced a slate of new developments Sept. 4 regarding its planned polysilicon production facility in Pocatello, including that it had secured a 10-year purchase agreement with Chinese ingot manufacturer Solargiga Energy Holdings worth $455 million.

The Solargiga agreement, which follows similar contracts worth a combined $582 million signed with Kinko Energy and Tianwei New Energy in July and August, will include $68 million in prepayments between the third quarter of the 2008 calendar year and the first shipment, expected in 2010.

The three contracts signed this summer total more than $1 billion, and bring the worth of Hoku’s current polysilicon supply agreements to nearly $2.1 billion, despite the fact that the company has terminated its supply contracts with Global Expertise Wafer Division (GEWD) and Sanyo Electric. Those contracts, signed in early 2007, were cancelled after unspecified financing targets were not met by May 31, 2008 and negotiations for contract amendments broke down. Both Sanyo and GEWD had already made $2 million in prepayments which Hoku will be required to return. Hoku representatives could not be reached for comment.

Dustin Shindo, CEO of Hoku Scientific, the parent company of Hoku Materials, said in a company release that the plant was oversubscribed at its 3,500 metric ton annual production level anyway, and the contract terminations have given the company new opportunities – especially after the Idaho Department of Environmental Quality approved its modified air quality permit, clearing the way for an expansion of the facility’s annual capacity from 3,500 metric tons to 4,000 metric tons.

"This realignment of production capacity is a positive development for Hoku," Shindo said in a company release. "We resolved the issue of our plant being oversubscribed, and gained the flexibility to allocate that capacity to customers that are able to provide up-front capital for plant construction costs, which the Sanyo and GEWD contracts did not do."

Even with the loss of the Sanyo and GEWD contracts, Hoku reported it has come out financially ahead, with prepayment commitments totaling $270 million – $30 million more than it had.  

Based on the strength of these deals, Hoku announced it had also terminated its equity distribution agreement with UBS. The company said in June that it planned to sell shares worth up the $54 million to raise funds for engineering, procurement and construction of the $390 million Pocatello facility.

The company will be conducting a pilot production and polysilicon reactor demonstration in the early 2009, with the first shipments of polysilicon expected later that year.