Energy Business

Hoku Shares Surge On Another Supply Award (HOKU, SOLF)

Shares of Hoku Scientific Inc. (NASDAQ:HOKU) are surging pre-market. The provider of clean energy products and technologies including polysilicon for the solar industry has announced that Solarfun Power Holdings’ (NASDAQ:SOLF) Hong Kong unit signed a definitive contract for Hoku’s sale and delivery of polysilicon to Solarfun over an eight-year period beginning in mid-2009.

The deal is subject to deliveries and conditions, but it is valued up to approximately $306 million payable to Hoku during the eight-year period.  The deal is set to start in the second half of 2009 at set prices that will decline throughout the eight-year period.  Here are the additional terms in the press release:

  • Initial deposit of $10 million to Hoku on or before December 28, 2007, and requires that Solarfun make additional prepayments for products in the aggregate amount of $45, which are to be paid to Hoku in three installments: the first payment is due on September 30, 2008, and the final payment is due on March 31, 2010.
  • The $45 million prepayment amount is to be placed in an escrow account by Solarfun, or secured by a letter of credit from Solarfun’s bank, on or before January 10, 2008.
  • Under the agreement, Hoku will grant to Solarfun a security interest in its polysilicon assets to secure Hoku’s obligation to repay $55 million to Solarfun as a credit against product shipments over time.

This is what Hoku is calling “the first order accepted for Phase II of its polysilicon business.”  Hoku’s previously announced customers include SANYO Electric Co., Ltd., Suntech Power Holdings Co., Ltd., Global Expertise Wafer Division Ltd., and now Solarfun.  Collectively, these buyers have agreed to purchase approximately $1.5 billion in polysilicon over a seven to ten year period from the completion of its factory build-out.

Hoku shares are up some 40% pre-market at $8.30, and the the 52-week trading range is $2.52 to $14.55.  Before today’s 40% gain pre-market its market cap was roughly $100 million.

Previously, we gave a “Both Sides of the Coin” review of Hoku Scientific as a highly speculative stock as a future materials supplier to the solar sector.

Jon C. Ogg
November 26, 2007