Hoku Scientific, Inc. (NASDAQ: HOKU) has just announced that its Hoku Materials subsidiary and Tianwei New Energy (Chengdu) Wafer Co., Ltd. have signed a definitive contract for Hoku’s sale and delivery of polysilicon to Tianwei over a ten-year period beginning in early 2010. The company said that $284 million may be payable to Hoku during the ten-year period of this contract, subject to product deliveries and other conditions.
The take-or-pay contract provides for the delivery of pre-set volumesof polysilicon each year. The first shipment will be in the first halfof 2010 and the remainder over a ten-year period at set prices (thatwill decline throughout the term of the agreement).
This contract also provides for a deposit of $15 million to Hoku thismonth in August 2008, and also requires that Tianwei make additionaldeposits in the amount of $15 million by November 15, 2008, $10 millionby January 15, 2009, and $5 million upon first shipment. In return, Hoku will grant Tianwei a security interest in itspolysilicon assets to secure Hoku’s obligation to repay $45 million toTianwei as a credit against product shipments over time.
Under recently announced contracts with Kinko Energy, Solarfun,Suntech, Sanyo, and Global Expertise Wafer, Hoku says it nowover-subscribed on its 3,500 metric tons per year of polysilicon production output. It also noted that it plans to realignits customer allocations within available capacity over the comingweeks as part of its on-going contract amendment discussions with Sanyoand Global Expertise Wafer Division.
This stock is still more representative of a call option forpolysilicon production rather than a smooth operation with years ofhistory, but now its revenue stream looks set as its factory canoperate at full capacity.
Shares closed up 2.4% at $5.90 today, but we are now seeing shares upanother 5% at $6.20 in after-hours after this contract was announced.
Jon C. Ogg
August 5, 2008