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Having secured the full allotment of polysilicon supply to various PV cell manufacturers from its under-construction polysilicon plant in Pocatello, Idaho, Hoku Scientific, Inc. has announced the first new long-term supply contract that comes from the Phase II expansion that will start shipments in the second half of 2009. The new deal is with Solarfun Power Holdings Co., Ltd., and is valued at $306 million over 8 years. "Signing this contract with Solarfun is the first order we have accepted for Phase II of our polysilicon business, which will include additional production capacity in excess of the 2,500 metric tons of annual capacity that is included in our Phase I development," said Dustin Shindo (pictured), Chief Executive Officer of Hoku Scientific. "The ultimate capacity of our Phase II expansion, in excess of the volumes we have committed to Solarfun, will be determined based on the total contracts we sign with other customers over the next several months."

"Hoku has built a solid reputation as a leader among the new entrants in the polysilicon field and we are extremely confident in their ability to meet our long term polysilicon requirements," said Solarfun's Chairman Lu Yonghua. "This contract will help us realize our anticipated manufacturing cost advantages through our previously disclosed vertical integration and capacity expansion plans."

The contract provides for the delivery of predetermined volumes of polysilicon each year, with the first shipment in the second half of 2009 and continuing over an eight-year period from the first shipment, at set prices that will decline throughout the term of the agreement, according to Hoku.

Solarfun will make an 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 million, 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, the company detailed in a press release.

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.

The first phase capacity at Hoku’s polysilicon plant is put at 2,500 metric tons per annum and has secured customers that include: SANYO Electric Co., Ltd., Suntech Power Holdings Co., Ltd., Global Expertise Wafer Division Ltd. - a subsidiary of Solar-Fabrik AG - and now Solarfun. Collectively, the supply deals are worth approximately $1.5 billion over a seven-to-ten-year period, Hoku said.