Hoku amends Jinko contract; announces new 10-year polysilicon supply agreement

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Hoku Materials, Inc. has entered into a 10-year polysilicon supply agreement with Shanghai Alex New Energy Company, Ltd., a crystalline silicon solar cells, modules and PV products manufacturer, with deliveries beginning in early 2010. The polysilicon has been offered at set prices that will decline throughout the agreement’s 10-year lifespan.

This new contract represents the resale of a portion of the polysilicon recovered following the amendment of a supply agreement with Jiangxi Jinko Solar Company (Jinko). Hoku confirmed that a small amount of Jinko’s original production capacity remains available for sale, for which Hoku is seeking a buyer.

Prior to this recent agreement with Hoku, Shanghai Alex had settled on an agreement with Jinko that would see Alex purchase some of the polysilicon Jinko was to receive from Hoku, in exchange for underwriting a portion of Jinko’s prepayment deposits. As a result, this additional capacity has been formally assigned to Alex at the request of Jinko and Alex.

This new arrangement stands as a second amendment to Jinko’s polysilicon supply agreement, reducing the overall volume of polysilicon to be sold by Hoku to Jinko. While the remainder of the Jinko contract remains unchanged, the company’s prepayment obligation – including the $15 million previously paid to Hoku – falls to $20 million.

Alex and Jinko may pay up an aggregated combined total of approximately $238 million to Hoku during the 10-year period under the terms of the take-or-pay contracts. Alex and Jinko will receive predetermined volumes of polysilicon each year, with combined prepayments totalling $40 million, of which $15 million has been paid by Jinko to date, and $7 million from Alex.

Further to this agreement, Alex will provide Hoku with discounted original equipment manufacturing (OEM) services for an amount of PV modules per year for each of the 10 years. This additional agreement will be optional to Hoku and will be priced at Alex’s most preferred rate.

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