Hoku signs first Phase II polysilicon deal with Solarfun worth $306 million

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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.

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