Hoku reduces volume of Solar-Fabrik deal

Kapolei, Hawaii-based Hoku Scientific (Nasdaq: HOKU) said today it reduced the volume of its polysilicon agreement with Freiburg, Germany's Solar-Fabrik.

Originally announced in June 2007 (see Hoku announces Solar-Fabrik deal, focus on silicon), the deal is now worth $117 million, down from $185 million.

Solar-Fabrik's Global Expertise Wafer Division has already paid Hoku $2 million in cash and provided a $25 million standby letter of credit.

Under the terms of the contract, Hoku had the option to reduce the amount of polysilicon to be shipped to Solar-Fabrik  and to increase the price of the products if Solar-Fabrik did not provide an additional $26 million standby letter of credit by Sept. 30.

"Our ability to complete the financing for the construction of our polysilicon facility depends in part on guarantees that our customers will prepay for products as we achieve milestones in the construction of our planned polysilicon plant," said Dustin Shindo, CEO of Hoku Scientific.

"To keep our financing moving forward, we unfortunately had to cut back the volume allocation to Global Expertise Wafer Division."

Hoku also announced today that it amended its supply agreement with Japan's Sanyo Electric (OTC: SANYY), extending the date for Hoku to complete the financing for its planned Pocatello, Idaho polysilicon plant.

Hoku said under the terms of the amendment, Hoku or Sanyo may terminate the supply agreement if Hoku has not secured financing by February 15, a six week extension from the previous deadline of December 31.

In December, Hoku said it signed a non-binding term sheet with Merrill Lynch for Hoku to borrow up to $185 million for the construction, procurement and start-up of the plant.

The facility is expected to produce 2,500 metric tons of solar-grade polysilicon per year when it is running at full capacity, with the first customer shipments planned for the beginning of 2009.

Hoku said Phase I construction costs are estimated to be $290 million.