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Hoku, Solarfun ink 8-year polysilicon supply agreement

Posted: 28 Nov 2007 ?? ?Print Version ?Bookmark and Share

Keywords:polysilicon supply deal? photovoltaic cell? plant expansion?

Clean-energy product provider Hoku Scientific Inc. and photovoltaic-cell manufacturer Solarfun Power Hong Kong Ltd have signed a definitive contract for Hoku's sale and delivery of polysilicon to Solarfun over an eight-year period beginning in mid-2009.

Under the contract, up to approximately $306 million may be payable to Hoku during the eight-year period, subject to product deliveries and other conditions. 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.

The agreement also provides for an initial deposit of $10 million to Hoku on or before Dec. 28, 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 Sept. 30, 2008, and the final payment is due on March 31, 2010. The deal stipulates that Hoku will grant 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.

"This contract will help us realize our anticipated manufacturing cost advantages through our previously disclosed vertical integration and capacity expansion plans," said Solarfun's Chairman Lu Yonghua.

Hoku is in the process of building a polysilicon plant in Pocatello, Idaho that is being designed for annual production up to approximately 2,500 metric tons of polysilicon. Hoku is currently planning a Phase II expansion of the polysilicon plant to expand capacity beyond 2,500 metric tons.

"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," concluded Dustin Shindo. "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."

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