Hoku Scientific: Polysilicon supply contracts
Hoku Materials, Inc., a wholly owned subsidiary of Hoku Scientific, Inc. , established to manufacture and sell polysilicon for the solar market, and Tianwei New Energy (Chengdu) Wafer Co., Ltd., a subsidiary of Tianwei New Energy Holdings Co., Ltd. that manufactures silicon wafers, photovoltaic cells, and modules in China, announced that they have amended their two polysilicon supply contracts to accelerate $5 million of the remaining $7 million in prepayments that Tianwei was obligated to pay to Hoku, eliminate Hoku's near-term shipping obligation to Tianwei, and adjust the long-term contract price.
Tianwei had already paid Hoku a combined $74 million in prepayments through April 30, 2009. Before the amendments, Tianwei was obligated to pay Hoku an additional $7 million upon Hoku's first shipment of products in 2010. In exchange for a long-term contract price adjustment, Tianwei agreed to pay $5 million of this remaining $7 million up front, and eliminated the requirement that Hoku ship polysilicon to Tianwei before March 2010. These early shipments would have been additive to the long-term contract amounts, and Hoku's failure to make these shipments would have resulted in a price penalty.
The remaining $2 million is to be paid when Hoku commences polysilicon shipments to Tianwei in 2010. As of June 30, 2009, Tianwei has paid to Hoku a combined aggregate of $79 million in prepayments for future product deliveries.
Hoku reported that the average prices over the ten-year term of each contract were adjusted downward by eight percent, such that the total amounts payable over the ten-year term of both agreements was reduced from approximately $511 million to approximately $468 million.
"The early payment of $5 million has helped us manage cash flow for our Hoku Materials subsidiary, especially as some of our other customers were requesting extensions of time make their prepayments to us," said Dustin Shindo, chairman and chief executive officer of Hoku Scientific. "Eliminating the early shipment requirement reduces near-term pressure for us to commence shipments, and allows us to more effectively manage the timing of our capital expenditures as we seek to raise additional financing for continuing construction costs."
"Tianwei has contributed $79 million out of a combined total of $158 million in prepayments from our polysilicon customers," said Mr. Shindo, chairman and chief executive officer of Hoku Scientific. "Their strong commitment to our project is reflected not just in the amount of capital committed, but in our mutual willingness to adjust our contractual commitments based on recent market conditions. The agreed upon unit prices remain attractive for Hoku over the ten-year period, while also offering Tianwei the ability to more effectively control its production costs and be competitive. The accelerated payment of $5 million helps us manage our near-term capital requirements."
"Tianwei views Hoku as one of our key strategic partners," said Mr. Aihua Guo, Tianwei's general manager. "These amendments strengthen our long-term commitment to Hoku, and we remain confident in their ability to begin shipping high quality polysilicon to us in the months ahead."
About Hoku Scientific, Inc.
Hoku Scientific (NASDAQ:HOKU - News) is a diversified clean energy technologies company with three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. Hoku Materials plans to manufacture, market, and sell polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho. Hoku Solar markets, sells, and installs turnkey photovoltaic systems in Hawaii. Hoku Fuel Cells has developed proprietary fuel cell membranes and membrane electrode assemblies for stationary and automotive proton exchange membrane fuel cells. For more information visit www.hokucorp.com.
Hoku ?, Hoku Scientific ?, Hoku Solar(TM) and Hoku Fuel Cells(TM) are trademarks of Hoku Scientific, Inc., and Hoku Materials(TM) is a trademark of Hoku Materials, Inc.
About Tianwei New Energy (Chengdu) Wafer Co., Ltd.
Tianwei New Energy (Chengdu) Wafer Company is a wholly owned subsidiary of Tianwei New Energy Holdings Co., Ltd (TWNE), with first class silicon wafer facilities in China's Sichuan Province. It has installed wafer capacity of 300 MW, with plans to expand to 600 MW from 2009. Its parent company, TWNE, is also based in Sichuan, China. TWNE owns wafer, photovoltaic (PV) cell and module facilities. TWNE has 100MW of installed PV cell capacity and 60MW of installed PV module capacity, with plans to increase PV cell and module capacity to 300 MW each in 2009. TWNE is a wholly owned subsidiary of Baoding Tianwei Group Company, Ltd., a leading manufacturer of power transmission equipment and green energy products in China, originally founded in 1958. Baoding Tianwei Group Company, Ltd. has approximately 8,000 employees. For more information visit www.twnesolar.com.
This press release contains forward-looking statements that involve many risks and uncertainties. These statements relate to Hoku Materials' ability to successfully derive revenues from the sale of polysilicon to Tianwei, and the amount and timing of those revenues; its ability to engineer and construct a production plant for polysilicon; Hoku Materials' relationship with Tianwei; its ability to manufacture polysilicon; the timing of when Hoku Materials would receive $2 million in prepayments from Tianwei; Hoku Materials' ability to meet the polysilicon shipment milestones and quality specifications in its agreement with Tianwei; the quality of polysilicon to be manufactured; Hoku Scientific's future financial performance; its business strategies and plans; and objectives of management for future operations. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause Hoku Scientific's actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. In evaluating these statements, you should specifically consider the risks described in Hoku Scientific's filings with the Securities and Exchange Commission. Except as required by law, Hoku Scientific assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Hoku Scientific, Inc.
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