Wednesday, January 27, 2010

Hoku Scientific Plans Advanced Solar Power Projects in Hawaii and Will Ramp up Polysilicon Production to 2500 Tons per Year at New Plant

Hoku Scientific, Inc., a materials science company focused on clean energy technologies, announced on January 27th  its financial results for the third quarter ended December 31, 2009 and provided a general update on its business.  The company expects to deliver more than 2,500 tons of polysilicon per year from its new facility and plans to installed advanced solar power projects in Hawaii later this year. 

Financial Results
Revenue for the quarters ended December 31, 2009 and 2008 was $259,000 and $767,000, respectively, derived primarily from photovoltaic, or PV, system installation and related service contracts. Revenues for the quarter ended December 31, 2009 were lower than expected as a result of management's focus on financing for the Company's polysilicon facility under construction in Pocatello, Idaho, and due to slower purchasing cycles for PV systems in Hawaii in 2009. As of December 31, 2009 deferred revenue of $495,000 was attributable to PV system installations and related service contracts.

Net loss for the quarter ended December 31, 2009, computed in accordance with U.S. generally accepted accounting principles, or GAAP, was $1.3 million, or $0.06 per diluted share, compared to $863,000, or $0.04 per diluted share, for the same period in the previous year.

Dustin Shindo, chairman, president and chief executive officer of Hoku Scientific, said, "Having successfully closed our financing agreement with Tianwei, we are working closely with our vendors to resume construction so we can move quickly toward our planned reactor demonstration and subsequent production ramp-up at our polysilicon manufacturing plant in Pocatello, Idaho."

Hoku reported that it had received the first tranche of $20 million in debt financing from Tianwei on January 21, 2010 and that it expects to receive the second tranche of $30 million in late February 2010.

Describing the Company's plant construction and operations timeline, Mr. Shindo continued, "When we signed the Tianwei financing agreements in September 2009, we expected to receive the $50 million in November 2009, which would have enabled us to complete the reactor test demonstration in December 2009, and commence customer shipments by the end of March 2010. With the several-months delay in receiving the $50 million, however, our first priority is to pay our most overdue invoices from our vendors before spending money on new construction. We now expect to conduct reactor demonstration testing by March 2010, and to begin our ramp-up to commercial production as soon as possible thereafter."

Commenting on Hoku Solar's recent announcement, Mr. Shindo stated, "We are also very excited by our letter of intent with Tianwei to explore the investment of capital in a fund that would own and operate Hoku Solar's PV projects in Hawaii, and sell the power generated by those projects to utilities or private consumers through negotiated power purchase agreements. According to the terms of the letter of intent, we will begin working with Tianwei to structure a solar project financing fund that could be as large as $50 million, and that would be aimed at funding the installation and operation of large commercial, industrial, and utility-scale PV projects in Hawaii. If the fund is successfully closed, it could be a transformative event for the growth of Hoku Solar's Hawaii-based PV business."

Hoku Materials Polysilicon Plant Update
Commenting on the Company's polysilicon subsidiary, Hoku Materials, Inc., Mr. Shindo said, "Our on-site efforts in Idaho during the past quarter have been focused on managing relationships with our vendors, and on staffing, training and equipment preparations for our upcoming reactor demonstration. We have concentrated on readying the reactors themselves, and on commissioning the necessary control, support and safety systems required to conduct the testing. We have kept our cash expenditures to a minimum pending receipt of the Tianwei funds."

Hoku had previously reported that the reactor demonstration would be followed by a phased ramp-up to a planned initial production capacity of approximately 2,500 metric tons of polysilicon per year. The Company explained that this first phase of production would be completed using third-party trichlorosilane, or TCS, initial quantities of which have already been procured and delivered to the Company's Pocatello facility.

Hoku also confirmed that it was to have completed a reactor demonstration in calendar year 2009 in order to trigger Suntech's next prepayment of $15 million. "Because the demonstration was delayed," said Mr. Shindo, "Suntech may have the right to terminate its polysilicon supply agreement with Hoku Materials, and request a refund of its $2 million prepayment. However, Suntech has not taken that position, and we expect that they will work with us to make the required adjustments to the milestone dates in the existing sales agreement. Suntech invested $20 million in our common stock in calendar year 2008, and they have previously shown their willingness to be flexible when needed."

Hoku reaffirmed its expectation that the $50 million in proceeds from the Tianwei financing, plus the additional $55 million in prepayments expected from the company's polysilicon customers, would be a sufficient amount to commission up to 2,500 metric tons of production capacity using third party TCS, and to commence initial commercial deliveries.

Subject to additional financing, Hoku said it expected to continue adding reactor capacity throughout calendar year 2010 until reaching the plant's full annual production capacity of 4,000 metric tons in the second half of the calendar year. Hoku also reported that it planned to bring its on-site TCS production facility online by the end of calendar year 2010, eliminating the Company's need to procure third-party TCS. Tianwei has committed to assist the Company in its efforts to raise the additional capital through one or more debt or equity offerings.

"We continue to execute our financing strategy around the commencement of initial commercial operations at our polysilicon plant in Idaho," said Mr. Shindo. "We believe we will have a wider range of choices available for long-term financing after we complete the reactor demonstration. Thus, while we continue to actively evaluate our options, we do not expect to commit to a particular financing strategy until that milestone is achieved."

Hoku Solar Update
Commenting on Hoku Solar, Mr. Shindo said, "During the third quarter of fiscal 2010, Hoku Solar advanced installation projects on Oahu and on Hawaii Island, and completed the second full quarter of operations for the PV systems installed on Hawaii Department of Transportation, or HDOT, facilities throughout the state. In aggregate, the HDOT systems continued to exceed their projected power output."

"Hoku Solar continues to advance its focus on developing and installing top-quality commercial, industrial and institutional solar power systems," said Mr. Shindo. "We are increasingly active in the utility-scale market, and with the coming introduction of a Feed-in Tariff in Hawaii, we remain very enthusiastic about emerging multi-megawatt development opportunities. The investment fund contemplated by our letter of intent with Tianwei could be a game-changing event for Hoku Solar."

Mr. Shindo summarized the Company's progress saying, "With the closing of the Tianwei financing, we look forward to a break-through year in calendar 2010 -- both in Hawaii and in Idaho."

About Hoku Scientific, Inc.
Hoku Scientific (NASDAQ: HOKU) 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 and installs turnkey photovoltaic systems and related services 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

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