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Hoku and Sanyo Ink Polysilicon Agreement

January 22, 2007 by Jeff Shepard

Hoku Materials, a division of Hoku Scientific Inc., has signed a polysilicon supply agreement with Japanese solar cell maker Sanyo Electric Co. Ltd. Under the contract, up to approximately $370 million may be payable to Hoku during a seven-year period, subject to the achievement of milestones. The contract provides for the delivery of predetermined volumes of polysilicon each year at set prices from January 2009 through December 2015.

The contract also provides for an initial direct deposit of $2 million to Hoku upon signing and requires that Sanyo place approximately 30% of the total purchase amount in an escrow account with Bank of Hawaii. Both companies each have the right to terminate the agreement if Hoku is unsuccessful in raising the additional capital required to complete the construction of the polysilicon plant within the next six months.

Hoku is a new entry in polysilicon, which is in short supply due to exploding demand in the solar cell industry. The company plans to build a plant in Idaho capable of producing 2,000 metric tons of polysilicon per year. Hoku estimates that the establishment of this larger facility may require total construction costs of approximately $260 million.