Hoku to sell wafers under new polysilicon barter with Jinko

Kapolei, Hawaii-based Hoku Scientific (NASDAQ: HOKU) subsidiary Hoku Materials said today it plans to sell silicon wafers instead of polysilicon to customers such as Suntech Power thanks to a modified deal with China’s Jiangxi Jinko Solar.

Hoku and Jinko signed a 10-year deal for Hoku to sell polysilicon to Jinko to be made into silicon wafers, ingots and other products. Jinko has paid $20 million to secure the supply and is required to pay an additional $13 million before the end of March.

But companies’ difficulty in getting financing prompted the pair to come up with a barter. Jinko will instead manufacture low-cost wafers at a discount for Hoku during the 10-year contract.

Hoku plans to exercise its option to provide some customers with wafers in lieu of polysilicon. A statement from the company said the move would “add additional value for our customers, and allows us to build a stronger long-term business." Suntech is among those customers, the company said.

"Changes in the availability of financing across international credit markets are affecting companies throughout the solar industry," said Dustin Shindo, chairman and chief executive officer of Hoku Scientific, in a release. "Nevertheless, Hoku is strongly committed to long-term partnerships. This means we are willing to work with our customers to establish contract terms which allow both companies to succeed over time."

Hoku Scientific's shares were down 7.61 percent at the close of trading today.

Under the new 10-year contract, Jinko will pay up to $178 million for polysilicon, and Jinko will provide discounted wafer manufacturing to Hoku, up to certain limits each year. Shipments of polysilicon are expected to begin in the second half of this year, with prices declining over the life of the contract.

"We are pleased by Hoku's willingness to work with Jinko to amend our contract," said Jinko chairman, Xiande Li. "These revised terms allow Jinko to retain a portion of its long-term polysilicon capacity from Hoku, an important component of our strategy to expand our business and drive down manufacturing costs."

Jinko raised $35 million in its second round of equity funding in October (see China’s JinkoSolar gets $35M).

The amended contract means Hoku has additional production capacity, and the company is in talks with customers for the polysilicon.

The company said it has received all scheduled customer prepayments at the end of 2008, with the exception of $43 million from Chinese wafer maker Solargiga Energy Holdings. Hoku is now considering whether to resell Solargiga’s allotted capacity.

Also today, Hoku said it received its first shipment of six Siemens-process reactors to be used in the production of polysilicon at the company's facility in Pocatello, Idaho.

Two have been assembled and installed. The company has ordered 28, and the next 10 are set to arrive in March.

Hoku said construction of the plant is on schedule.