Hoku, Tianwei amend polysilicon supply agreements

POCATELLO, USA & CHENGDU, CHINA: 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, have amended their two polysilicon supply contracts.

This amendment is meant 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 CEO 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 Shindo. "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 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."

China solar PV installed capacity likely to reach 10,000-20,000 MW by 2020

BEIJING, CHINA: (Xinhua via COMTEX) China's solar PV installed capacity will likely reach 10,000-20,000 megawatts by 2020 with the implementation of its solar photovoltaic (PV) roof plan and other supportive measures, China Securities Journal quoted Wang Zhongying, head of the Renewable Energy Development Center of the Energy Research Institute (ERI) as saying.

The predicted capacity is far higher than the government's original plan, which targets at 1,800 MW of solar PV installed capacity by 2020.

China has announced a plan to build the country's largest solar PV project in Dunhuang, Gansu, with a primary installed capacity set at 10 MW. Bidding for the project, enterprises have offered an average power price of 1.5 yuan/kwh.

Although the price is still far higher than the 0.6 yuan/kwh price of wind-generating electricity selling to grids and the 0.3 yuan/kwh price of on-grid thermal power, it can reflect the sharp decline in the solar PV costs, said Wang.

Calculated on the basis of current solar PV cost and on-grid thermal power price, Chinese government need give one yuan of subsidy to each kwh of electricity generated from solar power, Wang noted.

Wang also stated that Chinese government is likely to draw up more favorable measures to encourage investment in solar power project.

China announced a solar PV roof plan in March, promising to grant 20 yuan/watt-peak subsidy to solar PV projects whose single installed capacity exceeds 50 kWp.

Now, China-based solar PV product makers like SunTech Power Holdings Co., Ltd. (STP.NYSE), Solarfun Power Holdings Co., Ltd. (SOLF.Nasdaq) and China Technology Development Group Corporation (CTDC.Nasdaq), suffer significant losses due to foreign market shrinkage and a big number of provisions against price drops.

Source: Trading Markets