Hoku Scientific may sell Hoku Materials unit

NEW YORK - Hoku Scientific Inc. said Friday that its Hoku Materials unit, which makes and sells polysilicon for solar panels, is seeking new debt and equity financing amid a cash crunch linked to the global economic slowdown and is evaluating a possible sale.

Honolulu-based Hoku Scientific has retained Deutsche Bank Securities Inc. as its financial adviser to explore alternatives for Hoku Materials. The news sent Hoku Scientific shares tumbling 28 cents, or 12.3 percent, to $2 in aftermarket trading, having closed earlier up 2 cents at $2.28.

Hoku said that to save cash while looking at its financial options, it will temporarily slow construction and procurement at the polysilicon production plant it is developing in Pocatello, Idaho. Previously, Hoku had said it would just delay building part of the plant.

In spite of the delay, Hoku said it does not intend to lay off any workers.

"We are caught in the same perfect storm that many other companies are facing: The credit crunch, a general economic downturn, pressure on polysilicon and PV pricing, and a global decline in investment capital," said Hoku Scientific Chief Executive Dustin Shindo.

Also Friday, Hoku Materials and China-based solar module maker Suntech Power Holdings Co. said they amended a contract to delay deadlines by which Hoku needs to meet three polysilicon plant operation milestones.

The companies said that as part of the amended contract Hoku Materials must make a deal to shift control of the company by the end of next March.

Suntech could have ended the contract if Hoku didn't complete a polysilicon reactor test demonstration by Sept. 30, ship the first monthly amount of polysilicon or reach a certain plant operation milestone by Dec. 31.

Under the amended contract, the deadlines to reach these marks will be moved to Dec. 31, March 31 and Dec. 31, 2010.

Hoku has agreed to lower Suntech's total prepayment obligation, and authorized Suntech to replace a cash-collateralized standby letter of credit issued by ABN AMRO NV with one issued by a bank in China. The new letter can be collateralized with non-cash assets, which Suntech said will free up its restricted cash.

Suntech paid Hoku $2 million in prepayments in 2007. The company also invested $20 million in Hoku's private offering of common shares in February 2008.

CEO Shindo added that the issues affecting Hoku Materials have no effect on its Hoku Solar unit, which focuses on off-the-shelf integration of photovoltaic power systems.

"The companies are both wholly-owned subsidiaries of Hoku Scientific, but each operates completely independently of the other," said Shindo. "We remain very excited about the opportunity to continue expanding Hoku Solar's PV installation business and continue to actively install systems in Hawaii."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.