Hoku Materials, Inc., a wholly owned subsidiary of Hoku Corporation (NASDAQ: HOKU), established to manufacture and sell polysilicon for the solar market, and Suntech Power Holdings Co., Ltd. (NYSE: STP), the world's largest producer of crystalline silicon solar panels, today announced that they have amended their polysilicon supply contract to remove all milestones, adjust the contract term, and reschedule the initial shipment date.
With the removal of the milestones, Suntech is no longer obligated to pay the scheduled $30 million prepayment that was previously committed. However, Hoku will retain the $2 million in prepayments that Suntech has already paid, which will be credited against future shipments of polysilicon. These payments are separate from the $20 million that Suntech invested in Hoku's common stock through a private placement in early 2008. The term of the agreement was shortened to one year to match Suntech's prepayment of $2 million, and pricing and volume were fixed for the term of the agreement. The agreement will automatically be renewed after the initial term with the same terms unless terminated by either party. Hoku is not obligated to deliver polysilicon until June 2011.
"Suntech is one of the world's leading solar companies, and we are very pleased by the strength of our partnership," said Scott Paul, president and CEO of Hoku Corporation. "We originally signed our polysilicon sales agreement with Suntech in 2007, and -- owing to changes in the polysilicon market, and in our own ramp-up and production schedule -- the original milestones and prepayment schedule had simply become outdated. We are pleased to have found a mutually-beneficial way forward and look forward to many more years of continued partnership, in both our polysilicon and our PV integration business units."
"Hoku has continued to make significant progress with their polysilicon project, despite some very challenging market conditions. With their strong backing by Tianwei, a compelling cost structure, and a demonstrated commitment to long-term partnerships, we look forward to a long and mutually beneficial relationship with Hoku," said Steven Chan, Suntech's Chief Strategy Officer.