Hoku Revenue Down Drastically as Polysilicon Woes Continue
Hoku Scientific reported quarterly revenue that is down almost 97% year over year. Hoku Materials continues to struggle to fill the funding gap for the completion of its polysilicon plant in Pocatello, Idaho, where construction and procurement have been slowed down.
Aaron Hand, Executive Editor, Electronic Media -- PV Society, 8/1/2009
As Hoku Scientific Inc. (Honolulu) continues to struggle with the financing of its polysilicon plant in Pocatello, Idaho, the company saw its second-quarter revenue (derived primarily from photovoltaic system installation activity) drop almost 97% year over year. Revenue for the quarter (Hoku's first quarter of fiscal 2010) was $74,000, down from $2.2M a year earlier.
Hoku continued to make progress toward completing construction of it polysilicon production facility in Pocatello, according to Dustin Shindo, chairman, president and CEO. But the company's polysilicon subsidiary, Hoku Materials Inc., is competing for funds in a fierce market beset by an ever-growing oversupply of the raw material used to make most solar cells. It is one of more than a dozen new entrants adding polysilicon production capacity to the market as leading manufacturers such as Hemlock and REC expand production despite the economic downturn. The oversupply, combined with a slowdown in the PV market, has caused polysilicon prices to drop considerably since 2008.
Hoku Materials announced a few weeks ago that it had begun issuing orders for a temporary slowdown of construction and procurement activity at its Pocatello polysilicon plant. The company had previously announced a strategic delay in constructing the trichlorosilane (TCS) portion of the plant, but extended the slowdown to other areas of the plant as well. "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," Shindo said at the time.
 |
| Hoku Materials has slowed construction and procurement at its polysilicon plant in Pocatello, Idaho, which broke ground in 2007. It is facing a funding gap of $106M-$121M. |
Clarifying this week that construction has not stopped completely, Shindo noted that "it has taken longer than expected to identify the remaining financing for our polysilicon plant." Key partners will keep staff on site in order to be prepared to ramp back up quickly, and Hoku itself does not plan to make any layoffs, continuing to train the first group of plant operators hired in June.
"Hoku Materials has identified a number of potentially viable sources of financing, but we recognize that it will require a few more months to evaluate all options and negotiate the right deal," Shindo said. "As a result, we decided to take the prudent course of slowing down construction and procurement activities to reduce our cash outflow, at least until we have better visibility on the sources and timing of receipt for the remaining funds."
Hoku Materials estimates that it will cost ~$390M to engineer, procure and construct its polysilicon production plant. With prepayments customers have already made and plan to make, the plant is still facing a funding gap of $106M-$121M. But Hoku expects to re-ramp construction and procurement efforts once it had secured the first $30M-$50M of that total, with plans to purchase TCS from a third party at first, and to operate the plant at a lower interim capacity.
In addition to customer prepayments, Hoku is considering debt or equity financing strategies to secure the remaining funds, as well as a possible merger or sale of Hoku.
