The sun may be setting on the $390 million polysilicon plant that Hawaii-based solar firm Hoku Scientific is trying to build in Pocatello.

According to its fiscal 2009 earnings reported, released June 11, Hoku narrowed its losses from $4.3 million in FY08 to $3 million in FY09, and increased revenue from $3.2 million to $5 million, but it's still about $106 million short of the funds needed to cover the full cost of the facility, which would make polysilicon for use in solar panels.

Combined with turmoil in the credit and equity markets, and downward pressure on the spot market price for polysilicon, Hoku reported that it might be in for serious trouble as early as the coming year.

"Because of these difficulties in raising capital, if the company does not receive any such additional financing, the company may not have sufficient funds to complete the construction of its polysilicon plant, or to continue as a going concern for the next 12 months," read a statement from the company.

Currently six of the 28 polysilicon reactors have been installed at the plant, and a substation and transmission lines are expected to be completed in the coming months.

In the meantime, Hoku is deferring some planned expenditures by delaying a few construction projects and further pushing back arrival of additional reactors. The company will also put off initial reactor testing - which had been scheduled to take place this month - and is working to cover its financing gap through a combination of prepayments from new customers and "one or more financing strategies."

Customers have already committed to $243 million in prepayments on contracts totaling $1.9 billion over the next 10 years, and to date the company has received $155.5 million in repayment deposits. Hoku has also contributed $41 million of its own cash to the project.

Earlier this month, Hoku signed an agreement with the city of Pocatello for about $43 million in tax increment financing, which would provide the company with a reimbursement for its capital costs in building site infrastructure at the polysilicon plant.

But even if Hoku is able to raise the money and manage its liquidity, it might have to buy polysilicon on the spot market and resell it to customers in order to meet its obligation to start shipping product by the second half of this year, the company reported.

"We continue to manage our cash position carefully. While we work to identify the remaining sources of financing, we have decreased spending to match our project investment obligations with our cash inflows from customer prepayments. This has allowed us to make continued progress without jeopardizing our delivery obligations to our customers," company president and CEO Dustin Shindo stated in the earnings release.

"While current market conditions remain challenging, we remain focused on raising capital, increasing revenues and reducing expenses."

Shares in Hoku were trading around $3.13 at mid-morning on June 12, down about 29 percent.

Credit: IBR Staff

(Copyright 2009 Dolan Media Newswires)

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