Hoku Scientific, a Hawaii-based company building a polysilicon plant in Pocatello, has struck a deal with general contractor JH Kelly to get construction moving again.

The change order agreement, announced on Sept. 22, requires Hoku to pay a portion of the $12 million it owes the Longview, Wash.- based construction firm. In exchange, JH Kelly will delay foreclosing on the lien it filed against Hoku earlier this summer, and waive certain fees and interest associated with the past due payments.

Under the terms of the agreement, Hoku has until Dec. 1, 2009 to pay JH Kelly $5 million of the past due amount. Once the payment is received work can resume. If the money comes in on schedule, JH Kelly will give Hoku until Jan. 14, 2010 to pay off the balance of the $12 million it owes.

"We appreciate JH Kelly's commitment to seeing this through to completion; they are a one-of-a-kind company, and have more than earned our trust and loyalty," Hoku Scientific Chairman and CEO Dustin Shindo stated in a release.

The agreement doesn't solve all the company's problems though - it's still about $100 million short of the funds it needs to complete the $390 million plant.

"We need financing. We're very aware of it," said Darryl Nakamoto, Hoku's CFO. "Obviously we would consider the sale of our company. We want to get the plant built. That is our goal. Whatever we need to do it, we will."

Nakamoto said if Hoku can meet its $5 million obligation to JH Kelly in October, work will resume at its scheduled pace - still in time to meet certain construction milestones stipulated in an earlier agreement with Chinese customer Suntech Power.

Under that agreement, reached in July, Hoku must complete a polysilicon reactor test demonstration by Dec. 31, 2009; ship the first monthly quantity of polysilicon by March 31, 2010; or achieve a tricholorsilane (TCS) plant operation milestone by Dec. 31, 2010.

In exchange for the extended deadlines, Hoku agreed to reduce the Chinese solar firm's aggregate payments by $50 million. If the company can't meet its milestones, Suntech reserves the right to terminate its contract.

"We can save a lot of money - upwards of $40 million - by delaying the TCS portion of our plant. We would purchase third- party TCS versus building it initially," Nakamoto said. "It's kind of short term fix. ... (But) with the proper financing we would not necessarily delay the TCS, it just depends."

Nakamoto wouldn't comment on financing efforts, but did say JH Kelly and Suntech's willingness to work with the company have helped keep it afloat. The city of Pocatello has also expressed its desire to help, specifically through assisting the company secure a federal renewable energy loan guarantee.

"They're very strong supporters - they're very aware of the challenges facing the company," Nakamoto said. "We're exploring all options. We would love to get the federal loan guarantee... but we can't count on it. Obviously, again, we're exploring all opportunities."

Credit: Zach Hagadone

(Copyright 2009 Dolan Media Newswires)

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