North Coast Solar Stocks

June 2, 2009

Hoku Announces Tax Increment Financing and Provides Update on Status of Vendor Agreements

Filed under: HOKU — Tags: , , , , , , — Jason @ 7:30 am

Tuesday June 2, 2009, 7:30 am EDT

POCATELLO, ID–(MARKET WIRE)–Jun 2, 2009 — Hoku Materials, Inc., a wholly owned subsidiary of Hoku Scientific, Inc. (HOKU), established to manufacture and sell polysilicon for the solar market, today announced the signing of an Economic Development Agreement with the City of Pocatello which could provide up to approximately $43 million of tax increment financing to Hoku over time.

According to the terms of the agreement, The Pocatello Development Authority has agreed to provide Hoku with tax increment financing as reimbursement for the Company’s capital costs in building site infrastructure at its polysilicon production facility. This financing would be equal to 95% of the incremental property tax paid by Hoku, up to a maximum of approximately $26 million. In addition, once this initial $26 million cap is reached, Hoku will receive, as an incentive for hiring and maintaining certain numbers of employees, an additional tax reimbursement equal to 50% of the incremental property tax paid by the Company, up to a maximum of approximately $17 million.

Hoku clarified that the total amount of this financing would be reduced by the City of Pocatello’s costs of constructing the public road planned to run along the southern perimeter of Hoku’s project site, connecting Kraft Road to Highway 30 in Pocatello. If the City pays out of pocket, or obtains a bond to cover the cost of building the road, the initial $26 million in tax increment financing will be reduced on an equivalent basis, up to a maximum reduction of $11 million.

“We are pleased to have formalized this agreement with the City of Pocatello,” said Dustin Shindo, chairman and chief executive officer of Hoku Scientific. “While the tax increment financing is very important to us, perhaps more important is the strong support we continue to receive from the City of Pocatello and the State of Idaho. We are thankful and honored to be a part of the greater Pocatello community.”

Pocatello mayor, Roger Chase, added, “The City of Pocatello continues to be impressed by Hoku’s efforts. We believe strongly in sustainable, diversified economic development for our community, and plan to continue our focus on advancing renewable energy initiatives in Pocatello, Chubbuck, and Bannock County.”

In addition, Hoku reported today that it had reached separate agreements with four key vendors: Idaho Power Company, Polymet Alloys, Inc., BHS Acquisitions, LLC, and AEG Power Solutions USA, Inc., formerly known as Saft Power Systems USA, Inc.

Owing to recent revisions to the timing and amount of prepayment deposits expected by Hoku from some of its polysilicon customers, Hoku had previously announced that it had begun adjusting its construction and procurement schedule in order to more closely match its cash outflows with these expected receipts. The Company explained that the vendor contract amendments announced today were reached in order to better align Hoku’s capital expenditures and supply chain purchase obligations to this revised schedule.

In addition, Hoku reported it had reached an agreement with Great Western Malting Company to adjust the timing of its delivery of heated process water to more closely match Hoku’s revised construction and ramp-up schedule.

“We are pleased to announce these developments,” said Dustin Shindo. “In each case, Hoku was able to work collaboratively with our partners to make the necessary, incremental changes to our respective contracts, in order to compensate for revisions in the timing and amount of customer prepayments. In addition to continuing our focused efforts to match cash outflows to inflows, these amendments highlight the strength of Hoku’s relationship with its vendors and partners, and provide further testament to Hoku’s long-term partnership approach. Notwithstanding the schedule changes, and thanks to the ongoing support of these and other partners, we continue to expect to make our first shipments of product to customers in 2009.”

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