Hoku Scientific, Inc. (HOKU) and Tianwei New Energy Holdings Co., Ltd., a provider of silicon wafers, photovoltaic cells, modules and systems, revealed the signing of a definitive agreement providing for a majority investment in Hoku by Tianwei and debt financing by Tianwei and China Construction Bank for the construction and development of Hoku's polysilicon production facility in Pocatello, Idaho.
The deal would involve the conversion of $50 million of an aggregate of $79 million in secured prepayments previously paid by Tianwei to Hoku under certain polysilicon supply agreements into shares of Hoku's common stock and related warrants, plus the provision of $50 million in initial debt financing for Hoku, together with a commitment from Tianwei to assist Hoku in obtaining additional financing that may be required by Hoku to construct and operate the Pocatello facility. The conversion of the $50 million in secured prepayments will be reflected in amendments to Hoku's existing supply agreements with Tianwei that the parties intend to sign upon the closing of the transaction. Over the term of the two supply agreements, the cancellation of the $50 million in prepayments would reduce the price at which Tianwei purchases polysilicon by approximately 11% per year.
At closing, Hoku's current shareholders would continue to own 40% of the voting shares, and Hoku will continue to be traded publicly on Nasdaq. Additionally, Tianwei has agreed to a one year lock-up of 70% of its shares, further affirming its commitment to Hoku's long-term success. The transaction is expected to close in October 2009.
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