January 29, 2009 ndash; Analyst Comments ndash; Cowenrsquo;s Rob Stone weighed in on Hoku Scientific (Nasdaq:HOKU) this morning, stating that its polysilicon plant is progressing but with uncertain financing he expects the stock will track the market. Hokursquo;s poly plant is being largely paid for by a series of pre-payments for long-term take-or-pay contracts from customers, an attractive strategy which can limit dilution and debt ndash; if the customers maintain their schedule on pre-payments.

The problem is that poly prices have declined substantially from pre-negotiating pricing while mid-stream customers in the solar sector are facing project delays of their own, as well as tighter credit markets and this increases the risk to Hokursquo;s plan and ability to rely on pre-payments. Stone noted that Hokursquo;s second-largest customer (Solargiga) has defaulted on a pre-payment. Too much of this will cause delays in its progress to getting the poly plant completed and online.

Stonersquo;s takeaways:

middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Expects poly plant ramp to slow ndash; contracted prepayments now total $216 million, of which $106 million has been received to date (Solargiga and Jinko have defaulted)

middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Cut FY10/11 estimates to a loss of $0.50 per share on about $83 million in revenue (prior expectations of $0.36 loss per share on $142 million in revenue) nbsp;and $0.87 on about $227 million in revenue (prior $1.37 per share and $241 million in revenue). Pushed out poly production targets. Cut poly GM targets.

middot;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp; Noted that stimulus bill should boost solar activity in Hawaii, which should benefit Hoku.

Stonersquo;s rating on Hoku is NEUTRAL
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