Hoku Scientific, Inc. (HOKU), a diversified alternative energy technology company in China, announced this morning the signing of a significant contract for the supply of polysilicon to Jiangxi Kinko Energy, a Chinese manufacturer of solar wafers and ingots. The contract specifies an agreement to purchase up to $298 million worth of Hoku’s polysilicon over a ten-year period, with the first shipment to Kinko to occur in late 2009. Kinko will make an initial $10 million deposit, and additional prepayments of $20 million by December 20, 2008 and $25 million by March 31, 2009.

“We are pleased to have established a relationship with Kinko Energy, an emerging player in the global silicon ingot and wafer industries,” said Dustin Shindo, chief executive officer of Hoku Scientific. “Kinko Energy’s strategic approach and their focus on growth in the solar market make them an excellent long-term partner for Hoku.”

The cash infusion provided by this deal reduces Hoku’s financing needs for completion of its $390 million Idaho production facility. Until today’s announcement, Hoku had $280 million of the total cost of the facility accounted for, in customer prepayments and cash on hand. The remaining $110 million was to be raised through a combination of debt and equity offerings absent any new customer prepayments. The $55 million in prepayments from Kinko decreases the likelihood of common share dilution.

The Idaho facility’s expected annual polysilicon production of 3,500 metric tons is now fully allocated with the signing of the Kinko supply agreement. “Looking over a ten year period, we are actually slightly oversold at current planned capacity,” said Shindo. “As we have previously stated, though, Hoku is in ongoing contract amendment discussions with both Sanyo and GEWD/Solar Fabrik. We are generally seeking to strengthen these two relationships, but we may adjust delivery amounts or timing to either Sanyo or GEWD, or both, to address this slight overage.”

Shares of HOKU closed at $5.67 yesterday and have appreciated 40% in three weeks since closing at its 52-week low of $4.02 on July 7, 2008. The stock hit a 52-week high of $14.88 on January 3, 2008. Silicon supply contract announcements have historically been met with big pops on heavy volume. The solar sector showed strength during yesterday’s trading, so sentiment could be conducive to a big gain in HOKU today.

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