UPDATE 2-Hoku, Suntech amend polysilicon supply pact

Wed Jun 30, 2010 6:23pm EDT

* Hoku not obligated to start shipments until June 2011

* Suntech no longer has to make $30 million prepayment

* Hoku enters into $28.3 mln credit agreement

* Hoku shares down about 3 pct (Recasts lead; adds detail, background)

BANGALORE, June 30 (Reuters) - Solar raw material provider Hoku Scientific HOKU.O said it amended the supply pact with Chinese solar panel maker Suntech Power STP.N and also entered into a credit agreement to replace payments previously expected from Suntech.

The company, which entered into a $28.3 million credit agreement with the China Construction Bank, said Suntech no longer had to make the $30 million prepayment.

"These funds (from the credit agreement) substantially replace the prepayments formerly expected from Suntech Power, and are expected to be sufficient to commence initial commercial production runs at our polysilicon facility," Chief Executive Scott Paul said.

The company added it would retain the $2 million that Suntech had already paid, which will be credited against future shipments of polysilicon.

Hoku has been struggling to raise capital for the 4,000 tons-per-year, $390-million plant to manufacture polysilicon -- a key industry raw material.

Late last year, the company sold a minority stake to China's Tianwei New Energy Holdings Co -- which now owns about 60 percent of its outstanding shares -- to raise funds to finish the plant. [ID:nN29170431]

After the amendment, the term of the agreement with Suntech was shortened to one year with pricing and volume fixed for the term of the agreement, and that it is not obligated to deliver polysilicon until June 2011, Hoku said.

Earlier this year, the company had said Suntech may have the right to terminate its supply deal and request a refund of its $2 million prepayment, following a delayed reactor demonstration. [ID:nSGE60Q0LU]

However, in April, Hoku began pilot production of polysilicon at the Pocatello, Idaho manufacturing facility. [ID:nSGE6360LS]

Hoku shares were down about 3 percent at $3.25 Wednesday in after-market trade. The stock had closed at $3.34 Wednesday on Nasdaq, and has so far doubled from a July 2009 low. (Reporting by Adveith Nair in Bangalore; Editing by Jarshad Kakkrakandy and Vyas Mohan)

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