September 23, 2009

Pocatello, ID, USA: Hoku and JH Kelly Agree on Path Forward to Complete Construction of Polysilicon Plant

Hoku Materials has entered into a change order cost plus incentive agreement under its construction contract with JH Kelly, LLC, to confirm the plan for JH Kelly to complete construction of Hoku's planned 4,000 metric tons per year polysilicon production plant.

In July 2009, Hoku initiated a temporary slowdown of construction and procurement activities to preserve cash while Hoku sought to raise additional capital. JH Kelly subsequently filed a lien claiming past due accounts payable in the amount of approximately $ 12 million. Under the terms of the change order announced today, JH Kelly agreed that it would resume construction activities upon receipt of notice from Hoku and Hoku's payment of $ 5 million of the past due amount.

In the meantime, JH Kelly agreed to forbear from foreclosing on its approximately $ 12 million lien until after December 1, 2009, and if Hoku makes the $ 5 million prepayment by such date, Hoku will have until January 14, 2010 to pay the balance of the $ 12 million that is past due. JH Kelly also agreed to waive certain interest and other fees and charges that may be incurred as a result of the past due amounts.

In addition to confirming the financial path forward, JH Kelly reaffirmed its commitment to achieving Hoku's key project schedule dates if work is resumed in October. This would include completing a demonstration reactor in December 2009, completing construction of 2,500 metric tons of polysilicon production capacity in March 2010 and completing construction of the full 4.000 metric tons of capacity, including on-site Trichlorosilane (TCS) production, in December 2010 . The other terms of the contract remain unchanged.

"We appreciate JH Kelly's commitment to seeing this through to completion, they are a one-of-a-kind company, and have more than earned our trust and loyalty, said," Dustin Shindo, chairman and CEO of Hoku Scientific.

"We've kept key staff members on-site, and we are poised for accelerated construction schedule to initiate as soon as Hoku gives us the go-ahead and fulfills its payment obligations, said" Mason Evans, president of JH Kelly. "Hoku has kept us informed of their financing strategy, and we appreciate both their transparency and their dedication to making this project a success for all concerned."

Further details about: Hoku Scientific