Contractors have begun foreclosure proceedings against Hoku Materials forcing the Chinese-backed polysilicon manufacturer to lay off 100 workers even as the $700 million Pocatello plant was near the beginning of production.
Hoku announced that it received an additional loan from China Merchant's Bank, which is secured by a letter of credit drawn by Hoku's parent company, Tianwei New Energy Holdings Co. But it said its was not enough to covers its debts.
"The proceeds of the loan are insufficient to pay down current liabilities, resume construction, or start commercial operations," said Scott Paul, CEO of Hoku Corp. "The loan proceeds will be used to fund working capital requirements while we plan for a restructuring of our liabilities, and the liabilities of our subsidiary Hoku Materials, Inc.
Hoku was prepared to begin producing polysilicon, the raw material for power producing solar panels. But the market for the material has taken a dive and has been complicated by a U.S. Department of Commerce ruling May 17 that Chinese solar manufactures were dumping solar panels in the U.S. below cost.
it also installs solar power systems in Hawaii. And recently it announced a reseller agreement to establish Tianwei Solar USA Inc., a wholly owned subsidiary of Hoku. But it ceased business activities and terminated all staff at Tianwei Solar USA, Inc.
Its financial situation has remained perilous. It reported as of March 31, it estimated it had , its preliminary estimates of cash, other current assets and current liabilities was approximately$7.7 million in cash, $6.7 million in other assets, and $278.8 million in liabilities. Those liabilities $74.4 million of accounts payable at Hoku Materials.
Hoku hired Imperial Capital as financial advisor to assist with its restructuring effort, Paul said.
The layoffs were necessary to conserve cash, Paul said.
Hoku Solar would continue to seek opportunities to sell Tianwei's modules, The company said in its press release. It's main business, building solar power facilities based in Hawaii, will not be affected.
"We do not intend to restructure Hoku Solar, as it is operated as a stand-alone business, which supports its operating cash requirements from sales revenue,” Paul said.