Hoku Corporation Reports Preliminary Third Quarter Fiscal Year 2012 Results

HONOLULU, HI -- (Marketwire) -- 02/09/12 -- Hoku Corporation (NASDAQ: HOKU)

Highlights:

• 500% increase in quarterly revenue compared to same quarter in previous year
• 50 million in loans with Tianwei extended by one year
• Largest utility-scale PV facility on Oahu completed by Hoku Solar
• Polysilicon contract with Solargiga amended
• Brokered largest-ever sale of Tianwei PV modules in North America

Hoku Corporation (NASDAQ: HOKU), a solar energy products and services company, today announced its preliminary financial results for the third quarter ended December 31, 2011, and provided a general update on its business.

Financial Results

Revenue for the quarters ended December 31, 2011 and 2010 were 7.1 million and 1.2 million, respectively. Revenue was derived primarily from photovoltaic, or PV, system installations, the sale of electricity, and the resale of solar inventory. As of December 31, 2011 and March 31, 2011, deferred revenue of 1.1 million and 72,000, respectively, were attributable to PV system installation and related service contracts.

Net loss, computed in accordance with U.S. generally accepted accounting principles, or GAAP, for the quarter ended December 31, 2011 was 10.6 million, or 0.19 per share, compared to 3.0 million, or 0.06 per share, for the same period in fiscal 2011. The increase in net loss is primarily attributable to increased operating costs, including labor and materials, as the Company began commissioning and preparations for the operation of its polysilicon plant, and 5.2 million in expenses from payments to Idaho Power Company pursuant to its electric service agreement.

For the quarter ended September 30, 2011, the Company previously reported that it was analyzing whether declines in the market price for polysilicon had impacted the carrying value of its polysilicon plant and whether the carrying value was fairly stated in accordance with GAAP. The Company ultimately concluded that the carrying value was fairly stated, and as a result, there was no impairment charge to the Companys financial statements for the quarter ended September 30, 2011. The Company is again analyzing whether the prolonged decline in polysilicon pricing has impacted the carrying value of its polysilicon plant as of December 31, 2011. Accordingly, the results herein are preliminary estimates which do not reflect any impairment of long-lived assets which might occur as a result of this on-going analysis, and are subject to change if the Company determines that an impairment charge is necessary, which could significantly impact the Companys financial results.

Non-GAAP net loss for the quarter ended December 31, 2011 was 10.4 million, or 0.19 per share, compared to 2.8 million, or 0.05 per share, for the same period in fiscal 2011. Non-GAAP net loss for the quarters ended December 31, 2011 and 2010 excludes non-cash stock-based compensation of 173,000 and 175,000, respectively. The accompanying schedules provide a reconciliation of net loss and net loss per share computed on a GAAP basis to net loss and net loss per share computed on a non-GAAP basis. The Company uses non-GAAP measures of net loss and net loss per share, which the Company believes is appropriate to enhance an overall understanding of its past financial performance and its future prospects.

During the fiscal quarter ended December 31, 2011, the polysilicon industry experienced a significant decline in spot market pricing due to an oversupply of polysilicon relative to demand. Management noted that since the start of the 2012 calendar year, the polysilicon market has shown some preliminary signs of price stabilization, but expects that the market price could remain depressed throughout the calendar year.

Scott Paul, chief executive officer of Hoku Corporation, commented, "We anticipate continued market challenges given ongoing changes in government incentives to promote renewable energy, international trade complaints between the U.S. and China, financing constraints, and generally difficult macroeconomic conditions. However, we plan to continue seizing opportunities by focusing on execution and controlling costs. In short, we believe this to be an acute, but cyclical market depression and, together with Tianwei, we are taking steps to not just weather the storm, but to emerge stronger from it."

Commenting on the potential impairment charge, Mr. Paul said, "If it is determined that an impairment charge is necessary, it would be a non-cash charge that would reduce the plants associated depreciation expense. Depreciation is a significant component of our production costs, and such an impairment could improve the competitiveness of our operating model over time."

Summarizing the Companys progress during the quarter, Mr. Paul said, "On a year-over-year basis, we had a 500% increase in our quarterly revenue from Hoku Solar, continuing our success in earning market share as both a PV integrator for commercial projects, and as a design-build contractor for utility scale solar energy facilities. In Idaho, we engaged in productive discussions with Idaho Power to revisit the terms and conditions of our power supply agreement, and we focused on continued commissioning of the first 2,500 metric tons of polysilicon production capacity."

"Additionally, with the continued backing of Tianwei, we secured 42 million in debt financing during the December quarter and 10 million more in January 2012," said Mr. Paul. "Furthermore, with approval from Chinas State Administration of Foreign Exchange (SAFE) and China Construction Banks Shuangliu Sub-branch, the maturity date of the 20 million and 30 million loans from Tianwei New Energy, our majority stockholder, which were scheduled to mature in the first quarter of calendar year 2012, have been extended one year until the first quarter of calendar year 2013."

Business Updates

Hoku Materials Update

Commenting on the Companys polysilicon subsidiary, Hoku Materials, Inc., Mr. Paul said, "At Hoku Materials, we have continued selectively commissioning areas of the plant while implementing company-wide cost-control measures. This approach is necessitated by delays in securing and transferring additional funds from China, which has postponed the start-up of our polysilicon production plant."

Hoku reported that it was working together with Tianwei to obtain additional loans to finance plant construction and commissioning activities, accounts payable obligations, and working capital. In addition, the Company is engaged in productive discussions with Idaho Power regarding its electricity services agreement.

Mr. Paul continued, "As schedules of fund transfers from China become more predictable, construction activities will be ramped-up to complete the remaining, miscellaneous unfinished work and progress with plant operations. We continue to have the full support of Tianwei for our polysilicon project, and -- assuming the fund transfers resume in late February -- we anticipate accelerating selective construction activities in March, with the goal of commencing production this summer."

"Over the past several weeks, we have been working with our contractors by forming cross functional teams to evaluate each unit for system completeness and operational readiness," explained Mr. Paul. "To date, we have completed commissioning for several key areas including the power distribution centers, reactor power supplies, and compressor systems within the vent gas recovery unit."

Hoku confirmed its plan to continue with construction and commissioning activities after beginning operation of the plant. The first phase of operation includes 2,500 metric tons of annual polysilicon production capacity. The Company is continuing with plans to install additional equipment to expand its annual production capacity.

Regarding its electrical supply contract with Idaho Power, the Company clarified that its connection to the 82-megawatt Idaho Power grid-connected substation had not been interrupted. The Company further confirmed that, pursuant to an order issued by the Idaho Public Utilities Commission on January 13, 2012, its depository requirements with Idaho Power have been reduced by 1.8 million, and that Hoku Materials and Idaho Power are engaged in confidential settlement discussions regarding the terms and conditions of the Companys agreement to procure power from the utility.

Mr. Paul also commented on the Companys current customer obligations, saying: "As polysilicon prices have fluctuated with market dynamics, we have continued actively working with our customers to adjust contract delivery schedules, prices, and other terms as may be required. For example, we recently signed a contract amendment with Solargiga, extending the first delivery date in exchange for concessions on price and volume, and modification of the duration of the agreement."

Hoku Solar Update

Regarding Hoku Solar, Inc., the Companys downstream PV projects and development business, Mr. Paul said, "Hoku Solar continues to advance as a premier provider of investment-grade solar facilities for commercial, institutional and utility customers. In addition to our expanding backlog of commercial PV installation projects, in December 2011, we delivered the Kapolei Sustainable Energy Park, a 1.18 megawatt solar energy facility developed by Forest City Sustainable Resources. The project is the largest utility-scale PV facility on Oahu."

Mr. Paul continued, "Hoku Solar has invested heavily in our utility-scale PV capabilities over the last several years, and we are expanding our efforts to engineer and construct multi-megawatt PV generating facilities in Hawaii and elsewhere. Among others, related projects include the planned construction in 2012 of a second 1.2 megawatt solar facility on Oahu for project developer Forest City. Final engineering is in progress for this facility, which is to be located on former industrial land adjacent to the Pearl City Peninsula military housing community."

Tianwei Solar USA Update

Tianwei Solar USA, Inc. ("TWUSA") is a wholly-owned subsidiary of Hoku Corporation acting as the primary distributor of Tianwei New Energys PV modules to the North American market. Headquartered in Los Angeles, the division has focused efforts on developing key sales channels within the commercial and residential segments of the distributed generation solar market. In December 2011, TWUSA facilitated Tianwei New Energys largest-ever sale of PV modules in North America to a leading international PV systems installer.

Summary

Mr. Paul summarized the Companys prospects saying, "We are excited about Hoku Solars successes and its growing leadership position in delivering major, utility-scale PV energy facilities in Hawaii, including the just-completed Kapolei Sustainable Energy Park. At the same time, the global solar market is very turbulent. We are actively working to improve Hokus competitive position amidst the challenges of downward pressure on polysilicon pricing, and the potential imposition of import tariffs on PV modules manufactured in China, and on polysilicon manufactured in the United States. We are working with Tianwei to mitigate the impact of these and other external market forces, and to position Hoku for long-term sustainability and growth."

Conference Call Information

Hoku Corporation has scheduled a conference call on Thursday, February 9, 2012 at 5:00 p.m., Eastern Time, to discuss results for the Companys third quarter ended December 31, 2011 results and the Companys business outlook. All interested parties are invited to call-in. To participate, please call (877) 312-8795. A live webcast can also be accessed by going directly to the Companys website at www.hokucorp.com and selecting the conference call link on the home page. A playback of the webcast will be available on the Companys website until the Companys conference call to discuss its financial results for its fourth quarter and fiscal year ending March 31, 2012.

About Hoku Corporation

Hoku Corporation (NASDAQ: HOKU) is a solar energy products and services company with three business units: Hoku Materials, Hoku Solar, and Tianwei Solar USA. Hoku Materials manufactures, markets and sells polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho. Hoku Solar markets and installs turnkey photovoltaic systems and provides related services. Tianwei Solar USA markets and sells photovoltaic modules manufactured by Tianwei New Energy. For more information, visit www.hokucorp.com.

Hoku, Hoku Solar, and the Hoku Corporation logo are trademarks of Hoku Corporation, and Hoku Materials is the trademark of Hoku Materials, Inc., all rights reserved. All other trademarks, trade names and service marks appearing in this press release are the property of their respective holders.

Copyright 2012, Hoku Corporation, all rights reserved.

Forward-Looking Statements

This press release contains forward-looking statements that involve many risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "would" and similar expressions intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements about the Companys future growth, the potential asset impairment charge, financing of the completion and operations of its polysilicon production plant, financing support from Tianwei, the timing and completion of polysilicon production plant construction and commissioning, the fluctuation of market price of polysilicon and the macroeconomic condition for the solar market, the timing of the commencement and ramping up of commercial production of polysilicon, the renegotiation of the Companys agreement with Idaho Power, the timing of delivery of the Pearl City Peninsula PV project, if at all, the Companys ability to develop PV systems and compete in solar markets beyond Hawaii, the Companys ability to reduce the total capital cost per ton of production capacity, and the amount and timing of any eventual international trade restrictions, tariffs, or duties placed on PV modules manufactured in China, if any, and the impact of any such tariffs to the Companys Hoku Solar and Tianwei Solar USA business units. These statements involve known and unknown risks, uncertainties and other factors that may cause the Companys actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the Companys ability to secure additional financing necessary to complete its polysilicon production facility in Pocatello, Idaho; the Companys receipt, if at all, of additional customer prepayments based on agreed-upon schedules and contingent upon the Company meeting certain milestones under its current polysilicon supply agreements; the decline of polysilicon and solar market pricing, the Companys ability to meet its polysilicon delivery commitments under its supply agreements and/or amend its current contracts; the Companys ability to address depressed polysilicon prices, the Companys ability to complete commissioning of the first 2,500 metric tons of capacity and begin commercial delivery; the Companys ability to maintain good working relationships with customers that have provided it with prepayments; the Companys ability to complete its TCS plant; the Companys ability to ramp its production capacity for manufacturing and up to 4,000 metric tons of capacity in accordance with its operating plan; the Companys ability to install PV systems in Hawaii, including securing financing for such installations; the Companys ability to resale modules and systems imported from China, and the risks, uncertainties and other factors disclosed in the Companys most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. In evaluating these statements, you should specifically consider the risks described in the Companys filings with the Securities and Exchange Commission, as applicable. Except as required by law, the Company assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Use of Non-GAAP Financial Information

To supplement its financial statements presented on a GAAP basis, the Company uses non-GAAP measures of net loss and net loss per share, which are each adjusted to exclude expenses relating to non-cash stock-based compensation, which the Company believes is appropriate to enhance an overall understanding of its past financial performance and its future prospects. As the Company uses FASB ASC 718 to calculate its non-cash stock-based compensation expense, it believes that it is useful to investors to understand how the expenses associated with the application of FASB ASC 718 are reflected on its statements of operations. The Company further believes that where the adjustments used in calculating non-GAAP net loss and non-GAAP net loss per share are based on specific, identified charges that impact different line items in the statements of operations (including cost of service and license revenue, and selling, general and administrative expense), it is useful to investors to know how these specific line items in the statements of operations are affected by these adjustments. For its internal budgets and forecasting, the Company uses financial statements that do not include non-cash stock-based compensation expense. Our use of non-GAAP financial measures has limitations that include that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, non-GAAP net loss and non-GAAP net loss per share, do not have standardized meanings. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net loss or net loss per share prepared in accordance with GAAP. Whenever the Company uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

                     HOKU CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
              (in thousands, except share and per share data)

                         Three Months Ended           Nine Months Ended
                            December 31,                December 31,
                     --------------------------  --------------------------
                         2011          2010          2011          2010

Service and license
 revenue                   5,500        1,242        7,720        3,357
Product revenue             1,583             -         1,737             -
                     ------------  ------------  ------------  ------------
  Total revenue             7,083         1,242         9,457         3,357
                     ------------  ------------  ------------  ------------

Cost of service and
 license revenue            4,992           948         6,898         2,365
Cost of product
 revenue                    1,390             -         1,541             -
                     ------------  ------------  ------------  ------------
  Total cost of
   revenue                  6,382           948         8,439         2,365
                     ------------  ------------  ------------  ------------

Gross margin                  701           294         1,018           992

Operating expenses:
  Selling, general
   and
   administrative
   (1)                     11,274         3,344        29,640         8,801
                     ------------  ------------  ------------  ------------
    Total operating
     expenses              11,274         3,344        29,640         8,801
                     ------------  ------------  ------------  ------------

Loss from operations      (10,573)       (3,050)      (28,622)       (7,809)

Interest and other
 income                         -            27             -           166
                     ------------  ------------  ------------  ------------
Net loss                  (10,573)       (3,023)      (28,622)       (7,643)
                     ------------  ------------  ------------  ------------

Net income
 attributable to the
 noncontrolling
 interest                     (13)          (23)          (82)          (97)
                     ------------  ------------  ------------  ------------

Net loss
 attributable to
 Hoku Corporation        (10,586)      (3,046)     (28,704)      (7,740)
                     ============  ============  ============  ============

Basic net loss per
 share attributable
 to Hoku Corporation       (0.19)       (0.06)       (0.52)       (0.14)
                     ============  ============  ============  ============

Diluted net loss per
 share attributable
 to Hoku Corporation       (0.19)       (0.06)       (0.49)       (0.14)
                     ============  ============  ============  ============

Shares used in
 computing basic net
 loss per share        54,886,650    54,724,354    54,872,287    54,641,657
                     ============  ============  ============  ============

Shares used in
 computing diluted
 net loss per share    54,886,650    54,724,354    54,872,287    54,641,657
                     ============  ============  ============  ============

(1) Includes stock-based compensation and non-cash expense from issuance of
warrant as follows:
Selling, general and
 administrative               173           175         1,872           755



                     HOKU CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                     (in thousands, except share data)

                                                 December 31,    March 31,
                                                     2011          2011
                                                -------------  ------------
                     Assets
Cash and cash equivalents                              3,238       18,355
Restricted cash                                           757             -
Accounts receivable                                     3,811           548
Inventory                                               1,400           758
Costs of uncompleted contracts                            815           128
Prepaid expenses                                        5,726           531
                                                -------------  ------------
  Total current assets                                 15,747        20,320

Deferred cost of financing                                585           792
Property, plant and equipment, net                    635,142       481,481
                                                -------------  ------------
  Total assets                                       651,474      502,593
                                                =============  ============

             Liabilities and Equity
Accounts payable and accrued liabilities              76,590       27,149
Deferred revenue                                        1,059            72
Customer deposits                                      95,227        25,278
Notes payable - current                                63,300             -
Other current liabilities                                 580           467
                                                -------------  ------------
  Total current liabilities                           236,756        52,966

Related party notes payable, net                       48,958        43,593
Notes payable                                         251,388       194,295
Long-term customer deposits                            44,533       114,922
                                                -------------  ------------
  Total liabilities                                   581,635       405,776
                                                -------------  ------------

Commitments and contingencies
Stockholders equity:
  Preferred stock, 0.001 par value. Authorized
   5,000,000 shares; no shares issued and
   outstanding as of December 31, 2011 and
   March 31, 2011.                                          -             -
  Common stock, 0.001 par value. Authorized
   100,000,000 shares; issued and outstanding
   54,911,861 and 54,970,255 shares as of
   December 31, 2011 and March 31, 2011,
   respectively.                                           55            55
  Warrants for 11,196,581 and 10,000,000 shares
   of common stock as of December 31, 2011 and
   March 31, 2011, respectively.                       14,269        12,884
Additional paid-in capital                            115,977       115,500
Accumulated deficit                                   (61,142)      (32,438)
                                                -------------  ------------
  Total Hoku Corporation stockholders equity          69,159        96,001
                                                -------------  ------------
Noncontrolling interest                                   680           816
                                                -------------  ------------
  Total equity                                         69,839        96,817
                                                -------------  ------------
  Total liabilities and equity                       651,474      502,593
                                                =============  ============

                     HOKU CORPORATION AND SUBSIDIARIES

 Reconciliations from GAAP Net Loss and GAAP Net Loss per share to Non-GAAP
                                  Net Loss
                      and Non-GAAP Net Loss per share
                                (Unaudited)
                   (in thousands, except per share data)

                                  Three Months Ended     Nine Months Ended
                                     December 31,          December 31,
                                 --------------------  --------------------
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
GAAP net loss attributable to
 Hoku Corporation                 (10,586)   (3,046)  (28,704)   (7,740)
Stock-based compensation expense       173        175      1,872        755
                                 ---------  ---------  ---------  ---------

Non-GAAP net loss attributable
 to Hoku Corporation              (10,413)   (2,871)  (26,832)   (6,985)
                                 =========  =========  =========  =========

GAAP basic net loss per share
 attributable to Hoku
 Corporation                        (0.19)    (0.06)    (0.52)    (0.14)
Basic stock-based compensation
 expense per share                    0.00       0.01       0.03       0.01
                                 ---------  ---------  ---------  ---------

Non-GAAP basic net loss per
 share attributable to Hoku
 Corporation                        (0.19)    (0.05)    (0.49)    (0.13)
                                 =========  =========  =========  =========

GAAP diluted net loss per share
 attributable to Hoku
 Corporation                        (0.19)    (0.06)    (0.52)    (0.14)
Diluted stock-based compensation
 expense per share                    0.00       0.01       0.03       0.01
                                 ---------  ---------  ---------  ---------

Non-GAAP diluted net loss per
 share, attributable to Hoku
 Corporation                        (0.19)    (0.05)    (0.49)    (0.13)
                                 =========  =========  =========  =========

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