Hoku Scientific Inc. yesterday pushed forward with its expansion into solar technology, breaking ground on a $260 million polysilicon production plant in Idaho.

Officials from Hoku and the City of Pocatello signed a 99-year lease last week on the 67-acre site, and Hoku expects to begin construction within several weeks. The plant will be operated by a Hoku subsidiary, Hoku Materials.

Hoku said it expects to finish construction in the second half of 2008, with polysilicon shipments planned for the first half of 2009. Polysilicon is a key material used in the production of solar cells and integrated circuits.

"Groundbreaking is another significant step forward for Hoku's polysilicon business," said Dustin Shindo, Hoku Scientific's chairman and chief executive officer.

Under a light drizzle with temperatures in the 40s, the first shovels of earth were symbolically turned. Shindo was joined at the groundbreaking ceremony by Karl Taft, Hoku chief technology officer; Idaho Gov. C.L. "Butch" Otter; Roger Madsen, director, Idaho Commerce & Labor; Roger Chase, mayor of Pocatello; and Larry Ghan, chairman, Bannock County commissioners.

"It's terrific to see how quickly Hoku is moving forward," Chase said. "We're really looking forward to the completion of Hoku's polysilicon production plant and its contribution to the greater Pocatello community and economy."

Hoku estimates that the total cost to bring the facility online includes approximately $260 million to construct the facility, plus working capital and start-up costs. Plans call for the plant to produce an estimated 2,000 metric tons of polysilicon per year.

Sanyo Electric Co. Ltd. has agreed to pay approximately $110 million up-front through prepayments for products, which will be paid to Hoku as certain production and quality milestones are achieved. Hoku plans to finance the balance of the construction costs through additional customer prepayments and debt.

Hoku also announced yesterday that it has awarded a contract to VECO USA Inc. to provide engineering and related services for Hoku Materials' planned polysilicon production plant. The total value of the contract was not disclosed.

Hoku elected to end its engineering services contract with CH2M Hill Lockwood Greene, which was announced last August, and award the new contract to VECO. Hoku expects that VECO will provide complete engineering, procurement and construction services for the polysilicon plant from design through construction and start-up.

"We greatly appreciate the professional service we received from CH2M Hill and hope to work with them again in the future," said Dustin Shindo. "VECO is a highly respected global engineering and construction firm with polysilicon plant experience. We're excited to be working with them."

Hoku Scientific is a clean-energy technology company that develops and manufactures fuel cell membranes and membrane electrode assemblies for stationary (including residential and backup power applications) and automotive proton exchange membrane fuel cells. Hoku is currently expanding its business to manufacture solar modules and polysilicon for the solar market.

Hoku shares closed down 17 cents at $5.66 yesterday on the Nasdaq Stock Market.