HOKU a Hawaiian Fuel Cell Play

Hoku Scientific, Inc. (HOKU - Snapshot Report), based in Kapolei, Hawaii, engages in the design, development, and manufacturing of Membrane Electrode Assemblies (MEAs) and non-fluorinated membranes for Proton Exchange Membrane (PEM) fuel cells.

Founded in 2001, the company has three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. Hoku Materials will manufacture poly-silicon from its 4,000 metric tons poly-silicon per annum plant currently under construction in Pocatello, Idaho. The facility is expected to start shipments in the first half of 2009 and become fully operational by the first half of 2010. The company expects to increase the production capacity in the facility to 8,000 metric tons per annum in future.

Hoku Solar markets and installs turnkey photovoltaic systems in Hawaii. Hoku Fuel Cells develops proprietary fuel cell membranes and membrane electrode assemblies for stationary and automotive proton exchange membrane fuel cells.

The company was formerly known as Pacific Energy Group, Inc. and changed its name to Hoku Scientific, Inc. in July 2001. As of September 30, 2008, the company had poly-silicon supply agreements with Wuxi Suntech Power Co., Ltd., Solarfun Power Hong Kong Limited, Jiangxi Kinko Energy Co., Ltd., Wealthy Rise International, Ltd., a wholly-owned subsidiary of Solargiga Energy Holdings, Ltd., and Tianwei New Energy (Chengdu) Wafer Co., Ltd.

With $2.3 billion of poly-silicon order backlog for up to 10 years from five solar companies, represents a growth story. Buoyed by strong demand, the company realigned its poly-silicon customer portfolio. However, its poly-silicon plant will not be operational until 2009, and will achieve full capacity only in 2010.

Until then, the company will have to depend upon its PV [photovoltaic, or "solar"] system installation business, which just got a strong boost through the recent extension of the federal solar tax credits through calendar year 2016.

However, a non-contributory fuel cells business, rising cost structure, earnings dilutive stock issuance and a strong competitive challenge in the alternative energy industry may present material risks to the company.

Read the full analyst report on HOKU