HYFLUX : 成也 新加坡, 败也 新加坡

image credit to channelnewsasia.com

In last’s week’s Town-Hall meeting, in a distressed and disappointed mood, Hyflux"s CEO said that “ it was ironic that she built Hyflux and made it a successful business story started in Singapore and yet fail because of Singapore’s project ( Tuaspring Integrated Water & Power Project  -Link).

The Town-hall meeting was attended by almost 600-700 retail investors ( mostly retirees), with one reported to have invested more than $250,000 in 4.25% Perps Bond and also 200 plus MTN holders in early session.

“I’m retired so this was going to be a key part of my income but now, not just the income, I have to be worried about my capital. My kids are going to university soon so I have to figure another way out.”  (Quoted from channelnewsasia.com )

Hyflux : ( Facts and Figures from various sources )

  1 of Singapore’s most successful business story with about 50,000
 shareholders, bondholders, perpetual securities holders and preference shareholders - and over 60 per cent of them are owed around $1.17 billion
in total.

Of that the amount, $265 million is the debt owed to medium-term note (MTN) holders, and $900 million to perp holders and preference shareholders, Hyflux chief executive Olivia Lum said yesterday. The water treatment specialist's total liabilities stood at $2.95 billion
as of March 31.

During the Town-hall meeting, management try to give an update on the sale of Hyflux's largest asset, Tuaspring integrated water and power plant, proceeds of which will be used to pay back its 29 lenders and other creditors, among other things.

In the meeting, the management also highlighted that there are 8 interested parties - comprising a "good mix" of both foreign and Singapore companies eyeing or doing the due diligent for Tuaspring. 

image credit to businesstimes.com

Also, Hyflux has signed non-disclosure agreements with 19 interested parties for possible rescue financing.

Hyflux has been planning to divest up to 70 per cent of loss-making Tuaspring since February last year. The group holds the plant at a value of S$1.3 billion on its books and has said it wants to sell its stake at book value. Tuaspring itself managed to narrow losses of S$114.5 million in 2016 to S$81.9 million last year. Tuaspring's financial state today belies the big dreams on which it was built. At that time, the plant, which cost S$1.05 billion
in all, was touted to be the first integrated water and power plant in Asia,

To be sure, Tuaspring - the largest desalination plant in Singapore with a capacity of 70 million gallons of water, a day (mgd) - still remains a critical part of the country's water sector.

It has a 25-year water concession with national water agency PUB until 2038, after which ownership of the plant will be transferred to PUB.

Unlike the water portion, however, the electricity portion had no such long-term supply contracts; the water market in Singapore is structured differently from the electricity market, and power generation companies here compete to supply into the market. The 411-megawatt power plant was meant to be ancillary to the desalination plant - it was to supply electricity to the desalination plant, with excess power fed to the national grid.

Since the power plant started operations in early 2016 - three years after the desalination portion started - Tuaspring has been gradually expanding its share of the power generation market, from 3.1% in 2016 to 4.1% in 2017. This, however, had been done at a loss.

 MAYBANK, Hyflux's largest secured lender ( with $518.4 mil secured loan over Tuaspring project), has agreed to give the water project developer until Oct 15 to find a buyer for the Tuaspring integrated water and power plant and ink a binding purchase agreement.

Many questions still left unanswered whether Hyflux will be able to sell the Tuaspring at/above or below book value, will there be any hair cut for notes/perps securities and preference shareholders and at how much, will there be any “white knight” to come for rescue and how much dilution of shareholding for current shareholders, will there be “bail-out” from government / TLC (Temasek Link Companies) or any other interest parties at the end of the day, the most peculiar one will be from where Hyflux got the projection of Singapore population growth to be 8 million which they used in power consumption projection while bidding for the Tuaspring Project?

Hyflux will need to have the status update of affidavit filing on 19^th Sep and In-Court status conference after 2 weeks of affidavit filing, by then, we should be able to have a better and clearer picture on the reorganization of the whole debt structure and status.

Till then, let’s keep our fingers crossed and hope for the best, my heart goes out to those “mom and pop retail investors or retirees “ who used most of their CPF retirement fund to buy some of these products which may affect their retirement plan.

It might be easy to say or pin-point that this is a fair risk-reward investment decision where high yield came with high risk, but how many of such retirees really have knowledge of portfolio diversification and risk management.

By now, I think it will be just a waiting game until the next update.

Cheers !!

Related News:

Some disappointed, others keep calm: Hyflux shareholders meet company management for first time since crisis ( from Channel NewsAsia.com)

Hyflux perp holders and preference shareholders owed $900m ( from The StraitsTiems.com)

 Investors lament lack of progress on Hyflux revamp, Tuaspring sale (from The BusinessTiems.com.sg)

 

 

Oh Yah ! some blogs on “Should government or any TLC (Temasek Link Company) bailout Hyflux ?”  Yes or No ?

 The Govt should NOT bail out Hyflux ( from Hot Money ,Got Honey )

Government Should Bail Out Hyflux And Don't Put All Your Eggs Into One Basket ( from Investment Income For Life )

Hyflux is worth trying to save (from Governance for Stakeholders.com)