Hyflux disputes Indonesian investor claims that PUB action, Algerian plant dispute constitute events for pull-out

The Hyflux logo outside the Hyflux Innovation Centre located at 80 Bendemeer Road, on Feb 16, 2019.
The Hyflux logo outside the Hyflux Innovation Centre located at 80 Bendemeer Road, on Feb 16, 2019. ST PHOTO: LIM YAOHUI

SINGAPORE - Hyflux has disputed Salim-Medco's assertion that actions by national water agency PUB and offtakers or buyers of water from its Magtaa desalination plant in Algeria constitute events which allow the Indonesian group to pull out from its proposed $530 million investment into the troubled water treatment company.

In a bourse filing just before midnight on Tuesday (March 26) addressing Securities Investors Association Singapore (Sias) questions about whether the investor has signalled it will back away from its offer, Hyflux disclosed that "certain disagreements have recently emerged" between the company and SM Investments, the investment vehicle of its Indonesian white knight.

One "investor notice" concerns the PUB, which said last week that if Hyflux subsidiary Tuaspring Pte Ltd is unable to cure its defaults by April 5, the PUB will only take control of Tuaspring's desalination plant. Hyflux, in its latest filing, said that as the PUB had yet to terminate the water purchase agreement, any statements by the agency are not considered threats to cease Hyflux or Tuaspring's business.

It also said that if the PUB were to terminate its water purchase agreement (WPA), the earliest it would be able to do so is April 6. Along with 30 days notice from the PUB, the agreement would be terminated only on May 6, which is past the April 30 long-stop date fixed by the Salim-Medco consortium. Thus, any termination on Salim-Medco’s part would be able to take place only after its investment’s completion date.

“The company has been advised that Salim-Medco cannot rely on the PUB’s termination of the WPA to lawfully and effectively terminate the restructuring agreement prior to the long-stop date,” Hyflux said.

Hyflux has also disputed the defaults asserted in the notice given by Magtaa offtakers Sonatrach SpA and L'Algerienne des Eaux and their right to termination. It added it had been taking active steps to resolve the matters in the notice and the offtakers had yet to terminate its concession agreement for the Magtaa desalination plant in Algeria despite the notice having expired on Feb 8.

Hyflux also refuted Salim-Medco's claims that it had not agreed to the commercial terms of its restructuring plan, particularly the aggregate cash amount of $272 million for distribution to relevant creditors, with $271 million to be derived from the intended investment.

"The company's position is that an agreement with Salim-Medco on the commercial terms of the overall cash and equity allocation were reached prior to the publication of the restructuring proposal on Feb 16, 2019," the statement added.

In response to Salim-Medco stating it is not agreeable to vary its restructuring agreement, whether or not to accommodate a termination of the WPA or otherwise, Hyflux said that the schemes scrutinised at the High Court hearing on Feb 21 were premised on the same commercial terms. Amendments made to other schemes also do not vary these commercial terms.  

Hyflux also said that while it "has been unable to meaningfully engage" with Salim-Medco, their restructuring agreement "remains in force and the investor has not stated that it will resile from its proposed investment".

 
 
 

Nonetheless, if Salim-Medco "wrongfully terminates" the restructuring agreement, Hyflux said it would be able to lay claim to the $38.9 million deposit which was taken out of Salim-Medco's proposed investment, which was placed into escrow shortly after the agreement was executed.

Hyflux added that is proceeding with the scheme meetings on April 5 and 8, as scheduled, and will also proceed with the holding of an extraordinary general meeting on April 15.

However, it has cancelled its third town hall meeting. This is in light of the upcoming scheme meetings as well as scheduling difficulties with Salim-Medco.