Hyflux set to lose control of Tuaspring integrated plant

The Hyflux Tuaspring desalination plant in Tuas.
The Hyflux Tuaspring desalination plant in Tuas.ST PHOTO: TIMOTHY DAVID

Maybank appoints receivers; firm's founder deems removal good for group's restructuring

Hyflux is set to lose Tuaspring Integrated Water and Power Plant (IWPP), which was once its largest asset but has now been flagged by some analysts as a millstone around the neck of the embattled water treatment company.

Yesterday, it announced on Singapore Exchange that Maybank, Tuaspring's only secured creditor, has appointed Mr Timothy James Reid, a partner of insolvency and restructuring firm Ferrier Hodgson, and its executive director, Ms Theresa Ng Yau Yee, as receivers and managers, to take over the Tuaspring power plant.

If the Tuaspring power plant is sold by the receivers, then it would no longer be part of the Hyflux group, the company said.

Last month, Maybank terminated a collaboration agreement relating to the divestment of the Tuaspring integrated plant, and had announced that it intended to appoint receivers and managers over the facility's remaining assets.

This followed national water agency PUB's notice to Hyflux that it will terminate the water purchase agreement on May 17 and take over the Tuaspring desalination plant - a key water supply source - as well as shared infrastructure and related assets on May 18.

But the removal of Tuaspring IWPP is deemed positive by Hyflux founder Olivia Lum for the group's restructuring.

"By excluding loss-making projects such as the Tuaspring IWPP, potential strategic investors need not factor into their investment proposal the need to keep funding such assets," she had said in court papers filed on April 23.

Tuaspring, the first water plant in Asia to be integrated with power generation capabilities, cost Hyflux $1.05 billion in all. But it has been a drag on earnings since it began operations in March 2016.

At the heart of Hyflux's troubles is its expansion into the energy business through Tuaspring, where profits from the power plant were to have been used to subsidise the desalination plant's operation costs.

Tuaspring, the first water plant in Asia to be integrated with power generation capabilities, cost Hyflux $1.05 billion in all. But it has been a drag on earnings since it began operations in March 2016.

But electricity prices collapsed and, coupled with operating losses from the desalination plant, caused Hyflux to sink into debt.

Meanwhile, Hyflux clarified yesterday that it has received only a draft term sheet from potential white knight, United Arab Emirates utility Utico, contrary to a Reuters report on Sunday that said a binding offer to invest had been submitted.

In the Reuters report, Utico managing director Richard Menezes had said that a binding term sheet to invest $400 million in Hyflux had been submitted, and that working capital and any urgent interim funding would be part of the offer.

Hyflux said yesterday that it was informed by Utico's advisers that this draft term sheet, which was sent to Hyflux on May 6, is to be regarded as a binding term sheet.

But it clarified: "To avoid doubt, the company has not accepted or entered into the binding term sheet. The company's advisers are currently engaged in active discussions with Utico's advisers to finalise the proposed terms of Utico's investment."

In addition, Hyflux is also engaged in active discussions with Oyster Bay Fund on its proposed investment.

Hyflux said it "envisions" an investment of up to $500 million by the fund, subject to regulatory clearance, due diligence and the execution of a definitive agreement.

It added that, as an indication of its good faith and intent, the fund is prepared to buy preference and ordinary shares in HyfluxShop Holdings from the company for up to $26 million.

A version of this article appeared in the print edition of The Straits Times on May 15, 2019, with the headline 'Hyflux set to lose control of Tuaspring integrated plant'. Print Edition | Subscribe