A unit of troubled water treatment firm Hyflux has been released from all claims under a contract it won to build a desalination package in Iran.

The contract had called on the subsidiary to design, manufacture and supply a seawater reverse osmosis desalination package in Bandar Abbas, Iran.

Iranian firm Asia Water Development Engineering Company (AWDEC) had awarded the project in April last year.

However, the contract was suspended in October last year after the United States reintroduced sanctions on Iran and pulled out of the Iran nuclear deal.

The sanctions prevented Hyflux from maintaining the requisite banking support to receive payment from AWDEC for work to be done under the contract.

Hyflux said on Tuesday night that it had entered into an agreement where Horsol Switz Engineering Asia takes over the contract.

This agreement was announced hours after Hyflux said it had finally inked a restructuring agreement with Middle Eastern utilities group Utico for a $400 million rescue package, following seven months of negotiations.

The insolvent water treatment firm is scheduled to give the Singapore High Court a progress update tomorrow, when the court will also determine whether to extend Hyflux's debt moratorium beyond its expiry next Monday.

Hyflux said in a bourse filing last night that it has filed applications to the court for a two-month extension of the moratorium.