SINGAPORE (BLOOMBERG) - Sembcorp Industries was the only party that submitted a final bid for beleaguered Hyflux's Tuaspring project, which includes South-east Asia's biggest desalination plant, people with knowledge of the matter said.
Sembcorp's offer was below Tuaspring's book value and will not be enough to fully pay back loans to the project's main creditor, Malayan Banking Bhd, according to the sources. Keppel Corp, which had earlier shown interest in the asset, did not submit a binding bid by the Monday (Oct 1) deadline, the sources said, asking not to be identified because the information is private.
The two Singapore companies were the only suitors granted approval by the national water agency PUB to study detailed information on the asset, the sources said.
Hyflux's sale of Tuaspring, which had a book value of $1.47 billion at the end of March, is an important step for the cash-strapped firm. Saddled with $2.95 billion of liabilities, the Singapore-based company Hyflux started a court-supervised reorganisation process in May and obtained a six-month debt moratorium.
The water treatment firm is led by founder Olivia Lum, who was a poster child for Singapore entrepreneurs before Hyflux's finances were strained by an ill-timed entry into the energy business. Ms Lum said in July that there were eight interested parties for Hyflux and warned that bids should not be so low that the firm could not pay back its stakeholders.
Hyflux agreed with Maybank to execute a binding deal with a successful bidder by Oct 15, in return for the lender refraining from starting enforcement proceedings. Maybank had agreed to provide an 18-year $720 million financing facility for Tuaspring in 2013, when the project came online.
Representatives for Sembcorp and Keppel declined to comment. Representatives for Hyflux, Maybank and the PUB did not immediately respond to queries.
With only one bid on the table, Hyflux may seek to negotiate with Maybank to explore other options, the sources said. There are overseas investors who remain keen on Hyflux's entire business and may be willing to refinance Maybank's Tuaspring loan, though any investment could again hinge on the Singapore regulator's approval for the Tuaspring ownership, according to the sources.
Hyflux is considering appealing to the PUB to approve more parties that were interested in Tuaspring, arguing that the plant's operator would not be in a position to compromise Singapore's water security, the sources said.
The sale had earlier drawn interest from Malaysian tycoon Francis Yeoh's YTL Power International, people with knowledge of the matter said in August. Hyflux had also reached out to billionaire Anthoni Salim's Philippine company, Metro Pacific Investments Corp, to gauge its interest, the sources said at the time.
The Tuaspring project combines a desalination plant and a gas turbine power plant, and operates on a 25-year concession. It has a designed capacity of 318,500 cu m per day of desalinated water and 411 MW of power, according to its website.
Asset sales are key to Hyflux's efforts to trim its debt load while it also seeks rescue financing for working capital. At the end of March, it had $500 million of perpetual securities, $400 million of preference shares and $803 million of unsecured loans and bonds among its liabilities, an exchange filing shows.