Hyflux perps won't be redeemed till divestment of Tuaspring

Firm will not sell plant at a low price, says CEO as it posts net loss of $116.4m last year

Water treatment firm Hyflux will not redeem its retail perpetual securities until the divestment of Tuaspring is completed, it said yesterday.

A $400 million tranche of the perps will reach their first call date on April 25. The coupon yield will step up from 6 per cent to 8 per cent a year until they are redeemed.

Hyflux aimed to partially divest up to 70 per cent of Tuaspring water desalination and power plant last year, but has not. Tuaspring is held on its books at a value of $1.3 billion.

Chief executive and chairman Olivia Lum told a results briefing last night: "The last thing we want is a fire sale. We believe that we have a good asset, we have a good track record, still have a brand name. Why are we cornered? We know what we are doing.

"We have no shortage of interested parties talking to us. So we have to be very careful not to divest Tuaspring at a low price."

Hyflux has also been trying to sell the smaller Tianjin Dagang desalination plant in China since October 2016.

Ms Lum said: "People think we are going to fire sale the asset by lowering the tender price, we will not accept it. There is still upside potential for Tianjin Dagang."

  • AT A GLANCE

  • REVENUE: $353.6 million (-57%)

  • NET LOSS: $116.4 million (2016: $3.8 million profit)

  • DIVIDEND PER SHARE: 0 (2016: 0.25 cent)

Hyflux reported a net loss of $116.4 million last year, owing to continued weak electricity prices across the Singapore power market. In 2016, it made a restated profit of $3.8 million.

Group revenue excluding Tuaspring fell 57 per cent to $353.6 million last year, on lower engineering, procurement and construction work done.

Tuaspring made a net loss of $81.9 million last year, from a restated $114.5 million in 2016, as Singapore's electricity market remains oversupplied.

Ms Lum said: "We have put out an industry representation letter recently (signed by all seven generation companies) to the regulator.

"If the whole industry is losing more than a billion dollars every year, it makes the whole industry very vulnerable. I feel that it's just not sustainable."

At the end of last year, Hyflux had a cash balance of $314.2 million and it can progressively draw down from about $400 million worth of project finance loans as it achieves milestones in project construction.

Hyflux added that it is also due to collect some receivables for work done in the Middle East, North Africa region.

"A lot of the Middle East countries, their budgets were based on oil prices above US$70 a barrel," Ms Lum said.

"So we have seen many delays by the local governments, they have to drag payment. For example, in Saudi Arabia, we have to take at least six months to get our payment."

A version of this article appeared in the print edition of The Straits Times on February 28, 2018, with the headline 'Hyflux perps won't be redeemed till divestment of Tuaspring'. Print Edition | Subscribe