Investors facing huge losses on holdings in Hyflux want answers from the firm and national water agency PUB before they vote on a rescue plan on April 5 that looks increasingly like their last chance of getting anything back.
The key questions they want answered relate to the purchase price of "zero dollars" PUB has offered to pay for the Tuaspring desalination plant operated by Hyflux unit Tuaspring Pte Ltd (TPL).
They want to know how this price was determined and if there was an independent valuation.
Their concerns were contained in a letter the Securities Investors Association Singapore (Sias) sent yesterday to PUB on behalf of about 50,000 investors, including those with ordinary shares and those holding perpetual securities and preference shares.
Investors in the $900 million of unsecured perpetual securities and preference shares stand to lose about 90 per cent of their money under the rescue plan.
PUB has said the desalination plant purchase price is expected to be negative, based on calculations under the water purchase agreement. It is willing to buy the plant for zero dollars and waive any compensation claims on TPL.
Investors also asked why PUB did not wait until the outcome of the April 5 vote before issuing the default notice against TPL, "given that PUB was already aware of the situation in both companies since 2017".
Hyflux receives arbitration request relating to plant in Algeria
Troubled water treatment firm Hyflux has received a request for arbitration from a company in Algeria in relation to a seawater desalination plant in the North African country.
The request, filed with the International Chamber of Commerce's International Court of Arbitration in Paris, concerns disputes surrounding several agreements relating to the plant dating back to 2007, Hyflux said yesterday.
The Souk Tleta plant marked Hyflux's entry into the water treatment market in that region. It began operations in 2011 and supplies water to Algeria's national water company and national oil company.
Hyflux disclosed last November that the buyers of the plant's water were trying to terminate their purchase agreement.
It said it did not accept allegations made in the purported termination notice and would protect its rights.
In its filing to the Singapore Exchange yesterday, Hyflux said it has until April 20 to file an answer to the arbitration request.
The firm said it is unable to assess the impact of the arbitration proceedings because of the "uncertainty of the outcome of the company's ongoing reorganisation process and the unpredictability of the financial outlook for 2019".
In the same filing yesterday, Hyflux addressed what it called "unverified and speculative statements" concerning its court-supervised reorganisation process.
It referred to an article published last Saturday in The Straits Times that quoted an anonymous source as saying that Hyflux chief executive Olivia Lum had received dividends at a time when the firm was making losses.
Hyflux called the statement "incorrect", noting that Ms Lum received only dividends based on her ordinary shareholding in the company from 2007 to 2016, during which Hyflux recorded cumulative profit after tax.
"It was not until 2017 that the company recorded a net loss and no cash dividends were declared for 2017 onwards. It is to be noted that 2017 is the first year that Hyflux had recorded a net loss in its operating history," said the statement.
The article also noted the possibility of breaches of listing rules on continuous disclosure. Hyflux said it has been "committed to corporate transparency and material disclosures at all times".
Sias president David Gerald said in the letter that the investor watchdog "fully appreciates that PUB has to safeguard water security".
"However, recent actions by PUB, such as the service of default notice on TPL, have caused serious concerns to investors and stakeholders."
He also noted that investors are worried about a March 22 article in The Business Times that stated: "Hyflux's reluctant white knight should not use PUB as an excuse to back out of its investment agreement with the water company."
Mr Gerald asked: "Did PUB make this statement? If so, why? Does PUB have any intimation from (Salim-Medco consortium, SM Investments) to that effect?
"There is no other option on the table," he added. "The only hope for the 50,000 Singapore citizens in this saga is white knight SM Investments (SMI), the only investor to come forward." SMI has offered to bail out Hyflux with a $530 million lifeline that will give it 60 per cent of the restructured company.
But it notified Hyflux on March 18 that it reserves the right to back out of the deal on April 1.
On March 21, PUB said it would terminate its water purchase agreement and take over the desalination plant to safeguard national water security unless TPL fixes defaults at the facility by April 5.
Neither SMI nor Hyflux has given any updates on whether the deal is still on.
PUB said it was not able to respond yesterday. Hyflux is reviewing the Sias letter to PUB and will be announcing an update on the restructuring process.
Mr Gerald said in the letter that retail investors are in a predicament as they stand to get nothing if Hyflux undergoes liquidation.
In addition, Hyflux is "creating further uncertainty by not issuing the revised scheme document to the creditors incorporating the Sias proposal" that would claw back a slightly bigger recovery for them, Mr Gerald added.
The Straits Times understands that small retail investors may now recover up to 7.4 per cent cash, or $67 million of their claims - up from 3 per cent cash, or $27 million - if all the contingent claims drop off. This has come after senior unsecured creditors agreed to give up some of their share.