Official Opening of Tuaspring Desalination Plant by PM Lee (Olivia Lum at the right)

Hyflux’s Tuaspring praised by PM Lee 5 years ago now in financial difficulties

At the official opening of Tuaspring Desalination Plant 5 years ago in 2013, Prime Minister Lee Hsien Loong praised Hyflux and Olivia Lum for their ability to come up with a “cost-efficient design” of the plant.

“Hyflux won an international competition to design and build this plant. It reflects Hyflux’s capabilities in this rapidly growing industry because theirs was the most unique and cost-efficient design,” PM Lee said.

“They generate electricity on-site and have reduced the cost of producing desalinated water. And it also was able to build the plant on budget and in record time. So I congratulate Ms Olivia Lum and her team! Well done!” he praised Ms Lum.

According to PM, Tuaspring is “Asia’s largest seawater reverse-osmosis desalination plant”.

Singaporeans fortunate to have clean water

At the opening, PM Lee also reminded Singaporeans how fortunate they are, able to have access to clean drinking water, “Three quarters of a billion people lack access to clean drinking water. And every year, three and a half million people die of water-borne diseases – in fact the size of Singapore’s citizen population. And yet Singapore is in a privileged, comfortable, secure position.”

He said that Singapore has achieved this “with political leadership” and by taking “big political position” to price water properly. He said, “It is the way to make people take water seriously, take conservation seriously, to minimise wastage and abuse. But it is not the only thing we do because at the same time as we price our water properly we also have U-Save to defray low-income households’ utility bills so that nobody is unable to afford the water which they need.”

And, through “public-private partnerships” like working with Hyflux and Ms Lum, Singapore was also able to “explore and pilot new technologies and to develop our infrastructure for water in creative ways”, he said.

PM Lee also took the opportunity to thank PUB and their former Chairmen. The opening was attended by Ministers Vivian Balakrishnan and Grace Fu as well.

Hyflux won’t pay bond interest and seeks court protection

Meanwhile, Bloomberg reported today that Hyflux won’t be paying the bond interest to creditors due next Mon (28 May) and has already sought court protection (‘Fallen Singapore High-Flyer Gets Court Protection to Reorganize‘, 23 May).

It reported that Hyflux has started a “court-supervised debt reorganization process” to protect the value of its business after reporting unprecedented losses.

“Hyflux has also decided not to pay S$14.9 million of interest due on May 28 on its perpetual securities, some of which individual investors had bought through ATMs in Singapore two years ago,” reported Bloomberg.

“This is the first time we are seeing a bond sold to mom-and-pop investors through an ATM running into problems,” said an analyst at OCBC. “We expect such investors to take a hit as their securities are subordinated.”

In 2016, rather than confine its fund-raising to the institutional market, Hyflux took its perpetual bond issue to the retail crowd. Attracted by its mouth-watering 6 per cent interest, the demand from retail side was so strong that it was able to upsize its offering to S$500 million from the original target of S$300 million, a sum bigger than its then market capitalization of S$444 million.

After raising such an enormous sum, Hyflux redeemed two earlier perpetual bond issues that it had sold to institutional investors – a S$175 million issue with a coupon of 4.8 per cent and a S$300 million one with a coupon of 5.75 per cent. It is interesting to note that the two bond issues retired by Hyflux were almost equivalent in value to the S$500 million raised from the retail market.

Hyflux’s net loss dragged down by Tuaspring

Last year, Hyflux also posted its first ever annual loss since listing, and continued losing into the first quarter this year. It reported a net loss of S$22.2 million in the three months ended March 31. Its net debt now surged to 165 times EBITDA earnings as of March 31, from about 32 times at the end of last year, according to data compiled by Bloomberg.

Hyflux’s net loss was dragged down by the loss-making Tuaspring desalination plant, reported in the media earlier.

Excluding Tuaspring, Hyflux would have achieved a net profit of S$1.04 million in 1Q this year.

Hyflux has been trying to divest part of its stake in Tuaspring since early last year but has yet to find a buyer. It is also having discussion with potential “white knights” to inject additional funds for Hyflux.

Will Hyflux be “rescued” by Temasek or GIC, given that the nation’s water security could be at stake? Only time will tell.