In a public statement yesterday (22 May), Hyflux Chairman and Group CEO Olivia Lum blamed the depressed electricity prices in Singapore for her company’s woes.
In particular, Tuaspring, an integrated water and power plant, has been dragging Hyflux’s net profit down. Hyflux posted its first ever annual loss last year since listing, and continued losing into the first quarter of this year. It reported a net loss of S$22.2 million in the three months ended March 31, with net debt surged to 165 times EBITDA earnings from about 32 times at the end of last year.
Excluding Tuaspring, Hyflux would have achieved a net profit of S$1.04 million in 1Q this year.
Ms Lum, who came from Malaysia said, “One of our landmark projects is Tuaspring, the first Integrated Water and Power Project in Asia, which is an important track record to boost the group’s solution offering to its municipal clients.”
“This innovative project which contributes significantly to our nation’s water security, has, in recent years, not escaped the impact of depressed electricity prices in Singapore,” she added.
“As a result, 2017 marked the first full year of losses in our operating history. Although improvements in wholesale electricity prices have reduced losses in the last few months, a sharper rebound in prices is necessary to restore the group to its previous levels of profitability.”
She said that operating in a capital-intensive industry, Hyflux has always tried to divest their completed projects in order to recycle capital into new investments. However, plans to divest Tuaspring and another project in China “have taken longer given the prevailing market”.
“This has added stress to the business,” she acknowledged.
Hence, the company is now “stepping back” to “assess holistically” how to “reorganise” their liabilities, she added.
As such, the company has commenced a court-supervised liabilities reorganisation exercise so as to provide space and time for the group to focus on its ongoing discussions with strategic investors, optimise operations, target areas for growth and complete their projects to keep generating steady cash flow for the group.
“On the ground, it will continue to be business as usual,” she assured.
Hyflux not paying $14.9 million of bond interest due on May 28
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).
“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.”
And come September, Hyflux will also have a S$100 million of 4.25 percent bonds maturing. It’s not known what the company would do then.
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.
Hyflux, which was worth nearly S$2.1 billion at its peak in late 2010, now has a market value of only S$165 million. It’s the second-worst performer on Singapore’s FTSE ST All Share Index this year, with a 39 percent decline, trailing only Noble Group Ltd.
No doubt, many moms and pops would certainly be angry when they can’t get the interests due to them next Monday.