Following the Singapore government’s recent plans to seize Hyflux’s Tuaspring desalination plant, Salim Group has announced that it may change its decision to bailout the troubled homegrown water treatment firm from its massive debts through the company’s restructuring plan.
Nikkei Asian Review reported on Tue (19 Mar) that Salim, leader of Hyflux’s bailout consortium, has given the company a notice regarding their possible withdrawal from the process.
Hyflux told Nikkei on Monday that Salim’s notice was in tandem with a clause stipulated in their bailout deal, “which gives the consortium right to terminate the restructuring agreement” by Apr 1 “on the basis that a prescribed occurrence has arisen”.
The “prescribed occurrence” reportedly refers to the Public Utilities Board (PUB)’s announcement regarding its intention to “exercise its right to terminate the purchases and take over the plant if the company could not meet contractual obligations” last month.
Should Salim proceed with cancelling the agreement, Hyflux may end up being liquidated, unless it is able to secure a new sponsor “before the end of a debt moratorium granted by the court” at the end of next month.
Hyflux, drowning in S$2.7 billion in liabilities as of the end of Sep, stands to lose out on a “$380 million rescue package” from Salim, which was offered “in exchange for a 60% stake” in the water treatment company.
Currently, the fate of the company’s debt restructuring plan partially rests in the hands of its creditors as they await the voting process, which will take place in a meeting on 5 Apr.
Tuaspring crucial to Singapore’s water security, yet has failed to “to keep the plant reliably operational as required”: PUB
The sour fate facing Tuaspring and Hyflux has led the Government to brand Hyflux’s decline as “a commercial matter”, with the PUB serving a notice of default to Tuaspring’s owner for its operational and financial lapses, according to a report by Bloomberg on 12 Mar.
The PUB’s decision has attracted criticism from Hyflux’s retail investors.
In response to the criticisms, a PUB spokesperson told Bloomberg that its “decision to issue a default notice is to ensure the asset is secured and continues to produce water” for the Republic.
Earlier this month, PUB revealed that it was “taking steps to ensure that our water security is safeguarded,” and claimed that Hyflux has failed “to keep the [Tuaspring] plant reliably operational as required”, in addition to failing to “produce financial evidence to demonstrate its ability to keep the plant running for the next six months.”
On Tuesday, PUB told Nikkei that was it was “unable to provide details of the defaults which are subject to confidentiality obligations” regarding the Government’s possible seizure of Tuaspring.
Currently, Singapore’s water source comprises “a mix of imports from Malaysia” and local “purification and desalination”.
“Imports account for about 50% of demand, while desalination could meet up to 30%”, Nikkei reported PUB as saying.
Thus, said PUB, Tuaspring is crucial to Singapore’s water security, as Tuaspring is the largest of three existing desalination plants in the Republic, with two other plants scheduled to be completed by 2020.
The need for a robust locally-sourced treated water supply, according to Nikkei, is even more important at a time “when Malaysian Prime Minister Mahathir Mohamad’s government started pushing to charge more for the water shipments”.
On Mon (18 Mar), Hyflux revealed that it “is in communication with PUB” as well as the consortium over the notices from each side.