There is no reason why the Public Utilities Board (PUB) should use taxpayer dollars to mitigate the potential losses of investors in homegrown water treatment firm Hyflux, said the Ministry of the Environment and Water Resources (MEWR).
Responding to Mothership.sg‘s queries, MEWR said: “All investments carry risks. Businesses can come under financial stress and are not immune to defaults. There is no basis for PUB to utilise taxpayer dollars to offset investor losses.”
“For Private-Public contracts, PUB does not interfere with the business decisions made by the concession company, but will monitor to ensure that the concession company is able, and has the means to continue, to meet the contractual obligations owed to the PUB,” MEWR elaborated.
However, the Ministry supported PUB’s statement regarding SM Investments’ decision to withdraw from Hyflux’s restructuring plan.
Earlier, the Board stated that SM Investments, Hyflux’s bailout consortium, should not use its announcement regarding seizing the Tuaspring desalination plant as a justification or “basis” to withdraw from its bailout agreement with Hyflux.
MEWR reiterated PUB’s reasoning that Hyflux will benefit from PUB’s termination of the WPA should PUB decide to terminate the Water Plant Agreement (WPA).
The termination would “alleviate pressure” on Hyflux, in addition to improving Hyflux’s value and the value of its shares.
MEWR stressed that PUB had expressed its willingness to waive any compensation claims owed by Hyflux to the Board under the WPA, and that the Board’s “sole objective” was to “safeguard Singapore’s water security”, which it argued is reflected in PUB’s actions in Hyflux’s case.
“Prior to the issuance of the default notice, Tuaspring Pte Ltd (TPL) had not been able to fulfil various contractual obligations under the WPA, in particular, by failing to keep the plant reliably operational as required.
Also, TPL had not been able to produce financial evidence to demonstrate its ability to keep the plant running for the next six months,” according to the Ministry.
MEWR added that “PUB has provided sufficient time for TPL to resolve its operational and financial defaults.
“Given TPL’s current financial position, its inability to fulfil its contractual obligations is unlikely to change in the immediate to longer term,” concluded the Ministry.
Salim should not use possible seizure of Tuaspring to justify terminating its deal with Hyflux: PUB
In its press release on Fri (22 Mar), PUB claimed that Hyflux has “noted that PUB’s actions … would be favourable to” Tuaspring.
This is because, according to PUB, Hyflux suggested that the Board’s actions will lift “the pressure on the rest of the Hyflux Group”.
Consequently, the value of Hyflux and its shares will most likely observe a positive change as a result of PUB’s actions, according to the statutory board.
The Board added that its takeover of Tuaspring “will also increase the chances of Hyflux being successfully restructured”.
“PUB’s actions should therefore not be used as the basis for SM Investments’s decision to withdraw from the Restructuring Agreement”, stressed PUB.
PUB also assured in its press release on Fri that it has “the operational capabilities, experience and manpower to run” the Tuaspring desalination plant.
As Singapore’s national water agency, PUB is responsible for managing the Republic’s water supply via the Four National Taps, namely local catchment water, imported water, NEWater, and desalinated water.
SIAS poses several questions to PUB regarding potential Tuaspring takeover
Previously, Securities Investors Association Singapore (SIAS) CEO David Gerald, in his letter to PUB on Tue (26 Mar), wrote that while “SIAS fully appreciates that PUB has to safeguard Singapore’s water security”, the Association has an obligation to “represent the interest of the investors, particularly the retail investors of Hyflux” who are facing anxiety over Hyflux’s possible liquidation.
Consequently, Mr Gerald has urged PUB to make clarifications regarding several issues surrounding the Board’s recent announcements “to avoid speculations and address the investors’ uncertainties and fears”.
Among the questions posed by SIAS were those regarding PUB’s role in managing the Hyflux crisis, and to what extent it can exercise its authority in the issue.
Mr Gerald wrote: “In exercising the default notice and acquiring TSDP, is PUB acquiring just the right to operate or the asset?
“Will PUB also acquire the power plant as it is integrated with the desalination plant?
“What is the plan for the power plant?
“Will PUB acquire the asset or the right to operate?”
He also raised the question of the Tuaspring desalination plant’s valuation process, and challenged PUB’s plan at taking over the plant for “zero dollars”, asking if the purchase price should instead be “the equivalent [of the] replacement cost of building or an equivalent plant”.
Mr Gerald had also asked PUB as to why it has “chosen to issue the notice of default” that has an expiry date of 5 Apr, the same date that Hyflux’s creditors will be casting their votes on the restructuring plan, “given that PUB was already aware” of Hyflux and Tuaspring’s financial status since 2017.
“NEA could have also issued a notice of default for the construction of Tuas One.
“Taking NEA as an example, why couldn’t PUB also wait till after the Hyflux scheme meeting to issue the default notice?
“Wouldn’t that be helpful to the plight of the 50,000 Singapore citizens who have ploughed their money into Hyflux to avoid further uncertainty?
“Couldn’t PUB have waited till the outcome of the restructuring, on how the default could be remedied. Could PUB have waited a little longer?” asked Mr Gerald.
Mr Gerald further questioned if the notice of default was given because the Tuaspring desalination plant “was not included as part of court sanctioned moratorium”.
SIAS also sought clarification from PUB as to whether the Board is willing to give Tuaspring Pte Ltd “more time” to “remedy defaults arising under the WPA”.
“If not, why? Wouldn’t giving more time help all parties to focus on the restructuring process?” probed Mr Gerald.
