Hyflux Heads South

Hyflux Ltd. expects to get binding offers by Oct. 1 for its share in Southeast Asia’s largest desalination plant project as the embattled water treatment and power company finds a solution to repay stakeholders amid its restructuring efforts.
     
There are currently eight bidders for Tuaspring and they are in the process of getting in-principal approval from Singapore’s Public Utilities Board, Hyflux’s Chief Executive Officer Olivia Lum said at a briefing on Thursday. 

As Tuaspring is a strategic asset for Singapore, Hyflux needs to get the water agency’s approval every step of the way, she said.

“We would want to see what reasonable bid is on the table,” Lum said. “We all know that under this condition when the power market is still weak, it’s very difficult to get good value” but it can’t be so unreasonably low that the firm can’t pay back all the stakeholders, she said.
     
The sale of the Tuaspring project, Hyflux’s single largest asset that combines the desalination plant with a gas turbine power plant, is an important step for the cash-strapped firm.

Founded by Lum, an orphan who left a career in pharmaceuticals to start the company, Hyflux started a court-supervised reorganization process in May.

Creditor Negotiations

Earlier this month, it reached an agreement with key creditor Malayan Banking Bhd. to sell the stake in Tuaspring and execute a binding agreement with a successful bidder by Oct. 15.

If the process drags, Hyflux may have to sit down with Maybank and negotiate again, Lum said.
     
Hyflux, which was worth nearly S$2.1 billion ($1.5 billion) at its peak in late 2010, now has a market value of S$165 million. 

The book value for Tuaspring was S$1.47 billion as of the end of March 2018, according to a presentation by the company to its stakeholders this week.

The turnabout in Hyflux’s fortunes came as it stumbled following an expansion in recent years into the energy business.

It also arises amid potential tensions between Singapore and Malaysia, with Malaysian Prime Minister Tun Dr Mahathir Mohamad threatening to renegotiate a 1962 agreement to supply water to the city state.
     
Hyflux’s restructuring is complicated by its sale of perpetual bonds and preference shares to retail investors. There are a total of about 34,000 holders of such securities, according to an external spokeswoman for Hyflux.
     
The company is seeking rescue financing and 19 parties have signaled interest in participating in debtor-in-possession financing, Ernst & Young adviser Glenn Peters said at the same event.

“Whether the government helps us or not, it’s not up to us to comment,” Lum said in response to a query on whether Singapore authorities should step in to help Hyflux given its role in nation’s water security. “Going forward, I want to make sure that this company runs again.”