SINGAPORE (Apr 17): National water agency PUB has issued a notice to terminate its water purchase agreement with Hyflux subsidiary Tuaspring and take over the Tuaspring desalination plant at the end of the 30-day notice period.
A statutory board under the Ministry of the Environment and Water Resources, PUB said in a statement on Wednesday that this was “to safeguard Singapore’s water security”.
The move comes after Hyflux on April 4 cancelled meetings scheduled for April 5 and 8 to vote on a scheme of arrangement.
PUB had warned Hyflux that it may take over the plant if the company does not fix its contractual defaults by April 30. This extension was rescinded after Hyflux failed to get approval for the scheme of arrangement.
The company had said in a filing that it scrapped the vote on restructuring because it had no confidence that former white knight SM Investments is prepared to complete a $530 million cash infusion plan that forms the core of its survival plan.
See: Hyflux rescue bid by SMI falls through amid conflicting statements
Under the terms of an October 2018 rescue agreement, SMI – a group of Indonesian investors led by Anthoni Salim – would inject $400 million into Hyflux in exchange for a 60% stake. They will also loan the company an additional $130 million.
However, the relationship between the two parties soured after differences surfaced.
And the scuppered pact has added further uncertainty to the fate of the once-vaunted company, whose Tuaspring plant – the largest of three desalination plants in Singapore – was heralded as one of the “national taps” for the city-state.
See: Hyflux files lawsuit against former white knight SM Investments
PUB earlier expressed it is willing to pay $0 to take over the unprofitable Tuaspring desalination plant and waive the compensation sum likely to be payable by Tuaspring to PUB under the water-supply concession agreement.
In a filing to SGX on Wednesday, Hyflux says the termination of the water purchase agreement is expected to have a material impact on the group’s financial performance.
PUB’s taking over of the Tuaspring desalination plant and waiving of any compensation will likely help alleviate Hyflux’s working capital needs and enable the group to reach out to a wider pool of investors.
Hyflux, which is saddled with $2.8 billion of unsecured claims and default notices, had called for senior creditors to take a 75% haircut, while retail investors faced losses of about 90%.
