SM Investments to invest S$530 million into troubled Hyflux

A Singapore 10-dollar note Photo by Leslie Shaffer

Consortium SM Investments entered a binding agreement to invest S$530 million for a 60 percent stake in troubled water-treatment and power generation company Hyflux, the two companies said on Thursday.

Under the agreement, SM Investments will subscribe for shares in a private placement representing 60 percent of Hyflux’s enlarged issued share capital for S$400 million and give Hyflux a shareholder’s loan of S$130 million, it said. Hyflux will also be given a loan of S$30 million for its interim working capital requirements until the proposed investment is completed, it said.

SM Investments, a consortium of the Salim Group and Medco Group, has experience in owning and operating water and power utilities as well as power generation and distribution assets in Southeast Asia, it said in a filing to SGX after the market close on Thursday.

Olivia Lum, executive chairman and group CEO of Hyflux, said SM Investments was selected after a “rigorous selection process.”

She said in the statement that the financial strength of the Salim Group and Medco Group and the consortium’s experience in water utilities, power generation and infrastructure projects would open up new opportunities for Hyflux.

In May, Hyflux had filed for court protection, saying the oversupply of gas in Singapore’s market had resulted in depressed electricity prices, which hit earnings in 2017 and drove losses in the first quarter.

In addition, the company said in May that its plan to divest the Tuaspring project in Singapore and the Tianjin Dagang plant in China have taken longer than expected, adding stress to the business.

Anthony Salim, chairman of the Salim Group, said it was taking a long-term approach with its investment.

“We see tremendous potential for synergies between Hyflux and our existing businesses as well as opportunities within our consortium in which we can involve Hyflux,” Salim said in the statement. “We will work with Hyflux to keep its flagship assets intact, bearing in mind the significance of this company to Singapore.”

Arifin Panigoro, founder of Medco Group, expressed confidence that Hyflux could be turned around.

“Our aim is to further grow Hyflux leveraging on its strength in system integration and optimisation of water treatment and waste management as well as in power generation,” Panigoro said in the statement. “With our experience and strong track record in owning and operating businesses in energy, renewables, utilities and gas across Southeast Asia, we are confident we can unlock the full potential of Hyflux.”

The issue of new Hyflux shares under the agreement will need to be approved by shareholders at an extraordinary general meeting, it said.

The deal is conditional upon regulatory approvals and the approval of Hyflux’s noteholders of its scheme of arrangement, it said.

Hyflux shares have been suspended since May 23.

Get the Shenton Wire morning briefing in your inbox