Hyflux: Suspended Iran contract expected to have ‘material’ effect on earnings

Troubled water infrastructure player Hyflux said on Friday that the suspension of a contract in Iran after the U.S. moved to reinstate sanctions on the Middle Eastern country would have “a material adverse effect on the financial performance of the group.”

In April, Asia Water Development Engineering Co. (AWDEC) had awarded Hyflux’s wholly owned subsidiary Hyflux International Pte. Ltd. (HIPL) a contract for the design, manufacture and supply of a seawater reverse osmosis desalination package in Bandar Abbas, Iran, it said in a filing to SGX on Friday.

In addition, in July, AWDEC had provided a letter of intent for a second contract for a seawater reverse osmosis desalination package in Bandar Abbas, Iran, it said.

But after the U.S. withdrew from the multi-lateral deal which had eased sanctions on Iran in exchange for Iran suspending its nuclear program, Hyflux wasn’t able to maintain the needed banking support to receive payment from AWDEC under the contract, the company said.

Hyflux said that after discussions with AWDEC, it provided formal notification on 11 December that it would suspend the contract with effect from 16 October 2018. It added that it has taken no further steps to executive the second contract.

“The suspension of the contract is expected to have a material adverse effect on the financial performance of the group,” Hyflux said.

In the same filing to SGX, Hyflux said that HIPL and its joint venture partner Tolaram Corp. have terminated their agreement and will liquidate Yewa Water Company in Nigeria and apply to strike off Yewa Singapore. Yewa Singapore owns the majority stake in Yewa Water Company, it said.

Both Yewa Nigeria and Yewa Singapore have been dormant since incorporation, it said, adding that the termination of the joint venture, the liquidation and the striking off aren’t expected to have a material adverse effect on Hyflux’s financial performance.

In October, 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.

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.

Hyflux shares have been suspended since May 23.


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