Hyflux CEO and Executive Chairman Olivia Lum and the company’s board of directors said on Saturday that if the company’s restructuring plan is approved, they would contribute all of their shares and entitlements as holders of preference shares and perpetual capital securities, or the PNP, to be distributed to other PNP holders.
“We have spent an immense amount of time and effort over the past few months to negotiate and secure a deal to save the company,” said Lum in the filing to SGX on Saturday. “We have tried extremely hard to find ways to improve the terms of the restructuring plan for the PNP.”
She said she would contribute all of her 267 million Hyflux shares and securities and she volunteered to give up receiving any management shares in the company.
“In this way, it is my hope that they may reap the future benefits which the Salim-Medco consortium deal can offer them,” she said.
In October, consortium SM Investments entered a binding agreement to invest S$530 million for a 60 percent stake in the troubled water-treatment and power generation company.
The announcement on Saturday came amid criticism over how the company came to file for court protection, and after investor watchdog Securities Investors Association (Singapore), or SIAS, sent a list of questions seeking clarification over various aspects of the business and accounting.
One of the questions from SIAS pointed to Lum receiving more than S$60 million in dividends from her 34 percent Hyflux stake, as well as “significant” salary and benefits, while “shareholders and bondholders have seen their entire investment destroyed… Why isn’t Olivia contributing her gains to the restructuring process?”
In response, Hyflux said on Friday that while the question and newspaper reports might suggest Lum received the S$60 million in dividends in 2017, when the company reported losses, in fact, the dividends of S$58 million were paid over a 10-year period, from 2007 to 2016, with no dividend paid in 2017. It also noted the CEO’s salary has remained unchanged since 2011.
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 of 2018.
In addition, the company said in May that its plan to divest the Tuaspring project in Singapore and the Tianjin Dagang plant in China had taken longer than expected, adding stress to the business.
On Friday, the company reiterated in its responses to SIAS that it sought protection from creditors due largely to its investment in the Tuaspring Integrated Water and Power Project in Singapore, which included a desalination plant and an on-site power plant and was Hyflux’s largest asset.
“When the Tuaspring project was first awarded in 2011, the outlook for the Singapore power market was very favorable. The Tuaspring power plant was projected to turn in profits from day one,” Hyflux said on Friday. Instead, the average wholesale electricity price dropped from around S$220 a MWh in 2011, to an average of S$81 in 2017, causing significant losses, the company said.
The Tuaspring operating losses spurred some financiers to express concern over their ability to continue credit exposure to the company and raised the chances of a liquidity crunch, Hyflux said, adding that finding a buyer for Tuaspring was likely to be a prolonged process.
In response to an SIAS question on whether Hyflux had begun an independent investigation of the role of key executives in the company’s collapse, Hyflux said: “Nothing has come to the board’s attention of any wrongdoing on the part of any executive or board member that should require an independent investigation [or a probe into the role of the auditors].
Hyflux shares have been suspended from trading since May 23.