Hyflux: If Tuaspring fails to fix defaults, PUB may buy the desalination plant

Troubled water and energy infrastructure player Hyflux said on Thursday that Singapore’s national water agency PUB has informed the company that if it fails to resolve the Tuaspring plant’s defaults by 5 April, the agency may acquire the desalination plant.

Earlier this month, PUB issued Hyflux’s desalination plant, Tuaspring, a default notice and said it would exercise its right to terminate its water purchase agreement (WPA) and take over the plant if contractual obligations aren’t met.

After Hyflux requested clarification from PUB, the agency said that if it terminates the WPA, it will purchase only the desalination plant, and not the entire Tuaspring Integrated Water and Power Project, the infrastructure company said in a filing to SGX after the market close on Thursday.

If that happens, PUB told Hyflux it would be willing to waive the compensation sum that it was entitled to collect from Tuaspring under the WPA, the filing said. The Straits Times reported that PUB said it would be willing to purchase the desalination plant for zero dollars and waive the compensation, as the plant’s current valuation is negative.

Because the default could entitle SM Investments to terminate its restructuring agreement with Hyflux, the water company said it reached out to the investor on a “without prejudice” basis.

“The company acknowledges, however, that there is no obligation on the investor to vary the restructuring agreement. The company will make further announcements as and when there are material developments,” Hyflux said.

In October, SM Investments, which is a consortium of the Salim Group and the Medco Group, entered a binding agreement to invest S$530 million for a 60 percent stake in Hyflux, which had filed for court protection in May. Hyflux said that 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.

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