Utico and Hyflux reach deal with total S$400 million investment

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Troubled water infrastructure player Hyflux said Thursday it reached an agreement for UAE-based Utico FZC, the Middle East’s largest full-service utility and developer, to make a S$300 million equity investment and a S$100 million loan.

The proposed investment would see Utico take an 88 percent stake in Hyflux, subject to talks with stakeholders and definitive agreements being reached “expeditiously,” the two companies said in a filing to SGX.

Utico has also informed Hyflux it plans to offer the cash equivalent of a 4 percent stake in the enlarged Utico group, plus additional cash to the holders of Hyflux’s preference shares and perpetual capital securities, the filing sadi.

The companies said they have been actively engaged in talks over the past few weeks, and earlier this week met with representatives of various stakeholder groups to discuss the proposed agreement.

Troubled Hyflux had been negotiating with various parties after walking away from a white knight investor in early April.

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

But in early April, Hyflux terminated the deal, saying it had “no confidence” that SM Investments would complete the investment after the Indonesian consortium failed to provide a written commitment it would do so.

The deal’s termination led to Singapore’s water regulator PUB rescinding its extension of the default cure period for the contractual obligations of Hyflux’s Tuaspring Desalination Plant. As a result, PUB issued a notice to Hyflux that it would terminate its water purchase agreement (WPA) and take over the plant.

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