Darco Water: Issued letter of demand as Emsus misses first payment on deal reversal

Water in a fountainWater in a fountain

Darco Water Technologies said Friday the first settlement payment from Emsus Co. and Do Yun Yu for the reversal of the deal to acquire 75 percent of PT Panghegar Energy Indonesia came in both short and late, leading it to issue a letter of demand.

The waste-water treatment company said it faced a material impact to its financial performance if it needed to make further impairments.

The first settlement payment of US$200,000, along with interest of 2.5 percent per annum, was due on 30 September, but the company on 4 October received US$100,000 toward the first settlement, with the remainder still outstanding, Darco Water said in a filing to SGX.

“Given that the company has granted no less than three extensions of time for the first settlement payment to be paid and Emsus has failed to make full payment of the same by 30 September 2021, the company has on 8 October 2021 issued a letter of demand,” Darco Water said.

Darco Water is demanding Emsus and/or Do Yun Yu repay within seven days the total sum of US$914,363 — which includes the outstanding US$100,000 of the first settlement payment, US$500,000 toward the second settlement payment, US$313,000 toward the third settlement payment and all accrued interest, the filing said.

Previously, Darco Water had made a partial impairment of US$160,042 for the amount owed by Emsus, the filing said, adding the maximum further impairment amount for this financial year would be US$752,958.

“The Emsus further impairment will have a material impact on the financial performance of the company for FY2021,” Darco Water said.

The further impairment would amount to around 56 percent of the group’s profit before tax for the 2020 financial year, the filing said.

In July 2020, Darco Water had exercised its reversal option on the acquisition after the West Java government wouldn’t agree to re-negotiate terms of a cooperation agreement with PT Jabar Bersih Lestari (JBL), which was 80 percent owned by PT Panghegar Energy Indonesia.

JBL had entered a cooperation agreement with the West Java Province Regional Government of Indonesia to provide waste-management services in Bogor City, Bogor Regency and Depok City in Indonesia; that project was in its preliminary stage in November 2019, when Darco Water entered the deal to acquire the PT Panghegar Energy Indonesia stake.