Shentonwire: Singapore's Hyflux Ends the Restructuring Agreement with SM Investments

JAKARTA (TheInsiderStories) – Singapore water and electricity producer, Hyflux Ltd. said to end the investment proposal for the “white knight” from the consortium of Indonesia SM Investments (SMI) Pte Ltd. today (04/04). Despite trying several times to engage in negotiations about restructuring agreements, the company does not have confidence that SMI is ready to continue to complete the proposed investment.

In its official statement, Hyflux stated that it had sought a written written solution to convince the SMI to continue the agreement, but unfortunately the SMI refused to enter into a restructuring agreement and the company had accepted the refusal.

By the restructuring agreement, the SMI has the right to terminate the agreement if there is a “predetermined event” occurring and if the event that can be repaired is not corrected in two weeks until April 1, 2019.

According to the SMI, the termination of the water purchase agreement and the takeover of the Tuaspring facility by the Public Utilities Board (PUB) includes the events specified in the restructuring agreement. Because of this, the SMI confirmed that Hyflux had two weeks to fix this.

Tuaspring is a subsidiary of Hyflux which manages the Tuaspring Integrated Water and Power Project, the largest desalination facility in Southeast Asia (318,5000 m3 per day) which is integrated with a power plant of 411 megawatts (MW).

Actually, Hyflux will have a meeting with stakeholders at an extraordinary general meeting that was set for April 5 and 8, but the company has officially canceled the planned announcement on April 15.

The termination of the agreement followed a tense exchange in local media last week between Hyflux and SMI regarding whether Singaporean companies had withheld material information. However, Hyflux strongly denied the allegations at the end of last week.

The SMI did not agree with Hyflux’s plan to allocate investment, and said it planned to review allocations, which would affect the amount used to settle with creditors.

Hyflux denied that the company did not retain material information from SMI. Information has been provided immediately when and when requested by investors. In fact, the company was surprised by the sudden position taken by SMI.

Previously, SMI had signaled the right to terminate a restructuring agreement that was signed with Hyflux on October 18, 2018 then if Hyflux did not overcome the default of its subsidiary, Tuaspring Pte Ltd, in two weeks. With the cancellation of this agreement, the Salim Group and Medco Group plans to acquire Hyflux.

On March 18, Hyflux received notification from SMI. The letter refers to the Public Utilities Board (PUB) notification to Hyflux on March 5, 2018.

In its notification, the Singapore water management agency confirmed that Tuaspring’s default in fulfilling the water purchase agreement was signed on April 6, 2011.

Based on the agreement, Tuaspring has 30 days until March 6, 2019 to consult with PUB regarding the steps that need to be taken in order to reduce the consequences and improve all negligence that occurred.

PUB itself stated that Tuaspring’s inability to fulfill its obligations did not appear to be changing in the near future to the long term given its current financial position.

If the deadline fails to improve the default, PUB will use its right to terminate the water purchase agreement with Tuaspring. PUB will also take control of the Tuaspring facility. This letter from PUB made SMI send a notification to Hyflux.

The weakening price of electricity in the Singapore energy market made Tuaspring suffer a loss which weighed on Hyflux’s finances, where as of September 30, 2018, Hyflux’s net loss swelled to US$814 million (equivalent to S$1.1 billion) due to a decrease in Tuaspring’s value of S$916 million.

On May 22, 2018, Hyflux has submitted protection to the Singapore High Court to reorganize its debt and business. On June 19, the Singapore High Court granted the request of Hyflux and gave a suspension from bankruptcy.

From there, Hylux began exploring the possibility of new investors until finally choosing SMI as a strategic investor who bought a number of shares representing 60 percent worth S$530 million for 60 percent of shares of Hyflux, and provided loans of S$130 million under a shareholder loan agreement.

In addition, SMI will also provide a loan of S$30 million as temporary working capital needed by Hyflux until the acquisition transaction is completed.

S$1 = US$0.74

Written by Daniel Deha, Email: daniel@theinsiderstories.com