Hyflux set to lose Tuaspring Integrated Water and Power Plant
Water treatment firm clarifies it 'has not accepted or entered into' potential white knight's binding term sheet
Hyflux is set to lose its Tuaspring Integrated Water and Power Plant (IWPP), which was once its largest asset but has now been flagged by some analysts as a millstone around the embattled water treatment company's neck.
Yesterday, it announced that Maybank, Tuaspring's only secured creditor, has appointed Mr Timothy James Reid, a partner of insolvency and restructuring company Ferrier Hodgson, and its executive director Theresa Ng Yau Yee, as receivers and managers, to take over the Tuaspring power plant.
If the Tuaspring power plant is sold by the receivers, then it would no longer be part of the Hyflux group, Hyflux said.
Last month, Maybank terminated a collaboration agreement relating to the divestment of the Tuaspring integrated plant, and had announced it intended to appoint receivers and managers over the facility's remaining assets.
This followed national water agency PUB's notice to Hyflux that it will terminate the water purchase agreement on May 17 and take over the Tuaspring desalination plant - a key water supply source - as well as shared infrastructure and related assets on May 18.
But the removal of Tuaspring IWPP is deemed positive by Hyflux founder Olivia Lum for the group's restructuring.
"By excluding loss-making projects such as the Tuaspring IWPP, potential strategic investors need not factor into their investment proposal the need to keep funding such assets," Ms Lum had said in court papers filed on April 23.
Tuaspring, the first water plant in Asia to be integrated with power generation capabilities, cost Hyflux $1.05 billion in all. But it has been a drag on earnings since it began operations in March 2016.
At the heart of Hyflux's troubles lies its expansion into the energy business through Tuaspring, where profits from the power plant were to have been used to subsidise the desalination plant's operation costs.
But electricity prices collapsed and operating losses from the desalination plant caused Hyflux to sink into debt.
Hyflux clarified yesterday it had received only a draft term sheet from potential white knight United Arab Emirates utility company Utico, contrary to a Reuters report on Sunday that said a binding offer to invest has been submitted.
In the Reuters report, Utico managing director Richard Menezes had said a binding term sheet to invest $400 million in Hyflux has been submitted.
Hyflux said yesterday it was told by Utico's advisers this draft term sheet, sent to Hyflux on May 6, is to be regarded as a binding term sheet.
But it clarified: "To avoid doubt, the company has not accepted or entered into the binding term sheet. The company's advisors are engaged in active discussions with Utico's advisers to finalise the proposed terms of Utico's investment."