Business

PUB to take over Hyflux’s Tuaspring if defaults not resolved

It issues notice for Hyflux's desalination plant to resolve defaults

National water agency PUB has issued a default notice to Hyflux's Tuaspring, Singapore's largest desalination plant, to remedy defaults arising under the water purchase agreement (WPA) between them.

It said yesterday it will exercise its right to terminate the agreement and "take control of the plant" if the defaults are not resolved within the notice period.

Tuaspring (TPL) is a wholly owned subsidiary of Hyflux, the troubled water treatment company that has spent the last few months trying to reorganise to keep itself going.

The Tuaspring Integrated Water and Power Plant is Hyflux's single largest asset.

PUB said in a statement that TPL has been unable to fulfil various contractual obligations under the water purchase agreement, in particular by failing to keep the plant reliably operational as required.

In addition, TPL has not been able to produce financial evidence to demonstrate its ability to keep the plant running for the next six months, it said.

In 2011, PUB signed a 25-year agreement with TPL for Singapore's second and largest desalination plant, which is one of the three desalination plants currently in the Republic.

Desalinated water is one of Singapore's four national taps to ensure a diversified and sustainable water supply.

"Singapore's desalination plants are integral to our water security," said the PUB.

It noted that under the agreement, TPL has to deliver up to 70 million gallons of desalinated water a day to PUB for a 25-year period from 2013 to 2038.

"PUB has provided sufficient time for TPL to resolve its operational and financial defaults."

"Given TPL's current financial position, TPL's inability to fulfil its contractual obligations is unlikely to change in the immediate to longer term. PUB is taking steps to ensure that our water security is safeguarded."

It added that "with the issuance of the default notice, PUB requires TPL to fully resolve all defaults within the default notice period, failing which, upon the expiry of the default notice period, PUB will exercise its right to terminate the WPA and take control of the plant".

The statement did not say when the default notice period ends.

Hyflux has taken a $916 million impairment for the nine months ended Sept 30, to adjust for a fall in carrying value of the Tuaspring water and power plant and other write-downs.

This figure was released on March 2 after Hyflux submitted its latest statement of financial position to the High Court.

The impairment has put the Hyflux group in a net liability position of $136 million, indicating that the group is insolvent.

BUSINESS & FINANCE