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Investors lament lack of progress on Hyflux revamp, Tuaspring sale

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No serious bids for Tuaspring yet and no clear restructuring plan either.

Singapore

NO serious bids for Tuaspring yet and no clear restructuring plan either.

This was the update investors got from Hyflux during its townhall meetings on Thursday.

Hyflux has until Dec 19 to get creditors' buy-in for a debt revamp, and is waiting for the various groups to get organised before it can start negotiating a proper restructuring plan, the company said.

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Chief executive Olivia Lum faced a full house of retail perpetual preference shares and perpetual holders for the first time on Thursday evening.

She told reporters in between her meetings at the Hyflux Building: "Of course, my wish is (for a plan to be put out) as soon as possible, but sometimes the timeline is also beyond us. We try to force the bank lenders... but there are 29 of them, so it's not very easy."

Investors who attended the meetings said they were disappointed that she did not have more to share.

One of them said: "There were many people who wanted to ask questions, but were cut short. Under cost reduction, Hyflux mentioned that about 16 per cent of the staff had left, so they were working with fewer staff. But they didn't address the question about management pay cuts at all; the executives are not sacrificing at all."

Hyflux is dealing with a massive group of stakeholders. The bank debt of the entire group is S$1.8 billion. It owes note holders S$265 million. Another S$900 million is owed to 34,000 perp and pref share holders. It also has more than 16,000 shareholders.

Hyflux intends to start the restructuring process by speaking first to its banks and then working its way down the chain. Banks at the senior unsecured level formed a working group only in the last two weeks.

Meanwhile, the water-project developer has signed non-disclosure agreements (NDAs) with 19 interested parties for possible rescue financing. None of the 19 are Hyflux's current bank lenders. 

Hyflux's business is capital intensive, so fresh cash is crucial.

EY partner Angela Ee, who is advising Hyflux, said the management has been spending a lot of time seeking out strategic investors.

She told reporters: "For a group like this to move forward, we do need new money coming in, and we're talking about long-term strategic money because this is an EPC (engineering, procurement and construction) business. To win new projects and to work on them, you really need a lot of money."

Meanwhile, no serious bids have so far been received for Hyflux's sale of the Tuaspring integrated water and power plant (IWPP), although there are now eight interested parties in various stages of the bidding process.

The parties comprise both foreign and Singapore companies. Binding bids will have to be made by a  Oct 1.

Maybank, Hyflux's largest lender, has given it until Oct 15 to ink a binding purchase agreement for Tuaspring. 

Ms Lum said: "What we will accept, we cannot disclose now. We all know that under these conditions, when the power market is weak, it is very difficult to get good value. But it also cannot be so unreasonably low that I can't even pay my stakeholders."

Hyflux has been in talks with four interested buyers since June. Some have dropped out of the bidding process, though there has also been some new interest, said Hyflux chief financial officer Lim Suat Wah.

While some bidders are still waiting for water agency PUB's approval before they can start looking at Tuaspring, others have already gained access to Hyflux's dataroom, she added.

Ms Lum said that because Tuaspring is a strategic asset, bidders are required to agree to longer-than-usual confidentiality periods. The PUB also has to approve every name that comes through the door.

She also recounted to reporters the reasons behind her ill-fated decision to build a power plant into the Tuaspring project, without any prior experience.

Back then, Hyflux had missed opportunities in North African and the Middle East, where there were more IWPP projects available than standalone desalination plants, she said.

"For Hyflux, I've always been very ambitious. I saw the opportunities. If I could gain some experience in having an IWPP in home ground, perhaps that could propel us into the regional business.

"When we got into this project to become the smallest generation company, all our independent advisers had a very positive view of market; this was supported by the bankers and even the water agency."

But Tuaspring has been loss-making since it started producing electricity in 2016. After two years, its lenders became "jittery", Ms Lum said.

"Maybank was becoming a little bit impatient with us. They wanted to force-sale this project. That's why we entered into a moratorium," she said.

Hyflux filed for court protection on May 22. Ms Lim said: "The main trigger was the Tuaspring losses which we have been transparent about for the last two years... In February, we started to see signs of electricity prices improving. In fact, when we announced our first-quarter results on May 9, there was still no plan to file for court protection."

Asked whether Hyflux might receive any government assistance to restructure, Ms Lum said: "While this is a commercial company, all along we've also competed with many government-linked companies. Whether the government helps or not is not up to us to comment. Going forward, I still want to make this company run again."

To be sure, the PUB is agnostic about who operates Tuaspring and there are measures in place to keep the plant in operation no matter who owns it.