Perpetual securities won't be called until Tuaspring is divested: Hyflux

HYFLUX will not redeem its retail perpetual securities until the divestment of Tuaspring is completed, it said on Tuesday.

A S$400 million tranche of Hyflux's perps reach their first call date on April 25. Hyflux has the right but not the obligation to redeem its perps at the first call date. The coupon yield on these perps will step up from 6 per cent to 8 per cent per annum until they are redeemed.

Hyflux aimed to partially divest up to 70 per cent of Tuaspring water desalination and power plant last year, but has not. Tuaspring is held on its books at a value of S$1.3 billion.

Chief executive and chairman Olivia Lum told a results briefing on Tuesday evening: "The last thing we want is a fire sale. We believe that we have a good asset, we have a good track record, still have a brand name. Why are we cornered? We know what we are doing.

"We will continue to work towards more EPC (engineering, procurement and construction) jobs. We probably will not take on too many BOT (build operate and transfer) projects, but rather we will focus on partnering with other developers to act as a technology partner.

"We have no shortage of interested parties talking to us. So we have to be very careful not to divest Tuaspring at a low price."

She added: "Tuaspring is a very good model plant for a lot of other potential projects in the Middle East because combining desalination plants with power plants is kind of a strategic direction for many countries with water shortages."

Since October 2016, Hyflux has also been trying to sell the Tianjin Dagang desalination plant in China, which had a book value of S$150 million.

Ms Lum said that she is still looking for a buyer, although the asset has been brought back into Hyflux's balance sheet as it no longer meets the criteria to be classified as held for sale.

"The are people who submitted certain prices, but we are not happy with the prices. People think we are going to fire sale the asset by lowering the tender price, we will not accept it. There is still upside potential for Tianjin Dagang, so it's not right for us to accept those offers."

Hyflux reported a net loss of S$116.4 million in 2017, owing to continued weak electricity prices across the Singapore power market. In 2016, Hyflux made a restated profit of S$3.8 million.

Group revenue excluding Tuaspring fell 57 per cent to S$353.6 million last year, on lower EPC work done.

Tuaspring made a net loss of S$81.9 million, from a restated S$114.5 million in 2016, as Singapore's electricity market remains oversupplied.

Ms Lum said: "We have put out an industry representation letter recently (signed by all seven generation companies) to the regulator.

"If the whole industry is losing more than a billion dollars every year, it makes the whole industry very vulnerable. I feel that it's just not sustainable."

At the end of 2017, Hyflux had a cash balance of S$314.2 million. To complete ongoing projects, it can progressively draw down from some S$400 million worth of project finance loans as it achieves milestones in project construction.

Hyflux added that is also due to collect some receivables for EPC work done in the Middle East North Africa region.

"A lot of the Middle East countries, their budgets were based on oil prices above US$70 a barrel. So we have seen many delays by the local governments, they have to drag payment. For example in Saudi Arabia, we have to take at least six months to get our payment. Today's situation is maybe better than two years ago, but on the ground we feel that there's still a lot of constraints," Ms Lum said.

Hyflux added that it is in discussions with potential investors, with intention to inject funds for the group's growth activities.

Hyflux's full board faced bankers, analysts and investors during Tuesday's briefing.

Independent director Gay Chee Cheong told investors that he empathised with them: "I receive calls from head of consumer banking, private banking saying, 'A lot of my clients bought into your bonds'. We are working our best. Right now we are even going beyond the banks, using our own personal connections to get people whom we think will look at strategic value (for Tuaspring)."

Full-year loss per share was 21.79 Singapore cents, widening from a restated loss per share of 7.63 Singapore cents.

Net asset value per share was 14.1 Singapore cents as at end-2017, down from 45 Singapore cents at the end of 2016.

Hyflux shares rose one Singapore cent or 3.57 per cent to S$0.29 on Tuesday before results were announced.