PUB issues default notice to Hyflux's Tuaspring, says will take over plant if default
SINGAPORE: National water agency PUB has issued a default notice to Hyflux subsidiary Tuaspring Pte Ltd (TPL), which owns Singapore’s second and largest desalination plant, to remedy defaults arising under a 25-year water purchase agreement between them.
The move was made to ensure Singapore's water security is safeguarded, PUB said in a release on Tuesday (Mar 5), adding that Tuaspring has been unable to fulfil various contractual obligations.
AdvertisementPUB also said that it will exercise its right to terminate their water purchase agreement and take control of the desalination plan if Tuaspring is unable to resolve all defaults within the notice period.
[h=3]READ: Hyflux’s Tuaspring plant - The ‘noose around the neck’ that needs to be sold, but can it be done[/h]SAFEGUARDING SINGAPORE'S WATER SECURITY
Under the deal signed with PUB in 2011, Tuaspring has to deliver up to 70 million gallons of desalinated water per day to PUB for a 25-year period from 2013 to 2038.
AdvertisementAdvertisementDesalinated 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.
Tuaspring, however, has failed to keep the plant reliably operational as required, said PUB.
It has also not been able to produce financial evidence to demonstrate its ability to keep the plant running for the next six months, PUB added.
"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," the national water agency said.
"PUB is taking steps to ensure that our water security is safeguarded."
With the issuance of the default notice, PUB said, TPL will be required to 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," it said.
"NOOSE" AROUND HYFLUX'S NECK
Costing more than S$1 billion to build, the Tuaspring Integrated Water and Power Plant was the landmark project that marked water treatment icon Hyflux’s foray into the energy business.
But for all the ambitions that it embodied, the Tuaspring project struggled to turn a profit and according to some market observers, eventually became the “noose” around Hyflux’s neck.
Bogged down by the losses, Hyflux has been spent the last few months trying to restructure itself.
[h=3]READ: S$1.1b loss for Hyflux after taking S$916m impairment hit in first 9 months of 2018[/h][h=3]READ: SIAS submits alternative proposal urging Hyflux to give small investors 'a little more'[/h]According to a Mar 1 affidavit, Hyflux chalked up a net loss of S$1.1 billion for the nine months ended Sep 30, 2018, after taking a S$916 million impairment on the carrying value of Tuaspring and other projects.
Hyflux’s do-or-die restructuring plan will be voted on by investors on Apr 5 and 8. It has proposed a rescue plan that will see some of its debt being slashed by almost 90 per cent, but retail investors told Channel NewsAsia that this will see them suffering massive losses.
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SINGAPORE: National water agency PUB has issued a default notice to Hyflux subsidiary Tuaspring Pte Ltd (TPL), which owns Singapore’s second and largest desalination plant, to remedy defaults arising under a 25-year water purchase agreement between them.
The move was made to ensure Singapore's water security is safeguarded, PUB said in a release on Tuesday (Mar 5), adding that Tuaspring has been unable to fulfil various contractual obligations.
AdvertisementPUB also said that it will exercise its right to terminate their water purchase agreement and take control of the desalination plan if Tuaspring is unable to resolve all defaults within the notice period.
[h=3]READ: Hyflux’s Tuaspring plant - The ‘noose around the neck’ that needs to be sold, but can it be done[/h]SAFEGUARDING SINGAPORE'S WATER SECURITY
Under the deal signed with PUB in 2011, Tuaspring has to deliver up to 70 million gallons of desalinated water per day to PUB for a 25-year period from 2013 to 2038.
AdvertisementAdvertisementDesalinated 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.
Tuaspring, however, has failed to keep the plant reliably operational as required, said PUB.
It has also not been able to produce financial evidence to demonstrate its ability to keep the plant running for the next six months, PUB added.
"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," the national water agency said.
"PUB is taking steps to ensure that our water security is safeguarded."
With the issuance of the default notice, PUB said, TPL will be required to 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," it said.
"NOOSE" AROUND HYFLUX'S NECK
Costing more than S$1 billion to build, the Tuaspring Integrated Water and Power Plant was the landmark project that marked water treatment icon Hyflux’s foray into the energy business.
But for all the ambitions that it embodied, the Tuaspring project struggled to turn a profit and according to some market observers, eventually became the “noose” around Hyflux’s neck.
Bogged down by the losses, Hyflux has been spent the last few months trying to restructure itself.
[h=3]READ: S$1.1b loss for Hyflux after taking S$916m impairment hit in first 9 months of 2018[/h][h=3]READ: SIAS submits alternative proposal urging Hyflux to give small investors 'a little more'[/h]According to a Mar 1 affidavit, Hyflux chalked up a net loss of S$1.1 billion for the nine months ended Sep 30, 2018, after taking a S$916 million impairment on the carrying value of Tuaspring and other projects.
Hyflux’s do-or-die restructuring plan will be voted on by investors on Apr 5 and 8. It has proposed a rescue plan that will see some of its debt being slashed by almost 90 per cent, but retail investors told Channel NewsAsia that this will see them suffering massive losses.
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