PUB ready to take over desalination plant at zero dollars if Hyflux's Tuaspring does
SINGAPORE: National water agency PUB said on Thursday (Mar 21) it is willing to purchase the Tuaspring Desalination Plant (TDSP) at zero dollars, if the company is unable to fulfil its commitments under a water purchase agreement.
PUB had on Mar 5 issued a default notice to Hyflux subsidiary Tuaspring Pte Ltd (TPL), to remedy defaults under a water purchase agreement (WPA) between them.
AdvertisementUnder 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.
Tuaspring, however, has failed to keep the plant reliably operational as required, PUB said earlier this month.
If Tuaspring is still unable to fully resolve all defaults within the notice period, PUB said it will terminate the agreement and take over only the desalination plant within the Tuaspring integrated water and power project.
PUB added that it has the operational capabilities, experience and manpower to run the plant.
AdvertisementAdvertisementAccording to PUB, Tuaspring has stated that the desalination plant has been and will continue losing money for the next few years. The power plant is also incurring losses and the market condition is not expected to significantly improve in the near future.
"Current valuation is that the purchase price of the TSDP is negative, and TPL has to pay PUB a compensation sum under the WPA," said the water agency.
"However, PUB has informed TPL that it is willing to purchase the TSDP for zero dollars and waive the compensation sum," it added.
"This is because PUB is unlikely to recover the compensation sum from TPL, given TPL’s current financial position."
It was earlier reported that the termination of the water purchase agreement may jeopardise Hyflux's proposed restructuring by SM Investments – a consortium made up of Indonesian conglomerate Salim Group and energy giant Medco Group.
A Hyflux announcement on Mar 18 said that SM Investments sent notice to Hyflux saying that if it does not remedy the defaults under the water purchase agreement, SM Investments (SMI) may assert rights to terminate the restructuring deal.
However, Hyflux has noted that PUB’s actions will alleviate the pressure on the rest of the Hyflux Group, and also positively impacts Hyflux’s value and hence the value of the Hyflux shares being offered, PUB said.
“This will also increase the chances of Hyflux being successfully restructured. PUB’s actions should therefore not be used as the basis for SMI’s decision to withdraw from the restructuring agreement,” PUB said.
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SINGAPORE: National water agency PUB said on Thursday (Mar 21) it is willing to purchase the Tuaspring Desalination Plant (TDSP) at zero dollars, if the company is unable to fulfil its commitments under a water purchase agreement.
PUB had on Mar 5 issued a default notice to Hyflux subsidiary Tuaspring Pte Ltd (TPL), to remedy defaults under a water purchase agreement (WPA) between them.
AdvertisementUnder 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.
Tuaspring, however, has failed to keep the plant reliably operational as required, PUB said earlier this month.
If Tuaspring is still unable to fully resolve all defaults within the notice period, PUB said it will terminate the agreement and take over only the desalination plant within the Tuaspring integrated water and power project.
PUB added that it has the operational capabilities, experience and manpower to run the plant.
AdvertisementAdvertisementAccording to PUB, Tuaspring has stated that the desalination plant has been and will continue losing money for the next few years. The power plant is also incurring losses and the market condition is not expected to significantly improve in the near future.
"Current valuation is that the purchase price of the TSDP is negative, and TPL has to pay PUB a compensation sum under the WPA," said the water agency.
"However, PUB has informed TPL that it is willing to purchase the TSDP for zero dollars and waive the compensation sum," it added.
"This is because PUB is unlikely to recover the compensation sum from TPL, given TPL’s current financial position."
It was earlier reported that the termination of the water purchase agreement may jeopardise Hyflux's proposed restructuring by SM Investments – a consortium made up of Indonesian conglomerate Salim Group and energy giant Medco Group.
A Hyflux announcement on Mar 18 said that SM Investments sent notice to Hyflux saying that if it does not remedy the defaults under the water purchase agreement, SM Investments (SMI) may assert rights to terminate the restructuring deal.
However, Hyflux has noted that PUB’s actions will alleviate the pressure on the rest of the Hyflux Group, and also positively impacts Hyflux’s value and hence the value of the Hyflux shares being offered, PUB said.
“This will also increase the chances of Hyflux being successfully restructured. PUB’s actions should therefore not be used as the basis for SMI’s decision to withdraw from the restructuring agreement,” PUB said.
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