Saturday, February 16, 2019

On Why the Rich get Richer and the Poor get Poorer - The Hyflux Proposal Is Out!

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

In the vain attempt to make an emotional connection to the retail investors so that we would more likely accept her proposal, this woman called Olivia Lum says "she is deeply saddened". And as an act of showing remorse, she says she will pass to the perpetual and preference investors her 1.26% of restructured shares. I think she knows it is worthless that's why!

If she was sincere,

1) she would have cut her pay and her BOD's (Board of Directors) pay very much earlier on.  She didn't do it and instead defended it, despite numerous pleas and queries during the 2 townhalls by the retail investors. I have written about her pay before here and compared with other Singapore companies such as Ezion when the founders and BOD's voluntarily cut their pay up to 71%, years before the situation blew up. In addition to her pay, she has been earning $58 million in dividends.

2) she would not have quickly given out the dividends in species of the Hyfluxshop in January 2018 to the ordinary shareholders. It is a known fact that there is NEVER any obligation at all to give out dividends to ordinary shareholders. Many companies don't even give any dividends. On the contrary, she was obligated to give the perpetual securities retail investors their coupons in May because of the terms. I wrote about it here  and here . The coupons for the perpetual securities retail investors even went EX-DIVIDEND already and yet it is not paid at all.
Take note that she owns 34% of ordinary shares and only 0.002% of perpetual securities.
Isn't it obvious where her motivations lie?

AND SGX AND MAS PLEASE ANSWER : how come coupons/dividends already went ex-dividend and yet it is still not paid?

3) she should have concentrated her efforts to save Hyflux instead of Hyfluxshop. Due to the dividends in species of hyfluxshop, it has become a private company. Olivia acquired the remaining shares of Hyfluxshop and now owns more than 76% of Hyfluxshop ( renamed as Elo Water Shop).  Hyfluxshop still owes $20 million to Hyflux. Guess what she did at her majority controlled privately held Hyfluxshop , she held contests with cash prizes and a BMW car.
Link is here.
Imagine the ridiculousness of it. Hyflux, the mother company, is facing a liquidity issue, yet, Olivia is spending cash to promote her Hyfluxshop which still owes $20 million to the mother company.

The Proposal

Based on the 15 Feb Affidavit, here is the proposal:

Perps and Prefs ( retail investors owed $900m )

For every $100 , we get back $3 in cash and $7.6** in ordinary shares.
Total: $10.6 back

Unsecured creditors ( banks and accredited investors owed $988 m) 

For every $100 , they get back $18.8  in cash and $14.56** in ordinary shares .
Total: $33.4 back.*

* This is assuming no contingent claims materialise
**The ordinary shares valuation is derived from the implied $667 valuation of the whole of hyflux based on offer by Salim of $400 million for 60% of a clean hyflux.


My Thoughts

This is a very bad deal for the retail investors of the preference and perpetual securities.
I actually think it is a very good deal for the unsecured creditors (banks and the accredited investors) and i think they will accept it.

The way this whole episode of restructuring is conducted is grossly unfair and not equitable from the beginning.

It feels like the deal is shaft down the throats of the retail investors, just because the retail investors , who are unsophisticated and do not have the MEANS are not able to offer their views.

In my view , SIAS has done nothing of importance to help retail investors. The two townhalls were mainly for information dissemination purposes. There was not enough time to ask questions. It was even worse in the second townhall when an APP called PigeonHole was used. It does not allow follow up questions to answers that will enable the retail investors to drill down to the truth. It felt in my own view, like an administrative process, probably just to fulfill or satisfy the court that the retail investors were "consulted".

The Informal Steering Commitee set up by SIAS for the retail investors was also unheard of. I have not heard from any of them and neither have many others in the Telegram group. Some people mentioned they were made to sign Non-Disclosure forms which could have resulted in them not being able to communicate with us. Then what is the point? Is this for show and for formality sake?

However, for the unsecured creditors, their views have been sought very frequently. They engaged lawyers and counter proposed. 

And the unsecured creditors succeeded in getting a very good deal. Cheers to them.

Indeed, the rich gets richer and the poor gets poorer.
Vote against the Proposal. It's an insult.


Get Hyflux and Salim to propose a better one and the unsecured creditors would likely give us more ......just because, they NOW have much more to lose..........



Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion

Thursday, February 14, 2019

Why Did So Many Singaporeans Invest in Hyflux - The Positive Image Illusion


Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

The Genesis of the Positive Perception of Hyflux


1) Olivia nominated as member of the Corporate Governance Council of Singapore - playing an advisory role to MAS, ACRA and SGX


From MAS Website, published in 2010


2) Invited by the Consulate-General Of the Republic of Singapore for a talk as a Distinguished Business Leader- mentioned as "arguably Singapore's most celebrated female businesswoman







3) A poster child for Enterprise Singapore, which is a combination of two government agencies -  International Enterprise Singapore and Spring Singapore 



4) Poster child for the Overseas Singaporean Unit - a unit of the Ministry of Culture, Community and Youth 




5) A statement by the PMO office 




6) Hyflux featured in EDB ( Economic Development Board of Singapore) whose growth mirrors Singapore's water story




7) Participating in many National Day Parades




8) NEWater - A Singapore Success Story by PUB

First NEWater Plant installed by Hyflux



9) Collaboration with one of the leadings universities of Singapore - NTU



10) Believing in the Singapore Water Story



" Every other policy has to bend at the knees for our water survival. Water is a precious resource; without it you die. You can live without energy....But without water you dehydrate and die."
Quote from Lee Kuan Yew 


My Thoughts

It is a fact that many Merdeka and Pioneer Generations invested into Hyflux. These generations are the ones who saw through most of the ups and downs of Singapore development, from a swampy, forested area into the modern city we have now.  They are the ones who faced the Konfrontasi with Malaysia and Indonesia, the ones who experienced first hand the separation of Singapore from Malaysia, the ones who experienced the racial riots and the ones who lived through the period where  Singapore was threatened with water.

It is a fact that many of them can't read english and many are chinese educated. They didn't have much schooling like what the current generation is enjoying now. They grew up, believing in the Singapore story, believing in the vital importance of water to the very survival of Singapore. Without Water, there will be no Singapore. 

It is utterly inconceivable to me that some people choose to label them as "greedy" investors and they deserve it for taking that risk. Many of them didn't buy shares. They bought the preference shares and the perpetual securities which came with a step-up date which many of them thought it refered to the redemption date, like the bond. They invested not so much on intellect but more on the emotional connection they have with the Singapore Story which they grew up with, and the trust in what they saw with their eyes. They believed in Olivia Lum, the one who was protrayed as one of the Heros of the Singapore Water Story, the one who built a Singapore company that we can be so proud of, the one who appeared so many times alongside the progress of the nation.

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux

Tuesday, February 12, 2019

The Overlooked Importance of another Regulatory Risk - Hyflux


Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.
Background

1) Developing Singapore as a LNG Hub

In 2013, Singapore's first LNG terminal began operations. Prior to 2013, Singapore's only option was to import natural gas through pipelines from Malaysia and Indonesia. To support the development of Singapore as an LNG hub, Singapore had to create an 'artificial' demand for LNG to wean off dependence on pipeline gas. To achieve this, EMA ( Energy Market Authority) required power generation companies to use LNG instead and at the same time imposed restrictions on pipeline gas usage. This is despite LNG gas being much more expensive than pipeline gas.
Read the article by Hogan Lovells Lee & Lee in 2017, page 3.

2) LNG Vesting Contracts and its role in the current excess electricity supply

As part of the "encouragement" to use LNG gas to support the Singapore's LNG hub ambitions, LNG Vesting Contracts were given out by EMA to newer power generation companies who uses LNG gas . What these vesting contracts effectively did was to provide revenue stabilisation as power generation companies now know they are able to sell a specified quantity of their electricity at a fixed price. This allowed visibility and so many power generators entered the market, resulting in the current excess glut of electricity.

EMA has stated that the Vesting contracts was meant as a control of market power but personally, i think it isn't. New power generation companies have a small market share and so they wouldn't be able to exert any market power at all. Yet, they are given LNG Vesting contracts, so it's very hard for me to believe that was the noble intention. Anyway, who cares about what a layman blogger thinks.
Let's look at what our industry experts think about Vesting Contracts.


Taken from page 4/84 of Energy Market Authority document


Quote by Tuaspower (2014). Taken from page 5/31 appendix 1 of Energy Market Authority document

Quote by Huaneng Power International (2014). Taken from page 7/31 appendix 1 of Energy Market Authority document

Quote by YTL Power Seraya (2014). Taken from page 7/31 appendix 1 of Energy Market Authority document



Quote by YTL Power Seraya (2014). Taken from page 8/31 appendix 1 of Energy Market Authority document


Taken from here ,an article by Martin J van der Lugt , An independent Energy Consultant

A reply by the independent energy consultant, Martin J.van der Lugt to a comment

My Thoughts

Tuaspring is a power plant that uses only LNG gas as fuel to generate electricity. Chairwoman and CEO Olivia Lum stated in the townhall two factors (among others) that caused Tuaspring failure.
The expensive "take or pay" contract for LNG gas and the weak electricity market resulting in the low USEP ( market price of electricity).
She mentioned that based on the "take or pay"contract it is still cheaper to take the gas and burn it, even if it is not needed due to penalties.
Is this contract onerous due to the need to support the LNG terminal, a national ambition?
Was Tuaspring restricted from using the cheaper pipeline gas from Indonesia or Malaysia?
Without the restrictions by EMA on using the cheaper pipeline gas, would Tuaspring have survived?
Is Tuaspring failure on a purely commercial basis?

Regarding the weak electricity market, i think it is really likely the LNG Vesting contracts dished out by EMA caused the weak market. The whole industry was facing losses.
This is what Olivia Lum mentioned in April 2018 
".......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 not sustainable..... "

The policy in Singapore is for the minimum reserve margin to be 30% above System Peak Demand. In 2017 and 2018, the reserve margin is at or above 80% .
Isn't that too much or being too kiasu? Even from 2019 onwards, the reserve margin is above 60%, still too much compared to 30%.
And yet, despite this kiasuism or mis-planning , blackouts in Singapore still occured in June 2018 and September 2018. What an irony!


I can't see a reason how the Energy Market Authority of Singapore could be so blind as to be able to dish out licenses so freely to power companies such as to exceed the 30% reserve margin policy by such a wide margin. Population growth and industrial growth is controlled and can't increase suddenly overnight, while total capacity of power plants can be predicted as it is an addition of number of power plants.
Did the LNG Vesting Scheme dished out by the EMA and the excessive dishing out of licenses result in the oversupplied electricity market in Singapore, resulting in the failure of Tuaspring?

As seen from above, the benefit of the LNG Vesting scheme could have balanced out the expensive "take or pay" contracts for the use of LNG gas from the LNG terminal. To further highlight why the LNG Vesting scheme was sort of a lifeline to a power generation company, look at the volatile USEP ( market price of electricity) chart below.  As stated above, the power generation companies did think that the Vesting contracts had a revenue stabilisation factor, and so one will not be exposed fully to such volatility. The USEP price reached the lowest in 2016 due to the overbuilding of power generation companies due to the aforementioned LNG Vesting Scheme.

From EMA

From the diagram below, it can be seen that the USEP price in Q12016 was $56.26/MWH. Compare this to the higher price of $$134.22/MWH enjoyed by the new power plants under the LNG Vesting Scheme. The power generation companies are paid an excess of $77.96/MWH! This explains very clearly why the power generation companies think the LNG Vesting scheme is a kind of "incentive".


But why did Tuaspring bleed so much in 2016 if there was such an "incentive"?

Apparently, Tuaspring did not participate in the LNG Vesting Scheme and so was wholly subjected to the volatility of the USEP electricity prices. This is utterly ridiculous to think that the Tuaspring project went ahead without any "incentive" (LNG Vesting Scheme) which was to serve somewhat as a cushion for the expensive "take or pay" contract to support the Singapore's ambition to be a LNG hub.

What gave the Board of Directors of Hyflux such mighty balls to enter into the electricity market, with no prior experience i must add, since they are essentially a water company before that? This especially without the cushion of a LNG Vesting contract.
Olivia Lum did say they were given a projection of 8 million population projection by " don't know who". As of now, no clarification from Hyflux on who gave such a lofty projection though an email had been sent for clarification.

Does the excessive 80% electricity reserve margin lend any credibility to Olivia's claim of a 8 million population projection? But the population white paper publicly available only stated 6.9 million
Did Hyflux appeal to the EMA to let them enter the LNG Vesting Scheme?
Was Hyflux rejected by EMA?

Conclusion

I don't think the failure of Hyflux is due purely to commercial decisions as can be seen above. Poor policy planning also played a part in its failure. This does not mean i'm thinking of absolving Hyflux Board of Directors of any responsibility, because they are definitely responsible. But i do not think that the regulators, both EMA and PUB should be silent on this issue.

It is also very ridiculous that the biggest three power generation companies ( YTL Power Seraya, Huaneng and Tuaspower) in 2014 issued a warning call to EMA that the market was unsustainable.
The words used were" ...long term damage..."  and " ...unsustainable/market failure..". I wondered whether EMA heeded any of these warnings from the industry. I do feel a tinge of betrayal where the $500 million perpetual securities were still issued in 2016 to unsophisticated retail investors when such problems have already been brewing and EMA can't presume to not know about this, especially since they already received the feedback in 2014. Or maybe, just maybe...They don't care...maybe EMA is secretly happy that these retail investors were going to do " national service" by writing off their investments to support the LNG hub initiative of some Minister or Ministers. Do they realize that many among the ranks of these investors are retirees or people who work their hearts out for many years to save that kind of money ? Where is the "heartware" left in this country? They just don't care!

Regarding the up to 30% cheaper electricity rates that one currently enjoys now due to the Open Electricity Market that seem to be a good initiative. Don't rejoice as yet.
Consider this, who was paying for the " incentives" to those new power generation companies ?
The excess of $77.96 /MWH in Q12016 or the excess of $69.11/MWH in Q2016, who paid?
Read this article titled " Vesting Contracts made Singapore Consumers pay 2.7 Billion SGD over last 4 years". 
If this article is correct, wouldn't it mean we have all just prepaid for our electricity in the previous years and actually, we should not be thinking we are enjoying any cheaper rates now?

Food for thought?

Who are the sacrificial lambs in this episode? The total 50,000 retail investors of hyflux securities, who have partly done their "additional" national service to the country to help develop its ambitious LNG hub.

And guess who enjoyed this "incentive" of the LNG Vesting Scheme, presumably paid by Singapore citizens tax money? Not Tuaspring for sure since they couldn't sign up for the LNG Vesting Scheme.  See below picture.
Tuaspring, predominantly, owned by Singapore investors did not get to enjoy any of these incentives and failed, while Pacific light owned by the Indonesian Salim Group enjoyed it!
It is really ironic or in bad taste if Salim group is again going to win, at the expense of Singaporeans.

REJECT ANY UNFAIR SALIM PROPOSAL AT ALL COST!

I am too cheesed off to write further today!

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux

Saturday, February 9, 2019

The Underrated Importance of Regulatory Risk - Hyflux



Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

  1. The effort to divest Tuaspring started in January 2017.
  2. DBS and CICC Bank were appointed as advisors for the divestment exercise.
  3. By August 2017, more than 50 parties had indicated an interest in Tuaspring and had been provided access to the information memorandum concerning Tuaspring following written approval to disclosure being received from PUB. This information memorandum provided high level information on the asset.
  4. As a result of this exercise, the company received several preliminary non-binding bids, all of which were subject to agreement on the investment structure, regulatory and other approvals, and completion of detailed due diligence. Three of these indicative bids attributed an enterprise value of S$1.4 bn to the Tuaspring project. These came from a PRC SOE, a private UAE party and a subsidiary of a Singapore listed company.
  5. However, these numbers were not final but subject to various conditions, investment structures and further due diligence.
  6. To conduct further due diligence (which required obtaining access to more confidential information relating to Tuaspring) and to make a binding offer, an interested party needed to be approved by PUB to be granted access to such confidential information.
  7. By May 2018, none of these parties had completed their due diligence processes, and the time required to complete such due diligence and receive an offer was likely to take a much longer period of time. With the weak electricity market not likely to recover in the near term, the Group will continue to suffer losses. As such, Hyflux decided to commence a transparent financial reorganisation supervised by the High Court of the Republic of Singapore.
  8. The effort to divest Tuaspring continued in July 2018 through a collaborative sale process with the sole secured bank lender, Maybank.
  9. Of the parties that had expressed an interest previously, only 8 requested to be pre-qualified by PUB.
  10. Of the 8 parties, only 2 local parties were pre-qualified by PUB, of which 1 submitted a conditional bid in early October 2018.
  11. This conditional bid would have been insufficient to repay Maybank.
Cut and paste from here

My thoughts on the above

More than 50 bidders, out of which 3 bidders attributed Tuaspring with a value of $1.4 billion
In my mind, im thinking, just how many other bidders attributed Tuaspring with a value of  $1.3 billion, $1.2 billion, $1.1 billion or $1 billion, but were hindered, hampered, obstructed, discouraged or  tired out by the arduous procedures so as to be approved by PUB, resulting in only 8 bidders left by July 2018? 

It must be noted that the exercise started in january 2007 and Tuaspring was already bleeding millions of dollars each month and it seems this "thing" about getting PUB approval may have prolonged the process, culminating in a voluntary court protection in May 2018.

And out of the 8 bidders, only 2 local companies were pre-qualified by PUB to bid.
By then, with the voluntary court protection, i would think that these 2 local companies would take the opportunity to low ball. It was stated that the bid was insufficient to repay Maybank's loan ( roughly $500 million). 

Did the need for PUB approval cause Tuaspring's value to plunge from $1.4 billion to less than $500 million?

For those unaware, Tuaspring was the "elephant in the room", the entity which brought down Hyflux. The only entity among Hyflux's stable of completed local projects that had an electricity generation component, and it was the excessively oversupplied, overcrowded electricity market we have here in Singapore for "who knows what" that resulted in the millions of losses each month. 8 million population projection as per Olivia Lum, perhaps? Does the Energy Market Authority (EMA) have anything to say about awarding so many licences, resulting in this oversupply of electricity?

The funny thing about it all is, after reading the above, one would think that PUB would only allow local companies in due to strategic concerns, right?

Wrong.

The Indonesian consortium of Salim and Medco seems allowed to bid for 60% of Hyflux, giving them control of  local projects such as Tuaspring ( desalinated water and electricity), TuasOne ( Waste to electricity) , Singspring (desalinated water) and other assets in China and the Middleeast at a steal of $400 million for Hyflux group with a clean balance sheet. 
( based on Indonesian's condition that they want a near debt free Hyflux group as they want the full and final discharge of bonds, preference shares, perpetual securites and existing bank loans)


Take note that this was said on 20 November 2018 by the minister. 


So, whats happening? 
Why did it seem that PUB did not approve foreign ownership of Tuaspring at the beginning but later mention that foreign ownership will not affect Singapore's water security?

If only the $1.4 billion value or even $1 billion value of Tuaspring had been realised, the 34000 retail investors of Preference shares and Perps, countless other Singaporean investors in their bonds and ordinary sharesholders wouldn't have to face nearly $2.8 billion of their investment, nearly wiped out.

A short video made by a member of the telegram group.

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting
27) Another bomb to the retail investors of Hyflux

Saturday, February 2, 2019

Another bomb to the retail investors of Hyflux

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

FILE YOUR PROOF OF CLAIM HERE


"Any party who is required to and does not file their proof of claim by 5.00pm on Friday, 15 February 2019 will (subject to the Proposed Chairman’s discretion) not be entitled to vote at the Scheme Meeting(s), and may not be entitled to any payments or distributions made pursuant to the compromise or arrangement that will be voted upon at the Scheme Meeting(s). In such event, all their claims against the Scheme Companies as well as all obligations the Scheme Companies have towards them will be forever varied, waived, released, discharged and/or extinguished in accordance with the terms of the said compromise or arrangement." - from Hyflux Announcement on 1 Feb 2019.

15 calendar days to file proof of claim. 

It is extremely ridiculous to expect retail investors, whom many are retirees, to meet the timeline. Especially so, when a major holiday is upon us. While i think it is stated that those whose preference or perpetual securities are custodised with CDP do not need to file proof of claim, many have their shares custodised with CPF agent banks and nominee banks like Standard Chartered Bank. It seems these investors have to get their banks to file for them or else these investors 1) won't be allowed to vote and 2) have their claims forever extinguished. I wonder how accountable such banks will be if they didn't file for their customers. I guess nothing will happen, since there is little accountability in Singapore anyway, investors are passive and selfish to stand up for one another and banks should likely have those legal jargon that protects them from any accountability.

OCBC released a report  and below is an image from them.  Investors of Hyflux are awaiting the Salim restructuring proposal that has an indicative date of mid february 2019 to be released.
Creditors , perpertual and preference shareholders will then get to vote. It seems that if more than 75% in value  vote in favour of  the proposal terms, the Court is able to force the proposal terms on the rest who did not vote in favour. This is subjected to the following conditions. More than 50% of the voters who are present have to vote in favour AND the terms have to be fair and equitable to the dissenting class. What is considered fair and equitable i'm not sure ...do you know?


My Thoughts

The number of people present to vote is important, since both the value of shareholdings AND the number of hands are taken into account.
Given a tight 15 calendar days timeline and the Chinese New Year, is it reasonable to think that many people may miss the deadline, resulting in a low turnout?
Wouldn't it mean that the percentage of Olivia and board of directors' supporters present to vote will be higher?
And if their percentage is higher in terms of value and numbers of hands, wouldn't the proposal likely go through?
Does this seem fair or equitable?
Is this a ploy or is it not?
Is such a short timeline an industry practice? ( i vaguely recalled Ezra gave about 1.5 months for creditors to file proof of claim)
Where are the regulators? Who are looking out for the retail investors in Singapore?
Something is really wrong with my country.
Where is the accountability?

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting

Saturday, January 19, 2019

What happened at Hyflux's Second Townhall Meeting.

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.



" My company today is unlike other restructuring..the founder is still in the driver seat in those companies. They still own substantial shares, so they will still want to continue running the company . Whereas in this case, when the Salim Medco come in , they are only willing to take a 60% . So when they are taking over 60 % , i lost control and i also volunteer not to take up any management shares, so practically im not in the drivers seat anymore...........if you are so happy to see that i take some paycut, i will but i will only take the paycut and donate away because i think its right and i will not pump back to company because that will only benefit the new shareholders" - Olivia Lum

"I dont have a deep pocket and all along i have been too ambitious but the irony is there are so many projects that are built around the world but it is the project in singapore that caused the downfall of singapore. We didnt predict it. But during that time when we took it, it was not a single person decision. The PUB has to approve it, all the independent engineers and advisors have to say yes and the banks have to approve it as well before we can even get involved in this project. So during that time, everybody was singing praises about it. It was the most excellent and most sustainable way. Otherwise knowing Singapore,  nobody would stake out their necks and award something that is unsustainable in Singapore but something happened along the way and i dont want to mention it all over again . It was the situation about the electricity in Singapore and we are one of the victims. Other companies are also losing money but we are small." - Olivia Lum

So the above pretty sums up the state of the Company. No proposals were shown during the townhall except for informing that in the case of liquidation, perpetual and preference share holders will get 0% as they are ranked behind the banks and bondholders. From my gut feeling based on the replies, i think that it is very likely that the perps and preference shares will be converted to ordinary shares, perhaps with a token cash payment. The proposal should be out in mid-feb. 

My Thoughts

1)Salim wants to take the company debt free and they want Tuaspring. It seems most likely that they want everyone to be converted to ordinary shares in the end. The funny thing is ,Perpetual and preference shares are not debt. There is no redemption date for perps and preferences shares and they are classified as equities. The better alternative would be to stay on as perps and preference share, perhaps lower the coupon rate, instead of converting all into ordinary shares. But, it seems this is not the intention from my gut feel.

2)Maybank as a secured creditor seems to have the upper hand among all the different creditors. It is funny why they have such a privilege because, though secured, they have no other recourse since it is secured to Tuaspring only. This means that if Tuaspring is sold at say $400 million, while the maybank loan is about $500 million, Maybank only can recover $400 million. Maybank would not be able to go after other assets of Hyflux. 
From this train of thought, i still think Sembcorps low ball deal for Tuaspring only was better than Salim's offer for the whole Hyflux.
If it was the contingent liabilities that would be payable upon a change of Tuaspring ownership or liquidation that Hyflux is so afraid off, then i wonder why the offtaker(PUB) is not understanding enough to know that there are many Singaporean fathers, mummies, retirees who are affected by this, and so waive off such contingent liabilities. 
It may be such contingent liabilities that could be imposed by the offtaker (PUB) that could hit Hyflux at the group level that Maybank is leveraging on.It's really ironic if you ask me. 



3) Further to point 2, Olivia revealed that when they got into trouble, straightaway they approached PUB and NEA because Hyflux was doing projects for them. She also commented that there is no ministry that look after restructured companies, so i think i can't speak on behalf of the government, she said. I find it really ironic. Now, in my mind, is it a situation, again where Maybank is leveraging on the terms of the contract between Hyflux and PUB and NEA to hit Hyflux at the group level through contingent liabilities? SIAs Gerard continued with" Last time i told you to talk to your MP".

4)Why did Hyflux issue perpetual issues in May 2016 when the management know Hyflux is in Serious trouble? Why did the companies not issue rights but instead issue the perpetual securities in 2016?
Hyflux issued the perpetual securities in May 2016. That was after winning a big project in Egypt that was worth $500 million. At that point in time, Hyflux was still very profitable, we were just starting out the power operations, so it wasnt apparent at that point in time that it would reach to this extent. So at that time when we issued the perpetual securities, the prospect of repaying the perpertual securities was still very good. Why we did not raise any rights issues at that point? The market cap at that point was roughly only about $800 million, so raising $500 million in rights was not viable. - Hyflux CFO own words.

Firstly, i think she may have gotten her facts wrong as the highest market cap was about $550million ( $0.604 -Mar 11 2016) or $380 million ($0.447 - Jan 27 2016). NOT roughly $800 million. A difference of about $250 million to $420 million is a lot.  



5)"As a company, the book value of our assets are evaluated for impairment on a regularly basis and we have been doing that , so even if the 2017 results that we released in February 2018, the book value for all the assets were also assessed for impairment, so at that time, we were actually talking to several interested parties for the purchase of the Tuaspring plant and the numbers that were being spoken about at that time was pretty much close to the book value. The most recent exercise was under very different circumstances so its not a fair comparison  to compare the exercise with the one that we had last year." - Hyflux CFO

This statement is very very troubling. If the negotiations were around the book value of $1.3 billion before the VOLUNTARY filing of the court protection. Did the Board of Directors just caused investors a massive loss in their investment by VOLUNTARILY filing the protection? In my mind, it seems that companies were low balling Tuaspring or Hyflux after the court protection such that it is stated that the offered prices aren't even enough to cover Tuaspring Maybank loan of $500 million. 
A loss of about $800 million or more in value ( $1.3 billion to $500 million)!

Did the advisors advise wrongly and the BOD made the wrong decision to go for court protection, VOLUNTARILY?
Yes, maybe there could possibly be some expectation of incoming lawsuits, but if that is the case, couldn't they fight the lawsuit and when lost, then file for court protection? This would have given some more time for the purported time needed to sell Tuaspring before everyone in the whole world knows how dire the state Hyflux is in and start lowballing.



My intentions

Sias Geraid mention that " something is better than nothing". While that is of course is true, i think it depends on the context. 

I have a large stake in Hyflux perps and i will only accept a reduction in coupon while my perpertuals continue under the same terms and remain on the books. This is the minimum i expect. 
If this minimum is not met, i would choose to liquidate and lose it all. 

Simply put, being given Hyflux shares is not enough. It would take years ( if possible) to reach back my capital and judging from the number of retirees at the Townhall, honestly, they don't have that many years left on this earth also. 
By allowing all our perps and prefs to convert to ordinary shares, the real winner is Salim Group ( indonesions) and Maybank (Malaysians). Why would i want that?
The other winners of course are those high level people who have been singing praises of Hyflux and using Hyflux as the banner of entrepreneurship, using Hyflux for their environmental ambitions and using Hyflux as a way to secure our water supply at really very very cheap rates when Hyflux bidded for the Tuaspring project.
Olivia Lum is also the winner in the sense that her legacy lives on!

Since the court protection has been done( which shouldn't have been done so fast at least in my opinion) and the value of Tuaspring has been reduced such that the Maybank loan cannot be covered by a sale.
What can be done going forward? 
If Hyflux is so afraid of the contingent liabilities that will hit Hyflux at the group level if Tuaspring was liquidated by Maybank, why can't these contingent liabilities that will hit Hyflux at the group level  be waived by the offtaker (PUB), reducing the leverage that Maybank has. After that, then sell Tuaspring at whatever price as it isn't important now, Maybank will take the hit. Banks then extend credit lines to complete the Tuasone project and the Tuasone offtaker also waive off the contingent liabilities ( late completion penalties etc). ..but no..this will not happen.
Instead what has happened?
Salim ( the Indonesians) has to come into the picture to pump in just enough money to complete Tuasone because the banks wont help, and because the offtakers won't help. How ironic! The real, affected losers are the Singaporean fathers, mummies and retirees who again ironically, are not the ones demanding their money back right now since theirs are perpetuals/preference shares with no redemption dates!

Don't worry, PUB is still able to take over Tuaspring and charge some contingent liabilities as per the picture above, so our Water will still be safe.

This is my choice.
Enjoy your weekend!

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors?