Thursday, July 5, 2018

Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - 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.

Below are a list of questions that members of the Telegram Group raised.
If i missed out any of your questions, do forgive me. I have submitted the questions to Hyflux.

What is the breakeven USEP?
On what basis is Hyflux so confident that the USEP will rise?
What's the plan if USEP doesn't rise or Tuaspring is not divested?
How much the retail investors can get back if Tuaspring is sold at book value, below book value and above book value?

There was a consent solicitation exercise on Jan 2015 which was completed in Feb 2015.

Would Hyflux have been in breach of any financial convenants to the bondholders, without this consent solicitation exercise? 

Hyflux announced on 10 May 2018 of a coupon payment to BTWZ.
The ex-dividend is on 27 Maly 2018.
Dividends were given to the ordinary shareholders on Feb 2018.
Hyflux has broken a convenant.
We do not want to waive the right of default.

If we are asked to waive our right to hold Hyflux to a default, why should we do it since it will not harm the cashflow or operations of Hyflux?

The unrestricted cash position is only SGD18.6 million in June 2018.

Did Hyflux notice its cash position when declaring coupon for BTWZ in May?
Where did Hyflux planned to get the cash for BTWZ coupon originally?

In 2017,part of the issuance of btwz was used to redeem 2 tranches of wholesale perpetuals  which were issued in 2014, while N2H was issued in 2011. 
We would like retail investors to be treated fairly and equally on par with non retail investors. Accredited/wholesale investors may be thought of as those fully aware and capable to stomach all risks.

Why were the N2H not redeemed instead since it was issued earlier than the wholesale perpetuals?
What is the detailed plan to redeem the retail preference shares (N2H) and perpetuals (BTWZ)?
What are the milestones that must be reached before the redemption occurs?

The management of other companies facing similar fate to Hyflux has shown a willingness to take responsibility.
Ezion CEO took a pay cut of 19% in 2015, 42% in 2016 and another 38% in 2017. Total pay cut of 71% , comparing 2014 to 2017.

Why isn’t Hyflux management not taking such paycuts early on and deferred bonuses?

The wholesale bondholders generally consists of more sophisticated investors who have the capacity and resources to take on more risk or losses. The retail investors are less sophisticated with many of them retirees who could have used the CPF funds which are meant for retirement purposes.

 Are there any new terms given to the wholesale bondholders?
Can you share with us how these new terms will disadvantage the retail investors?
Can you share us whether Hyflux took into consideration the different investor profile of the whole investors and the retail investors to determine the new terms?

We noticed that the remuneration in stock options for the Chairwoman/CEO/Founder reduced along the years, while the cash component of her salary increased.
Hyflux is currently facing cashflow issues.
Can you explain the rationale for increasing the cash component of salary?
Going forward, can we have a higher percentage in stock options instead of cash to show alignment of interest?

When comparing salary( cash) with Hyflux industry peers, Chairwoman/Founder/CEO seems to have the largest salary in cash, despite making losses, while her peers are still profitable.
Peers are Darco, Citic Environtech, Moya Holdings, China Everbright.
What is the rationale for this?

When comparing with Hyflux’s industry peers, Hyflux seems to have directors, as a percentage, who have served the longest on the board?
Peers are Darco, Citic Environtech, Moya Holdings, China Everbright.

What is the rationale for this?

When comparing with Hyflux’s industry peers, other than Darco, Hyflux is the only other company with Chairwoman and CEO position under the same person
Peers are Darco, Citic Environtech, Moya Holdings, China Everbright.

What is the rationale for this?

We noted that Hyflux has never done a placement or rights issue as a form of fund raising. In comparison, her peers have actively done a mixture of rights and placement, in addition to borrowing and bond issuance. Peers include Citic Envirotech, Darco, China Everbright, SIIC Enviroment holdings and Moya Holdings Asia

Why were there no rights or placement shares in the history of Hyflux?
Are there any current investors looking to invest through placement and will you be open to dilution?
Would you prefer to borrow or do a placement in this current situation? 

Hyflux has conducted massive sharebuybacks across the years from 2011 to 2015.
During this period, Hyflux has also borrowed money from retail investors and wholesale investors.
The cashflow of Hyflux is poor.

What is the rationale for conducting such massive sharebuybacks?

Hyflux bidded $0.45 per cubic metre with PUB for 1st year while TP-STM bidded $0.91 per cubic metre in 2017. 

Why did Hyflux bid so low?
Will the price with PUB increase after first year and will this help in the cashflow of Hyflux?
Is the loss of TS contributed partly by the low price to PUB?

Besides TS, are there any other projects that are facing loss?
Hyflux has stated that the loss was mainly attributed to Tuaspring and there is currently an oversupplied electricity market.
Current supply and demand can be easily calculated.
Tuaspring is also one of the largest investments by Hyflux .
The electricity market is also a new venture to Hyflux.

During planning of Tuaspring, did Hyflux forsee the oversupply of electricity? 
Regarding the forecasted electricity demand, where did Hyflux get this information from and how different is the forecasted demand compared with the current demand?
Was there some incentives given to Hyflux such that Hyflux made such a fatal bet on this market?

Hyfluxshop issued SGD20 million worth of preference shares to Hyflux.
Hyflux currently is facing cashflow issues itself and should not be in the position to lend fund.

Why didn’t HyfluxShop issue the preference shares to Olivia or find other investor/source of funds instead?

Is Hyflux seeking any government assistance?
There is a recent hike of electricity tariffs of 6.9% in 3rd quarter of 2018.

How much does Tuaspring benefit from this hike?

There is a recent hike of water tariffs of 30% in July 2018.

How much does Tuaspring benefit from this hike?

The revenue of generators consist of those sold in the wholesale market ( USEP price ) and those sold to SP Group ( vesting price)

What is the percentage of Hyflux revenue dependent on vesting price and USEP price?
What is the percentage of Hyflux electricity taken up by the vesting contracts?
Does Hyflux have visibility on the amount of vesting contracts it will be entitled to when planning for Tuaspring?

Hyflux has stated that she is trying to sell Tianjing Dagang and Tuaspring.
Tianjing Dagang is an asset in China, while Tuaspring is an asset in Singapore and we know that Singapore is facing an oversupply of electricity.
Both have taken a longer than expected time to sell.

Are there any inherent issues with Tianjing Dagang that it is taking such a long time to sell?

TuasOne is coming online in end 2018 or 2019. This will add to the supply of electricity.

Will TuasOne be another Tuaspring?

Hyflux built Tuaspring in 2012.
Hyflux must have based the investment on demand and supply considerations.

Did Hyflux take into account electricity sources from other embedded generation and renewables such as solar generation to determine the supply?
Were such information readily available for Hyflux then?

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