Saturday, July 14, 2018

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

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.

Town Hall questions to Hyflux - continued
Other than Tuaspring, Hyflux holds a few other assets which are profit generating.

Instead of selling only Tuaspring and Tianjing Dagang , has Hyflux considered selling itself as a group?

CITIC Environmentech has as its major shareholders China Reform Holdings Corporation Ltd which is a wholly state-owned investment company. It has been securing many projects frequently.
Keppel and Sembcorp also have Temasek as a large shareholder and they are in the local power generation industry too.

Why does Hyflux not have any state-owned company investing in it ?
Has Hyflux approached or been approached by any state-owned company?

In the announcement on 6 July 2018, it is stated that Maybank will appoint her own valuer and they will be actively engaged in the divestment process.
Hyflux is given a deadline 15 October to sell Tuaspring.

What is the plan of Hyflux or outcome that will happen if Tuaspring is not sold by that date?
Why is Hyflux so confident to have a fixed date of sale by 15 October?
Can we have the reason why Maybank needs to appoint her own valuer and not take Hyflux’s valuation at face value?
How many offers does Hyflux have at this point in time?
Can we have any indication on whether these offers are above, around, or below the book value of Tuaspring as stated in the annual report 2017?

In your annual report 2017 page 5, you stated “ We have also announced our intention to divest the Tianjing Dagang Desalination in China as well as partially divest the Tuaspring IWPP in Singapore.”
It is stated in the announcement on SGX-ST 6 July 2018,” …to divest its interest in Tuaspring’s integrated Water and Power Project..”
Tuaspring uses Kristal proprietary membrane technology which should be a source of recurring income for the group.

Can you clarify whether Hyflux is going to divest fully or partially its stake in Tuaspring?
Will there be any recurring revenue to Hyflux  if Tuaspring is divested fully?

When Hyflux decided to built Tuaspring, it was one of the largest investment by Hyflux into a completely new business.  
EMA has stated as their goal that they were introducing more competition to the generation sector.
Hyflux has stated that the power plant was built to supply power to the desalination plant and the excess was sold to the grid.
The incumbent power generators like YTL and Tuaspower already have a first mover advantage in securing customers in the contestable market and locking them in. This is disadvantages to Tuaspring.
It seems the electricity business is a lousy business to be in.
Logically, if there was going to be cut-throat competition in the electricity market, Hyflux would have been better off buying electricity off the grid at USEP prices.

What motivated Hyflux to invest in Tuaspring?
Were there any incentives given to Hyflux from any government agencies?
Where and how did Hyflux forecast demand for the electricity?

Tuaspring sells electricity based on the USEP price to the contestable market and also based on the LNG vesting price to SP Group.

What percentage of the revenue from electricity is derived from selling at the USEP and selling at the LNG vesting price?

Can you clarify on the purchase of LNG as an input into the power plant of Tuaspring?
Is the purchase of LNG a long term contract and is the purchase price of the LNG contracted at a high price such that this could also be a factor in Tuaspring losing money?
Who does Tuaspring buy the LNG from?

Hyflux defaulted on BTWZ when they were not paid a coupon.
The moratorium was granted after the ex-date of coupon payment to BTWZ on 17 May 2018.

If you had enough funds to redeem either BTWZ or N2H, which would you redeem first?
Since the moratorium was granted after the ex-date of coupon for BTWZ, would these outstanding coupon incur the prevailing 6% pa as per the terms granted in the OIS?

Hyflux recently received a letter of intent from an Iranian repeat customer.

Can you clarify where Hyflux would intend to get the cash to service this customer?
Would Hyflux rather use any available cash to service this customer than to repay any amount due to the preference shareholders and the perpetual share holders?

Based on past restructuring exercises by other companies in Singapore, example, Ezion, a debt to equity swap was done.
It has to be highlighted that the investors of N2H and BTWZ are unsophisticated and many N2H have used their CPF accounts meant for their retirement.
They do not have the stomach and resources to handle a debt to equity swap.

Can you clarify if a debt to equity is on the cards for N2H and BTWZ?
What are the options for N2H and BTWZ?

The financial advisors and other entities have accepted shares in lieu of cash for payment of services  rendered to Ezion. This is to help the cashflow of Ezion.

Is Hyflux considering such an option to help in the cashflow of Hyflux?

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